Meralco non-committal to ‘Swiss challenge’ plea on supply contracts

By Myrna Velasco – Updated April 19, 2018, 4:17 PM
from Manila Bulletin

Energy Secretary Alfonso G. Cusi personally made his appeal to Manila Electric Company (Meralco) to subject its controversial power supply agreements (PSAs) to a Swiss challenge, but he has not gotten definitive commitment from the utility firm on this plea.

Energy Secretary Alfonso Cusi (MANILA BULLETIN FILE PHOTO)

He said this was raised during a discussion he had with Meralco Senior Vice President Rogelio L. Singson, who is also the President of Meralco PowerGen Corporation, the giant distribution firm’s power generation investment arm.

Cusi divulged that the response he got from Singson was that, as an industry player, the utility firm would also need to look at the competitive selection process (CSP) rules being enforced by the Energy Regulatory Commission.

A ‘Swiss challenge’ is being proposed on the PSAs of Meralco for these deals to finally have their legal tenability tested and to really gauge if their proposed tariffs are cost-competitive enough to the Filipino consumers.

Cusi said he is putting forward this recommendation, so these supply deals could finally make their way out of the controversies, especially so since these are also hounding the power projects tied to them.

He noted that Swiss challenge could be an acceptable option, because that also falls within the ambit of the CSP policy being enforced on the supply procurement of distribution utilities.

“They can have that subjected to Swiss challenge… whatever is a legal process, I’m not going to demand something that is not legal,” the energy chief stressed. A Swiss challenge entails matching the offer or tender of the original project proponent.

Cusi further emphasized that his main concern would be “to make sure that it is affordable and fair to everybody.”

The energy chief added “I’m not against Meralco… it’s just a good process, and I want assurance of supply and I’m looking at 2021, 2022 to 2030, we need to build up on investments,” Cusi said.

At least two power plant projects of Meralco PowerGen – the Subic and Atimonan coal-fired power projects, are now at more advanced stages of implementation, but the firm cannot totally move with construction phases yet because their PSAs are still gridlocked by regulatory approval.

For the two-unit RP Energy coal-fired power project at aggregate capacity of 600 megawatts, total financing had been placed at P56 billion (or US$1.28 billion).

And on the company’s 1,200MW Atimonan One Energy Inc. project in Quezon province, Singson previously apprised media that cost estimate had already been re-adjusted to US$3.0 billion or more than P150 billion.

Singson previously indicated “this (Atimonan project) to us is a very, very high priority because this is the first 2x600MW ultra super critical plant in the country and this is a single biggest investment at P153 billion, about $3.0 billion which means this can significantly increase foreign investments.”

He qualified that in terms of project approvals, “everything is in place – from financing, EPC (engineering, procurement and construction), BOI (Board of Investments) approval, connection agreement with the National Grid Corporation of the Philippines, LGU (local government unit) support and we even have in place our O&M (operation and maintenance) joint venture, what is missing is the PSA, unfortunately.”

Singson emphasized the proposed Atimonan plant “is shovel ready,” adding that the company “continues to make sure that the community is very supportive of this project.”

He further narrated “I personally met with the Mayor and the bishop of Lucena just to get the full support and we’re staking the reputation of the Meralco Group and the entire MVP group in this project.”

On the project sponsor-firm’s standpoint, “we want Atimonan to be a major model for recipient of project of this scale, so we are banking on transforming the small, sleepy town of Atimonan to be a major community after the project is completed,” Singson said.

At construction phase, the power generation investment arm of Meralco would be targeting 3,000 to 4,000 workers at the site, hence it is also making sure that “the community is ready for such a scale of movement of workers.”