SC asked to stop ERC from enforcing DOE circular allowing power suppliers to select bidding panels

Published September 10, 2019, 12:20 AM

by Ellalyn De Vera & Richa Noriega

By Rey Panaligan

The Supreme Court (SC) was asked on Monday (September 9) to stop the Energy Regulatory Commission (ERC) from implementing a Department of Energy (DOE) circular that allows power distribution utilities (DUs) to select their own third party that will supervise the conduct of competitive selection process (CSP) on all power supply agreements (PSAs).


In a petition filed by Bayan Muna party-list, the SC was told that DOE’s new circular, Energy Department Circular 2018-02-003, effectively allowed the DUs, themselves, to appoint a third party to conduct CSPs on PSAs.

Circular 2018-02-003 amended certain provisions of Circular 2015-06-0008 which mandated the selection of a third party recognized by the ERC and DOE or the National Electrification Administration (NEA).

“The fact that the DUs appoint all the members of the third party bids and awards committee (TPBAC) no longer makes the bids and awards committee the ‘third party’ despite the token name. Section 5 of DC 2018-02-0003, therefore, expressly brings back the control of the bidding process to the DUs by repealing the mandatory requirement of a third party,” the petition stated.

In the petition filed by Bayan Muna, through its chairman Neri Colmenares and Rep. Carlos Zarate, the SC was told that Circular 2018-02-0003 violates policies and provisions intended to protect consumers under the Electric Power Industry Reform Act (EPIRA) of 2001 and the Constitution.

The petitioners said Circular 2015-06-0008 “ensures that the DUs do not have complete control of the bidding process so that said DUs cannot frame the terms of references to favor affiliates, associate firm, or selected suppliers.”

They pointed out that a third party recognized by the ERC and DOE or NEA is intended to ensure a sense of checks and balance, as well as transparency, in the bidding process to benefit consumers.

“Whether or not the DUs will manipulate the bidding is of no moment. The fact is, the assailed department circular has expressly reversed provisions favoring the consumers and given the DUs the opportunity to manipulate and the option to control the bidding process which is detrimental to the consumers and violative of relevant laws,” they added.

The petitioners pleaded for the issuance of a temporary restraining order (TRO).

Earlier, the SC had declared final its decision that ordered the conduct of CSP on all PSAs submitted by the country’s power distribution utilities on or after June 30, 2015 “to prevent monopolies that result in exorbitant electricity rates.”

The SC also ruled that “upon compliance with the CSP, the power purchase cost resulting from such compliance shall retroact to the date of effectivity of the complying PSA, but in no case earlier than 30 June 2015, for purposes of passing on the power purchase cost to consumers.”

The decision written by Senior Associate Justice Antonio T. Carpio was anchored on Section 19, Article XII of the Constitution which provides that “the State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”

The SC said that since the authority to distribute electricity is given through a legislative franchise, a regulated monopoly within their respective franchise areas, “competitors are legally barred within the franchise areas of distribution utilities.”

Thus, it pointed out that “facing no competition, distribution utilities can easily dictate the price of electricity that they charge consumers.”

“To protect the consuming public from exorbitant or unconscionable charges by distribution utilities, the State regulates the acquisition cost of electricity that distribution utilities can pass on to consumers. As part of its regulation of this monopoly, the State requires distribution utilities to subject to competitive public bidding their purchases of electricity from power generating companies,” it said.

“Competitive public bidding is essential since the power cost purchased by distribution utilities is entirely passed on to consumers, along with other operating expenses of distribution utilities. Competitive public bidding is the most efficient, transparent, and effective guarantee that there will be no price gouging by distribution utilities,” it stressed.

The issue on CSP was raised before the SC by the Alyansa Para sa Bagong Pilipinas, Inc., represented by Evelyn V. Jallorina and Noel Villon.

Named respondents were the ERC, the Department of Energy, Manila Electric Company (Meralco), Central Luzon Premiere Power Corp., St. Raphael Power Generation Corp., Panay Energy Development Corp., Mariveles Power Generation Corp., Global Luzon Energy Development Corp., Atinoman One Energy, Inc., Redondo Peninsula Energy, Inc. and the Philippine Competition Commission (PCC).

Challenged in the petition were the several postponements done by the ERC in the process of subjecting all PSAs by distribution companies to CSP which requires power distributors to get at least two offers for supply of electricity before awarding a PSA to ensure the least cost for electricity consumers.

The SC decision ruled that the authority of the ERC was limited only to the implementation of the CSP and that the ERC had no power and authority to postpone the conduct of CSPs.