2. What are the main reasons behind RCOA?

Retail Competition and Open Access

The Electric Power Industry Reform Act (EPIRA) mandates the Energy
Regulatory Commission (Commission) to promote competition, encourage
market development, ensure consumer choice, and penalize abuse of market
power in the restructured electricity industry. More particularly, the
Commission is mandated to promote competition by creating a level playing
field, among others, in the competitive retail electricity market.

The main reason behind the RCOA is to lower electricity prices.

The head of an independent operator in the Philippines’ Wholesale
Electricity Spot Market (WESM) has urged the authorities to move full
steam ahead with the government’s Retail Competition and Open Access
(RCOA) program.
Francis Juan, CEO of the Independent Electricity Market Operator of the
Philippines, Inc. (IEMOP), said the full implementation of the RCOA
program will end the uncertainty that clouded over the electricity market.

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9. With RA9136 in place, what reforms were instituted in the power industry? Walay labot
10. With restructuring, will the power industry be fully deregulated?

14. What guides the sale schedule of the NPC generation plants?

15. What is the status of the privitizaton of NPC generation asstes in Visayas and Luzon?

19. When was TransCo bidded out?

22. How can the government ensure that the proceeds from the sale of NPC assets will be
optimized?

24 In terms of currency denomination, what composes the power sector loans?

WESM CEO: Fully implement RCOA to lower electricity prices

INQUIRER.net / 03:39 PM November 23, 2018

The head of an independent operator in the Philippines’ Wholesale Electricity
Spot Market (WESM) has urged the authorities to move full steam ahead with
the government’s Retail Competition and Open Access (RCOA) program.

Francis Juan, CEO of the Independent Electricity Market Operator of the

Philippines, Inc. (IEMOP), said the full implementation of the RCOA program
will end the uncertainty that clouded over the electricity market.

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“Having RCOA moving again will definitely enhance competition at WESM. We

have received inquiries from several potential contestable customers who
consume more than 750 kW if they can already register. They want to benefit
from lower electricity prices that retail electricity suppliers can offer. It’s time we
push ahead with the full implementation of the Epira (Electric Power Industry
Reform Act) law,” said Juan.

He joins other industry advocates who are appealing to the Supreme Court to
act on a pending petition that effectively blocks the full implementation of
RCOA.

Increasing competition 

Following the energy crisis and the rolling blackouts of the Ramos
administration, the Philippine government embarked on a policy of increasing
competition in the energy industry.

According to Juan, the passage of the Epira law broke the power monopoly,
unbundled the power sector, and opened the market to new retail electricity
suppliers (RES) who could offer better services at lower costs.

Under the RCOA regime, contestable customers (CCs) – consumers of more

than 750 kW – are now able to choose their retail electricity suppliers and
generate savings in their power costs of up to 26 percent, according to at least
one study conducted by the Ateneo de Manila University-based research
institution Manila Observatory.
When RCOA was first launched, a wave of CCs – malls, universities, factories,
and office buildings – migrated away from the dominant supplier, Meralco, to
new RES and immediately benefited from lower prices. But several CCs –
which include the Ateneo, PCCI, Marikina Riverbanks Development Corp and
San Beda College Alabang – petitioned the Supreme Court (SC) in 2017 to
issue a temporary restraining order on the mandatory migration aspect of
RCOA and eligibility of distribution utilities to participate as suppliers.

These issues have to be resolved soon for RCOA to benefit more CCs and
enhance competition in the electricity market, Juan said.

Chilling effect

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Policy makers and energy industry executives agree that the TRO has had a
chilling effect on the market by preventing the migration of CCs and slowing
down the government’s full implementation of RCOA, which is already 10 years
late in terms of the Epira mandated timeline.

Without the TRO, Juan said, there would be no legal obstacle for the eligible
CCs to move to new RES. In addition, the lowering of the threshold to 500 kW –
and, eventually, down to the household level – would increase the number of
CCs. Everyone stands to benefit from an expanded market of consumers and
suppliers.

In spite of the TRO, more and more CCs, those who were earlier issued
certificates of contestability by the ERC, are opting to voluntarily migrate. Out of
the 1,873 CCs who consume 750 kW or more, 62 percent or 1,153 CCs now
have retail supply contracts with RES representing 71 percent of the total 4,008
MW demand of all CCs.

Significant savings 

Juan said these CCs are enjoying a generation charge of P4.58 per kWh on
average, lower by P0.62 from Meralco’s charge of P5.20 per kWh. These are
significant savings that CCs can pass on to consumers or reinvest in their
operations.

According to Juan, competition in the energy market can result in lower

electricity prices and increased consumer choice. “The Supreme Court’s delay
in acting on the petition filed in 2017 is just causing regulatory uncertainty at a
time when the Executive and Congress are looking for ways to reduce
electricity prices to reduce the burden on ordinary Filipinos and boost the
country’s competitiveness. Industry advocates say the Supreme Court needs to
rescind the TRO now and decide consistently in favor of competition and fair
markets.”

Juan added that with the full implementation of the Epira law, RCOA could be
brought down to the level of household consumers. “With RCOA, every
household will soon have the power to choose the lowest cost electricity
supplier and generate savings from their hard-earned pesos.” said Juan./asu

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2 Here is a summary of the benefits of RCOA to consumers and the Philippine

economy in general. Many of these were discussed at the EPDP presentation
last September.

1. Contestable customers will have more choices in pricing and power supply
contracting — privileges that are not available to small and captive customers.

2. Small customers can aggregate their demand or allow an aggregator to

pool their combined demand to become contestable customers.

3. Contestable customers can choose the type or source of power they want.
Some simply want cheaper prices, others want stable 24/7 electricity even if
costs are higher than those offered by their previous ECs or DUs, whose
services may be unreliable. For their part, other consumers who wish to
source all of their energy needs from renewables can also do so — as long as
they are willing to fork out more money for the privilege.

4. Contestable customers can have full control of their generation costs and
are not required to subsidize small and/or off-grid consumers, unlike
traditional end-users. They can choose to have flatter load factors by using
more baseload, an arrangement that is ideal for companies, especially those
that use power 24/7 like manufacturing plants, big hotels, hospitals, and BPO
centers.

5. Customers can shift demand to off-peak hours and can “peak shave” to
reduce their electricity price. Consumers have big leeway and choices based
on their needs and corporate philosophy and branding.

6. There are more than 50 RES to choose from, shown in the table above.
Contestable customers can also engage in financial hedging or enter into
contracts with any financial provider to hedge its existing contact structure and
they need not necessarily be an RES.

7. More investments in power generation can be expected as power

companies can contract directly with customers and bypass ECs, a number of
which have issues with paying generation companies on time.

The SC TRO has therefore resulted in the following unintended

consequences:

1) It disallowed many contestable customers in the 750-999 kW demand

category to enjoy RCOA, forcing them to stay with their ECs or DUs and
depriving them of the benefits discussed above.

2) Other eligible customers have been discouraged from availing the RCOA
due to lingering uncertainties.

3) DUs also face uncertainties whether to get additional generation contracts

or not for contestable customers because the latter can leave them anytime
once the TRO is lifted.

4) New RES players and existing RES with expiring licenses cannot get new
ERC licenses. This means lesser competition among RES, DUs, and ECs.
Less competition means lesser choice for customers.

The SC therefore, should resolve this uncertainty soon — either lift the TRO
and allow the various ERC resolutions to be implemented again, or strike
down those resolutions so that the ERC can issue new resolutions and
regulations to implement RCOA. RCOA has to be implemented because it is
pro-choice, pro-consumers, and abandons monopolization and unreasonable
subsidies.

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a

member-institute of Economic Freedom Network (EFN) Asia.

http://bworldonline.com/effects-sc-ruling-electricity-retail-access-
open-competition/

10.

With restructuring, will the power industry be fully deregulated? How can
government ensure that consumers will be protected from undue and frequent
increases in power rates?

No, only generation and supply will be deregulated. Distribution and transmission will
continue to be regulated by the Energy Regulatory Commission (ERC). Under RA 9136,
government will create an independent, quasi-judicial regulatory body called the Energy
Regulatory Commission (ERC) to replace the Energy Regulatory Board. The
Commission will be made up of a Chairman and four Commissioners, all of whom will be
appointed by the President of the Philippines. The ERC will be tasked to promote
competition in the power sector, encourage market development and ensure customer
choice. Compared to its predecessor, the ERC will have stronger and broader powers in
the sense that it will be authorized not only to correct but to prevent and penalize anti-
competitive practices. It will also be given certain rate-setting functions.

http://zameco2.com/epira/

22 How can government ensure that the proceeds from the sale of NPC assets will
be optimized?

A set of criteria in the grouping of NPC assets will be considered. These criteria include
financial viability, efficiency of operations, and management and operational synergy.
Furthermore, all assets of NPC shall be sold in a open and transparent manner through
public bidding.

15 The PSRP and EPIRA targets for privatizing the eligible NPC power
generating plants were optimistic, primarily due to (i) the
continuing effects of the Asian financial crisis, which constrained
electricity demand growth; and (ii) the rapid private sector
implementation of large blocks of more environmentally acceptable,
natural gas-fired power generating plants in Luzon with Government
support. This reduced the utilization of older NPC-contracted IPP
power plants and NPC’s own power plants until electricity demand
rebounded to higher levels. The lack of prospective market share in
the near term, therefore, limited investor interest in bidding for
eligible NPC power generating plants in the last few years. However,
steadily growing electricity demand, the Government’s vigorous
efforts to associate transition supply contracts to eligible NPC
power generating plants, and the initial operations of the WESM are
stimulating greater private sector interest in acquiring eligible NPC
power generating plants. Further strengthening of ERC under the PSDP
also will help allay private sector perceptions of regulatory and
country risks

The EPIRA target was the privatization of 70% of NPC’s eligible

capacity in Luzon and Visayas by June 2004. Seven hydroelectric power
plants, with a combined rated capacity of 115.4 MW, have been
auctioned off (for $134 million)—i.e., only 2.7% of the 4,336 MW of
eligible generation assets for privatization. The bidding for the 360
MW Magat Hydroelectric Power Plant is scheduled before the end of
2006. The bidding for the 600 MW coal-fired Masinloc Thermal Power
Plant failed because the winning bidder was unable to secure
financing for its purchase in the absence of a bilateral supply
contract. Similarly, the bidding for the 600 MW Calaca Thermal Power
Plant failed because the best offer did not meet the Government’s
reserve (minimum expected) price.

19 For the TransCo concession, two auctions failed due to an

insufficient number of qualified bidders.23 In accordance with EPIRA,
the private concessionaire of TransCo will need to obtain from
Congress a national franchise to operate the transmission facilities.
However, Congress has refused to grant such a franchise to a future
concessionaire without knowing its identity, i.e., before the
selection process is completed. In May 2006, PSALM launched a third
round of bidding, and received 12 expressions of interest. In
September 2006, three consortia of bidders submitted prequalification
documents. In contrast to the previous two rounds of bidding, a new
concession structure has been adopted that will require financial
closing only after Congress grants a franchise. Although time-
consuming, this structure will reduce regulatory risks to the
investor. 24 Along with ADB, the World Bank and the International
Finance Corporation have announced their intention to provide
political risk guarantee and/or funding for the bidders. The bid
opening is scheduled on 20 December 2006.

24 The World Bank also has been active in the power sector. To
improve coordination of ADB- and World Bank-assisted operations, ADB
and the World Bank reached an understanding in 1998 on the division
of responsibility in the power sector. According to this
understanding, ADB would take the lead in providing policy advice to
the Government on power sector restructuring, while continuing
support to NPC before its privatization. The World Bank would assume
a more prominent role in rural electrification programs. Other major
multilateral and bilateral agencies involved in the sector include
the Japan Bank for International Cooperation (JBIC), the Japan
International Cooperation Agency, the United States (US) Overseas
Private Investment Corporation, and the US Agency for International
Development. ADB has been coordinating its assistance to the sector
with other agencies, particularly the World Bank and JBIC. A summary
of major external assistance to the power sector is in Appendix 6.
42. In preparing the PSDP, ADB, JBIC, the World Bank, DOE, and other
Government agencies held several meetings to ensure the close
coordination of external support for the power sector reform agenda.
Given ADB’s history of support for power sector reforms in the
Philippines, and the comprehensive program that it has designed with
Government agencies in recent months (as reflected in the PSDP), the
Government considered it appropriate for ADB to continue its lead
role, at the same time welcoming continuation of the strong support
from other development partners. ADB and other development partners
are strongly aligned on the overall reform agenda, and on the need to
restore financial health of PSALM and facilitate privatization. The
development partners also share an understanding of the urgency for
power sector reforms to support the Government’s broader task of
fiscal consolidation, which is the primary focus for macroeconomic
management. The World Bank is supporting the Government’s fiscal
consolidation through a development policy loan (DPL),, which
includes a component to support 29 ADB. 2001. Special Evaluation
Study on Program Lending. Manila. 30 ADB. 2003. Country Assistance
Program Evaluation in the Philippines. Manila. 15 the power sector.
The World Bank also approved a TA grant to complement ADB’s
assistance, 31 and is considering a partial risk guarantee for the
private concessionaire of TransCo

14 The overall sale schedule for the privatization of generation

assets may change depending on number of factors such as investors;
interest and plant-specific concerns. The specific time tables for
the asset or the complete asset package is release publicly a couple
of months before the actual bid date. S

https://www.adb.org/sites/default/files/project-document/66704/37752-
phi-rrp.pdf

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Oq1IGzdMC&pg=PA117&lpg=PA117&dq=sale+schedule+of+the+NPC+generating+p
lants&source=bl&ots=CteftbGSIR&sig=ACfU3U1wupjKcNsMU29rdcMU1kac70RIXw
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6PQtNvpAhUQBZQKHcDxAWIQ6AEwA3oECAsQAQ#v=onepage&q=sale%20schedule
%20of%20the%20NPC%20generating%20plants&f=false