Metro Manila (CNN Philippines, May 6) — The Supreme Court (SC) has ruled that all power supply contracts secured by electricity distribution firms should go through competitive bidding.
Voting 10-2, the high court struck down a series of decisions made by the Energy Regulatory Commission (ERC) which postponed the competitive selection process (CSPs) for deals between power plants and distribution utilities.
SC arrived at the decision during a special en banc session on Friday, May 3, for a case lodged by consumer group Alyansa Para Sa Bagong Pilipinas, Inc. against the Manila Electric Co. (Meralco), the biggest power distributor in the country.
In 2016, the consumer group asked the high court to stop the ERC from approving a 20-year power supply deal between Meralco and seven power plants, saying these were entered into via negotiated deals rather than competitive bidding.
In a statement sent Monday, the court ruled that the ERC “committed grave abuse of discretion” for delaying the implementation of public bidding for power supply agreements (PSAs) despite existing guidelines.
The court said the CSP requirement is provided in the implementing rules of the Electric Power Industry Reform Act of 2001 “for the protection of the consuming public.”
A circular issued by the Department of Energy (DOE) mandates all electricity distribution companies to go through public bidding before signing supply deals, which is meant to result in the lowest cost of power. This should have taken effect June 30, 2015. However, the ERC postponed its implementation by nearly a year, having issued two resolutions which pushed back its effectivity to April 30, 2016. By then, the court said 90 PSAs have been submitted before the regulator, including long-term deals beyond 20 years.
“The ERC’s delegated authority is limited to implementing or executing competitive selection process in accordance with the 2015 DOE Circular, not postponing CSP so as to freeze CSP for at least 20 years, effectively suspending CSP for one entire generation of Filipinos,” read the decision penned by Senior Associate Justice Antonio Carpio.
With the ruling, the SC said all PSA applications filed by electricity firms with the ERC on June 30, 2015 or later are “required to comply with the CSP.”
“Thereafter, the Supreme Court further ordered that the power purchase cost after compliance with the CSP shall retroact to the date of the effectivity of the PSA, but in no case earlier than 30 June 2015, for purposes of passing the purchase cost to the consumers,” it added.
Bayan Muna party-list submitted a subsequent request to nullify the Meralco supply contracts, calling them “sweetheart deals” given that the generation companies which will supply over 3,500 megawatts are its sister firms. These are the Central Luzon Premiere Power Corporation, St. Raphael Power Generation Corporation, Panay Energy Development Corporation, Mariveles Power Generation Corporation, Global Luzon Energy Development Corporation, Atimonan One Energy Inc., Redondo Peninsula Energy Inc., which were tagged as respondents.
