New ERC chief eyes changes in contracting rules
The new chair of the Energy Regulatory Commission (ERC) will push for changes in the agency’s current rules that govern power supply deals. Francis Saturnino Juan seeks to speed up approval processes and regain investor confidence.
While the competitive selection process (CSP) formulated and mandated by the Department of Energy has no issue, the commission’s outdated methodology of cost-based review of power rates has been weighing down on contract approvals, according to Juan.
Juan, who just assumed the post earlier this month, had floated this issue during a recent open commission meeting.
He said the CSP “ensures transparency and competition” in the acquisition of electricity supply by distribution utilities from power generation firms, protecting Filipino consumers from unreasonably high rates.
However, since the present approach of the ERC does not acknowledge the rates included in the proposed power supply agreements—which are supposedly considered the lowest calculated responsive bid—the deals face delays amid long reviews at the ERC.
This, in turn leads to mounting backlogs, he said.
Juan also said that this leads to sluggish capital or investment flows in the market, as private players are discouraged to invest due to low contract prices set after the regulatory review. The investor’s move is either to cancel the contract or just make the capacity available to the Wholesale Electricity Spot Market, he added.
Given this scenario of delayed approvals and distribution utilities’ buying from the more volatile spot market, the ERC chief said consumers will be exposed to high electricity bills.
“Those were some of the thoughts I had when I entered the ERC. So I thought, why not? Let’s engage the stakeholders—including consumers … Maybe, it is high time that we engaged the stakeholders on a possible amendment to our existing guidelines,” Juan said.
He proposed conducting consultations on the potential amendments.
The ERC chair also said that if the issues would be addressed, investors would see less risks associated with their money, which can make them more competitive in the bidding.
