Article 89p. 89

NATURAL RESOURCES AND ENVIRONMENTAL LAWS STATUTES and IMPLEMENTING RULES AND REGULATIONS

administrative supervision of the TRANSCO. The market

operator shall undertake the preparatory work and initial

operation of the wholesale electricity spot market. Not

later than one (1) year after the implementation of the

wholesale electricity spot market, an independent entity

shall be formed and the functions, assets and liabilities

of the market operator shall be transferred to such entity

with the joint endorsement of the DOE and the electric

power

industry

participants.

Thereafter,

the

administrative supervision of the TRANSCO over such

entity shall cease.

Subject to the compliance with the membership criteria,

all generating companies, distribution utilities, suppliers,

bulk consumers/end-users and other similar entities

authorized by the ERC shall be eligible to become

members of the wholesale electricity spot market.

The ERC may authorize other similar entities to become

eligible as members of the wholesale electricity spot

market

either

directly

or

indirectly.

All

generating

companies,

distribution

utilities,

suppliers,

bulk

consumers/end-users

and

other

similar

entities

authorized

by

the

ERC,

whether

direct

or

indirect

members of the wholesale electricity spot market, shall

be bound by the wholesale electricity spot market rules

with respect to transactions in that market. NEA may, in

exchange for adequate security and a guarantee fee, act

as

a

guarantor

for

purchases

of

electricity

in

the

wholesale

electricity

spot

market

by

any

electric

cooperative or small distribution utility to support their

credit standing consistent with the provisions hereof. For

this purpose, the authorized capital stock of NEA is

hereby

increased

to

Ten

billion

pesos

(P10,000,000,000.00).

All

electric

cooperatives

which

have

outstanding

uncollected billings to any local government unit shall

report such billings to NEA which shall, in turn, report

the

same

to

the

Department

of

Budget

and

Management (DBM) for collection pursuant to Executive

Order 190 issued on December 21, 1999.

The cost of administering and operating the wholesale

electricity spot market shall be recovered by the market

operator

through

a

charge

applied

to

all

market

members: Provided, That such charge shall be filed with

and approved by the ERC.

In

cases

of

national

and

international

security

emergencies or natural calamities, the ERC is hereby

empowered to suspend the operation of the wholesale

electricity spot market or declare a temporary wholesale

electricity spot market failure.

Section 31. Retail Competition and Open Access. - Retail

competition and open access on distribution wires shall

be implemented not later than three (3) years upon the

effectivity of this Act subject to compliance with the

following conditions precedent:

(a)

Establishment

of

the

wholesale

electricity

spot

market;

(b) Approval of unbundled transmission and distribution

retail wheeling charges;

(c) Initial implementation of the cross subsidy removal

scheme; and

(d) Privatization of at least 70% of the total capacity of

generating assets of NPC and of the total capacity of the

power plants under contract with NPC in Luzon and

Visayas. Upon the initial implementation of open access,

the ERC shall allow all electricity end-users located in

Luzon

with

a

maximum

demand

of

at

least

two

megawatts (2MW) to be the contestable market. For the

Visayas and Mindanao areas, the initial threshold level

shall

be

one

and

a

quarter

megawatts

(1.25MW).

However, the ERC shall, on January 1, 2004, reduce the

maximum demand for the contestable market in Luzon

to one megawatt (1MW) for at least two (2) years and

Seven hundred fifty kilowatts (750kW) for the Visayas

and Mindanao areas. Thereafter, the ERC shall determine

a threshold level when open access shall apply to all

distribution utilities.

In the case of electric cooperatives, retail competition

and open access shall be implemented not earlier than

five (5) years upon the effectivity of this Act.

Section

32.

NPC

Stranded Debt and Contract Cost

Recovery. - Stranded debt of NPC shall refer to any

unpaid financial obligations of NPC which have not been

liquidated by the proceeds from sales and privatization

of NPC assets.

Stranded contract costs of NPC shall refer to the excess

of the contracted cost of electricity under eligible IPP

contracts of NPC over the actual selling price of such

contracts in the market. Such contracts shall have been

accredited by the DOE or NPC and approved by the ERB

as of the effectivity of this Act.

The national government shall, in exchange for the

equivalent amount of the equity of NPC, directly assume

a portion of the financial obligations of NPC in an

amount

not

to

exceed

Two

Hundred Billion Pesos

(P200,000,000,000.00).

For

this

purpose,

the capital

stock of NPC shall be increased to Three hundred billion

pesos

(P300,000,000,000.00)

common

shares

which

shall be divided into Three billion (3,000,000,000.00)

shares with a par value of One hundred pesos (P100.00)

per share.

The

ERC

shall

verify

the

reasonable

amounts

and

determine the manner and duration for the full recovery

of stranded debt and stranded contract costs as defined

herein: Provided, That the duration for such recovery

shall not be shorter than fifteen (15) years nor longer

than twenty-five (25) years. The ERC shall, at the end of

the first year of the implementation of stranded cost

recovery and every year thereafter, conduct a review to

determine

whether

there

is

under-recovery

or

over-recovery and adjust (true-up) the level of stranded

cost recovery charge accordingly.

The NPC and PSALM shall have the duty to mitigate all

potential stranded contract costs of NPC.

Section 33. Distribution Utilities Stranded Contract Costs

Recovery.

-

Stranded

contract

costs

of

distribution

utilities shall refer to the excess of the contracted cost of

electricity under eligible contracts of such utilities over

the actual selling price of such contracts in the market.

Such contracts shall have been accredited by the DOE or

NPC and approved by the ERB as of the effectivity of this

Act.

Within one (1) year from the start of open access, any

distribution

utility

that intends to seek recovery of

stranded contract costs shall file notice of such intent

with

the

ERC

together

with

an

estimate

of

such

obligations, including the present value thereof and

such other supporting data as may be required by the

ERC. Any distribution utility that does not file within the

date specified shall not be eligible for such recovery.

Any distribution utility which opts to recover stranded

cost shall have a duty to mitigate its potential stranded

contract costs by making reasonable best efforts to:

(a) reduce the costs of its existing contracts with IPPs;

and

© 2018 Compiled by RGL

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