Surprising development

Just recently, the Taguig Regional Trial Court extended a temporary restraining order (TRO) against the Manila Electric Co.’s (Meralco) upcoming bidding for an additional power supply of 1,000 megawatts.

The court extended the duration of the TRO from 72 hours to 20 days as it granted a petition filed by members of the Malampaya consortium who argued that the terms for Meralco’s bidding through a competitive selection process (CSP) violated the preference given to indigenous natural gas under existing laws.

In their petition, the consortium said that the favor being accorded to imported liquefied natural gas (LNG) would discourage investors from exploring and developing other oil and gas fields in the country, adding that the lack of demand for Malampaya’s gas supply would lead to lack of revenues, ultimately hitting the government’s 60-percent share in revenues.

The extension of the TRO came as a surprise, especially for Meralco, saying this impacts its efforts to secure the most cost-effective power supply for its customers. It earlier warned that any delay in the process could result in higher electricity rates.

Meralco noted that the TRO was initiated by the Malampaya consortium which does not participate in the CSP as it does not directly supply or contract with the distribution utility. The members of the consortium are Prime Energy, UC 38 LLC, Prime Oil and Gas Inc. and the PNOC Exploration Corp. (PNOC EC).

Atty. Paris Real, one of the intervenors in the case representing electricity consumers, argued that plaintiff Malampaya consortium has no legal personality to question a bidding process that only generation companies can participate in.

The consortium sells its indigenous gas to First Gen, which is the exclusive buyer of the Malampaya gas and is the one responsible for selling the energy generated by the power plants to distributors like Meralco.

When Meralco conducts a bidding, First Gen is the one who joins, not the Malampaya consortium. Ergo, as claimed by Real, the Malampaya consortium is in no place to question a bidding where its buyer, First Gen, intends to participate.

The consortium and First Gen should instead review the terms of their gas supply agreement and make sure these costs are fair and competitive.

Another consumer advocate Atty. Andres Manuel, Jr. disclosed that the Malampaya consortium’s own witness admitted that fuel prices of indigenous natural gas are higher than imported LNG, and that logically, higher fuel costs would result to higher electricity prices to be offered by their the generating companies using the indigenous gas.

So clearly, what the Malampaya consortium wants is to give preference to First Gen’s natural gas plants, to ensure viability of continuously operating the Malampaya gas field profitably, even if that would mean higher electricity costs.

What the consortium wants, as Atty. Manuel aptly pointed out, is to revise the terms of reference of the CSPs in such a way that would favor indigenous sources. But that is clearly anti-competitive since there is only one source of indigenous fuel.

If Meralco and the government end up tailor-fitting the terms of these CSPs to give the Malampaya consortium preferential treatment, they will violate their own mandate and go against the very core and essence of the EPIRA.

Meralco insists that CSPs are conducted in compliance with the rules and regulations set by the Department of Energy and Energy Regulatory Commission. No discrimination nor favoritism happens during its CSPs because the winning bidder is always the one that submits the lowest offer.

Energy industry authorities, interestingly, are eerily quiet considering the role they play in approving the TORs of the CSPs and the resulting power supply agreements (PSAs) from these government-mandated biddings.

Observers suspect that this is because the Malampaya consortium counts among its minority stakeholders the government-owned PNOC-EC, which in turn is chaired by the DOE.

So why did PNOC-EC agree to the filing of the TRO against biddings that follow the DOE’s own CSP rules? If the DOE thinks there is something wrong with the TORs of the CSPs, then why did it issue certificates of conformity and give a go-signal to the biddings?

We have yet to hear from the DOE and ERC but along with Meralco, they better be mindful of their next steps and be reminded that ultimately, they are answerable to the consumers.

Better use of idle funds

There has been so much brouhaha about a Department of Finance circular directing the transfer of unusued subsidies amounting to P89.9 billion from the Philippine Health Insurance Corp. (PhilHealth) to the National Treasury to support the government’s unprogrammed approriations.

Several groups and individuals have in fact challenged the legality of the fund transfer before the Supreme Court, saying that it is unconstitutional and inconsistent with the Universal Health Care Act which mandates that excess PhilHealth reserve funds shall be used to increase program benefits and to decrease amount of members’ contributions.

It should be emphasized that these unutilized subsidies did not come from member’s contributions. Instead, they are taxpayer-funded subsidies to Philhealth.

As economist and Albay Rep. Joey Salceda pointed out, “we can’t have excess money sleeping around our GOCCs while withholding that same money from public investment. Low government spending reduces growth. Reduced growth creates poverty. Poverty creates hunger. Hunger creates disease.”

The DOF has also explained that it is preferable to use these unutilized subsidies for unprogrammed appropriations rather than introduce new taxes or incur additional debt.

It has been noted that reallocating these funds could boost economic growth by 0.8 percent, potentially raising the total growth rate to 6.5 percent for the year. This reallocation is also expected to create approximately 600,000 new jobs.

Since PhilHealth has sufficient resources to support its members, the unutilized subsidies could play a crucial role in driving economic growth while avoiding new taxes and reducing government borrowing.

For comments, e-mail at [email protected].