ERC scrutinizes supply overcontracting by DUs

By Myrna M. Velasco – November 1, 2021, 2:23 PM
from Manila Bulletin

The Energy Regulatory Commission (ERC) is rigidly scrutinizing the power supply agreements (PSAs) entered into by distribution utilities (DUs) in its bid to strictly disallow ‘overcontracting’ in the electricity supply procurements of regulated power utilities.

“Our priorities now, we are looking into those expiring and we have started looking into those which have overcontracted. We have to be very firm that we do not allow overcontracting.” ERC Chairperson Agnes T. Devanadera stressed.

She indicated that if DUs will be found to have over-contracted on their power supply purchases, the ERC will have to reduce their capacities, just so the end-consumers will not be saddled with expensive electricity rates.

“We have to be very ‘solomonic’ in our decisions on overcontracting because there will be direct benefits to the consumers when we reduce the capacity of the overcontracted and that will be reflected in the reduction of the rates,” the ERC chief explained.

Devanadera qualified the regulatory body is currently in the process of evaluating at least 512 pending PSA applications – and some of these are up for renewal; while the rest are new filings.

Nevertheless, the ERC chairperson specified that “it doesn’t mean these PSAs have not been implemented just because they are pending. All of these have been issued either the provisional authority on the 75th day or interim relief if beyond 75 days.”

Of the power supply deals being reviewed by the ERC, the bulk or 221 contracts have been pending from 2011 to June 29, 2015; while 129 PSAs have been affected by the Supreme Court decision in 2019 that requires all power supply contracts underwritten by the DUs to go through competitive selection process or CSP.

About six contracts have been unresolved since 2007 or earlier; 42 contracts were filings from 2008 to 2010; and 36 contracts were lodged with the regulatory body from June 30, 2015 to 2017.

Devanadera expounded that the approval of the PSAs had not been going as fast as many industry players would have wished because of the ERC’s twin handicap on low operating budget and lack of personnel who can comprehensively handle the evaluation of power supply contracts.

“No matter how many we try to target, we are unable to because of lack of manpower — as we all know that in the evaluation of PSAs, we have to go into detail,” Devanadera stated.

For the supply pacts that had been impacted by the SC ruling, she emphasized that these will have to be dismissed by the Commission – although these are still undergoing review also at the regulatory body.

“We have to be very strategic in moving these things. Strategic meaning, if they (PSAs) are about to expire or if they really need urgent review so that the DUs can also make preparations for the next round of CSPs — that’s the way we do things,” the ERC chief noted.

To fast track evaluation and approval of PSAs, Devanadera sounded off that one step they must take is expand the automation of the ERC’s processes, “because even just the verification of data within the Commission — for the bigger portion, it’s still manual.”

Beefing up manpower is another course of action that the ERC has been advancing; and it already has a pending request with the Department of Budget and Management (DBM) for an additional budget on its propounded structural reorganization.