Basic Concepts on
Power Supply Agreement (PSA)
Francis Saturnino C. Juan
Executive Director
Energy Regulatory Commission
1
What is a Power Supply
Agreement (PSA)?
A PSA is a bilateral agreement between
a Generation Company (GenCo) and a
Distribution Utility (DU) for the
purchase and supply of power.
2
Why does the ERC need to review
and approve PSAs?
Section 25, Chapter 2 of the Republic Act No. 9136 or
the Electric Power Industry Reform Act of 2001
(EPIRA) states that:
RETAIL RATE. The retail rates charged by distribution
utilities for the supply of electricity in their captive market
shall be subject to regulation by the ERC based on the
principle of full recovery of prudent and reasonable
economic costs incurred, or such other principles that
will promote efficiency as may be determined by the ERC.
3
GENERATION CHARGE
 Biggest component of the
retail rate (around 40% to
60%)
 Through the generation
charge, the DUs recover
their generation costs
associated with their
energy purchases from :
A PSALM/NPC
(under duly
approved TSCs)
NPC TOU Rate
B IPPs
(under duly
approved PSAs)
ERC-approved
Contract Rate
C WESM
Spot Market Rate
4
Power Generation Sources
Oil-based
Coal
10%
34%
Hydro
Renewable
12%
0.1%
Geothermal
Natural Gas
15%
29%
Based on DOE Power Statistics 2010 Data
5
RATE STRUCTURE REVIEW
What does the ERC look into in its PSA
review and approval process?
Capacity Fee/Capital Recovery Fee
Fixed Cost
Fixed O&M
Operations & Maintenance Fee
Fuel Recovery Fee/Energy Fee
Variable
O&M
Variable
Cost
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GENERATION RATE STRUCTURE
Capacity Fee/Capital Recovery Fee
Fixed
Cost
 Cost for the recovery of capital or investment
incurred in putting up the power plant
 Fixed for the duration of the project life/plant
economic life
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GENERATION RATE STRUCTURE
Operations & Maintenance Fee
Fixed
O&M
Variable
O&M
 Costs involved in operating and maintaining a utility plant
and in the provision of utility service; and
 Operating outlays consist mainly of costs for purchased
power, fuel, wages, applicable taxes, maintenance,
supplies, and other necessary expenditures.
8
GENERATION RATE STRUCTURE
Fuel Recovery Fee/Energy Fee
Variable
Cost
 Pass-through cost to allow recovery of fuel consumed
to generate power
 Cost also depends on the plant heat rate
9
GENERATION RATE APPROVAL
Steps:
1. Provisional
Approval
2. Final
Approval
10
PROCEDURE FOR THE
APPLICATION OF PSA
Receipt of
LGU
Legislative
Body of the
Application/
Publication
of the
Application
Last Day for
the Issuance
of Provisional
Authority
Earliest Day for
the issuance of
Provisional
Authority (P.A.)
Filing of
the
Application
Commission
issues Order &
Notice of
Public Hearing
Earliest Date
for the Initial
Hearing
Issuance
of Final
Authority
Day 34
Day 1
Day 10
After 30 days from the (a) receipt
of a copy of the application by
the LGU Legislative Body or (b)
publication of the application,
whichever comes later
Day 75
Within 1 year
from the
issuance of
P.A.
11
•
Units involved in
Units in
Measuring
Wh Electricity &
Basic Terms in
Power
Generation
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Units in Measuring Electricity
Watt (W) - is the basic unit of measure of
electric power
Watt-hours (Wh) – is the total amount of
energy consumed over a period of time
kilowatt (kW) – is one thousand watts
kilowatt hour (kWh) –is one kW of electricity
for one hour
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Units in Measuring Electricity
Megawatt (MW) – is one million watts
Megawatt (MWh) – is one million watts of
electricity for one hour
Gigawatt (GW) – is one billion watts
Terawatt (TW) – is one trillion watts
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Basic Terms in Power Generation
• Demand - is the amount
of electric power required
by
an
appliance
or
equipment
to
operate
within its rating.
100 watts
(Demand)
• Capacity - is the amount
multiply by
10 hours
•
equals 1,000 Watt-hours or 1 kWh
(Energy)
of electric power that a
generator is capable of
delivering to satisfy the
demand.
Energy – is the amount of
electric power used in
hours.
15
Basic Terms in Power Generation
• Peak Load - is the
maximum instantaneous
load over a designated
interval of time.
• Base Load - is the
constant part of the total
load on an electrical
power supply system.
• Intermediate Load – is
the
range from base
load to a point between
base load and peak.
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Basic Terms in Power Generation
• Capacity Factor - is
the ratio between the
power plant’s average
production compared to
its rated capability.
• Load Factor - is the a
measure of the output of
a power plant compared
to the maximum output it
could produce.
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Capacity Factor vs. Load Factor
Capacity = 10
Passengers
Day 1
5 passengers
Day 2
9 passengers
Hence, 5 + 9 = 14 passengers or an average of 7 passengers (14/2 days).
In this case, the Capacity Factor would be 0.7 (7/10), while the Load Factor
would be 0.778 (7/9)
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Basic Terms in Power Generation
• Installed Capacity - is
the amount of power or
output that a generator can
produce at any given point
of time or instantaneously.
• Dependable Capacity is the capacity that can be
relied upon to carry system
load for a specified time,
provide assumed reserve,
and/or meet firm power
obligations.
19
Basic Terms in Power Generation
is the amount of energy
that the fuel must supply
to produce a unit of
electrical
energy
and
represents the overall
efficiency of a power
plant.
20
Basic Terms in Power Generation
• Baseload Power Plant
– is the energy plant
devoted to the production
of baseload supply to meet
electrical demand.
• Peaking Power Plant –
is the energy plant that is
generally run during peak
demand for electricity.
Sual Power Station
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VISION:
Asia’s benchmark for excellence
in power regulation.
MISSION:
The Energy Regulatory Commission
promotes and protects the long-term
consumer interests in terms of quality,
reliability, and reasonable pricing
of a sustainable supply of electricity.
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