Rigged bidding? ERC to tighten oversight of power supply auctions

MANILA, Philippines — The Energy Regulatory Commission (ERC) is moving to impose an added layer of scrutiny on power supply procurements by reviewing auction terms before bidding begins.

Under its proposed regulatory framework, the ERC intends to review first the terms of reference (TORs) for competitive selection processes (CSPs) to weed out anti-market practices and ensure the procurement of least-cost power.

The proposed rules would mandate power distribution utilities and the system operator to first submit their TORs to the ERC before publishing invitations to bid.

The TORs would then undergo a two-tier review anchored on three key criteria: completeness, competitiveness and compliance with the least-cost principle. 

“We are setting the rules of the game earlier in the process to ensure that competition is genuine and not merely procedural,” ERC chairman and CEO Francis Saturnino Juan said.

The CSP is a government-mandated bidding mechanism that requires power utilities to secure electricity supply from generation companies offering the most cost-effective rates. 

With the proposed framework, securing a TOR certificate of compliance or obtaining deemed approval upon the lapse of the prescribed review period would become a prerequisite before a CSP can proceed. 

The proposed rules would likewise require power utilities to submit a sworn least-cost justification statement, attesting that the TOR parameters neither exclude legitimate bidders nor favor certain suppliers. 

“By reviewing the TOR upfront, we help prevent anti-competitive design and ensure that procurement outcomes truly reflect the least-cost for consumers,” Juan said.

The power regulator, however, clarified that approval of the TORs does not limit its authority to review or act on CSPs if anti-competitive elements are later discovered.

Meralco, the country’s largest power utility, said it remains committed to adhering to all rules and policies that may be adopted by the ERC and the Department of Energy.

“We just want to ensure that the rules governing the CSP are clear so that we can invite as many participants as possible in the biddings,” Meralco head of utility economics Larry Fernandez said yesterday when sought for insights on the ERC’s proposal.

All concerned energy stakeholders may submit their comments on the proposed rules until July 24, ahead of a virtual public consultation on July 31.