DOE to junk Meralco’s emergency supply procurement plea despite shortage

The Department of Energy (DOE) is inclined to disapprove the plea of power utility giant Manila Electric Company (Meralco) for emergency supply procurement despite highly probable supply shortages that could descend into rotational blackouts during the 20-day Malampaya shutdown this October and in the May 2022 elections.

In a Congressional hearing, DOE Undersecretary Felix William Fuentebella indicated “I don’t think it will be recommended favorably or it will be granted because it does not address the supply issue.”

The proposed interim power supply agreement (IPSA) is between Meralco and Masinc Power Partners Co. Ltd. (MPPCL) of the San Miguel group; and it prescribes that the former will procure additional 220MW to augment its supply during the critical periods when Malampaya will have its preventive maintenance shutdown on October 2-22 this year; and for next year’s polling period when demand will also surge because of the summer months.

Meralco, in particular, is seeking the IPSA’s exemption from the competitive selection process (CSP) given the urgency on its need for additional supply; and that the negotiated deal by the parties is likewise priced cheaper than the previously approved rates by the Energy Regulatory Commission.

But Fuentebella insisted the IPSA will not likely be greenlighted because “it is in a way circumventing the CSP policy issue, which is a protection to our consumers.”

Nueva Ecija Representative Rosanna Vergara, nevertheless, questioned the DOE official that if the 220MW capacity purchase from the Masinloc plant will be an additional supply for Meralco, “why will it not address the supply issue – if it will add more capacity into the franchise area of Meralco?”

Fuentebella merely responded “it’s because they will just get it from the same existing supply. And the emergency procurement - when it will be utilized, it should not be utilized to circumvent the general competitive selection process. So combining these two, these are the reasons for not granting such application.”

Vergara thus reminded the DOE that it is in the agency’s Circular itself that mandates the need “to negotiate the procurement of emergency power supply provided that the cooperation period of the corresponding PSA (power supply agreement) shall not exceed one year.”

The lawmaker further specified that in the same policy of the DOE, it was similarly stipulated that “the rate shall not be higher than the latest ERC-approved generation rate,” with her stressing that “it is what it seems to be with this Masinloc Power Partners that Meralco wants to go into for additional 220MW.”

Vergara added the reason for such propounded emergency procurement to be carried out by a distribution utility like that of Meralco, is for it to contract with power suppliers “to have these IPSAs to avert (supply) shortages.”

As laid down by Meralco, the IPSA will serve as an extension of the utility firm’s power supply deal with MPPCL, which was first cemented in 2019 and due to expire this year.

The capacity to be contracted, under the supply pact, will be for a minimum of 220MW for the initial six months; and will be ramped up to 260MW in the succeeding six months.

Meralco reiterated the IPSA had been priced significantly lower at P6.9161 per kilowatt hour (kWh) compared to the cost in their original supply deal which had been at P11.0022 per kWh; and is likewise substantially cheaper than the previous peaking rates that the company had signed with other power suppliers.