Retail competition and open access

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By Delmar Carino

The Recloser

Wednesday, December 5, 2012

OR RCOA for short.

But some quarters are misinformed about it. They claim that in a regime of open access, everything is open – that any entity can apply for a license to distribute electricity and replace, if not to rival, the duly franchised distribution utility. Worse, they believe that a separate electric cooperative can co-exist with the existing electric cooperative and engage in the same business.

That’s wrong. The “open access” in the RCOA means that a qualified entity can make use of the transmission and distribution lines which are supposed to be exclusive to the National Grid Corp. of the Phil (NGCP) and the electric cooperatives, respectively, because of their franchise. The qualified party refers to any retailer of electricity duly licensed by the Energy Regulatory Commission (ERC) to sell, broker, market or aggregate electricity to consumers in the market.


The aspect of “retail competition,” meanwhile, comes as a natural course. Licensed energy retailers will compete to sell power to end users or customers. This means that the franchise holder, like the electric cooperatives, will no longer have the monopoly to supply power to a segment of its consumer market.

Stated differently, “open access” is a market condition where consumers of electricity are given the freedom to choose their respective supplier of electricity whom they believe offers the best power supply agreement at the least price per kilowatt hour. The “retail competition,” on the other hand, allows power suppliers, from power makers or generators to aggregators and retail electricity suppliers, to beat one another in directly haggling or transacting business with electricity consumers.

But will not the RCOA be unfair to existing franchise holders like Beneco? No sir. The consumers will have to pay the electric cooperative for the use its lines that will transport the power the power retailer would supply to the doorstep of the end user. The fee is known as “wheeling in charges” the rates of which must be approved by the ERC. Besides, the RCOA will not diminish the powers and rights of the cooperative. Its franchise will remain intact. In fact, the franchise holder can also apply as a retailer of its own.

The law, however, has also provided caps to cushion the impact of the RCOA on electric cooperatives particularly that of suddenly losing its customer base. Under the guidelines, member consumers have been classified into two kinds of market -- contestable and captive. The former refers to end users who consume a monthly average peak demand of at least one megawatt (1MW) for the preceding twelve (12) months. Those consuming below the cap shall remain as the captive market that does not have a choice but to continue buying power from the franchise holder in the area. The RCOA will initially cover only those in the contestable market. BENECO has more than 140,000 member accounts. SM is its sole contestable consumer.

The law though says that two years after the initial implementation of the RCOA, the threshold level for the contestable market shall be reduced to 750kW. And every year thereafter, the ERC shall evaluate the performance of the market and decide if it would be feasible to gradually reduce the threshold until the household level.

On Dec. 26, 2012, a day after Christmas, the ERC will switch on the RCOA. It will still be a transition period though until June 26 next year. The transition period will be used for registration, discussion, training and simulation of the system among suppliers, contestable consumers and other stakeholders.

I asked Engr. Mario Esteban, our senior planning officer at the corporate planning office, if BENECO is ready for RCOA. He said yes with conviction. His boss, Engr. Joselito Villarey, our corporate planning department manager and regulatory compliance officer, grinned.

With approval, I suppose.

Published in the Sun.Star Baguio newspaper on December 05, 2012.


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