The Energy Regulatory Commission (ERC) has issued updated guidelines on the conduct of the competitive selection process (CSP) for the procurement of power by distribution utilities (DUs) and electric cooperatives.
Under CSP, DUs may sign power supply agreement (PSA) with a generation company only after calling for and receiving at least two qualified bids and will only be allowed to have direct negotiations with other power suppliers only after two failed bidding procedures.
The guidelines reinforced the obligation of DUs to determine whether least cost can be met by either financial PSAs or physical PSAs.
Financial PSAs are not power plant-specific and must set out a tariff structure that shall be fixed for the duration of the contract term while for physical PSAs that are plant-specific, the tariff structure and cost-components must be clearly provided by DUs in their terms of reference.
The ERC also streamlined the procurement of emergency PSAs (EPSAs) with more robust timelines for evaluation to meet DU emergency power needs while also providing clear compliance parameters for situations that are exempted from the CSP.
Amid the changes, the regulator said it will provide a comprehensive checklist of pre-filing requirements for PSAs procured through CSP or exempted from such CSP, as well as PSA templates prescribing the minimum standard to facilitate stakeholder compliance with the new framework.
The ERC also set a maximum contract duration for the different PSAs now up to one year for EPSAs, 10 years for financial PSAs, 15 years for physical PSAs and 20 years for PSAs involving renewable energy plants.
The updated guidelines also set out that PSAs submitted to the ERC for approval will now be reviewed on two levels, with the first level involving process review to determine compliance, and the second level, which is a substantive review, to determine the PSA’s reasonableness in terms of tariff, costs, risk allocation and other contractual terms.
The updated CSP guidelines also provide DUs with a dedicated protest mechanism for issues involving the conduct of the CSP, with remedies such as blacklisting of suppliers in case a winning bidder frustrates the process or fails to deliver the DU’s supply requirements after signing the PSA.
