Residential and commercial electricity consumers may not realize it yet, but they may enjoy lower power rates as early as next year. Competition in the electricity sector, or market forces, will be enforced by the Energy Regulatory Commission, with dominant retail Manila Electric Co. finally indicating its intention to comply with the rules on retail competition and open access, or RCOA.
For a while, it looked like the efforts of the ERC to speed up the advent of competition in the local power sector would be stalled, after Meralco obtained an injunction from the Pasig Regional Trial Court to stop the energy regulator from implementing the RCOA rules.
RCOA is a scheme in which retail power suppliers vie for contracts in an open market, or the “contestable market.” The framers of the Electric Power Industry Reform Act had thought that competing in an open market was an effective way to drive electricity prices down. The creation of that market begins with the one-megawatt-and-up peak consumption category, and will eventually include large residential customers.
Meralco initially was not pleased with the rules. The RCOA guidelines excluded it and other local distribution utilities from selling electricity to end-users in the open field, whether or not that market is in their respective franchise areas.
The ERC said Meralco and other retailers must form affiliate distribution utilities to obtain a retail electricity supplier license, if they qualify under the rules.
Meralco lawyers managed to get the Pasig RTC injunction, a move that baffled some lawyers. The law says only the Supreme Court may review and act on petitions related to decisions made by the ERC.
The high court later stopped the Pasig RTC through a temporary restraining order that effectively prevented the lower court from implementing its own injunction against the ERC-issued RCOA rules.
ERC chairman Jose Vicente Salazar has been pushing hard for the RCOA despite grumblings from major power players that could be adversely affected by open competition in the higher-end electricity market.
Salazar weathered heavy pressure coming from power heavyweights. Salazar is a seasoned lawyer and once served as national president of the Integrated Bar of the Philippines.
Industry observers also recall that Salazar led the advocacy for alternative dispute resolution, which has now become widely adopted. Salazar understands how the judicial system works and has used that understanding well in this particular case.
Level playing field
The SC ruling has estopped the lower courts from meddling in the RCOA issue. ERC’s Salazar had put the issue back in the proper legal process and into the hands of the proper body, that is, the Supreme Court.
The RCOA actually is a win-win solution to both consumers and retail electricity suppliers. The SC TRO has prevented further delays in the implementation of a scheme that will eventually create a regime of genuine competition in the power sector. When there is real competition, the market emerges as a winner. Suppliers compete in terms of prices and quality of service, while customers get the value of their money.
The SC ruling also brings the public closer to its dream of becoming the real market power. If and when RCOA realizes its goal, a bigger chunk of the market can move from being “captive” to being “contestable.” To be “contestable” means one is able to select from the available and competing options.
The other winner, of course, is the electric power industry itself. Competition develops the market and enlarges the pie. It compels players to sharpen strategies and clearly define their competitive edge. When industry players do these, they up their business revenue potentials.
Meralco, meanwhile, may form an affiliate entity that will apply for a RES license from the ERC, after apparently realizing the merits of open competition.
The ERC recently issued a draft resolution amending the schedule of mandatory retail competition and open access, which allows large power users to choose their own suppliers.
The ERC said in a draft resolution that end users with an average monthly peak demand of at least 1 megawatt were mandated to enter into supply contracts with a retail electricity supplier by Feb. 26, 2017.
The regulator earlier imposed a December 2016 deadline for the retail supply contracts. The draft resolution is still subject to comments by industry players.
The ERC said the December 2016 timeline was no longer feasible for the contestable customers, or those with a monthly demand of at least 1 MW, to negotiate and migrate to the competitive retail electricity market.