Non-issuance of RES license to Gencos and DUs opposed

Manila Bulletin 
By Myrna M. Velasco 
Published: August 21, 2013 
The amendments to the Retail Competition and Open Access (RCOA) Rules which prescribe non-issuance of retail electricity supplier (RES) license to generation companies (GenCos) and distribution utilities (DUs) have been stirring fierce objections because the policy could stifle competition and may also spell the failure of the long-awaited competitive regime in the restructured electricity sector.
The Energy Regulatory Commission (ERC) has proposed revisions to Articles I, II and III of the RCOA Rules, which effectively excludes power generators and DUs from securing RES licenses.
The only exceptions to these would be the GenCos and DUs which were granted RES licenses prior to the effectivity of the proposed rules revisions, but even their capacity off-take shall be enforced with limitations.
While restrictive measures are not necessarily objected to, players in the industry noted that a blanket prohibition on new batch of RES license issuances to GenCos and DUs may have some implications on the envisioned competitive structure of the deregulated industry or the “power of choice” which should have been rightly afforded to the end-users.
Under Section I of the amended RCOA Rules, it was prescribed that: “no generation company may be issued a RES license;” and “no DUs or its affiliates may be issued a RES license.” It was similarly stated that “generator companies with existing RES licenses shall be subject to the limitations imposed…”
Such policy, it was noted, will be in effect “during the transition period or until such time that the ERC shall deem appropriate considering market conditions.”
The existing RES license holders include: Trans-Asia Oil and Energy Development Corporation; Aboitiz Energy Solutions Inc.; GN Power Mariveles Coal Plant Ltd. Co.; First Gen Energy Solutions Inc.; Cabanatuan Electric Corporation; Masinloc Power Partners Co. Ltd.; Team (Philippines) Energy Corporation; SN Aboitiz Power-RES Corporation; San Miguel Electric Corporation; Global Energy Supply Corporation; Ferro Energy Supply Corporation; Premier Energy Resources Corporation; Kratos RES Inc.; Ecozone Power Management Inc.; DirectPower Services Inc.; PRISM Energy Inc.; GNPower Ltd.; and Adventenergy Inc.
It can be gleaned from that list that most of the retail electricity suppliers are GenCos or affiliated with power generators.
Meanwhile, the DUs which, were granted local RES license or those permitted to supply electricity within their franchise areas or as supplier of last resort (SoLR), include: Manila Electric Company (Meralco); Dagupan Electric Company; Visayan Electric Company; Subic Enerzone Corporation, Bohol Light Company Inc., Tarlac Electric Inc., San Fernando Electric & Light Power Co., Angeles Electric Corporation, Ilocos Norte Electric Cooperative Inc., Cebu I, II and III Electric Cooperative Inc.; Benguet Electric Cooperative Inc., Batangas II Electric Cooperative Inc., and Nueva Ecija I Electric Cooperative Inc.
As to the imposed restrictions, the amended Rules under Section II stipulate that “the capacity controlled by any or all of a business conglomerate’s RES entities shall be included in the limitation on the total capacity controlled by its generator companies.”
The capacity cap, it was stressed, shall be in keeping with the market share limitations set forth under the Electric Power Industry Reform Act (EPIRA), primarily the 30-percent market share cap on installed grid capacity; and 25-percent on national installed capacity.
Moreover, it was provided that “a RES may only sell up to 50% of its total capacity to all of its end-user affiliates.”
The ERC further prescribed that “any or all of business conglomerate’s RES entities may only purchase up to 50% of its capacity requirement from affiliate generator companies.”
Article III of the Rules also mandates that one of the basic requirements for RES License Application will be “a projected five-year financial statements and a five-year business plan.” Such will effectively detail out the applicant’s target customers, capacity and energy allocations as, well as value-added services.
The industry regulator also stressed that “all existing retail supply contracts and those that are currently being transacted shall be reviewed by the ERC to ascertain that they are on an arms-length basis and do not violate market control or anti-competitive rules.”   source