One last electricity crisis to end the year

Ben D. Kritz

Ben D. Kritz

ON Wednesday, the controversy-plagued Energy Regulatory Commission (ERC) found itself facing two more complaints to round out what has been a troubling few months for the agency. A petition by the Philippine Chamber of Commerce and Industry (PCCI), Ateneo De Manila University, San Beda College (Alabang) and mall owner Riverbanks Development Corporation was filed at the Supreme Court, essentially asking the Court – again – halt the implementation of the Retail Competition and Open Access (RCOA) regulations that Meralco and a few other big power interests have fought tooth and nail to try to stop ever since the program was conceived about seven years ago.

What the complainants are protesting this time is the ERC edict that all contestable customers —for now, big users of electricity who consume 1 MW or more per month—abandon their current electricity supply agreements and renegotiate with one of the 23 suppliers on the ERC’s approved list. According to PCCI, et al., this rule essentially creates a “new power cartel,” which would limit consumers’ choices and allow suppliers to keep electricity prices higher than they would be under a truly “open competition” scheme.

The petition filed this week has Meralco’s fingerprints all over it, even though the nation’s largest power distributor is not a named party to the complaint. 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.

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) that it would form another subsidiary to serve as a supplier that would qualify as a RES under the new rules. Approval of the new subsidiary, Vantage Energy Solutions and Management Inc., has not yet been given by the ERC, and so it is in Meralco’s best interests to stop or at least delay the roll-out of the RCOA program, given that it is certain to lose at least some of MPower’s big customers to other suppliers.

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; in any case, it is difficult to argue that a consumer’s choices are being “limited” when he is presented with 23 different options.

If there is a legitimate point to the latest petition, it may be the argument that the penalty to contestable consumers for not complying with the RCOA provisions is unfair. Under the scheme, a contestable customer who does not participate 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. This provision pushes the boundaries of ERC’s mandate to regulate the supply and cost to consumers of electricity; there does not seem to be an argument that would satisfactorily explain how the first option—the 10 percent price penalty—actually advances that mandate. What may be a more fair solution is to add the option of paying WESM rates to the lengthy list of choices big power consumers are given under RCOA. But beyond that, this week’s attempt to stop the program is as specious and self-serving as every one that has preceded it.

What is unfortunate and frankly infuriating is that Meralco is actually a fairly well managed company with tremendous resources, and, if it was run by business-minded people rather than pure rent-seekers, could be a reliable, competitive, and preferred supplier for many large customers. Instead, it has once again resorted to trying to bend the regulatory framework to maintain its market dominance, which hurts the entire industry.

Hopefully, the Supreme Court will remember the precedent it set with its overturning of the Pasig RTC ruling in favor of Meralco and rule consistently with respect to this latest petition when the Court reconvenes next month.


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