THE Energy Regulatory Commission (ERC) plans to review the rules for power supply agreement (PSA) for generating companies to address a regulatory backlog and encourage more investment, a top official said over the weekend.
ERC chairperson Francis Saturnino Juan said the current rules for power supply agreements (PSAs) are too “rigid and time consuming.” He said that even after a PSA has undergone a CSP, the ERC still conducts its own review and determines what the allowable rates should be based on a cost-based review.
This often leads to rates that are unacceptable to the parties, causing them to terminate the agreements, Juan said.
He said that as an example, a generator won a contract with a distributor at a price of P5 per kilowatt-hour, but the ERC only approved P1.
“He just won’t implement it. He’ll just terminate the contract because that’s not my bid. So there are situations like that. The investment just doesn’t continue,” Juan said.
He said the Supreme Court, in the Alyansa case, declared that the CSP should be the “open and transparent way of procuring power,” which would satisfy the distribution utilities’ (DUs) obligation to secure the least cost of supply under the Electric Power Industry Reform Act.
Juan said the Supreme Court also upheld the validity of the CSP circular issued by the Department of Energy, and the ERC “has no option but to follow the circular.”
Under the proposed amendments, if the required CSP process has been followed and “there are no badges of anti-competitive behavior,” the results of the CSP would be upheld and adopted.
“This would streamline the entire PSA review process of ERC and make it more stable and predictable. This way, we are able to attract more investments in generation or make competition work to make generation prices lower for the DUs,” Juan said.
“That’s moving forward. For existing, we’d just have to complete the evaluation and decide soonest. We’ll do a pubcon first then finalize and approve. Only after then will it become effective,” he said, using an abbreviation for “public consultation.”
The Philippine Independent Power Producers Association (PIPPA), a professional organization for independent power producers, supports the ERC’s proposal.
“We wholly support this and we welcome this approach. We believe in the CSP process and that the winning bidder’s price should be respected as it is the result of an open and competitive bidding,” PIPPA executive director Anne Estorco-Montelibano said.
She said the ERC’s review should only focus on whether the distribution utility and the winning bidder adhered to the CSP process, not on the price itself.
“Price should not be a factor in the review as it has undergone a transparent and fair market competition,” Estorco-Montelibano said.
She said delays in approving power supply agreements and ancillary service procurement agreements expose distribution utilities and consumers to the volatility of spot market prices.
