BIPCOR slams Banelco for alleged hasty award of power supply deal

Bantayan Island Power Corp. slammed what it described as the hasty award by Bantayan Island Electric Cooperative of a 15-year, 15-megawatt power supply contract to a new supplier in Bantayan Island.

BIPCOR director Fichte Peñaloza said in a statement during the bidding process for a new power supply deal that the company was eased out of the process when Banelco refused to open its second envelope.

BIPCOR’s power supply agreement with Banelco will expire in November 2021.  Both BIPCOR and Isla Norte Energy Corp., a joint venture of Vivant Integrated Diesel Corp. and Gigawatt Power Inc., submitted separate bids during the 2019 competitive selection process for a new PSA conducted by Banelco.

“We emphasize that we have partnered with the Bantayan Island community for years, witnessing its growth and development. BIPCOR has been the stand-alone power generator and new power provider of Banelco since 2006. However, to our dismay, what transpired during the bidding process was an apparently systematic and coordinated effort to ease Bipcor out as Banelco’s sole power provider at all costs,” Peñaloza

He said the opening of bids was conducted on Sept. 20, 2019 with representatives of both bidders present. 

“Our bid documents in the first envelope were ‘all passed’ except for the certification from the supplier of the diesel engine generator set which was ‘not notarized’. After our summary disqualification, BIPCOR’s second envelope was being returned unopened but our representative, Mr. Reinerio Lastimoso, insisted on leaving the envelope in the third party bids and awards committee’s hands to safeguard the integrity of BIPCOR’s financial offer while the notary issue was unresolved,” Peñaloza said.

“The committee declined the custody but the financial offer remained properly sealed and TPBAC members signed off on its cover and seal. Under CSP rules and the Supreme Court decision making public bidding of all power procurement mandatory from June 2015 onwards, the distribution utility like Banelco constitutes the TPBAC to conduct the CSP. Of its five members, at least two are consumer representatives,” he said.

The CSP bids came in two envelopes, including the technical proposal and the financial offer and they were to be opened sequentially, after qualifying each envelope separately. 

“On Banelco’s hasty award to the other consortium, we maintain that there was gross violation of the rules governing the grant of PSA, the bidding protocols and the CSP as mandated by the Department of Energy. Our disqualification from the bidding due to a simple and minor defect in our document—which was not even listed in the bidding procedures—was absolutely without basis. Thus, it was highly anomalous and illegal for Banelco to arbitrarily proceed with the grant of the contract to Vivant,” Peñaloza said.

He said compounding BIPCOR’s problems was the CSP rule that any party protesting or contesting a decision of TPBAC should pay a non-refundable protest fee which should be determined by TPBAC itself, and in this case was set at P3.6 million. 

“Under that rule, resort to court action to fight for our rights and secure a competitive price for Banelco members-owners could only be had after BIPCOR paid the substantial, non-refundable protest fee of P3.6 million. We paid the price, otherwise consumers in the island could be denied cheaper electricity if the financial proposal of BIPCOR was not opened,” he said.

“Still, Banelco denied our protest, refused to open our second envelope and issued last November its notice of award of the PSA to Vivant, prompting BIPCOR to file before Mandaue RTC Branch 84 a petition for injunction with prayer for the issuance of a TRO and a writ of preliminary injunction.

BIPCOR, however, failed to secure the TRO after the judge denied its application a day prior to the deadline for submission by the parties of their respective memoranda.

Mandaue City Regional Trial Court Branch 84 Presiding Judge Joe Noel Lawas, in an order dated Feb. 21, 2020 but received by BIPCOR lawyers on June 3 via electronic mail, denied the company’s motion for reconsideration to stop Banelco’s award of a 15-year supply contract to a new supplier—Isla Norte Energy Corp., a consortium of Vivant Integrated Diesel Corp. and Gigawatt Power Inc. 

“The lower court’s denial of our motion for reconsideration of the order denying BIPCOR’S application for TRO opens our case to the appellate and higher levels where we may have a better chance of presenting our case for BIPCOR and for the Banelco coop members. For all intents and purposes of CSP, there was actually no bidding when TPBAC and Banelco refused to open Bipcor’s Second Envelope, leaving only one financial offer on the table,” Peñaloza said.

Vivant recently claimed it sealed the 15-year PSA with Banelco for the supply of 15-MW power supply and announced that it would construct a 23-megawatt diesel-fired facility to energize Bantayan starting next year.

“That is simply not true. The announcement unduly preempts the outcome of the pending litigation between the parties and the rigorous evaluation of the PSA by DOE on CSP compliance and the Energy Regulatory Commission on least cost,” Peñaloza said.

“As things stand, there was only one financial offer opened and considered and least cost can hardly be determined under those circumstances. The notice of award issued by TPBAC chairman Ronald Aloyan and Banelco general manager Lee Rivera said the PSA was awarded to Vivant consortium ‘as the lowest calculated and responsive bidder having submitted the bid price offer for TCGR [true cost generation rate] amounting to P13.3060 (pKWH) exclusive of VAT… ”

The generation charge actually collected from electric coop members is the SAGR or subsidized approved generation rate which is net of the subsidy paid out of the missionary electrification charge all electricity consumers pay under universal charges. Today, the missionary charge is about P0.15 pkWH. In the case of Vivant’s TCGR if applied to Banelco’s June 2020  SAGR of P6.2546, the subsidy all consumers will pay would be about P7.0514 pKWH. 

Banelco has a franchise population of 138,000 with 23,401 captive customer connections, 21,212 of them residential. Its annual energy sales are projected to reach 52 million kWH at the onset of the new PSA next year, reaching over 106 million kWH once the new PSA ends in 2036. 

“If a failure of bidding is declared, BIPCOR will pursue a new bid to make sure the competitive process is observed.  If, on the other hand, our second envelope is opened and considered, we will concede to whatever the better rate offer is for the Banelco coop members and the rest of the country’s electricity consumers who pay the missionary electrification subsidy,” Peñaloza said. 

Topics: Bantayan Island Power Corp. , Bantayan Island Electric Cooperative , power supply
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