# DC2012-05-0005 — Prescribing the General Policies for the Implementation of the Retail Competition and Open Access ## Department Circular No. DC2012-05-0005 Signed: 4 May 2012 by DOE Secretary Jose Rene D. Almendras Effectivity: Immediately following publication in at least two (2) newspapers of general circulation; remains in effect until otherwise revoked --- ## WHEREAS RECITALS 1. EPIRA Section 2(c) declares State policy to ensure transparent and reasonable electricity prices in a regime of free and fair competition and full public accountability. 2. EPIRA Section 37 mandates DOE to supervise the restructuring of the electric power industry, formulate rules and regulations to implement EPIRA objectives, and exercise such other powers as may be necessary or incidental to attain EPIRA's objectives. 3. EPIRA Section 31 provides that Retail Competition and Open Access (RCOA) shall be implemented not later than three (3) years upon EPIRA effectivity, subject to five pre-conditions: 1. Establishment of the wholesale electricity spot market (WESM); 2. Approval of unbundled transmission and distribution wheeling charges; 3. Initial implementation of the cross subsidy removal scheme; 4. Privatization of at least seventy percent (70%) of the total capacity of generating assets of NPC in Luzon and Visayas; and 5. Transfer of management and control of at least seventy percent (70%) of the total energy output of power plants under contract with NPC to the IPP Administrators. 4. ERC certified fulfilment of the above pre-conditions in ERC Case No. 2011-004-RM dated 06 June 2011. 5. EPIRA Section 31 further provides that upon initial RCOA implementation, ERC shall allow all electricity end-users with a monthly average peak demand of at least **one megawatt (1 MW)** for the preceding twelve months to be the Contestable Market. Two years thereafter, the threshold shall be reduced to **750 kW**, at which level Aggregators shall be allowed to supply electricity to end-users whose aggregate demand within a contiguous area is at least 750 kW. Subsequently and every year thereafter, ERC shall evaluate market performance and gradually reduce the threshold level until it reaches the household demand level. 6. All Generating Companies, Distribution Utilities, Suppliers, Bulk Consumers/end-users and other entities authorized by ERC shall be eligible to become WESM members, subject to compliance with WESM Rules membership criteria. 7. On 17 June 2011, DOE issued DC2011-06-0006 creating the RCOA Steering Committee to ensure appropriate conditions for efficient transition to RCOA implementation. 8. One of the RCOA Steering Committee's functions is to review existing rules and procedures on RCOA, develop and recommend policies to implement systems and processes needed to govern transactions therein. 9. After several deliberations and careful study, the RCOA Steering Committee recommended: (a) integration of RCOA in the WESM; and (b) definition of specific policies to operationalize RCOA concepts such as customer empowerment, the business of electricity supply, supplier, supplier of last resort, and WESM membership. --- ## OPERATIVE PROVISIONS **Section 1. Declaration of Policy.** Consistent with the EPIRA, the transition to RCOA shall promote genuine competition, greater efficiency, customer choice, and the true cost of electricity. The power of choice of supplier is provided to Contestable Customers (CCs) subject to rules herein and subsequent DOE rules. **Section 2. Definition of Terms.** Terms carry the same meaning as defined in the EPIRA and its IRR unless otherwise provided. - **Contestable Customer** — electricity end-user who is a part of the Contestable Market. - **Contestable Market** — electricity end-users who have a choice of supplier, as determined by ERC per EPIRA. - **Captive Market** — electricity end-users who do not have a choice of supplier, as determined by ERC per EPIRA. - **Central Registration Body (CRB)** — entity assigned to undertake development and management of systems, processes, and IT systems capable of handling customer switching and information exchange among retail electricity market participants, and settlement of their WESM transactions. PEMC designated as CRB through DC2012-02-0002 and ERC Resolution No. 15, Series of 2006. - **Certificate of Eligibility** — certificate issued by ERC to a CC recognizing it as such. - **Directly Connected Customers (DCCs)** — industrial or bulk electricity end-users directly supplied by a Generation Company, PSALM, or NPC through Subtransmission Assets. - **Last Resort Supply Event** — event when a supplier of a CC fails to provide electricity due to a default of the Supplier, including: (i) cessation of operation; (ii) revocation of license; (iii) non-payment for transmission and distribution services; and (iv) suspension of WESM membership due to non-compliance with WESM Rules. - **Open Access Date** — date determined by ERC marking commencement of RCOA operations in the specified grid/s. - **Supplier** — any person or entity authorized by ERC to sell, broker, market, or aggregate electricity to end-users. - **Structural Unbundling** — separation of different activities through creation of separate divisions/departments within a single company or, at the option of any electric power industry participant, separation into different juridical entities, with clear separation of accounts between regulated and non-regulated business activities. - **Functional Unbundling** — separation of functions into different components, e.g., separation of the wire from the supply functions of a DU or separation of products from the sale of electricity by a Generation Company. **Section 3. RCOA Integration into the WESM.** Consistent with the definition of Open Access, CCs are allowed use of the transmission and distribution systems and shall be integrated into the WESM. All CCs shall become WESM members as Trading Participants, directly or indirectly. **Section 4. Customer's Choice.** Upon the Open Access Date, a CC shall be allowed to choose its electricity source: a Generation Company, a Supplier, an affiliate of a DU constituted as a Supplier, or the Supply Business of a DU within its franchise area. 4.1. All CCs shall only deal with a supplier duly licensed by ERC, including DUs that have structurally or functionally unbundled into Wire and Supply businesses, duly approved by ERC. 4.2. ERC shall certify all eligible CCs at least six (6) months prior to initial RCOA implementation. All DUs are mandated to provide DOE, ERC, and PEMC the list of CCs including pertinent information such as load profile for the last twelve months and customer names. 4.3. PEMC is directed to register all eligible CCs certified by ERC within three (3) months prior to Open Access Date. **Section 5. Supplier of Electricity.** All ERC-licensed Suppliers shall register with PEMC as direct WESM member Trading Participants. All Suppliers shall provide PEMC with their offer terms and conditions to CCs for publication on the PEMC website. **Section 6. Supply Contract.** For initial RCOA implementation, Supply Contracts by CCs shall have a minimum term of **one (1) year** following the WESM billing cycle. CCs shall provide copies of Supply Contracts to PEMC, ERC, and DOE. **Section 7. Directly Connected Customers.** 7.1. From the effectivity of this Circular, existing DCCs must register as a Customer (Direct or Indirect Trading Participant) in the WESM. 7.2. Upon expiration of Power Supply Contracts, all DCCs meeting the demand threshold shall be treated as CCs subject to all RCOA rules. 7.3. A DCC that does not qualify as a CC may seek ERC approval to be considered as a CC. **Section 8. Embedded Generation.** 8.1. All embedded generators shall register with PEMC as non-scheduled Generation Company. 8.2. The policy for embedded generation shall be developed by DOE in coordination with relevant stakeholders, subject to the most beneficial arrangement. **Section 9. Metering.** 9.1. Except for DCCs connected to the NGCP-operated system, the DU shall be the Metering Service Provider (MSP) and owner of all billing and associated metering equipment prior to implementation of competitive metering services. 9.2. Metering requirements for CCs shall be compliant with WESM metering standards. **Section 10. Supplier of Last Resort.** The franchised DU shall act as the Supplier of Last Resort (SOLR) in instances of a Last Resort Supply Event. The DU-SOLR shall source electricity to be supplied to the CC through WESM or any available supply in the market. **Section 11. Disconnection.** In consultation with stakeholders, the DOE Disconnection Policy shall be reviewed and amended to reflect changes arising from RCOA integration into WESM. The policy shall apply the concept of cross-default disconnection to all DUs, Suppliers, and CCs. **Section 12. Customer Switching.** CCs shall only be allowed to switch to another supplier every **six (6) months** from RCOA implementation or upon CC entry into RCOA, and shall be made only at the end of the billing period. Formal notification to PEMC of the CC's intent to switch shall be given at least **one (1) month** prior to switching. **Section 13. Protection for Captive Customers.** 13.1. Consistent with EPIRA, DUs shall secure Supply Contracts in the least cost manner for Captive Customers. 13.2. A DU may continue to provide electricity services to CCs within its franchise area as a local Supplier, as a separate entity. **Section 14. Billing and Settlement for Contestable Customers.** As far as practicable, a single billing policy shall be adopted with the Supplier as the billing entity issuing bills to the CC reflecting all applicable charges. Single billing policy is adopted to minimize impact to current billing arrangements and avoid possible double charging and multiple layers of attendant administrative costs. **Section 15. Regulatory Support on RCOA Policies.** ERC shall ensure provision of regulatory support consistent with the policies set forth under this Circular and in accordance with existing laws and procedures. **Section 16. Responsibilities of PEMC.** In accordance with the policies set forth in this Circular, PEMC shall perform its responsibilities and obligations under DC2012-02-0002 designating it as the CRB. **Section 17. Repealing Clause.** Nothing in this Circular shall be construed to repeal any mechanisms already existing or responsibilities already provided for under existing rules, except insofar as manifestly inconsistent herewith. **Section 18. Separability Clause.** **Section 19. Effectivity.** Effective immediately following publication in at least two (2) newspapers of general circulation; remains in effect until otherwise revoked.