THE Energy Regulatory Commission (ERC) has given its go-signal for the implementation of the competitive selection process (CSP) in the procurement of power supplies by distribution utilities (DUs) for their captive markets.
According to ERC chairman Jose Vicente B. Salazar, the move aims to make transparent the manner in which DUs buy electricity from power generators.
The CSP assures that such supply is bought and passed on to consumers at the least possible cost, he said.
Under the CSP, Salazar said that a DU may execute a power supply agreement (PSA) with a generation company only after successfully complying with the requirements of the process.
The requirement is for a DU to openly call for and receive at least two qualified bids from generation companies.
The DU is not barred from entering into a contract for power supply.
The CSP further requires that direct negotiations with other power suppliers be entered into only after at least two failed CSPs.
Once implementation of the CSP begins, the ERC will no longer allow the filing by DUs of applications for PSA approval without compliance with the CSP requirements.
“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,” said Salazar.
In justifying the ERC’s decision, Salazar said the move to implement the CSP “comes after a period of study and consultation with concerned industry players and stakeholders of over two years.”
Salazar pointed out that the study and consultations on CSP started way back in February 2013.
He also said there should be no more delays in its implementation to ensure that the distribution of power supply in the country remains stable.
“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,” said Salazar.
Issued by the DOE through Department Circular 2015-06-0008, the CSP mandates competitive bidding between DUs and generation companies in the sale of electricity via the mediation of a third-party expert.
However, power distribution giant Manila Electric Co. (Meralco) is opposed to the DOE circular.
Meralco warned that the DOE circular would ultimately result in “increased generation charges to the damage of consumers” as it fails to promote the interest of the public.
Meralco said the circular also violates the right of the DUs to choose the manner upon
which they will comply with their least cost obligation under the Electric Power Industry Reform Act (EPIRA) and their franchises.
According to Meralco, 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.
Meralco’s position was supported by CitizenWatch, an independent network of citizen rights advocates, saying that the CSP would only cause power rates to go up.
CitizenWatch said that the CSP will not work in an environment where there are not enough power generation players and will be prone to abuse, resulting in higher cost of electricity.