Meralco’s prepaid electricity service may require modified regulatory framework

Prepaid retail electricity service (PRES) which is a thriving trend-setting innovation of Manila Electric Company (Meralco) may need to tread on modified system of regulation once “freedom of choice” for consumers would finally be brought down to the household level.

This was indicated by Commissioner Alfredo J. Non of the Energy Regulatory Commission (ERC) in an exclusive interview, noting further that under the current set of “contestability for end-users,” the classification of prepaid electricity service is not clearly demarcated.

“The law says ‘contestability’ up to the retail (household) level. But as we see it now, there’s no clear coverage in the law,” he stressed. By law, he refers to the Electric Power Industry Reform Act (EPIRA) which governs the overall restructuring process of the electric power sector.

Non added that as far as the ERC is concerned, “we implement the law first. Then if prepaid will become part of the contestable market (especially at the retail level), then the concept of contestability will change at that point.”

He clarified that the Commission is not necessarily against the introduction of prepaid electricity in the restructured power market, but they are just ensuring that the regulatory framework underpinning that segment of the market will be properly defined and delineated.

The ERC official has divulged that it was his suggestion to set colatilla in their decision on the rollout of Meralco’s initial 40,000 prepaid meters, stressing that such is being treated as their leeway in figuring out an appropriate regulatory scheme for the service. The same will apply to all distribution utilities (DUs) offering similar type of service.

“When we put this into transition, we have to look at the provisions of the law first. And then eventually, if we deem that these will set changes in the industry structure or in the offer of services to end-users, then we can work on some modifications of the rules or ask that the law (EPIRA) be revisited itself,” he averred.

Once Retail Competition and Open Access (RCOA) would stretch out to the household level, it is envisioned that Meralco’s business as a DU will just be confined already to the use of its wires.

It is from that standpoint, according to Non, that the ERC ruling propounded a spin-off of its prepaid business to a retail electricity supplier (RES) which could also be its affiliate or subsidiary or it may then choose to totally cease from offering the service and just divest it to other interested parties.

“At 750 (kilowatts) threshold, the rest will remain as captive customers. Then eventually when household level is reached, it becomes free for all, so you can’t have a prepaid in the DU anymore. That means, if everybody would become contestable, the prepaid service would no longer have a place in the DU business,” the ERC official has reiterated.

Meralco itself has previously told media that it will appeal the regulatory body’s verdict on its prepaid electricity service.

While policy and regulatory issues are being sorted out, the utility firm remains keen on expanding the coverage of its service and aligning it as an option to consumers who are eager into taking a shift in their service patronage so it fits better into their lifestyles and budgets.