Bidding a must to ensure lower power rates, says Petilla

03:37 PM October 21st, 2015

Competitive bidding for all power supply requirements of distribution utilities (DUs) should be mandatory instead of optional to get the best power rates for consumers, Liberal Party candidate for senator and former energy secretary Carlos Jericho Petilla said on Wednesday.

Petilla, the brains behind the landmark regulation called “Competitive Selection Process” or CSP, said in a statement that the circular is already helping achieve the goal of bringing down cost of power in the country and ensure transparency in the procurement process.

He cited as concrete examples at least two areas in Regions 1 and 3 where the practice of demand aggregation and competitive bidding yielded a per kilowatthour price of P3.12 and P3.20, respectively, as opposed to the recently negotiated Meralco rate of P4.20 per kw.

“This is the best example why CSP should be mandatory. Anything that two companies negotiate on but people pay for can’t be kept secret. It has to be open,” he said.

Department Circular No. DC2015-06-0008 applies to power supply contracting of distribution utilities, including Meralco. It mandates that all CSPs undertaken by DUs must increase the transparency needed in the procurement process to reduce risks, promote and instill competition in the procurement and supply of electric power to all electricity end users.

Some sectors, however, are pushing for a voluntary enforcement of the CSP circular, Petilla said.

Meralco president Oscar Reyes earlier said that distribution utilities must be allowed to do the CSP side by side with bilateral negotiations to help them determine which ones could really yield a better deal for electricity consumers.

However, Petilla maintained that the circular must be mandatory. He said only when the process is competitive can customers be assured that they are getting the best price instead of negotiated rates as what happens in bilateral contracts.

“Making the circular’s implementation optional is tantamount to watering down the regulation and defeating its principal aim,” he stressed.

He also allayed concerns that additional costs of third party auctioneers would lead to higher power rates to be passed on to consumers.

He said bidders are required to post bidding fees that can be used to pay for the services of auctioneers, adding that compared to the hundreds of millions, if not billions, involved in power contracts, a minimal service fee to be set by government for third party auctioneers “is a drop in the bucket.” The Energy Regulatory Commission and the DOE are expected jointly issue the guidelines and procedures for the aggregation of the un-contracted demand requirements of DUs and the process for the recognition or accreditation of the third party that will conduct the CSP.