PCC flags competition barriers in retail electricity market

The government should address persistent competition barriers in the retail electricity market to widen consumers’ ability to purchase power from their preferred suppliers, according to the antitrust watchdog Philippine Competition Commission (PCC). In a statement on Monday, April 6, the PCC said it found in a market study that the current state of the local retail power market is contrary to the Electric Power Industry Reform Act (EPIRA), which implements retail competition. EPIRA, embodied under Republic Act (RA) No. 9136, enables eligible customers to choose and source their electricity requirements from their preferred retail electricity suppliers (RES). The PCC said the implementation of the law appears insufficient, noting that RES affiliated with power generators have “inherent advantages” that make it difficult for smaller players to compete. “If generators would prioritize supplying electricity through bilateral contracts, spot market, and retail supply agreements with their affiliate retailer, independent retailers would be left with residual supply,” the commission said. The PCC said this should encourage the Independent Electricity Market Operator of the Philippines (IEMOP) to revisit policies on vertical integration between generation and retail distribution to enhance competition. IEMOP is responsible for calculating real-time market prices and the dispatch schedule of participants in the Wholesale Electricity Spot Market (WESM). In addition, the PCC said IEMOP could also look into introducing reforms to address the high level of “affiliate switching” in the retail electricity market. In essence, this means that consumers appear to have chosen different RES but are only moving between retail suppliers affiliated with the same parent company. The PCC is recommending easing the entry of independent retailers to curb such practices in order to improve retail competition and broaden consumer choice. The commission said its market study also flagged barriers that restrict the ability of eligible customers to switch to RES. It noted that consumers do not possess enough knowledge of the switching process, especially its technical and documentary requirements, as well as how to negotiate retail supply contracts. Consumers also face delays in the procurement and installation of retail metering systems, the PCC said. In a policy dialogue with the PCC to discuss the study’s findings, IEMOP said it anticipates lowering the required minimum monthly consumption for contestable customers from 500 kilowatts (kW) to 100 kW this coming June. IEMOP said this move is projected to increase customer engagement in the retail power market, which may lead to greater competition. Ahead of this transition, IEMOP is now working on improving its central registration system to streamline and automate customer switching requirements. This includes the development of an electronic-based switching system to handle the expected surge in market participants.