Tuesday, January 17, 2017

ERC reforms stir controversy

By Ernesto Hilario -

Recently, media was flooded with news items regarding the suit filed by the Philippine Chamber of Commerce and Industry (PCCI) and several other groups against the Energy Regulatory Commission (ERC).
In a petition filed before the Supreme Court, the PCCI-led group asked the High Court to stop the ERC from implementing the so-called Retail Competition and Open Access (RCOA) policy.
The group, in particular, alleged that the ERC has “limited” the choice of retail power suppliers from which the so-called contestable market can buy. This is that segment of the overall electricity market whose power consumption is 1 megawatt or more per month. Unlike those with lower requirements (called “captive market”), these consumers can select who to buy power from under the concept of the RCOA.
In its emotional plea before the SC, the group accused the ERC of depriving consumers of “freedom of choice”. They are being made to buy only from a list of some 23 suppliers, the plea said.
We do not question bases and the wisdom of the PCCI-led group’s petition. After all, the PCCI is led by some of the country’s most respected business leaders.
There is just one thing that puzzled many. Aren’t some of the  23 retail electricity suppliers in the ERC list the very same affiliates registered by the country’s big power-distribution utilities? Aren’t the rest of the power-generation companies acting as retail electricity suppliers?
The way we understand it, what the ERC did was to require the current distribution utilities to set up and register an affiliate which is designated as the retail electricity supplier (RES) under the RCOA policy. It is the RES which is allowed to compete for the business of the contestable market.
We are puzzled as to why the petitioners object to this list. Does the PCCI prefer that the likes of Manila Electric Co. (Meralco) directly take part in the open competition?
Again, we can only speculate on why the ERC prefers the round-about way with the RES. We can only surmise that the ERC is preventing current distribution utilities from using their own brand so as not to have an undue advantage within their current service areas. But again, that is for the SC to look into and decide on.
Anyway, the point is that everybody is doing their job.
Despite the controversy generated by the petition, the ERC appears to be determined to push the reforms prescribed under the Electric Power Industry Reform Act (EPIRA).
In fairness to ERC Chairman Jose Vicente Salazar, these reforms— particularly RCOA—gained a lot of headway under his watch. Salazar has been branded as too determined bordering on being pushy. If he is using that trait to push for competition in the power sector, then we don’t mind. At the end of the day, it’s reforms the public wants and Salazar is clearly doing his job.
Salazar’s bid to push for more intense competition in the power sector will benefit the public. After all, when there is real competition, prices usually go down. Also, the quality of service goes up. This is expected. That’s the way companies compete for business in a contestable market.
The situation is different in the captive market. Here, customers merely groan each time they are saddled with rate increases. Somehow, Salazar’s bid to make sure RCOA is in place creates the hope that larger portions of that captive market can soon be part of the contestable category.
It is understandable that certain major power distributors should be averse to Salazar’s policies. First of all, a captive market is a lucrative bread and butter. Second, the franchise area is a  territory where they expect to have a natural advantage. Any and all business entity wants and tries to create an advantage over competition. They invest a lot in building that advantage.
We are not very clear about the position of the Meralco on the RCOA and on the RES issue, in particular. If we recall correctly, Meralco had initially opposed the RES-related policy and had announced that it may consider taking the legal route if ERC pushes it to comply.
But did not Meralco recently apply for a license for its RES? If this is correct, then it may be safe to assume that Meralco would have anything to do with the move by the PCCI to haul the ERC to court over the RCOA and RES issues. This is contrary to current speculation that Meralco may be behind PCCI on this particular collision with the regulatory agency.
Such speculation may have merely been fueled by the fact that it was also PCCI who came to Meralco’s succor several years ago when the latter was under threat of a takeover by the government. That time, the Government Service Insurance System, then headed by Winston Garcia, was poised to use its vaunted financial resources to acquire the majority share of the distribution giant.
The PCCI became the voice of sobriety and wisdom as it took a firm stand against a government takeover of Meralco.
PCCI is one of the voices of the business sector. It did its job before, it is doing its job now.
So is the ERC.
The apparent head-on collision between the two is expected and may after all be healthy.
Let’s wait for the High Court to do its job, too. Only a ruling by the SC would prove whether Salazar is on the right track or if changes need to be done with the policy reforms.

SMC plans to supply cheap power to Muslim provinces

By Lenie Lectura -

The power-generating capacity of the power plants that San Miguel Corp. (SMC) plans to put up in predominantly Muslim provinces would be sold for as low as P3 per kilowatt-hour (kWh), much cheaper than the prevailing rates sold to electric cooperatives (ECs) in Mindanao.
SMC President Ramon S. Ang said the company’s power business is pursuing plans to put up a 58-megawatt (MW) coal-power plant each in Tawi-Tawi, Sulu, and Basilan for a total of 174 MW.
“On our Mindanao projects, we have plans to put up a power plant in Jolo, Sulu. Also, there’s an intention to put up another one in Basilan and another one in Tawi-Tawi. All 58 MW each,” Ang said.
Electricity in these areas is being provided by various ECs that source power from the National Power Corp. (Napocor). These ECs, according to Ang, pay Napocor as much as P15 per kWh.  Ang said residents in these areas will benefit from the projects since power produced from coal plants are much cheaper than those generated by diesel-fired power facilities.
“Right now, Napocor is supporting Jolo, Sulu, with 25 MW. I am offering P3 per kWh to supply them 58 MW from the current rate of P15 per kWh. They have nothing to lose,” Ang said. His offer was accepted by Agriculture Secretary Emmanuel F.  Piñol.  “I am talking with Secretary Piñol. He will help us push through with these projects. Secretary Piñol agrees that these initiatives will create a very good growth. Can you imagine the unstable power supply in Jolo, Basilan and Tawi-Tawi? Then all of a sudden they have reliable power supply,” Ang added.
Should Napocor and SMC agree on this, Ang said his company would be able to put up the power plants in two-and-a-half years. He also proposed that the cheap rates be enforced for a period of 10 years.
Ang said the peace and order situation in the area does not discourage him from pursing the planned investments. “No issue. I have no problem operating in Basilan, Tawi-Tawi, Jolo,” he said. In June last year, Ang said SMC signified interest to put up power plants, develop a port and invest in bulk-water facilities in Mindanao.
A memorandum of understanding (MoU) with the Autonomous Region in Muslim Mindanao (ARMM) was already signed to help develop the area through investments in industries ranging from energy to ports and bulk-water facilities.
The  ARMM is comprised of Basilan, Lanao del Sur, Maguindanao, Sulu and Tawi-Tawi. It is an autonomous region in the Philippines and the only region that has its own government.
The MOU specifically covers an agreement for SMC to build a power plant and help provide long-term solutions to Mindanao’s power crisis.
Over the next two years SMC has committed to build the power plant that will serve the entire ARMM region, which will benefit an estimated 573,446 households.
At present, only 30 percent of households in the region have electricity. Brownouts, particularly during the summer months, are prevalent.
Ang said the ARMM represents one of the most underpenetrated markets in the Philippines, “but is a region ripe for investment, offering huge potential growth.”
SMC’s investment in the ARMM is in line with its strategy to locate facilities and production centers outside urban centers, creating strong “second-tier cities”, generating jobs and rebalancing the national economy by income and growth dispersal.
Instability, lack of infrastructure and lack of a stable power supply has made investors wary, but Ang said he hoped SMC’s vote of confidence in the war-torn province would create much-needed jobs, business opportunities and provide a major economic boost to the ARMM to ease worries over perceived investment risks.

RCOA scheme under review

 (The Philippine Star) |

MANILA, Philippines - The Department of Energy (DOE) is mulling to give large power end-users more leeway under the retail competition and open access (RCOA) scheme by making it optional for those with at least one megawatt (MW) in monthly demand to migrate to the open market scheme.
The agency is reviewing the mandatory provision under RCOA rules to be able to accommodate adjustments in requiring large power end-users to comply, DOE Undersecretary Felix William Fuentebella said in an interview.
This follows a series of consultations with industry stakeholders, he said.
“The DOE secretary is open in making it not mandatory, or optional, to strengthen more the choice for the customers. That’s part of coordination with the Energy Regulatory Commission (ERC),” Fuentebella said.
Under the RCOA regime, end-users who are part of the contestable market, or contestable customers (CCs), are given the choice to choose their supplier of electricity to foster competition in the generation and supply sector.
Last November, the DOE and ERC decided to extend the deadline for one-MW end-users to
In the original timeline, these end-users are supposed to have retail supply contracts (RSC) by Nov. 26, 2016.
Fuentebella said the deferred schedule is still on and the DOE would have to speed up the RCOA policy review to make it mandatory or not.
 “The February schedule will push through but whether (we will make it) mandatory or not, that’s what we have to look at,” he said.
Meanwhile, mandatory contestability for CCs with 750 kilowatts to 999 kw average peak demand remains on June 26.
The DOE’s decision to study the mandatory provision of RCOA is a welcome development for end-users, particularly for those that find it hard to secure RSCs, Manila Electric Co. (Meralco) SVP Alfredo Panlilio said.