PEZA ruling against competitive proposal scored

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BAGUIO CITY  – The joint venture of the National Transmission Corporation (TRANSCo) and the Benguet Electric Cooperative (BENECO) questioned the unilateral decision of the administration of the Philippine Economic Zone Authority (PEZA) in rejecting their competitive proposal to operate, maintain and manage the Baguio City Economic Zone’s power distribution system for a 25-year period through the so-called lease concession agreement.

In his letter to PEZA Director-General Charito Plaza, TRANSCo president and chief executive officer lawyer Melvin A. Matibag, who represented the joint venture consortium, stated that the companies jointly submitted to PEZA the following commercial proposal in terms of rate wherein the PEZA concession fee was pegged at P0.1100 per kilowatthour, service fee – P0.1500 per kilowatthour and distribution, supply and metering (DSM) rates of locators – P0.2600 per kilowatthour.

“The announcement of PEZA that it received a proposal from Meralco is an indication and evidence that PEZA has accepted Meralco’s concession fee proposal of P0.1100 per kilowatthour that is for the use of the PEZA-owned assets in the Baguio City Economic Zone to operate, maintain and manage the power distribution system, PEZA agreed with Meralco to be compensated at P0.110 per kilowatthour. If this is not acceptable to PEZA, it would have not accepted Meralco’s proposal and subsequently publish as an original proponent which PEZA wanted other parties to challenge,” Matibag stressed.

He underscored that the joint venture’s proposal is matching Meralco concession fee proposal of P0.1100 per kilowatthour.

On the concessionaires 0&M service fee, Meralco proposed P0.2348 per kilowatthour which is the difference of the existing DSM rate P0.3448 per kilowatthour and the PEZA concession fee P0.1100 per kilowatthour.

He argued that the Meralco proposal intends to maintain the existing DSM rate for the first 4 years of the cooperation period subject to other conditions while the joint venture proposed P0.1500 per kilowatthour which is fixed for 25 years and that there will be no adjustments unless there are changes in circumstances and force majeure events which after the objective and conditions of the lease concession agreement.

“We have clearly indicated that the proposed DSM rates for the locators is only P0.2600 per kilowatthour, hence, there is no other interpretation to the difference between our proposed rates and Meralco’s rates amounting to P0.0848 per kilowatthour but a power rate reduction to be enjoyed by the locators in the Baguio City Economic Zone,Matibag stated.

The TRANSCo and BENECO joint venture noted that PEZA did not issue evaluation framework or methodology that will guide the selection process and PEZA only called for commercial proposal that could challenge Meralco’s proposal.

Since PEZA accepted Meralco’s proposed P0.1100 per kilowatthour concession fee, Matibag argued that it can be surmised that in the absence of published competition rules and evaluation criteria for the said transaction, the contest is principally the final DSM rates for the locators which can be differentiated by the concessionaires 0&M service fee which is consistent with the government’s objective to reduce power rates and as the joint venture understands PEZA mandate to operate and management economic zones that will attract investors to locate in the country.

Earlier PEZA declared that the joint venture proposal is not compliant with PEZA’s board approval to retain BCEZ’s existing distribution rate in the amount of P0.3448 per kilowatthour for the first 4 years of the concession period.

However, Matibag asserted that PEZA never published nor issued to interested parties the content of PEZA Board Resolution No. 18-480 which is a material information for the start of transaction and in fact, PEZA’s clarificatory letter dated October 22, 2018has mislead the joint venture to answer that the difference between their proposed rates and meralco’s rates amounting to P0.0848 per kilowatthour is power rate reduction to be enjoyed by the locators in the BCEZ.

If the PEZA Board Resolution No. 18-480 stated a policy that the existing rate in the BCEZ at P0.3448 per kilowatthour shall be retained, Matibag claimed that PEZA should not have asked the joint venture to clarify the same in the first place and that the joint venture should have been notified that the P0.0848 per kilowatthour will be taken by PEZA as additional or increase in concession fee.

“While PEZA did not provide us a copy of the board resolution, we believe that the said resolution is for the acceptance of the proposal of Meralco for the 25-year lease concession agreement as original proponent. The conditions therein apply only to Meralco and not to competitive proponents like the joint venture,” Matibag said.

He underscored that the board resolution containing a condition that existing distribution rates of P0.3448 per kilowatthour shall be retained is a reiteration of Meralco’s proposal that is acceptable to PAZA board and is not meant to be imposed to other proponents, particularly if the proposal is intended to reduce the rates.

“We believe that the PEZA board would have not declared a policy that will disallow the reduction of power rates in economic zones, thus, the logical interpretation of the board’s acceptance of Meralco’s proposal with the condition to retain the rates is that there will be no power rate increase in the BCEZ for the first 4 years of the concession agreement. It cannot be interpreted as the board will not accept a proposal to reduce power rates in the zone,” Matibag exclaimed.


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