Preventing another 20 years of coal
Lessons from Meralco’s electricity procurement processes
Following a two-year legal battle which effectively prevented seven coal power supply agreements with expensive electricity rates to come into effect for the next 20 years, Meralco risks procuring expensive electricity from coal companies for the next 20 years yet again.
After facing heavy backlash from electricity consumers, Meralco significantly improved the terms of reference for its 1,200 MW and 500 MW tenders in July 2019, compared to the standard terms posted by distribution utilities. Meralco reported that lower electricity rates for February 2020 were due to the new PSAs. Notably, only three out of the six PSAs executed bought electricity from coal power plants.
However, last month, Meralco suspiciously reverted to the standard terms of reference for its 1,800 MW greenfield baseload tender with a 20-year contract term. Meralco is requiring a two-part tariff structure instead of a straight energy price, allows pass-through of fuel costs for the second half of the contract term, grants outage allowances instead of 100% guaranteed supply availability, among others.
To avoid locking-in electricity consumers to 20 years of expensive and dirty coal electricity, the DOE should order Meralco to revise the terms of the 1,800 MW tender and consider incorporating the following recommendations in its draft revised and supplementary CSP policy based on lessons learned from Meralco’s electricity procurement practices.
Read CEED’s latest policy brief here: