Business Mirror
by Lenie Lectura - August 23, 2015
THE Energy Regulatory Commission (ERC) may review the controversial Department of Energy (DOE) circular that requires distribution utilities (DUs) to resort to auction in securing their power requirements from power-generation companies.
ERC Commissioner Josefina Patricia M. Asirit said the agency will “act more prudent” in dealing with the DOE circular on Competitive Selection Process (CSP). The ERC is tasked to come up with the implementing rules and regulations (IRR) in October this year.
Asirit said there could be “far-reaching implications” arising from the implementation of the DOE circular. “But if it will compromise certain aspects, then maybe we should revisit it.”
The DOE circular states that all DUs shall procure power supply agreements (PSAs) only through CSP conducted through a third party duly recognized by the ERC and the DOE.
The circular applies to future contracts. It does not apply to existing PSAs that have been approved or have been filed for approval before the ERC.
Asirit said a technical working group composed of experts from the ERC and DOE was formed to craft the IRR, supposedly within 120 days from the time the circular took effect on June 30.
But the crafting of IRR is a long process, as this would still have to undergo public hearings to solicit comments from industry stakeholders. Besides, she said, Malacañang had just appointed a new ERC chairman.
“This is something which has not been brought yet to the new ERC chair. This is something that we, among the commissioners, need to discuss. There are publications and possibly parties that may want to intervene, which will make the process long,” she explained.
ERC Chairman Jose Vicente B. Salazar, for his part, said the agency “can hire more technical people” to assist in crafting the IRR, and that there is no need to tap the services of third-party consultants. A third-party consultant, he said, “has no accountability.”
Former Energy Secretary Carlos Jericho L. Petilla, who signed the controversial DOE circular shortly before he resigned, earlier said the International Finance Corp. has been tapped by the DOE to conduct a study on the IRR and that the results of which will be forwarded to the ERC. There is no update from the DOE on this.
Salazar said the ERC will promulgate the rules for CSP, but it also has the option to “revisit” the policy. “I’ve been known to be impartial. When I was with the DOJ [Department of Justice], we would consider all arguments and set aside all biases so we could arrive at a fair decision on the matter. I can assure everyone that I will thoroughly study it and that the decision will be fair,” the former undersecretary of the DOJ said.
The Manila Electric Co. (Meralco), a DU that sources the majority of its power requirements through bilateral contracts, is against the mandatory implementation of CSP, saying it will best work if implemented voluntarily.
“Our view is it doesn’t promote the best interest of consumers. It’s a nice concept, an attractive concept, but do it on a voluntary basis,” Meralco President Oscar S. Reyes earlier commented.
Meralco officials said the CSP scheme is unfair because only the DUs and electric cooperatives (ECs) are mandated to comply, but not the generation companies (gencos). “What if the participating gencos are flippers, or those that are not serious? How can the DUs, such as us, get the best rate for our consumers in such cases,” they lamented.
When asked if Meralco would volunteer to adopt the CSP, Reyes said the most appropriate model for Meralco would be “a mix of bilateral, voluntary CSP and WESM [Wholesale Electricity Spot Market].”
Reyes pointed out that different utilities have different requirements. “Will the template for CSP fit everyone? Are we sure that all gencos that will participate are serious? We are only mindful of what’s best for the consumers.” AC Energy Holdings Inc. of the Ayala group, on the other hand, is in favor of the CSP.
“We are obviously in favor and we don’t see that any different from what is already happening in the PPP (public-private partnership] as long as it is run properly,” AC Energy Holdings Inc. President John Eric Francia said.
Francia said the next crucial part is the drafting of IRR. “The devil is in the details. A lot of details and variables need to be thoroughly studied so the intent and the spirit of the circular is addressed properly.”
Francia said power producers, such as AC Energy, should not be mandated to also participate in the CSP. “According to the DOE circular, it’s not mandatory for the gencos. So, we can sell to contestable customers or at the WESM,” he said.
Petilla said he expected industry stakeholders to oppose this all the way to the courts. “For me, this is just common sense. Why is it good and why is it not good? I am quite sure that the DOE will take into consideration any opposition they have, but the main reason we will have CSP is transparency,” Petilla had said.
Industry sources said CSP is also meant “to eliminate self-dealing activities in cases when the DU has an affiliate or sister firms engaged in power generation.”
In the power industry, it is a known fact that Meralco has a power arm engaged in the generation business, while AboitizPower is also involved in distribution business via Visayan Electric Co., Subic Enerzone Lima Enerzone and Davao Light.
Another former energy secretary, Francisco L. Viray, however, viewed it differently. “If that’s what is being targeted, then that is what should be addressed. Why allow cross ownership in the first place?”
Besides, Viray said, there could be other ways in procuring competitively. He also noted that the crafting of the template for the auction is a difficult task. “If it’s going to be an open bidding, then that could even be an avenue for court litigation,” which, Viray noted, could only delay the entire process. source
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