Question & AnswerQ&A (ERC)
The Guidelines aim to establish the process for determining when recovery of the generation component should be limited by rates in the Transition Supply Contract (TSC), set procedures and criteria for full recovery of reasonable costs related to generation components in retail rates, and establish guidelines for approval of new generation contracts by the ERC.
The Guidelines apply to National Power Corporation (NPC), Generation Companies (excluding SPUG), National Transmission Corporation (TRANSCO), Power Sector Assets and Liabilities Management Corporation (PSALM), Department of Energy (DOE), Distribution Utilities, and combinations of Distribution Utilities.
Captive Market refers to electricity end-users who do not have the choice of a supplier of electricity, as determined by the ERC in accordance with the Act (Republic Act No. 9136).
A Transition Supply Contract is a contract for electricity supply filed with the ERC by NPC in accordance with Section 67 of the Electric Power Industry Reform Act of 2001 (RA 9136).
The recovery of costs for the generation component through retail rates by a Distribution Utility is limited to the applicable Regional TSC Rate, provided that an equivalent quality and quantity of electricity is still available under the applicable regional TSC as shown by the Regional TSC Availability Record.
The Generation Rate Adjustment Mechanism (GRAM) allows the periodic adjustment of the Generation Rate to reflect changes in fuel and purchased power costs after review and approval by the ERC.
The Distribution Utility must file a rate application with the ERC for approval, which should include supporting documents such as technical and economic characteristics of generation capacity, cost analyses, procurement details, and relevant contracts or agreements before inclusion of such costs in retail rates.
The DOE supervises the restructuring of the electricity industry, develops policies and programs, ensures adequate and reliable supply, and certifies Regional TSC Availability Records filed by NPC and TRANSCO.
NPC and TRANSCO must file updated Regional TSC Availability Records every six months during the term of the Transition Supply Contracts.
The ERC evaluates the appropriateness of such costs using technical, environmental, economic, and financial criteria, including compliance with legislation, fuel diversity, and alignment with the Power Development Plan. Approval is needed before those costs can be recovered.