GenCos need to follow rules on power generating capacity nationwide this year

by Lenie Lectura, 09 April 2015
from Business Mirror

GENERATION companies (GenCos) are limited to own, develop and operate a total of 4,396.291 megawatts (MW) of generating capacity nationwide this year, the Energy Regulatory Commission (ERC) said.

The ERC is mandated under Section 45 (a) of Republic Act 9136, or the Electric Power Industry Reform Act of 2001 to set the market share limitation annually to prevent a person, company, related group or independent power producer administrator, singly or in combination, to own, operate, or control more than 30 percent of the installed generating capacity (IGC) of a grid, and/or 25 percent of the national IGC.

In a resolution, the ERC has set a limit of 3,917.327 MW of IGC in Luzon; 709.107 MW in the Visayas; and 649.115 MW in Mindanao.

In 2014 the capacity ceiling that each GenCo could own or operate was placed at 3,612.425 MW in Luzon; 548.187 MW in the Visayas; and 589.091 MW in Mindanao. Last year’s limit on IGC per GenCo on a nationwide basis stood at 3,958.087 MW.

“Pursuant to its mandate to promote free and fair competition in the generation and supply of electricity to achieve greater operational and economic efficiency and to ensure consumer protection and enhance the competitive operation of the markets of generation and supply of electricity, the ERC resolved to set the 2015 IGC per grid and national grid and market share limitations,” the ERC said in its six-page resolution.

To date, the ERC said no GenCo has violated the market share limitations. The next adjustment will be implemented in March 2016. First Gen Corp. of the Lopez group, San Miguel Corp. and Aboitiz Power Corp. are three of the biggest power producers in the country to date.

“The ERC determines and adjusts the installed generating capacity and the market share limitation yearly to ensure a competitive generation sector in the electric power industry that promotes and protects consumer interests,” ERC Chairman Zenaida G. Cruz-Ducut said.

In another resolution, the ERC is requiring distribution utilities (DUs) and GenCos to jointly file their respective applications for approval of their power supply agreements (PSAs).

The regulator said that while the entire PSA rules have yet to be completed, all DUs and GenCos should jointly file their PSA applications.

“Before, it was only optional for the GenCo to join as co-applicant. Now, ERC is requiring it to join,” ERC Executive Director Francis Juan said when sought for comment.

One of the salient provisions of the draft PSA rules requires the DU and GenCos to file with the commission a joint application for the approval of their PSA and for the determination of the reasonable costs that the DU can recover from its captive market as part of its retail rate.

“The commission reiterates its stand requiring the joint filing of PSA applications consistent with its authority to review the PSAs entered into by the DUs with GenCos  whose markets have not reached household demand level, to regulate the retail rates charged by DUs for the supply of electricity in their captive market shall be subject to regulation by the ERC based on the principle of full recovery of prudent and reasonable economic costs incurred, or such other principles that will promote efficiency as may be determined by the ERC,” the commission said in a resolution issued in February but released only this week.

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