RCOA to end Meralco-industry deal

by Myrna Velasco, 12 July 2015
from Manila Bulletin

The retail competition and open access (RCOA) policy laid down by the Department of Energy (DOE) is calculatedly cracking a hard whip on power utility giant Manila Electric Company (Meralco) as such could be the ‘end of an era’ of electricity supply services to big ticket end-users or the so-called contestable customers (CCs), primarily the industries.

Other similarly-placed distribution utilities (DUs) will likely be affected, and their scope of service may just already be confined to captive customers or those end-users within the consumption level of 749 kilowatts and below or generally the residential and small commercial end-users.

In the RCOA circular laid down by the department, it expressly stipulated that “the capacity or energy that shall remain with the DU shall be adequate to supply the power requirements of its remaining captive market, including the DUs projected demand growth.”

The retail competition policy pathway being set forth by the DOE is somehow aligned with the prescriptions previously cast by the Energy Regulatory Commission.

By June 2016, it was indicated that full and mandatory retail competition will finally be enforced – and that all contestable customers and/or directly-connected customers shall already depart from sourcing their supply from franchised DUs.

“All CCs (contestable customers) with an aggregate demand ranging from 750kW and 999kW for the preceding 12-month period, are mandated to secure their RSCs (retail supply contracts) with RES no later than 25 June 2016,” the DOE has directed.

Within that regime of retail competition in the industry, the end-users within the prescribed threshold of 750kWs and up shall already contract or purchase their capacity needs from licensed retail electricity suppliers or aggregators.

The energy department has added that effective June 26, 2016, “aggregators shall be allowed to compete with RES, generation company and prospective generation company.”

In an earlier interview, former Energy Secretary Carlos Jericho L. Petilla has admitted that the policy intent of the RCOA will “really kill Meralco’s business on the supply side”, as he similarly noted that they just want to eventually see the power utility confining its business to service provision via the wires.

As a DU, both the DOE and ERC policy and regulatory frameworks would bar Meralco and affiliate companies from becoming a retail electricity supplier.

Petilla acknowledged though that there is a “gray area” because power generators can apply for a license as RES – and in Meralco’s case, it has a power generation subsidiary of which plunge into RES business is a matter that has not been clearly tackled in the Circular.

In the past years, Meralco has been innovating a lot on the supply side of its business – aiming at service and cost improvements for its big-ticket customers. But with the RCOA framework, the utility firm might eventually see its aspirations dashed on that domain.

On the aggregation side for RCOA, the threshold will even be made lower at 501kW after two years, as culled from the energy department circular.

It stated that “all electricity end-users with an average demand ranging from 501 kW to below 750kW for the preceding 12 months may be allowed to choose their respective RES effective 26 June 2018, subject to the determination of the ERC on the basis of its evaluation on the performance of the retail market.”

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