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.

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