Republic of the Philippines


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Devanadera Looks Into DUs’ Possible Over-Contracting of Power Supply

Energy Regulatory Commission (ERC) Chairperson and CEO Agnes VST Devanadera have ordered the review and revision, if warranted, of the agency’s policy on Power Supply Agreement (PSA) approvals amidst reports on the alleged over-contracting of power supply of some Distribution Utilities (DUs), particularly Electric Cooperatives (EC).  

“I have directed our technical staff to look into the bilateral contracts entered by and between DUs and Generation Companies (GenCos), more particularly on the aspect of justifications offered on the need for the contract.  We must ensure that the contracts entered by the DUs are indeed required and not become stranded costs that will be passed on to the consumers,” Chair Devanadera stated.

Most PSAs include a Take or Pay provision which denotes that with or without sourcing of power from the contracted GenCo,  the DU shall pay a cost which will be passed on to the consumers.  Thus, if a DU engages so many power suppliers unnecessarily, it will cause an upward adjustment on the blended generation rate being charged by the DU.

“We have already summoned to our office some Electric Cooperatives that were reported to be expecting a generation rate increase due to newly approved contracts to explain and for them to come up with measures to mitigate the impact of power rate increases that they will implement.  Distribution utilities should be responsible and conscionable enough to ensure that they should only contract power supply that would address their power requirements so as not to burden the consuming public with an unreasonable high cost of power.  So for PSA applications, we (ERC) will now start looking for the rationale and implications thereof and the DUs should be able to prove that the PSA will redound to the benefit of the consuming public,” Chair Devanadera added.


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