Alfie, in an interesting post today about GNPower and Meralco and Masinloc, is worried about developing true competition in the power sector – at the generation level and at the retail supply level. I am too.
Here’s what competition in retail supply looks like to me:
In March, April, and May the electricity used by my industrial process shoots up to ten times it’s normal usage, and it’s used in the afternoons only. This just happens to be the way my business runs. But this coincides with the dry season and electricity spot prices are at their highest levels and highest volatility during this time. I know I’ll have to pay relatively high prices for my electricity, but if we happen to have a draught one season and a power plant or two or a large transmission line is out of service, spot prices would absolutely go through the roof and devastate my very existence as a business.
I want a Retail Supplier to step in and hedge that risk for me. I want it to supply all my requirements used between 2pm and 10pm on weekday afternoons for the months of March, April, and May. What are you going to charge me for that?
Or … let’s say I’m another customer and I want a Retail Supplier to step in and provide me electricity at spot prices, year round, with a collar (i.e. if prices go above a certain amount during an hour, they will charge me only the cap price and if they go below a certain level, I will pay the floor price). What are you going to charge me for that?
Or … let’s say I’m another customer and I want you to cover 75% of my load requirements at a fixed price and I’ll buy the remainder at spot. What are you going to charge me for that?
This is not your father’s telephone … errrr… electric company. This is retail competition. And for a Supplier to play the game, it has to have both a portfolio of different types of customers and a portfolio of supply products (spot and fixed contracts) to hedge it’s own positions while enabling it to provide hedges to me.
Welcome to Retail Competition. Think we’ll ever get there?