Department
Circular No. 2003-12-011
ENJOINING
ALL DISTRIBUTION UTILITIES TO SUPPLY ADEQUATE, AFFORDABLE, QUALITY AND RELIABLE
ELECTRICITY
WHEREAS, Section 2 of
Republic
Act No. 9136, also known as the “Electric Power Industry
Reform Act of 2001” or “EPIRA”, declared as a policy
of the state, among others, “[t]o ensure the quality, reliability, security and
affordability of the supply of electric power;”
WHEREAS, pursuant to Section 17 of
EPIRA, the
Department of
Energy has the mandate, among others:
a. “[t]o
ensure the reliability, quality, and security of supply of electric power”
(Sec. 37 (d));
b. “[t]o
encourage private sector investments in the electricity sector and promote
development of indigenous and renewable energy sources” (Sec. 37 (e)(i));
c. [i]n
consultation with other government agencies, to promote a system of incentives
to encourage industry participants, including new generating companies and
end-users to provide adequate and reliable electric Supply” (Sec. 37 (e)(iii));
d. “[t]o
develop policies and procedures and, as appropriate- promote a system or energy
development incentives to enable and encourage electric power industry
participants to provide adequate capacity to meet demand including, among
others, reserve requirements” (Sec. 37 (i)); and
e. “[t]o
monitor private sector activities relative to energy projects in order to
attain goals of the restructuring, privatization, and modernization of the
electric power sector as provided for under existing laws. Provided, That the
Department of Energy shall endeavor to
provide for an environment conducive to free and active private sector
participation and investment in all energy activities” (Sec. 37 (j));
WHEREAS, pursuant to Section 6 of
EPIRA, the “generation of electric power, a business
affected with public interest, shall be competitive and open”;
WHEREAS, pursuant to Section 47 (j) of
EPIRA, the
National
Power Corporation (NPC) “may generate and sell electricity only from the
undisposed generating assets and IPP [Independent Power Producer] contracts of
PSALM Corp.
and shall not incur any new obligations to purchase power through bilateral
contracts with generation companies or other suppliers”
WHEREAS, pursuant to Section 23 of EPIRA, all distribution utilities, as defined in the law, “shall have the obligation to supply electricity in the least cost manner to its captive market subject to the collection of retail rate duty approved by the Energy Regulatory Commission (ERC)”;
WHEREAS, pursuant to Sections 4 (nn) and 37
(c) of
EPIRA, the
Department
of Energy has formulated prepared and updated the ten-year Power
Development Program (PDP) in coordination with generation, transmission and
distribution utility companies, which indicated a critical reserve requirement
in various regions of the country in the upcoming five years of the planning
horizon;
WHEREAS, the
Department
of Energy through various communication programs has encouraged and
campaigned for the entry and removal of barriers to entry of private sector
participation in the generation of electricity in line with the PDP;
NOW,
THEREFORE, the
Department of Energy is issuing this Circular
to all distribution utilities:
SECTION
1. Reiteration of State Policy. –
All distribution utilities must henceforth take cognizance and assume full
responsibility to forecast, assure and contract for the supply of electric
power in their respective franchise areas to meet their obligations as a
distribution utility.
SEC.
2. Compliance. – While
the
NPC and the
National Transmission Corporation or
TRANSCO are pursuing government projects to
improve the supply and delivery of electric power in the national grid, all
distribution utilities must submit to the
Department
no later than 15th of March every year the annual 5-year Distribution
Development Plan pursuant to Section 4 (p), Rule 7 of the Implementing Rules
and Regulations of
EPIRA. The Distribution Development Plan shall
include, among others all abstract of the terms and conditions of power supply
contracts with
NPC’s existing and
available supply, and, where NPC’s supply is not available and sufficient, the
power supply contracts with private power producers to augment the power supply
in their franchise areas and to assure that power interruptions are
minimized. The proscription prescribed
under Section 45 of
EPIRA on “Cross Ownership, Market
Power Abuse and Anti-Competitive Behavior” shall be strictly followed by all distribution
utilities. The
Department shall issue within (30) days from
effectivity of this Circular separate guidelines for the preparation of the
Distribution Development Plan.
SEC.
3. Assistance to Electric Cooperatives
(ECs). – To assist the ECs in their power
supply contract negotiations, the
National
Electrification Administration (NEA) shall provide training programs to ECs
and other necessary activities necessary to provide reliable and quality
service to all the consumers. Towards
this end,
NEA shall submit to the
Department within thirty (30) days from the
effectivity of this Circular the action plan to assist the ECs, to include, but
not limited to, financial management services, funding arrangements and other
structures that will support the ECs ability to enter into power supply
contracts. Thereafter the Department
shall issue the appropriate implementing guidelines for this purpose.
SEC.
4. Enforcement. – Towards achieving the objectives of
EPIRA and this Circular, any distribution utility which
fails to comply shall be immediately recommended by the Department for
appropriate sanction, fines and/or penalties, including modification and
revocation of certificates of public convenience and/or necessity, license or
permits of franchised distribution utilities, to the ERC, pursuant to Sections
45 (p) and 46 of
EPIRA.
SEC.
5. Effectivity. – This
Circular shall take effect immediately a day after its posting in the
Department’s website and complete publication
in a newspaper of general circulation.
VICENTE
S. PEREZ
Secretary
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