Republic ofthe Philippines

ENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City
01

RESOLUTION NO. __

, SERIES OF 2016

A RESOLUTION CLARIFYING THE EFFECTIVITY OIl

ERC RESOLUTION NO: 13, SERIES OF 2015
WHEREAS, Section 23 of the Republic Act No. 9136, otherwise known as
the Electric Power Industry Reform Act of 2001 (EPIRA), and Section 4(h), Rule
7 of the Implementing Rules and Regulations (IRR) of the EPIRA provide that a
Distribution Utility (DU) shall supply electricity in the least cost manner to its
captive market within its franchise area, subject to the collection of retail rates
duly approved by the Energy Regulatory Commission (ERC);
WHEREAS, under Section 43 of the EPIRA, the ERC is mandated to
promote competition, encourage market development, and ensure consumer
choice, and for these purposes, it shall exercise such regulatory functions as are
appropriate and necessary in order to ensure the successful restructuring and
modernization of the electric power industry;
WHEREAS, on 20 October 2015, the ERC approved Resolution No. 13,
Series of 2015, entitled "A Resolution Directing All Distribution Utilities (DUs) to
Conduct a Competitive Selection Process (CSP) in the. Procurement of Their
Supply to the Captive Market," (hereinafter, CSP Resolution);
WHEREAS, under the CSP Resolution, DUs are required to undertake a
CSP before entering into a Power Supply Agreement (PSA) with a Generation
Company (GenCo) and a resort to direct negotiation may only be made after at
least two (2) failed CSPs;
WHEREAS, Section 2 of the CSP Resolution provides that pending the
issuance of a prescribed CSP, DUs may adopt any accepted form of CSP, the

mioimum term, of"I"eo"

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(a)

Required/Contracted

Capacity and/or Energy Volumes;

(b)

Generation
others);

(Hydro,

(c)

Method of procurement for fuel, if applicable;

(d)

Cooperation/Contract

(e)

Tariff Structure unbundled to Capacity Fees, Variable and Fixed

Operating and Maintenance (O&M) Fee, Fuel Fee and others,
including the derivation of each component. Base Fee adjustment
formula, if any;

(f)

Form of Payment (Pesos or Foreign Currency Denominated);

(g)

Penalties (if applicable);

(h)

If applicable, details regarding any transmission projects or Grid

connection projects necessary to complement the proposed
generation capacity, including identification of the parties that
will develop and/or own such facilities, any costs related to such
projects and specification of the parties responsible for recovery
of any cost related to such projects; and

(i)

Other key parameters.

sources

Coal, Natural

Gas, Diesel and

Period;

WHEREAS, as provided under the CSP Resolution, PSAs already

executed but not yet filed or those that are still in the process of negotiation as of .
the CSP Resolution's effectivity are already covered by the CSP requirement;
WHEREAS, since the publication of the CSP l}esolution on 06 November
2015, the Commission has received several letters from stakeholders which raised
issues on the constitutionality of the effectivity of the CSP Resolution, sought
clarification on the implementation of the CSP and its applicability to the renewal
and extension of PSAs, requested a determination of the accepted' forms of CSP,
and submitted grounds for exemption from its applicability, among others.
WHEREAS, after judicious study and due consideration of the different
perspectives raised in the aforementioned letters, with the end in view of
ensuring the successful implementation of the CSP for the benefit of consumers,
DUs, and GenCos, the Commission has resolved to allow a period oftransition /

the full implementation

of the CSP Resolution and, as such, restates
effectivity date of the CSP Resolution to a later date;

the

NOW, THEREFORE, pursuant to its mandate under Republic Act No.

9136, the Commission RESOLVES, as it is hereby RESOLVED, to issue the
following clarifications on the implementation of the CSP Resolution:
1.

The effectivity of the CSP Resolution is hereby restated to be 30 April

2016. All PSAs executed on or after the said date shall be required,
without exception, to comply with the provisions of the CSP Resolution.

2.

On the other forms of CSP referred to in Section 2 of the CSP

Resolution, these should, likewise, comply with the following:
a. The requirement of at least two (2) qualified bids for the CSP to
be considered successful under Section 1of the CSP Resolution;
and
b. The terms of reference specified under Section
Resolution.

of the CSP

3. In reference to PSAs with provisions allowing the automatic renewal or

extension of their term, whether or not such renewal or extension
requires the intervention of the parties thereto, the following rules shall
apply:
a. PSAs that were approved by the Commission or filed with the ERC
before the effectivity of this Resolution may have one (1) automatic
renewal or extension for a period not exceeding one (1) year from the
end of their respective terms;
b. Automatic renewal clauses or extension of PSAs shall no longer be
permitted upon effectivity of this Resolution.
This Resolution shall take effect immediately following its publication in a
newspaper of general circulation in the Philippines ..
Let copies of this Resolution be furnished the University of the Philippines
Law Center-Office of the National Administrative Register, the Department of
Energy, the Philippine Electric Power Operators Association, Inc., the Philippine
Rural Electric Cooperatives Associatio , Inc., and all DUs and GenCos .
. Pasig City,

15 March 2016.

ERe

Office of the Chairman

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JOSE VICENTEB. SALAZAR

Chairmanr

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JOSEFINAPAT

GijRONIMO D. STA.
Co m .ssioner

Commissioner