Supply me to the moon
Bayan Muna Rep. Carlos Zarate, the human rights lawyer from Davao City, hometown of the motorbiking Duterte Harley, came up with quite a suitable description for it: “midnight deal.”
He was referring to the supply contract between Meralco and its subsidiary, RP Energy, operator of the 600-MW power plant in Subic, Zambales.
It seemed that Meralco and RP Energy slipped in the contract at the last minute, just when ERC was about to require distributors to bid out supply contracts, supposedly so they would get the best possible prices to benefit their customers.
So Zarate wanted power sector police ERC, the Energy Regulatory Commission, to put the approval of the contract on hold.
Just recently—surprise—Meralco holding company called MGen came out with an interesting update on the deal that could send your imagination flying all the way to the moon.
Its SVP, Angelito Lantin, reportedly revealed that its subsidiary RP Energy would secure the ERC approval this month already.
There—despite the call for ERC to hold the deal, the MGen executive seemed to be confident in their getting the ERC approval.
It was possible, of course, that MGen only wanted to sooth the nerves of some worried creditors, including those with hundreds of millions of pesos in exposure to RP Energy.
Assured approval of the midnight deal, este “supply contract,” would surely raise the comfort level of banks on the company’s ability to repay its loans.
Question: How in the world could MGen predict what ERC would do?
Word went around in the industry about the possible reason behind such optimism: the 90-day suspension of the ERC chair, engineer-lawyer Jose Vicente Salazar.
Based on recent hearings in the House of Representatives, only Salazar—out of the five members of the commission en banc—stood in the way of the supply contract.
When Salazar became ERC chair two years ago, he set out to implement a forgotten provision in the law called Epira, the Electric Power Industry Reform Act of 2001, which was supposed to help bring down our electricity rates, said to be the second highest in Asia, although the rates more than doubled in the past 16 years.
The law said that, in getting into contracts for power supply, distributors must undergo CSP, “competitive selection process,” meaning, bidding.
At the very least, according to Epira, distributors must get two qualified bids for their supply, and one of them would have to come from companies that they did not own.
In other words, distributors would be open season to all power suppliers.
Unfortunately, because of still mysterious reasons, ERC forgot about the provision in all the 15 years of Epira.
Of course NGOs noted the presence of quite influential players in the power sector.
Thankfully, Salazar came around to force its implementation, and under him, ERC even set the start of the competitive bidding rule in November 2015.
Based on the House hearings, however, a couple of ERC commissioners maneuvered the postponement of its implementation by five long months, reset as it were to April 2016.
Salazar was on record to have opposed the resetting of the deadline.
Anyway, those five months were more than enough for some distributors to go into some supply contracts with their own companies, and they included Meralco.
From what I gathered, ERC employees had to do overtime work on the last working day of April 2016, so that ERC could accept seven contracts, all from Meralco and its companies in power supply.
That perhaps fueled the suspicion of lawmakers like Zarate regarding the last minute supply contracts of Meralco.
Just when ERC extended its deadline for five months, the only member of its five-man commission en banc that opposed the extension, well, got an amazing 90-day suspension.
In no time at all, some MGen official voiced out his prediction of ERC approval of the contract between Meralco and RP Energy.
Insiders told us that Meralco had submitted seven supply contracts, covering some 3,500 MWs, as a result of the benevolence of ERC in extending the deadline.
