DOE wants to tie loose ends of CSP policy on power supply deals

by Myrna Velasco – February 29, 2016

from Manila Bulletin

HOUSTON, Texas – As many power project lenders and turnkey contractors have been raising serious concerns about the competitive selection process (CSP) on power supply contracting, the Department of Energy (DOE) noted that it is urgently necessarily for the relevant government agencies to issue more definitive rules on the ‘less understood and unresolved parameters’ of the policy.

Asked by international attendees during her presentation at last week’s IHS-CERA Week here as to the concerns or hurdles the government has encountered on its CSP policy, Energy Secretary Zenaida Y. Monsada admitted that “there is still a need to issue more detailed regulations to guide industry players and to set some balance on the industry’s requirements.”

The issued Circular by the DOE and the corresponding Resolution of the Energy Regulatory Commission (ERC) on the mandate, she said, appeared that they cannot stand alone, thus, the crafting of the guidelines would be one of the priority concerns that must be fixed.

“We just issued the requirement for this (CSP), but we need to issue more detailed regulations,” she stressed.

On DOE’s end, she noted that they would push for the categorization of power plant technologies as part of the parameters in the bidding process.

By that, she meant that each technology shall be competing with their counterparts – because if the auction will accommodate mix of technologies, coal might always end up the winning bidder based on the ‘least cost option’ paradigm.

“We thought of categorizing the power plants. Because as it is now, only coal can bid the cheapest, so to guide players and set some balance, we need to do the technology categorization,” she expounded.

That would be in addition to the energy department’s endless bid for a ‘third party aggregator’ – at least for the power supply deals of the electric cooperatives.

In a separate interview after her talks, Monsada disclosed that many lenders, power plant investors and even engineering, procurement and construction (EPC) contractors have raised some questions as to how power projects would go about the CSP requirement – as even the off-taker DUs seem to be lost on the policy’s framework.

She acknowledged that this has been prompting her to seek an immediate meeting with the ERC so they can finally tie the loose ends of the policy.

Monsada said she will be sending a formal letter to ERC Chairman Jose Vicente B. Salazar so they can jointly resolve the issues and concerns being raised by power investors, their lenders and even EPC contractors.

In a random check with industry players, they noted that they are having dilemmas on delayed approval of their power supply agreements which in essence have been igniting worries among their creditors and contractors.

The CSP also entails additional cost burden to many power generators because they are the ones shelling out cash if the contracting distribution utilities – primarily the electric cooperatives – would not have the wherewithal for it.