Power industry given more time to adjust to Competitive Selection Process

by Lenie Lectura – March 22, 2016

from Business Mirror

The implementation of the Competitive Selection Process (CSP), a policy meant to discourage negotiated power-supply contracts between a distribution utility (DU) and a power producer, has been moved to April 30 to give stakeholders more time to adjust to the new scheme.

“After judicious study and due consideration of the different perspective raised, with the end view of ensuring the successful implementation of the CSP for the benefit of consumers, DUs and gencos [generation companies], the commission has resolved to allow a period of transition for the full implementation of the CSP resolution, and, as such, restates the effectivity date of the CSP resolution to a later date,” the Energy Regulatory Commission (ERC) said in its four-page Resolution 01, 2016, signed on March 15 but posted on its website late Monday.

The ERC, in its Resolution 13, Series of 2015. issued last October 20, called for the mandatory implementation of the CSP in November 2015. However, the commission was swamped with requests for exemption, while others asked the ERC to defer the implementation.

“We received a lot of request, because they have either completed the negotiation, signed the PSA [power-supply agreement] or are about to sign it,” the ERC spokesman, lawyer Floresinda Baldo-Digal, said in a text message, when sought to elaborate on the latest ERC Resolution 01, 2016.

The latest resolution effectively moved the start of the CSP implementation to April 30.

The CSP seeks to curb negotiated PSAs between a DU and a power producer. It is meant to ensure that power supply is bought and passed on to consumers at the least possible cost by bidding out the power requirements of the DU, instead of entering into a bilateral power-supply contract with a genco.

“The effectivity date of the CSP resolution is hereby restated to be April 30. All PSAs executed on or after the said date shall be required, without exception, to comply with the provision of the CSP resolution,” the ERC stated.

PSAs that were approved by the ERC or filed with the commission before the effectivity of this resolution may have one automatic renewal or extension for a period not exceeding one year from the end of their respective terms.

The ERC made it clear that automatic renewal clauses or extensions of PSAs shall no longer be permitted upon effectivity of the resolution.

Last year, the ERC has received several letters from industry stakeholders, who raised issues on the constitutionality of the CSP resolution. They sought clarification on the implementation of the CSP and its applicability to the renewal and extension of PSAs, requested a determination of the accepted forms of CSP, and submitted grounds for exemption from its applicability, among others.

ERC Chairman Jose Vicente Salazar said last February that the following asked for exemption from the CSP: Philippine Rural Electric Cooperative Association Inc., the Association of Mindanao Rural Electric Cooperatives Inc., Agusan del Norte Electric Cooperative Inc., Negros Occidental Electric Cooperative, and Palawan Electric Cooperative.

SMC Global Power and GN Power also sought for an exemption from the CSP, Salazar added. Region 8 electric cooperatives, meanwhile, requested to draw power from GN Power Ltd. Co.