New rules on retail competition and open access (RCOA) in the electricity sector may hurt local industries, a major business group has warned.
The Federation of Philippine Industries (FPI) has expressed its disagreement with the Energy Regulatory Commission’s (ERC) new rules on RCOA, saying that these run counter to the country’s drive to a competitive retail electricity market.
FPI Chairman Jesus Lim Arranza said, “Certain resolutions recently issued by the Energy Regulatory Commission on the RCOA implementation run counter to the spirit of free market and competitive environment as espoused by the Epira [Electric Power Industry Reform Act].”
Arranza was referring to ERC Resolutions No. 10 and 11, which effectively limit the choice of customers to select their power supplier by disallowing distribution utilities and other industry players from taking part in the retail electricity service (RES) market and imposing market share caps on all RES suppliers.
“It is ironic that what the ERC is trying to achieve with the open access scheme is exactly the opposite that the industries could be facing soon if this mechanism is put in place,” Aranza said.
The FPI said contestable customers—currently, those with monthly power consumption of at least one megawatt—are concerned about the intervention of the ERC in the deregulated retail electricity supply market, given the prevailing competitive environment where customers are free to choose their suppliers.
As more and more customers will soon be part of the contestable market, FPI said likely scenario is one in which contestable customers will be at the mercy of the few remaining suppliers.
FPI also said that if companies were not able to source the cheapest power rates, these new rules would severely hurt local manufacturers as prices may potentially pick up.
The industry group said most of the manufacturers might pass the higher cost of their production to customers by increasing the price of their goods, which can impair their competitiveness as the country competes under the regime of Asean Economic Community integration.
FPI for at least three years has pushed for deferment of the RCOA’s implementation, out of concerns about insufficient power supply.
FPI also expressed dismay over the seeming lack of consultation with customers, especially big manufacturers and companies that will be directly affected by the rule changes.
“What they are guaranteeing is transparency but not lower power cost. It is a supplier’s market. Many contestable customers have not been approached by a supplier, thus they will be served by a Supplier Of Last Resort (SOLR), the rate of which will be based on WESM (Wholesale Electricity Spot Market) prices plus a 10 percent premium,” Arranza said.