PURSUING PRO-COMPETITIVE REFORMS IN PH EPI EDNA ESPOS CREW PROJECT

Transcription

1 PURSUING PRO-COMPETITIVE REFORMS IN PH EPI BY EDNA ESPOS CREW PROJECT National Orientation Workshop & National Reference Group Meeting September 24, 2015 Manila

2 PH EPI ENTRY POLICY Open National Monopoly Regional Monopolies Contestable

3 PH Electricity Cost 14% 5% 23% Distribution Taxes Generation 50% 8% Transmission

4 OTHER MAIN REGULATORY POLICIES & MARKET FEATURES Generation Transmission Distribution Supply Rate Regulation Spot-market Bilaterals lifted with RCOA Indirect via DU retail rate Regulated Regulated Market Non-Price Regulation ERC Competition Rules, ERC/DENR/DOE regulations on performance standards such as heat rates; emissions etc Mainly direct ERC regulations Mainly direct ERC regulations RCOA Code of Conduct & other rules Horizontal Structure Installed generating capacity ownership,operation or control by company/related group limited to 30% of grid, 25% national Only 1 private operator of govt assets None None Vertical Structure or Cross- Ownership 1. Allowed between DU & GENCO but former limited to 50% of demand sourced from associate 2. Dus, GENCOs their officials, stockholder, affiliates, relatives within 4 th degree consanguinity & affinity cannot hold interest in TRANSCO & concessionaire, & conversely 3. NGCP franchise diluted 2. Exempts a) relatives of Dus/GENCOs etc w/o employment, consultancy, fiduciary relationship/interest in Grantee & conversely and b) 1% stock ownership Generators, DUs allowed in contestable retail market

5 OTHER MAIN REGULATORY POLICIES & MARKET FEATURES Generation Transmission Distribution Supply Market 3 separate wholesale. LUZ-VI WESM. At least 90% physical BCQ Wide price separation of Leyte-Samar-Bohol from other Visayas sub-grids on peak hours Mindanao 100% physical bilaterals (121 EC, 17 PDU, 8 LGU) MERALCO,75% Luzon peak VECO, 31% Visayas peak DLPC, 23% Mindanao peak 1 MW competitive retail now in LUZ-VI 750 kw soon; Others to be determined Supply- Demand Balance Market Concentration Entry Barriers Inadequate Generation (See chart) HHI Luzon 1,280 Visayas 1,879 Mindanao 3, permitting and licensing requirements Congestion problems Insufficient grid/subgrid interconnection 79.9% households electrified (target 90% by 2017) 66% sitios electrified (target 32.4k by end of PNoy term) Not enough RES supply offer to 1 MW contestable customers monopoly monopoly A/o Oct 2014 MERALCO Local RES 60%; Balance to Local RES of other Dus & GENCOs Franchise Franchise ERC License

6 Power Generation Capacity MW 35,000 30,000 25,000 20,000 15,000 10,000 5, ,416 21,470 15,548 Indonesia(PLN) Philippine Vietnam Thailand 10,627 23,527 Increase in PH Generation Capacity captured only increased Residential Requirements ,901 30,318 17,025 Source: IEEJ-JICA (2013)

7 PRO-COMPETITION REFORM POSSIBILITIES TRANSMISSION & DISTRIBUTION (1) Application of PH Competition Law Limited prohibitions on agreements between competitors not applicable Applicability of prohibitions on anti-competitive vertical restraints limited by State Action Immunity & Filed Rate Doctrines Merger provision not applicable o only 1 transmission oecs should merge; MERALCO divest but very difficult because franchise property right protected by Bill of Rights (2) Pro-Competitive Regulatory Reforms Transmission Planning & Investment to Enhance Generation Competition Robust design and implementation of Incentive Regulation in Rate Methodology. Current ERC approach incorrect (rate base valuation, WACC calculation, no efficiency targets, efficient cost baselining) and leads to higher tariffs, not efficiency

8 Source: NGCP 2013 TDP Consultation Draft

9 Visayas Sub-Grids Demand and Generating Capacity, 2014 Source: DOE 25 th EPIRA Implementation Report

10 VISAYAS NODAL PRICES HOURS 8 & 20, HOUR FUEL CODE RESOURCE_ID PRICE HOUR FUEL CODE RESOURCE_ID PRICE 8 6 5EAUC_G cebu 8 1 8SLWIND_G guimaras/panay 8 4 5KSPC_G cebu 8 4 8PEDC_G panay 8 4 5TPC_G cebu 8 1 6SACASL_G negros 8 4 8PEDC_G panay 8 3 6PAL1A_G negros 8 3 6NASULO_G negros 8 3 6NASULO_G negros 8 3 4LGPP_G leyte 8 3 6PAL2A_G negros 8 3 6PAL1A_G negros 8 4 5KSPC_G cebu 8 3 6PAL2A_G negros 8 4 5TPC_G cebu 8 3 4LEYTE_A leyte 8 6 5EAUC_G cebu 8 1 8SLWIND_G guimaras/panay 8 3 4LEYTE_A leyte 8 1 6SACASL_G negros 8 3 4LGPP_G leyte CPPC_G cebu PDPP3_G panay EAUC_G cebu SLWIND_G gumaras/panay KSPC_G cebu PEDC_G panay PDPP3_G panay PAL1A_G negros TPC_G cebu NASULO_G negros PEDC_G panay PAL2A_G negros NASULO_G negros KSPC_G cebu LGPP_G leyte TPC_G cebu PAL1A_G negros CPPC_G cebu PAL2A_G negros EAUC_G cebu LEYTE_A leyte LEYTE_A leyte SLWIND_G guimaras LGPP_G leyte

11 PRO-COMPETITIVE REFORM POSSIBILITIES: GENERATION & SUPPLY (1) Application of PH Competition Law Constrained No GENCO/related group caught by 50% market share threshold generation rates for at least 90% regulated via DU retail rates Source: PEMC Annual Report

12 PRO-COMPETITIVE REFORM POSSIBILITIES GENERATION & SUPPLY (1) Application of PH Competition Law ability/incentive to game organized electricity market not dependent on market share. P p

13 (2) Streamline/Simplify Permitting & Licensing Requirements (3) Build Generation Adequacy Mandatory long-term contracting for 100% of DU demand thru CSP with DOE Circular Weak incentives for generation investment in restructured & privatized industry. Excessive market, finance, regulatory risk Missing money problem of electricity spot markets ERC must ensure auction design competitive & transparent; maximize participation of existing investors & encourage new entry; format minimizes procurement cost; promote regulatory stability; sustain investments e.g. reasonable price ceilings Proper sequencing of policy reforms delay RCOA for < 1 MW market until generation adequacy achieved or at least make it optional to consumers

14 (4) ERC to promulgate and implement market behavior rules prohibiting market manipulation prohibit physical withholding, economic withholding, uneconomic production, others set conduct & market impact thresholds; default bids (5) Proper Market Rules & Appropriate Market Design MC pricing principle price caps as scarcity price (& relationship between offer price and offer cap) Gross pool vs net pool

15 Source: PEMC Annual Report

16 PhP Off-Peak Offers By Plant Type, Per MWh, Jun-Sept Binga-Hydro Magat-Hydro SRoque-Hydro Sta Rita-NG Ilijan-NG Tiwi-Geo Leyte-Geo Makban-Coal Sual-Coal Pagbilao-Coal

17 Peak Prices/MWh of Marginal Plants, June-Sept Angat Binga Magat SRoque Kalayaan Sta Rita Ilijan Tiwi Calaca Makban Masinloc Sual Pagbilao Limay BPPC

18 PRO-COMPETITIVE REFORM POSSIBILITIES: INSTITUTIONS Institutions That Work Well Build Administrative capacity of regulator or simplify rules and regulations to align with regulator s administrative capacity Independence of Market Operator

19 End of Slides Thank You