FPI: Rule changes in competitive retail-electricity market may hurt local industries

by BusinessMirrorJune 13, 2016

from Business Mirror

THE Federation of Philippine Industries (FPI) has expressed apprehension over the new rules of the Energy Regulatory Commission (ERC) affecting retail competition and open access (RCOA) in the energy sector, noting the changes are detrimental to its industry members and runs counter to a competitive market.

FPI Chairman Dr. Jesus Lim Arranza said, “Certain resolutions recently issued by the ERC on the RCOA implementation run counter to “the spirit of free market and competitive environment as espoused by the Epira [Electric Power Industry Reform Act].” Arranza was referring to ERC Resolutions 10 and 11, which effectively limits the choice of customers to select their power supplier by disallowing distribution utilities and other industry players from taking part in the retail electricity service (RES) market and imposing market-share caps on all RES suppliers.

“It is ironic that what the ERC is trying to achieve with the open-access scheme is exactly the opposite the industries could be facing soon if this mechanism will take place,” Aranza said. The FPI said contestable customers, those whose monthly power consumption is at least 1 megawatt, are concerned over the intervention of the ERC in the deregulated retail electricity-supply market, given the prevailing competitive environment where customers are free to choose their suppliers. Given that more and more customers will soon be part of the contestable market, FPI expressed concern over the highly probable scenario where contestable customers will be at the mercy of the few remaining suppliers.

Not being able to source the cheapest power rates, it added, will severely hurt local manufacturers.  FPI said since most manufacturers will likely pass on the higher cost of their production to customers by increasing the price of their goods, this could impair their competitiveness, especially as the country competes under the regime of Asean Integration.

As early as three years ago, the FPI already expressed worry about insufficient power supply and pushed for deferment of the RCOA’s implementation. FPI also expressed dismay over the seeming lack of consultation of customers, especially big manufacturers and companies that will be directly affected by said changes.

“What they are guaranteeing is transparency, but not lower power cost. It is a supplier’s market. Many contestable customers have not been approached by a supplier, thus they will be served by a Supplier Of Last Resort, the rate of which will be based on WESM [Wholesale Electricity Spot Market] prices, plus a 10-percent premium,” Arranza said.