The Energy Regulatory Commission (ERC) is widening its review on over-contracting of power supply being carried out by private distribution utilities (DUs) and electric cooperatives (ECs) as it drives up electricity tariffs being passed on to ratepayers.

According to ERC, over-contracting has been one of the key concerns raised by power utilities on the second leg of its caravan in Cagayan de Oro City in Mindanao, corresponding to its initiative focusing on the scrutiny of the power supply agreements (PSAs) to judiciously flesh out the various rate components being reflected in the electric bills.

The ERC noted that power supply over-contracting is an emerging issue among DUs and ECs in Mindanao given the targeted commercial operations of the Wholesale Electricity Spot Market (WESM) in the grid next month.

Apart from over-contracting, the industry regulator is similarly pursuing more comprehensive approach in the review of the PSAs, primarily validation of their contracted capacities vis-à-vis actual demand; and then revisiting the supply mix of the power utilities.

Another major element being evaluated in the PSAs is the supply sourcing of the power utilities, including the mandated procurement of prescribed percentage of their portfolio from renewable energy (RE) capacities in line with the enforcement of the Renewable Portfolio Standards (RPS) policy; as well as from the Wholesale Electricity Spot Market (WESM) and how the utilities have been pursuing diversification in their sourcing of capacities from various generators.

While the regulatory body's effort has yet to translate to lower electricity rate, which is one of campaign promises of then presidential hopeful Bong Bong Marcos, ERC Chairperson Monalisa C. Dimalanta is convinced that there is enough room to bring down rates via the reset of tariffs of the regulated entities, primarily the transmission and distribution segments of the industry.

The methodology in calculating the pass-on tariff of system operator National Grid Corporation of the Philippines (NGCP) and the DUs had been anchored on performance-based rate setting (PBR), which sets the allowable revenues of regulated power utilities four to five years in advance so they can be incentivized to make investments in improving their services to consumers.

Given the regulatory lag in the adjustment of tariffs, the ERC indicated that actual rates for pass-on in the electric bills may have already gone down, hence, that is now the focus of its review on the rate-setting of the power utilities.

Beyond these measures, Dimalanta emphasized that the entry of more renewable energy (RE) into the country’s power mix will help bring down electricity rates in the longer term, “since these plants have no fuel costs.”

Additionally, she is advocating for the acceleration of the country’s net metering system, so that more ‘prosumers’ or consumers who generate their own electricity will be able to join the program.

She conveyed that the ERC is now addressing complaints on the restriction of capacity that the prosumers can inject into the grid, as that is currently limited and that is seen resulting in wastage of generated electricity.

“Prosumer programs are also pushed – like net metering – so those who can afford to self-provide will not need to draw from the grid,” she stressed.