2nd DRAFf as of 13November 2015

Republic of the PhilippinesENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City

REVISED RULES FOR CONTESTABILITY

Pursuant to Section 43 of Republic Act No. 9136, its Implementing Rulesand Regulations (IRR), the Energy Regulatory Commission (ERC)hereby promulgates the following Amendments to the Rules forContestability.

ARTICLE IGENERAL PROVISIONS

Section 1. Objectives

a) To clarify and establish the conditions and eligibilityrequirements for End-users to be part of the ContestableMarket;

b) To lower the threshold level of the Contestable Market.

Section 2. Scope

These Rules shall apply to:

1. Contestable Market;2. Retail Electricity Suppliers (RES);3. Distribution Utilities (DDs); for purposes of these Rules, DDs

include entities authorized to supply electricity within theirrespective economic zones;

4. Supplier of Last Resort (SOLR); and5. All other relevant industry participants.

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Section 2. Definition of Terms

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

Act

Captive Market

Central RegistrationBody (CRB)

Contestable Market

Contiguous Area

Contestable Customer

Directly-Connected

RepublicAct No. 9136, otherwise known as"Electric Power Industry Reform Act of2001"

The electricity End-users who do not havethe choice of a supplier of electricity, asmay be determined by the ERC inaccordancewith the Act.

An independent entity assigned toundertake the required processes,information technology, and other systemscapable of handling customer switchingand information exchange among retailelectricitymarket participants.

The electricityEnd-users who have a choiceof a supplier of electricity, as may bedetermined by the ERC in accordance withthe Act.

Areas which are located within certainboundaries such as, subdivisions, villages,economic zones, business districts, andother similar situated End-users in whichthe supply of electricity can be measuredthrough metering devices.

An electricity Elld-user that belongs to theContestable Market. An aggregate ofContestable Customers organized under thesecond phase of retail competition andopen access shall be considered as a singleContestable Customer, unless otherwiseprovided by the ERC.

Industrial or bulk electricity end-users,

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Customers (DCC)

Distribution Utility(DU)

End-user

Energy RegulatoryCommission (ERC)

Last Resort SupplyEvent

Market Operator (MO)

Open Access

which are directly supplied with electricityby a Generation Company or Power SectorAssets and Management Corporation(PSALM) or National Power Corporation(NPC) pursuant to Republic Act No. 6395,as amended by Presidential Decree No.395. (Resolution 16, Series of 2012,Transitory Rules for the Implementation ofRCOA)

Any electric cooperative, privatecorporation, government-owned utility orexisting local government unit which hasan exclusive franchise to operate adistribution system in accordance with itsfranchise and the Act.

Any person or entity requiring the supplyand delivery of electricity for its own use.

The independent and quasi-judicialregulatory agency created under Section 38oftheAct.

An event where a Contestable Customerceases to receive service from its RES or anevent where a Contestable Customer fails tochoose an RES as stated in Sections 1 and2, Article II of the Rules for the Supplier ofLast Resort.

The entity responsible for the operation ofthe Wholesale Electricity Spot Market.

The system of allowing any qualified personthe use of transmission, and/or distributionsystem and associated facilities subject tothe payment of transmission and/ordistribution retail wheeling rates dulyapproved by the ERC.

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Retail Aggregator

Retail Aggregation

Retail Competition

Retail ElectricitySupplier (RES)

Retail Supply Contract(RSC)

Rules forContestability.

Rules for the Supplierof Last Resort (SOLRRules)

Single Premise

A person or entity duly licensed by the ERCto engage in consolidating the electricpower demand of End-users qualified forcontestability for the purpose of purchasingand reselling electricity on a group basis.

The joining of two or more End-userswithin a contiguous area into a singlepurchasing unit, wherein such purchasingunit shall be part of the ContestableMarket, as provided in Section 31 of theAct.

The provision of electricity to End-users inthe Contestable Market by Retail ElectricitySuppliers through Open Access.

Any person or entity authorized by the ERCto sell, broker, market or aggregateelectricity to End-users in the ContestableMarket.

The contract entered into by and betweenthe Contestable Customer and the RetailElectricity Supplier.

The set of rules promulgated by the ERCthat prescribes the conditions and criteriafor an End-user to qualify as a ContestableCustomer.

The set of rules promulgated by the ERCthat provides the policies and proceduresfor the provision of supply to ContestableCustomers in the case of a Last ResortSupply Event.

Any of the following shall comprise a SinglePremise if owned or occupied by an End-user, under one business name registeredwith the utility and used by such End-user

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for the same business enterprise (notintended for re-selling):

a) the whole of any single building orstructure;

b) a part of any singlebuilding or structure;c) two or more adjoining parts of any single

building or structure;d) the whole of two or more buildings or

structures occupying the same lot ofland.

Supplier of LastResort

Threshold ReductionDate

A regulated entity designated by the ERCtoserve End-users in the Contestable Marketfollowinga Last Resort Supply Event.

The date declared by the ERCto indicate thereduction of the threshold level for End-users to qualifyfor contestability.

For purposes of these Rules, 26 June 2016shall be considered the Threshold ReductionDate.

ARTICLE IIDETERMINATION OF CONTESTABILITY

Section 1.Mandatory Migration to Contestability Status

1.1 All End-users with a monthly average peak demand of at least onemegawatt (1MW), which have been issued Certificates ofContestability by the ERCare hereby mandated to enter into retailsupply contracts with suppliers of electricity. Such mandatoryrequirement shall likewise apply to all End-users with a monthlyaverage peak demand of at least seven hundred fifty kilowatts(750kW).

1.2 Compliance with mandatory contestability requires that theconcerned Contestable Customers must have transferred andswitched to their respective suppliers of electricity by 26 June2016, the next Threshold Reduction Date..

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1.3 The lowering of the threshold to cover Contestable Customers witha monthly average peak demand of at least five hundred kilowatts(sookW) shall be effective on 26 June 2018, subject to a review ofthe performance of the retail market by the ERC;

1.4 Aggregation of demand shall subsequently be allowed one yearthereafter, or on 26 June 2019. During this phase, suppliers ofelectricity shall be allowed to contract with End-users whoseaggregate demand within a Contiguous Area is at least soo kW;and

loS Contestability for End-users with an average peak demand oraggregate thereof of below sookW, shall be determined based onthe continuing evaluation and assessment of the retail market bytheERC.

Section 2. Eligibility Requirements of End-users to bepart of the ContestableMarket

2.1 Effective 26 June 2016, an End-user that is certified by ERC to bepart of the Contestable Market should have already switched to anRES for its own supply of electricity. Thus, the ContestableCustomer must have entered into a retail supply contract at least60 days prior to 26 June 2016.

2.2 An End-user whose demand requirements vary monthly andachieves the threshold level only a number of months within ayear, but whose monthly average peak demand for twelve (12)months attains the required threshold level shall be qualified to bepart of the Contestable Market.

2.3 The monthly average peak demand for a certain period is computedas the sum of the monthly registered peak demand divided by thenumber of months for the relevant period. Sources of registeredpeak demand include the measurements registered at the utilitymeters of the relevant DU or the National Grid Corporation of thePhilippines (NGCP) (for End-users directly connected totransmission facilities) or reports provided by those with self-generating facilities.

2.4 The eligibility of End-users to be part of the Contestable Marketshall be determined as follows: .

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a. An existing End-user that has increased its demand andregistered a historical monthly average peak demand of at leastseven hundred fifty kilowatts (750kW) for the preceding twelve(12) months shall be eligible to be part of the ContestableMarket;

b. A newly-connected End-user whose forecasted monthly peakdemand is three (3) MW and above shall qualify as aContestable Customer, Provided that it has furnished the ERCproof of its projected demand duly certified by the DU, subjectto the ERC's confirmation of the validity of the projecteddemand;

c. A newly-connected End-user whose forecasted monthly averagepeak demand is at least seven hundred fifty kilowatts (750 kW),but below three (3) MW, is required to have a registeredhistorical monthly peak demand of at least seven hundred fiftykilowatts (750 kW) for three (3) consecutive months before itbecomes eligiblefor contestability.An End-user that has been inoperation for less than twelve (12) months upon the nextThreshold Reduction Date shall be considered a newlyconnected End-user.

2.5 The eligibilityof an End-user shall be based on its monthly averagepeak demand as indicated by a single utility meter. An End-usermaintaining multiple utility meters in a Single Premise has theoption to consolidate its demand by requesting the DU to install asingle main utility meter, which may result in modifications in itsconnection agreement and Distribution Wheeling ServiceAgreement with the DU. In this case, the basis for contestability isthe consolidated forecasted demand, which shall be based on thehistorical coincident peak demand of all meters, except that anEnd-user whose coincident peak demand totaling at least sevenhundred fiftykilowatts (750 kW) is not measurable by all its meterswillbe treated as newlyconnected End-user.

2.6 An End-user whose actual demand attains the threshold level butpartially sources its requirements from a DUwhere its demand asregistered in the utility meter does not reach the threshold level,shall inform the ERC and show proof of its eligibility as aContestable Customer, subject to ERCapproval and certification.

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2.7 An End-user which has entered into a retail supply contract with anRES within the period specified herein is deemed to have migratedfrom the regulated service of a DU to the competitive retail market.Such Contestable Customer shall no longer be allowed to revertback to the captiv~ market. However, in instances where theContestable Customer's average peak demand has decreased to lessthan 25% of the threshold for the preceding six (6) month period,and the same is not attributable to seasonal demand, it may send awritten request to the ERC, with a confirmation from the RES orSOLR that the demand level of such Contestable Customer hasdecreased by such amount. Such Contestable Customer may bereverted to the Captive Market, subject to ERC approval. Upon suchapproval, the Contestable Customer shall settle its obligations withits RES as stated in the Retail Supply Contract (RSC) before it isreverted to the Captive Market. Subsequently, the concerned RES ofthe said qualified End-user shall inform the Central RegistrationBody (CRB) and the ERC that its customer shall revert to theCaptive Market.

Section 3.Procedures in Informing Eligibility of End-user inthe Contestable Market

3.1 A DU shall regularly submit to the ERC and CRBon a monthly basisaccurate information on Contestable Customers that have accountswith the DUwhich have satisfied the threshold levels, as provided inthese Rules.

3.2 The ERC shall regularly monitor the DU's regular submission of thelist of qualified Contestable Customers that have accounts with theDU. The DU shall be held responsible for the information submittedto the ERC. Failure to disclose the status of an End-user, found tobe otherwise qualified for contestability, shall subject the DU to theimposition of fines and penalties set by the ERC.

3.3 NGCP shall be responsible for End-users directly connected to itstransmission facilities relative to informing them of their eligibilityand providing ERC with relevant information covering such End-users.

3-4 The ERC shall issue certifications for the Contestable Customers inthe first and second phase of retail competition, based on the datasubmitted by the DUs and the NGCP, prior to Threshold Reduction

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Date covering the respective phases. The certificate shall serve asauthority that such End-users are eligible. The certification to beissued by the ERC may be universal, referring to the End-usersincluded in the list with certain exceptions, or specific to anindividual End-user.

3.5 The ERC shall issue certifications within seven (7) Business Daysafter receipt of information of the list of qualified End-users.

3.6 After the issuance by the ERC of a certification under Section 3-4 ,End-users that become eligible under Section 2.6, Article II shallrequest a certification directly from ERC.

3.7 The DU shall have the obligation to notify the End-user, in writing, ofits eligibility within fifteen (15) days from receipt of the Certificate ofContestability from the ERC.

3.8 To ensure that the notice is duly received or presumed to be receivedby the Contestable Customer, the concerned DU shall send a writtennotice to the qualified Contestable Customer via registered mail.The return card provided after the registered mail has been receivedby the Contestable Customer shall serve as proof that the latter hasbeen properly notified. .

Other acceptable means of notification may be made, provided thata record of the appropriate proof of receipt and notification can beprovided by the DU. This includes personal delivery, electronic mailor fax.

3.9 Any End-user qualified as a Contestable Customer shall enter into aRetail Supply Contract with an RES within one billing period afterbeing informed of its eligibility.

3.10 End-users connected to the DU system with utility meters thatcapture the End-user's entire consumption eligible to become part ofthe Contestable Market, but have not been included in the DU's listof qualified Contestable Customers, or have not been informed bythe DU within its franchise area in writing, shall not be subject to theSOLR Rate. Instead, it shall be charged the existing DU retail rateuntil such time that the Contestable Customer is properly informedand certified and is switched to an RES. The non-complying DUshall submit a written explanation to the ERC on its failure toinclude the Contestable Customer in its list, or its failure to inform

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the concerned Contestable Customer. Failure to disclose suchinformation shall subject the erring entity to appropriate fines andpenalties set by the ERC.

ARTICLE IIIGENERAL FRAMEWORK

1.1 A Contestable Customer which finds itself without an RSC at leastthirty (30) days prior to the Threshold Reduction Date declared bythe ERC should immediately inform the DU and the ERC of suchfact.

1.2 Government entities qualified as Contestable Customers shallcontinue to be supplied by the DUs or their current retail suppliersuntil such time that the Government Policy Procurement Board(GPPB) shall have issued the necessary guidelines for theirprocurement of supply of electricity.

1.3 The DU designated by the ERC as an SOLR shall provide the lastresort supply service for the Contestable Customer upon occurrenceof a last resort supply event, pursuant to the Rules for the SOLR.

1.4 For Directly Connected Customers (DCC) qualified as ContestableCustomers, but which are indirect members of the WESM, their lastresort provider shall be the franchised DU designated as an SOLRwhere the DCC is located. DCCs which are direct WESM membersmay opt to transfer to the SOLR or secure their power requirementfrom the WESM in accordance with the WESM Rules uponoccurrence of a last resort supply event.

ARTICLE IVAMENDMENTS

The ERC shall amend and/or expand the coverage of these Rules fromtime to time as may be necessary to meet the needs of the Electric PowerIndustry Participants and End-users. Before making any significantrevisions of these Rules, the ERC will undertake public consultation asappropriate.

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ARTICLE VREPEALING CLAUSE

To avoid inconsistency with these Revised Rules for Contestability,Resolution No. 11 Series of 2013 entitled "A Resolution Adopting theSupplemental Rules to the Transitory Rules for the InitialImplementation of Open Access and Retail Competition" is herebyrepealed accordingly.

All rules and guidelines or portions thereof, issued by the ERC, thatare inconsistent with these Revised Rules for Contestability, are herebyrepealed or modified accordingly.

ARTICLE VISANCTIONS

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

ARTICLE VIISEPARABILITY

If for any reason, any provision of these Rules is declaredunconstitutional or invalid by final judgment of a competent court, theoilier parts or provisions hereof which are not affected thereby shallcontinue to be in full force and effect.

ARTICLE IXEFFECTIVITY

These Rules shall take effect on ilie fifteenth C15th) day following itspublication in a newspaper of general circulation in the country.

Pasig City,._ November 2015.

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JOSE VICENTE B. SALAZARChairman

ALFREDO J. NONCommissioner

JOSEFINA PATRICIA A.MAGPALE-ASIRIT

Commissioner

laID / jsj/lnj/DTL/FSCJ

GLORIA VICTORIAC. YAP-TARUCCommissioner

GERONIMO D. STA. ANACommissioner

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