Taguig court issues TRO vs Meralco's upcoming power supply bidding

The Taguig City Regional Trial Court (RTC) on Wednesday issued a temporary restraining order (TRO) against Manila Electric Company's (Meralco) upcoming public bidding for an additional power supply of a cumulative 1,000 megawatts (MW).

In a five-page order promulgated on July 31, Executive Judge Byron San Pedro of Taguig City RTC-Branch 15-FC, granted the plea of the members of the consortium operating the Malampaya gas field—Prime Energy, Prime Oil and Gas Inc, UC38 LLC, and the Philippine National Oil Exploration Corp. (PNOC-EC)—for the immediate issuance of a 72-hour TRO against Meralco's conduct of competitive selection process (CSP) for its 600-MW and 400-MW power supply requirements after finding merit in the plaintiffs' verified complaint.

"Wherefore, acting on the basis of the allegations of the plaintiffs and on the strength of the evidence as presented in the complaint… the plaintiffs' application for a 72-hour Temporary Restraining Order is hereby granted, subject to posting of bond," the court order read.

"Upon posting a TRO bond which is hereby fixed in the amount of P5,000,000, let a Temporary Restraining Order effective for 72 hours be issued in favor of the plaintiffs-applicants enjoining the respondent Manila Electric Company from conducting its competitive bidding selection process (CSP), under its current Terms of Reference, including the receipt of bids, the award and the implementation of any award arising from (it)," the Taguig RTC said.

The TRO effectively stopped the following:

• Meralco's Invitation to Bid Contract Capacity of 600 MW, effective September 2025, whose bid submission deadline is scheduled on August 2, 2024 at 9 a.m., including all other dates that may be scheduled after; and
• Invitation to Bid Contract Capacity of 400 MW, effective September 2025, whose submission deadline is scheduled on September 3, 2024 at 8 a.m., and all other dates that may be scheduled after.

"Upon evaluation of the allegations contained in the verified complaint for injunction, it appears from the facts shown that great or irreparable injury would result to the plaintiffs-applicants before the writ of preliminary injunction could be heard. In other words, there exists EXTREME URGENT NECESSITY for the writ as to warrant the issuance of Temporary Restraining Order to prevent further damages to the plaintiffs' interests, the government and the environment," the court ruled.

The Taguig RTC's decision stemmed from a 54-page complaint filed by the members of the Malampaya Consortium, who argued that the bid terms violate the preference given to indigenous natural gas under existing laws, and creates a direct threat to the country's energy security and energy sovereignty.

The petitioners said Meralco's bidding through CSP was "flawed, skewed or supplier-driven and grossly violative of existing laws, rules and regulations."

The petitioners sought the issuance of the 72-hour TRO against Meralco prior to a permanent injunction.

Without a TRO, the petitioners said, the bidding would proceed and render the case moot.

The petitioners also claimed the terms of reference (TOR) governing the bids set by Meralco, should be put on hold because it "violates the preference given to indigenous natural gas under relevant laws, rules and regulations."

It referred to provisions in the Electric Power Industry Reform Act (EPIRA) and orders issued by the Department of Energy (DOE) which gives preference to local natural gas in power generation.

The Meralco TOR for the scheduled bids "unduly disadvantages power suppliers which use ING (indigenous natural gas) as a fuel source," the petition read.

The petitioners pointed out that the conduct of the CSPs do not accurately reflect least cost available, as the terms allow imported LNG and coal-based power plant bidders to use lower reference costs, only to later pass on higher cost of fuel and actual non-fuel commodity costs to consumers.

"The favor being accorded imported LNG and coal would also discourage investors from exploring and developing other oil and gas fields in the Philippines, which is a very high-cost, high-risk activity. Eventually, the Philippines may have no indigenous gas sources to speak of," the petitioners said.

"Lack of demand for Malampaya's supply would necessarily lead to lack of revenue, ultimately hitting the government's 60% share in revenues," the petitioners added.

Service Contract 38, which governs the Malampaya operations and had been extended for 15 more years, provides the government a 60% share of net proceeds from Malampaya gas sales.

Government revenue from Malampaya had already reached P374 billion as of 2023. At least P26 billion was earned by the government in 2022 alone.

Finally, the petitioners said the award of new PSAs to plants using imported LNG or coal would "condemn the country to a 15-year reliance" on fuel sources that could also cause detrimental environmental and public health impacts.

"To allow the Subject CSPs which are hard-wired and skewed to favor coal-fired power plants is to take a step backwards which is clearly a digression from the worldwide trend to go for cleaner sources of energy," the petition said.

All CSPs comply with rules

In a separate statement, Meralco Regulatory Management head Jose Ronald Valles said the power distributor has yet to receive the TRO issued by the Taguig RTC on the conduct of CSP for an additional 600 MW and 400 MW power supply.

"We would like to stress however that all CSPs for our supply requirements are done in accordance with existing rules of Department of Energy (DOE) and Energy Regulatory Commission (ERC)," Valles said.

"It is our mandate to ensure that we conduct these in a timely manner, as delay will expose our consumers to unnecessary burden in the amount of billions of pesos in the form of higher power rates," the Meralco official said.

Meralco has been reiterating that any generation company can submit offers for its CSPs.

"While we prioritize power plants using indigenous fuel as required by DOE, we have to ensure that it will not violate our least cost mandate under the law. There is no preferential treatment and Meralco always awards the contracts to the compliant bidder that offered the lowest cost," said Valles.

Meralco also clarified that Santa Rita and San Lorenzo plants, which use Malampaya natural gas, could not join the earlier 1,800-MW baseload CSP because they are still fully contracted with Meralco on the delivery date of the requirements.

These plants have no extra capacity that can supply the 1,800-MW requirements of Meralco, according to the power distributor.

It added that San Gabriel, another plant that uses Malampaya gas, joined the bidding for 1,200-MW capacity but the latter's offer of P8.45 per kWh was still beyond the reserve price set for that CSP and was therefore non-compliant.

The offer was significantly higher than the winning bid of about P7 per kWh.

"Contrary to some misleading allegations, the TORs for all Meralco CSPs apply to all bidders without discrimination or preferential treatment, and the Reserve Prices, including the bid offers submitted by the bidders are inclusive of all costs, including fuel and fuel-related costs, with no hidden charges," the company said.

"No costs that were not submitted by the bidder will be allowed as pass-through charges under the PSAs," it added. — VDV, GMA Integrated News