The Energy Regulatory Commission’s (ERC’s) approval of the application of GNPower Ltd. Co. for a retail electricity supplier’s license which was awarded on July 19, 2006 was marked as “another step forward” towards the full deregulation of Philippine power industry by introducing competition at the retail level.

GNPower Ltd. Co is now part of the so called “Supply Sector”, the new sector in the power industry introduced in the EPIRA Law (RA 9136) which is deregulated and competitive. Hopefully, this competition will lower down the cost of electricity at the consumer side. GNPower is the first electricity supplier to comply with the ERC’s directive to secure a supplier’s license prior to marketing electricity. They will be the first competitor of MERALCO’s Supply or Retail Group. However, since GNpower is the first one to apply, MERALCO’s Supply Group seems hasn’t secure a supplier’s license yet.

Though EPIRA’s vision to achieve competition at the retail level is viable, a full competition at the generation level is seems far to foresee. One reason is the existence of supply contracts between generation and distribution of electricity which hinders the full blown competition in the Electricity Market. Supply Contract or Power Purchase Agreement (PPA) is a risk mitigation measure of generation companies to ensure that the energy that they will produced will be purchased. The case of NPC-IPP’s and the forfeited purchase of Masinloc Coal Plant are examples where Supply Contracts is a must for some generation companies. Unfortunately, generation companies with supply contracts do not bid their true generation cost in the Electricity Spot Market and settlements are made outside of the market.

For the industry to be fully competitive, GNpower, as a supplier, should purchase their bulk power at the spot market. However, since they will own a 600 MW coal plant which is currently being developed near the town of Mariveles, Bataan. (

The Philippine Star 07/22/2006

), it is more likely that they will just undergo a contract.

Ref:
The Philippine Star 07/22/2006

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