DOE raises concerns on bid terms for Meralco power deal

By Lenie Lectura - September 25, 2019

https://businessmirror.com.ph/2019/09/25/doe-raises-concerns-on-bid-terms-for-meralco-power-deal/

THE Department of Energy (DOE) has raised some concerns on the bidding terms of Manila Electric Co.’s (Meralco) power-supply contract that involves 1,200 megawatts (MW) of greenfield capacity.

 “I’m talking to [Meralco] about the certain correction on the TOR [terms of reference]. We’re talking of the size of the plant, not to be limiting…for the plant not to be 100 percent contracted because we want to build our electricity market. Any greenfield plant can opt to contract or sell only, let’s say, up to 50 percent of the capacity,” said Energy Secretary Alfonso Cusi. 

The 50-percent limit is only an example. Cusi said the DOE is still threshing the details out. “We just don’t like it to be limiting, so we encourage more participation so we can build the electricity market, improve our energy capacity, rates and energy reliability. If I sell my capacity at 100 percent then there will be no reserve.  What is left for me to trade it in the market?” Cusi pointed out.

Meralco utility head economics Lawrence Fernandez said the DOE was given a copy of the bid bulletin. “It was clarified in bid bulletins that capacity in excess of 1,200 MW may be sold to others, e.g., the WESM [Wholesale Electricity Spot Market],” he said in a text message when sought for comment on Tuesday.

Meralco conducted a bidding, via competitive selection process (CSP), for the 1,200-MW greenfield capacity on September 15, but it was declared a failed bidding after only Atimonan One Energy Inc., a unit of Meralco Powergen Corp., submitted its offer. Meralco President Ray Espinosa said the TOR was amended in order to attract more bidders.

Cusi’s office received the modified TOR from Meralco recently. Once the DOE gives its green light, Meralco will proceed to publish the bid invite and hopefully conclude the bidding process, within the year. 

If the CSP is  successful, the next step for Meralco is to file the power-supply agreement (PSA) for approval before the Energy Regulatory Commission (ERC).

“We’re hoping this week it would be cleared so we can publish also this week and then we can start the rebidding,” said Espinosa.

The DOE has been vocal in saying that it does not want power-generation companies to sell 100 percent of their installed capacity to distribution utilities (DUs). A sufficient buffer must be set aside for replacement power, ancillary services and spot market. 

In fact, the agency said in May it was crafting a circular that will cap the energy contracted at 70 percent of the power facility’s installed capacity.

“We have to encourage the power plants to be well-maintained. To do this, we’re looking at a 70-percent cap of their contracting with distribution utilities so that they can have more power available for replacement power, for power available for ancillary services and more power available in the spot market,” said DOE Undersecretary Felix William Fuentebella.