ERC directs DUs to ink bilateral deals with power producers
The Energy Regulatory Commission (ERC) issued Resolution No. 21 dated October 19, 2005 directing all distribution utilities (DUs) to enter into future bilateral power supply contracts with power producers. This directive aims to ensure market price stability and sufficient supply of electricity as the Wholesale Electricity Spot Market (WESM) starts commercial operation next year.
Presently, the DUs are required to enter into power transition supply contracts (TSCs) with the National Power Corporation (NPC), the State power firm, to ensure continued electric service to their customers pending the privatization of the NPC assets. Said TSCs, however, are only good for one (1) year after the implementation of open access and retail competition.
“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. rationalized.
Subsequent to the TSC and upon the commencement of retail competition and open
access, DUs have to ink a bilateral contract with generation companies for the
electricity requirements of their captive customers, subject to ERC approval.
No DU, however, shall source more than ninety (90) percent of its total power
requirements from bilateral power supply contracts. The remaining 10% of its
power requirements should be sourced from the WESM.
Section 31 of the Electric Power Industry Reform Act (EPIRA) states that, upon initial implementation of open access, the ERC shall allow electricity end-users with a monthly average peak demand of at least one megawatt (1MW) for the preceding twelve (12) months to be the contestable market. Two (2) years thereafter, the threshold level for the contestable market shall be reduced to seven hundred fifty kilowatts (750kW). At this level, aggregators shall be allowed to supply electricity to end-users whose aggregate demand within a contiguous area is at least 750kW. The ERC will reduce such threshold level until it reaches the household demand level.
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 in order to protect public interest and meet the objectives of the EPIRA.
December 15, 2005