What is the advantage of becoming a contestable customer? One phrase: lower generation cost. I have seen prices drop from P7.00/kwh to as low as P5.00/kwh when a customer switches from the utility to a Retail Electricity Supplier.
In general, customer choice introduces competition, which can bring down costs, improve service quality, or both.
Likely beneficiaries
Who would benefit from this move by the ERC? As I said, many SMEs, hospitals, restaurants, and similar institutions.
To put it in perspective, 100 kW will be the peak demand for a restaurant with a floor area of 300-400 sqm and small grocery stores or supermarkets with floor areas between 500 and 1,000 sqm.
About 50-60 percent of this would be HVAC (air conditioning) and lighting. Small office buildings, with HVAC systems and fewer than four stories, will also typically have a demand of 100 kW.
Light industrial shops, like machine shops, would also be typical 100 kW users. Several gyms and fitness centers, medical diagnostic centers, and some dialysis centers would also benefit from the opening of retail competition for 100kw customers.
Because retail aggregation has also been allowed, villages, barangays, condominiums, and chain stores or pharmacies can aggregate their demand under a single franchise, provided they reach at least 100 kW. Upper-class villages are likely to meet the 100-kW threshold.
This move will benefit middle-class subdivisions, where households will likely have a demand of 3-6 kW. A village with around 50 middle-class households can already qualify as an aggregated customer for the utility.
Where pushback lies
So, where is the pushback coming from? The primary concern is a very simple one - the meter. Once a household becomes a contestable customer, its meter must be compliant with the “smart” meter required by WESM. The meters must have five-minute interval reading capability and must have communication ports.
These WESM-compliant meters can cost three to five times as much as regular meters without communication ports.
However, new technologies can now aggregate individual meters into a single device that serves as a communications port. These technologies are probably even more innovative than conventional “smart” meters because they can measure system losses at the low-voltage end of the distribution system.
These innovative technologies will also allow consumers to check their consumption on their mobile phones. Installing IoT in their home appliances can give these consumers further control over their electricity consumption.
Customer choice matters
More importantly, this is the customer’s choice. If the customer believes the savings from lower generation costs will more than offset the meter cost, it may choose to become a contestable customer.
As long as safeguards are in place, open competition is always good for electricity consumers.
I hope the ERC will NOT back down on its proposal to open competition at the 100 kW level. Stay on the course, ERC!
Mr. Delgado has served as Chief Executive Officer (CEO) of various firms ranging from banking, power, and advisory services for over 40 years.
