Viewpoint: Meralco Midnight Contracts an ERC-Meralco Conspiracy?

Evelyn Viray Jallorina

Alyansa para saBagongPilipinas

6 October 2017

Did ERC actually conspire with Meralco in making way for MeralcoPowerGen to sign the 3,551mw of new power supply agreements?

Our cause oriented group, Alyansa para saBagongPilipinas had filed a complaint with the Office of the Ombudsman against the ERC Commissioners for abuse of discretion and dereliction of duty for extending the November 6, 2015 deadline to April 30, 2016 for the requirement of competitive biddings (CSP) for the signing of Power Supply Agreements that will be charged to the consumers.

Consequently Meralco was able to fast track the negotiation of 3,551mw of power supply agreements with project companies controlled by its sister company MeralcoPowerGen that corner 100% of the base load requirement of Meralco for the next 20 years at negotiated prices. The contracts were signed on April 26 and 27 2016 and filed with the ERC a few days later a day before the extended deadline.

The ERC Commissioners claimed that the extension was not designed to favor Meralco but in response to the request of many affected distribution utilities and IPPs who had signed contracts but were not able to apply with the ERC by the original November 6, 2015 deadline. Allegedly, ERC decided to give them time to complete their applications for those signed contracts.

Meralco claimed that they were NOT one of those who requested which appear to be true because their contracts were not signed until April 26 and 27, 171 days after the November 6, 2015 original CSP deadline.

Meralco and the MVP group however are reported by newspapers to have lobbied against the CSP policy from the beginning.  Their chairman claimed that CSP is illogical and would work against consumers. At various times since 2014, they also lobbied for the delay in the implementation of the CSP policy, to make it voluntary, for them to be allowed to do swiss challenge type biddings. They also fought the requirement by DOE to have the bidding process administered by Third Party consultants. From December 2015 to February 2016 they were reported to have been unofficially lobbying to be allowed by the ERC to do swiss challenge bidding evidently to assure their favored generators win.

Then on March 15, 2016 the ERC Commissioners under Chairman Salazar mysteriously extended the CSP deadline thus giving Meralco enough time to fast track an unheard of 3,551mw of power supply contracts with five (5) strategic partners who have apparently agreed to be the minority partners of Meralco’s power generation sister company, MeralcoPowerGen. That was a record 41 calendar days to finalize very complex power supply agreements that must have included tough negotiations and corporate approvals for the partnership with MeralcoPowerGen.

The ERC Commissioners’ claim however that the extension was not intended to favor Meralco appears to be belied by a twin resolution that they passed on the same fateful day of March 15, 2016.

We noticed that the ERC Commissioners passed an accompanying resolution no. 3 series of 2016,

“A RESOLUTION HOLDING IN ABEYANCE THE ISSUANCE OF THE ERC RESOLUTION SETTING THE ANNUAL INSTALLED GENERATING CAPACITY PER GRID AND NATIONAL GRID AND THE MARKET SHARE LIMITATIONS PER GRID AND THE NATIONAL GRID”

The ERC has this duty to assure the limitations of market share domination as established by Section 45 of the Epira Law. Power generators are limited to own, operate, or control not more than 30% of a grid and 25% of the national grid. Their Resolution recognized that

“Section 45 (a) of Republic Act No. 9136 (R.A 9136), orthe Electric Power Industry Reform Act (EPIRA), states that no company orrelated group can own, operate or control more than thirty percent (30%)of the installed generating capacity of a grid and/or twenty five percent(25%) of the national installed generating capacity;

On 14 December 2005, the Energy Regulatory Commission (ERC) adopted and promulgated Resolution No. 26, Series of 2005 entitled “A Resolution Adopting the Guidelines for the Determination
of the Installed Generating Capacity in a Grid and the National Installed Generating Capacity and Enforcement of the Limits on Concentration of Ownership, Operation or Control Installed Generating Capacity under Section 45 of Republic Act No. 9136” (Market Share Guidelines);”

For the year 2016, the ERC established the limits in its Resolution 3 of 2015 as follows:

To determine compliance of each generator, the ERC was guided by Rule 11 which watered down the restriction to only “control” instead of the Epira Laws criteria of own, operate, or control. There is an issue of the illegality of Rule 11 since it fails to comply with the Epira Law.That means in Luzon no generator should own, operate, or control more than 3,917mw, 709mw in Visayas, and 649mw in Mindanao. Nationally no one should have 4,396mw.

The ERC under its previous Chairman Zenaida Ducut apparently was seeking to correct the error of Rule 11 and had drafted a new formula for determining the compliance of each power generator to include ownership, operation, or control instead of only control.  On August 19, 2015 the ERC published the draft changes and invited all stakeholders to submit their comments under ERC Case No. 2015-005 RM. Signing with Chair Ducut were Commissioners Asirit, Non and Taruc.

The ERC is supposed to establish the new limits for the coming year by March 15 of every year. Why did they “hold in abeyance” the limits instead of establishing one on March 15, 2016?

It appears it was to avoid highlighting limits that could be breached by the concentration of capacity.  The ERC Commissioners seemed to know in advance that the postponement of the CSP that they were passing would result to certain IPP’s to acquire significant power generating capacity.

We suspect that the two resolutions that were passed on the same day were not made independent of each other but a premeditated facilitation of the large Meralco power supply contracts that they knew will beat the April 30, 2016 deadline.

The passing on March 15, 2016 of Resolution 3 of 2016 holding in abeyance the limits on concentration of generating capacity belies ERCs claim that the postponement of the CSP policy that was resolved on the same day of March 15, 2016 were made independently and did not favor Meralco.

We believe that there was clear conspiracy between ERC and Meralco on the CSP. ERC evidently knew that large contracts will be signed and they were preventing the violation of capacity limits.

Will the Ombudsman listen?

Alyansa para sa Bagong Pilipinas