ERC caps RES to source 50% from affiliated generators

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The Energy Regulatory Commission (ERC) is planning to allow retail electricity suppliers (RES), which have an affiliated generation company, to source only 50 percent of their capacity from their affiliates.

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“We’re saying, they’re only allowed to get 50 percent of their capacity from their affiliates—so that other RES without generators can also source with them because of the limited supply,” ERC Commissioner Alfredo Non told reporters.

He said that the new limit ensures fairness for the contestable consumers, which currently have a power requirement of one-megawatt or more.

“If you are a RES and intend to supply affiliates—we cannot allow that —because it will limit especially those huge RES like Ayala and SM. They are the ones capable of getting big supply at a lower cost, but to supply only to affiliates, it will be unfair to customers,” the commissioner said.

Non explained those with RES licenses should act like suppliers, as contestable customers earlier complained they are unable to find a RES.

For contracts signed before the implementation of RES rules, he explained the commission will give them a winding down period of three years —without extension.

The ERC will also allow distribution utilities to become a RES through its affiliate, which is contrary to its earlier position.

ERC Chairman Jose Vicente Salazar disclosed the commission expects to publish the draft rules this week, allowing existing and potential RES to submit their comments.

The comments will then be reviewed in a commission meeting and will be finalized before publication.

The chairman further said two resolutions will be released by the commission—the rules on contestability and the restrictions.

Salazar said the commission will conduct a reassessment in the market and will determine whether to change the percentage 18-24 months after its issuance.

“We put it in the rules. Between the 18th and 24th months from the time we issued this, we will have a reassessment and we will determine if we can change the percentage—depending on what we see in terms of how these competitors are doing business and how the market is growing in terms of objectives of retail competition and open access,” the chairman said.

Salazar said the commission has consulted with industry players such as the Manila Electric Co., Visayan Electric Co. and San Miguel Energy Corp.

Non further disclosed both private and public economic zones could apply for a RES license.

The rules, however, vary as public eco-zones are allowed to sell to customers and supply to other contestable customers.

For private eco-zones, their operations will fall as contestable customers of their distribution utilities (DUs).

The Energy Regulatory Commission is an independent, quasi-judicial body mandated to promote competition and penalize abuse of market power in the industry.

PNA

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1 Comment

  1. Kris Balitbukel on

    Why should an RES be restricted to source only up to 50% of its capacity from its affiliate when sourcing 100% would allow it to offer cheaper electricity to the contestable market? In the end, all the contestable market cares about is who is the RES that can offer the lowest price for its requirements. The ERC does not even regulate the prices that an RES offers to the contestable market. Why should it also regulate where an RES source its capacity. A contestable customer can choose its RES and has the power to say no to any offer by an RES. In contrast, a captive customer of a DU does not have the same ability. A DU’s captive customer cannot choose its generation supplier as it is the DU who makes that decision when it contracts its power supply with generators of its choice. In such an arrangement, there is a possibility for an abuse of market power when a DU contracts with an associated firm. Thus, EPIRA imposes a limit that DU may only contract up to 50% of its requirements from an associated firm. In this instance, preventing the possibility of abuse of market power even trumps the case when the supply form the excess of 50% from an associated firm is the cheapest, indeed even if given away for free. Clearly, we have a case where the contestable market does not need the regulators false protection because they can take care of themselves with the power to say no to any RES.