DOE, ERC make changes to CSP rules

MANILA, Philippines — The Department of Energy (DOE) and the Energy Regulatory Commission (ERC) are introducing changes to the rules of the competitive selection process (CSP).

The DOE is simplifying the CSP rules, DOE Undersecretary Rowena Cristina Guevara said on the sidelines of the Water Philippines and PhilEnergy Event yesterday.

“Because we made it easier to implement because right now everyone is having difficulty because it’s similar to Republic Act 9184 or Government Procurement Reform Act. We are staying away from that because the private sector is involved, we don’t want to force on them the government process,” she said.

The amendment will also give distribution utilities (DUs) more control over how they conduct the bidding and the ERC full oversight over the regulatory side of the process.

“There were some regulatory functions under the DOE [in the current CSP rules]. We are removing [it from DOE] and giving it back to the ERC,” Guevara said.

“So we said maybe we should make this simpler and then will make it such that control is with the DUs and the ERC so I think those things I think will make our DUs happier,” the DOE official said.

Meanwhile, ERC chairperson and CEO Monalisa Dimalanta said the power regulator is studying what changes it can introduce to improve the conduct of CSP.

“We saw last year how even recently awarded power supply agreements (PSAs) were tested but they failed to withstand the challenges resulting in disputes and termination,” she said.

“So, it compels us to evaluate the CSP rules to see what improvements can be made to avoid this to ensure commitments are delivered to consumers,” the ERC chief said.

Last year, San Miguel Corp. (SMC) power units South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC) issued notices of termination to Manila Electric Co, (Meralco) of their PSAs effective Oct. 4, citing unexpected and unprecedented “change in circumstance,” including skyrocketing global fuel prices brought about by multiple factors such as the Russian invasion of Ukraine.

SPPC and SMEC are the administrators of the Ilijan and Sual plants, respectively.

Meralco and SMC Global Power Holdings Corp. had then asked the ERC for temporary rate hike in the prices of their PSAs signed in 2019 to recover fuel costs amid the unprecedented spike in fuel prices.

However, the joint petition of Meralco and SMC units were denied by the ERC.

SPPC and SMEC filed their respective petitions for certiorari before the Court of Appeals (CA) to assail the ERC order, which directed the power suppliers and distributor to uphold the fixed price and the provisions of their PSA.

It secured a 60-day temporary restraining order (TRO) from the CA suspending the implementation of the PSA between SPPC and Meralco.

SPPC officially ceased supplying Meralco on Dec. 7, forcing Meralco to start sourcing additional 670 MW from the electricity spot market.

In the case of SMEC, its petition for a TRO on the PSA with Meralco covering the supply of 330 MW was denied.

More recently, SMC Global subsidiaries Excellent Energy Resources Inc. (EERI) and Masinloc Power Partners Co. Ltd. (MPPCL) also terminated two PSAs with Meralco covering the period 2024 to 2025.

Meralco said the termination has no impact on its business and financial conditions yet, as the electricity is not yet being supplied under the said PSAs.

However, it would look at the best available options, including the he reconduct of a competitive selection process for the contract capacity of 1,800 MW with commercial operations date 2024 to 2025.