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Ayala unit gives support to DOE’s CSP scheme

July 27, 2015News

The development arm of the Ayala group in the energy sector is in favor of the Department of Energy (DOE) circular that requires competitive selection process (CSP) in securing power-supply contracts.

“We are obviously in favor, and we don’t see that any different from what is already happening in the PPP [public-private partnership], as long as it will be managed properly,” AC Energy Holdings Inc. President John Eric Francia said. Conglomerate Ayala Corp. has participated in a number of PPP projects under the Aquino administration.

From experience, Francia said the “only downside is that PPP infra is slow. This is to make sure that there are no loopholes.” The CSP requires all distribution utilities (DUs) and electric cooperatives (ECs) to bid out their power requirements, instead of entering into negotiated contracts with power producers or generation companies (gencos).

The way CSP is envisioned to work is that the bidding will be conducted by a third party duly recognized by the DOE and the Energy Regulatory Commission (ERC). International Finance Corp. has been tapped by the DOE to conduct a study on the implementing rules for the CSP. The results of which will be forwarded to the ERC.

Pangilinan-led Manila Electric Co. (Meralco) is a DU that sources the majority of its power requirements through bilateral contracts. It is against the mandatory implementation of CSP, saying that it will best work if implemented voluntarily.

“Our view is it doesn’t promote the best interest of consumers. It’s a nice concept, an attractive concept, but do it on a voluntary basis. We respect the intentions of the CSP, but make it voluntary,” Meralco President Oscar Reyes earlier said.

Francia said the next crucial part is the drafting of implementing rules and regulations. “The devil is in the details. A lot of details and variables need to be thoroughly studied, so that the intent and the spirit of the circular is addressed properly.”

Francia was referring to the IRR, which the ERC has 120 days from June 30 to craft. Meralco hopes that the ERC will not mandate DUs to take part in the auction and, instead, heed its call to implement the scheme on a voluntary basis.

Meralco officials said the CSP scheme is unfair, because only the DUs and the ECs are mandated, but not the gencos. “What if the participating gencos are flippers, or those that are not serious? How can the DUs, such as us, get the best rate for our consumers?” they lamented.

Francia said power producers, such as AC Energy, should not be mandated to also participate in the CSP. “According to the DOE circular, it’s not mandatory for the gencos. So, we can sell to contestable customers or at the WESM [Wholesale Electricity Spot Market]. I don’t think it should be mandatory,” he commented.

When asked if Meralco would volunteer to adopt the CSP, Reyes said the most appropriate model for Meralco would be “a mix of bila-
teral, voluntary CSP and the WESM.”

Reyes pointed out that different utilities have different requirements. “Will the template for CSP fit everyone? Are we sure that all gencos that will participate are serious? We are only mindful of what’s best for the consumers.” 

Source: Business Mirror