State-run Philippine National Oil Company (PNOC) is engaging into a new business niche by positioning as retail electricity supplier (RES), primarily to satiate the power supply requirements of the government agencies nationwide.

In an interview, PNOC President and CEO Oliver B. Butalid indicated that the company will be securing a regulatory license for its plan to dabble into the RES segment of the restructured power sector.

“We have plan to become RES. We want to service government entities only, we don’t want to compete with the private RES,” he noted.

On this business proposition, the PNOC chief executive said they would be able to help peer-government agencies bring down their electric bills; because the tariffs negotiated under the RES supply procurement are typically lower compared to the blended rate of the franchised distribution utilities.

And on the part of the state-run firm as RES, this is expected bringing in added revenue stream given the scale of operations of various government buildings and facilities all over the country.

“Government is one of the biggest energy users and even if many government entities are potential contestable customers – the likes of office buildings, government hospitals, state universities and colleges -- most of them don’t even know that they are contestable (customers),” Butalid stressed.

Under the precept of the Retail Competition and Open Access (RCOA) in the deregulated power sector, contestable customers are those within the threshold of 500 kilowatts and up, which can already exercise their ‘power of choice’ as they can directly negotiate with their preferred suppliers of electricity at a rate that will fit their budgets.

In addition, RES suppliers are often demanded to extend services that are of higher quality compared to what they have been traditionally getting from incumbent utilities.

Butalid explained that PNOC will be in the best position to cater to the electricity needs of government agencies, because it is already well-versed with the State-underpinned procurement policies and processes.

“We will be focusing on the contestable government entities and the reason why we have an edge is: it’s because of the procurement system of government,” he emphasized.

The PNOC executive stated it could turn extremely difficult for many government agencies to navigate RES procurement, because it will not be as straightforward compared to how deals are cemented with private sector off-takers (capacity purchasers).”

“Can you imagine how difficult it is for them to procure RES services because the service is not as straightforward as the others. Then on the rates for supply procurement, there’s a lot to study because there’s a lot of variabilities,” he expounded.

Butalid added “unlike us, we are government, so agency-to-agency -- we can be the RES and the government can be our captive market.”

Based on initial number-crunching done by PNOC, it was reckoned that if demand aggregation will be pursued, government buildings in Metro Manila alone could top roughly 65 megawatts of power supply requirements.

“Can you imagine if we aggregate that - then we will have now the opportunity to represent them and negotiate directly with baseload, mid-merit and peaking plants – we will structure it, I’m pretty sure we can bid for utility-competitive pass-through rate. We buy power supply from whoever is lower,” the PNOC chief executive underscored.