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The Market Testing of Power Supply Agreements: Rationale and Design Evolution in the Philippines

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  • Fabella, Raul

Abstract

We first set out the rationale for the emerging policy of the Competitive Selection Process (CSP) which mandates market testing the Power Supply Agreements (PSA) of Distribution Utilities in the Philippines. It will potentially address several possible market failures such as connected dealings (“sweetheart deals,” in common parlance) with proprietary GENCOS, lack of incentives for DUs to procure at lowest cost, abuse of market power by large GENCOS in certain localities, etc. It will also potentially lighten the regulatory load of the Energy Regulatory Council (ERC) by replacing the burdensome and politically-sensitive accounting method of evaluating PSAs. It may also attract additional generation capacities by new players. Lower generation cost―and finally, lower prices for consumers―is also a possibility, but not guaranteed. We then discuss the evolution of the design of the CSP over the last two years and how the simplest and best modality was finally arrived at.

Suggested Citation

  • Fabella, Raul, 2016. "The Market Testing of Power Supply Agreements: Rationale and Design Evolution in the Philippines," MPRA Paper 87725, University Library of Munich, Germany, revised Aug 2016.
    • Handle: RePEc:pra:mprapa:87725
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    File URL: https://mpra.ub.uni-muenchen.de/87725/1/MPRA_paper_87725.pdf
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    References listed on IDEAS

    as
    1. Hayek, F. A., 1991. "The Fatal Conceit," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226320663 edited by Bartley, III, W. W., October.
    2. Fabella, Raul V, 1993. "Consumer Resistance and Monopoly Behavior under Franchise Contestability," Public Choice, Springer, vol. 76(3), pages 263-271, July.
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    Cited by:

    1. Ravago, Majah-Leah & Fabella, Raul & Alonzo, Ruperto & Danao, Rolando & Mapa, Dennis, 2016. "Filipino 2040 Energy: Power Security and Competitiveness," MPRA Paper 87721, University Library of Munich, Germany, revised Jan 2018.
    2. Mondal, Md Alam Hossain & Rosegrant, Mark & Ringler, Claudia & Pradesha, Angga & Valmonte-Santos, Rowena, 2018. "The Philippines energy future and low-carbon development strategies," Energy, Elsevier, vol. 147(C), pages 142-154.
    3. Nori Tarui, 2017. "Electric utility regulation under enhanced renewable energy integration and distributed generation," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(3), pages 503-518, July.

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    More about this item

    Keywords

    competitive selection; power supply contracts; market failures; outsourcing to market;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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