The Electric Power Industry Reform Act of 2001 (EPIRA) unequivocally mandates that retail competition, consumer choice, and private contracting—not government control—drive efficiency.
Yet, the Energy Regulatory Commission’s (ERC) new circular mandating fixed-price contracts for Retail Electricity Suppliers (RES) directly undermines this progress.
ERC Resolution No. 13 series of 2024 (Adopting the Omnibus Rules for Customer Choice Programs in the Retail Market) does not stabilize prices as it claims; it is more likely to drive them upward. More critically, it undermines the competitive foundation established by EPIRA and unlawfully expands regulatory control over private decisions.
The circular effectively compels all Retail Electricity Suppliers (RES) to offer only fixed-price contracts. These contracts must be backed by performance bonds or hedging contracts, which undeniably increase barriers to entry and compliance costs.
A policy that forces costs up
The WESM is designed to be dynamic, with prices influenced by global fuel conditions, seasonal demand, and generation availability. RES companies manage these risks through diversified portfolios, flexible pricing structures, and hedging instruments. Together, these strategies help stabilize costs and maintain competitive rates.
The ERC circular removes this flexibility. In volatile markets, fixed prices magnify risk, forcing suppliers to charge higher premiums to hedge against price fluctuations and uncertainty. Worse, this denies customers the option to choose floating-price contracts.
Consumers bear these higher costs, as the ERC Rule raises bills rather than lowers them.
Anti-competitive by design
Retail competition can succeed only when multiple suppliers innovate and deliver differentiated products. The most creative pricing, renewable integration strategies, and tailored supply packages often emerge from smaller, dynamic RES —empowered to structure contracts in line with their risk profiles.
EPIRA never authorized the regulator to dictate contract terms. It requires suppliers to compete on price, strategy, technology, and innovation. The circular removes the tools.
A regulatory overreach
EPIRA prohibits the ERC from dictating commercial terms between private entities. The law allows ERC to regulate conduct, enforce transparency, and prevent abuse—not to design contracts or assign market risk.
Mandatory contract structures transform the regulator into a market participant rather than a referee. The ERC circular actively distorts the market it is supposed to protect.
A better path
The ERC must address these failures and grant contract freedom between retail electricity suppliers and customers. Only then will market-based hedging and risk management thrive. Disclosure requirements should match those for banks and their clients.
Electricity rates fall when markets operate freely—not when regulators dictate pricing or contract terms for the private sector.
The ERC must act now to revise or rescind the circular, restore genuine market competition, ensure consumer choice, and lower electricity costs for all users.
Urgent and decisive action is needed to protect the interests of electricity consumers and the integrity of the competitive market.
A power industry expert with over 40 years in experience as chief executive officer in firms ranging from banking, power, and advisory services.
