The ERC's ability to promptly address the issues or complaints brought before it is now seriously in doubt, casting a shadow over the entire power industry.
This recent event highlights what I have always pointed out: The regulatory framework, the ERC, must be fixed. I wrote about this recently.
Consider the case of a utility whose capital expenditure (capex) application with the ERC has been in limbo for over five years.
National Grid Corporation of the Philippines' (NGCP) struggle to connect generators to the grid was a direct result of the delays by the ERC. Another power firm has been waiting for its Power Purchase Agreement's final approval for seven years.
The current regulatory framework is doomed to fail. ERC is swamped with cases that it can no longer deal with quickly and efficiently. It has created regulations that have made electricity service challenging and difficult to deliver.
Take the case of utilities' power procurement process. Today's regulation requires a "Competitive Selection Process" (CSP). The CSP requires utilities to first determine their supply needs against their expected demand.
Based on this analysis, utilities will propose that the Department of Energy (DOE) conduct the CSP. In the case of electric cooperatives, there is an additional step - obtaining the approval of the National Electrification Administration (NEA).
Once the government gives its nod to the utility's CSP, it conducts the bidding, which requires preparing the terms of reference or TOR. This TOR is supposed to be done by a "third party bids and award committee" or "TPBAC."
The TPBAC must have representation from the utility consumers. The utility must submit their recommended member-consumers to the DOE. Once the DOE nods to the TPBAC membership, the committee can create a technical working group or TWG to work on the TOR.
As soon as this TOR is done, it is again sent to the DOE for its final approval. Once approved, the utility can then conduct the bidding.
The bidding process itself will take some time. The utility and the winning entity file the winning bid to the ERC. How long it will take the ERC to decide with finality on any application is anybody's guess.
In effect, what is supposed to be a market-driven price will now be subjected to a judicial process where the regulator will determine whether the market price is fair for consumers.
One can imagine the number of cases the ERC will need to adjudicate—from tariff-setting to CAPEX approval. In my opinion, in its attempt to regulate a larger swathe of issues, the ERC has put itself in a situation where it will definitely fail to do its job.
Again, as I said, let us reboot and reset this entire regulatory framework to factory settings.
A power industry expert with over 40 years in experience as chief executive officer in firms ranging from banking, power, and advisory services.
