Mandatory CSP – The devil is in the Implementation
27 November 2015
David Celestra Tan, MSK
The passing of the Mandatory Competitive Selection Process (CSP) is a major and bold policy shift of the DOE and an enlightened regulatory stand by the ERC that should usher in a new era of pro-consumer safeguards and perhaps true “least cost” power.
The key word though is “it should”. A lot depends on how it is implemented and whether the regulators would shoot themselves in the foot by allowing circumvention and rigged biddings.
We are still waiting whether Meralco was able to maneuver to get its three Meralco PowerGen projects exempted or beat the new rules that set the cut off criteria as those bilateral power supply contracts that have been approved or applied for at the ERC at the time of the effectivity of the CSP policy. We know that the ERC had already reviewed Meralco’s 460mw coal power project in Mauban. It is possible that the 600mw Redondo Power in Subic, a joint venture of Meralco and Aboitiz who together control 75% of the energy market of the Philippines, had also beaten the deadline. How about the announced 1000 natural gas project of Meralco PowerGen in Atimonan Quezon? Could its ERC application been fast-tracked after the June 30, 2015 announcement of the DOE Circular for CSP? Who knows what other Meralco mid-night contracts had been signed and filed with the ERC while Meralco was fighting all out to delay the ERC Resolution for implementation?
If these mid-night contracts have managed to beat the rules, the mandatory CSP would be a pyrrhic victory for the consumers. It will not mean much for Meralco’s captive consumers for the next 25 years and Meralco would effectively have monopolized its power generation. Let us hope the ERC did not participate in a deplorable hoodwinking of the consumers about the benefits to them of the mandatory CSP regulations.
We are also waiting whether Meralco and its Chairman MVP will open to competitive bidding its next 1,060 mw of power generation supply instead of just negotiating them with its subsidiary generators.
MSK is submitting this week to the ERC and the DOE its contributions on the CSP implementing rules. We are seeking to address the concerns raised by Meralco on the role of the Third Party, mandatory aggregation, and etc.
Some salient points:
1. The forecast of its own power requirement and the amount of capacity that will be bid shall start with the DU itself but subject to the validation of the DOE, Third Party, or other institutions that would be deemed appropriate. The true power planning capability of the government must be strengthened complete with enforcement mechanism.
2. The Third party would not be asuper and arbitrary body but a facilitator and administrator of the CSP to assure proper, transparent, and judicious evaluation and award.
3. CSP’s that are clearly designed to favor a sister company like a power plant that should be delivered in three (3) months or a plant in a specific location, and etc. We advise against Swiss Challenge as a bonafide CSP because it is designed to favor a particular technology or proponent. Only in pioneering technologies should it be allowed.
4. Aggregation should not be mandatory. Capacities of sufficient economy of scale to be attractive to bidders is the only criteria.
5. The DOE can lead the bidding of reserve capacity for emergency or security of supply in case the private sector is not stepping up and these do not necessarily mean it would be the government absorbing the costs.
6. CSP process can be competitive bidding, request for proposals, and negotiations in that order and as long as it is transparent and competitive.
Filipinos are known to be so smart they pass wonderful and pioneering rules. But we are also known to shoot ourselves in the foot in the implementation, to compromise and lose our way and forget about why the law is being passed.
Epira Law, A wonderful law that lost its way
The EPIRA law of 2001 is a monument to this regrettable trait. It started with wonderful words on aspirations for anti-monopoly, competitive markets, least cost power, anti-market domination. But then it inserted under Section 45(b) the permission for a DU to contract with an affiliated company up to 50% of its demand. And this is in the very section called anti-monopoly and cross-ownership. If that is not enough, the DOE and DOF then that oversaw the drafting of the Implementing Rules and Regulations to make the Epira implemented, inserted Rule 11 which provided a cathedral sized loop hole for monopolization. We seem to be too smart, we know how to outsmart ourselves in the same law.
The Mandatory CSP rule is also a wonderful rule. But whether or not it will really benefit the consumers depends on its implementation where normally we succumb to the devil.
Let us keep this in mind as we celebrate the day of hero Andres Bonifacio, the founder of the Katipunan.
Happy and safe long weekend!
Matuwid na Singil sa Kuryente Consumer Alliance Inc.
