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Republic of the Philippines
DEPARTMENT OF ENERGY
(Kagawaran ng Enerhiya)

BAGONG PILIPINAS

DEPARTMENT CIRCULAR NO. _2C <02/—03- 009

DECLARING THE COMMERCIAL OPERATIONS DATE OF RETAIL
COMPETITION AND OPEN ACCESS (RCOA) AND GREEN ENERGY OPTION
PROGRAM (GEOP) IN MINDANAO

WHEREAS, Republic Act (RA) No. 9136, titled “Electric Power Industry Reform Act of
2001” or the EPIRA, declares the policy of the State, among others, to ensure the
quality, reliability, security, and affordability of the supply of electric power and to ensure
transparent and reasonable prices of electricity in a regime of free and fair competition
and full public accountability to achieve greater operational and economic efficiency
and enhance the competitiveness of Philippine products in the global market;

WHEREAS, Section 31 of the EPIRA mandates that retail competition and open access
on distribution wires shall be implemented not later than three (3) years upon the
effectivity of the law, subject to the fulfillment of the conditions stipulated therein;

WHEREAS, Section 37 of the EPIRA mandates the Department of Energy (DOE) to,
among others, supervise the restructuring of the electric power industry; facilitate and
encourage reforms in the structure and operations of distribution utilities for greater
efficiency and lower costs; jointly with the electric power industry participants, establish
the wholesale electricity spot market and formulate the detailed rules governing the
operations thereof; and exercise such other powers as may be necessary or incidental
to attain the objectives of the EPIRA;

WHEREAS, on 09 May 2012, upon declaration by the Energy Regulatory Commission
(ERC) of the fulfillment of the conditions set in Section 31 of the EPIRA, the DOE
promulgated Department Circular (DC) No. DC2012-05-0005, titled “Prescribing the
General Policies for the Implementation of the Retail Competition and Open Access
(RCOA)”, integrating RCOA in the Wholesale Electricity Spot Market (WESM) and
providing specific policies to operationalize RCOA concepts such as customer
empowerment or customer choice, the business of supply of electricity, supplier,
supplier of last resort, and membership in the WESM, among others;

WHEREAS, RA 9513 or the “Renewable Energy Act of 2008“ declares the policy of
the State to, among others, accelerate the exploration and development of renewable
energy resources such as, but not limited to, biomass, solar, wind, hydro, geothermal
and ocean energy sources, including hybrid systems, to achieve energy self-reliance,
through the adoption of sustainable energy development strategies to reduce the
country’s dependence on fossil fuels and thereby minimize the country’s exposure to
price fluctuations in the international markets;

WHEREAS, Section 9 of RA 9513 mandates that the DOE shall establish a Green
Energy Option program which provides end-users the option to choose RE resources
as their sources of energy. In consultation with the National Renewable Energy Board
(NREB), the DOE shall promulgate the appropriate implementing rules and regulations

which are necessary, incidental or convenient to achieve the objectives set forth under
the said law;

Energy Center, Rizal Drive cor. 34th Street, Bonifacio Global City, Taguig City, Philippines 1632
Tel. No. (Trunkline) (632) 8479-2900
Website: http://www.doe.gov.ph; E-mail: info@doe.gov.ph
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DC on Declaring the Commercial Operations Date of RCOA and GEOP in Mindanao
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WHEREAS, on 18 July 2018, the DOE issued DOE DC No. DC2018-07-0019, titled
“Promulgating the Rules and Guidelines Governing the Establishment of the Green
Energy Option Program pursuant to Renewable Energy Act of 2008”, establishing the
GEOP and allowing stakeholders in the electric power industry to contribute to the
development and utilization of clean energy, particularly, RE, in the country;

WHEREAS, in compliance with the provisions of RA 9136 and RA 9513, RCOA, and
GEOP were implemented on a voluntary basis in Luzon and Visayas on 26 June 2013
and 03 December 2021, respectively;

WHEREAS, on 26 January 2023, WESM in Mindanao commenced commercial
operations pursuant to DOE DC No. DC2022-12-0039, titled “Declaring the
Commercial Operation of the Wholesale Electricity Spot Market (WESM) in the
Mindanao Grid”, which will ensure a fair playing field for electricity investors and access
to a competitively priced, stable, and reliable electricity supply for consumers;

WHEREAS, the establishment of WESM in Mindanao will help facilitate the
implementation of policy mechanisms that promote competition and customer choice
through RCOA and GEOP;

WHEREAS, the DOE, cognizant of the readiness of the Mindanao Grid for the
commercial operation of RCOA and GEOP, drafted a circular and posted the same on
the DOE website on 15 May 2023 to solicit comments and recommendations;

WHEREAS, to provide a better understanding and awareness among the public on the
implementation of RCOA and GEOP and on the draft circular, the DOE, in collaboration
with the ERC and with support from the Independent Electricity Market Operator of the
Philippines (IEMOP) and the Philippine Electricity Market Corporation (PEMC),
conducted a series of information, education, and communication campaigns and
public consultations with Mindanao stakeholders in the following areas and dates:

Davao Cit 18 May 2023

Zamboanga

Butuan | 04 July 2023

Cagayande Oro | 18 July2023
General Santos City | _—— 30 August 2023 |

NOW, THEREFORE, based on the foregoing premises and in consideration of the
comments and recommendations received from stakeholders on the proposed
implementation of RCOA and GEOP in Mindanao, the DOE hereby issues, adopts and
promulgates the following:

Section 1. Declaration of the Commercial Operations of RCOA and GEOP in
Mindanao. The DOE hereby declares 26 March 2024 as the commencement date of
the commercial operations of RCOA and GEOP in the Mindanao Grid. For this purpose,
the following guidelines shall be observed:

1.1 All electricity end-users whose average peak demand falls within the threshold
for contestability set by the ERC shall be allowed, ona voluntary basis, to source
their electricity supply from a Retail Electricity Supplier (RES). Electricity end-
users whose average peak demand does not fall within the contestability
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threshold, but are nevertheless interested to participate in RCOA, may
participate as part of an aggregated demand in accordance with prevailing ERC
rules on demand aggregation;

1.2 All electricity end-users in the Mindanao Grid whose average peak demand falls
within the threshold set by DOE for participation in the GEOP shall be allowed,
on a voluntary basis, to source their electricity supply from a Renewable Energy
Supplier (RE Supplier), subject to applicable rules and regulations;

1.3 The migration of eligible electricity end-users under the RCOA or GEOP shall be
governed by applicable procedures under the WESM Rules, Retail Rules and
Market Manuals, and other relevant issuances by the DOE and ERC;

1.4 Prior to the commercial operations date as provided herein, the ERC, Market
Operator (MO)/Central Registration Body (CRB), WESM Governance Arm
(WGA), Distribution Utilities (DUs), Network Service Providers (NSPs) and
Metering Service Providers (MSPs) shall ensure the readiness of all requisites in
the full implementation of RCOA and GEOP as provided under applicable rules
and regulations; and

1.5 In coordination with the ERC, the MO/CRB, DUs, NSPs, MSPs and other relevant
entities, the DOE shall conduct training and orientation to ensure the
familiarization of all stakeholders with applicable procedures, guidelines, rules
and regulations in the implementation of RCOA and GEOP in Mindanao.

Section 2. Treatment of DUs’ Displaced Contract Capacity or Energy (DCC/E)
Arising from the Migration of Customers under RCOA and GEOP. Any DU which
may incur DCC/E shall inform the ERC, copy furnish the DOE, of its DCC/E. Towards
this end, the ERC, in the exercise of its functions under the EPIRA, shall ensure the

adjustments of the DUs’ power supply contracts through any of the following
mechanisms:

2.1 Invoke adjustment provisions, if any, in the power supply agreements (PSAs) for

the adjustment of contracted capacity or energy due to migration under RCOA
or GEOP;

2.2 In cases where PSAs of DUs do not contain provisions on the reduction of
contracted capacity or energy, renegotiate the reduction of contracted capacity
or energy as may be allowed by the ERC, subject to applicable rules and
regulations, provided, that the proposed reduction shall comply with least-cost
provisions under the EPIRA;

2.3 Auction the DCC/E to other DUs or RES, subject to ERC rules and regulations;

2.4 Declare the DCC/E in the WESM as quantities for sale, subject to ERC’s
applicable rules and regulations; or

2.5 Explore other means to reduce the DCC/E, provided, that, it shall comply with
the least cost provisions of the EPIRA and shall not discriminate against or

unduly increase the generation charges of the DU’s remaining Captive
Customers.

DCC/E shall refer to the excess in the contracted Capacity or energy of a DU from a
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generation company, resulting from the unutilized volume of capacity or energy
attributable to migrating Contestable and GEOP Customers.

The capacity or energy remaining with the DU shall be adequate to supply the power
requirements of its Captive Market including the DU’s demand growth.

The ERC shall closely monitor all measures taken by the DU on transactions involving
the DCC/E, such that any anti-competitive behavior or abuse of market power shall be
dealt with accordingly.

Section 3. Responsibilities of the Energy Agencies and Stakeholders. Pursuant to
their respective mandates and functions under the EPIRA and its Implementing Rules
and Regulations, the WESM Rules and Manuals, and other relevant laws and
issuances, the CRB, WGA, National Electrification Administration, National
Transmission Corporation, National Grid Corporation of the Philippines, DUs and other
concerned stakeholders in Mindanao are enjoined to extend their full support and
cooperation in the commercial operation of RCOA and GEOP and voluntary
participation of qualified electricity end-users in the RCOA and GEOP in Mindanao.

Section 4. Regulatory Support. For the proper implementation of the policies set
herein, the ERC is hereby enjoined to render the necessary regulatory support to
ensure the timely and successful implementation of the commercial operation of RCOA
and GEOP in Mindanao to include but not limited to:

4.1 Review and render decisions on all applications for the adjustments in the DU’s
PSAs as may be necessary, in accordance with Section 2 of this Circular:

4.2 Licensing of the Suppliers;

4.3 Approval of the cost recovery by relevant entities in putting up systems and
facilities required to implement the provisions of this Circular; and

4.4 Promulgation of rules and regulations, including penalties, to ensure a
competitive and level playing field in RCOA and GEOP.

Section 5. Repealing Clause. The provisions of other circulars, orders, issuances,
rules, and regulations which are inconsistent with the provisions of this Circular, are
hereby repealed, amended, modified, or superseded accordingly.

Section 6. Separability. If, for any reason, any section or provision of this Circular is
declared unconstitutional or invalid, such parts not affected shall remain valid and
subsisting.

Section 7. Effectivity and Publication. This Circular shall take effect immediately
upon its publication in two (2) newspapers of general circulation. A copy of this DC
shall be filed with the University of the Philippines Law Center — Office of National
Administrative Register (UPLC-ONAR).

Issued this MAR 01 2024 at the DOE, Energy Center, Rizal Drive cor. 34th
Street, Bonifacio Global City, Taguig City.

RAPHAEL P.M. LOTILLA By
ecretary ot