ERC starts scrutiny of power supply deals

Published November 19, 2022, 10:23 AM

by Myrna M. Velasco

The Energy Regulatory Commission (ERC) has kicked off review of prevailing power supply agreements (PSAs) between generation companies and the distribution utilities (DUs), primarily the electric cooperatives (ECs), on efforts to bring down electricity rates in the country.

The scrutiny on the PSAs has been started already by the regulatory body through a “PSA caravan” in Region I and in the Cordillera Administrative Region, and will eventually be expanded nationwide.

Lowering of electricity rates is among the key campaign promises of President Ferdinand Marcos Jr. Consumers, especially those served by the ECs, have been complaining of exorbitant electric bills at the range of P16 to P21 per kilowatt hour.

According to ERC Chairperson Monalisa C. Dimalanta, there is still a room for the rates to go down via the review of the PSAs because heaps of these supply deals had just been provisionally granted, hence, there would still be latitude for adjustment in the final approval.

“The generation charge comprises 50 to 60-percent of the power bills. So, if that goes down, power bill goes down,” stressed Dimalanta.

The chief regulator further emphasized that “many PSAs are still under provisional authority, meaning, the rates are still only temporarily approved. ERC still has to make final determination of those rates.”

She added that another facet being examined by the ERC in the targeted nationwide PSA caravan is the supply mix on the capacity procurements of the DUs, as that too, will have implications on the rates and on the reliability of services to consumers.

“Supply should follow demand profile – each DU or EC will have different mix depending how much their customers’ need for baseload, mid-merit and peaking capacities,” Dimalanta specified.

As explained, the PSA caravan serves as the “ERC’s grassroots-based efforts to evaluate primarily the generation component of consumers’ electricity bills.”

Based on data provided by the regulatory body, the generation charges in electricity tariffs across Luzon, Visayas and Mindanao grids had gone up by more than 20 percent as of August this year versus 2021 level.

“The generation rate increase is driven mainly by the pass-through (non-fixed) component of the rates for the cost of fuel, specifically coal, and the upward adjustment in foreign exchange rate,” the ERC noted.

Commissioner Alexis Lumbatan, who led the ERC caravan in Ilocos Norte, told stakeholders in the area that the intent of the activity is to “look at your PSAs and find immediate and long term solutions for the DUs to be able to sustain themselves and for the consumers also to enjoy lower electricity rates.”

“This is an industry-wide concern. That’s why we, as regulators, are now taking a proactive stance … this is just the start of a collaboration by the regulator and all stakeholders, moving forward, meeting and facing head on, the challenges of high power rates,” Lumbatan said.

The electric cooperatives that participated in the caravan include: Central Pangasinan Electric Cooperative Inc.; Ilocos Norte Electric Cooperative Inc.; Ilocos Sur Electric Cooperative; Pangasinan III Electric Cooperative Inc.; Abra Electric Cooperative Inc.; and Mountain Province Electric Cooperative Inc.