In preparation for retail competition in the power industry, the Energy Regulatory Commission (ERC) has started drafting rules on the eligibility of end-users to choose their own electricity suppliers.
ERC chairman Rodolfo Albano Jr. said they would hold a public consultation on the draft for the “rules for contestability” starting next week.
He said the rules will seek to clarify and establish conditions and eligibility requirements for end-users to qualify as a “contestable customer.”
Contestable customers are electricity end-users who can choose their electricity retail supplier. A contestable consumer market will be in place upon implementation of open access and retail competition.
Initially, open access and retail competition will be implemented in the franchise areas of both the private distribution utilities and electric cooperatives, and the economic zones in the Luzon Grid.
Under the EPIRA (Electric Power Industry Reform Act), the contestable market will consist initially of electricity end-users with a monthly average peak demand of at least one megawatt (MW) for the 12-month period immediately preceding the open access date (Phase 1).
After two years, ERC said the threshold level for the contestable market in the Luzon grid will be reduced to 750 kilowatts (kw).
At this level, aggregators will be allowed to supply electricity to end-users whose aggregate demand within a contiguous area is at least 750 kw (Phase 2).
Subsequently and every year thereafter, the ERC shall evaluate the performance of the market.
On the basis of such evaluation, it shall gradually reduce the threshold level until it reaches the household demand level which is seen to occur seven years after Phase 2.
Electricity customers under a contestable market will be served by either a retail electricity suppliers (RES) or a local RES. RES are persons or entities authorized by the ERC to sell, broker, market or aggregate electricity to end-users in a contestable market.
A local RES, on the other hand, is a non-regulated business segment of a distribution utility (DU) catering to the contestable market but only within its franchise area. As such, a license for a local RES is not required.
In the event, however, that a customer ceases to receive service from its RES or local RES, or when a customer fails to choose a RES, a supplier of last resort (SOLR) will serve the requirements of such customer. A SOLR is a regulated entity designated by the ERC to serve end-users in the contestable market following a last resort supply event.
“The rules for contestability is only one of the several frameworks to be adopted in preparation for a vibrant competitive electricity market as envisioned in the EPIRA whose ultimate goal is to provide electricity consumers with a power of choice,” Albano said.