New approach to cut PSA application backlog–ERC
By Lenie Lectura – August 12, 2024
from Business Mirror
The Energy Regulatory Commission (ERC) is implementing a “one plant, one rate” approach in addressing backlogs for unresolved power supply agreement (PSAs) applications.
From 2021 to 2023, PSA cases reached 828. However, only 381 cases were resolved during the period, representing a resolution rate of only 46 percent. There are still 447 PSA applications that remain unresolved by the commission.
“We have already started this to clean up our backlog and decisions on pending PSAs would be issued in the course of the year based on this approach,” ERC Chairperson Monalisa Dimalanta said in a Viber message.
The usual practice for PSA applications, according to the ERC chief, is “to do the evaluation fresh for each PSA application, with no or very little reference to previous rates of the same plant in other PSAs.”
With the “one plant, one rate” approach, the ERC evaluates the cost components of a power generation plant to set its base rate. “We then use that base rate to compare it with the rate in the PSAs it has with various distribution utilities that are still pending with us and we adjust based on inflation and similar indices to account for the different supposed dates.
This makes the rates for the same plant across various PSAs uniform, except for inflation adjustment, and, granting the CSP (competitive selection process) requirements are all complied with, will then be adopted by the Commission for approval of the PSAs,” Dimalanta said.
The ERC chief informed lawmakers last week during the deliberations on ERC’s proposed P1.5-billion budget for 2025 that it has started implementing a new approach to address the PSA backlog.
“We call this the ‘One plant, One rate’ approach. What we will do for all power plants with pending PSA for approval is to implement one rate for all PSAs for the power plant. This is meant to simplify the process. That’s the approach adopted by the commission to resolve the pending PSAs in our backlog, many of which have already expired.”
Pending PSA applications remain one of the four major challenges that beset the ERC. The three other major challenges are the delay on the reset of distribution utilities and electric cooperatives, pending over and under recoveries cases, and backlog of cases carried over since the creation of ERC. From 2001 to 2023, the total number of cases filed with the ERC reached 9,546. Of which 6,847 cases have been resolved leaving 2,699 pending cases. Of the 9,546 cases, consumer related complaints top the list at 4,265. Of which, the ERC has resolved 3,630, representing a resolution rate of 85.11 percent.
The ERC’s strategic priorities for 2025 include least cost pricing towards affordability, structural reforms for effective regulation, adopting regulatory framework in support of energy transition, advancing consumer empowerment through energy democracy, and supporting the quest for energy security and sustainability.
The ERC is seeking a budget of P1,517,350,000 for 2025. This year’s approved budget is only P911,627,000, lower than the approved budget of P1.05 billion for 2023.
The agency’s revenue collection in 2023 stood at P1.076 billion, higher than its budget for that year and for 2024. As of June, the total collection reached P132 million which nearly triple the collections recorded in June 2023, when it reached P45 million. Bulk of the revenues will be collected by the end of September this year.
The ERC also told lawmakers that it will study if the lowest price offer bid could be used as the benchmark for approving power rates.
“The proposal of Congressman Zaldy Co of benchmarking is similar, to a certain extent, to the ‘One Plant, One Rate’ method. He proposes that the resulting bids per technology or type of plant for the previous year, based on global prices, can be used as benchmark rates per type of plant that will participate in CSPs for the current year. We will study this as our moving-forward measure, considering previous studies on benchmarking commissioned by the ERC in prior years but were not adopted,” said Dimalanta.
