‘Swiss Challenge’ a CSP option for DUs

by Myrna Velasco November 5, 2015

http://www.mb.com.ph/swiss-challenge-a-csp-option-for-dus/

Swiss challenge or an auction process that allows a third party to match an unsolicited bid is aligned among the forms of competitive selection process (CSP) that has been mandated for the distribution utilities (DUs) on securing their power supply agreements.

This was indicated by Acting Energy Undersecretary Mylene Capongcol when asked on the methods of CSP that the DUs could execute on their power supply procurements.

That was in reference to the Resolution No. 13 Series of 2015 of the Energy Regulatory Commission (ERC) which effectively kicked off the enforcement of mandatory CSP for all private distribution utilities and electric cooperatives.

Several provisions of the resolution came as puzzle to the industry – for both the DUs and the generation companies. Nevertheless, the Department of Energy (DOE) and ERC signified that the details have yet to be studied.

Capongcol said the forms of CSP that will be permitted shall include: Bidding, Swiss Challenge and a method that is anchored on the Government Procurement Law wherein direct negotiation is allowed after two failed biddings.

Industry players have opined though that “bidding” alone has different variations, so the prescriptions in the Resolution shall at least be clarified to all affected stakeholders.

The ERC has not issued guidelines on the controversial CSP version set out by former Energy Secretary Carlos Jericho Petilla. Instead, the regulatory body extracted its own CSP draft back in 2013 and became the basis of its resolution.

Under it, DUs are now required to undertake mandatory CSP on their power supply agreements, but without the aid of a third party – which has been a main feature of the Petilla-DOE version.

When asked on his reaction about the CSP mandate issued by the ERC, Petilla told media “that’s their call… for as long as guidelines will ensure that true competition will not be compromised.”

ERC Chairman Jose Vicente B. Salazar said the policy will be effective upon publication of the resolution.

The only exception to the CSP process would be the PSAs already filed with the ERC, but the ones just completed negotiations must still be subjected to the auctioning process.

The DUs though may conduct direct negotiation with generation companies after the conduct of two failed biddings on their supply procurement.

“Direct negotiation with interested party for the supply of electricity may be made by the DU after at least two (2) failed CSPs,” the ERC said.

A CSP is considered failed, according to the ERC, if “no proposal was received by the DU; only one supplier submitted an offer; or the competitive offers of suppliers failed to meet the requirements prescribed under the terms of reference of the CSP.”

“For PSAs already executed but are not yet filed or for those that are still in the process of negotiation, the concerned DUs are directed to comply with the CSP requirement before their PSA applications will be accepted by the ERC,” the regulatory body has stipulated.

Salazar explained that this is just an initial form of the mandated tendering process on DUs’ supply procurement; and that a fine-tuned version will still be issued eventually.