CSP policy revision sets terms on ‘unsolicited proposal’ for power supply deals

Published December 1, 2020, 6:00 AM

by Myrna M. Velasco

The proposed revisions in the competitive selection process (CSP) for power supply agreements (PSAs) set the framework for unsolicited proposals or tenders that distribution utilities (DUs) may resort to on their power supply procurements.

Under the draft supplemental Circular released by the Department of Energy (DOE), it was prescribed that a DU can consider accepting ‘unsolicited proposal’ from a generation company (GenCo) as long as this conforms with the guidelines enforced by the agency.

Chiefly, it was stipulated that the unsolicited proposal is in accordance with the DUs’ Power Supply Procurement Plan (PSPP) for the current year, as reviewed by the DOE and posted at the department’s e-portal for CSP bulletins.

The unsolicited proposal, as prescribed, “shall include a company profile registration with the Securities and Exchange Commission; a feasibility study which should indicate relevant assumptions; generation cost; the draft PSA and other documents that are deemed necessary by the proponent.”

The DOE similarly emphasized that the unsolicited offer may only be entertained if “there is no ongoing CSP,” and that the covered timeframe for that shall commence from the publication of ‘invitation to bid’ by the distribution utility.

Further, the DOE specified that “the resulting PSA will not result in over-contracting on the part of the DU in terms of both capacity and energy requirements,” in accordance with the current year’s Distribution Development Plan; and such must take into account existing PSAs; the supply agreements set for approval by the Energy Regulatory Commission (ERC); as well as ensuing PSA from ongoing CSP activity.

In unsolicited proposals, the energy department likewise laid down that “the contracted capacity shall not exceed 10-percent of the DU’s peak demand,” and that “the proposed generation cost must not be higher than the lowest ERC-approved generation tariff for same or similar technology in the area.”

At the same time, the DOE propounded that the unsolicited bid must not incur subsidy for the resultant power supply deal.

And ultimately, the department mandates that “the unsolicited proposal shall deliver significant benefits to the captive consumers of the DU – both in terms of reliability and no increase in the average true cost of generation rate (TCGR) to the DU.”

Once submitted, it was decreed that the DU must acknowledge receipt of the unsolicited proposal within seven-day period; and that evaluation of the tender must commence within 14 days from the date of lodgment.

Following that, the DUs’ third party bids and awards committee (TPBAC) or the warranted third party auctioneer (TPA) as aided by a designated technical working group (TWG) must “evaluate the unsolicited proposal – including its merits, the qualifications of the GenCo, the appropriateness of the contractual arrangements and the completeness of the submission” within the prescribed 60-day timeframe. “If the unsolicited proposal is accepted, the DU shall submit to the DOE a report on the evaluation made on the proposal, with corresponding affidavit from the evaluators,” and must also contain key information such as the company profile; cooperation period; and the rate offered on peso-per-kilowatt hour (kWh) basis.