A welcome show of resolve from the ERC


LATE last week the Energy Regulatory Commission (ERC) announced it had rejected 11 applications for approval of power supply agreements (PSAs) between electricity generating companies and electric distributors. It was a minor story for that day but it has a number of important long-term implications.

The rejected applications were for ERC approval of negotiated PSAs between electric cooperatives in various parts of the country and a handful of power generating companies, such as Ayala’s GN Power, Alsons’ Western Mindanao Power Corp., the Lopez Group’s Energy Development Corp., and San Miguel’s two power generation concerns, San Miguel Consolidated Power Corp. and San Miguel Energy Corp. The reason for the ERC’s disapproval was pure technicality – they were legally defective, ERC chair and CEO Jose Vicente Salazar explained, because they did not present the required Verification and Certification of Non-Forum Shopping.

Salazar noted that the Supreme Court has ruled in several cases that unless a compelling reason to waive these sorts of basic requirements is presented, not meeting them, no matter how inconsequential they may actually be, is ground for rejecting an application.

The attention to detail on the part of the ERC is a change from the way the regulatory agency ordinarily handled applications of this sort during the administration of former President BS Aquino 3rd, even if it may just represent a bit of stubbornness on the part of the regulator. The broader issue involved in all this is the requirement, first handed down by the Department of Energy a couple of years ago and overseen by the ERC, that PSAs are to be developed as a result of competitive bidding, unless compelling circumstances (such as no generating companies submitting bids) prevented that.

The rationale behind the requirement was to give consumers better value through more reliable and competitively priced electricity supply. Not surprisingly, competitive bidding faced opposition from the power generation, and even distribution, sectors trying to prevent to from being enforced. At least they tried to water the regulations down so they would not lose the advantage of individually negotiated PSAs, in which generators could command higher prices for the electricity they produce.

In that sense, the ERC’s move looks like tit-for-tat; if certain generators and distributors are going to persist in trying to find ways around competitive bidding, the ERC is going to nitpick over every letter and punctuation mark in their documentation, and reject it – which is well within the commission’s legal authority to do – at the slightest anomaly.

The ERC’s holding those whose business it monitors to strict account according to established laws and regulations is praiseworthy, and we hope it continues in a consistent, transparent way. Forcing electric distributors to start the process of securing supply of power from step one, so we are told by industry advocates of the old way of doing business, does raise the specter of power shortages if deals are not made in time. But that will only happen if the generating companies and the distributors make the condemnable choice not to serve their customers.

The ERC, which has been for years maligned, and justifiably so in many instances, as a tool of a profiteering power industry, has taken a small but most appreciated step to establish its firm independence for the sake of the public interest. We hope that the commission builds on this to increase its credibility even more, which will not only serve the public, but also help to create the “level playing field” potential investors in our power sector are looking for.


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