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Friday, March 29, 2024

Competitive power auction starts–ERC

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The Energy Regulatory Commission on Wednesday announced it would start the mandatory implementation of the competitive selection process, or CSP, on the purchase of electricity by distribution utilities.

ERC in a resolution directed all distribution utilities to conduct mandatory CSP in the procurement of their supply to the captive market.

ERC chairman Jose Vicente Salazar said in a separate statement the move aimed to promote transparency in the  purchase of electricity by distribution utilities from power generators.

Salazar added the CSP, which raised numerous concerns among industry players on its implementing guidelines, “assures that such supply is bought and passed on to consumers at the least possible cost.”

Salazar said that under the CSP, a distribution utility may sign a power supply agreement, or PSA, with a generation company only after successfully complying with the requirements of the process.

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The directive calls on a distribution utility to openly call and receive at least two qualified bids from generation companies with which the DU is not barred from entering into a power supply contract.

The resolution, however, did not endorse the delegation of a third party to conduct a CSP. The third party role was cited under the Energy Department’s circular DC 2015-06-0008.

ERC’s resolution, meanwhile, requires direct negotiations with other power suppliers only after at least two failed selection process.

Salazar said the ERC would no longer allow distribution utilities to file applications for approval of the power supply agreement without compliance with the CSP requirements.

Salazar said the resolution “removes all uncertainties on how the CSP will be implemented by the ERC and paves the way for a regime of greater transparency and competition in the power supply procurement  processes in the industry.”

He said the CSP  underwent study and consultations with concerned industry players and stakeholders for over two years.

The ERC chairman also said that there should be no more delays in the implementation to ensure the stable distribution of power supply in the country.

“The process has come to a convincing conclusion that the CSP will promote transparency and competition as it advances the welfare and interest of consumers,” he said.

While the regulator issued the resolution pushing for the implementation of the CSP, the joint guidelines with the Energy Department have yet to be released.

The ERC and the department met Tuesday to fine tune the guidelines and resolve contentious issues. The two said they “are convinced that there is an advantage to be gained by having CSP in place, in terms of ensuring transparency in the DUs supply procurement and providing opportunities to elicit the best price offers and other PSA terms and conditions from suppliers.”

Manila Electric Co., the country’s biggest power distributor, earlier warned that generation rates might go up with the mandatory implementation of the CSP.

It said the circular failed to promote the interest of the public because requiring the distribution utilities to undergo CSP “would ultimately result in increased generation charges to the damage of consumers.”

Meralco said the circular also violated the right of the distribution firms to choose the manner upon which they will comply with their least cost obligation under the EPIRA and their franchises.

“Under the CSP, it will be difficult, if not impossible, for DUs not to contract with a winning bidder that does not have a track record,” it said.

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