ERC affirms DU restrictions on retail competition

by Myrna Velasco – May 18, 2016

from Manila Bulletin

The Energy Regulatory Commission (ERC) is cementing with finality the prohibition it intends to enforce versus distribution utilities (DUs) on the retail competition phase of the deregulated power sector.

In an interview with reporters, ERC chairman Jose Vicente B. Salazar has indicated that the last set of rules on retail competition and open access (RCOA) regime of the industry had already been decided recently by the Commission.

“We decided last Thursday during our strategic planning workshop, we already resolved all the issues… this will be the last in the series of rules,” he said.

Salazar explained that this will categorically end the era of the local RES, which has been the DUs’ retail supply arm in servicing contestable customers within their franchise area.

Contestable customers are those mandated by law and other relevant edicts to have “the power of choice” when it comes to their power supply contracting or procurement.

In the restrictions imposed, he noted that “the DUs definitely cannot be in retail supply, although they can still form their own RES (retail electricity supplier) affiliate.”

The constraints set would be for their RES affiliates having their own sets of management and board of directors – and a business portfolio completely unbundled from their power distribution venture.

“They cannot have the same directors, they can’t have the same office and facilities and they can’t also have the same set of officers,” Salazar expounded.

The termination of local RES will commence at the targeted mandatory enforcement of retail competition by June next year at the prescribed lower threshold of 750 kilowatts.

Salazar said the other earlier-set conditions on 50-percent level of RES procurement from generation-company affiliates; as well the 30-percent market share cap based on peak demand, will also be carried in the soon-to-be-released ERC rules.