1. Philippines’ Electric Power Regulatory Framework
Asia Pacific Energy Regulatory (APER) Forum 2016
29 September 2016
Atty. Neil Simon S. Silva
Executive Director
Energy Regulatory Commission (ERC)

2. Points of Discussion Pre-Restructuring/EPIRA Post-Restructuring
Electricity Markets
Retail Competition and Open Access (RCOA)
APER Forum 2016

3. RESTRUCTURING Before the reforms… DISTRIBUTION TRANSMISSION POWER
PLANTS
& IPPs
END
USERS
SYSTEMS
OPERATIONS
NATIONAL POWER CORPORATION
18 PRIVATE
UTILITIES
2 LOCAL
GOVERNMENT
UNITS
120 ELECTRIC
COOPERATIVES
OTHER IPPs
APER Forum 2016

4. RESTRUCTURING After the reforms… NGCP GENERATION DISTRIBUTION
TRANSMISSION
POWER
PLANTS
& IPPs
END
USERS
SYSTEMS
OPERATIONS
NATIONAL TRANSMISSION CORPORATION
NGCP
20 PRIVATE
UTILITIES
120 ELECTRIC
COOPERATIVES
OTHER IPPs
RE SOURCES
Solar, ROR
Hydro,
Wind,
Biomass,
Ocean
MARKET
OPERATOR
SUPPLY
GENERATION
APER Forum 2016

5. Competition at the wholesale & retail level
RESTRUCTURING
Performance
Based
Regulation
Benchmarking
Competition at the wholesale & retail level
APER Forum 2016

6.  RESTRUCTURING Existing contractual arrangements Generators/ WESM
NGCP/
TRANSCO
Distribution Utility
End-users 
APER Forum 2016

7.   RESTRUCTURING Transaction flow under Open Access Regime NGCP/ WESM
Generators 
NGCP/
TRANSCO
Distribution Utility
End-users
APER Forum 2016

8. Electric Power Industry Restructuring
Generators
NPC/PSALM
San Miguel Energy Corporation
Aboitiz Power
FirstGen
Filinvest Development Corp
Transmission
Previously, TransCo
Now, National Grid Corporation of the Phils (NGCP)
Distribution
Davao Light (DLPC)
SOCOTECO II
CEPALCO
Visayan Electric (VECO)
Generation
Transmission
Distribution
Supply
Captive & Contestable Customers
So with the restructuring came in the new players. If before, generation is done mainly by NPC-PSALM, due to the privatization, we are hearing entities such as SMEC, Aboitiz Power now has Therma South, Therma Marine, Therma Mobile
Transmission service which has been likewise an NPC function before was transferred to TransCo and now under a Concession Agreement for 25 years to an entity called the National Grid Corporation of the Philippiines.
Players in the distribution sector did not change that much, you still have DLPC, SOCOTECO, CEPALCO, SUKELCO.
Later on in the very near future, you will be meeting a new group of entities called the Retail Electric Suppliers or RES.
APER Forum 2016

9. ERC’s MANDATES – Sec. 43 EPIRA
Promote competition
Monitor the Market
Encourage market development
Ensure customer choice
Penalize abuse of market power
APER Forum 2016

10. Sectoral Functions Generation Transmission Distribution Supply
Tariffs of NGCP
Philippine Grid Code
CAPEX plans
Ancillary services
Certificate of Compliance
Generation tariffs = Bilateral power supply contracts
Feed-in-Tariffs (RE)
SPUG (Missionary Electrification)
WESM monitoring
Competition Rules
Distribution
Supply
Tariffs of distribution utilities
Philippine Distribution Code
Lifeline rate
Franchise for consortium of sub- transmission assets
Stranded contract cost
Systems loss
CPCN
Spot inspections/ audits
Bilateral power supply contracts
CAPEX plans
Magna Carta and
DSOAR enforcement
Suppliers’ licenses
Issuance of needed rules
for retail competition
Declaration of open access
and retail competition
Competitive
Regulated
APER Forum 2016

11. Objective of EPIRA RESTRUCTURING R.A. 9136 (EPIRA) PRIVATIZATION
RETAIL COMPETITION & OPEN ACCESS
RESTRUCTURING
R.A (EPIRA)
The BLUEPRINT of the electricity industry.
PRIVATIZATION
APER Forum 2016

12. Retail Competition & Open Access Transfer of NPC-IPP Contracts
The Journey
Retail Competition & Open Access
Transfer of NPC-IPP Contracts
Privatization of NPC
Establishment of WESM
Cross Subsidy Removal
Unbundling of Rates
Title of Presentation

13. The Electricity Markets
APER Forum 2016

14. Network Service Provider
Wholesale Electricity Spot Market (WESM)
Network Service Provider
System Operator (SO)
Central Dispatcher
Market Operator (MO)
Dispatch Scheduler
Operates the WESM
Operates and maintains the transmission network
Ensures the reliability and security of the system
Generators
Customer
Trading Participants
Metering Service
Provider
Ancillary Service
Provider
APER Forum 2016

15. Salient Features of WESM
Market place for trading electricity as a commodity that reflects its market based value
Prices not subject to regulation but governed by market forces
Uses the concept of a “gross pool” where all electricity output including those covered by bilateral contracts are centrally coordinated
Uses the locational marginal pricing concept where prices vary across points in the power system
APER Forum 2016

16. Limitations & Safeguards
Competition Rules and Complaint Procedures
Market Share Limitation (MSL) Guidelines
Business Separation Guidelines
Code of Conduct for Competitive Retail Market Participants
Licensing Rules (Generation and Supply)
Offer Price Cap, Secondary Cap
Market Mitigation Measures
Rules Imposing Restrictions of the Operations of DUs and RES in the CREM
APER Forum 2016

17. Monitoring of the WESM
Prepares daily market monitoring report on the supply and demand outlook and market clearing prices
Performs daily interval analysis to ensure compliance of WESM participants to the WESM Rules, Philippine Grid Code and other rules promulgated by the Commission
Requires routine reports and information from the Market Operator and System Operator
Investigate possible anti-competitive behavior referred by PEM Board or any other parties through creation of Investigation Unit (IU)
APER Forum 2016

18. Post-Facto Investigation
Investigation made motu proprio or upon request made by stakeholder
Creation of an Investigatory Unit headed by the Investigating Officer (fact-finding process)
Investigation Officer files complaint with the Commission and prosecutes the case
APER Forum 2016

19. Retail Competition and Open Access (RCOA)
APER Forum 2016

20. What is RCOA?
Non-discriminatory use of transmission and distribution facilities
Scheme which paves way to the creation of a Competitive Retail Electricity Market (CREM)
CREM- Electricity market wherein contestable customers exercise ability to choose suppliers of electricity by virtue of open access in the distribution system
So what is this RCOA? As defined, it is the non-discriminatory use of transmission and distribution facilities which also paves way to the creation of a Competitive Retail Electricity Market. What is this CREM? It is the electricity market where the contestable customers choose their electricity supplier as allowed by the RCOA.
APER Forum 2016

21. Commercial Operations
RCOA Set-up
RCOA open in 2 grids Luzon and Visayas
RES
Local RES
SOLR (regulated)
Sellers (Suppliers)
Commercial Operations
(26 June 2013)
Rules and Regulations governing RCOA
Buyers (Contestable Customers)
The commercial operations of RCOA in the Luzon and Visayas grids was implemented on 26 June As it has a market, it is composed of buyers and sellers which are governed by the ERC rules and DOE Circulars.
The sellers are the RES, which are discussed earlier as the entities granted by the ERC to supply power to the contestable market and the Suppliers of Last Resort (SOLR) or DUs authorized by the ERC to provide the power requirements of contestable customers in case experience a Last Resort Supply of Event. These SOLRs are regulated by the ERC.
As to the buyers in the CREM, these are the contestable customers or those who are qualified under the threshold levels to choose their electricity supplier. The participation of these customers shall vary on their threshold levels. During the initial stage, end-users with an average monthly peak demand of 1MW and above shall be allowed to buy electricity from RES and join the RCOA. The succeeding phases shall then allow the 750kW-999kW, then the 500 and below and eventually the household level.
1MW and above
750kW-999kW
500 below
Household level
ERC Rules
DOE Circulars
APER Forum 2016

22. Salient Features APER Forum 2016 Power to Choose
Suppliers licensed by ERC
Power to Choose
Deregulated prices
Contracts- Not subject to ERC approval
Default Metering Services Provider (MSP)= DU
For directly connected Contestable Customers, MSP shall be NGCP
Single Billing Concept
Among the salient features of RCOA are:
1. The suppliers of electricity in the CREM, or the RES, should secure a license from the ERC. Once licensed, these RES can supply electricity to contestable market where retail competition is in force. The ERC has issued guidelines in evaluating entities who wishes to become a RES.
Power to choose. Contestable customers have the right to choose their supplier of electricity. This means that they may choose to enter into a retail contract with a supplier according to their own preference.
Another feature is that the prices agreed between the RES and the contestable customer are not regulated by the ERC. Meaning, they can enter into any rate for the supply of electricity they wish to as long as both parties are amenable to it.
Likewise, the contracts between the RES and contestable customers or the Retail Supply Contract (RSC) are not subject for approval by the ERC but are still under monitoring of the same.
The default metering service provider in the CREM under the ERC Resolution shall be the DU until a competitive bidding of the meter is in place.
For the directly-connected customers (DCC), since they are not customers of the DU, the default MSP shall be NGCP.
A single billing concept is being implemented in the CREM. This means that the RES is responsible to contract with the network service provider (DU/NGCP) and with the generation company for the supply of electricity on behalf of the contestable customer. With this, the contestable customer will receive 1 billing which reflects all the charges that the customer is required to pay.
And finally, switching as early as every month is allowed. A contestable customer can enter into a contract with a RES this month and switch to a different one the following month.
Monthly switching allowed
APER Forum 2016

23. RCOA Benefits Competitive rates Entrance of new industry players
Flexible contract terms
Better Supplier service
Innovation of additional service
Competitive Rate- the end goal of EPIRA is competition through competitive rates among the industry players
Entrance of new industry players- Additional power plants, suppliers and other players are foreseen to join the CREM
Contestable Customers may negotiate with their chosen RES for their rate depending on the load profile
With the competitive rates, additional offers and promise of better service, a strong competition among the industry players are expected
To attract more customers, suppliers will be improving their services
Value-added service may likewise be offered as a marketing strategy.
APER Forum 2016

24. Revised Rules for Contestability
ERC Issuances
New Rules
2016 Rules Governing the Issuance of Licenses to Retail Electricity Suppliers and the Prescribing the Conditions Therefor
Revised Rules for Contestability
Resolution Imposing Restrictions on the Operations of Distribution Utilities and Retail Electricity Suppliers in the Competitive Retail Electricity Market
As an update, the following rules have been issued by the ERC on RCOA.
On March 8, 2016, the ERC approved Resolution No. 5, Series of 2016 entitled “A Resolution Adopting the 2016 Rules Governing the Issuance of Licenses to Retail Electricity Suppliers and the Prescribing the Conditions Therefor” which prescribes additional requirements on RES applicants
On May 12, 2016, the ERC issued Resolution No. 10, Series of 2016 entitled “A Resolution Adopting the Revised Rules for Contestability” which sets the timeline for the implementation of RCOA; and
Resolution No. 11, Series of 2016 entitled “Resolution Imposing Restrictions on the Operations of Distribution Utilities and Retail Electricity Suppliers in the Competitive Retail Electricity Market” which provides safeguards on the operations in the CREM.
Resolution No. 5, Series of 2016
Resolution No. 10, Series of 2016
Resolution No. 11, Series of 2016
APER Forum 2016

25. RCOA Timeline 26 June 2016 - Threshold Reduction Date- 750kW
- Voluntary
26 Dec. 2016
- Mandatory Contestability- 1MW and above
26 June 2017
-Mandatory Contestability-750kW-999kW
26 June 2018
-Retail Aggregation
-Lowering of threshold to 500kW subject to the review of ERC
Under the Rules for Contestability, the ERC prescribed the timeline for the implementation of the mandatory contestability in the RCOA under the recently-approved Revised Rules for Contestability. On 26 June 2016, customers with an average peak demand of at least 750kW will be allowed to join the Competitive Retail Electricity Market (CREM). All customers with a demand of at least 1MW and 750kW, shall be mandated to join the CREM on 26 December 2106 and 26 June 2017, respectively. Retail Aggregation is slated to commence on 26 June 2018 simultaneous with the lowering of the threshold to cover customers with a demand of 500kW, subject to the review of the status of the retail market by the ERC.
APER Forum 2016

26. Thank you!
Visit us at: