ERC Rules on Capital Expenditure Approval

The ERC implements Section 43(f) of Republic Act No. 9136 (EPIRA), which requires ERC verification of significant operating costs or investments of TRANSCO and Distribution Utilities (DUs) that become part of the rate base, to ensure transparent and accepted industry procurement and purchasing practices protecting the public interest.
The amended approval rules build on ERC Resolution No. 13, Series of 2006, which adopted guidelines governing the submission, evaluation, and approval of electric distribution capital projects.
The amended approval rules also build on ERC Resolution No. 18, Series of 2008, which adopted rules for approval of regulated entities’ capital expenditure projects.
The resolution is tied to the ERC’s authority under Section 58 of the EPIRA, which involves regulatory requirements affecting planning and CAPEX processes.
The resolution is grounded in policy considerations that align EC development and CAPEX with the Philippine Distribution Code (PDC) and safety standards under the Philippine Electrical Code (PEC).

The ERC requires CAPEX approvals to protect the public interest through transparent and accepted industry procurement and purchasing practices.
The ERC adopts a framework that supports comprehensive and integrated development planning for electric cooperatives (ECs).
The ERC’s development and CAPEX planning approach must be consistent with the PDC and safety standards set by the PEC.
The resolution supports capacity-building needs and technology modifications relevant to EC CAPEX application preparation.

The resolution approves and adopts Amended Rules for Approval of Regulated Entities’ Capital Expenditure Projects, through an annex integral to the resolution.
The approval framework responds to requests from Electric Cooperatives (ECs) in Mindanao for extension of time to file multiyear capital expenditure applications.
The resolution is implemented by the ERC and operationalized through regulated utilities and planning actors involved in distribution CAPEX processes.
The resolution is addressed to all DUs through the requirement to furnish copies.

March 8, 2006: ERC adopted Resolution No. 13, Series of 2006, establishing a uniform system for filing applications for electric distribution capital projects.
December 15, 2008: ERC adopted Resolution No. 18, Series of 2008, adopting rules for approval of regulated entities’ capital expenditure projects.
April 20, 2009: ERC issued an order suspending the filing of ECs’ multiyear capital expenditure applications until further notice.
The resolution responds to EC needs for capacity building and modification of existing system technologies, which drove requests for extensions of filing time under the transitory provision of the earlier amended rules.

Section 23 of the EPIRA requires DUs to prepare and submit to the Department of Energy (DOE) their annual Distribution Development Plans (DDP).
In the case of ECs, DDPs must be submitted through the National Electrification Administration (NEA).
The National Electrification Administration (NEA) required ECs to formulate their Integrated Computerized Planning Model (ICPM) in preparation for annual CAPEX projects and programs, and structural and/or institutional development.
A Technical Working Group (TWG) was created with representatives from ERC, NEA, International Finance Corporation (IFC), PHILRECA, NAGMEC, and AMRECO to formulate and promulgate a “Electric Cooperative Distribution Utility Planning Manual.”
The manual provides guidance for the systematic and economic expansion and rehabilitation of distribution facilities and for acquiring assets to meet consumer needs, safety and performance standards, and regulatory requirements, including EC structural and/or institutional planning and development.
The Memorandum of Agreement (MOA) adopting the Electric Cooperative Distribution Utility Planning Manual was executed on August 5, 2009 among ERC, NEA, PHILRECA, NAGMEC, and AMRECO.

The ERC approves and adopts the Amended Rules for Approval of Regulated Entities’ Capital Expenditure Projects.
The amended rules are incorporated as an integral part of the resolution through an Annex “A”.
The ERC considered comments/inputs submitted by various regulated entities on the proposed amendments, which were reflected in preparation for issuance of the amended rules.

The ERC posted the proposed amendments on its official website at erc.gov.ph on November 16, 2009.
The effective date is triggered by publication in a newspaper of nationwide circulation.
Copies must be furnished to UPLC-ONAR and to all DUs after adoption.

The resolution is adopted to amend and update the ERC’s earlier framework on regulated entities’ capital expenditure project approvals established through ERC Resolution No. 13, Series of 2006 and ERC Resolution No. 18, Series of 2008.
The resolution addresses the operational impact of the April 20, 2009 suspension of EC multiyear CAPEX application filings pending further notice, by approving and adopting the amended approval rules.