Saturday, May 18, 2024

DOE freezes issuance of exemption papers from conduct of CSP

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THE Department of Energy (DOE) on Tuesday imposed a moratorium on the issuance of Certificate of Exemption (COE) from the conduct of competitive selection process (CSP), pending issuance of a new CSP policy.

The DOE, Energy Regulatory Commission and the National Electrification Administration are currently drafting a new CSP policy that aims to rationalize and streamline the conduct of CSP, particularly the issuance of COE-CSP, and the review of the terms of reference (TOR) for unsolicited proposals (UP), among others.

To ensure a smooth transition to the new circular, “the DOE hereby suspends the issuance of the COE-CSP on this ground upon effectivity of this advisory.

“In the alternative, the DU (distribution utility) and the power supplier shall jointly file their Emergency Power Supply Agreement (EPSA) before the ERC for its approval,” the DOE advisory stated.

However, COE-CSP applications with complete requirements filed with the DOE before the effectivity of the moratorium shall be processed.

For COE-CSP applications with incomplete requirements and submitted to the DOE before the effectivity of the moratorium, the DOE shall also process these provided that the remaining requirements are completed during the period of the moratorium.

Recently, the Manila Electric Company (Meralco) secured a COE-CSP for a 300-megawatt (MW) EPSA for one year with South Premiere Power Corp. (SPPC).  Meralco is now seeking a similar exemption for 180MW baseload capacity requirement.

Meralco had said the execution of the EPSA will help shield electricity consumers from volatile and potentially higher generation costs in the Wholesale Electricity Spot Market, which is historically recorded during the dry season when power demand spikes. Earlier on Tuesday, the DOE had  issued a draft circular on the changes it wants to introduce to the rules of the CSP.

“To ensure efficient, timely and transparent procurement of power supply to the captive market, there is a need to streamline the conduct of CSP and the responsibilities of the DOE, ERC and NEA (National Electrification Administration) under EPIRA that is adaptable, flexible to the needs of the DU (distribution utility),” the draft circular on “Prescribing The Policy For The Distribution Utilities’ Mandatory Conduct Of Competitive Selection Process For The Procurement of Power Supply For the Captive Market,” stated.

The DOE reiterated that it is tasked under EPIRA to formulate rules while the ERC, in the exercise of its functions under the same law, enforces these rules.

Among the key principles in the proposed CSP circular include the one-year timeframe for the procurement of all power supply through a competitive process prior to expiration of power supply agreement (PSA) or projected increase in demand, development of greenfield power projects, and accountability in the procurement process and implementation of the PSAs.

More importantly, the “conduct of CSP shall be considered by the ERC in the determination of the DU’s compliance with its obligation to supply its captive market in the least cost manner.”

All power supply must be procured via CSP. The DOE cited six instances in which CSP is not required: in negotiated procurement of emergency power supply wherein the emergency power supply agreement (EPSA) shall be filed directly with the ERC within 30 days after the occurrence of the force majeure event; when the supply to the DU from any generating plant embedded in its franchise is utilizing indigenous or renewable energy (RE) sources; when any DU exercises opt-in mechanism under the Green Energy Auction Program; when there is a provision for power supply by the Power Sector Assets and Liabilities Management Corp. for the power produced from undisposed assets; when there is a provision for power supply by the National Power Corporation in off-grid areas prior to entry of new power providers or in emergency circumstances; and when there are off-grid areas with less than one megawatt demand.

“All are subject to the ERC’s determination of the DU’s compliance with its obligation to supply electricity in the least cost manner to its captive market, taking into consideration the quality, affordability, sustainability and reliability of the electric power supply,” the draft circular stated.

DOE Undersecretary Rowena Cristina Guevara earlier said the proposed amendments are meant to give the DUs more control over how they conduct the CSP and the ERC a firmer role in the regulatory side of the process.

“Because we made it easier to implement because right now everyone is having difficulty because it’s similar to Republic Act 9184 or Government Procurement Reform Act. We are staying away from that because the private sector is involved, we don’t want to force on them the government process.

“There were some regulatory functions under the DOE. We are removing that and giving it back to the ERC,” Guevara said. “So we said maybe we should make this simpler and then will make it such that control is with the DUs and the ERC so I think those things I think will make our DUs happier,” the DOE official added.

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