Passage of Electricity Procurement Act of 2018 pushed

Published January 29, 2018, 10:18 AM

by Patrick Garcia

By Hannah Torregoza

Senator Sherwin Gatchalian on Sunday called on Congress to pass the measure seeking to create reforms in energy procurement to help ease the burden for electricity consumers.

Gatchalian is referring to Senate Bill No. 1653, otherwise known as the Electricity Procurement Act of 2018, or “an act institutionalizing reforms in the procurement by distribution utilities and other distribution entities of supply for the captive market,” which is now under Committee Report No. 231, and still pending second reading at the Senate.

Sen. Sherwin T. Gatchalian (Senate of the Philippines / MANILA BULLETIN)
Sen. Sherwin T. Gatchalian
(Senate of the Philippines / MANILA BULLETIN)

In his sponsorship speech of the bill last week, the senator said passage of the measure could help save a power consumer at least P60 for a 200-kilowatt hour household or an economy wide savings of P13-billion.

Gatchalian pointed out that the measure seeks to address concerns over the generation charge—the largest component of a consumer’s electricity bill and which makes up about half of the costs shouldered by consumers.

He explained that the generation charge has long been the product of negotiated contracts between distribution utilities and generation companies.

“This mysterious process, hidden from public scrutiny, has often given rise to allegations of sweetheart deals and raised concerns about how the prices of contracts unduly favor generation companies at the expense of the consumers,” said Gatchalian, chair of the Senate committee on energy.

Once enacted into law, the measure will remove the veil of secrecy that has for so long covered power supply contracting.

“(That) veil that should not have been there in the first place, because it is the consumers who have been paying for every single centavo of what has been contracted,” the lawmaker stressed.

Under the bill, Gatchalian proposes a Competitive Selection Process (CSP) that is uniform across all distribution utilities and generation companies interested to buy and sell electricity.

The system will allow power generators to compete and offer lower electricity prices in order for them to clinch a distribution utility contract.

He said the CSP envisioned in the bill will provide an avenue to discover the real cost of electricity in order to get the lowest price for the benefit of the consumers.

“First, it will provide a maximum reserve price to be determined by ERC. Any bid higher than this reserve price will not be accepted. Second, it will require all bids to reflect a price per kilowatt-hour inclusive of all costs that will be passed on to consumers. This way, consumers are protected from fluctuating pass-on charges such as foreign exchange and fuel cost,” he pointed out.

“Our internal estimates show that 30 centavos per kilowatt-hour can be saved with an effective competitive selection process. This translates to a P60 savings for a 200 kilowatt-hour household – equivalent to two kilograms of rice. This will result to economy wide savings of P13-billion,” he stressed.

To further boost consumer confidence in the procurement process, the bill requires consumer representation at every step of the process. Also, an electronic portal containing all relevant information on the CSP will be made easily accessible to the public.

The bill also requires the Energy Regulatory Commission (ERC) to determine a maximum reserve price in the bidding process of electricity procurement.