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THE Energy Regulatory Commission (ERC) might be forced to review the deadlines it set for big power consumers to secure a supply contract with retail electricity suppliers after a court blocked the mandatory provisions for the industry’s envisioned greater retail competition and open access (RCOA). The temporary restraining order and injunction against the RCOA provisions, which were sought by distribution utility Manila Electric Co. (Meralco) and granted by a lower court, have been lifted after the Supreme Court on Friday prohibited the legal proceedings to continue. Meralco said it was exploring legal remedies. “The uncertainty is not helpful to the market, especially the customers,” an official of a newly licensed retail electricity supplier (RES) said. “If you’re a customer, ERC is saying you have to sign contracts by October — that’s the deadline by this month — for your contracts to be effective Dec. 26, 2016.” ERC is said to be reviewing the timeline set for RCOA and is leaning towards extending the deadline set for consumers to negotiate new supply contracts with electricity retailers. A review of the timeline was part of the subject of a press release issued by the ERC on Friday, which was recalled after it was sent to media in response to the high tribunal’s ruling. “If you’re a customer now, do you negotiate, do you sign up, will suppliers really wait for you forever?,” the RES official said. Under Department of Energy (DoE) circular DC2015-06-0010, electricity end-users with a monthly average peak demand of at least 1 megawatt (MW) for the preceding 12 months will become part of the “contestable market” when RCOA takes effect. Two years afterwards, the threshold level for the contestable market will be reduced to 750 kilowatts (kW). The ERC is required to evaluate the performance of the electricity market and gradually reduce the threshold level until it reaches household demand level. ERC Resolution No. 10, Series of 2016, adopted the revised rules for contestability, which also mandated consumers with an average peak demand of at least 1 MW to enter into a retail supply contract with a RES 60 days before Dec. 26, 2016. However, the lower court’s move to temporarily block the mandatory provision left customers unsure of how to proceed. The Supreme Court’s ruling thus left customers with little time to negotiate a supply contract. — Victor V. Saulon
Authorities are carefully weighing their options on how to move forward following a Supreme Court (SC) order that temporarily stopped the implementation of a landmark policy meant to give consumers the choice to choose their own supplier of electricity. They could not stress enough how vital this policy is to make consumers fully appreciate the benefits of the Electric Power Industry Reform Act (Epira). “Epira is incomplete without the RCOA Retail Competition and Open Access,” Energy Undersecretary Felix William B. Fuentebella said in a phone interview. “We can’t say Epira will be a failure if RCOA is not implemented, but rather it will just be incomplete.” Since Epira was enacted into law 16 years ago, the power industry’s generation, distribution and transmission sectors were already unbundled. Monopoly had ceased to exist. “We have unbundled the major sectors. Now, we are at the stage of unbundling further what had been unbundled. RCOA is among the last stages of Epira for the law to be fully implemented,” Fuentebella said. The Department of Energy (DOE) and the Energy Regulatory Commission (ERC), both respondents in the recent ruling of the SC, said they will respect and abide by the temporary restraining order (TRO) on the implementation of DOE Circular DC2015-06-0010, Series of 2015, and ERC Resolutions 5, 10, 11 and 28, Series of 2016, without prejudice. The SC issued the TRO on February 21, or less than a week before February 26, when the DOE circular and the ERC resolutions were supposed to take effect. In particular, power users consuming an average of at least 1 megawatt (MW) per month are required to source power from a licensed retail electricity supplier (RES). At present, the majority of power consumers are being supplied by the Manila Electric Co. (Meralco). The DOE circular and the ERC resolutions further mandate customers with 750 kilowatt-hours (kWh) to 999 kWh a month of electricity usage to pick their preferred RES on or before June 26, 2017. Threshold The rules also state the lowering of the threshold to cover an end-user with an average monthly peak demand of at least 500 kWh is set on June 26, 2018, subject to the review of the performance of the retail market by the ERC. Those who fail to do so before the deadline will be cut from their distribution utilities and transferred to a designated supplier of last resort, where the price of electricity is costlier. “This is what we are saying. Consumers would not be able to fully appreciate the benefits of Epira if some of the provisions would not be enforced. Epira must be taken as a whole for everyone to appreciate its benefits,” Fuentebella pointed out. But the High Tribunal found no basis for the mandatory migration being ordered by the DOE and the ERC through the questioned issuances. More important, the petitioners have established a clear, legal right to the TRO, considering that Epira provides for voluntary migration of end-users. The Court also noted the urgent need to issue the TRO, considering the February 26 deadline. “If a TRO is not issued, the petition will become moot, and petitioners stand to suffer grave and irreparable injury, because they will be disconnected from the distribution utility or make to pay a supplier of last resort a 10-percent premium between the higher contracts and the Wholesale Electricity Spot Market,” the SC said. Legal complexities The TRO was sought by the Philippine Chamber of Commerce and Industry, Ateneo de Manila University (AdMU), San Beda College and Riverbanks Development Corp. “AdMU believes that our government and regulating bodies should ultimately seek to protect our basic, constitutional right to freedom of choice. And this right should extend to all electricity consumers,” AdMU President Fr. Jose Ramon Villarin said. He added: “If we are allowed to choose the best supplier for our needs in a market that is allowed to work freely and for the common good, then such a scenario will be most beneficial to all consumers concerned, especially those smaller-scale contestable customers CCs, like schools and universities, that may have a difficult time searching for a new contract.” Still, the DOE and ERC vowed to exhaust all available legal remedies to put forward the factual and legal bases on which the promulgation of the assailed rules have been based. “Due to the legal complexities surrounding the TRO, the DOE, ERC and the Philippine Electricity Market Corp. (PEMC) are still in the process of drafting a general advisory for the guidance of the RCOA stakeholders, without prejudice to future issuances,” the DOE said. The issues being considered by these agencies are whether applicants who have already executed retail supply contracts (RSCs) and were already registered and switched shall continue to honor their respective RSCs, and that ongoing applications for registration filed before the Central Registration Body (CRB) may proceed voluntarily. It is thoroughly being reviewed if applicants who wish to withdraw or defer their registration before the CRB may do so consistent with the Retail Market Rules, provided that the CRB shall not be liable for any legal repercussions that may arise out of the CCs’ contractual obligations; and whether remaining CCs who have not yet secured their RSCs may continue to negotiate and exercise their power to choose. Relaxing the rules While the DOE said it is duty-bound to implement the RCOA, Energy Secretary Alfonso G. Cusi said he is personally not in favor of the mandatory implementation of the questioned issuances. “But what can I do? It’s there when I came in,” he said. Cusi also said he supports RCOA, as this policy provides consumers the freedom of choice as to which power provider they prefer to deal with, resulting in higher productivity for them. “And the power of choice can only be maximized when there is a level playing field for all suppliers,” he assured. “It is hoped that whatever the decision by the Supreme Court, it will redound to the ultimate benefit of the consumers, which is really the intent and the spirit of RCOA.” Cusi said. He said before the TRO came out, the DOE and ERC were in the process of easing the rules for the 1-MW consumer by giving them more time to forge a supply contract. “We were thinking of relaxing it, but this the SC TRO came,” he said. An option being considered by the DOE after the TRO was issued is to issue a new circular aimed at easing the rules for 750-kW CCs who are mandated to contract their power supply with an RES by June 26 this year. “We may come out with a revised, amended arrangement. We can’t do anything with the February 26 deadline because it has lapsed already. I am preparing for the June deadline,” he said. The proposed revision may include the elimination of some deadlines, particularly the two-month period before the mandated date within which a supply contract must be sealed with a RES. “Dapat kasi ’yung landscape ay clear at kaya talagang magawa in time,” Cusi said. The DOE would have to consult with the ERC on this though. Meantime, the DOE, in coordination with the ERC and PEMC, as the CRB, will continue to conduct information drive and to educate the CCs on the benefits of RCOA in order to respond to queries affecting the industry players. The DOE assures the public that extensive consultations and coordination efforts will continue toward full implementation of the provisions of the law favoring the consumers’ power of choice. Mixed reactions The ERC, for its part, said the TRO would unduly burden consumers. Lawyer Rexie Digal, ERC spokesman, explained in a text message that RCOA affords the end-users the ability to choose their supplier of electricity, including the ability to negotiate for the rate that would be charged to them. The scheme, she said, starts with large customers, but is expected to reach the household at some point. “Delay in the implementation would deprive the ordinary consumers of enjoying the fruits of competition sooner. The end-users would remain as captive to their DUs distribution utilities for a long period of time,” she said. The Philippine Independent Power Producers Association (Pippa) also expressed concern on the SC TRO indefinitely enjoining the implementation and enforcement of the regulations on RCOA. “The RCOA is mandated by the Electric Power Industry Reform Act of 2001, but implemented only in 2013. It aims to institutionalize competition in the supply of electricity, allowing the electricity end-users to choose their suppliers based on low price and other factors. The recent TRO issued by the Supreme Court has the effect of putting on hold aspects of the RCOA, specifically the timeline for lowering of thresholds,” it said. While Pippa supports the implementation of RCOA, it hopes that the issues before the SC would be resolved with finality at the soonest possible time. “We support the move from the DOE and ERC for a unified policy on RCOA. We hope that this will finally settle the issues and the industry will already move forward to attain the objectives of Epira,” the group of power-generation companies said. For party-list Bayan Muna, the TRO only benefits big power distributors. “Delaying or stopping open access only works in favor of big distributors,” Bayan Muna Chairman Neri J. Colmenares said. Consumer group CitizenWatch, meanwhile, said it was “pleased” with the SC decision. “With a deadline of February 26, consumers would have had breakout of existing contracts and scramble to find and enter into new contracts just to meet the deadline imposed by the ERC, or lose power all together. If not for the issuance of the TRO, the ERC’s mandatory policy would have forced consumers into entering contracts with qualified suppliers, even if these contracts were unfavorable or more expensive contracts,” CitizenWatch Secretary-General Paco Pangalangan said. “Furthermore, by limiting the choice of customers to a list of retail suppliers deemed qualified by the ERC and by prohibiting distribution utilities from participating in the contestable market, the DOE circular and the ERC regulations in question do not promote free competition. This will lead to higher prices of electricity, thereby affecting ordinary consumers and will be ultimately detrimental to the economy,” Pangalangan added.
The Philippine Independent Power Producers Association (Pippa) has joined calls for the Supreme Court to revisit its earlier order enjoining the implementation of the retail competition and open access (RCOA). In a statement, Pippa insisted that the RCOA is mandated by the Electric Power Industry Reform Act of 2001 (Epira), but implemented only in 2013. It explained that RCOA is aimed at institutionalizing competition in the supply of electricity, and allow electricity end-users to choose their suppliers based on low price and other factors. The recent TRO temporary restraining order issued by the Supreme Court has the effect of putting on hold aspects of the RCOA, specifically the timeline for lowering of thresholds,” the statement read. Pippa is an association of 28 companies engaged in power generation. Collectively, Pippa’s members have 13,549.4 megawatts of grid-installed capacity, or 82.8 percent of the country’s total and serve millions of Filipinos in Luzon, the Visayas and Mindanao. Unified policy “PIPPA supports the implementation of RCOA and hopes the issues before the Supreme Court will be resolved with finality at the soonest possible time,” the power producers said. “We support the move from the DOE Department of Energy and ERC Energy Regulatory Commission for a unified policy on RCOA. We hope that this will finally settle the issues and the industry will already move forward to attain the objectives of Epira,” the group added. The DOE, ERC and the Philippine Electricity Market Corp. (PEMC) said they will form a new policy that will make it easier to shift to an open- market scheme. The DOE also said it will be exhausting all remedies to see the implementation of RCOA, which is covered in DOE Circular DC-2015-06-0010, Series of 2015; ERC Resolution 5, Series of 2016; ERC Resolution 10, Series of 2016; ERC Resolution 11, Series of 2016; and ERC Resolution 28, Series of 2016. Choices RCOA allows electricity end-users with at least 1 megawatt of peak demand to choose their suppliers. End-users can choose between 23 retail electricity suppliers (RES) designated by the ERC. It was supposed to take effect on February 26, but the Supreme Court stopped it by issuing a temporary restraining order (TRO). The TRO was issued based on a petition filed by the Philippine Chamber of Commerce and Industry, Riverbanks Development Corp., Ateneo de Manila University and San Beda College, Alabang.
Renewables are fast making their way into the energy mainstream and could be the norm in the not-so-distant future. Even Saudi Arabia, the world’s biggest oil producer and exporter, is turning to wind and solar to generate electricity at home. The Middle East kingdom plans to develop nearly 10 gigawatts of renewable energy by 2023, starting with wind and solar plants in its vast northwestern desert. The effort could replace the equivalent of 80,000 barrels of oil a day now burned for power, a Bloomberg report said. Saudi Arabia, in all, is seeking $30 billion to $50 billion worth of investment in renewables. In the Philippines, renewables already account for about 30 percent of the country’s power mix, compared with the plan of the more developed European Union to generate 20 percent of energy from similar sources by 2020. The share of renewable energy sources is expected to further increase amid the plan of government-led National Renewable Energy Plan to triple the capacity to 15,304 megawatts by 2030. More entering the fray A relatively new aggressive company is making its own stride in the renewables sector. Pure Energy Holdings Corp. is on the prowl to strategically acquire assets, develop natural resources that are sustainable, and be a basic service provider for the needs of the community. Pure Energy’s existing and planned projects, under unit Repower Energy Development Corp., will have a total capacity of 153 MW, of which 123 to 125 MW will come from hydro energy. The company plans more investments in the renewable energy sector―besides hydropower ventures―to build up its portfolio to 500 MW in five years, company officials said. Pure Energy is looking at a basket of renewable energy projects such as wind, solar and biomass to expand the portfolio, after it lists its shares in the local stock exchange. It already owns 50 percent plus one share in a joint venture named Pure Meridian Hydropower Corp., which has nine projects. These include a 10.6-MW project in Bukidnon, which has just broken ground with construction soon to start. The company also broke ground for the second project with Manila Electric Co., a 3-MW station in the province of Quezon. Then there’s a run-of-river hydro power plant in Pulanai River, Bukidnon that is expected to generate more than 74 gigawatt-hours annually. Aside from Meralco, Pure Energy is jointly developing a P620-million hydro power plant with the Tiu-Laurel family behind the food and fishing conglomerate Frabelle Corp. The 3-MW facility will be built in the upper cascade of the Labayat River. A recent report from Philippine Electricity Market Corp. said renewable energy investments had saved the Philippines P4.04 billion. Renewable energy technologies have the potential to bring the Philippines to a state of energy independence. Muddled issue The Supreme Court on Tuesday last week temporarily barred the government from implementing new regulations that compelled big consumers starting on February 26 to enter into a power supply deal with any of the retail electricity suppliers accredited by the Department of Energy and the Energy Regulatory Commission. The TRO did not effectively stop the implementation of the retail competition and open access, or RCOA, as some misinformed sectors want to make it appear. These groups claimed the Supreme Court order could lead to unfair competition. Not really. The TRO actually empowers customers to decide on their own, instead of favoring big generators and generator-RES. It gives consumers the power to choose and not impose on customers to abandon existing power suppliers The DoE and ERC resolutions mandated that customers who consume more than 1 MW and 750MW of power must discard their current suppliers, even if they are already satisfied with the arrangement. Some quarters have complained that electricity consumers would be forced to buy their power only from retail electricity suppliers “hand-picked” and accredited by the ERC. The local RES who were previously allowed by the Electric Power Industry Reform Act to sell power to the contestable customers were disallowed by the ERC and ordered to wind down their operations. But why force these customers to leave if they do not want to? The SC did not not stop or delay RCOA. Consumers are still free to buy their power from the ERC-licensed RES if they choose to. They are not prevented from doing so by the SC. What the TRO prevented is the order of the ERC to force consumers to buy their power only from ERC-licensed RES. The RCOA, thus, is still in place and effective contrary to what the some sector claims. Several customers have deferred switching their suppliers when the TRO was issued because they believe mandatory contestability is disadvantageous to them. About 140 electricity customers readily requested a delay in their RCOA switching applications. Electricity consumers are not keen on abandoning their current suppliers, who have been providing them with efficient service, in favor of RES licensed by the DoE and ERC. Small business enterprises, the academe, power sector watchdog and electricity consumer groups have lauded the SC TRO because it gives back their right to freedom of choice as envisioned by Epira. “We believe that our government and regulating bodies should protect our basic, constitutional right to freedom of choice. And this right should extend to all electricity consumers. If we are allowed to choose the best supplier for our needs in a market that is allowed to work freely and for the common good, then such a scenario will be most beneficial to all consumers concerned, especially those smaller scale contestable,” one consumer said.