Power Wheeling and Open Access in the Philippines: A Guide for Industrial Customers

Open access in the Philippines is the system that allows any qualified person to use the transmission and/or distribution system and its associated facilities, subject to payment of transmission and/or distribution retail wheeling rates duly approved by the Energy Regulatory Commission (ERC). This definition comes from Section 4(ll) of Republic Act No. 9136, the Electric Power Industry Reform Act of 2001, commonly called EPIRA. Power wheeling, in practice, is the use of those wires to move electricity from a chosen supplier to a customer's premises. The ERC determines who may participate, and only end-users with a choice of supplier — the contestable market — can do so.

What open access means under EPIRA

EPIRA divides the electric power industry into four sectors: generation, transmission, distribution, and supply (Section 5). Open access sits at the intersection of all four. It lets a qualified user buy electricity from a supplier and have it delivered over wires owned by someone else.

Section 4(ll) of EPIRA defines open access as 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. The definition is deliberately broad: it covers both transmission and distribution facilities, and it ties the arrangement to ERC-approved rates.

The policy behind the reform is stated in Section 2: transparent and reasonable prices in a regime of free and fair competition, greater operational and economic efficiency, and enhanced competitiveness of Philippine products in the global market. For industrial customers, that last point is the commercial heart of open access.

Who is a contestable customer

EPIRA distinguishes two classes of end-users.

A captive market refers to electricity end-users who do not have the choice of a supplier of electricity, as may be determined by the ERC (Section 4(c)). A contestable market refers to the electricity end-users who have a choice of a supplier of electricity, as may be determined by the ERC (Section 4(h)).

The statute does not fix the threshold itself. It leaves the determination to the ERC, which issues the rules identifying which customers may switch. Industrial users with substantial loads are the typical contestable customers, but the specific qualification is a regulatory question, not a statutory one.

The roles of TRANSCO, distribution utilities, and suppliers

Open access depends on three separate obligations.

Transmission. Section 9 requires TRANSCO to provide open and non-discriminatory access to its transmission system to all electricity users. Section 7 classifies transmission as a regulated common electricity carrier business subject to the ERC's ratemaking powers. Transmission charges are filed with and approved by the ERC under Section 19.

Distribution. Section 23 requires any entity engaged in distribution to provide open and non-discriminatory access to its distribution system to all users. The same section entitles a distribution utility to impose and collect distribution wheeling charges and connection fees from end-users as approved by the ERC. Section 24 requires those distribution wheeling charges to be filed with and approved by the ERC.

Supply. Section 29 provides that the supply sector is a business affected with public interest, and that all suppliers of electricity to the contestable market must obtain a license from the ERC, except distribution utilities and electric cooperatives with respect to their existing franchise areas. The ERC prescribes the qualifications of suppliers, which include technical capability, financial capability, and creditworthiness, and it may require a bond or other evidence of the ability to withstand market disturbances.

A supplier is defined in Section 4(xx) as any person or entity authorized by the ERC to sell, broker, market, or aggregate electricity to end-users. An aggregator, under Section 4(a), consolidates the electric power demand of end-users in the contestable market for the purpose of purchasing and reselling electricity on a group basis — a structure that lets smaller industrial loads combine buying power.

How the pieces fit together for an industrial customer

For a large industrial customer, the practical path runs through four steps. First, confirm with the ERC's rules whether the customer qualifies as contestable. Second, engage a licensed supplier, or an aggregator, for the electricity itself. Third, arrange transmission or distribution wheeling with the wire owner, at rates approved by the ERC. Fourth, ensure the retail rate billed reflects the segregated components EPIRA contemplates.

Section 4(ss) defines the retail rate as the total price paid by end-users consisting of the charges for generation, transmission and related ancillary services, distribution, supply, and other related charges for electric service. Section 25 requires every distribution utility to identify and segregate in its bills to end-users the components of the retail rate. That segregation is what allows a contestable customer to see exactly what it pays for each service.

Two charges are worth separating. The distribution wheeling charge is the ERC-regulated charge for the use of a distribution system and/or the availment of related services (Section 4(p)). The supplier's charge is the charge imposed by electricity suppliers for the sale of electricity to end-users, excluding charges for generation, transmission, and distribution wheeling (Section 4(yy)).

Does open access make generation prices unregulated?

Largely, yes. Section 6 provides that upon implementation of retail competition and open access, the prices charged by a generation company for the supply of electricity shall not be subject to regulation by the ERC except as otherwise provided in EPIRA. Wires remain regulated; the generation commodity is meant to be disciplined by competition.

The same section keeps a safeguard: the ERC may require generation companies to submit their financial statements when determining the existence of market power abuse or anti-competitive behavior. Sales of generated power by generation companies are also value added tax zero-rated, pursuant to the objective of lowering electricity rates to end-users.

Frequently asked questions

What is power wheeling in the Philippines? It is the use of transmission and/or distribution facilities to deliver electricity from a supplier to an end-user, with the wire owner paid a wheeling rate approved by the ERC. The legal basis is the open access definition in Section 4(ll) of EPIRA.

Who can avail of open access? End-users in the contestable market — those who have a choice of supplier — as determined by the ERC under Section 4(h) of EPIRA. Captive market end-users, who have no such choice, remain with their distribution utility.

Do I still pay my distribution utility under open access? Yes, for the services it still provides. Section 23 allows a distribution utility to collect ERC-approved distribution wheeling charges and connection fees, and Section 25 requires the retail rate to be segregated into its components.

Practical takeaways

• Open access is defined in Section 4(ll) of EPIRA as the use of transmission and/or distribution systems by any qualified person, subject to ERC-approved wheeling rates.
• Only contestable customers — those with a choice of supplier, as determined by the ERC — can participate; captive customers cannot.
• Transmission and distribution are regulated common carrier businesses required to give open and non-discriminatory access under Sections 7, 9, and 23.
• Suppliers to the contestable market need an ERC license under Section 29, and aggregators may consolidate demand under Section 4(a).
• Generation prices are generally unregulated once retail competition and open access are implemented, subject to the ERC's market power safeguards under Section 6.

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

• REPUBLIC ACT NO. 7832 - AN ACT PENALIZING THE PILFERAGE OF ELECTRICITY AND THEFT OF ELECTRIC POWER TRANSMISSION LINES/MATERIALS, RATIONALIZING SYSTEM LOSSES BY PHASING OUT PILFERAGE LOSSES AS A COMPONENT THEREOF, 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.