Mandating Competitive Selection in Power Supply

Republic Act No. 9136 (EPIRA) provides the State policy to ensure the quality, reliability, security and affordability of electric power supply.
EPIRA requires transparent and reasonable electricity prices in a regime of free and fair competition with full public accountability to enhance operational and economic efficiency and improve competitiveness of Philippine products.
EPIRA directs the enhancement of private capital inflow and broadening of ownership base in power generation, transmission, and distribution.
EPIRA requires protection of public interest affected by rates and services of electric utilities and other electric power providers.
EPIRA mandates the DOE to supervise restructuring of the electric power industry, including ensuring reliability, quality, and security; encouraging private investments; facilitating reforms for greater efficiency and lower costs; developing necessary policies and procedures; and exercising incidental powers to achieve EPIRA objectives.

The Circular applies to any entity that owns, operates, or controls one or more distribution systems in both main grid and off-grid areas.
The entities covered include Electric Cooperatives (ECs).
The entities covered include Private Investor-Owned Distribution Utilities (PlOUs).
The entities covered include Local Government Unit Owned-and-Operated Distribution Systems/Utility (LGUOUs).
The entities covered include Multi-Purpose Cooperatives duly authorized by appropriate Government agencies to operate electric power system.
The entities covered include entities duly authorized to operate within economic zones.
The Circular also covers other duly authorized entities engaged in the distribution of electricity.

After the Circular’s effectivity, all covered Distribution Utilities (DUs) must procure Power Supply Agreements (PSAs) only through CSP.
CSP must be conducted through a Third Party duly recognized by the ERC and the DOE.
For ECs, the Third Party must also be duly recognized by the National Electrification Administration (NEA).
All DUs’ CSPs must observe three standard features: (a) aggregation for un-contracted demand requirements, (b) annually conducted, and (c) use of a uniform template for the PSA terms and conditions that the ERC issues in coordination with the DOE.
CSP must be conducted for un-contracted demand requirements of DUs and for procurement of PSAs consistent with the ERC-issued PSA template.

In defining “aggregation” for this Circular, aggregation refers to the wholesale demand and energy requirements of DUs, not to Contestable Markets under Retail Competition and Open Access (RCOA) regime.
“Un-contracted demand or energy requirements of the DUs” means energy and demand not yet procured individually or collectively by the DUs.
“Un-contracted demand or energy requirements” excludes energy and capacity covered by PSAs that have been filed for approval before the ERC.

Within one hundred twenty (120) days from the effectivity of the Circular, the ERC and DOE must jointly issue guidelines and procedures for:
- aggregation of un-contracted demand requirements of the DUs; and
- the process for recognition or accreditation of the Third Party that conducts the CSP.
The ERC—upon determination and in coordination with the DOE—must issue supplemental guidelines and procedures to guide DUs and the Third Party in designing and executing the CSP.
Supplemental guidelines must ensure that any CSP and its outcome result in greater transparency in procurement of electric supply.
Supplemental guidelines must also promote greater private sector participation in the generation and supply sectors, consistent with EPIRA’s declared policies.

The Circular applies prospectively and does not apply to PSAs with tariff rates already approved and/or have been filed for approval by the ERC before the Circular’s effectivity.
The DOE, through the Electric Power Industry Management Bureau (EPIMB), together with the ERC, monitors:
- compliance with conditions of CSPs; and
- compliance with provisions of PSAs.

The ERC must, in exercising its EPIRA powers and functions, establish and impose existing fines and/or penalties for non-compliance of electric power industry participants.
The enforcement objective is to support implementation of the Circular.

The Circular does not amend, supersede, or repeal mechanisms, institutions, or responsibilities already existing under any existing law, rule, or contract.
If any section or provision is declared unconstitutional or invalid, the remaining provisions continue in full force and effect under the separability clause.
The Circular remains effective until otherwise revoked.