ERC assures timely approval of Mindanao energy supply contracts

MANILA, Philippines - The Energy Regulatory Commission (ERC) has assured that it is exhausting all efforts to ensure the timely approval of supply contracts of power generation firms to help secure the power needs of Mindanao, a government official said.

“The ERC has consistently exerted its best efforts for the timely review of the power supply agreements submitted to it. We have the new generation capacities built in the Visayas to demonstrate this commitment,” ERC executive director Francis Saturnino Juan said.

Mindanao suffered severe power shortage during the summer months of 2010 due to the long drought. The El Niño weather phenomenon affected the ability of Mindanao’s hydro power plants to deliver power. Mindanao’s power generation mix is largely dependent on hydro facilities.

There are currently several power generation projects lined up for Mindanao which includes the 50 MW Mt. Apo 3 geothermal and 5 MW Camiguin wind project of of Energy Development Corp., Green Power Davao and Green Power Cagayan de Oro’s 35-MW biomass plant (17.5 MW each), 225-MW Agus 3 hyro project, Conal Holdings’ 200-MW coal plant in Sarangani, Aboitiz Power’s 300 MW coal plant in Davao, among others.

These plants, however, need to secure power supply contracts with distribution utilities and electric cooperatives to make their project viable. The supply contracts need to be filed and approved by the ERC.

As of Monday, Mindanao’s power reserve was at only 2 MW. Power demand was at 1,230 MW while supply was at 1,232 MW according to data from the National Grid Corporation of the Philippines.

Juan said ERC’s mandate is to review the power supply agreements entered into by the distribution utilities with the generation firms for the supply of electricity to their customers and balances the interest of the distribution utilities, generation firms and the consumers.

“The ERC determines the reasonable generation cost associated with these purchases for inclusion in the DUs’ generation charge to its captive customers. The ERC allows a rate that is sufficient to allow the generation company’s recovery of its reasonable costs and a reasonable return on its invested capital,” Juan said.

The ERC official said that if the documentary requirements and other required submissions are submitted to the ERC without delay on the part of the proponents and if the proceedings are not protracted, “the early resolution of the case is facilitated.”

“Hence, even while the ERC strives to resolve these applications expeditiously, it is constrained to await the termination of the hearing process and complete submission of the data requirements, both in keeping with the requirements of due process,” Juan said.

He said that “if sought by the parties and if warranted by the circumstances, the ERC issues provisional relief to support the development of these projects, while the final generation rates are still being evaluated and determined.”

The Department Energy is wooing investors to fill in the gap of around 2,500 megawatts needed by the Mindanao grid up to 2030.

Energy Secretary Jose Rene Almendras earlier said Mindanao should have at least 500 MW of non-hydro baseload power generation.

“I hope there will be more non-hydro baseload generation projects that will follow. Ideally we should have 500 MW of non-hydro baseload generation in Mindanao,” Almendras said.

“We have always said the reserves in Mindanao are too thin which is why we are rushing baseload plants,” he said.