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In blow to Meralco, SC orders competitive bids for power-supply deals

A lineman from Meralco checks on electric cables in San Andres, Manila, in this BusinessMirror file photo.

THE Supreme Court, voting 9-2 with one abstention, has mandated the conduct of a competitive selection process (CSP) on all power-supply agreements (PSAs) submitted by distribution utilities on or after June 30, 2015.

The  SC-Public Information Office (PIO) said the Court en banc granted the petition filed by Alyansa Para Sa Bagong Pilipinas Inc. in a decision penned by Senior Associate Justice Antonio Carpio.

In granting the petition, the Court en banc held that the Energy Regulatory Commission committed grave abuse of discretion amounting to lack or excess of jurisdiction when it unilaterally postponed the effectivity of the CSP requirement by issuing ERC Resolution 13 and ERC Resolution 1.

The CSP rules require power distributors to get at least two offers for supply of electricity before awarding a PSA, ensuring the least cost for electricity consumers.

The Court pointed out that the authority of the ERC was limited only to the implementation of the CSP, and that the ERC had no power and authority to postpone the CSP’s application.

As a consequence of the SC ruling, all PSA applications submitted by the DUs on or after June 30, 2015, were required to comply with the CSP in accordance with 2015 circular issued by the Department of Energy (DOE).

The 2015 DOE Circular, which became effective on June 30, 2015, mandated all DUs to undergo CSP in securing PSAs.

Furthermore, the Court directed that the power purchase cost after compliance with the CSP shall retroact to the date of effectivity of the PSA, “but in no case earlier than June 30, 2015, for purposes of passing the purchase cost to the consumers.”

The implementation of the 2015 DOE Circular was set aside after the ERC issued on October 20, 2015, Resolution 13. Such stated that pending the issuance by the ERC of a prescribed CSP, a DU may adopt any accepted form of CSP, subject to certain minimum requirements or standards to be incorporated in the terms of reference.

It also allowed direct negotiation after at least two failed CSPs and set the cut-off date for the compliance of the CSP requirement to November 7, 2015, instead of June  30, 2015, effectively postponing the implementation of the DOE circular.

Battle over resolutions

However, on March 15, 2016, the ERC issued Resolution 1, which restated that the effectivity of the CSP requirement for PSAs is on April
30, 2016, instead of November 7, 2015, as previously set in ERC
Resolution 13.

With the issuance of ERC Resolution 13 and ERC Resolution 1, the implementation of the CSP under the 2015 DOE Circular was effectively postponed for a total of 305 days, from June 30, 2015, to April 29, 2016.

“The delegated authority to implement CSP does not include the authority to postpone or suspend CSP for 20 years, beyond the seven-year terms of office of the ERC Commissioners postponing or suspending the CSP, and beyond the seven-year terms of office of their next successors, as well as beyond the six-year terms of office of three Presidents of the Republic,” the Court said in ruling against the ERC.

The Court noted that a total of 90 PSAs were submitted for approval with the ERC for the period April 16, 2016, to April 29, 2016, with terms spanning more than 20 years.

The Alyansa Para Sa Bagong Pilipinas along with intervenor Bayan Muna have claimed that the issuance of the assailed ERC resolutions was motivated by a desire to give more time to Meralco and respondent generation companies and other players to enter into self-negotiated PSAs, in violation of the CSP policy of the State.

They alleged that by extending the CSP deadline from November 2015 to April 2016, the ERC allowed Meralco to enter into seven PSAs with its affiliated power-generating companies, tying up 3,551 megawatts, or 90 percent  of its supply, to 20-year contracts that would cost consumers P12.44 billion a year.

Concurring in the ruling were Chief Justice Lucas P. Bersamin, Associate Justices Diosdado Peralta, Mariano del Castillo, Estela Perlas-Bernabe, Marvic M.V.F. Leonen, Jose Reyes Jr., Ramon Paul Hernando and Rosmari Carandang.

Those who dissented were Associate Justices Alfredo Benjamin Caguioa and Andres Reyes Jr. while Associate Justice Francis Jardeleza abstained.

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