Challenges in Regulating the Energy Sector: A Case Study

Energy Regulatory Commission Chairman and CEO Monalisa Dimalanta. Photo by Mike Alquinto
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IMPOSING consistent regulation in the electricity sector can be a challenging task, especially considering the frequent intervention of the courts, which can sometimes take years to render a judgment. A recent case involving an electric distributor in Pampanga serves as an example of the complexities involved in regulating the industry.

In March 2023, the Energy Regulatory Commission (ERC) ordered the San Fernando Electric Light and Power Co. Inc. (Sfelapco) to pay a P21.6 million penalty and refund P654 million to its customers for disallowed and excess charges from 2014 to 2022. However, Sfelapco appealed the ERC ruling to the Court of Appeals, which, in a Nov. 30, 2023, decision, reversed the ERC’s refund order. The court argued that while Sfelapco had imposed unauthorized charges, there was no specific provision in the law requiring a refund.

The Court of Appeals’ ruling may seem illogical, as one would expect a convicted individual to return stolen property. Recognizing this, the ERC Chairman, Monalisa Dimalanta, expressed agreement with the view and stated that the ERC would appeal the decision with the help of the Office of the Solicitor General. Despite the challenges posed by the court system, Dimalanta emphasized the importance of judicial review in ensuring the correctness of regulatory decisions.

Dimalanta acknowledged that the slow pace of the court process is a management problem that needs to be addressed. The Supreme Court is reportedly considering expanding the special court system to handle technical cases, such as those involving the ERC. This move would help reduce the uncertainty caused by unresolved legal questions and expedite the resolution of cases.

In addition to addressing regulatory challenges, the Philippines is also making progress in expanding consumer choice in the electricity sector. Dimalanta highlighted the expansion of the Retail Competition and Open Access (RCOA) program, which allows large consumers to choose their electricity supplier. The threshold for becoming a contestable customer has been lowered to 500 kWh per month, and with the completion of the Mindanao-Visayas interconnection, the RCOA program will be extended to Mindanao.

Another program, the Green Energy Option Program (GEOP), enables contestable customers to source their electricity from renewable sources. These initiatives aim to promote competition, encourage the use of clean energy, and empower consumers to make informed choices about their energy supply.

While challenges remain in the regulation of the electricity sector in the Philippines, there are efforts being made to overcome them. The expansion of the RCOA program and the potential establishment of specialized courts for technical cases demonstrate the commitment to improving the regulatory framework. By addressing these challenges and empowering consumers, the Philippines is paving the way for a more efficient and sustainable electricity sector.

Source: The Manila Times

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