Meralco announced lower electricity rates for this month. This continues what consumers hope will be trend toward more economical power pricing.
If electricity rates are lower, it is because generation costs are coming down. They are coming down because of the competitive selection process (CSP) now required for distribution utilities awarding power supply agreements (PSAs) to producers.
CSP forces competitive bidding. It forces power producers to run their plants more efficiently and maintain the tightest margins in order to win PSAs. In this competitive environment, only the fittest survive. In the end, this is a win for consumers.
No PSA is more coveted than the ones with Meralco, the nation’s largest distribution utility. Because of the sheer volume of its power purchases, Meralco is able to attract the most efficient power providers to supply its franchise area. The distribution utility is able to include in its power supply agreements hefty fines on its suppliers for failure to deliver the volume contracted. These fines, apart from providing assurance of supply, are also passed on to benefit consumers.
This week, Meralco held the first PSA auctions for long-term supply contracts. In the auctions for baseload capacity, three power suppliers offered the lowest prices: Phinma Energy Corp., San Miguel Energy Corp. (SMEC) and South Premiere Power Corp. (SPPC).
Phinma offered to supply 200 MW at a rate of P4.750, SMEC 330 MW at P4.6314, and SPPC 670 MW at P4.6314. These prices are substantially lower than the electricity costs that consumers in the Meralco franchise area paid for historically. They are certainly much lower than other distribution franchise areas.
A new regime of cheaper energy is in the offing.
Meralco is likewise offering PSAs for 1,200 MW of power generated using greenfield technologies. For this segment, Meralco set high efficiency and low emissions (HELE) technology standards.
We are entering a more benign period of green energy deployment. Only a large volume distribution utility can encourage businesses to invest in more environmentally friendly power generation.
The recent round of PSA auctions is a much-delayed event. Leftwing lawmakers from Bayan Muna have long been obsessed with Meralco’s power purchases. They delayed the award of new PSAs (and hence, the construction of new generating capacity) by petitioning the Supreme Court to compel the distribution utility to observe the competitive selection process.
The Court eventually ruled in favor of the petitioners, but not before the delays in investments in new generation capacities made our power reserves perilously thin. Now that auctions are being held to finally award PSAs using the competitive selection process closely supervised by the Department of Energy, the same leftist agitators are complaining about Meralco’s involvement in choosing consumer representatives to the third-party bidding and awards committee.
Energy Secretary Al Cusi had explained this aspect. In drafting the DOE circular on the competitive selection process, the regulators wanted to ensure consumer interest are protected through competent representatives.
Perhaps the leftist groups want to appoint their own know-nothing mouthpieces to that panel with no other objective than to indulge in populist agitprop to play to the crowd. That will not serve consumers well.
Glass
Much concern has been raised about the proliferation of substandard flat glass products imported cheaply into our market. This is a serious public safety concern.
Modern high-rises use steel frames and glass skins. If either the frames or the skins are substandard, the slightest quake can produce an immense calamity.
In response, the Department of Trade and Industry (DTI) recently issued Administrative Order 19-05. The order sets product standards for flat glass products. On the basis of these technical standards, the mandatory Philippine Standard (PS) licensing scheme will be issued.
The new technical standards complement standards earlier set for steel products. With stricter regulation of key construction components, public safety is better assured.
The DTI order, however, could not be enforced. Makati RTC Judge Ma. Caridad Villamor-Yee issued a writ of preliminary injunction against the DTI order.
Complainants in this case are two influential groups of glass importers. They claim that the DTI order setting standards for flat glass products was issued without hearing out their side. They characterize the order as oppressive and irregular. The order, they say, will create a “virtual monopoly” by making it virtually impossible for some importers to bring in their products. They even warn that the DTI order could have adverse repercussions for government’s infra program.
The complainants, quite oddly, were joined by the Citizens Crime Watch (CCW), an organization that claims to be fighting criminality, corruption and wrongdoing in government. CCW has threatened to file administrative and criminal charges against DTI Secretary Ramon Lopez, Undersecretary Ruth Castelo and Executive Director for consumer protection James Empeno. Threats like this are par for the course for agencies with regulatory functions.
CCW has a reputation for hair-trigger filing of cases. This is the same group that filed plunder charges against former president Benigno Aquino III and former health secretary Janet Garin in connection with the Dengvaxia controversy.
But regulatory issues should not be entirely about which businesses are harmed and which are not. They are also about what science and technical expertise dictate. Otherwise, we ought not to suppress those who peddle harmful products such as banned drugs on the ground their business interests will be harmed.
This particular controversy over setting standards for flat glass products will, hopefully, be settled with public safety and consumer protection as the foremost considerations.
Of course, while lawyers wrangle, the injunction stays and the mandatory standards could not be enforced.