By:
Ronnel W. Domingo - / 05:49 AM August 04, 2018
The Energy Regulatory
Commission (ERC) is looking into the possibility that distribution utilities
(DUs), particularly electric cooperatives, are overcontracting their power
supply at the expense of consumers.
“We must ensure that
the contracts entered by the DUs are indeed required and not become stranded
costs that will be passed on to the consumers,” ERC chair and chief executive
Agnes Devanadera said in a statement.
Devanadera noted most power supply agreements (PSAs) include a “take or pay”
provision, which means that the supply must be paid for whether or not the
electricity is received—and that this cost is passed on to the consumers.
She said she ordered
the review and revision, “if warranted,” of the agency’s policy on the approval
of PSAs amid reports of alleged over-contracting by rural utilities.
“I have directed our
technical staff to look into the bilateral contracts entered by and between DUs
and generation companies (GenCos), more particularly on the aspect of
justifications offered on the need for the contract,” Devanadera said.
“We have already summoned to our office some electric cooperatives that were
reported to be expecting a generation rate increase due to newly approved
contracts to explain and for them to come up with measures to mitigate the
impact of power rate increases that they will implement,” the ERC chair said.
“Distribution utilities
should be responsible and conscionable enough to ensure that they should only
contract power supply that would address their power requirements so as not to
burden the consuming public with an unreasonable high cost of power,” she said.
Devanadera said that
for applications on the approval of PSAs, utilities should be able to prove
that the PSA would redound to the benefit of consumers.
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