Legal challenge looms against ‘open access’ power supply deals

William S. Pamintuan, Meralco deputy general counsel, said the legal options include court action and possibly an appeal to the Energy Regulatory Commission (ERC).

"We'll explore both [options] just to cover all bases with the regulators," he said after the company's annual shareholder meeting on Tuesday.

He was reacting to two resolutions issued by the ERC that will fully implement retail competition and open access, or RCOA, in the electricity market.

Resolution 11 imposes restrictions on the operations of distribution utilities and retail electricity suppliers in the competitive retail electricity market, while Resolution 10 adopts the revised rules on what is a "contestable customer." Both resolutions, issued on May 12, take effect immediately following their publication in a newspaper of general circulation.

Oscar S. Reyes, Meralco president and chief executive officer, said the company's position has always been to leave the choice to customers, let market forces decide and have as much competition as possible.

"So rather than take away or eliminate competition, have as much competition as possible. We've had I think experiences where it's not in the best interest of the market or the consumer for there to be interventions," Mr. Reyes said during a briefing after the company's annual meeting.

The ERC said it issued the resolutions as part of its mandate under Republic Act No. 9136, or the Electric Power Industry Reform Act of 2001, to promote true competition and prevent "harmful monopoly and market power abuse in the electric power industry."

Resolution 11 bars distribution utilities from engaging in the supply of electricity in the contestable market, which is composed of customers who were determined by the ERC to have a choice of electricity supplier. This market is made up of those whose average monthly peak consumption is at least 1 megawatt (MW) or more for the past 12 months, although the aim is to gradually decrease this threshold until it reaches households.

Starting on June 26, the ERC will be issuing "certificates of contestability" to end users with an average demand of at least 750 kilowatts (kW) and 1 MW and allow them to contract with any retail electricity supplier (RES) on a voluntary basis.

But on Dec. 26, the requirement to secure a retail supply contract will become mandatory for those consuming at least 1 MW. For the 750-kW-999-kW consumers, the mandatory date is June 26, 2017.

The lowering of the threshold to cover end users consuming at least 500 kW is set on June 26, 2018.

Retail aggregation -- or the joining of two or more end-users within a contiguous area into a single purchasing unit -- will also be allowed starting on June 26, 2018. During this phase, suppliers of electricity will be allowed to contract with end users whose aggregate demand within a contiguous area is at least 750 kW.

The ERC has also directed so-called "local RES" to wind down their business within three years from the effectivity of the resolution, while telling to no longer sign or execute any retail supply contracts. Meralco serves as a local RES within its franchise area under a separate unit called MPower.

To guard against monopoly, the regulator has not allowed suppliers to provide more than 30% of the total average monthly peak demand of all contestable customers. Suppliers are also not allowed to transact more than 50% of total energy transactions of its supply business within its affiliate contestable customers.

The only time that a distribution utility will be allowed to do business in the contestable market is a supplier of last resort, which is designated by the ERC to serve those who cease to receive services from their retail electricity supplier or those that failed to choose a supplier.

RCOA is effective only in grids where the wholesale electricity spot market is operational.

Under RCOA, the electricity highway composed of the transmission grid of National Grid Corporation of the Philippines and the distribution wires of utilities will be made available to all eligible users for a fee. This will allow retail electricity suppliers to deliver to consumers.

Meralco's controlling stakeholder, Beacon Electric Asset Holdings, Inc., is party owned by Philippine Long Distance Telephone Co. (PLDT).

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls.

Source: Bworld Online