DUs no longer allowed to do ‘unsolicited proposals’ or Swiss challenge under CSP

By Myrna M. Velasco – February 19, 2018, 10:00 PM
from Manila Bulletin

The newly-issued Circular of the Department of Energy (DOE) will already prohibit distribution utilities (DUs) from undertaking ‘unsolicited proposals’ or Swiss challenge in the fortified competitive selection process (CSP) on power supply contracting for captive customers or those segment of end-users that cannot exercise freedom of choice yet on suppliers.

As noted by Energy Secretary Alfonso G. Cusi, the DUs will be formally notified on this policy change in the coming days.

He similarly emphasized that the department will already solicit the Power Supply Procurement Plan (PSPP) of the DUs and electric cooperatives (ECs) so the department can start assessing how the policy can be effectively enforced moving forward.

The new CSP policy likewise require the creation of third party bids and awards committee (TPBAC) or third party auctioneer (TPA) to effect transparency in the bidding process or to give representation to the segment of consumers that shall be affected.

And as reiterated by DOE Assistant Secretary Redentor E. Delola,  “Swiss challenge (or matching a submitted bid) will no longer be allowed…unsolicited proposals, in the same vein, shall not be allowed.”

The energy official further noted that DUs can only invoke ‘force majeure condition’ on their supply procurement within the prescribed transitory period of one year.

“Because as a DU, you should know your requirement. At least, there shall not be an instance wherein it is the GenCo telling the DU that: you have a requirement of 100 megawatts, so this is my offer. What we are trying to avoid here is having an auction that is tailor-fitted to just one supplier,” Delola stressed.

Cusi expounded that the system of auction shall delve with having categorized offers for baseload, mid-merit and peaking requirements of the DUs – and such shall stir up competition among generation companies of different technologies.

“The basic premise of the CSP is to have it technology neutral – meaning, they should be able to compete with each other.  What we just require is submission of offers with categorization: either as baseload, mid-merit or the peaking needs for supply of the DUs,” he said.

Baseload are those generating facilities that could provide a power system’s need for electricity round-the-clock; while mid-merit capacity are those that could flexibly adjust their output depending on the system’s demand fluctuation; and peaking plants are facilities that can be called for dispatch when system demand would be at increased level.

“So here, we are talking about the same type of power that shall be submitted under the CSP. But beyond that, these power plants with offers must meet the same standard of reliability,” Cusi pointed out, citing as an example that a plant cannot offer baseload generation if its capacity will be de-rated or almost nil at certain times of the day.

Delola further asserted that “what we want to achieve is to require the GenCos offering bids that their capacities are either for baseload, mid-merit or peaking – but they shall also specify if these are conventional or renewable energy (RE) technologies.”