QuestionsQuestions (ERC)
The Guidelines are issued pursuant to Sections 25 and 67 of Republic Act No. 9136 (EPIRA) and Part II, Rule 5, Section 6 of the EPIRA IRR.
They include ensuring quality/reliability/security/affordability of electricity; transparent and reasonable prices with accountability; enhancing inflow of private capital and broadened ownership in generation; and encouraging efficient energy use and demand-side management (DSM).
Captive Market refers to end-users who do not have a choice of supplier of electricity as determined by the ERC. Contestable Market refers to end-users who have choice of supplier of electricity as determined by the ERC.
The Guidelines apply to NPC, generation companies (excluding SPUG), TRANSCO, PSALM, DOE, distribution utilities, and combinations of distribution utilities.
A TSC is a contract for electricity supply filed with the ERC by NPC in accordance with Section 67 of EPIRA.
Within 30 days from effectivity, NPC must file supplemental agreements for existing NPC supply contracts with the ERC; ERC acts within 60 days from acceptance. Within 60 days, NPC must offer TSCs to all distribution utilities in each region subject to availability and Section 4, Article III.
Within 30 days after NPC’s offer, the distribution utility submits a letter of intent to the Office of the President of NPC and PSALM, with a copy to ERC. It must include the hourly schedule of demand and energy during the term, if available, with as much detail as possible.
Each distribution utility’s request is reduced on a pro-rata basis with other requesting utilities in that region, based on the letters of intent received.
It records, by region, the capacity/energy eligible for TSCs, transmission limitations, capacity/energy taken by executed and pending TSCs, and remaining availability. It is certified by the DOE and is filed initially and then updated every six months during the TSC term.
Recovery is limited to the applicable Regional TSC Rate, provided equivalent quality and quantity of electricity is still available under the TSC as demonstrated by the Regional TSC Availability Record. Costs beyond the applicable TSC rate (as updated) are disallowed except for eligible contracts under Section 33 of EPIRA.
It requires that, based on the Regional TSC Availability Record, an equivalent level of quality and quantity is still available to the distribution utility under the applicable regional TSC for the period corresponding to the sought recovery.
The primary limitation does not apply to amounts of electricity in excess of what is available under the regional TSC. In that case, ERC evaluates the appropriateness of generation costs using technical, environmental, economic, and financial criteria (including technology characteristics, fuel diversity, legal compliance, scenarios of demand/fuel/FX/capital, risk balance, and DOE PDP).
ERC evaluates generation component costs proposed for inclusion using technical, environmental, economic, and financial criteria (technology and fuel mix, legal compliance, scenario-based costs, foreign exchange and capital costs, risk balance), referencing the DOE Power Development Plan. The same evaluation methodology applies to new contracts or amendments.
GRAM allows periodic adjustment to the generation rate to reflect changes in fuel and purchased power costs after ERC review before costs are passed on to customers. ICERA adjusts for currency exchange changes (FOREX/CERA) after ERC review. They are used to ensure full recovery of prudent and reasonable economic costs associated with purchased power serving the captive market, regardless of source.
The distribution utility must file a rate application with ERC for approval before including any new power supply contract costs in retail rates; ERC must approve the inclusion of such costs.
It must include: expected availability of TSC capacity/energy with documentation; technical and economic characteristics of capacity; cost analyses supporting proposed pricing; procurement details leading to selection; transmission/grid connection project details and cost recovery responsibility; and other documents ERC may require.
The application must include consistencies/inconsistencies with DOE PDP (with analyses), expected TSC availability (if relevant), technical/economic characteristics, cost analyses supporting pricing, procurement details, transmission/grid connection project details, load forecast projections and variability (including effect of retail competition and potential load reduction), and if filed later than two years from effectivity of the Guidelines, an alternative DSM program with projected costs/benefits. ERC approval process should not exceed six months and a Certificate of Compliance must be issued.
They are not subject to ERC approval but must be filed with ERC under Section 45 of EPIRA. Costs for such contracts must be separately accounted for and cannot be recovered in retail rates to the captive market.