Distribution utilities told: Forge bilateral power supply contracts
Sunday, December 11, 2005
To guarantee that they would not fall short of their future electricity supply, the Energy Regulatory Commission (ERC) has directed the distribution utilities (DUs) to already start finalizing bilateral power supply contracts.
On the strength of Resolution No. 21, the regulatory body resolved that there is a dire need for DUs to enter into future bilateral power supply contracts with power producers even at this early stage to make certain that the customers they serve and the country would not be stricken by another round of power outages.
Even with the much-anticipated commercial operation of the Wholesale Electricity Spot Market (WESM) next year, the ERC opined that it remains paramount that bilateral contracts are in place because they remain as the best shield from capacity shortages.
In fact, by all intents and purposes, WESM is mainly being positioned to cater to imbalances in the market, or those that would account for the non-contracted capacity.
The mandate of the Electric Power Industry Reform Act (EPIRA) is clear that the distribution utilities are required to enter into transition supply contracts (TSCs) with the National Power Corporation, to ensure continued electric service to their customers pending the ongoing implementation of policy reforms for the entire power industry, including the privatization of the generation assets of the National Power Corporation.
It was prescribed that the TSCs shall be in force one year after the implementation of open access and retail competition.
Given the delays in the privati-zation process, of which 70-percent asset divestment is a crucial precondition to open access, it was noted that it may take an even longer time before any genuine competition could reign in the market place. (MMV)
The sense of such scenario, according to the industry regulator, gives higher level of burden for the DUs to initially serve the needs of the consumers; since direct sourcing of supply from preferred power producers, primarily for the big-ticket players may yet take a little longer.
"It is our paramount duty to ensure that there is sufficient supply of electricity by encouraging private investments in the generation of electricity in order to meet the growing electricity demand," ERC Chairman Rodolfo B. Albano, Jr. has averred.
An assurance that DUs are keen on entering into bilateral power contracts, he noted, will likewise entice new power investments, especially those that have been grounded for a time because there are no willing off-takers of the generated capacity.
Albano explained that subsequent to the TSC and upon the commencement of market and retail competition, DUs have to ink a bilateral contracts with generation companies for the electricity requirements of their captive customers, subject to the regulator’s approval.
"Bilateral power supply contracts with the power producers, together with other safeguards to be enforced by the ERC, will enhance market competition and prevent market monopoly or market power abuse in order to protect public interest and meet the objectives of the EPIRA," the ERC further points out.
But as provided for under EPIRA, the ERC chief has reminded the DUs that they cannot source more than 90-percent of their total requirements from bilateral power supply contracts.
As envisioned, the remaining 10-percent of their required supply can be procured from other sources, including the WESM.
Section 31 of the power industry reform law states that upon initial implementation of open access, the ERC shall allow electricity end-users with a monthly average peak demand of at least onemegawatt for the preceding 12 months to be the contestable market. The ERC is mandated to gradually reduce the threshold level until it reaches the household demand level
posted by philpower @ 5:34 PM,
