GenCos urged to offer ‘least cost’ in Meralco supply tendering

Published July 19, 2019, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2019/07/19/gencos-urged-to-offer-least-cost-in-meralco-supply-tendering/

With several power supply agreements (PSAs) expiring this year, power utility giant Manila Electric Company (Meralco) is soliciting PSA tenders for aggregate capacity of 2,900 megawatts both from existing power facilities and then greenfield projects due to come on stream by year 2024.

For Filipino consumers to really benefit from “lowest cost power supply,” Laban Konsyumer, Inc. (LKI) President Vic Dimagiba is calling on all power generation companies (GenCos) to make offers in the three sets of competitive selection process (CSP) that Meralco has been scheduling for its power supply procurement.

“The CSP process will ensure that the much-needed power supply will be provided at the least cost possible, which will in turn benefit consumers,” the former trade and industry official noted; adding that the CSP itself “was designed to ensure the best bids and the least cost to the consumers.”

The 2024 requirement of Meralco will be for 1,200MW base load capacity and that is being auctioned this year within the purview of the CSP policy guided by the Department of Energy’s circular and as upheld recently in a ruling of the Supreme Court.

The bulk of power supply deals due for competitive bidding will be to replace its contracts falling due this year and in the coming years. So far, three CSP tenders had been scheduled by the power firm for its new PSAs.

For the greenfield capacity, the power firm has factored in the gestation period of new power plant projects – which normally takes 4-5 years from permitting to securing financing; tapping engineering procurement and construction (EPC) contracts up to the actual construction and advancing the plant to commercial operations.

Under the Power Supply Procurement Plan (PSPP) submitted by Meralco to the DOE, it was shown that three more PSAs will expire in December this year; while another one already lapsed in May.

The major PSA maturing in December is for the 1,065-megawatt contracted capacity from the Ilijan gas-fired power facility with South Premiere Power Corporation (SPPC) of the San Miguel group – the plant of which has been catering to the baseload and mid-merit capacity needs of the power utility company.

The others are the 250MW contracted capacity from the Pagbilao coal plant of Therma Luzon Inc. of the Aboitiz group; and the 260MW PSA-underpinned procurement from the Masinloc coal plant acquisition of the San Miguel group. Both plants serve the base load capacity requirements of Meralco.

The contracts that already expired had been those of Philippine Power and Development Company (an embedded facility); the PSA with Therma Mobile Inc. of the Aboitiz group but was renewed with interim power supply agreement (IPSA) during this year’s summer months; plus the one with Sem-Calaca power facility of the Consunji group which had also been set for renewal. The rest of the PSAs that had fallen due had been with Panay and Toledo plants and the 1890 Energy Corp. plant which all catered to the peaking capacity needs of Meralco.

For its future power requirements that will be supplied by prospective PSAs from greenfield or new-build power facilities, Meralco noted that such had been anchored on forecast demand growth mainly of its captive end-users or the segment of consumers that has to be continually served by their franchised distribution utilities.

From the utility firm’s captive peak demand of 5,658 megawatts in 2019; that is seen rising to 6,557MW in 2024 or an increase of 899MW plus the increasing supply needs also of the commercial and industrial end-users that it will be continually serving. Based on the company’s projections, demand growth will reach as high as 1,059MW in 2024; and will climb higher to 1,110MW in 2028.

In its forecast of coincident peak demand, Meralco noted it factored in franchise demand growth rate of 2.76-percent and has likewise taken into account the pace of migration of contestable customers.

The contestable end-users are those customers that can already exercise their freedom of choice in contracting their power supply with their preferred electricity suppliers – being the mandate under the Retail Competition and Open Access (RCOA) policy as sanctioned by the Electric Power Industry Reform Act for the liberalized power sector.