ERC suspends RES licensing pending review of rules

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Source: BusinessWorld | November 25, 2014 08:13:00 PM

THE ENERGY Regulatory Commission (ERC) has suspended the issuance of licenses to new retail electricity suppliers (RES) as it moves to address regulatory issues with the hope of attracting more companies to participate in the retail market.
The regulator, in a resolution published yesterday, resolved “to hold in abeyance the evaluation of the RES license applications and suspend the issuance of such licenses until such time that the amendments on the rules… has been made by the commission.”

The ERC was mandated by the Electric Power Industry Reform Act of 2001 (EPIRA) to license the RES segment.

An RES is an accredited supplier that can provide electricity to contestable customers as provided under the retail competition and open access (RCOA).

Under the RCOA, large users with an average 1 megawatt monthly consumption have the option to seek their own suppliers — which are either the existing distribution utilities (DUs) like Manila Electric Co. or an accredited RES.

The suppliers in turn can provide tailored supply packages based on the customer’s consumption and preferences.

In its resolution dated Oct. 22, the ERC noted that it revised the rules for the issuance of licenses to the RES segment in November 2013 to address concerns of contestable customers on their difficulty in securing RES supply contracts.

However, the ERC said there is a need to further amend the rules to address “the current issues on retail market for regulatory guidance” and “for the purpose of planning the intending participants’ retail business operations.”

The new set of amendments, the ERC added, is intended “to provide a competitive environment that shall encourage more players to participate in the retail market, and ensure a level playing field for all market participants.”

The commercial implementation of the RCOA began in June 26, 2013.

Contestable customers who were unable to execute contracts with an RES will continue to be served by their respective DUs until such time that they are able to secure contracts.

Qualified customers are expected to benefit from the “customer switching” provision of the RCOA, where the customers have the option switch to another supplier on a monthly basis.

This provision was intended to empower consumers to choose the most competitive supplier in terms of quality of supply and rates of electricity.

Only contestable customers will benefit from RCOA in the meantime, but the idea is to eventually bring down the cap for all other customers.

Section 31 of the EPIRA provides that two years after the implementation of RCOA, “the threshold level for the contestable market shall be reduced to 750 kW (kilowatts).”

“Subsequently and every year thereafter, the ERC shall evaluate the performance of the market. On the basis of such evaluation, it shall gradually reduce threshold level until it reaches the household demand level…” the EPIRA states. — Claire-Ann Marie C. Feliciano