MSK Petition for Rule Change on Contracting for Bilateral Contracts For ERC To Pass a Resolution Mandating that the Bilateral Contracts for Power Supply to Serve the Captive Consumers shall be Subjected to Open Competitive Bidding

ERC Case No RM The Meralco Consumers are paying P13.5 Billion a year in higher generation charges of affiliated generation companies vs non- affiliated generators

Reasons for the Petition EPIRA Statement of Policy Section 2 c ( c )To insure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability (f) To protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power. Section 43 (f) In the public, establish and enforce a methodology for setting transmission and distribution wheeling and retail rates for the captive market of a distribution utility, taking into account all relevant considerations, including the efficiency and Section 43 (0) Monitor the activities in the generation and supply of the electric power industry with the end in view of promoting free market competition and ensuring that the allocation or pass through of bulk purchase cost by distribution is transparent, non- discriminatory….

Meralco’s Generation Purchases COAL POWER *Source: Meralco Website SupplierOwn er Capaci ty (mw) ReferenceShare of Supply Ave Rate (4 mons ) Ave Rate Difference July 2014 OctNovDecJanAffiliat e vs Sister per Gen Affiliat e vs Sister in % Meralco s Average Generati on Coal Power Non-Affiliate Sem- Calaca DMCI %3.33 MasinlocAES %3.44 Therma- Luzon Pagbilao Aboit iz %3.62 SMEC-San Migu el 1, %

Meralco’s Generation Purchases COAL POWER *Source: Meralco Website SupplierOwn er Capaci ty (mw) ReferenceShare of Supply Ave Rate (4 mons) Ave Rate Difference July 2014 OctNovDecJanAffiliat e vs Sister per Gen Affiliat e vs Sister in % Coal Power Affiliate Quezon Power- Mauban EGAT -Thai %

Meralco’s Generation Purchases NATURAL GAS SupplierOwn er Capaci ty (mw) ReferenceShare of Supply Ave Rate (4 mons) Ave Rate Difference July 2014 OctNovDecJanAffiliat e vs Sister per Gen Affiliat e vs Sister in % Meralco s Average Generati on php per kwh Natural Gas Non-Affiliate SPPCSMC1, Affiliate First Gas Sta. Rita Lopez1, First Gas San Lorenzo Lopez

SupplierOwn er Capaci ty (mw) ReferenceShare of Supply Ave Rate (4 mons) Ave Rate DifferenceTotal Price Diff (Php Billion ) July 2014 OctNovDecJanAffiliat e vs Sister per Gen Affiliat e vs Sister in % Meralco Ave Php per kw Energygwh or milion kwh4mo Total SEM- Calaca Masinlo c Therma Luzon SMEC/S ual QPL , , SPPC First Gas Sta. Rita , First Gas San Lorenzo , , , TOTAL4,

Meralco’s New 3,000mw capacity Project CoLocationCapacit y MW FuelOwnership% owner ship Annou nced Rate QPPL 2Mauban460CoalMeralco PowerGen 51%4.35 RedondoSubic600CoalMeralco PowerGen 51% Pagbilao - ?500CoalMeralco PowerGen 51% Atimonan1,500Coal & LNG Meralco Power Gen 51% Other Projects Batangas600Summit Group San Gabriel and Santa Maria Batangas1,260LNGFirst Gen

Limits of Supply Concentration Epira RA 9136 Section 45 (a) and (b) 30% of a Grid (Luzon, Visayas, Mindanao) 25% of the National Grid Luzon Grid3, mw Visayan Grid mw Mindanao Grid mw National Limit 3, mw

Monopolization MWContract Yrs Meralco’s Future Demand 20208,000 First Gas1,500 QPPL 440 Mgen – Meralco PowerGen3,00025 First Gen1,26020 Summit Group 6006,80025 Forecasted Share of Energy80% Source: Newspaper accounts and Meralco Website.

Monopolization and Self-Negotiated Contracts are Anti-Consumer 20 to 30% Higher generation rates to consumers Unfavorable fixed capacity charges Barrier to Entry of investments from truly independent power producers who can bring lower cost, new technologies, and promote healthier competition. Competitive bidding is consistent with the Epira Law and its IRR.