DUs prevented from new supply deals for big-ticket customers

by Myrna Velasco – May 27, 2016

from Manila Bulletin

Distribution utilities (DUs), including Manila Electric Company (Meralco), are now prevented from securing new power supply contracts for their contestable customers – generally their big-ticket subscribers in the consumption threshold of 750 kilowatts (kW) and up.

This has been anchored on Resolution No. 11 Series of 2016 issued by the Energy Regulatory Commission (ERC) relative to the imposition of restrictions upon DUs and retail electricity suppliers (RES) under the Competitive Retail Electricity Market (CREM) regime.

In the ERC edict, it stipulated that “no distribution utility shall engage in the supply of electricity to end-users in the contestable market unless such supply is made in its capacity as a supplier of last resort.”

In the voluntary phase of the power industry’s competitive era, the DUs have been listed as Local RES – meaning, they continue to serve contestable customers within their respective franchise areas.

Contestable customers are those end-users who can already exercise their power of choice in procuring their electricity supply – preferably with RES and no longer to be served by franchised DUs.

The ERC has prescribed June 26 this year as the kick-off point for mandatory contestability, but firming up supply procurement contracts primarily for those in the 750kW threshold is stretched until June next year; while those in the 1.0MW threshold will be until December 26 this year.

The ERC further directed that “all Local RES shall wind down their business within three (3) years from effectivity of  (the) Resolution.”

It qualified that “existing retail supply contracts (RSCs) entered into with their respective contestable customers shall remain valid until expiration of the said contracts subject to the winding down period.”

Nevertheless, the ERC directed that “no new RSCs shall be signed and executed after the effectivity of (the) Resolution.”  Said resolution was dated May 12, 2016.

The regulatory body added “existing retail supply contracts entered into with their respective contestable customers shall remain valid until the expiration of the said contracts subject to the winding down period.”

Another CREM restriction enforced by the ERC sets that “no RES shall be allowed to supply more than 30 percent of the total average monthly peak demand of all contestable customers.”

The ERC specified that “the level of demand shall be determined on a quarterly basis which should be posted on the website every 30th of the month following the quarter.”

Additionally, ERC said, “no RES shall be allowed to transact more than 50 percent of the total energy transactions of its supply business, with its affiliate contestable customers.”