ERC 'pro-consumer regulatory structure' cited

MANILA, Philippines – The Energy Regulation Commission (ERC) “has just created a structure in its regulatory supervision that now makes sure electricity firms would be pro-consumer,” said the Foundation for National Development (FND) the other day.

Lawyer Rafael dela Torre, chief advocacy officer of CPI Organizational Studies and Advocacy (COSA), pointed out that the electric power industry regulator has “rightly handed down a policy which places both the consumer and the industry player in a win-win situation.” Dela Torre was referring to performance-based regulation (PBR), a new rewards and price-setting mechanism which ERC approved for companies in the transmission and distribution business.

ERC first implemented PBR for the National Transmission Corp. (TransCo) in 2006 and subsequently ordered that all private distribution utilities (DUs) would be under this new regulation regime. The first DUs placed under PBR were Cagayan Power and Light (Cepalco) and Dagupan Electric (Decorp) last October 2008. The Manila Electric Co. (Meralco), Cotabato Light, Iligan Light, and Mactan Electric are the next batch of distribution utilities placed under PBR effective last May.

Dela Torre said ERC’s adoption of PBR “is simply following the trend around the world,” since this regulation scheme is now widely practiced for the wires business in the US, UK, Australia, and New Zealand.

Under PBR, companies must pay a fine to their customers when they do not meet their performance targets. “ERC has made sure the customer receives higher value for his money,” Dela Torre said, in the same way that ERC is assuring distribution utilities to remain viable with just enough return – so they can continue operating.

Effective last May, ERC approved the PBR-based upward adjustment of 25.7 centavos per kilowatt hour for Meralco, the distributor’s first adjustment since June 2003. “To have an adjustment after six years of a little over 25 centavos is a very reasonable one,” the advocate said, adding that this decision was arrived at after a series of consultative meetings and hearings.

The regulator was also cited for “installing a fining system” where companies will pay a fine to effective customers if they do not meet previously agreed on performance targets. “I want to believe that this is part of ERC’s mandate to maintain a regulatory environment which assures all electric power consumers with affordable, reliable, uninterrupted and consistent supply of electric power,” the electric industry advocate said.

The obviously pro-consumer provisions of the ERC order on PBR are placed under the Guaranteed Service Level (GSL) scheme, where the DU is committed to provide satisfactory service to consumers – or else they will be fined, the COSA leader said.

If the DU exceeds an aggregated of 35 hours in sustained service interruptions (brownouts) within the year, the DU shall pay the customer P120. If the frequency of service interruptions exceed 25 times within the year, the DU shall pay the customer P150.

If the restoration of electric power supply to the customer takes longer than 15 hours, the DU shall pay the customer P120. If the DU commits a date for new service connection to the customer but such connection suffers a delay, the DU shall pay the customer P47 for every day of delay up to the maximum amount of P235.

Dela Torre noted that if these amounts are multiplied with the number of the DUs’s customers, their “fines” would run into millions of pesos!”

He further noted that generally all sectors in business, government and enlightened civil society have accepted this regulatory system.