Meralco nixes new rules on retail competition, open access

MANILA, Philippines - The Manila Electric Co. (Meralco) is seeking court relief after the government issued new rules on the retail competition and open access (RCOA), which it claimed are not in accordance with Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA) and its implementing rules and regulations.

Under the RCOA regime, end-users that are part of the contestable market, or contestable customers, can choose their supplier of electricity.

Meralco, through ACCRA law firm, filed a petition with Pasig Regional Trial Court – Branch 157 last May 27, asking the local court to declare the recent issuances of the Department of Energy (DOE) and Energy Regulatory Commission (ERC) on RCOA rules null and void.

In the DOE Circular DC2015-06-0010 issued last June 2015 which took effect July 1 last year, any distribution utility (DU) is prohibited to become a retail electricity supplier (RES) beyond its franchise area while all existing local RES are given until the expiration of their respective retail supply contracts (RSCs) to continue their operation.

A local RES is defined as entities under a DU that may engage in the business of supplying electricity to the contestable market without need of obtaining a license from the ERC.

“In other words, under the DOE Circular, the DU will be absolutely prohibited from engaging in the supply business after the expiration of their subsisting RSCs,” Meralco said in its petition.

Meanwhile, the ERC issued Resolution No. 5 last March 8 which took effect a month after, requiring all interested parties to supply to the contestable market to secure a RES license while all DUs aspiring to become a RES are subject to restrictions.

In Resolution No. 10 signed last month which took effect May 28, the ERC removed the “local RES” in the list where RCOA rules apply and provided a timeline mandatory migration of contestable customers to RCOA.

ERC Resolution No. 11, meanwhile, disallowed any DU to retail electricity to the contestable market and ordered all local RES to wind down their operations in three years once the rules take effect.

The power regulator also imposed a 30 supply percent market cap on RES and prohibited them from supplying more than 50 percent of the capacity requirements of their affiliate contestable customers.

Meralco claimed that under EPIRA, DUs and electric cooperatives are recognized to engage in the business of supplying electricity to the contestable market within their franchise area without the requirement of securing a license.

The same was also recognized by the DOE and ERC in their earlier circulars and resolutions.

“The prohibition, in the guise of ‘promoting free and fair competition,’ wants to, with one sweep, remove local RESs like MPower out of the picture, to their prejudice, and to the detriment of the 50 percent portion of the contestable market who have voluntarily and intelligibly chosen to con act with MPower for their energy supply. It is only meant to curtail the market share of MPower in the contestable market,” the petition read.

Meralco currently supplies to contestable customers through its local RES MPower. To date, MPower accounts for about 50 percent of the market share of the contestable market within its franchise, or 18 percent of the total nationwide.

Other RES include Trans Asia Oil & Energy Development Corp. with nine percent; Aboitiz Energy Solutions with four percent; Advent Energy Inc., Team (JPhiis.) Energy Corp., and Direct Power Services Inc., with three percent each; Ecozone Power Management Inc. with two percent; and others for 4 percent, government data showed.

“What the DOE and ERC actually want is to curb MPower’s market leadership for fear that it is causing a monopoly effect on the market, i.e., effectively preventing new entrants and curtailing tHe growth of other suppliers in the industry. Such fear is completely baseless an wildly,” Meralco said.