Transparency

The Procurement Act has been in force for about two decades now. It ensures a regime of transparency and competitiveness necessary to protect consumers and taxpayers.

Corruption may still be abundant and that is because the unscrupulous discover ways to go around the rules or play the system. This does not, however, invalidate the need for clear rules on transparency and competitiveness. Should we ever get to amending the Procurement Act, it must be to ensure a more effective system for guarding against corruption.

Our energy sector, particularly the distribution utilities, are governed by the strictest procurement rules. Power distributors must comply with the Competitive Selection Process (CSP) overseen by the Department of Energy. Under this process, power producers must compete among themselves to offer the lowest price for bulk electricity supplies.

Under CSP, consumers are assured of the cheapest possible power. Electricity costs may still fluctuate because of changes in oil prices and other factors. Electricity prices might seem higher than they should ideally be. But the bidding system ensures the cheapest power under prevailing conditions.

Without the CSP, electricity distributors and power producers might conspire against the consumers and indulge in profiteering. Distributors could award long-term contracts to cronies or get away with transfer pricing to harm consumers.

Power supply contracts awarded through the CSP ensure producers a stable demand for the power they produce, encouraging them to offer a better price for electric power. Without these power supply contracts, distributors will be forced to rely on the spot market for their daily supplies.

The electricity spot market is the trading platform where merchant producers sell their spare energy production and where distributors buy their emergency needs. Prices at the spot market are always higher than the price of contracted supplies. Think of this as some sort of energy convenience store where premium prices need to be paid for the convenience of power availability.

Also, small and less efficient power plants sell their power through the spot market. Their production costs disable them from