Alsons mulls entry into retail electricity business
ALSONS CONSOLIDATED Resources, Inc. (ACR) is considering putting up a separate retail electricity supply (RES) business, although the timing and the decision to do so would largely depend on its current customers — the distribution utilities.
“All power companies at one point or another will have to go into RES business. We are preparing for that but our policy on retail electricity is to do it to the extent that we do not compete with our utility consumers,” said Joseph C. Nocos, vice-president for business development at ACR.
For now, the rules on retail electricity and open access ( RCOA) are not applicable to Mindanao because a wholesale electricity spot market ( WESM) is required before the Energy Regulatory Commission ( ERC) will declare the regulation’s applicability on the southern island. The DoE expects WESM Mindanao to be ready by next year.
Under RCOA, new power industry players called retail electricity suppliers (RES) take over the power sourcing function of the distribution utilities to serve electricity end-users issued with certificates of contestability by the ERC.
A RES will be able to access transmission and distribution systems so that they can offer electricity deals to contestable customers, or those whose electricity use has reached the thresholds set by the ERC. Contestable customers have the choice on which supplier best suits their electricity needs.
Retail competition is believed to result in lowering the price of electricity as sellers try to find ways to attract business.
Mr. Nocos said Mindanao’s situation is different largely because one of its biggest energy source is the Agus- Pulangi hydroelectric complex, which is a cheaper power source.
“I believe that contestable customers currently would be better off staying with their utilities. Why? Because the utilities have access to NPC (National Power Corp.) hydro. It’s unique to Mindanao,” he said.
“If they go with a RES, unless that RES is a RES that has access to a portfolio of power plants with baseload, intermediate, peaking and reserve capacity, they will be stuck with just one technology, with one plant,” he said.
However, he said if that plant goes down for maintenance, the contestable customer would have to go to the “supplier of last resort,” which charges higher electricity costs.
Mr. Nocos said utilities in Mindanao currently enjoy “NPC rates, which has the effect of averaging down the cost of power.”
A RES, on the other hand, is subject to the cost of a single power source, say coal, which is also subject to the volatility of the fuel price.
“If you’re a cement plant, or you’re a steel plant, you would want to have a firm idea of what your power cost is going to be and where you’re going to be drawing your power from,” he said.
“So, to that point, given these considerations in Mindanao, I believe that it might be more advantageous for the large consumers, the contestable consumers, to be given the choice not to be obligated to these rules,” he added.