Senator Alan Peter Cayetano filed a resolution to postpone the bidding for Manila Electric Company’s (Meralco) 600-megawatt and 400-megawatt power supply requirements until its terms of reference (TOR) are reviewed to ensure fairness in the selection of bidders and arrive at the true lowest cost for the supply of energy.
Cayetano introduced Senate Resolution 1090 on July 29, 2024 urging the Senate to call on Meralco to defer its competitive selection process (CSP), saying the current rules remain unclear and may put certain bidders at an advantage at the expense of power suppliers that use indigenous natural gas.
“The Terms of Reference (TOR) of CSP 1 and CSP 2 do not reflect the real preference afforded to indigenous natural gas and its full utilization,” the veteran legislator wrote in the resolution.
The seasoned lawmaker had initially raised these concerns during a public hearing by the Senate Committee on Energy on July 18, 2024 on the impending depletion of Malampaya gas and the country’s transition to cleaner fuel sources.
During the hearing, the senator noted that Meralco appears to favor power generation companies that utilize imported coal.
“The Malampaya indigenous natural gas will be unutilized if the indigenous natural gas-powered plants are not given a chance to fairly compete.”
In his resolution, Cayetano wrote that the Malampaya indigenous natural gas will be unutilized “if the indigenous natural gas-powered plants are not given a chance to fairly compete in CSP 1 and CSP 2”.
This, he added, is “contrary to the policy and objectives of the EPIRA and Department Order No. 002023-10-0022 of transitioning to a clean energy mix.”
Cayetano also criticized Meralco’s TOR for treating the historical actual costs of non-fuel items as merely evaluative and non-binding.
According to him, this approach disadvantages indigenous natural gas suppliers by allowing bidders with other energy sources to submit bids with lower fuel costs, only to eventually pass on higher non-fuel commodity costs to consumers.
“The lack of clarity in the rules regarding TORs in the biddings will result in the underutilization of our indigenous natural gas [and] open the possibility of circumventing the distribution utilities’ obligation to supply their captive customers in the least-cost manner,” Cayetano wrote.
“The CSP must ensure fairness and competition in the bidding process so that only power suppliers offering the true least-cost supply will be contracted,” he added.
“Meralco could influence the results of the bidding by altering the definitions of certain concepts in their TOR.”
Additionally, Cayetano noted that Meralco could influence the results of the bidding by altering the definitions of certain concepts in their TOR, such as “greenfield”.
According to the Energy Regulatory Commission, “greenfield” refers to projects that are not yet existing, constructed, or financed. However, Meralco defined it as plants that are operational as of January 2020.
In the July 18 hearing, Cayetano said the Department of Energy and the Energy Regulatory Commission “should seriously consider stopping. It wouldn’t cause too much delay clarifying all these rules and pending cases”.
