Published
By Myrna M. Velasco
The Energy Regulatory
Commission (ERC) is targeting to prescribe a “benchmark rate” that shall serve
as reference price in the conduct of Competitive Selection Process (CSP) in the
supply contracting of the Private Distribution Utilities (DUs) and the electric
cooperatives (ECs) of the country.
Instituting a
“reference price” or even a “fixed rate” for power supply agreements (PSAs)
underpinned by CSP had been among the discussion-points set out by the ERC in
successive consultations with the industry stakeholders.
The conduct of CSP in
the supply procurements of power utilities had turned into an “inescapable
reality” in the industry following the ruling of the Supreme Court on such
policy enforcement.
In the proposed CSP
rules of the regulatory body, it noted that it shall “utilize a financial model
in calculating the benchmark rate,” with inputs such as capital and operating
costs; rates of return and technical parameters.
The industry regulator
is also propounding review of the rates “on a regular basis”, and as of last
week’s consultation with the industry, proposals laid on the table include rate
adjustment for generation companies (GenCos) that may only be held once every
five years.
“The model will take
into account relevant factors such as, but not limited to, the type of contract
(financial or physical), the load factor, load shape and location or reference
node to calculate the benchmark price for a portfolio of efficient new
entrant-plants to match the terms of the PSA being addressed,” the ERC said.
On the proposed
benchmark rate, the ERC emphasized that in the interim, it will be publishing
its approved PSA rates – every January of each year, “to serve as initial
benchmark rate for the DUs.”
The capital recovery
component of the benchmark rate, as explained, shall refer to “capital-related
component to recover the cost or investment over the economic life of the plant
together with a reasonable rate of return.”
On the operating and
maintenance (O&M) fee component, this delves with the “recovery of
operating and maintenance cost which may be broken down into local and foreign
components.”
The CSP processes for
DUs, as prescribed by the Circular of the Department of Energy, shall be
administered by a bids and awards committee – and the power utility must also
observe transparency in undertaking competitive bidding on supply contracting.
Direct negotiations,
emergency procurements, the submission of unsolicited proposals as well as
exemption from the CSP exercise are also being laid down in the rules.
The exemptions in
particular shall apply to generation projects funded by technical grants or
donations; the provision of supply by state-run Power Sector Assets and
Liabilities Management Corporation (PSALM) from its undisposed assets; and the
small-scale renewable energy facilities (the maximum capacity of which shall be
at 1.0-megawatt).
Emergency procurement,
on the other, may be carried out by affected DUs “due to occurrence of force
majeure, fortuitous event or other analogous circumstances,” and the PSA
duration shall not exceed one year.
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