Assessing ERC's draft guidelines on competitive selection of power supply agreements | The Final Word - video Dailymotion

CNN Philippines

The Energy Regulatory Commission has drafted guidelines on how power distribution utilities will select and execute supply agreements.  How will this affect our kababayans? Let's get the thoughts of NASE-CORE President Pete Ilagan.   Visit our website for more #NewsYouCanTrust: https://www.cnnphilippines.com/  Follow our social media pages:  • Facebook: https://www.facebook.com/CNNPhilippines • Instagram: https://www.instagram.com/cnnphilippines/ • Twitter: https://twitter.com/cnnphilippines

Transcript

00:00 The regulatory commission has drafted guidelines on how power distribution utilities will select

00:04 and execute supply agreements.

00:07 How will this affect our Kababayans?

00:08 Let's get the thoughts of NASICOR President, Steve Ilagan.

00:11 Mr. Ilagan, great to have you with us.

00:14 Briefly, what are some of the salient features of these proposed ERC implementing guidelines?

00:22 Well, the basic issue that really caught our attention was their proposed revision or their

00:35 proposed template for the power supply contract shortening the period of the contract.

00:46 That's the main issue that we focused on in raising to the attention of the commission.

00:54 So revising and shortening the contract, does this benefit distribution utilities and generation

01:01 companies?

01:03 Well, definitely not.

01:06 But before I elaborate on that, Rico, allow me to state that there is a provision in the

01:14 Electric Power Industry Reform Act which touches specifically on supply and price.

01:20 And this is in Section 2 in its declaration of policy, Item B, which says to ensure the

01:27 quality, reliability, security and affordability of the supply of electricity.

01:35 Another thing that we question in this proposed revision of the power supply agreements template

01:42 is we cannot accept that it is now ERC making policies.

01:50 Because we all know that the basic function of ERC is to fix the rates.

01:57 And even under the IPERA, the basic functions of ERC is number one, to promote competition.

02:05 Two is to encourage market development, ensure customer choice and penalize abuse of market

02:16 power.

02:17 Nowhere in the functions of ERC calls for the commission to issue policies like what

02:29 it is doing now under the draft policy.

02:35 So Mr. Ilagan, what must be done then with this proposed ERC implementing guidelines?

02:43 Well, there is a current provision for power supply agreement which can be found under

02:52 the rules of practice and procedure promulgated by ERC.

02:57 And under Rule 20 of these rules and procedures, it only requires the power supply agreement

03:03 to make a statement of the salient provisions of the said contract and stipulations on the

03:11 pricing.

03:13 It should also state the supply and demand scenario of the applicant's utility and the

03:20 contracted capacity.

03:23 And lastly, its impact on the overall tariff of the utility.

03:30 These are the things required in the application for the approval of power supply agreement.

03:38 And we do not know where ERC is coming from for these proposed guidelines in the procurement

03:46 and evaluation now of the power supply agreement.

03:49 So Mr. Ilagan, are you saying then that reducing the term of the power supply agreement is

03:53 anti-consumer?

03:54 Definitely, because it will increase the price of electricity on a per kilowatt hour

04:03 basis.

04:04 Well, it's just like buying a car on a loan basis.

04:09 I mean, if the period of payment is shorter, then the monthly amortization is higher.

04:16 We know it will not take a financial genius, Rico, to understand that a shorter period

04:24 will increase the rate.

04:27 Because the rate approved by the ERC, we understand, is to allow the power supplier offering its

04:35 electricity to recover their investment.

04:39 And this is a guaranteed terms of recovering their investment.

04:44 And we know that investment in billions of pesos are mostly borrowed funds.

04:50 So are you saying then--

04:51 This is going to be made to be paid in a shorter time.

04:56 Definitely the amortization payment will be higher.

05:00 So--

05:01 This is passed on to the consumers through the rates approved by the Energy Regulatory

05:06 Commission.

05:07 So with this ERC implementing guidelines, Mr. Ilagan--

05:10 --the question is, why is this-- and this will only be required for new investors and

05:16 not for the plants that have-- not for the companies that have existing power supply

05:22 agreements with the distribution utilities.

05:25 So it's even unfair for new investors.

05:28 And it will scare-- it will drive away new investors or potential investors in the power

05:35 industry.

05:36 So this will definitely discourage more investments in the power sector.

05:41 And it will only favor a handful of groups.

05:44 Certainly, and this may even result to supply crisis.

05:49 That's what we are afraid of.

05:54 Thank you so much for your insights and for joining us on The Final Word.

05:58 NASICOR President Pete Ilagan, this issue definitely will have to be discussed once

06:05 again.

Assessing ERC's draft guidelines on competitive selection of power supply agreements | The Final Word

Category

Transcript

Recommended