In the spirit of "we really do do things differently at Asian Energy Advisors," let's examine one aspect of our business from over the past week.
It involves a host of complex Philippine market structural challenges, about which I'll spare you the discourse. But let me say that I'm trying to move us away from debilitating practices that continue to hamstring our sector's ability to "perform better" – economically and in a lot of other ways.
In a proposal to a developer of an independent power project (small hydroelectric) I stated the following:
In order to transact a deal with a distribution utility, like [redacted], you will have to participate in an open and competitive bidding for power supply to the EC. It is only after winning such a solicitation that you will be able to formally conclude an ESA (electric sales agreement) with the utility.
As your advisors, we can, and should, provide some level of guidance to the EC in their structuring of such a solicitation. However, it would be inappropriate for us to take responsibility for their design and conduct of the solicitation since that is a conflict of interest.
The client got back to me and asked if I could clarify that paragraph. Here's what I sent back:
It is our experience that often Philippine ECs will ask the proponent of an independent power project (IPP) to pay for the technical advisory assistance in preparing the EC's open solicitation which, under ERC rules, they must conduct prior to selecting an IPP for providing power which the retail customer will eventually have to pay for. When the proponent of an IPP prepares the cooperative's bid specifications in such cases, then there is a conflict of interest, but not necessarily an act of impropriety.
We are amenable to working with and helping the cooperative develop a bid specification package.
Here's how we would handle the situation. If the coop requests assistance from you (with us acting as your agent) in developing the bid specification and if you would like us to assist them, then we will. You should understand that our recommendations to the cooperative, in such an event, will be based on our assessment of what is in the best interest of the cooperative and will not be unduly biased toward your project. This is also important to you because should you be selected, the cooperative will have to demonstrate to the satisfaction of the ERC that the solicitation met the ERC's guidelines. If there were undue bias, it could put ERC approval at risk down the line.
We think that as long as the bid specifications are not unduly biased AGAINST you and is properly designed in the best interests of the cooperative's consumers, then your project will be in a very competitive position to be a legitimate part of the cooperative's power supply portfolio.
Of course, after we provide a draft bid specification and recommendation to the cooperative, it will be up to them to modify it, or not, as they see fit. The cooperative will have ultimate responsibility for the content of the bid specifications they release but, more to the point, we will have had an opportunity to insure that they are properly briefed and are not unwittingly releasing something that is detrimental to the consumers – that is the essence and intent of our paragraph.
I really wish I could just state that we would have nothing to do with the Coop's solicitation design. But frankly, I don't feel I have that luxury. If we weren't being (potentially) paid by the IPP, I would want to assist the Coop if I could get paid for doing so. The reality is, at this stage in our sector's transition, the Coops tend to prefer going without any adequate advice than paying for it. So this becomes an opportunity to inject some advisory that should accrue to the benefit of the rate-payers – but at the price of placing me in conflict of interest that we as a firm have to manage.
Actually, I'm trying to force ERCs hand with this disclosure. I would like for them to come down with a directive baring such conflicts while simultaneously requiring the ECs to have an independent party assess and manage their procurement and provide a report to ERC with a report certifying the legitimacy of the procurement. At least, that's where my thinking is at the moment.
In the meantime, I'm continually re-evaluating my position on this.
What are your thoughts on this issue?
Posted via email from Nick’s Philippine Notes
Yesterday I was discussing, with some people that have more inside information than I do, the time line for introduction of Retail Competition (or Retail Access – the ability to chose who you buy power from).
Supposedly, the sale of Calaca, which was awarded last week to DMCI, should start the EPIRA clock ticking on the introduction of Retail Competition. But what does that clock look like? You really can’t find it in EPIRA or its IRRs (Implementing Rules and Regulations). You have to piece it together.
This is the view I synthesized from my conversation:
EPIRA requires Retail Competition no later than mid-2004 (three years after the Act). But based on the above, we’ll be luck to see Retail Access within ten years of EPIRA’s passage.
Is it really going to be that long. Is the above correct? I don’t know where they got the concepts of ERC Notification and DOE Declaration nor why there is a six month delay tagged onto each.
Posted via email from Nick’s Philippine Notes
The Philippine Electricity Market Corporation gets the open web and open foundations. And they are doing it right. We – as a private sector public – are falling down on this one.
PEMC is posting tons of data to the web regarding the Wholesale Electricity Spot Market (WESM). You can go to this page
and click through to bunches and bunches of market data regarding bids and offers and clearing prices and marginal generator units. It’s somewhat obscure to the uninformed. It’s in generally raw form. Very simplified. But it’s text format which means it’s open.
It is up to us, the public, and some enterprising individual or company to swoop in, write the code to access this data, massage it, and present it back in an easy-to-consume format. It’s a business opportunity waiting to happen!
It’s not PEMC’s obligation to do that. They are doing the right thing. We – as a public – have to get our act together and ride this EPIRA horse the way it was meant to be rode.
Any coders out there want to collaborate?
