Update on CSP Front!
David Celestra Tan, MSK
Consumers were overjoyed when the DOE and then later the ERC passed the rules requiring the bidding or competitive selection process (CSP) for the contracting of power supply. Meralco decided not to obstruct the pro-consumer policy by threatened challenge of it’slegality. So how has it been in the implementation?
Now six months after the DOE passed this bold policy and 2 months after the ERC finally released their own enabling regulatory rule that was supposed issued in October 2015, both the Meralco and Aboitiz groups have announced competitive biddings for the interim and short term power supply for the summer of 2016 with one year power reserve contracts.
These gesture biddings have been expected and but we remain wary that these are designed to demonstrate that they are following the CSP policy and that requiring that Third Parties administer the CSP would not be really necessary.
It will be in the contracting for the plum power supply, the long term base-load contracts, where we can really see whether these two distributor-generator giants are willing to comply not only with the words but the spirit of the CSP idea that is supposed to open the generation market and cause true competition. Meralco still has 2,000mw to go in their announced goal of 3,000mw for their sister company Meralco PowerGen. The 460mw Mauban coal expansion and the 600mw Redondo Power in Subic appear to have beaten the CSP requirement.
Who will seriously participate in these tenders if it is Meralco and Aboitiz themselves conducting the bidding where their own affiliated generators are going to participate. Who really takes seriously swiss challenge type biddings that everyone in the business knows is just a pseudo bidding designed to favor the original “proponent”. It takes a lot of time and resources to prepare serious bids for a multi billion power project. Who would bother if they know the bid committee is a sister company of the one of the bidders. Who bothers with bidding for swiss challenge type tenders?
It will take time for the truly independent power generation investors to believe in the honest to goodness conduct of the CSP before we can see a robust and true competition that can bring down rates. It is not going to happen with mixed signals from the government agencies, specially DOE and ERC, on their resoluteness to truly open the generation market and create competition.
The DOE seemed serious about the words and spirit of its Resolution 2015-06-0008 that mandated CSP. Secretary Zenaida Monsada announced that they will conduct CSP’s for new renewable energy projects, something MSK had been espousing. With so many investors interested in Solar and Wind, why not auction it off to the lowest offered rates and minimize FIT subsidies? With true CSP, solar should come down to P7.00 to 7.30 per kwh instead of the current FIT of P8.69 per kwh, a likely 20% reduction.
Talking about the CSP, the DOE needs to improve its own implementation of the CSP rule for missionary areas where its Electric Power Industry Management Board had been issuing certifications that an electric coop had conducted a CSP without really caring whether the CSP was truly competitive. This had caused the award of sweetheart deals and clearly blatant CSP trickery that were overpriced and huge losses to the government. One such CSP had the winner bidding P9.38 per kwh only to be awarded the contract for P12.80 per kwh. That’s a loss of P175 million per year to the government who by the way passes the subsidy on to the people as part of the universal charge being assessed by the National Power Corp.
The same thing cannot be said of the ERC with it’s unexplainable position not to require that the CSP be administered by Third Parties, an essential to assure a level playing field, transparent bidding process, and judicious evaluation and award. This anemic posture is actually very disheartening to see in the country’s regulatory agency. Unless there is an enlightened change in ERC’s resolve in assuring a truly competitive bidding, we would be seeing another let down of consumer hopes in the numbing pattern of the Epira Law of 2001, its implementing rules of 2003, and now the supposed mandated CSP.
Implementation continue to bedevil the consumers. Meralco’s and Aboitiz gesture biddings are the equivalent of head-fakes in basketball. What a front for true CSPs.
Matuwid na Singil sa Kuryente Consumer Alliances Inc.
