Distribution utilities with voided power-supply agreements may get 1-year reprieve from DOE to allow time for holding competitive selection process

By Lenie Lectura – August 22, 2019
from Business Mirror

Power lines frame a street scene in Manila in this December 3, 2017, file photo.

Power-supply agreements (PSAs) affected by the Supreme Court decision may apply for a temporary exemption before the Department of Energy (DOE).

Based on an advisory issued by the agency, the affected distribution utilities (DUs) may exercise the provisions in Sections 2.2.2 and 2.2.4 of Department Circular (DC) 2018-02-0003, subject to the limitations stated therein—specifically for not more than one year—during which time the DU must conduct the competitive selection process (CSP) for its long-term power supply.

“DUs with PSA that have been invalidated by the SC decision can apply for CSP exemption as provided in the 2018 DC. The exemption will only be for one year,” DOE Assistant Secretary Redentor Delola said, adding that the one-year exemption will assure the DU of steady supply for one year while a CSP is being conducted to replace the contracts affected by the SC decision.

During the one-year exemption, the rate shall not be higher than the latest Energy Regulatory Commission-approved generation tariff for the same or similar technology in the area. “It has to be lower than the approved rate of the same technology in the area,” stressed Delola.

The DOE said that affected DUs that will apply for CSP exemption shall submit documents in support of their application, including but not limited to Board Resolutions, a copy of the negotiated PSA and supply and demand scenario showing impact of the SC decision on its supply profile.

The application for CSP exemption must also be accompanied by an updated Power Supply Procurement Plan of the concerned DU.

The SC decision requires all PSAs forged after June 30, 2015, to undergo CSP.

The CSP requires DUs to hold competitive bidding for their supply requirements as against securing power deals via bilateral contracts. This is meant to ensure transparency and fair competition.

The SC decision stemmed from allegations that the ERC gave due preference to Meralco by extending the deadline for compliance of CSP.

The ERC appealed the SC ruling. However, this was denied recently.

The ERC said it would file a Motion for Clarification on how to implement the SC decision.