ERC nixes monopoly in power sector

by Madelaine B. Miraflor – June 26, 2016

from Manila Bulletin

The Energy Regulatory Commission (ERC) has affirmed that nobody, even the largest distribution utility, could take a dominant position in the industry, as it appealed for a favorable court decision against the Manila Electric Co.’s (Meralco) petition to nullify issuances of the power sector regulator on retail competition and open access (RCOA).

In an interview, ERC) Chairman Jose Vicente Salazar said the regulatory agency is not preventing Meralco or any distribution utility to form a local retail electricity supplier (RES) as a subsidiary as long as this will not monopolize the market.

“Nobody can have a dominant position in the market. Nobody can abuse its dominant position in the market. If the formation of an affiliate is in conformity with the rules, then we will grant it,” he added.“We are not preventing Meralco from forming or creating an affiliate to undertake the business of a RES. We are just following what is being undertaken in other countries that when you participate as a RES, you shouldn’t have conflict of interest,” Salazar told reporters on the sidelines of 10th Wholesale Electricity Spot Market (WESM) Anniversary Night.

To recall, Meralco requested the local court to stop the new rules of the government when it comes to retail competition and open access (RCOA), which allows end-users to choose who would supply them electricity.

Meralco said these issuances, which includes three resolutions from ERC and one circular from the Department of Energy, will stop MPower, Meralco’s local RES, from operating and will limit choices for consumers.

In DOE Circular DC2015-06-0010, any DU like Meralco is not allowed to become a RES beyond its franchise area.

It also ordered existing local RES to stop operating until the expiration of their respective retail supply contracts (RSCs).

Meanwhile, one of ERC resolutions has required all interested parties to supply to the contestable market to secure an RES license, while all DUs that want to become a RES are subject to restrictions.

As for the other resolution, ERC already removed the “local RES” in the list where RCOA rules apply and provided a timeline mandatory migration of contestable customers to RCOA.

The third resolution orders all local RES to wind down their operations in three years once the rules take effect.

Salazar said that with the current set-up, some industry players could no longer participate in the competition because MPower holds 50 percent of the market share within its franchise and 18 percent nationwide.

“When I talked to other industry players a week ago, they are saying that with what Meralco is doing right now, in effect, the other players could no longer participate,” the ERC chief said.

“I guess the way to manage this is that discussions will continue, within which we will implement some revisions of the law. I’m hoping that the injunction will not be issued so that while we are implementing the rules, we will have continuous discussion with the industry,” he added.

The Temporary Restraining Order (TRO) to stop the implementation of these issuances in response to Meralco’s claim is going to end before the end of this month.