Structural reforms are always a welcome development in the economy to promote efficiency. But authorities should give companies enough time to adjust to the new economic regime and test the market.
As things stand, Christmas will not be merry for business and consumers if the country’s energy regulator pushes the hasty implementation of mandatory “contestability” for big power customers.
For backgrounders, the Supreme Court in June issued a temporary restraining order against the writ of preliminary injunction of a Pasig court, allowing the Energy Regulatory Commission to require mandatory contestability among consumers with an average peak demand of at least 1 megawatt.
Contestable customers in the face of the TRO must prepare for the mandatory contestability. The development will force them to hurriedly enter into retail supply contracts to ensure continuous supply and avoid possible electricity disconnection.
The ERC extended its deadline to implement the new electricity regime from December 26, 2016 to February 26, 2017 to give customers more time. The time limit, however, may not be enough given the arduous process of shifting to a new supplier for a critical service such as electricity.
This is especially difficult for businesses, because they are forced to break out of their cheaper contracts with distribution utilities, only to find suppliers with higher rates.
Through the mandatory contestability, customers are being forced to accept higher rates and will find themselves at the mercy of suppliers. Such a situation will have a chain effect. Higher electricity prices lead to increased operational cost, and in the end, businesses will raise the prices of their goods and services. This, in turn, will hurt the competitiveness of the Philippines in the face of Asean integration and drive away investors. Uncompetitiveness will likely result in loss of jobs.
For consumers, the mandatory contestability scenario will be a burden as well.
Thus, it is illogical for the government to intervene in a market that is already working. Current electricity prices are at par with 2010 levels. And the hurried implementation of the rules on retail competition and open access, or RCOA, will likely drive up the cost of consumer goods in the coming holidays as manufacturers are left with no choice but to reflect the higher cost of power in their product prices.
ERC’s mandate
The ERC, meanwhile, has the mandate to protect consumers. Pursuing the undue regulation will only increase electricity prices. The regulator should protect the consumers, not injure them.
Consumers deserve to know what the rush is all about in the aggressive implementation of mandatory contestability, with just months to spare to wind up existing contracts. Generation companies, it seems, will benefit from higher electricity prices at the expense of the consumers.
Not everybody is pleased with the forthcoming retail electricity rules. A major business group earlier warned that the RCOA might hurt local industries and undermine, instead, ERC’s efforts to reduce power rates in the Philippines.
The Federation of Philippine Industries has disagreed with the ERC’s new rules on RCOA, saying they ran counter to the country’s drive toward a competitive retail electricity market.
“Certain resolutions recently issued by the Energy Regulatory Commission on the RCOA implementation run counter to the spirit of free market and competitive environment as espoused by the Epira,” FPI chairman Jesus Lim Arranza said.
Arranza referred to ERC Resolutions No. 10 and 11, which effectively limit the choice of customers to select their power supplier by disallowing distribution utilities and other industry players from taking part in the retail electricity service market and imposing market share caps on all RES suppliers.
“It is ironic that what the ERC is trying to achieve with the open access scheme is exactly the opposite that the industries could be facing soon if this mechanism is put in place,” Aranza said.
The FPI said contestable customers”•or those with monthly power consumption of at least one megawatt”•were concerned about the intervention of the ERC in the deregulated retail electricity supply market, given the prevailing competitive environment where customers are free to choose their suppliers.
As more and more customers will soon be part of the contestable market, FPI said, the likely scenario is one in which contestable customers will be at the mercy of the few remaining suppliers.
E-mail: rayenano@yahoo.com or extrastory2000@gmail.com or business@thestandard.com.ph
