[OPINION] RCOA Expansion: Empowering Electricity Consumer Choice
By Cezar John Estrada, Arthur Kent Holt, & Kenneth Jack Muñoz -
The Energy Regulatory Commission (ERC) recently called for comments on the draft Resolution1on Prescribing the New Timeline for the Implementation of Retail Competition and Open Access (RCOA). Through this issuance, the ERC aims to lower the threshold level for participating in the RCOA with a tentative timeline of effectivity, thus enabling smaller electricity demand consumers to enjoy another option of supply.
- 500kW to 749kW - 26 February 2021
- 100kW to 499kW - 26 January 2022
- At least 10kW - 26 January 2023
What is RCOA?
RCOA is a policy mechanism which allows qualified electricity end-users to voluntarily choose and contract with a licensed Retail Electricity Supplier (RES), aside from the Distribution Utility (DU). Currently, RCOA is limited to electricity end-users with monthly average peak demand of 750kW or above, and is only being implemented in the Luzon and Visayas grids where the Wholesale Electricity Spot Market is operational. Based on data2 from the ERC, as of August 2020, there are a total of 1,478 end-users with about 4,016MW of demand who already have contracts with RES. This amount of demand already comprises about 32% of the peak demand in the Luzon and Visayas grids.
RCOA is one of the results of the restructuring of the electric power industry in 2001 through the enactment of Republic Act No. 9136 otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA). As indicated in the EPIRA, RCOA’s ultimate goal is to bring consumer choice down to the household level. To realize this objective, the ERC has been mandated to evaluate yearly the performance of the market and, based on such evaluation, gradually reduce the threshold level for participating in RCOA until it reaches the household demand level.
Impact of Lowering RCOA Threshold
While the EPIRA is clear in mandating the implementation of the RCOA with the aim of reaching the household level, some sectors of the power industry are doubtful, worried, or sometimes unaware of its potential impacts. The major sectors that are monitoring its potential impacts are the DUs and the End-users.
Distribution Utilities
Negative impacts perceived by the DUs from the implementation of the RCOA include reduction of energy sales received from the end-users, or potential violations against their Power Supply Agreements (PSA) with Generation Companies due to decrease in energy demand. But such may not be the case with the implementation of the RCOA.
While the RCOA gives qualified end-users the option to choose their power supply provider, they will still remain physically connected to the distribution system for the entire contract period with a RES. As a result, the actual electricity consumed by an end-user will still utilize and pass through the distribution system, by which the DUs are required to be paid for. Thus, compensatory measures for the shifting of end-users from the DU to a RES shall be considered also in assessing and quantifying RCOA’s potential impact to the collections of the DUs.
The same measures shall also be ensured in PSAs with generation companies. At present, several PSAs already have provisions that allow the DUs to lower their contracted demand and/or energy caused by end-users participating in the RCOA. With such, DUs are already equipped to cause and justify the reduction of their supply needs from the generation companies.
End-Users
With the lowering of the threshold level to at least 10kW by 2023, many end-users will become empowered in managing and saving cost from their electricity usage including businesses that are now experiencing financial and operational difficulties due to the pandemic. At 10kW demand, a business operating daily for 12 hrs will yield a monthly electricity bill of around Php30,000 – Php 40,000, depending on the retail rates of the DUs. Establishments classified as small, medium and large are the ones expected to have this level of electricity cost and are majority of the potential participants of the RCOA. Based on data3from the Philippine Statistics Authority in 2018, establishments classified as small, medium, and large totaled to about 116,000 establishments. This means that the draft resolution from ERC will empower and encourage more than 100,000 end-users to exercise their rights to choose for another supply option.
RCOA does not only empower end-users to choose their supplier but also enable them to potentially get savings by contracting supply with RES which can offer lower generation rates as compared to their DUs. Further, with people and businesses becoming more conscious of the effects of global warming and involved in implementing sustainability goals, the availability of having an option to choose their supply source will help increase their chances of achieving their targets.
Implementing RCOA for Consumer Choice
The implementation of the RCOA for end-users with smaller demand is envisioned to transform the power industry and promote further competition among stakeholders, which we hope will bring down electricity rates. With the appropriate policy and regulatory environment, we will be able to ensure that the Filipino people are not deprived of their right to choose their electricity supply, as mandated by EPIRA. In the recent draft issuance of the ERC, there may still be a number of questions that need to be addressed, but with clear answers and solutions, we will be able to modernize the power industry.
In the midst of the pandemic, many end-users felt the need to look for a better supply option because of their increasing bills, and RCOA may be one of the solutions they are looking for. The implementation of the RCOA, with a harmonized execution and coordination with all sectors concerned, can be seen as beneficial and not a burden to stakeholders. By putting the consumer’s rights and interest at the top of our priorities, we are not only following the mandates of the EPIRA but also ensuring that this mechanism is one that makes sense for the Filipino people.
Cezar, Arthur, and Kenneth are Registered Electrical Engineers who advocates Energy Literacy and Policy Development
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