THE Energy Regulatory Commission (ERC) is proposing to amend the rules governing the power supply agreements (PSA) of distribution utilities and power suppliers to streamline the approval process to shore up investor confidence.
In a draft resolution, the ERC said the proposed changes are meant to expedite resolution of PSA applications and facilitate the entry of new generating capacities to support growing demand.
A PSA is a contract entered into by a distribution utility (DU) and a power supplier to procure a certain capacity for a price as a result of a competitive selection process (CSP). The CSP policy requires DUs to procure power through a transparent bidding exercise to secure least-cost supply.
One of the ERC’s proposed amendments is the immediate approval of the lowest bid under the executed PSA resulting from the CSP, as long as it complies with the guidelines and shows no indication of anti-competitive behavior.
Meanwhile, for PSAs resulting from direct negotiation, the ERC will review for reasonableness in terms of costs, risk allocation and other contractual terms “to ensure compliance with the least-cost obligation of the DU.”
Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 tasks the ERC with promoting competition, encouraging market development, and expanding consumer choice in the electric power industry.
The law also requires the Department of Energy (DoE) to facilitate and encourage reforms in the structure and operations of DUs for greater efficiency and lower costs.
In 2015, the DoE issued a circular requiring DUs to undergo CSP in securing their PSAs to ensure “transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability.”
In a recent open commission meeting, ERC Chairman and Chief Executive Officer Francis Saturnino Juan questioned the agency’s current evaluation methodology for PSAs.
He said the ERC still reviews rates based on cost-based methodology, even if contracts came via tendering or selection processes.
“Is our failure to honor the result of the CSP conducted in accordance with the DoE circular a violation of the DoE circular itself?” he said.
Mr. Juan said backlogs may affect investor confidence as they could end up not pursuing the power supply contracts because the bids are not honored.
“Maybe it is high time that we engage the stakeholders on a possible amendment to our existing guidelines,” he said. — Sheldeen Joy Talavera
