The lower-than-reserve price offers in the competitive selection process (CSP) of the 1,800 megawatts power supply agreements (PSAs) for power utility giant Manila Electric Company (Meralco) will result in cheaper electricity rates for consumers, according to the Department of Energy.
Energy Secretary Alfonso G. Cusi cited the bid offers as very encouraging. “It will definitely bring down rates which would be to the benefit of our consumers,” Cusi said.
He qualified though that the CSP is a work in progress, which aims to help us achieve electricity tariff levels that are affordable and competitive enough to attract both foreign and local investors to do business in the Philippines.
Bid offers by subsidiary-firms of San Miguel Corporation in the CSP auction of Meralco had been below the reserve price set by its third party bids and awards committee (TPBAC) at P5.2559 per kilowatt hour.
Excellent Energy Resources Inc. of SMC Global Power Holdings Corporation submitted a winning bid of P4.1462 per kWh for 1,200-megawatt of gas-fired power capacity; while its Masinloc Power Partners Co. Ltd. tendered a price offer of P4.2605 per kWh for 600MW of coal-fired power capacity.
The price bid in the gas capacity is cheaper by P1.1097 per kWh if reckoned vis-à-vis the reserve price and as calculated on levelized cost of energy (LCOE) basis; while the winning offer in the coal capacity is lower by P0.9954 per kWh.
On the part of Meralco, Lawrence S. Fernandez, vice president of the utility firm and CSP-TPBAC Secretariat, noted that the lower price bids they cornered had been a continuation of the CSP outcomes that they had in 2019 – wherein consumers then were warranted to enjoy savings of as much as P13.86 annually in their electric bills.
“As evidenced in the past, a successful PSA and the resulting PSA signings will result in additional savings, and ultimately, least cost to consumers,” he stressed.
Fernandez emphasized that as of last year, “Meralco’s customers experienced net rate reduction of P1.3870 per kWh, equivalent to bill reduction of more than P277 for a 200-kilowatt hour household.”
The power firm executive further asserted “with this continued downward trend, largely due to these new power supply contracts, Meralcao’s rate today are at their lowest levels in three years.”
For the new capacity additions under the PSAs, SMC previously indicated that it will be expanding its gas-fired power capacity by 1,200 megawatts, proximate to the site of the 1,200MW Ilijan gas facility in Batangas – in which the company serves as independent power producer administrator (IPPA) until next year; and then the gas plant will be turned over to it following the lapse of the asset’s Build-Operate-Transfer (BOT) contract with the government.
The propounded coal plant in the newly cornered Meralco PSA serves as an expansion of its existing Masinloc plant which has a capacity of 630 megawatts.