ERC prescribes ‘lock-down period’ on all power supply contracts

Published October 13, 2018, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2018/10/13/erc-prescribes-lock-down-period-on-all-power-supply-contracts/

It will no longer be easy for flipping-generation companies to unload capacities that they have tied to power supply agreements (PSAs) because the Energy Regulatory Commission (ERC) shall soon be prescribing “lock down” proviso on contracts.

In the draft rules issued by the regulatory body to relevant stakeholders, it is expressly stated that “the winning bidder shall not be allowed to sell and/or assign the contract to any other entity.”

The only exception, according to the ERC, is if it has “given approval and determination of the assignee or buyer’s legal, technical and financial eligibility.”

Beyond the competitive selection process (CSP) via formal competitive bidding which is the method of power supply contracting being instituted for DUs, the ERC will also be allowing submission of unsolicited proposals from GenCos based on the published requirement of specified power utilities.

DUs could refer to privately owned power utilities such as the Manila Electric Company (Meralco), Visayan Electric Company (VECO), Davao Light & Power Co., Cagayan Electric Power and Light Company Inc. and others; as well as the country’s over-a-hundred electric cooperatives.

In an unsolicited tender, the ERC has prescriptions for capacity cap as stipulated in the draft rules.

“The contracted capacity subject of the unsolicited proposal shall not exceed 10-percent of the DUs total annual peak demand,” the ERC has emphasized.

Additionally, the regulator laid down that “the unsolicited proposal is made public and subjected to competition,” stressing further that “when a distribution utility receives an unsolicited proposal for the supply of electricity, the DU shall then publish and invite third parties to match or improve it.”

The ERC specified that “for an unsolicited proposal to be considered by the DU, the proponent has to submit a complete proposal – which shall include a cover letter, feasibility study which should indicate relevant assumptions; company profile; the draft contract which adheres to the minimum terms provided and other documents that are needed even if proprietary in nature.”

On Swiss challenge, the ERC indicated that the bids and awards committee (BAC) “shall publish the invitation for comparative proposals after receipt of the notification from the original proponent that the latter accepts all the terms and conditions” – and such must be explicitly stated in its letter of acceptance.

It was similarly established that “the deadline for submission of comparative proposals shall not be earlier than 60 days from the date of the last publication of the invitation for comparative proposals.”