DOE to lodge ‘options’ to Palace for faster resolution of ERC mess

By Myrna M. Velasco – January 22, 2018, 10:01 PM
from Manila Bulletin

Even without imprimatur from Malacanang, the Department of Energy (DOE) has taken upon itself to technically exercise ‘regulatory powers” over the restructured electricity sector by giving go-signal on the capacity offer of power plants at the spot market even without yet their certificates of compliance (COCs) to operate, just so it can ensure ample power supply during the summer months.

But the bottom line of this action, according to Energy Undersecretary Felix William Fuentebella, will be for the DOE to have ‘solid basis’ that it can present to Malacañang for what is aimed at as faster resolution of the lingering impasse at the Energy Regulatory Commission (ERC) due to the suspension of its four Commissioners.

“Once we have collated all the data, the Secretary (Alfonso G. Cusi) will have to present it in Malacañang so they can have a comprehensive assessment of the situation; and will hopefully help them decide to immediately fill the leadership void at ERC,” Fuentebella explained.

Past that, the DOE is also trying to resolve bigger concerns of convincing generation companies (GenCos) to defer cost recoveries especially if their capacities are covered by power supply agreements – especially if costs do not match those in the spot market.

Fuentebella said the department will have to assess demand outlook first, “then we’ll talk to them (GenCos).” Eventual cost recoveries have been raised as a major concern by some GENCOs, thus, they would want to hear exact details of the plan yet from concerned agencies – primarily the DOE and the ERC.

During the 2010 power supply shortfall in Luzon grid, one power company was mandated by the DOE then to dispatch capacity even without a COC, but it took painful processes and long years for that firm to recover costs on its plant’s operations on those periods.

If power plants will sell in the Wholesale Electricity Spot Market (WESM), there is a settlement price that prevails in the market, but if their capacities are covered by bilateral contracts, it is not clear what are the cost recovery parameters if their COCs to operate are still pending for approval.

Fuentebella admitted that the department is not fully armed yet with information also if the applications of power plants for renewal of COCs already fall within the six-month lapse, or the period when they are no longer liable for penalties if their capacities are injected into the grid without corresponding COCs.

“Inventory is being taken…the ERC has the data, we will validate,” the energy official said, when asked on the details of the duration of pending COC applications of the power plants.

The DOE merely leaned on a resolution of the Philippine Electricity Market Corporation (PEM) Board as its legal basis in mandating the WESM offer of capacities of power plants with pending COC applications. In truth, however, several facets of operations of WESM and PEMC are subject to ERC’s oversight and regulations, so questions are likewise raised if that particular entity in the industry can actually subvert a regulator’s function.

Regulation of the industry is not a ‘core function’ vested upon the DOE or the PEM Board, hence, these entities may need concrete legal ground in taking over the functions of the ERC when it comes to the permits or licenses of power plants to operate.

ERC Spokesperson Floresinda B. Digal forthrightly stated to the media that “we have not been furnished a copy of said directive (DOE order).”

She, however, qualified that “we understand the concern of the DOE in ensuring that there be continuous power supply in the country.”

The ERC further indicated that on its part, “all staff work at the level of the services were completed but were not presented to the Commission for its deliberation because of the suspension.”

Energy Secretary Alfonso G. Cusi reiterated that “our primary concern is the interest of consumers and security of supply, especially so that demand is expected to rise due to the coming summer season.”

He stressed that his department is “taking a proactive approach given this extraordinary situation at the ERC.”

Cusi added “we are managing the situation to ensure that there will be no disruption in the country’s power supply as a result of the delay in the processing of applications, including COCs, and also to avoid higher clearing prices if electricity supply in the market is curtailed.”