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ERC to seek clarification from SC on competitive selection ruling

ERC to seek clarification from SC on competitive selection ruling


The Energy Regulatory Commission (ERC) said Friday that it will seek clarification from the Supreme Court (SC) after the tribunal denied the agency’s motion for reconsideration on a ruling that invalidated a number of power supply contracts that could affect millions of electricity consumers.

In a statement, ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said she had yet to receive a copy of the Supreme Court’s resolution, which was released to reporters on Thursday.

“Nevertheless, should that be the case, we will comply with the directive of the Supreme Court. We only need to seek guidance through a Motion for Clarification on how to implement their Decision particularly on the rates and the continued supply of electricity to the affected public utilities,” she said.

The ERC filed a motion for reconsideration after the Supreme Court announced on May 6, 2019 its decision requiring all power supply agreements (PSAs) forged after June 30, 2015 to undergo a competitive selection process (CSP) to arrive at the least-cost power for consumers.

The high court ruled on a case that questioned the power supply contracts forged by Manila Electric Co. (Meralco) covering 3,551 megawatts (MW) to meet the expected increase in power demand and number of customers.

The PSAs were filed for approval on April 29, 2016 or just before the April 30, 2016 deadline set by the ERC. After that date, contracting parties are required to first undergo a CSP before forging a PSA.

The ERC promulgated its rules on competitive bidding in November 2015 but had to restate its effective date to April 30, 2016 through a resolution in March 2016. The move was opposed by some sectors, leading to the case filed before the court.

With the denial of the motion for consideration, the ERC said the decision would result in the possible immediate termination of 99 affected power supply contracts. The termination will result in the cessation of power supply to 52 distribution utilities (DUs) that are serving 13 million electricity consumers — 9.371 million from Luzon, 1.767 million from the Visayas, and 1.978 million from Mindanao, it added.

The agency said the termination of the contracts could mean a total of 743 MW would have to be sourced from the electricity spot market, particularly: 370 MW in Luzon, 86 MW in Visayas, and 287 MW in Mindanao.

It said current prices in the wholesale electricity spot market (WESM) might range from P5.00 to P8.00 per kilowatt-hour, or higher than the rates forged in the affected contracts at P3.00 to P6.00. It said an increase in the generation charge “may be inevitable.”

The commission added that in Mindanao, there is no electricity market yet to serve as the default source of supply for the power distribution companies, thus without the PSAs they will have no other means to provide enough supply to their consumers, which could result in brownouts.

“We will also need guidance on how prior settlements based on the affected contracts will be evaluated considering the rates that were implemented,” Ms. Devanadera said.

She said the initial calculations of the ERC showed that about P50 billion worth of generated power is involved in the PSAs that were filed within the period covering June 30, 2015 to April 29, 2016, “which we (the ERC) subsequently approved, and were implemented by the concerned parties in the PSAs.”

“[The amount] will be translated to rate adjustments in the consumers’ electricity bill on top of the rate adjustment resulting from sourcing power from the electricity spot market,” Ms. Devanadera said.

Asked to comment, Meralco reiterated that it had already started holding three competitive bidding exercises for power supply contracts.

“As an update, pre-bid conferences for two of the three [CSPs] were conducted yesterday, involving 19 interested bidders,” said Lawrence S. Fernandez, Meralco vice-president and head of utility economics.

In a separate statement, the ERC said it had directed the operator of the wholesale electricity spot market to make the necessary adjustments to the net settlement surplus (NSS) allocations and the corresponding settlement calculations for the June 2018 to May 2019 billing months.

The regulator said the directive to the Philippine Electricity Market Corp. (PEMC) is a result of its findings on the inconsistencies in the share of power generators and customers in the NSS allocations issued by the market operator.

“An audit of relevant PEMC/MO (market operator) systems and operations may be in order. We need to ensure that market processes and transactions are accurately and efficiently carried out so as not to compromise the public benefit of reasonable electricity pricing, as well as to ensure that our consumers are spared from unnecessary burden,” said Ms. Devanadera.

It said upon validation, PEMC/MO reported that the miscalculations were caused by its erroneous application of the formula in its software that is used to determine NSS allocations. PEMC/MO has since applied the necessary corrections, it added.

Ms. Devanadera said the total refund due to Luzon and Visayas consumers amount to P1.403 billion, of which 77% or P1.08 billion will be refunded to consumers in the Meralco franchise area.

About 23% or P321.36 million will be refunded to consumers covered by other distribution utilities and electric cooperatives. The remaining amount at P371 million will be due generation companies, retail electricity suppliers, and directly connected customers.

“We have directed PEMC/MO to immediately effect the refund, no later than the July 2019 billing period to benefit our consumers,” Ms. Devanadera said.


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