The Energy Regulatory Commission (ERC) has instituted revisions in the ‘financial capability standards’ that generation companies (GenCos) must comply with, primarily in ensuring their operational viability.
The regulatory body stated it comprehended the need to amend and update the ‘financial guidelines’ for the power producer firms, because the parameters measuring their financial capacities had been based on rules drawn up as far back as 15 years ago.
The key amendment, the ERC noted, had been relaxing the 1.5x level of debt service capability ratio (DSCR), because that was still based on standards set in 2005.
The regulatory body added that with such scale of financial standards enforced then, “only 32-percent of the total number of GenCos with issued COCs (certificates of compliance) are compliant with the required 1.5x DSCR.”
The ERC pointed out that the revisions were effected “considering the significant changes in the economic conditions in the Philippines via-a-vis the ERC’s mandate under the EPIRA (Electric Power Industry Reform Act) to ensure quality and reliable delivery of power services to the public, thereby, promoting and protecting consumer interest.”
The industry regulator emphasized “after a thorough review of all information gathered by the Commission pursuant to its regulatory powers, as well as careful evaluation of the comments submitted by the various stakeholders, the ERC finds merit in the proposed amendments to the financial guidelines.”
The ERC thus noted the modifications were cast “with the end view of promoting overall financial viability of the generation sector; safeguard against the risk of financial non-performance; and encourage efficiency to ensure the quality and reliability of supply which will ultimately redound to the protection of public interest.”
It was in July last year when the ERC stepped up soliciting inputs and comments from relevant stakeholders on the propounded tweaks in the financial standards for GenCos.
The industry players which submitted their position papers on that rule-making move of the ERC
include: Aboitiz Power Corporation, SMC Global Power Holdings Corporation and its independent power producer administrator-subsidiaries; Millennium Energy Inc.; Panasia Energy Inc.; AC Energy Corporation; First Gen Corporation; Manila Electric Company; Mindanao Energy Systems Inc.; Global Business Power Corporation; GN Power; Oriental Mindoro Electric Cooperative Inc.; and the Philippine Independent Power Producers Association Inc.
ERC Chairperson Agnes T. Devanadera previously indicated that “the Commission takes cognizance of the fact that we need to update our rules and guidelines to make them responsive and suitable to the prevailing conditions in the electric power industry.”
She explained that from the past decade, “a lot of developments have taken place in the power industry and the economic conditions,” hence, there’s already huge disparity if referenced on the standards laid down way back in 2005.
With the revised guidelines, the regulatory body reiterated, such will guarantee that “the GenCos are financially capable to operate and produce sustainable electricity.”