* This is my column in BusinessWorld on April 30, 2018.
In several statistics comparing electricity prices in
Asia, the Philippines often ranks as the third most expensive in Asia next to
Japan, Singapore, or Hong Kong.
Here are numbers from three different sources: (1) The
Lantau Group (TLG), “Global Benchmark Study of Residential Electricity
Tariffs,” May 2013. The study prepared for the Energy Market Authority (EMA),
Singapore; (2) Enerdata, cited by Chris Herrera, “Optimization of Supply”
presented at EPDP lecture, UPSE, October 26, 2017; and (3) International Energy
Consultants (IEC), “Regional/Global Comparison of Retail Electricity Tariffs:
Executive Summary,” May, 2016.
In the IEC study, subsidized markets are Indonesia,
Malaysia, Thailand, South Korea, Sri Lanka, Taiwan. Unsubsidized and
deregulated markets are Japan, Philippines, and Singapore. Hong Kong is
unsubsidized but it is unsure if it’s deregulated.
The Electric Power Industry Reform Act (EPIRA) of 2001
has several provisions to help reduce Philippines’ electricity prices. The
deregulation of power generation encouraged many private power producers to
compete with each other. The Wholesale Electricity Spot Market (WESM) average
prices for instance have been declining, in Pesos/kWh: 6.43 in 2010, 3.80 in
2011, 4.87 in 2012, 3.85 in 2013, 4.40 in 2014, 3.47 in 2015, and 2.84 in 2016.
The retail competition and open access (RCOA) under EPIRA
is also an excellent provision. RCOA allows the “contestable consumers” or
those with average electricity consumption of 1,000 KW (or 1 MW), a level which
will later be reduced to 750 KW a day, to choose their own Retail Electricity
Suppliers (RES) and leave their existing private distribution utility (DU) or
electric cooperative (EC).
With RCOA, electricity consumers can set their own
conditions from their RES.
Some can demand that they be supplied 100% only from
renewables even if the price is higher, others can demand that they be supplied
only from cheap and stable sources. Small customers can also aggregate their
demand or allow an aggregator to pool their combined demand to become
contestable customers.
There are two recent reports in BusinessWorld related to
this.
(1) SC asked to lift TRO on retail power suppliers (April
24)
(2). DoE may step in as licensing body for retail power
suppliers (April 12).
Report #1 is about Bayan Muna (BM) petition at the
Supreme Court (SC) that it should lift its indefinite temporary restraining
order (TRO) it issued in February 2017 barring the Department of Energy (DoE)
and the Energy Regulatory Commission (ERC) from further implementing RCOA and
allow the contestable customers to choose their own RES.
I was surprised that the pro-state intervention and
pro-big government Bayan Muna suddenly turned around and campaigned for
pro-market, pro-consumer choice — that consumers be given more freedom to
choose an RES from the 23 short-listed by the ERC. Turns out that Bayan Muna is
only doing this to further fight Meralco as a monopoly in electricity
distribution in Metro Manila and some surrounding provinces. However, the group
is silent about the Constitutional provision granting monopoly power to all
other DUs and ECs in the country.
Report #2 is about the DoE studying the legality of being
the issuer of licenses for RES. There are no updates about this yet.
The indefinite TRO has a very adverse result, reducing
consumer choice, especially the contestable customers.
Those who consume 750-999 KW a day and are willing to
move voluntarily to RES cannot do so because they will be disallowed by the ERC
and PEMC. And even those who consume 1MW or more per day that are already
qualified for RCOA are hesitant to have power contracts with RES because of the
continuing uncertainty.
The ERC also does not and cannot issue new RES licenses
or renew expiring ones, resulting in reduced RES competition.
Even some DUs also face uncertainties whether to get
additional generation contracts or not for contestable customers because these
customers can leave them anytime once the TRO is lifted.
Government prohibitions should be kept to the minimum.
The EPIRA law has already succeeded in reducing electricity prices and expanded
the country’s power supply capacity so why suspend more customer choice and
empowerment?
The SC indeed should lift its indefinite TRO because it
is anti-consumers and anti-business. Existing DUs have the freedom to put up
their own RES so that contestable customers who have left the DU franchise
system can still be their customers. Or the SC can strike down certain ERC
resolutions so that it can issue new resolutions and regulations to implement
RCOA and further expand consumer choice.
---------------
See also:
BWorld 205, Energy mix and wishful thinking, April 30, 2018
BWorld 206, Intellectual property rights in East Asia, May 09, 2018
BWorld 207, Fare control and surge cap are wrong, May 10, 2018
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