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Energy procurement reforms to generate P13 billion consumer savings

SURIGAO CITY, Philippines – Customers fill a local barbecue joint in Surigao City, 30 September 2015 file image. Senate Committee on Energy chair Sen. Win Gatchalian has filed a bill that seeks to increase competition among energy generators which would then drive generation costs down, shaving approximately P60 for the average household consuming 200 kilowatt hours off their monthly bill. Photo by Mark Cayabyab/OS WIN GATCHALIAN

Senator Win Gatchalian is pushing for the passage of Senate Bill No. 1653, otherwise known as the Electricity Procurement Act of 2018 – a measure which proposes the implementation of a competitive, transparent, and uniform electricity procurement process that is poised to save consumers as much as P13 billion annually in electricity charges.

Gatchalian, the chairman of the Senate Energy Committee and principal sponsor of the measure, explained that the generation charge, which makes up about half of the costs shouldered by consumers in their monthly electricity bills, has long been the product of negotiated contracts between distribution utilities and generation companies. This mysterious process, hidden from public scrutiny, has often given rise to “allegations of sweetheart deals and raised concerns about how the prices of contracts unduly favor generation companies at the expense of the consumers,” he said during his sponsorship speech for the measure last week.

In this context, the senator hailed the Energy Procurement Act of 2018 as a “revolutionary bill that will remove the veil of secrecy that has for so long covered power supply contracting — a veil that should not have been there in the first place, because it is the consumers who have been paying for every single centavo of what has been contracted.”

Regarding the bill’s effect on power prices, Gatchalian explained: “Sa sistemang ito, maglalaban-laban yung mga generators na magbabaan ng presyo upang makakuha sila ng kontrata ng isang distribution utility.” This increased competition would then drive generation costs down, resulting into an average savings of P60 for the average household consuming 200 kilowatt hours per month — equivalent to approximately 2 kilograms of rice.

To further boost consumer confidence in the procurement process, SB 1653 requires consumer representation at every step of the process. Meanwhile, an electronic portal containing all relevant information on the Competitive Selection Process will be made easily accessible to the public.

The bill also requires the Energy Regulatory Commission (ERC) to determine a maximum reserve price in the bidding process of electricity procurement. Gatchalian says this “will reveal the real cost of electricity and in turn will provide the lowest price for the benefit of consumers.”