ERC Consulted the Public on Timeline For Full Retail Competition

The Energy Regulatory Commission (ERC) conducted a public consultation on the draft “Resolution Prescribing the Timeline for Full Retail Competition" last November 22, 2006 at the ERC Hearing Room. The said resolution did not indicate a specific commencement date but instead specified that retail competition and open access shall start upon completion of the last two (2) conditions prescribed in the Electric Power Industry Reform Act (EPIRA). These are the seventy percent (70%) privatization requirement for National Power Corporation’s (NPC) generation assets in Luzon and Visayas and the transfer of the management and control of at least seventy percent (70%) of the total energy output of power plants under contract with NPC to the independent power producer (IPP) administrators. The other three (3) prerequisites have already been met, to wit, the establishment of the WESM, unbundling of transmission and distribution wheeling charges, and initial implementation of the cross subsidy removal scheme.

The resolution further proposed that on the fifth year after retail competition and open access commence, subject to a study by ERC, individual households may be allowed to choose their supplier of electricity. This indicative timeline was proposed in order to provide guidance to electric power industry participants and for distribution utilities to be able to plan their future energy requirements.

The EPIRA further mandates that upon the initial implementation of open access, the ERC will allow all electricity end-users with a monthly average peak demand of at least one megawatt (1 MW) for the preceding twelve (12) months to be the contestable market. Two years thereafter, the threshold level for the contestable market shall be reduced to seven hundred fifty kilowatts (750 kW). Subsequently and every year thereafter, the ERC will evaluate the performance of the market. On the basis of such evaluation, it will gradually reduce the threshold level until it reaches the household demand level.

In the discussions presided by Commissioner Rauf A. Tan, oversight commissioner for wholesale and retail competition, the NPC noted that the implementation of full retail competition (FRC) on the 5th year is incompatible with the EPIRA as the latter requires a gradual reduction of the threshold level. The National Association of Electricity Consumers for Reforms (NASECORE) on the other hand wanted the FRC to commence even earlier. Most of the participants, however appeared to support the indicative timeline as the implementation of FRC is dependent on ERC’s evaluation of the performance of the market.

Commissioner Tan was delighted with the active participation of representatives from the generation, transmission, distribution, and supply sectors. The consumer sector was also well represented by NASECORE and the NPC Industrial Customers Association, Inc. (NICAI).

The comments raised by the participants will be considered by the ERC and a second draft will be posted in its website for comments.

November 29, 2006