ERC to clarify SC ruling on CSP

After the Supreme Court (SC) junked its appeal, the Energy Regulatory Commission (ERC) will seek clarification from the High Court on how to implement its directive for competitive selection process (CSP) as this may result in higher electricity prices.

The SC en banc dismissed ERC’s motion for reconsideration and affirmed its decision to void all power supply agreements (PSA) closed after June 30, 2015.

While the ERC has yet to receive the latest SC decision, ERC chairperson and chief executive officer Agnes Devanadera said the regulator would seek clarifications as to how to implement the SC ruling, which would affect ongoing PSAs.

“We have not yet received a copy of the Supreme Court’s resolution purportedly denying our motion for reconsideration. Nevertheless, should that be the case, we will comply with the directive of the Supreme Court. We only need to seek guidance through a motion for clarification on how to implement their decision particularly on the rates and the continued supply of electricity to the affected public utilities,” she said.

Based on its finding, 99 affected PSA contracts would be terminated due to the high court’s decision.

This would result in the cessation of power supply to 52 distribution utilities (DUs) that are serving 13 million electricity consumers composed of 9.371 million from Luzon, 1.767 million from Visayas, and 1.978 million from Mindanao.

In that case, a total of 743 megawatts (MW) would have to be sourced from the electricity spot market, particularly 370 MW in Luzon, 86 MW in Visayas, and 287 MW in Mindanao.

Current prices in the wholesale electricity spot market (WESM) may range from P5 to P8 per kilowatt-hour whereas some of the affected contracts were priced at P3 to P6 per kwh. Thus, increase in the generation charge may be inevitable.

For Mindanao, there is no electricity market yet that can serve as the default source of supply for the DUs.

The ERC warned that without the PSAs, DUs would have no other means to provide enough supply to their consumers, resulting in brownouts.

“We will also need guidance on how prior settlements based on the affected contracts will be evaluated considering the rates that were implemented. Our initial calculations disclosed that about P50 billion worth of generated power is involved in the PSAs that were filed within the period covering June 30, 2015 to April 29, 2016, which we (the ERC) subsequently approved, and were implemented by the concerned parties in the PSAs,” Devanadera said.

“Therefore, the P50 billion will be translated to rate adjustments in the consumers’ electricity bill on top of the rate adjustment resulting from sourcing power from the electricity spot market,” she said.

Last May, the SC came out with a decision that all PSA applications submitted by DUs to the ERC on or after June 30, 2015 shall comply with the CSP policy, which requires DUs and electric cooperatives to undertake competitive bidding to secure PSAs with generation companies.