Solidarity in the time of COVID-19 -- MS Supplement

1,200 new megawatts by December

"I hope the Supreme Court sees the folly of this group’s tactic."



The Competitive Selection Process is indeed an important policy reform finally being implemented by the Department of Energy after long consultations and debates with stakeholders, industry and government regulators. Fortunately, legal tussles, an expected reality with game changing policies, have been resolved by the Supreme court order upholding the 2018 DOE Circular on the CSP.

Responding to a looming energy crisis, DOE Secretary Alfonso G. Cusi rightly put pressure on Distribution Utilities to immediately start addressing their backlog of Power Supply Agreements under the CSP process aimed to benefit consumers by instituting a bidding process to ensure lower generation costs.

First to respond successfully was Meralco with its recent announcement of the successful bidding of 1,200 Megawatts contract awarded to PHINMA Energy Corp., San Miguel Energy Corp., and South Premiere Power Corp. The results were even lower than the Levelized Cost of Energy cap and was based on a non-discretionary Pass or Fail assessment administered by a Third-Party Bids and Awards Committee in compliance with the DOE’s circular. These 10-year contracts are expected to be operational in three months’ time. Representatives from the DOE and several generation companies witnessed the proceedings and found the process effective and expressed their appreciation describing the results as “pro-consumer.”

The “all-in” rates provided by the successful bidders already include line rental, VAT, and the cost of power replacement for all plant outages. These energy companies are also obligated to pay a fine if they are unable to deliver the agreed power.

Urgency for more megawatts

Consumer advocacy group has repeatedly echoed the DOE’s warnings of increasing incidence of yellow, red alerts and power outages as shown by data gathered from the group’s daily monitoring of power the situation in the Luzon grid plants (Power Plant Watch).

To support the economic activities needed to sustain the country’s economic momentum, we need to have enough megawatts to power the fast-growing demand. The cost and reliability of power has been a negative factor in attracting more employment-generating foreign direct investments. The urgency to build new and efficient power plants not just to replace the obsolete ones that are so inefficient and therefore expensive to operate puts pressure on the DOE to move fast just to close the 10,000 MW gap in baseload capacity requirements in the next three years.

According to DOE estimates, by 2040, we will be needing an additional 43,765 MW of baseload capacity. With only 1200 MW coming online in December, simple arithmetic shows that we will need to build 42,565 MW more.

Compounding this challenge are the bureaucratic delays in permits that will eat-up around three to five years before a power plant can operate. Plus, the anti-development groups disguised as environmental or pro-poor advocacies who’s full time job is to attack government and bloc projects that have strategic impact to national development.

Why? Because more economic development and prosperity makes their reason for existence irrelevant. If you try to read into all their protests, they are anti-government, anti-big business, anti-development and offer no real solutions.

Their objective is not to offer solutions. Their objective is to discredit the system, create discontent, destabilize the government, creating an untenable situation that opens the opportunity to seize power and establish a socialist dictatorship.

These leftist groups found another target as Bayan Muna partylist filed a petition for a temporary restraining order based on suspicions that the issuance of a 2015 DOE Circular 2018-02-003 allowing the entry of a third party recognized by the Energy Regulatory Commission and National Electrification Administration makes the CSP vulnerable to manipulation. Ironically, they were part of the clamor for the immediate implementation of the CSP. Now they are questioning the first successful bid and want to stop 1200 megawatts from going online.

Hopefully, the Supreme Court will see the folly of this tactic and favor the strategic significance of the DOE’s first successful CSP. Meralco’s template should spark a surge of pro-consumer bids to reboot the long pending PSAs stranded for years in bureaucratic limbo.

If we don’t get these megawatts in time, the first to suffer from the inconvenience, the inflationary effect of brownouts and higher power rates will be the poor sectors of the country which, ironically again, these leftist groups so loudly shout to represent and fight for. Deceivingly, this is their objective.

Topics: Orlando Oxales , Competitive Selection Process , Department of Energy , DOE Secretary Alfonso G. Cusi , Power Supply Agreements , PHINMA Energy Corp. , San Miguel Energy Corp. , South Premiere Power Corp.
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