WESM CEO: Fully implement RCOA to lower electricity prices

The head of an independent operator in the Philippines’ Wholesale Electricity Spot Market (WESM) has urged the authorities to move full steam ahead with the government’s Retail Competition and Open Access (RCOA) program.

Francis Juan, CEO of the Independent Electricity Market Operator of the Philippines, Inc. (IEMOP), said the full implementation of the RCOA program will end the uncertainty that clouded over the electricity market.

“Having RCOA moving again will definitely enhance competition at WESM. We have received inquiries from several potential contestable customers who consume more than 750 kW if they can already register. They want to benefit from lower electricity prices that retail electricity suppliers can offer. It’s time we push ahead with the full implementation of the Epira (Electric Power Industry Reform Act) law,” said Juan.

He joins other industry advocates who are appealing to the Supreme Court to act on a pending petition that effectively blocks the full implementation of RCOA.

Increasing competition 

Following the energy crisis and the rolling blackouts of the Ramos administration, the Philippine government embarked on a policy of increasing competition in the energy industry.

According to Juan, the passage of the Epira law broke the power monopoly, unbundled the power sector, and opened the market to new retail electricity suppliers (RES) who could offer better services at lower costs.

Under the RCOA regime, contestable customers (CCs) – consumers of more than 750 kW – are now able to choose their retail electricity suppliers and generate savings in their power costs of up to 26 percent, according to at least one study conducted by the Ateneo de Manila University-based research institution Manila Observatory.

When RCOA was first launched, a wave of CCs – malls, universities, factories, and office buildings – migrated away from the dominant supplier, Meralco, to new RES and immediately benefited from lower prices. But several CCs – which include the Ateneo, PCCI, Marikina Riverbanks Development Corp and San Beda College Alabang – petitioned the Supreme Court (SC) in 2017 to issue a temporary restraining order on the mandatory migration aspect of RCOA and eligibility of distribution utilities to participate as suppliers.

These issues have to be resolved soon for RCOA to benefit more CCs and enhance competition in the electricity market, Juan said.

Chilling effect

Policy makers and energy industry executives agree that the TRO has had a chilling effect on the market by preventing the migration of CCs and slowing down the government’s full implementation of RCOA, which is already 10 years late in terms of the Epira mandated timeline.

Without the TRO, Juan said, there would be no legal obstacle for the eligible CCs to move to new RES. In addition, the lowering of the threshold to 500 kW – and, eventually, down to the household level – would increase the number of CCs. Everyone stands to benefit from an expanded market of consumers and suppliers.

In spite of the TRO, more and more CCs, those who were earlier issued certificates of contestability by the ERC, are opting to voluntarily migrate. Out of the 1,873 CCs who consume 750 kW or more, 62 percent or 1,153 CCs now have retail supply contracts with RES representing 71 percent of the total 4,008 MW demand of all CCs.

Significant savings 

Juan said these CCs are enjoying a generation charge of P4.58 per kWh on average, lower by P0.62 from Meralco’s charge of P5.20 per kWh. These are significant savings that CCs can pass on to consumers or reinvest in their operations.

According to Juan, competition in the energy market can result in lower electricity prices and increased consumer choice. “The Supreme Court’s delay in acting on the petition filed in 2017 is just causing regulatory uncertainty at a time when the Executive and Congress are looking for ways to reduce electricity prices to reduce the burden on ordinary Filipinos and boost the country’s competitiveness. Industry advocates say the Supreme Court needs to rescind the TRO now and decide consistently in favor of competition and fair markets.”

Juan added that with the full implementation of the Epira law, RCOA could be brought down to the level of household consumers. “With RCOA, every household will soon have the power to choose the lowest cost electricity supplier and generate savings from their hard-earned pesos.” said Juan./asu