• Meralco successfully bends SC to its will, for now


    Ben D. Kritz

    LAST Tuesday, a petition for a temporary restraining order against the implementation of the Retail Competition and Open Access (RCOA) rules for electricity supply was granted by the Supreme Court, a move that surely brought smiles to the faces in Meralco’s headquarters.

    The petition was filed by the Philippine Chamber of Commerce and Industry (PCCI), Ateneo De Manila University, San Beda College (Alabang) and mall owner Riverbanks Development Corporation.

    Largely unknown “power sector watchdog” Bantay Kuryente hailed the ruling, saying it was an acknowledgement by the Court of “multi-sectoral” opposition to the program, “multi-sectoral” apparently meaning, in this case, “a representative group of some of Meralco’s largest customers.”

    The petition was originally filed on December 28 of last year. What it argued was that the February 26 deadline imposed by the Energy Regulatory Commission (ERC) for implementation of RCOA was unfair. Under the rules, all contestable customers (big consumers who use more than 1 MW of electricity per month) would have to abandon their current electricity supply agreements and renegotiate with one of the 23 suppliers on the ERC’s approved list. The petition claimed that the rule would force electricity customers into disadvantageous contracts just to beat the deadline.

    According to PCCI, et al., this rule essentially creates a “new power cartel” that would limit consumers’ choices and allow suppliers to keep electricity prices higher than they would be under a truly “open competition” scheme.

    Prior to its being halted by the TRO, the RCOA scheme dictated that contestable customers who did not have an appropriate supply contract by the February 26 deadline would either have to pay a 10 percent premium on its current contract price, or pay the Wholesale Electricity Spot Market (WESM) price, whichever is higher.

    While Meralco is not the only power interest to have fought tooth and nail to try to stop the program ever since it was originally conceived about seven years ago, it is the biggest, has fought the hardest, and has the most to lose once RCOA is implemented. The mandatory participation in the program only applies to users of 1 MW or more now; it is voluntary for those using between 750 kW and 1 MW per month, but the mandatory threshold will eventually be lowered.

    Ideally, within a timeframe of three to five years, the contestable customer definition will be gradually lowered to the usage level of average households, giving almost everyone in the country the opportunity to choose their own electricity supplier, rather than being tied to those who control franchise areas.

    The reason why suspicion naturally falls on Meralco, the nation’s largest electricity distributor, is that under the RCOA rules, a distribution utility (DU) or a local retail electricity supplier (RES) that operates only within the franchise area of the DU cannot be a Retail Electricity Supplier as the RCOA program defines it. Meralco unit MPower is a local RES, and happens to serve more contestable customers than any other power supplier, and so has the most to lose, because it cannot, under the rules, be part of the list of 23 approved suppliers.

    After the SC rejected an earlier bid (technically, by overturning a Pasig trial court’s ruling in Meralco’s favor) by Meralco to stop the RCOA implementation, the utility announced (on December 1 last year) that it would form another subsidiary to serve as a supplier that would qualify as a RES under the new rules. Fair enough; with that decision, Meralco demonstrated that it can, however grudgingly, abide by rules that apply to everyone else, and from a customer point of view, the formation of a new RES by Meralco is a positive move. Meralco is, after all, the best developed and equipped of the country’s distributors, and all things being equal, would be a convenient and reliable supply choice for most.

    Once Meralco’s new RES subsidiary, Vantage Energy Solutions and Management Inc., gained ERC approval, there should have been no reason for Meralco to continue to contest the scheduled implementation of RCOA. That happened on February 9, so as far as Meralco is concerned, the playing field is now as level as it’s going to get.

    The only reason for the TRO to be issued now is that Meralco might not be ready to play on that field, and is concerned that some of MPower’s big customers might migrate to suppliers other than Vantage, anyway.

    There is some precedent for surmising the bloated utility giant is moving too slowly to be competitive: It was partly successful in delaying the rollout of prepaid electricity programs due to its inability to get its act together on its own offering for three years or more, while comparative upstart Xen Energy Systems Inc. – which has a staff of maybe a dozen people – smoothly and with a minimum of fuss was able to roll out its own reliable and less expensive system for successful pilot testing in multiple provincial areas in a matter of months.

    The RCOA scheme is a well thought-out program that took several years to develop, and it will help to improve electricity service and prices to end-users, a market that will expand rapidly once the 1 MW threshold for contestability is lowered. Far from creating a “new cartel,” the ERC developed a list of qualified suppliers based on reasonably objective and consistent criteria, something even Meralco tacitly acknowledged with the launch of its new RES. In any case, it is difficult to argue that a consumer’s choices are being “limited” when he is presented with 24 different options for supply of the same commodity.

    The only provision of the RCOA rules that ought to be questioned is the 10 percent penalty for non-participation. While it is understandable that the ERC (which is under considerable pressure from the Department of Energy) is anxious to have the program finally become a reality, and understands that many Filipino businesses are slow to move unless forced to do so, the penalty may be taking things a bit too far. That is something the Supreme Court will have to decide; let’s hope it does so quickly, and otherwise recovers enough of its wits to dispense with the rest of this cynical attempt to stop a pro-consumer concept.



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