The Energy Department on Wednesday asked the Energy Regulatory Commission to resolve the pending issues hounding the power supply agreements signed by Manila Electric Co. with generation companies.
“The PSAs submitted with ERC [have] an issue. It has been talked about and we will wait for their decisions, their findings. There are issues raised against it,” Energy Secretary Alfonso Cusi said, when asked about a presentation by research firm The Lantau Group that power rates could actually go down if Meralco’s PSAs were not approved.
“They [ERC] have to make a decision. They have to make a thorough study of the matter and come up with a decision and make sure that it is the right decision because there are questions raised against it,” Cusi said.
Sarah Fairhurst, founding partner of strategy and economic consulting firm The Lantau Group, said the non-approval of Meralco’s PSAs would create a “contracting gap” that would allow “cheaper options to creep into those gaps.”
Meralco, the country’s biggest power distributor, has around 3,551 megawatts of supply agreements with seven power generators pending with the ERC. The regulator vowed to act on the applications within three months from early July.
Meralco’s supply agreements drew opposition from various groups with some questioning the company’s submission of applications a day before the competitive selection process deadline.
“Non-approval of Meralco PSA’s re-opens the competition,” Fairhurst said in a presentation delivered during a recent energy forum.
Fairhurst described the current competitive selection process “utterly ineffective,” with the delay in its implementation allowing thousands of contracts to bypass any need for competition.
Fairhurst said the current “Swiss Challenge” in the power sector was “easily gamed and ineffective.”
“Forcing the same fuels to compete against each other limits real competition. Very short bidding windows and poor advertising of opportunities mean almost nobody can compete,” Fairhurst said.
The ERC and the DOE required distribution utilities and electric cooperatives to engage in CSP or bid out their requirements to ensure transparency and promote least cost to consumers.
Fairhurst said the best solution was to “incentivize players” who wanted to procure competitively, rather than regulate them to do so.
“Accelerating RCOA [retail competition and open access] so that real customers with an incentive to buy at least cost have the opportunity to do so,” she said.
“The proposed Energy Procurement Bill is a second best solution to incentives, but it would certainly be better than the current CSP,” Fairhurst said.