Power Wheeling and Open Access for Data Centers in the Philippines

Data centers in the Philippines can use power wheeling to buy electricity from a supplier of their choice while still using the wires of the transmission and distribution networks. Under Republic Act No. 9136, the Electric Power Industry Reform Act of 2001 (EPIRA), Open Access refers to the system of allowing any qualified person the use of transmission and/or distribution systems and associated facilities, subject to payment of transmission and/or distribution retail wheeling rates duly approved by the Energy Regulatory Commission (ERC). In practice, this means a data center does not have to buy all its power from the distribution utility whose franchise area it sits in — it can contract with a supplier and pay wheeling charges for the delivery.

What power wheeling means for a data center

Power wheeling is the use of another party's wires to move electricity from a generator or supplier to an end-user. EPIRA divides the electric power industry into four sectors: generation, transmission, distribution and supply. Each plays a distinct role in delivering electricity to a facility such as a data center.

For a data center, the practical effect is a choice of supplier. Instead of being limited to the local distribution utility's retail rate, the data center can enter the contestable market — defined in EPIRA as the electricity end-users who have a choice of a supplier of electricity, as may be determined by the ERC. End-users who do not have that choice are considered the captive market.

The delivery itself is still physical. Electricity flows through the grid — the high voltage backbone system of interconnected transmission lines, substations and related facilities — and then through the distribution system, which EPIRA defines as the system of wires and associated facilities belonging to a franchised distribution utility extending between the delivery points on the transmission or sub-transmission system or generator connection and the point of connection to the premises of the end-user.

Who provides the wires and what they may charge

The transmission and distribution networks are regulated common carriers. EPIRA provides that the transmission of electric power shall be a regulated common electricity carrier business, subject to the ratemaking powers of the ERC. Distribution of electricity to end-users is likewise a regulated common carrier business requiring a national franchise.

Both must give access on fair terms:

• The transmission system operator is required to provide open and non-discriminatory access to its transmission system to all electricity users.
• A distribution utility must likewise provide open and non-discriminatory access to its distribution system to all users.

For the use of these wires, the ERC approves the charges. Transmission Charge refers to the regulated cost or charges for the use of a transmission system, which may include the availment of ancillary services. Distribution Wheeling Charge refers to the cost or charge regulated by the ERC for the use of a distribution system and/or the availment of related services. The rates themselves are filed with and approved by the ERC.

The supply side: who can sell electricity to a data center

A data center that enters the contestable market buys from a supplier — any person or entity authorized by the ERC to sell, broker, market or aggregate electricity to the end-users. EPIRA also defines an Aggregator as a person or entity engaged in consolidating electric power demand of end-users in the contestable market, for the purpose of purchasing and reselling electricity on a group basis. Aggregation can matter for data centers with large, steady loads.

The supply sector is a business affected with public interest. Except for distribution utilities and electric cooperatives with respect to their existing franchise areas, all suppliers of electricity to the contestable market require a license from the ERC. The ERC prescribes the qualifications of electricity suppliers, including demonstration of technical capability, financial capability and creditworthiness, and may require a bond or other evidence of the supplier's ability to withstand market disturbances.

Why this matters for data center site selection and cost

Data centers are power-intensive, so the electricity supply arrangement is a major cost and risk factor. Open access gives a large load the ability to contract directly for generation supply, while wheeling charges cover the use of the wires.

EPIRA's declared policies support this framework. The State seeks to ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability, and to enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors. It also aims to encourage the efficient use of energy and other modalities of demand side management.

For a data center, the relevant questions are whether the facility qualifies as a contestable market end-user, who the available suppliers are, and what transmission and distribution wheeling charges apply to its location and load profile.

Frequently asked questions

Can a data center in the Philippines choose its own electricity supplier? Yes, if it qualifies as a contestable market end-user. EPIRA defines the contestable market as end-users who have a choice of a supplier of electricity, as may be determined by the ERC. A qualified end-user may use transmission and/or distribution systems under the Open Access system, paying ERC-approved wheeling rates.

What is the difference between transmission and distribution wheeling charges? Transmission Charge is the regulated cost or charge for the use of a transmission system, which may include ancillary services. Distribution Wheeling Charge is the ERC-regulated cost or charge for the use of a distribution system and/or related services. Both are filed with and approved by the ERC.

Does a supplier need ERC approval to sell to a data center? Generally, yes. Except for distribution utilities and electric cooperatives with respect to their existing franchise areas, all suppliers of electricity to the contestable market require a license from the ERC.

Practical takeaways

• Open Access under EPIRA allows any qualified person to use transmission and/or distribution systems and associated facilities, subject to ERC-approved retail wheeling rates.
• A data center needs to qualify as a contestable market end-user to choose its own supplier; otherwise it remains part of the captive market served by the distribution utility.
• Transmission and distribution networks must provide open and non-discriminatory access to all users.
• Suppliers selling to the contestable market generally require an ERC license, and the ERC sets their qualification standards.
• Aggregation can allow end-users to consolidate demand for group purchasing and reselling of electricity.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 9136 - AN ACT ORDAINING REFORMS IN THE ELECTRIC POWER INDUSTRY, AMENDING FOR THE PURPOSE CERTAIN LAWS AND FOR OTHER PURPOSES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.