Meralco could cut rates – think tank

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MILLIONS of Manila Electric Co. (Meralco) consumers could enjoy lower power rates if Meralco and generation companies halted the power supply agreements (PSAs) between them, according to a Hong Kong-based energy think tank.

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Lantau Group of Hong Kong warned on Tuesday that non-approval of the Meralco PSAs would result in what it considered a “contracting gap” which would allow “cheaper options to creep into those gaps.”

It added that a few business groups, including the Philippine Chamber of Commerce and Industry (PCCI), previously warned that delays in approving the PSAs, now facing opposition from civil society groups, endanger the energy security and hamper the economic growth in the country.

In a presentation during the 2nd Philippine Annual Renewable Energy Conference in Parañaque City last July 19 and 20, one of Lantau’s founding partners, Sarah Fairhurst, said the non-approval of such agreements reopens the competition.

The think tank said a number of civil society groups have considered the Meralco PSAs as sweetheart deals because the majority of these deals were awarded by the latter without bidding to Meralco-controlled or –affiliated generation companies.

The seven Meralco PSAs call for 3,551 megawatts of electricity supply.

It added these groups call these supply agreements “midnight deals” because Meralco and the gencos submit their applications to the Energy Regulatory Commission on the last day before the regulatory body would have required Meralco to bid out the contracts under a competitive selection process (CSP).

Due to delays in implementing the CSP, Lantau doubts the effectiveness of the ERC program in drawing the least cost of electricity for consumers.

“A real CSP process allows the cheapest option to win and thus enhances economic options,” Lantau said. “The current PSA approval process …does not result in the least cost procurement.”

In a House committee hearing last July 4, the ERC said they sought to address issues and concerns raised by industry players pertaining to the CSP scheme.

Soon after the promulgation of the CSP in November 2015 until April 2016, the ERC received letter-inquiries from distribution utilities and gencos “assailing the legal implications of the CSP to PSAs that are currently existing, due for renewal, submitted to the ERC for approval, or otherwise already executed.”

“The ERC developed and promulgated the CSP as an additional safety net to promote consumer interest, though it is not a mandatory requirement under the EPIRA (Electric Power Industry Reform Act). It must be emphasized that the imposition of the CSP does not mean an abandonment of the thorough evaluation process of the ERC nor is it tantamount to the approval of the PSA,” ERC Officer-in-Charge Alfredo J. Non said.

The regulator also pledged to resolve the Meralco PSA petitions within three months and that it will ensure that the cross-ownership limitations outlined in the EPIRA is not breached.

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