Retail customers tearing down monopoly in power industry – ERC

By Myrna M. Velasco – August 20, 2020, 2:09 PM
from Manila Bulletin

As the consumers who can already exercise their “power of choice” or those contracting directly their electricity service from preferred suppliers already corner a significant pie of roughly 5,000 megawatts in the country’s electricity demand, the Energy Regulatory Commission (ERC) tagged such development as business evolution out to shatter long-reigning monopoly in the power sector.

“This is a positive indication which signifies that competition in the CREM (Competitive Retail Electricity Market) is gaining ground and slowly breaking the monopoly in the supply of electricity by allowing more entities to act as supplier,” the industry regulator stressed.

Based on its report, the ERC stipulated “the total demand of all contestable customers as of the second quarter of 2020 is recorded at 4,977.31 MW.” Pricing wise, contestable customers have likewise been sourcing at dwindling tariff trends from P4.12 per kilowatt hour (kWh) in April; down to P3.97 per kWh in May; then P3.95 per kWh in June.

Contestable customers are those end-users sourcing their supply directly from power generators or retail suppliers as sanctioned by the Retail Competition and Open Access (RCOA) policy of the restructured power industry.

ERC Chairperson Agnes T. Devanadera pointed out “the increased participation of contestable customers in the CREM and the diminishing trend in the prices being offered is a silver lining in the midst of this Covid-19 pandemic,” with her adding that “this positive development stimulates competition among RES and will entice more contestable customers to shift to these electricity providers.

And given that power peak demand in 2019 already topped 14,000 MW or inching close to 15,000MW, it is apparent that the share of the contestable customers already account for roughly one-third of Philippine electricity demand.

The regulatory body emphasized that of the genus of contestable customers, 81-percent are being served by retail electricity suppliers (RES); while the balance of 19-percent are still under the tutelage of the distribution utilities (DUs) which had functionally unbundled their power retail business as local RES entities.

The ERC fleshed out that customers already issued with certificates of contestability totaled 2,089 as of end-June this year. Of the figure, it qualified that 1,460 or 70-percent have entered into retail supply contracts — and such entails that the qualified customers have decided to contract directly from suppliers.

Alternatively, the 30-percent or around 629 customers secured their supply from the services of a regulated or franchised distribution utility.

At the end of second quarter this year, the regulatory body stated that it granted a total of 42 RES licenses; and authorized 25 local RES or those served by existing DUs and electric cooperatives.

In the retail market, customers with usage within the threshold of 750 kilowatts and above can already contract for their own supply based on the terms set forth under the RCOA policy.

And while the power retail segment has been continually expanding its base, Devanadera asserted that “the Commission has been regularly monitoring the activities in the CREM to observe the behavior of the stakeholders in this market, particularly in terms of pricing, switching patterns and the capacity and energy of contestable customers.”

Through the retail power market, customers can avail of supply and service that they want based on their budgets; and if they are not satisfied with the service of a supplier, they can also switch providers based on a timeframe prescribed under the market rules.

The ERC further narrated that based on its monitoring, it culled that 55-percent of the licensed RES are affiliates of generation companies; 20-percent are operating a generation company as another business segment; then 17.5-percent have no links with the power industry; and the balance of 7.50-percent are affiliated with the DUs.

“Having more suppliers that are Genco-affiliated gives confidence that electricity supply is ensured and that they have the capability to offer competitive or cheaper prices in the CREM,” the industry regulator stressed.