Improved power deals to guarantee enough supply

MANILA  -Distribution utilities can now procure supply from power providers without depending on a specific plant, allowing “greater assurance of supply” and ensuring consumers of reliable delivery.

The operation of financial power supply agreements (PSAs) is among the major changes in the new competitive selection process (CSP) guidelines that the Energy Regulatory Commission (ERC) issued last week, according to the agency’s top official

CSP refers to the bidding process that power providers must undergo before supplying the electricity requirements of a distribution utility, such as Manila Electric Co.

READ: ERC sets fresh review of power bidding protocols

“The new CSP guidelines now clearly allow the operation of financial PSAs. This type of PSAs do not depend on the operation of a specific plant, so the [distribution utility, or DU] will have greater assurance of supply from a wider range of sources of plants in the grid,” ERC Chair Monalisa Dimalanta told the Inquirer in a Viber message on Monday.

Compared with so-called physical PSAs that require generation companies to nominate a power plant that will provide electricity to distribution utilities, financial PSAs allow sourcing from any power plant at a fixed rate.

The qualified supplier and the terms of supply would depend on the distribution utilities’ terms of reference.

This would help reduce cases of power outages for consumers, as distribution utilities now have more power plants to tap, Dimalanta explained.

Contract terms

Under the new guidelines issued on Oct. 3 but only publicly released on Sunday, financial PSAs have a maximum contract term of 10 years.

Emergency PSAs may be undertaken for only a year while physical PSAs have a maximum of 15 years. Agreements involving renewable energy plants may last up to 20 years.

Contract term limits were also among the new additions in the framework, which was first issued in 2018.

The ERC came up with new guidelines after Dimalanta had said earlier this year that the old policy lacked a stronger criteria that would measure reliability and prevent outages or supply shortage. Sudden terminations of contracts due to the inability of generation companies to provide supply at a low price were among the major concerns.

The new CSP guidelines allowed the blacklisting of suppliers that are not able to deliver their obligations “without due cause.”

Dimalanta recognized, however, that the risk of contract termination “is always there,” since the law allowed parties to terminate their deals. INQ