DOE to bring down RCOA threshold to 500 kilowatts

By Myrna M. Velasco –  August 21, 2017, 10:00 PM

from Manila Bulletin

Breaking power utilities’ service dominance is all up in the agenda of the Department of Energy (DOE) as it is now seriously considering to bring down power retail competition threshold to 500 kilowatts in the remedial measures it is set to craft for the Retail Competition and Open Access (RCOA) policy.

Such direction is being contemplated upon in one of the two Department Circulars that the DOE is set to issue to ‘cure the perceived defects’ of the earlier rules on the electricity sector’s competitive retail regime.

As indicated by Energy Undersecretary Felix William Fuentebella, the threshold level for contestability will be brought down to 750 kilowatts and eventually to 500kW – which entails then that commercial end-users and households with massive electricity usage may already be covered.

Retail competition in the restructured power sector is currently stuck at 1.0 megawatt following the temporary restraining order of the Supreme Court on the questionable rules of the RCOA policy.

Nevertheless, Fuentebella noted that the energy department would be ‘curing these challenged RCOA provisions’ in their planned policy-setting via issuance of specific Circulars.

One circular will prescribe “voluntary scheme” of power retail competition; he said, while the other Circular will tackle the participation of local retail electricity suppliers (L-RES) of distribution utilities, like that of the Manila Electric Company, other private DUs and electric cooperatives.

“We will have two Department Circulars.  One circular will look into the ‘voluntariness’ of being contestable customer and then you can go back into being a captive one,” the energy official stressed, apparently referring to the switching option that customers in the RCOA could still resort to.

In addition, he said, the other policy plan of DOE will be to allow the L-RES of DUs, but with him qualifying that these power utilities should not be engaging in cross-subsidization of their costs across customer segments.

For example, he cited that a DU could be tempted passing on higher costs to its captive customers when cost of supply procurement would be high; or could also be done in terms of savings. Essentially, he noted, that should not be allowed.

“One circular will be for qualifying local RES, provided they do not pass-on cost to their captive customers – because that would be unfair practice,” Fuentebella said. Captive customers are those that cannot exercise power of choice yet in their electricity supply preference and service options.

For allowing the L-RES of DUs to be back in the fold of retail competition, Fuentebella emphasized that they shall be setting stringent conditions, so the question of “fairness” as raised in cases filed at the Courts can be squarely addressed.

“We have to state the conditions why. So if they overcome these conditions, we will allow them. But it will be a ‘China Wall’ type of running it,” he said.

It must be recalled that such had been one of the contentious and tricky provisions that had been the subject of legal skirmish raised against retail competition in the power industry.