ERC sets implementation of RCOA

by Lenie Lectura, 18 July 2015
from BusinessMirror

THE Energy Regulatory Commission (ERC) will start soliciting comments for the full implementation of Retail Competition and Open Access (RCOA) by end of this month.

In an announcement, the ERC invited all industry stakeholders to submit their comments on or before July 30. The commission has released the first draft of “Rules Governing the Issuances of Licenses or Authorization for Retail Electricity Suppliers [RES] and Prescribing the Requirements and Conditions Thereto” and the “Revised Rules for Contestability.”

The draft rules are, likewise, scheduled for public hearing on August 14.

“The proposed amendments to the Rules for Contestability focus on the timeline for the mandatory contestability and the lowering of the threshold to 750 kilowatts [kW], which is set on June 26, 2016,” ERC Director Francis Saturnino Juan said in a text message, when sought for comment.

He said that among the amendments in the 2015 RES rules are the restriction of RES to supply not more than 25 percent of the total peak demand of the retail market; classification of RES licenses; renegotiation, auction or declaration in the Wholesale Electricity Spot Market (WESM) as options in treating displaced contract capacity; and a one-year timeline for existing RES to comply with such limitations.

Further, Juan said the move to amend the rules is in line with the Department of Energy’s (DOE) directive to establish policies to facilitate the full implementation of RCOA.

Under RCOA, which officially began on June 26, 2013, customers with monthly average peak demand of at least 1 megawatt, dubbed as contestable customers (CCs) by the ERC, are now able to choose the supplier of their energy requirement.

These suppliers, commonly known as RES, will directly negotiate and contract on a wholesale level with power-generation companies so they can sell electricity to contestable customers at competitive rates.

Two years thereafter, the Electric Power Industry Reform Act (Epira )of 2001 mandates that the threshold level for contestable market shall be reduced to 750 kW. Subsequently, every year thereafter, the ERC shall evaluate the performance of the market. On the basis of such evaluation, it shall gradually reduce the threshold level until it reaches the household-demand level.

However, participation in this mechanism is voluntary, as CCs could still choose whether to ink retail service contracts (RSCs) or continue sourcing from their current power distributors.

As of April this year, only about 35 percent of the total CCs that have been certified by the ERC have chosen their RES and registered with Philippine Electricity Market Corp., administrator of the WESM.

“The DOE takes cognizance of the uncertainties brought about by the status quo regime, its impact on the preparation of Distribution Development Plan, particularly in the load or demand forecasting, and the DUs [distribution utilities] power supply contracting for its franchise area,” the agency said in its June 19 circular.

Therefore, the agency “issues, adopts and promulgates the following policies for the continued development and implementation of RCOA as embodied in the Epira,” Department Circular 2015-06-0010 stated.

It said that all CCs, currently being served by their franchised DUs, are mandated to secure their respective RSCs no later than June 25, 2016, with a licensed RES. This also applies to all CCs, with an average demand ranging from 750 kWh and 999 kWh for the proceeding 12-month period.

The RSCs should be submitted to the DOE and the ERC for monitoring, assessment, policy- and rule-making purposes, particularly on the timelines and effectivity date of the RSC.

Moreover, all electricity end-users with an average demand ranging from 501 kWh to 750 kWh for the preceding 12 months may be allowed to choose their respective RES effective June 26, 2018, subject to the determination of the ERC.

Voluntary contestability for end-users with average demand of 500 kW and below for the preceding 12 months shall be based on continuing evaluation and assessment by the ERC.

The Manila Electric Co. (Meralco), the largest DU in the country, said it will still continue to distribute electricity to all contestable customers in its franchise area. The corresponding distribution charge due to Meralco for rendering this service will be reflected in the RES’s monthly bill.

Moreover, all power distribution-related concerns, like scheduled and unscheduled interruptions, new service applications for electricity, application for increased power requirements and energizing new facilities, will still be coursed by the CCs to Meralco.

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