‘Epira incomplete without RCOA’

By Lenie Lectura – March 5, 2017

from Business Mirror

Authorities are carefully weighing their options on how to move forward following a Supreme Court (SC) order that temporarily stopped the implementation of a landmark policy meant to give consumers the choice to choose their own supplier of electricity.

They could not stress enough how vital this policy is to make consumers fully appreciate the benefits of the Electric Power Industry Reform Act (Epira).

“Epira is incomplete without the RCOA [Retail Competition and Open Access],” Energy Undersecretary Felix William B. Fuentebella said in a phone interview. “We can’t say Epira will be a failure if RCOA is not implemented, but rather it will just be incomplete.”

Since Epira was enacted into law 16 years ago, the power industry’s generation, distribution and transmission sectors were already unbundled. Monopoly had ceased to exist.

“We have unbundled the major sectors. Now, we are at the stage of unbundling further what had been unbundled. RCOA is among the last stages of Epira for the law to be fully implemented,” Fuentebella said.

The Department of Energy (DOE) and the Energy Regulatory Commission (ERC), both respondents in the recent ruling of the SC, said they will respect and abide by the temporary restraining order (TRO) on the implementation of DOE Circular DC2015-06-0010, Series of 2015, and ERC Resolutions 5, 10, 11 and 28, Series of 2016, without prejudice.

The SC issued the TRO on February 21, or less than a week before February 26, when the DOE circular and the ERC resolutions were supposed to take effect. In particular, power users consuming an average of at least 1 megawatt (MW) per month are required to source power from a licensed retail electricity supplier (RES).  At present, the majority of power consumers are being supplied by the Manila Electric Co. (Meralco).

The DOE circular and the ERC resolutions further mandate customers with 750 kilowatt-hours (kWh) to 999 kWh a month of electricity usage to pick their preferred RES on or before June 26, 2017.

Threshold

The rules also state the lowering of the threshold to cover an end-user with an average monthly peak demand of at least 500 kWh is set on June 26, 2018, subject to the review of the performance of the retail market by the ERC.

Those who fail to do so before the deadline will be cut from their distribution utilities and transferred to a designated supplier of last resort, where the price of electricity is costlier.

“This is what we are saying. Consumers would not be able to fully appreciate the benefits of Epira if some of the provisions would not be enforced. Epira must be taken as a whole for everyone to appreciate its benefits,” Fuentebella pointed out.

But the High Tribunal found no basis for the mandatory migration being ordered by the DOE and the ERC through the questioned issuances. More important, the petitioners have established a clear, legal right to the TRO, considering that Epira provides for voluntary migration of end-users.

The Court also noted the urgent need to issue the TRO, considering the February 26 deadline. “If a TRO is not issued, the petition will become moot, and petitioners stand to suffer grave and irreparable injury, because they will be disconnected from the distribution utility or make to pay a supplier of last resort a 10-percent premium between the higher contracts and the Wholesale Electricity Spot Market,” the SC said.

Legal complexities

The TRO was sought by the Philippine Chamber of Commerce and Industry, Ateneo de Manila University (AdMU), San Beda College and Riverbanks Development Corp.

“AdMU believes that our government and regulating bodies should ultimately seek to protect our basic, constitutional right to freedom of choice. And this right should extend to all electricity consumers,” AdMU President Fr. Jose Ramon Villarin said.

He added: “If we are allowed to choose the best supplier for our needs in a market that is allowed to work freely and for the common good, then such a scenario will be most beneficial to all consumers concerned, especially those smaller-scale contestable customers [CCs], like schools and universities, that may have a difficult time searching for a new contract.”

Still, the DOE and ERC vowed to exhaust all available legal remedies to put forward the factual and legal bases on which the promulgation of the assailed rules have been based.

“Due to the legal complexities surrounding the TRO, the DOE, ERC and the Philippine Electricity Market Corp. (PEMC) are still in the process of drafting a general advisory for the guidance of the RCOA stakeholders, without prejudice to future issuances,” the DOE said.

The issues being considered by these agencies are whether applicants who have already executed retail supply contracts (RSCs) and were already registered and switched shall continue to honor their respective RSCs, and that ongoing applications for registration filed before the Central Registration Body (CRB) may proceed voluntarily.

It is thoroughly being reviewed if applicants who wish to withdraw or defer their registration before the CRB may do so consistent with the Retail Market Rules, provided that the CRB shall not be liable for any legal repercussions that may arise out of the CCs’ contractual obligations; and whether remaining CCs who have not yet secured their RSCs may continue to negotiate and exercise their power to choose.

Relaxing the rules

While the DOE said it is duty-bound to implement the RCOA, Energy Secretary Alfonso G. Cusi said he is personally not in favor of the mandatory implementation of the questioned issuances. “But what can I do? It’s there when I came in,” he said.

Cusi also said he supports RCOA, as this policy provides consumers the freedom of choice as to which power provider they prefer to deal with, resulting in higher productivity for them. “And the power of choice can only be maximized when there is a level playing field for all suppliers,” he assured.

“It is hoped that whatever the decision by the Supreme Court, it will redound to the ultimate benefit of the consumers, which is really the intent and the spirit of RCOA.” Cusi said.

He said before the TRO came out, the DOE and ERC were in the process of easing the rules for the 1-MW consumer by giving them more time to forge a supply contract. “We were thinking of relaxing it, but this [the SC TRO] came,” he said.

An option being considered by the DOE after the TRO was issued is to issue a new circular aimed at easing the rules for 750-kW CCs who are mandated to contract their power supply with an RES by June 26 this year.

“We may come out with a revised, amended arrangement. We can’t do anything with the February 26 deadline because it has lapsed already. I am preparing for the June deadline,” he said.

The proposed revision may include the elimination of some deadlines, particularly the two-month period before the mandated date within which a supply contract must be sealed with a RES.

Dapat kasi ’yung landscape ay clear at kaya talagang magawa in time,” Cusi said.

The DOE would have to consult with the ERC on this though.

Meantime, the DOE, in coordination with the ERC and PEMC, as the CRB, will continue to conduct information drive and to educate the CCs on the benefits of RCOA in order to respond to queries affecting the industry players.

The DOE assures the public that extensive consultations and coordination efforts will continue toward full implementation of the provisions of the law favoring the consumers’ power of choice.

Mixed reactions

The ERC, for its part, said the TRO would unduly burden consumers.

Lawyer Rexie Digal, ERC spokesman, explained in a text message that RCOA affords the end-users the ability to choose their supplier of electricity, including the ability to negotiate for the rate that would be charged to them.

The scheme, she said, starts with large customers, but is expected to reach the household at some point.

“Delay in the implementation would deprive the ordinary consumers of enjoying the fruits of competition sooner. The end-users would remain as captive to their DUs [distribution utilities] for a long period of time,” she said.

The Philippine Independent Power Producers Association (Pippa) also expressed concern on the SC TRO indefinitely enjoining the implementation and enforcement of the regulations on RCOA.

“The RCOA is mandated by the Electric Power Industry Reform Act of 2001, but implemented only in 2013. It aims to institutionalize competition in the supply of electricity, allowing the electricity end-users to choose their suppliers based on low price and other factors. The recent TRO issued by the Supreme Court has the effect of putting on hold aspects of the RCOA, specifically the timeline for lowering of thresholds,” it said.

While Pippa supports the implementation of RCOA, it hopes that the issues before the SC would be resolved with finality at the soonest possible time. “We support the move from the DOE and ERC for a unified policy on RCOA. We hope that this will finally settle the issues and the industry will already move forward to attain the objectives of Epira,” the group of power-generation companies said.

For party-list Bayan Muna, the TRO only benefits big power distributors. “Delaying or stopping open access only works in favor of big distributors,” Bayan Muna Chairman Neri J. Colmenares said.

Consumer group CitizenWatch, meanwhile, said it was “pleased” with the SC decision.

“With a deadline of February 26, consumers would have had breakout of existing contracts and scramble to find and enter into new contracts just to meet the deadline imposed by the ERC, or lose power all together. If not for the issuance of the TRO, the ERC’s mandatory policy would have forced consumers into entering contracts with qualified suppliers, even if these contracts were unfavorable or more expensive contracts,” CitizenWatch Secretary-General Paco Pangalangan said.

“Furthermore, by limiting the choice of customers to a list of retail suppliers deemed qualified by the ERC and by prohibiting distribution utilities from participating in the contestable market, the DOE circular and the ERC regulations in question do not promote free competition. This will lead to higher prices of electricity, thereby affecting ordinary consumers and will be ultimately detrimental to the economy,” Pangalangan added.