Viewpoint: Meralco asks DOE to delay bidding for 1,800-MW supply
By Lenie Lectura -April 28, 2020
from Business Mirror
THE Manila Electric Company (Meralco) is asking the Department of Energy (DOE) to delay the conduct of a competitive auction for 1,800 megawatts (MW) of power capacity requirement.
Meralco President Ray Espinosa said the DOE has approved the terms of reference (TOR) for the 1,800MW power supply agreement (PSA). The company wants to schedule the bidding at a still undetermined date amid the Enhanced Community Quarantine (ECQ).
He explained that Meralco’s biggest concern is the volatility of fuel prices and uncertainty of prices going forward.
“While the DOE has cleared our terms of reference for the 1,800 MW CSP, we are in dialogue with DOE to discuss with them a possible push to a later date of this CSP given the volatile fuel prices in the market today.
The volatility is so high that it would be difficult for us to have a proper valuation, which is a distinguishing criteria to determine who will win in the CSP,” said Espinosa.
He meant that if the bids are evaluated now using artificially low fuel prices, this could be disadvantageous for consumers because when the PSA is implemented in 2025, fuel prices go back up to normal levels. Also, bidders may raise concerns about submitting binding bids given prevailing uncertainty.
“The other problem with CSP today is the ECQ, which actually prevents us from holding face to face meetings with the bidders for conducting and receiving voluminous documents that will accompany each bid,” added Espinosa.
The DOE has yet to act on Meralco’s request. “We are addressing the details with the DOE and we will just inform everyone on the decision of the DOE once we get it,” he said.
The 1,800MW PSA consists of the 1,200MW PSA that was supposed to undergo a second round of CSP combined with “portions from 1,000MW and 500MW baseload CSPs that were supposed to be conducted this year.”
According to Meralco utility economics head Lawrence Fernandez, the company was supposed to conduct three CSPs this year. These are 1,000MW baseload for 2025, 500MW baseload for 2027 and 600MW mid-merit for 2023.
Last year, Meralco conducted three CSPs. These are the 1,200-MW baseload capacity starting 2020, 500MW mid-merit starting 2020 and the 1,200-MW baseload starting 2024.
The first two CSPs were successful but the last one resulted in a failed bid. Meralco had pushed for the conduct of a second round of CSP for the 1,200-MW baseload starting 2024 but later on decided to discontinue this.
“On top of the 1,200MW last year, we were supposed to have two more baseload CSPs this year. We just combined the 1,200MW and portions (600MW) from the two other baseload CSPs this year to make it to one new CSP of 1,800MW,” he explained.
He added Meralco will review the line up after the 1,800MW is bidded out to consider the effect on present and future power demand of the current situation.
