Adopting the Rules for the Power Supply Option Program (PSOP)

January 25, 2010

ERC RESOLUTION NO. 01-10

A RESOLUTION ADOPTING THE RULES FOR THE POWER SUPPLY OPTION PROGRAM (PSOP)

WHEREAS, pursuant to Section 43 of Republic Act 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), and its Implementing Rules and Regulations (IRR), the Commission is mandated to promulgate rules and regulations, and perform regulatory functions appropriate and necessary in order to ensure the successful restructuring and modernization of the electric power industry;

WHEREAS, it is necessary to provide the regulatory framework to ensure the effective implementation of the Power Supply Option Program (PSOP), in that an additional choice of supply is made available to qualified customers;

WHEREAS, to govern the PSOP, a set of Rules has been crafted to provide guidance, among others, on the eligibility of potential participants to the PSOP, the manner of entry and exit of said participants as well as the treatment of existing contracts during the implementation of the scheme;

WHEREAS, the first draft of the Rules was subjected to public consultation on September 4, 2008, and the second draft was posted in the two (2) ERC-administered websites on November 17, 2008 for second round of comments;

WHEREAS, from December 15, 2009 to January 15, 2010, the third draft was posted to seek the final comments from the industry participants;

WHEREAS, in accordance with the provisions of the EPIRA and after a careful consideration of the various views and comments submitted by interested parties, the Commission deems it appropriate to adopt the Rules for the PSOP; SaDICE

NOW THEREFORE, the Commission, after a thorough and due deliberation, hereby RESOLVES, as it is hereby RESOLVED, to APPROVE and ADOPT, the "Rules for the Power Supply Option Program" herein attached as ANNEX "A" and made an integral part of this Resolution.

This Resolution shall take effect immediately following its publication in a newspaper of general circulation.

Pasig City, January 25, 2010.

(SGD.) ZENAIDA G. CRUZ-DUCUTChairperson

(SGD.) RAUF A. TANCommissioner

(SGD.) ALEJANDRO Z. BARINCommissioner

(SGD.) MARIA TERESA A.R. CASTAÑEDACommissioner

(SGD.) JOSE C. REYESCommissioner

ATTACHMENT

RULES FOR THE POWER SUPPLY OPTION PROGRAM(previously referred to as Interim Open Access)

ERC CASE NO. 2008-013 RM

Pursuant to Section 43 of Republic Act No. 9136, its Implementing Rules and Regulations (IRR), the Energy Regulatory Commission (ERC) hereby promulgates the following Rules for the Implementation of Power Supply Option Program in Luzon.

ARTICLE I

General Provisions

SECTION 1. Objectives. —

1.1 To provide the regulatory framework for the implementation of the Power Supply Option Program; and

1.2 To ensure the effective implementation of the Power Supply Option Program in that an additional choice of supply is made available to qualified customers.

SECTION 2. Scope. —

These Rules shall apply to:

1. Eligible Customers;

2. Retail Electricity Suppliers;

3. Eligible Distribution Utilities;

4. Generation Companies or Affiliate thereof;

5. National Grid Corporation of the Philippines (NGCP);

6. Independent Power Producer (IPP) Administrators;

7. Market Operator; and

8. Other relevant industry participants.

SECTION 3. Definition of Terms. —

As used in these Rules, the following terms shall have the following respective meanings:

Act	Republic Act No. 9136, otherwise
	known as "Electric Power Industry
	Reform Act of 2001".
Business Day	A day other than a Saturday, a Sunday or
	an official or declared Philippine national
	or local public holiday.
Connection Agreement	Agreement between a connection
	customer and a DU relating to
	distribution connection assets and
	services.
Contestable Market	The electricity End-users who have a
	choice of a supplier of electricity, as may
	be determined by the ERC in accordance
	with the Act.
Distribution Utility	Any electric cooperative, private
	corporation, government-owned utility or
	existing local government unit which has
	an exclusive franchise to operate a
	distribution system in accordance with its
	franchise and the Act.
Distribution Wheeling Service	The conveyance of power throughout a
	distribution system in a manner to meet
	the demand of End-users or generators.
Distribution Wheeling Service	An agreement between an Eligible DU
(DWS) Agreement	and a Retail Electricity Supplier on behalf
	of an Eligible Customer for the
	procurement of Distribution Wheeling
	Service. Insofar as it concerns the
	transactions in the Power Supply Option
	Program, the Distribution Wheeling
	Service Agreement shall include the
	procurement of transmission services.
Eligible Customer	For purposes of these Rules, an End-user
	who is qualified to participate in the
	Power Supply Option Program in
	accordance with the eligibility
	requirements under Section 3, Article II
	of these Rules, and certified as such by
	the ERC.
Eligible Distribution Utility	A Distribution Utility which expresses its
	willingness to voluntarily implement the
	Power Supply Option Program through
	the mechanism provided under Section 2,
	Article II hereof.
Eligible Supplier	Any of the entities which have secured a
	RES License and are qualified to
	participate in the Power Supply Option
	Program through the mechanism
	contained in Section 1, Article II hereof.
End-user	Any person or entity requiring the supply
	and delivery of electricity for its own use.
Energy Regulatory Commission	The independent and quasi-judicial
(ERC)	regulatory agency created under Section
	38 of the Act.
Generation Company	Any person or entity authorized by the
	ERC to operate facilities used in the
	generation of electricity.
Independent Power Producer	An existing Generation Company or any
(IPP)	power generating entity which is not
	owned by the National Power
	Corporation.
IPP Administrator	Qualified independent entities appointed
	by Power Sector Assets and Liabilities
	Management Corporation who shall
	administer, conserve and manage the
	contracted energy output of NPC IPP
	contracts, including selling the contracted
	energy output of these contracts and
	offering ancillary services, where
	applicable.
Market Operator (MO)	The entity responsible for the operation of
	the Wholesale Electricity Spot Market.
Market Trading Node (MTN)	The node at which electricity will be
	either bought or sold from the spot
	market, as described in detail in Clause
	3.2.2 of the Wholesale Electricity Spot
	Market Rules.
National Power Corporation	The government corporation created
(NPC)	under Republic Act No. 6395, as
	amended.
NPC Successor Generating	Otherwise known as the winning bidder,
Company	to which PSALM has successfully turned
	over any NPC-owned power plant
	privatized in accordance with Section 47
	of the Act. As such, said assignee shall
	have complied with all the deliverables as
	provided in the asset purchase agreement
	including the required up-front payment
	generally amounting to forty percent
	(40%) of the bid price.
National Grid Corporation of the	The corporation awarded the concession
Philippines (NGCP)	to operate the transmission facilities of
	the National Transmission Corporation
	pursuant to the Act and Republic Act No.
	9511.
Open Access	The system of allowing any qualified
	person the use of transmission, and/or
	distribution system and associated
	facilities subject to the payment of
	transmission and/or distribution retail
	wheeling rates duly approved by the ERC.
Open Access Date	The commencement date of Open Access
	and Retail Competition in a particular
	grid, as determined by ERC, in
	accordance with the Act.
Petition for the Implementation	The Petition docketed as ERC Case No.
of Interim Open Access in the	2008-026 RC, filed the Philippine
Luzon and Visayas Grids	Independent Power Producers Association
(the Petition)	(PIPPA), Manila Electric Company
	(MERALCO), Visayan Electric Company
	(VECO), Davao Light and Power Co., Inc.
	(DLPC), Clark Electric Distribution
	Corp., Cagayan Electric Power and Light
	Company (CEPALCO), San Fernando
	Electric Light and Power Co.
	(SFELAPCO), and Panay Electric
	Company, Inc. (PECO), collectively
	referred to as the Petitioners.
Power Sector Assets and	The corporation created pursuant to
Liabilities Management	Section 49 of the Act.
Corporation (PSALM)
Power Supply Option Program	The voluntary supply scheme which
(PSOP)	stemmed from the Petition for the
	Implementation of Interim Open Access
	in the Luzon and Visayas Grids, as
	modified by the ERC.
Power Supply Option Program	The contract entered into by and between
Contract (PSOP Contract)	the Eligible Customer and the Eligible
	Supplier pursuant to the PSOP
	arrangements prescribed hereunder.
Retail Competition	The provision of electricity to End-users
	in the Contestable Market by Retail
	Electricity Suppliers through Open
	Access.
Retail Electricity Supplier (RES)	Any person or entity authorized by the
	ERC to sell, broker, market or aggregate
	electricity to End-users in the Contestable
	Market.
Terms of Reference	The description of the proposed scheme
	attached to the Petition for the
	Implementation of Interim Open Access
	in the Luzon and Visayas Grids, signed by
	the Petitioners, except for SFELAPCO,
	and several business groups.
Transition Supply Contract	A contract for electricity supply filed by
(TSC)	NPC and approved by the ERC in
	accordance with Section 67 of the Act.
Wholesale Electricity Spot	The Wholesale Electricity Spot Market
Market (WESM)	established by the Department of Energy
	pursuant to the Act.

Terms, not otherwise defined herein, which are defined in the Act or its Implementing Rules and Regulations (IRR) shall have the meaning ascribed to them in the Act or its IRR, as the case may be.

SECTION 4. Guiding Principles. —

To ensure the effective implementation of Power Supply Option Program (PSOP), the following policies shall be adhered to:

4.1 The Rules for Power Supply Option Program (the "Rules") shall be effective only for the period prior to the Open Access Date. Once the ERC declares the establishment of actual Open Access and Retail Competition, the PSOP and all contracts and transactions related thereto shall automatically terminate upon Open Access Date, provided that the same shall not terminate resolution of any obligations or disputes arising from the PSOP.

4.2 The PSOP is another supply option to customers in addition to the existing programs such as the Customer Choice Program of the Manila Electric Company (MERALCO) and the One Day Power Sale (ODPS) of the National Power Corporation (NPC). The implementation of the PSOP within a franchise area shall be a voluntary act on the part of a DU. Therefore, only Eligible Customers within the franchise areas of Eligible DUs shall be allowed to participate in the program.

4.3 A single billing policy to the Eligible Customer by the Eligible Supplier shall be adopted. The Eligible Supplier shall contract with other service providers (i.e., Eligible DU for transmission and distribution wheeling and ancillary services) on behalf of its Eligible Customers, except for the Connection Agreement, which shall be entered into by an Eligible Customer with its Eligible DU.

4.4 The Eligible DU shall be the sole metering service and data provider for the Eligible Customers within the former's franchise area.

4.5 For the duration of PSOP, a policy of single entry and single exit by the Eligible Customer shall be enforced. That is, should an Eligible Customer avail of PSOP, the Eligible Customer will have to be supplied by an Eligible Supplier for the entire duration of its participation in the PSOP. Should the Eligible Customer decide to exit from the PSOP and return to the regulated retail rates of the DU, said customer shall no longer be allowed to revert to the PSOP for the rest of the program.

4.6 The accounting and settlement of energy imbalances, net settlement surplus and line rentals associated with the implementation of PSOP shall be subject to a separate set of Rules to be determined by the stakeholders and approved by the ERC.

ARTICLE II

Eligibility Requirements

SECTION 1. Eligibility of Generating Companies and Retail Electricity Supply Licensees as Suppliers in the Power Supply Option Program. —

1.1 Only Eligible Suppliers shall be allowed to participate in the PSOP. Eligible Suppliers shall include:

1.1.1 All Generation Companies, including NPC-Successor Generating Companies, or their related groups, that are within the mandated market cap, i.e., owning, operating or controlling 30% or less of the installed generating capacity in a grid and/or 25% or less of the national installed capacity pursuant to Section 45 of the Act;

1.1.2 NPC-IPPs with respect to capacity which is not covered by contracts;

1.1.3 IPP Administrators with respect to the uncontracted energy which is subject to their administration and management;

1.1.4 NPC/PSALM, upon compliance with the market share limitation as provided in Section 45 of the Act; and

1.1.5 A Retail Electricity Supplier (RES) duly licensed by the ERC.

1.2 To be Eligible Suppliers, entities enumerated under Sections 1.1.1 to 1.1.4 hereof must have secured a RES license from the ERC.

1.3 If a licensed RES is engaged in the power generation and/or distribution business and other electricity-related business activities, it must have an ERC-approved Business Separation and Unbundling Plan (BSUP) in order to be allowed to participate in the PSOP as Eligible Suppliers.

1.4 NPC/PSALM shall continue selling its capacity at the wholesale level either through the Wholesale Electricity Spot Market (WESM) or through its Transition Supply Contracts (TSCs).

SECTION 2. Eligibility of Distribution Utilities. —

2.1 The implementation of the PSOP within a particular franchise area shall be a voluntary act on the part of a DU. No DU shall be allowed to implement the PSOP without the appropriate authorization granted by the ERC conferring upon it the status of an Eligible DU.

2.2 All DUs who intend to participate in the PSOP shall notify the ERC in writing of such intent, with proof that the following requirements have been met:

2.2.1 The DU must have Eligible Customers within its franchise area;

2.2.2 The DU must have ERC-approved unbundled rates;

2.2.3 The DU must have filed its Business Separation and Unbundling Plan (BSUP);

2.2.4 The DU must have initially implemented its inter-class cross subsidy removal scheme;

2.2.5 The DU must have submitted a complete list of its eligible Customers with their respective information, as provided in Section 1.1, Article III of these Rules;

2.2.6 The DU must have manifested, through an undertaking, that it shall abide by all the rules and guidelines of ERC; and

2.2.7 The DU is a direct member of the WESM.

2.3 DUs which took part in the Petition and are signatories to its Terms of Reference (TOR), are deemed to have volunteered their participation in the PSOP and shall not be subject to Section 2.2 hereof.

SECTION 3. Eligibility of Power Supply Option Program Customers. —

3.1 Only Eligible Customers within the franchise areas of Eligible DUs shall be allowed to implement the same. For the avoidance of doubt, directly connected customers that are not customers of the Eligible DU and with existing supply contracts with other suppliers shall not be allowed participation in the PSOP.

3.2 Upon implementation of the PSOP, only End-users with a monthly average peak demand of at least one megawatt (1 MW) for the preceding twelve (12) months shall be eligible to participate, notwithstanding that during some of those months, the End-user's monthly peak demand may have fallen below one megawatt (1 MW).

3.3 The eligibility of an End-user shall only be based on the peak demand as indicated by a single utility meter.

3.4 The threshold level for End-users should remain at one (1) MW throughout the duration of the implementation of the PSOP.

3.5 The demand requirements of non-eligible End-users cannot be aggregated into a single End-user to become a single Eligible Customer.

3.6 Once an End-user is certified to be eligible, it will remain eligible throughout the duration of PSOP regardless of changes in its peak demand during the program.

3.7 The ERC reserves the right to refuse certification of a particular End-user should the latter be found to have not complied with the eligibility requirements.

ARTICLE III

Procedures on Informing End-Users of their Eligibility

SECTION 1. Notification Process Prior to the Commencement of the PSOP. —

1.1 The ERC shall determine which End-users shall be eligible to participate in the PSOP based on the most recent customer information submitted by Eligible DUs to the ERC in compliance with the Rules on Customer Switching.

1.2 The ERC shall issue certifications for Eligible Customers within fifteen (15) Business Days from the effectivity of these Rules. Such certification shall be coursed through the Eligible DU.

1.3 The Eligible DUs shall send the certification to the concerned End-user, containing the details of its eligibility, within five (5) days of receipt from the ERC.

1.4 An End-user that wishes to participate in the PSOP shall send written notice to the Eligible DU and the ERC of its intent to participate for purposes of inclusion in the program.

1.5 Such notification from the End-user shall constitute a waiver of confidentiality relative to the following information: Eligible Customer's name, billing and service address, and contact information such as telephone number/s and e-mail addresses. Such information shall be posted by the ERC on its website.

1.6 End-users that meet the eligibility requirements but have not been informed thereof may directly request the ERC to evaluate their eligibility.

SECTION 2. Notification Process for the Duration of the PSOP. —

2.1 Where the PSOP has already commenced and is ongoing, Eligible DUs shall submit an updated list of Customers to ERC for certification. The ERC shall issue certifications for new Customers within five (5) Business Days from receipt of information from the Eligible DU.

2.2 The Eligible DU shall notify the concerned End-user of its eligibility, as provided in Section 1.3 hereof.

ARTICLE IV

Power Supply Option Program Entry and Exit Procedures

SECTION 1. Entry of Eligible Customers to the PSOP. —

1.1 Upon receipt by an Eligible Customer of an ERC certification stating that it is qualified to participate in the PSOP, it shall send a written notice to the ERC and the Eligible DU of its intent to participate, as provided under Section 1.4, Article III of these Rules.

1.2 Once the Eligible Customer has notified ERC and the Eligible DU of its intent to participate in the program, the ERC shall send a written acknowledgment to the Eligible Customer within five (5) Business Days notifying the latter that it may already enter into a PSOP Contract with an Eligible Supplier.

1.3 Once the Eligible Customer and Eligible Supplier have executed a PSOP Contract, the Eligible Supplier shall inform the DU of the existence of said contract and for this purpose shall enter into a DWS Agreement with the Eligible DU.

1.4 The PSOP Contract and DWS Agreement shall take effect on the next regular meter reading date from the execution of the contracts if the execution of both contracts were made at least ten (10) days before the said meter reading date.

1.5 Should the completion of the requirements be made less than ten (10) days prior to the Eligible Customer's next scheduled meter reading date, the PSOP Contract and DWS Agreement shall take effect on the Eligible Customer's subsequent meter reading date.

1.6 The Eligible Customer shall continue to be responsible for its obligations with the DU under the contracts.

SECTION 2. Exit of Eligible Customer from the PSOP. —

2.1 An Eligible Customer that has entered into a PSOP Contract with an Eligible Supplier has the option to terminate its contract, provided that such is expressly so stipulated in the said PSOP Contract and subject to the terms and conditions stated therein. Should the Eligible Customer wish to revert to the Eligible DU's regulated supply rates, notice should be given to the Eligible Supplier and to the DU at least sixty (60) days prior to the intended exit. 

2.2 An Eligible Customer which reverts to the regulated supply rate of the DU is required to enter into a service agreement with the Eligible DU.

2.3 Termination of the PSOP Contract shall coincide with the effective date and time of the service agreement between the Eligible Customer and the Eligible DU, which should be after the end of a billing period identified by the parties. Once the exit and reversal has been made, the Eligible Customer is prohibited from yet again participating in the PSOP.

2.4 An Eligible Customer which receives supply from its Eligible DU by virtue of a default supply event under Section 2.15, Article V hereof, shall be allowed to revert to the regulated supply rate at any time during the three (3) month period referred to under Section 2.24, Article V hereof. Such reversal should be made upon due notice to the Eligible DU and said reversal shall be deemed as its express and voluntary act of exit from the PSOP scheme.

2.5 An Eligible Customer that is under the default supply service for three (3) consecutive months shall be automatically reverted to the Eligible DU's regulated supply rate at the end of the three (3) month period. The Eligible DU providing default supply shall notify the Eligible Customer at least fifteen (15) days prior to the expiry of the three (3) month period for the latter to switch to an Eligible Supplier to avoid reversal to the Eligible DU's regulated supply rates. Proof of such notification must be furnished the ERC by the Eligible DU. Failure of the Eligible Customer to switch to an Eligible Supplier at the end of the three (3) month period shall automatically revert the Eligible Customer to the Eligible DU's regulated supply rate.

ARTICLE V

Obligations of Power Supply Option Program Participants

SECTION 1. Obligations of Eligible Suppliers. —

1.1 Eligible Suppliers that are Generation Companies shall comply with the ownership limitation as provided in Section 45 of the Act.

1.2 An Eligible Supplier may procure its power requirements from other Eligible Suppliers, Generation Companies, IPP Administrators and/or the WESM.

1.3 Eligible Suppliers shall ensure that it shall contract with Eligible Customers whose names have been published at the ERC website and certified as such by the ERC.

1.4 Eligible Suppliers shall provide all power requirements of its Eligible Customers, except for energy related to distribution system losses, energy imbalances as defined by the WESM Rules, and line rental. In addition, Eligible Suppliers shall ensure continuous supply at all times.

1.5 Prior to entering into a PSOP Contract with an Eligible Customer, the Eligible Supplier shall conduct an orientation for the benefit of the latter, regarding the nature and provisions of the PSOP Contract and that the PSOP Contract shall, in all instances, include a provision that the same shall terminate upon Open Access Date.

1.6 Eligible Suppliers are required to collect the Universal Charge from all of its Eligible Customers on a monthly basis, and shall comply with the Rules Governing the Collection of Universal Charge and the Guidelines and Procedures Governing Remittances and Disbursements of Universal Charge, issued by ERC.

SECTION 2. Obligations of Eligible Distribution Utilities. —

2.1 Eligible DUs shall provide non-discriminatory access to its distribution system, and shall provide all regulated services at rates approved by the ERC and at non-discriminatory terms and conditions.

2.2 Upon coordination with the Eligible Supplier, the Eligible DU shall determine and assign each Eligible Customer to a specific Market Trading Node (MTN) as defined under the WESM Rules.

Metering and Data Dissemination Services

2.3 Eligible DUs shall provide metering related services to Eligible Customers within its franchise area. WESM compliant interval metering facilities for Eligible Customers participating in the PSOP shall be completely installed by the Eligible DU at the start of the same as declared by the ERC. The DU shall be allowed to recover the additional charges that cover the incremental costs related to enhancement of metering facilities, billing and data dissemination services subject, however, to ERC approval.

2.4 Eligible DUs shall continue to own, operate, maintain and access the meters utilized by the Eligible Customers.

2.5 Eligible DUs shall continue with the regular meter reading schedules for the Eligible Customers, and provide the meter reading data of each Eligible Customer to its respective Eligible Supplier, within three (3) Business Days from the meter reading date.

2.6 Eligible DUs shall only disseminate meter reading data to an Eligible Customer's current Eligible Supplier. It shall not release meter reading data and other details to other Eligible Suppliers or any other entity without the Eligible Customer's express authorization. Likewise, the Eligible DU shall not release information on the Eligible Customer's historical consumption to any Eligible Supplier without the Eligible Customer's authorization. Only information stated in the Eligible Customer's authorization will be released by the Eligible DU.

Transmission Wheeling and Ancillary Services

2.7 An Eligible DU shall continue contracting with NGCP for transmission wheeling service and ancillary services on behalf of the Eligible Suppliers for the duration of the PSOP contract or default supply contract. The Eligible DU shall bill the Eligible Supplier for both transmission wheeling and ancillary services provided to each Eligible Customer in accordance with the ERC-approved NGCP rates and charges.

Distribution Wheeling and other Regulated Services

2.8 An Eligible DU shall provide distribution wheeling service to each Eligible Customer and shall bill the Eligible Supplier for distribution wheeling, system loss and other applicable regulated charges per customer classification as provided to each Eligible Customer.

2.9 An Eligible DU shall be responsible for procuring all energy related to distribution system losses, as provided for under Section 5.4 of the Distribution Services and Open Access Rules. The system loss charges should be based on blended purchased power costs of the Eligible DU and shall be based on the ERC-approved rates.

Disconnection/Reconnection of Eligible Customer

2.10 In cases of non-payment by the Eligible Customer, an Eligible Supplier may send a forty eight (48) hour written notice of disconnection to such customer. The Eligible Supplier shall provide the Eligible DU a request for disconnection at the same time it sends notice of disconnection to the Eligible Customer.

2.11 In case of non-payment by the Eligible Customer despite notice of disconnection, the Eligible DU shall disconnect the Eligible Customer within twenty four (24) hours from receipt of request for disconnection from the Eligible Supplier.

2.12 Should the Eligible Customer settle its obligations to the Eligible Supplier prior to the time of disconnection, the Eligible Supplier must send an advice to the Eligible DU to desist from disconnecting service. Such advice shall be time-stamped and recordable, and shall take effect upon receipt of the Eligible DU of a time-stamped notice. Otherwise, the Eligible DU shall not be responsible for verifying the validity of the Eligible Supplier's request for disconnection.

2.13 The Eligible DU shall reconnect the supply services of the Eligible Customer immediately upon written advice of the Eligible Supplier.

Non-payment of Eligible Supplier to Eligible DU

2.14 In the event an Eligible Supplier fails to pay the Eligible DU by the due date prescribed for the service, the Eligible DU shall notify the Eligible Supplier that service under the DWS agreement will be terminated in seven (7) days. If the Eligible Supplier fails to pay within forty eight (48) hours following said notice, the Eligible DU shall send a copy of the notice of disconnection to the Eligible Supplier's affected Eligible Customers. Prior to termination of service under the DWS agreement, the Eligible Customer must either acquire supply from another Eligible Supplier or temporarily acquire service as a default supply customer to avoid disconnection. If upon termination of service under the DWS agreement the Eligible Customer has not acquired service from another Eligible Supplier or the default supplier, the DU shall have the right to physically disconnect such customer. If at the time the disconnection is to be made, the Eligible Supplier tenders full payment of the unpaid bill to the agent or employee of the Eligible DU who is to effect the disconnection, the said agent or employee of the Eligible DU shall desist from disconnecting the service to allow the Eligible Supplier to pay the bills within twenty four (24) hours, provided however, that the Eligible Supplier can only invoke this provision once for the same unpaid bill.

Default Supply

2.15 An Eligible DU shall provide default supply to its Eligible Customers due to the occurrence of any of the following circumstances:

2.15.1 The Eligible Supplier has ceased to operate;

2.15.2 The Eligible Supplier's license has been revoked by ERC; or

2.15.3 The Distribution Wheeling Service Agreement between the Eligible Supplier and the Eligible DU has been terminated.

2.16 The Eligible Supplier is responsible for all costs of providing electricity to Eligible Customers until such time that the default service for the latter has commenced.

2.17 Should any of the events under Section 2.15 hereof occur, the rate to be charged shall be the applicable WESM nodal energy price or the IPP bilateral contract price, whichever is higher, for the energy consumed by an Eligible Customer during all hours that it has been supplied by the Eligible DU. No additional costs shall be charged by Eligible DUs to the Eligible Customers for this service.

2.18 For the circumstance under Section 2.15.1 hereof, the Eligible Supplier shall inform the Eligible DU, the ERC and all affected Eligible Customers of the fact of cessation of operation. 

2.19 The ERC shall inform the Eligible DU of the circumstance under Section 2.15.2 hereof, and the Eligible DU in turn shall inform the affected Eligible Customers.

2.20 Upon receipt of the notification under Sections 2.18 and 2.19 hereof, and upon occurrence of the circumstance under 2.15.3 hereof, the Eligible DU shall notify the Eligible Customer that the latter may avail of default supply service. The Eligible Customer shall be responsible for informing the DU that it wishes to avail of default supply. Should the Eligible Customer fail to notify the Eligible DU that it shall avail of default supply, the DU shall be compelled to disconnect said Eligible Customer. Said notification by the Eligible DU shall be deemed as a forty eight (48) hour disconnection notice to the Eligible Customer and the same should be explicitly stated in the same.

2.21 In no case shall default supply service be longer than three (3) months. The Eligible Customer should contract and execute contracts with an Eligible Supplier within said period of time. Any new PSOP Contract entered into shall be effective on the next applicable billing cycle.

2.22 In the event of power shortage, the WESM Rules will govern such a contingency. The default supplier is not intended to be a generator of last resort for such contingency.

SECTION 3. Rights and Responsibilities of Eligible Customers. —

3.1 Upon receipt of the ERC certification from the Eligible DU, the Eligible Customer shall send a written notice to its Eligible DU and the ERC, expressing its intention to participate in the PSOP. Qualified Eligible Customers who do not opt to participate need not send notices to their DU.

3.2 The qualified Eligible Customer may forward a written authorization to the Eligible DU authorizing the latter to provide an Eligible Supplier with information on its historical consumption and other details only if such Customer wishes to negotiate with such Eligible Supplier.

3.3 Eligible Customers shall be provided with a copy of the PSOP Contract upon its signing.

3.4 A Eligible Customer may file a complaint with the ERC regarding disputes on PSOP transactions with the Eligible Supplier, provided that a complaint concerning the same issue has been previously filed with the respective Eligible Supplier, and such Customer was adversely affected by the Eligible Supplier's resolution of the complaint.

ARTICLE VI

Contracts Between Power Supply Option Program Participants

SECTION 1. Supply Contract between Generation Company and Eligible Supplier. —

1.1 The supply contracts between Generation Companies and Eligible Suppliers during the PSOP shall have a term that will commence on the date agreed upon by the parties, which in no case shall be earlier than the date of implementation of the PSOP. Such contracts shall automatically terminate upon Open Access Date.

SECTION 2. Provision of PSOP Contract by the Eligible Supplier to the Eligible Customer. —

2.1 A PSOP Contract between an Eligible Supplier and an Eligible Customer shall have a minimum term of twelve (12) months, within which the Eligible Customer cannot opt to be supplied by the Eligible DU unless otherwise agreed upon under Section 2.15 to 2.25, Article V. Thereafter, the parties are allowed to renew their contract, or the Eligible Customer shall be allowed to elect another Eligible Supplier, subject to the provisions of these Rules.

2.2 The PSOP Contracts shall provide as a stipulation that the supply of electricity shall commence on the first day of the next billing cycle from execution of the PSOP Contract or any other first day of succeeding billing cycles, as agreed upon by both RES and Eligible Customer.

2.3 The rates and any terms and conditions of a PSOP Contract between an Eligible Customer and an Eligible Supplier may only be modified by agreement in writing between both parties.

2.4 An Eligible Supplier shall ensure that upon signing of the PSOP Contract, the counterparty Eligible Customer is provided with a copy of said contract.

SECTION 3. Distribution Wheeling Service Agreement Between Distribution Utility and Eligible Supplier. —

3.1 A DWS Agreement shall be entered into between the Eligible Supplier and the Eligible DU on behalf of the Eligible Customer. Said DWS Agreement shall commence only on the effective date of the PSOP Contract between the Eligible Supplier and the Eligible Customer. The template DWS Agreement provided in the Distribution Services and Open Access Rules may be used as basis for this purpose.

3.2 Aside from the transmission and distribution wheeling services, the DWS Agreement between an Eligible Supplier and Eligible DU shall include manner of accountability for the following items and attachment:

3.2.1 Pass-through costs related to system losses, deferred costs and other charges incurred by such Eligible DU prior to the commencement of PSOP Contracts entered into by Eligible Customers within its franchise area, subject to ERC-promulgated rules and regulations;

3.2.2 Lifeline subsidies;

3.2.3 Bill deposits equivalent to forecasted monthly consumption on Eligible DU's charges to the Eligible Supplier, including but not limited to DWS, transmission charge, systems loss charge, etc., subject to yearly adjustment as provided in the Distribution Service and Open Access Rules (DSOAR); and

3.2.4 Metering service agreement, which covers procurement of meter on behalf of the customer (if applicable), meter installation, maintenance, calibration, repair, meter reading and meter data dissemination to Eligible Supplier.

3.3 The term of the DWS Agreement as a result of the PSOP transaction shall end upon Open Access Date.

ARTICLE VII

Reduction of Contracted Volume Between Generation Company and Eligible Distribution Utility

1.1 All existing Transition Supply Contracts (TSCs) will remain valid. Where the Eligible DU's energy requirement is reduced due to the transfer of an End-user to an Eligible Supplier, such DU may reduce its Transition Supply Contract (TSC) volume in accordance with the provisions of the TSC, or as otherwise agreed upon by the parties.

1.2 The Eligible DU shall provide the NPC Successor Generating Company with the corresponding monthly energy requirement of a Customer intending to transfer to an Eligible Supplier, and the equivalent energy that will be reduced under the TSC by virtue of such transfer, at least ten (10) days prior to the billing date of NPC Successor Generating Company. The instant provision shall apply only during the unexpired term of the assigned and transferred TSC to a particular NPC Successor Generation Company.

ARTICLE VIII

Reportorial Requirements

SECTION 1. Once the PSOP commences, Eligible DUs shall submit the following information to the ERC:

a. Names of Eligible Customers within its franchise area;

b. Names of Eligible Customers that have opted to participate in Power Supply Option Program;

c. Names of Eligible Supplier serving each participating Eligible Customer; and

d. Names of Eligible Customers under default supply, and the date its default supply commenced.

Eligible DUs shall submit an updated list of Eligible Customers to the ERC on a monthly basis. Eligible DUs that have been continuously complying with the reportorial requirements under Section 1, Article II of the Rules on Customer Switching are deemed to have complied with this provision but shall be required to make submissions on a continuing basis.

SECTION 2. Each Eligible Supplier shall file a quarterly report to the ERC containing the following information:

a. Average prices. Each Eligible Customer's average retail sale price broken down by transmission and distribution service territories; for each category, the average retail sale price is the total revenue divided by the total kilowatt-hour sales;

b. Revenues. Total revenues from kilowatt-hour sales to Eligible Customers;

c. Customers. Name of Eligible Customers served, and amount of deposits collected from each;

d. Bank certification. Certification from reputable bank, stating the amount deposited in escrow; and

e. Other information. Other information that the ERC deems necessary or useful in carrying out its duties and obligations.

SECTION 3. All Eligible Suppliers and NPC/PSALM, NPC-IPPS, NPC-Successor Generating Companies shall submit a quarterly report to the ERC containing monthly sales to their respective TSC customers (in kW, kWh and peso sales), and the Eligible Suppliers with which they have executed supply contracts.

ARTICLE IX

Effectivity of Power Supply Option Program

The PSOP shall commence ninety (90) days after completion of either of the following conditions, whichever comes earlier:

a. The transfer of the operation of the Calaca NPC Generation Assets to the private generation companies concerned or its equivalent in terms of capacity; or

b. The privatization of at least 70% of the total capacity of generating assets of NPC in Luzon and Visayas.

The PSOP shall be implemented only in Luzon and shall end upon Open Access Date.

All contracts entered into by entities participating in the Power Supply Option Program shall be deemed terminated upon Open Access Date. Electric power industry participants shall then enter into new contracts under the Open Access regime, in accordance with the rules and policies for Open Access and Retail Competition.

ARTICLE X

Amendments

The ERC shall amend and/or expand the coverage of these Rules from time to time where this may be necessary to meet the needs of the electric power industry participants and End-users. Before making any significant revisions of these Rules, the ERC will undertake public consultation as appropriate.

ARTICLE XI

Sanctions

The ERC shall impose the appropriate fines and penalties for any violation or non-compliance with these Rules, pursuant to the "Guidelines to Govern the Imposition of Administrative Sanctions in the Form of Fines and Penalties Pursuant to Section 46 of R.A. 9136".

ARTICLE XII

Separability

If for any reason, any provision of these Rules is declared unconstitutional or invalid by final judgment of a competent court, the other parts or provisions hereof which were not affected thereby shall continue to be in full force and effect.

ARTICLE XIII

Effectivity

These Rules shall take effect immediately following its publication in a newspaper of general circulation in the country.

Pasig City, January 25, 2010.

(SGD.) ZENAIDA G. CRUZ-DUCUTChairperson

(SGD.) RAUF A. TANCommissioner

(SGD.) ALEJANDRO Z. BARINCommissioner

(SGD.) MARIA TERESA A.R. CASTAÑEDACommissioner

(SGD.) JOSE C. REYESCommissioner