Tilting the balance of power in the electricity sector

Electric power consumers – whether households or industrial users – have the power of choice in a modernized industry that will generate, supply and distribute electricity more efficiently.

This was stated by Energy Secretary Vicente S. Perez who said the creation of an "empowered consumer group" is mandated under Republic Act 9136 or the Electric Power Industry Reform Act of 2001 (EIRA).

"The President’s recently announced 10-point strategy goes beyond mere electricity rate reduction," Perez said. It is about tilting the balance of power in a transparent electricity sector in favor of the end-users, he pointed out.

The shift in favor of end-users is evident in the President’s move for the unbundling of tariffs, the introduction of price incentives, the competition in the wholesale market, open access, and the pressure on distribution utilities to perform more efficiently, Perez explained.

"In effect, the President is telling suppliers, ‘you will now have to go and court the market’," Perez added.

"This is a contrast to the regime that we are now phasing out where consumers can only howl at ineffiency – under the new era, end-users can take positive action against inefficient suppliers," he said.

Under the Arroyo strategy, end-users may opt to increase their electricity consumption with beneficial results, and select the power source that puts the most cost-effective offer on the table.

Perez said under the "Special Program to Enhance Electricity Demand (SPEED)," large end-users will enjoy a declining per-kilowatt hour price of electricty as consumption increases.

"This is the President’s strategy to stimulate economic activity and electricity demand," Perez said. He added that the structure would lead to the increased utilization of excess generation capacity that will, in turn, help reduce stranded contract costs.

The National Power Corp. (NPC) is set to implement the strategy in tandem with distribution utilties.

Mrs. Arroyo’s strategy also calls for the accelerated implementation of open access, which will allow end-users with at least one-megawatt average monthly consumption to choose their electricity source.

Perez said the deregulated power supply sector will enable household consumers to form cooperative-type associations to leverage their number to buy electric power "at more reasonable costs and to buy it from the supplier of their choice."

This is a major innovation introduced by the EIRA and will definitely revolutionize the way consumers buy electric power. Perez explained that the empowerment of the electric power market "will follow the way the telecommunications market developed in the country."

The previous monopoly set-up in the local telecom industry placed the consumers at a position of disadvantage vis-a-vis the dominant player, he pointed out. The recent subsequent deregulation of the telecom industry gave consumers the power to choose which technology and which carrier they want to use, he explained.

"Just like in telecom, the players cannot compel the public to buy handsets from their ‘affiliated suppliers’," Perez underscored, illustrating the current situation where distributors sell electricity generated by power producers either owned by or affiliated with them.

The wholesale and retail supply of electric power will soon be opened to competition, Perez said. This will benefit consumers in two ways, because the competition will lead to consumer-friendly pricing structure and better service," he added.

"We are now witnessing the restructuring of the power industry which, in turn, will allow and encourage competition in the power generation and supply sectors," he pointed out.

President Arroyo set a December 2003 target for the early pilot introduction of limited open access. In the meantime, preconditions to open access are now being worked out. Among these are the unbundling of tariff rates, the operation of the interim wholesale spot market (WESM) and the removal of cross subsidies.