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ERC rejects Meralco’s bid to extend supply deal

The Energy Regulatory Commission denied the application of power retailer Manila Electric Co. to extend its power supply agreement with Therma Luzon Inc. of the Aboitiz Group.

ERC ordered Meralco to instead conduct a competitive selection process in the wake of the Supreme Court ruling directing distribution utilities to bid out their supply requirements.

“Pursuant to the Supreme Court decision, Meralco must comply with the competitive selection process requirements provided under the Department of Energy Circular No. DC 2018-002-0003,” the regular said.

The DOE circular stated that all PSAs signed by DUs should be a result of a CSP, except as provided in Section 2 where a DU might be exempted from conducting a CSP in case of negotiated procurement of emergency power supply.

ERC said Meralco failed to substantiate that its situation fell under the CSP exemption.

Meralco filed a motion with the ERC to extend the contract with TMI for three years or until December 25, 2022. 

Meralco and TMI signed a PSA in 2012 for the purchase of 350 megawatts of capacity from the Pagbilao power plant, a coal-fired facility in Quezon province.

Meanwhile, ERC also rejected calls for its representative to be present as an observer during the CSP of power generation companies.

“Considering that the PSA that will  be signed following the CSP proceedings will be eventually filed with the ERC, the presence of our representative might give the impression that the commission has given its stamp of approval on the resulting PSA,” ERC chairperson and chief executive Agnes Devanadera said.

The regulator made its position clear that was not prudent for its representative to be an observer during the CSP process in a recent  letter to the Department of Energy.

ERC expressed concern that the presence of an agency representative would create a perception that the entire CSP proceedings were done in compliance to all applicable rules and might no longer be assailed during the hearing for the application for the PSA approval. 

It said this perception would put ERC’s impartiality in the conduct of the hearings and eventual resolution of the case in question. 

The DOE circular on the CSP required the third-party bids and awards committees of distribution utilities to invite observers in their respective CSP, including the ERC.

It said the presence of an ERC representative as an observer was a concern which was repeatedly raised during public hearings, particularly for adoption of the proposed rules governing the execution, review, and evaluation of power supply agreements entered into by distribution utilities for the supply of their captive market.

“The ERC, acting as quasi-judicial body in hearing applications for approval of PSAs, must comply with the basic tenets of due process.  As such, it must not only act impartial but must also appear impartial and accord every duly recognized interested party the opportunity to scrutinize the entire CSP process during hearings,” Devanadera said.

“Thus, the presence of ERC representatives during CSP proceedings has serious implications.  Having said that, it is our position that we should not act as an observer during the DUs’ CSP proceedings,” she said.

Topics: Energy Regulatory Commission , Manila Electric Co. , power supply , Therma Luzon Inc.
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