OPINIONS and OPTIONS
By ELINANDO B. CINCO
Some praise is due to the Department of Energy (DOE) and its Secretary Cusi for issuing the 2018 DOE Circular on Competitive Selection Process, which was upheld by the Supreme Court recently.
Because of the Department of Energy’s efforts, we got the excellent news this past week about the Meralco bidding for contract capacity of 1,200 MW on Monday and the 500 MW on Wednesday cutting down generation charge.
These two successful bids are a promising step into a brighter future for us all, and a positive glimpse of things to come, especially in the power industry.
It is a good thing that the DOE is not being affected by the efforts of militants like Bayan Muna and its many personalities. The 2nd Successful Competitive Selection Process (CSP) of Meralco, led by DOE is an excellent answer to those blocs who have been tirelessly working against the setting up of more power plants.
It seems like they want our country to go back to the 1990s where there were rotating brownouts. They continue to go against the “Build, Build, Build” agenda of the administration.
It is quite clear that our country is in dire need of more power supply, and additional capacity to the grid. This is evidenced by the growing number of red and yellow alerts in the Philippines. But this sector still manages to try to forestall new power plants from being started. We desperately need more power supply for our growing economy and continuous development.
But kudos to the DOE and to companies like Meralco for sticking to their mission of bringing reliable and cheap power to households and customers, despite the counterproductive efforts of activists.
It was music to my ears when Meralco announced on September 11, 2019, the successful conduct of another bidding, for a contract to supply Meralco 500 MW of mid-merit capacity effective December 26, 2019, for a term of 5 years.
This was done in accordance with the DOE circular requiring distribution utilities to procure power through Competitive Selection Process (CSP). The CSP was administered by the Third-Party Bids and Awards Committee (TPBAC) that was constituted pursuant to the DOE circular. The process was faithfully followed by all participants.
And contrary to the fiery messages and communications from oppositors, we, as consumers, can rest assured that the CSP process is being followed and upheld faithfully.
Everything they are doing is aboveboard because DOE is closely watching and closely monitoring.
The distribution utility informed the public recently that after the opening and evaluation of the bids that day, the TPBAC declared the bids submitted by First Gen Hydro Power, Phinma Energy, and South Premiere Power to be the best bids.
I can truly say that consumers won this week. Because of the successful bids from the CSP, we will soon enjoy lower rates. Thus, I am praising DOE Sec. Cusi for immediately implementing the Supreme Court decision and for closely overseeing the Meralco bidding.
Much gratitude also goes to Meralco for conducting a fair and transparent bidding in accordance with the 2018 DOE circular which resulted in generation charges that were much lower than currently prevailing generation charges from gas and coal power generation companies.
Meralco ensured that the bids will be lower than current generation charges through the mechanism of a sealed reserve cap which was lower than prevailing generation charges. In fact, the bids of PHINMA, SMEC, and SPCC were even lower than Meralco’s reserve LCOE cap, thus proving that the Meralco bidding created a very price competitive atmosphere which resonated across all bidders. We as consumers can expect that the other biddings to be conducted by Meralco will result in even lower generation charges to the great benefit of customers.
First Gen Hydro Power Corporation’s bid was for contract capacity of 100 MW with an all-in headline rate (VAT inclusive) of 5.1908 PhP/kWh and Computed all-in Levelized Cost of Energy (LCOE), VAT Inclusive, of 5.3989 PhP/kWh. Phinma Energy Corporation’s bid was for 110 MW at all-in headline rate, VAT inclusive, of 5.5858 PhP/kWh and Computed all-in LCOE, VAT inclusive, of 5.5858 PhP/kWh. South Premiere Power Corporation’s bid was for 290 MW and had an all-in headline rate, VAT Inclusive, of 5.5347 PhP/kWh and Computed all-in LCOE, VAT inclusive, of 5.7527 PhP/kWh.
I am firm that CSP will result in additional savings and, ultimately, least cost to consumers. It will be recalled that Meralco also successfully bid out 1,200 MW of baseload capacity last September 9.
Reports say the resulting prices from the CSP are significantly lower than their average generation cost today of around R5.88 per kwh (VAT inclusive). Recent bidding for 500 MW expects to save consumers R4.4 billion annually for the next five years. This is equivalent to a rate reduction of around R0.13 per kwh for consumers, starting December 26, 2019.
Along with the results of the first successful CSP, consumers are projected to enjoy total savings of around R13.86 billion a year, or a rate reduction of R0.41 per kwh.
These new contracts will ultimately lead to the much-needed additional power supply to address our growing demand for power in the country. The bid prices submitted were pro-consumers. Meralco’s 6.7 million residential customers will enjoy lower rates for the next 10 years.
This is a process that tries to combine best practices of both private and public procurement. The best news for us all is that based on reports, the savings for a typical household of R41 per kwh translates to annual saving of R984 per year.
Let us not let those angry militants get in the way of true progress for our nation.
Tags: Elinando B. Cinco