Meralco: 9 gencos keen on joining power supply auction
By Lenie Lectura – October 27, 2020
from Business Mirror
Meralco networks crew are seen replacing a 60-foot pole along Eulogio Rodriguez Jr. Avenue (C5) in Barangay Ugong, Pasig City, in this file photo.
Nine power generation companies (gencos) have expressed interest to participate in the competitive auction for the 1,800megawatt (MW) power requirements of the Manila Electric Co. (Meralco).
“As of October 23, TPBAC (Third Party Bids and Awards Committee) Secretariat already received Expressions of Interest from several gencos with offered capacities totaling 3,600MW, utilizing a variety of technologies,” the company said in its financial and operating results for January to September.
The identities of the gencos were not revealed, citing non-disclosure agreements.
“We are not at liberty to disclose the names of companies who expressed interest. There are around nine GenCos,” said Meralco Head of Regulatory Affairs Jose Ronald Valles when sought for comment. “It’s a total of 3,600MW. Some submitted 600MW while some submitted a minimum of 150MW.”
Atimonan One Energy, Inc. (A1E), a wholly-owned subsidiary of Meralco PowerGen Corp. (MGen), said during the utility firm’s press briefing that it will participate in the Meralco’s Competitive Selection Process (CSP) for its 2024-2025 requirements.
“We are on track to deliver energy requirement for Meralco’s Greenfield CSP by late 2024/mid2025,” said MGen President Rogelio Singson.
MGen is the power generation arm of Meralco.
A1E is the developer of the country’s first ultra-supercritical coal-fired power plant valued at P160 billion. The 2x600MW plant will be built in Atimonan, Quezon. The site preparation activities for the plant fully resumed in late August.
Earlier, San Miguel Corp. (SMC) President Ramon S. Ang said the conglomerate’s power business unit would join the auction. Other interested firms include AC Energy Inc., the power arm of Ayala Corp.; Consunji-led Semirara Mining and Power Corp. (SMPC); and Aboitiz Power Corp.
SMC and AC Energy won in September last year the power supply contracts covering 1,200MW of Meralco’s power requirements.
Meralco has set on November 12 the deadline for the submission of Expression of Interest, with bid submission deadline and opening of bid offers set on January 25, 2021.
In the bid invite, Meralco said it would need 1,200MW by December 2024 and 600MW by May 2025. A bidder can offer at least 150MW. If the total capacity offer goes beyond 1,800MW, the bidder that fills up the last stack shall have its offer reduced. The price offers must not go over than the pre-determined reserve price, which would only be revealed during the opening of the bids scheduled on January 25, 2021.
Meralco prefers baseload plants or those that continuously run on a 24/7 basis. These power facilities should be in commercial operation not earlier than January 2020 but no later than May 2025. The scheduled outage allowance (OA) and forced OA of the plants that will offer to supply Meralco should not exceed 30 days and 15 days, respectively.
Power rates
Bayan Muna Chairman Neri Colmenares and Matuwid na Singil sa Kuryente convener David Celestra Tan questioned Meralco’s retail rates.
“This year, Meralco likes to boast that its generation rate had come down from P4.9039 per kwh in January to P4.12 per kWh in August, a 16-percent reduction. They like to point out that they negotiated hard with its IPP’s [Independent Power Producer] by declaring force majeure during this pandemic so the take or pay provisions of the contract were not applied, thus saving us consumers P1.5 billion,” Colmenares said.
However, he said electricity spot market prices dropped 193 percent to P2.421 per kWh in August from P8.49 per kWh in January while the fuel of these plants declined by 28 percent to $50.34 in August from $69.66 in January. In contrast, Colmenares said Meralco’s generation rate dropped only by16 percent.
“Our analysts noticed that in Meralco’s generation mix is sticking out like a sore thumb, the Quezon Power Mauban’s average rate for the period January to September 2020 of P6.73 per kWh. It is 51 percent higher than AC Energy at P4.55, 66 percent higher than San Miguel’s Sual at P4.051, an astonishing 82 percent higher than Therma Power in Pagbilao at P3.6549 per kWh,” he said.
“Quezon Power is 66 percent higher than the new 460mw San Buenaventura coal plant at P4.0533 per kWh. There is a lot that needs to be explained in the Quezon Power charges that are passed on to the consumers. This is anomalous and needs a Congress or a DOE (Department of Energy) and ERC (Energy Regulatory Commission) investigation to protect the public interest.”
When sought for comment, Meralco spokesman Joe Zaldarriaga said Meralco’s retail rates have significantly gone down to its lowest levels in years.
He said the average retail rate of Meralco from January to September this year stood at P8.04 per kWh, which is P0.96 per kWh lower than the same period in 2019.
The average generation charge for the same period was also lower as a result of the implementation of the Power Supply Agreements (PSAs) which were concluded under the CSP in December 2019, the force majeure claims of Meralco against its power suppliers which totaled P2.4 billion as of September 30, lower Wholesale Electricity Spot Market (WESM) prices, and the appreciation of the Philippine peso versus the US dollar and lower fuel prices.
Meralco’s September 2020 rates marks the fifth straight month of reduction in the average retail rate, which is the lowest since September 2017.
“In fact, at around P8 pesos per kWh, it has already gone down by almost P1 per kwh on a year to date comparison. The generation charge has dropped by 17 percent during the same period last year as a result of our newly implemented PSAs, which took effect last year,” he said.
Zaldarriaga also said the rates were approved by the ERC. “All our supply agreements, including the rates therein, have undergone public hearings participated in by various groups. It is duly and legally approved by the regulator and has fully complied with lawful requirements. Important to note as well, all of Meralco’s pass-through charges also undergo confirmation hearings by ERC.”
Tan, meanwhile, noted that Quezon Power’s P6.5919 per kwh rate last January was a stark contrast to all the other coal power suppliers of Meralco. “Masinloc was at P5.4658 per kwh, Luzon Therma of Aboitiz in Pagbilao at P3.9001 per kwh, San Miguel’s Sual at P4.0689 and AC Energy at P4.2366 per kwh. That’s an average premium of 52.4 percent.
In terms of absolute numbers, for the first 9 months of 2020, Meralco bought P1.601 billion kwh of electricity from Quezon Power at an average price of P6.73 per kwh. The average price of all other coal power suppliers to Meralco for that period is about P4.20 per kwh. This means Meralco paid Quezon Power P2.53 per kwh higher than the average or at a total cost of P4.05 billion premium this year 2020. That P4.05 billion had been passed on to Meralco consumers,” said Tan.
