EPSA: Initial Report from FERC/NARUC on Competitive Procurement a Commendable Start, Action Should Follow
September 19, 2008 // Published as a news service by IHS
The report, written by the Analysis Group, highlights best practices in the competitive procurement of electric power resources, emphasizing that strong enforcement of competitive procurement rules benefits consumers.
Competitive procurement refers to the process in which electricity suppliers are permitted to bid on an equal basis for the right to supply electricity to a utility and ultimately its consumers.
In written comments it submitted to the FERC/NARUC Collaborative, EPSA said, "For this dialogue to actually impact future electricity supplies, the federal and state collaborative should promptly make recommendations and states should be held accountable for implementing them."
EPSA urged the collaborative to adopt and commit to implementing and enforcing the best practices highlighted in the report.
According to EPSA, necessary elements for a sound competitive process include:
- The use of an independent monitor to independently evaluate offers and report on the process and results to regulators.
- The presence of an open stakeholder process for potential bidders and other affected parties.
- The clear outlining of needs and system conditions early in the bidding process.
- The proper treatment of risk when considering a utility self-build proposal versus a competitive supplier's power purchase agreement.
According to EPSA, 40% of states have competitive procurement rules, but this percentage drops to less than a third in states that are vertically-integrated. "It is in these states where strong competitive procurement is most needed to guard against utility construction risks and cost over-runs, as well as affiliate abuse," EPSA said.
Source: Electric Power Supply Association (EPSA).