Meralco facing fresh hurdles in power-supply deals via CSP

THE Manila Electric Co. (Meralco) faces yet again another hurdle in securing power-supply deals.

“What we have to clarify,” according to Meralco President Ray Espinosa, is the fact that “what is being regulated by the DOE (Department of Energy) is the process.”

There is need to clarify as well that “the CSP [competitive selection process] has to follow certain guidelines to ensure it is transparent, it is truly competitive and basically attain its objective of securing supply at the least cost,” Espinosa said, when asked how the utility firm will move forward if the DOE will not approve the terms of the power-supply contract.

Meralco could not proceed to rebid via CSP its power supply contract involving 1,200-megawatts (MW) of greenfield capacity without the green light of the DOE. The first auction was declared a failure after only one bidder participated.

Energy Secretary Alfonso G. Cusi has been vocal in saying that he wants more power generation firms to participate in the bid so consumers are assured of affordable and stable electricity.

As such, Cusi said his office would provide inputs upon submission of the bidding terms by Meralco. It has been two weeks since Meralco sent to the DOE the terms of reference (TOR).

One of the suggestions raised by the DOE is to allow existing and old plants to join the CSP instead of allowing only new power plant to supply Meralco.

Espinosa said Meralco had considered this, but the utility firm decided “to proceed on the basis of what we have set out originally, which is to differentiate the brownfield from the greenfield.”

He was explaining that there are financial and economic differences between brownfield and greenfield plants. He also explained that power-supply agreements (PSAs) that are awarded to these types of plants vary and differ in financial and economic terms.

“It  will be difficult for us to move to a situation where a greenfield capacity that we need to ensure reliable and affordable supply will eventually be open to older and pre-existing plants that will crowd out investors or power generators who want to build new plants.

“It would simply be very difficult for them to compete. There is no discrimination against the existing and old plants.

“We cannot just have a situtation where the existing plants and brownfield plants also compete for the greenfield capacity,” Espinosa elaborated.

The DOE also wants to allow bidders to bid for small chunks instead of the full 1,200 MW capacity.

For example, one winner can supply 200 MW out of the 1,200 MW and another winner for 1,000 MW.

The DOE proposal is similar to the two power deals that were also conducted via CSP.

However, Espinosa said the so-called stacking and pay as bid method suggested by the DOE for greenfield plants “goes against the grain of what we’re trying to achieve, which is energy security through reliable and affordable power.”

He added: “And it also goes against the grain of our own power development plan that we have been submitting to the government for the past administrations, including this administration.”

Meralco, he said, has carefully studied the DOE’s suggestions. The agency will receive a formal reply from Meralco soon.

“Our intention,” Espinosa said, is to explain to the DOE the need “to maintain this dichotomy because it’s only in this dichotomy” that incentives are provided to build new plants.

“We feel that our position is reasonable and that we basically have the basis upon which to go for a second round of CSP for the 1,200 MW,” Espinosa said.

Image Credits: Nonie Reyes