DOE’s Cusi says he prefers Swiss challenge option for Meralco PSAs

By Lenie Lectura - April 19, 2018

https://businessmirror.com.ph/does-cusi-says-he-prefers-swiss-challenge-option-for-meralco-psas/

ENERGY Secretary Alfonso G. Cusi on Wednesday said he prefers the power-generation arm of Manila Electric Co. (Meralco) to undergo a Swiss challenge scheme for the power-supply agreement (PSA) applications yet to be acted upon by regulators.

“I’ll not speak on the legal issues. My personal view is that they subject it to Swiss challenge. I am not against Meralco….  I am looking for affordability. I am looking at the tariff. I want assurance of supply. But, at the same time, I am going to make sure that it is affordable and fair to everybody,” Cusi said.

The energy secretary added he discussed this with Meralco PowerGen Corp. (MGen) President Rogelio “Babes” Singson. “Babes told me that the PSAs are already pending with the ERC [Energy Regulatory Commission],” the DOE chief said when asked for Meralco’s reply.

Meralco’s PSAs applications cover a total of 3,551 megawatts with various generation companies (gencos).

These are with Redondo Peninsula Energy Inc., St. Raphael Power Generation Corp., Atimonan One Energy Inc., Central Luzon Premiere Power Corp. and Mariveles Power Generation Corp. of the San Miguel Group and Global Luzon Energy Development Corp. of Global Business Power Corp.

Meralco President Oscar S. Reyes said these PSAs were entered into as early as April 2016. These underwent all the necessary due process, including documentation and public hearings.

However, the ERC allegedly favored Meralco by excluding the power-distributor from the competitive selection process (CSP), which requires distribution utilities and power-generation companies to subject their PSAs to price challenges.

This did not sit well with consumer groups and other sectors. Lawmakers conducted an inquiry into the alleged midnight deals for Meralco.

The agency denied this. The ERC extended the validity of the CSP policy mainly because it wanted to address the valid concerns raised by the distribution untilies and gencos. “The extension of the CSP implementation was not intended to benefit any electric power industry participant, but to give time to those who have already completed their PSAs but failed to submit the same to the ERC prior to the effectivity of the CSP,” the ERC said.

The delay in the approval of these applications and the consequent delay in the financial close and, subsequently, the commercial operations date of the power projects will adversely affect the utility firm’s ability to meet demand growth in its franchise and overall energy security in the Philippines.

“I am not going to demand something that is not legal,” Cusi added when asked if shifting the procurement process to Swiss challenge from CSP is legal.

“It did not go through CSP, that’s the issue. So have it undergo via Swiss challenge,” Cusi said.

Reyes said ERC approval is urgently needed, saying the delay has caused significant increases in the engineering, procurement and construction (EPC) costs and financing costs of the new power plants.

The Meralco official said that if the total costs of the projects were to balloon, then the financing cost would increase, as well. “It would be most unfair to Meralco customers,” Reyes said.

“Costs have been increasing,” he added. “We negotiated very competitive EPC costs. We negotiated competitive costs and also financing terms. I don’t think we can repeat it.”

Reyes could not stress enough the importance of the PSAs, which, he said, are meant to meet additional electricity demand. “We don’t want to create any sort of fears or concerns, but I think you just have to look at reality if you keep on delaying projects. Demand is not stopping,” the Meralco official said.

For now, all Meralco could do is to “continue to make our case and appeal for timely action and decision.”

“Our option is to continue to hope,” Reyes said.