What remains as hazy regulatory rules on cost recoveries for power supply procurement was pointed to as the major triggering factor for the waning appetite of Manila Electric Company (Meralco) to enter into any new contracts with power generators.

The uncertainties are also seen compounded by the much-anticipated entry of open access in the envisioned competitive marketplace; as well as the wholesale aggregation policy which is coming two years after.

In an exclusive interview, Meralco first vice president and utility economics head Ivanna G. dela Pena noted “the area that is not yet clear is on power sourcing – especially recoverability of purchased power costs within the era of retail competition.”

She indicated that Meralco has its hands tied as far as future supply contracting is concerned because it cannot ascertain yet how far its hold on big-ticket customers would shape following the advent of open access in the deregulated industry. The open access policy regime will already give end-users within the 1.0 peak demand bracket the power to choose their preferred electricity suppliers; and that accounts for 27 percent of Meralco’s customer base.

One year after open access, Meralco’s transition supply contract (TSC) with state-run National Power Corporation (NPC) will also automatically lapse; hence, the need for the utility firm to plan for that chunk of its requirement.

While trying all avenues and strategies to sustain patronage of its customers, the Meralco executive noted that those are uncertainties that cannot be plainly swept under the rug at this stage in the industry’s restructuring.

“You have uncertainty in the market because the customers may shift suppliers; so DUs (distribution utilities), especially Meralco, are hesitant to enter into long-term PPAs (power purchase agreements).

These are the current issues, plus, the rules are not yet very clear with respect to power sourcing and its recoverability,” Dela Pena stressed.

With wholesale aggregation which will be next phase of policy implementation after open access, Meralco similarly faces the risk of losing more of its customers, primarily those within contiguous (adjoining) areas.

“We still have a significant need of supply for our captive market,” the Meralco executive enthused, referring to customer segments, primarily residential end-users, which shall remain under its charge for longer period because of the phased implementation of open access.

Nevertheless, she laid down realities that when wholesale aggregation finally comes into play and the open access threshold is brought down lower to 750 kilowatts and eventually to 500kW, Meralco’s captive market will also be trailing a shrinking base.