Amendments to RES License Rules by ERC

The amendments are promulgated pursuant to Republic Act No. 9136, known as the Electric Power Industry Reform Act.
The ERC exercises authority to promote competition and protect consumer interests through regulatory interventions in the initial implementation of open access and retail competition.
The ERC’s mandate includes ensuring there is no abuse of market power and conflicts of interest by market participants, and ensuring compliance with rules protecting consumers.
The amendments are adopted to ensure the retail market operates as intended by the Electric Power Industry Reform Act.

The amendments respond to issues and concerns of Contestable Customers regarding difficulties in obtaining fixed offers from RES, and the unavailable capacity of RES and generation companies.
The amendments provide necessary regulatory interventions to support the smooth implementation of the competitive retail electricity market.
The amendments reflect the ERC’s objective to regulate market structure and conduct during a transition to open access and retail competition.

Article I, Section 4 (Scope) defines who may engage in the selling, brokering, or marketing of electricity to the Contestable Market consistent with the Act and its implementing rules and regulations, including:
- Generation Company or an affiliate thereof;
- An affiliate of a Distribution Utility (DU) with respect to Contestable Customers within or outside its franchise area;
- An Independent Power Producer (IPP) Administrator; and
- Any other Person intending to engage in the selling, brokering, or marketing of electricity to the Contestable Market.
During the transition period, and until the ERC deems appropriate considering market conditions, the following limitations apply:
- No Generation Company or IPPA Company shall be issued a RES License;
- Generation Companies with existing RES Licenses remain subject to the limitations under Article II, Section 5;
- No Company affiliated to DUs shall be issued a RES License.
RES licenses earlier issued to Generation Companies are honored until they expire.
Retail Supply Contracts (RSCs) of Generation Companies whose licenses expire are required to be assigned to other licensed RES.
The ERC evaluates market conditions for readiness for full Retail Competition and Open Access (RCOA) not later than June 25, 2015.

Article II, Section 5 (Ownership Limitation and Restrictions) imposes the following capacity and affiliate constraints:
- Capacity controlled by any or all entities in a business conglomerate acting as RES entities is included in the limitations on the total capacity controlled by its Generation Companies.
- Such conglomerate-controlled capacity is limited to 30% of the grid capacity and 25% on the national level.
- A RES may sell only up to 50% of its total capacity to all of its end-user affiliates.
- A RES and affiliate RES, acting singly or collectively as one or as an aggregate, is prohibited from purchasing more than 50% of its capacity requirements from its affiliated Generation Companies.

Article III, Section 2 (Basic Requirements for RES License Application) requires applicants to submit:
- Projected Five-year Financial Statements; and
- A Five-year Business Plan detailing the applicant’s target customers, capacity and energy allocations, and value-added services.
The outline for the Five-year Business Plan is to be provided by the ERC.

A monitoring obligation is imposed using the following timeline and submissions:
- Within sixty (60) working days from the effectivity of the amendments, all licensed RES must initially submit required documents to the ERC for monitoring.
- Thereafter, licensed RES must submit the documents on an annual basis, without need of further notice.
Licensed RES must submit:
- Retail Supply Contract documentation, so the ERC can review existing retail supply contracts and those being transacted to ascertain that they were negotiated on an arms-length basis and do not violate market control or anti-competitive rules.
- An updated Five-Year Business Plan, required for market monitoring and evaluation.

Section 2 provides that Section 4, Article I; Section 5, Article II; Section 2, Article III; and Section 3 of Article IV of the Revised Rules for the issuance of Licenses to Retail Electricity Suppliers are modified accordingly.
Rules, regulations, guidelines, and other issuances not expressly revised by these amendments, and not inconsistent with them, remain in force and effect.
Article VI includes monitoring provisions and reportorial requirements for licensed RES under the amended framework.

If any section of the amendments is declared unconstitutional or invalid, the remaining parts or sections not affected continue to be in full force and effect.