Senator Alan Peter Cayetano has filed a resolution seeking to postpone the bidding for Manila Electric Company’s (Meralco) 600-megawatt and 400-megawatt power supply requirements.

In filing Senate Resolution 1090 dated July 29, Cayetano said that this is 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.

The resolution also urges 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,” he wrote in the resolution.

Cayetano 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, he noted that Meralco appears to favor power generation companies that utilize imported coal.

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 the senator, 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,” he 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.
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."

Bidding delay may result in higher power rates

Meralco reiterated that the conduct of the CSP for its supply requirements is in accordance with existing rules of Department of Energy (DOE) and ERC, and complies with the EPIRA’s mandate to secure the least-cost supply in an open and transparent manner.

“None of the prospective bidders, even the generation companies that use the Malampaya gas, raised issues that can be a basis for postponement of the bidding, hence, Meralco has no valid ground to do so,” Meralco Senior Vice President and Head of Regulatory Management Jose Ronald V. Valles said.

On the previous CSPs that were being questioned, Meralco emphasized that the TORs have certificates of conformity from the DOE. In fact, the ERC found the recent 1200MW CSP of Meralco to be fully compliant with existing laws and regulations, which is the reason why the ERC gave a Provisional Authority to implement the resulting Power Supply Agreement (PSA). This particular CSP was participated in by First Gas’ San Gabriel plant, which submitted a very high price resulting in it becoming non-compliant.

“Again, any generation company can submit offers for these CSP. While we prioritize power plants using indigenous fuel as required by DOE, we have to ensure that it will not violate our least cost mandate under the law. There is no preferential treatment and Meralco always awards the contracts to the compliant bidder that offered the lowest cost”, Valles reiterated.

Meralco also clarified that Santa Rita and San Lorenzo plants, which use Malampaya natural gas, could not join the earlier 1800MW baseload CSP because they are still fully contracted with Meralco on the delivery date of the requirements. These plants have no extra capacity that can supply the 1800MW requirements of Meralco.

While San Gabriel, another plant that uses Malampaya gas joined the bidding for 1,200 MW capacity, its offer of P8.45 per kWh is still beyond the reserve price set for that CSP and was therefore non-compliant. The offer was just significantly higher than the winning bid of about P7 per kWh.

Contrary to some misleading allegations, the TORs for all Meralco CSPs apply to all bidders without discrimination or preferential treatment, and the Reserve Prices, including the bid offers submitted by the bidders are inclusive of all costs, including fuel and fuel-related costs, with no hidden charges. No costs that were not submitted by the bidder will be allowed as pass-through charges under the PSAs. (With Chino S. Leyco)