Republic of the PhilippinesENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City

IN THE MATTER OF THEADOPTION OF THE RULESGOVERNING THEISSUANCE OF LICENSESOR AUTHORIZATION TORETAIL ELECTRICITYSUPPLIERS (RES) ANDPRESCRIBING THEREQUIREMENTS ANDCONDITIONS THEREFORAND THE REVISED RULESFOR CONTESTABILITY

ERC CASENO. 2015-003 RMx -------------------x

NOTICE

Notice is hereby given that the second draft of the "Rules

Governing the Issuance of Licenses to Retail Electricity

Suppliers (RES) and Prescribing the Requirements and

Conditions Therefor" and the "Revised Rules for

Contestability" are posted on the Energy Regulatory Commission

(ERC) websites www.erc.gov.ph and www.buyyourelectricity.com.ph

for comments from the industry stakeholders. All interested partiesmay submit their comments to contestable@erc.gov.ph on or before

04 December 2015. The said Rules may be downloaded from theforegoing ERC Web sites or photocopied, at cost, during regular office

hours at the ERC Main Office.

Pasig City, 13November 2015.

ATTY. NA:~. MARASIGAN~o~Staff

Office of the Chairman and CEO

2ndDRAFT as of 13November 2015

Republic of the PhilippinesENERGY REGULATORY COMMISSION

San Miguel Avenue, Pasig City

-2015 RULES GOVERNING THE ISSUANCE OF LICENSESTO RETAIL ELECTRICITY SUPPLIERS (RES) AND

PRESCRIBING THE REQUIREMENTS AND CONDmONSTHEREFOR

. Pursuant to Sections 29, 31, and 45 of Republic Act No. 9136, hereinafterreferred to as the Act, its Implementing Rules and Regulations (IRR), thePhilippine Distribution Code (PDC), and the Wholesale Electricity SpotMarket (WESM) Rules, the Energy Regulatory Commission (ERC)hereby adopts the following Rules for the Issuance of Licenses to RetailElectricity Suppliers (RES) and Prescribing the Requirements andConditions Therefor, hereinafter referred to as the "2015 RES Rules".

ARTICLE IGENERAL PROVISIONS

. Section 1. Objectives

The following are the objectives ofthese 2015 RES Rules:

a. To promote free, fair, and true competition and accountability,and prevent harmful monopoly and market power abuse ofElectric Power Industry Participants to achieve greateroperational and economic efficiency, thereby rationalizingelectricity prices and making them competitive and transparent;

b. To ensure consumer protection and enhance the competitiveoperation of the retail electricity market; and

c. To prescribe and clarify the qualifications, disqualifications andthe legal obligations of grantees of RES licenses, to ensurecompliance with existing laws and rules.

Section 2. Guiding Principles

a. No Person may engage in the Supply of Electricity to End-users inthe Contestable Market unless such Person has secured an RESLicense from the ERC.

b. The RES License shall stipulate all the obligations of an RESconsistent with the qualifications and criteria required of an RESherein and such other laws, rules and regulations pertinentthereto. An RES License shall be issued upon compliance withthe standards and requirements herein set forth.

c. All RES shall have an equal opportunity to compete for availablesupply including excess contract capacities of DistributionUtilities due to the switching of Contestable Customers.

Section 3. Who may become an RES

In accordance with the Act and its IRR, any of the following may becomean RES;

a. Generation Company or Affiliate thereof;

b. An Affiliate of a DU with respect to the latter's ContestableMarket within or outside its Franchise Area;

c. Retail Aggregators;

d. An Independent Power Producer (IPP) Administrator; and

e. Any other Person intending to engage in the selling, brokering ormarketing of electricity to the Contestable Market, consistentwith the Act and its Implementing Rules and Regulations.

A DU shall no longer be allowed to supply electricity to the contestablemarket, unless such supply is made in its capacity as a Supplier of LastResort (SOLR). The DUs are hereby enjoined to wind down their

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respective supply businesses such that no Local RES shall be allowed by26 June 2016.

Further, no DU affiliate shall be allowed to operate as an RES by 26 June2016, in which case, a winding down of its supply business is likewiseenjoined. An affiliate of a DU shall be granted a license to operate onsuch date determined by the ERC, taking into consideration the supplyand demand in the retail market.

Section 4. Issuance of a License

The ERC shall issue a license to a qualified RES that complies with allapplicable requirements stipulated herein such as, but not limited to,technical and financial qualifications, conditionalities of cross-ownership, market power abuse, anti-competitive behavior and all otherrequirements which are deemed necessary for the properimplementation of these 2015 RES Rules and the competitive retailelectricity market (CREM).

No RES shall be allowed to engage in selling, brokering, marketing oraggregating of electricity to Contestable Customers or to participate inthe WESM without a valid license from the ERC. A license obtained by aqualified RES from the ERC shall be valid within Philippine territorieswhere retail competition and open access exist.

Once an RES license has been granted, such RES shall be given a periodof one (1) year from receipt of such grant to enter into contracts withContestable Customers otherwise, such license shall be deemed revoked.

Section 5. Definition of Terms

Act

Affiliate

Republic Act No. 9136, otherwiseknown as "Electric Power IndustryReform Act of 2001".

Any Person which, alone or togetherwith any other Person, directly orindirectly, through one or moreintermediaries, Controls, is Controlledby, or is under common Control withanother Person. Affiliates shallinclude a subsidiary company and

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Applicant

Code of Conduct forCompetitive RetailMarket Participants

Commercial Bank

Competition Rulesand Complaint

parent company and subsidiaries,directly or indirectly, of a commonparent.

A Person or entity seeking to obtain alicense to become a supplier of retailelectricity to the ContestableCustomer.

The set of rules promulgated by theERC to govern the conduct ofcompetitive retail marketparticipants, their stockholders,directors, officers and employees,within the boundaries of faircompetition.

Corporations which, in addition tothe general powers incident tocorporations, exercise all suchpowers as may be necessary to carryon the business of commercialbanking such as accepting drafts andissuing letters of credit; discountingand negotiating promissory notes,drafts, bills of exchange, and otherevidences of debt; accepting orcreating demand deposits;receiving other types of deposits anddeposit substitutes; buying andselling foreign exchange and gold orsilver bullion; acquiring marketablebonds and other debt securities; andextending credit, subject to suchrules as the Monetary Board maypromulgate. These rules may includethe determination of bonds and otherdebt securities eligiblefor investment,the maturities and aggregate amountof such investment.

The rules promulgated by ERC topromote and ensure competition in

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Procedures

Competitive RetailElectricity Market(CREM)

ContestableCustomer

Contestable Market

Control

Distribution Utility(DU)

Economic Zones(EZs)

the electric power industry pursuantto the Act and its Implementing Rulesand Regulations.

An electricity market whereincontestable customers exercise theirability to choose suppliers ofelectricityby virtue of open access inthe distribution system.

An electricityEnd-user that belongs tothe ContestableMarket.

The electricity End-users who have achoice of a supplier of electricity, asmay be determined by the ERC inaccordancewith the Act.

The power to direct or cause thedirection of the management policiesof a Person by contract, agency, orotherwise.

Any electric cooperative, privatecorporation, government-ownedutility or existing local governmentunit which has an exclusivefranchiseto operate a distribution system inaccordance with its franchise and theAct, including DDs operating in theEconomicZones.

Selected areas which are highlydeveloped or have the potential to bedeveloped into agro-industrial,industrial, tourist, recreational,commercial, banking, investment andfinancial centers, including but notlimited to the following: IndustrialEstates (IEs), Export ProcessingZones (EPZs), Free Trade Zones,Information Technology Parks andTourist/Recreational Centers, the

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End-user

Energy RegulatoryCommission (ERC)

Escrow Agreement

Franchise Area

GenerationCompany (GenCo)

Holdout Agreement/Restricted Account

Independent MarketOperator (IMO)

"Bases Conversion DevelopmentAuthority" or "BCDA", "CagayanEconomicZoneAuthority" or "CEZA","Clark Development Corporation" or"CDC", "Philippine Economic ZoneAuthority" or "PEZA", "PhividecIndustrial Authority" or "PIA", and"Zamboanga City Economic ZoneAuthority" or "ZCEZA.

Any Person or entity reqUIrmg thesupply and delivery of electricity forits ownuse.

The independent and quasi-judicialregulatory agency created underSection 38 of the Act.

An agreement where a fund ordeposit is held in trust by aCommercial Bank, to be turned overto the grantee only upon fulfillment ofa condition.

A geographical area exclusivelyassigned or granted to a DistributionUtilityfor distribution of electricity.

Any Person or entity authorized bythe ERC to operate facilities used inthe generation of electricity.

An agreement where a fund ordeposit in a Commercial Bank is heldsubject to certain bank placed and/orcustomer placed restrictions.

A Person or entity who is financiallyand technically capable, with provenexperience and expertise of not lessthan two (2) years as a leadingindependent market operator ofsimilar or larger size electricity

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IPP Administrator

Market Operator

National PowerCorporation (NPC)

National GridCorporation of thePhilippines (NGCP)

NationalTransmissionCorporation(TransCo)

markets endorsed jointly by theDepartment of Energy (DOE) andElectric Power Industry Participantsto assume the functions, assets andliabilities from the AutonomousGroup Market Operator (AGMO),pursuant to Section30 of the Act.

Qualified independent entitiesappointed by Power Sector Assets &Liabilities Management Corporationwhich shall administer, conserve andmanage the contracted energy outputofNPCIPP contracts.

The "Autonomous Group MarketOperator" or "AGMO"constituted bythe DOEunder Section 30 of the Act,with equitable representation fromElectric Power Industry Participants,initially under the administrativesupervision of the TRANSCO,whichshall undertake the preparatory workand initial operation of the WESMuntil the creation of an IndependentMarket Operator which shall assumethe functions, assets and liabilities oftheAGMO.

The government corporation createdunder Republic Act No. 6395, asamended.

The corporation awarded theconcession to operate thetransmission facilities ofthe NationalTransmission Corporation pursuantto the Act and RepublicActNo. 9511.

The corporation organized pursuantto Section 8 of the Act to acquire allthe transmission assets of the NPC.

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Person

Philippine StockExchange (PSE)

Retail Aggregation

Retail Competition

Retail ElectricitySupplier (RES)

Retail ElectricitySupplier's (RES)License

Retail Rate

Retail SupplyContract (RSC)

Supply of Electricity

A natural or juridical person, as thecasemaybe.

The corporate body duly organizedand existing under Philippine law,licensed to operate as a securitiesexchange by the Securities andExchangeCommission(SEC).

The joining of two or more End-userswithin a contiguous area into a singlepurchasing unit, wherein suchpurchasing unit shall be part of theContestable Market, as provided inSection31of the Act.

The provision of electricity to aContestable Customer by the RESthrough OpenAccess.

Any Person or entity authorized bythe ERC to sell, broker, market oraggregateelectricityto the End-users.

The authority granted by the ERC toany person or entity to act as supplierof electricity to the ContestableMarket.

The total price paid by End-usersconsisting of the charges forgeneration, transmission and relatedancillary services, distribution, supplyand other related charges for electricservice.

The contract entered into by andbetween the RES and the Contestable.Customer.

The sale of electricityby a party otherthan a generator or a distributor in

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Universal Charge

Value-added Service

\VItolesaleElectricity SpotMarket (WESM)

the franchise area of a distributionutility using the wires of thedistribution utility concerned.

The charge, if any, imposed for therecovery of stranded costs and otherpurposes pursuant to Section 34 ofthe Act.

Service(s) or product offered inaddition to the Supply of Electricity toa Contestable Customer.

The wholesale electricity spot marketestablished pursuant to Section 30 ofthe Act.

ARTICLE IIQUALIFICATIONS OF A RETAIL ELECTRICITY SUPPLIER

Section 1. \VIto may apply. The following may apply as an RES:

a. A natural person of legal age, duly registered with the Departmentof Trade and Industry (DT!) as engaged in the retail electricitysupply business; or

b. A juridical person duly registered with the Department of Tradeand Industry (DT!), Securities and Exchange Commission (SEC) asan entity authorized to engage in the retail electricity supplybusiness.

Section 2. Technical and Managerial Standards

The Applicant shall provide the following information in support of itstechnical and managerial capability to ensure reliable electricity supplyin accordance with its customer contracts:

a. Ability and knowledge to operate and manage the electricity supplybusiness, where the Applicant shall provide documentation

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demonstrating that at least two (2) of its officers or employeesholding managerial positions have a combined experience in thearea of competitive electricitymarkets of at least ten (10) years; orshould the Applicant engage the services of a Consultant, saidConsultant should have at least fifteen (15) years of relevantexperience in the electricity industry.

b. Ability to set-up and operate within the customer switching systemapproved by ERC,an automated information exchange associatedwith business to business (B2B) communications and transactionsand the capability to comply with all applicable customerregistration, settlement policiesand market rules and protocols.

c. Ability to maintain appropriate billing and collection system for itscustomers.

d. Ability to maintain a website which provides updated informationsuch as average prices and value-added services of RES to enablethe Contestable Customers to make informed choices.

e. Technical ability to enter into any necessary access orinterconnection arrangements or other required contracts withNGCP,the Market Operator and one or more Distribution Utilities,i.e. historical transactions with the industry participant, such asservice contracts, agreements and/or transaction receipts asconfirmation.

f. Adequate staffing and employee training to meet all service levelcommitments.

g. Other relevant information that the ERC may require which canprovide pertinent information regarding the ability andcompetence of the RESin ensuring reliable electricity supply.

Section 3. Credit Standards and Security Deposit

An Applicant must possess any of the following credit standards todemonstrate that it has the financial capability required to undertakethis business:

a. Investment grade credit rating by a reputable credit bureau; or

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b. Unused cash resources in an amount equivalent to theApplicant's expected monthly billings, or Ten Million Pesos(PhPlO,OOO.oo),whichever is higher, with an attached proof ofcreditworthiness confirmed through the certification ofcompanies (including Generation Companies, NGCP andDistribution Utilities) that have extended credit line to theApplicant; or if the Applicant is an affiliate or subsidiary and theApplicant has yet to commence operations as an RES, a swornstatement from the parent company that it shall infuse therequired working capital of the Applicant for its RES business,with supporting documents regarding the parent company'scapability to support the Applicant;

Once an Applicant has been issued an RES license and hasstarted operations, the RES shall update its unused cashresources to approximate the actual monthly billings on aquarterly basis to reflect the changes in the number ofContestableCustomer it serves; or

c. The Applicant shall meet a minimum Quick Ratio of 1.5X uponapplication. The Quick Ratio shall be calculated as the ratio ofthe sum of Cash,Marketable Securities, and Trade Receivablestothe Current Liabilities. The QuickRatio shall be used to measurethe safety margin for the payment of the current debt of theapplicant if there is shrinkage in the value of cash andreceivables.

In the event that the Applicant does not meet, or will potentiallynot meet, the above credit standard prescribed by the ERC, thesaid Applicant shall be required to submit a Program to Complywithin sixty (60) days of the occurence of the said event statingthe following:

a. Concrete activities/measures to be undertaken to upgradeperformance and their estimated financial effects;

b. Expected semi-annual targets/milestones achievements; andc. Clear and definite timetable for the activities and the targets.

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Section 4. Treatment of Cash Deposits from ContestableCustomers

An RES who has collected cash deposits from its customers based onprojected sales, shall be required. to deposit the actual cash amountcollected in an Escrow Account; or in a Restricted Account/HoldoutAgreement entered into with the customer, making the said cash depositunavailable for use in financing the said RES' working capitalrequirements. The escrow amount shall be reconciled every close of eachmonth to ensure that it is equal to the customer's cash deposit at the endof the month, and such amount shall be maintained until the nextreconciliation. The RES shall submit to the ERC a certification from aCommercial Bank located in the Philippines stating that it has availed ofthe said bank's Escrow facility, or Restricted Account/HoldoutAgreement facility, or a certification stating the cash amount depositedin the abovementioned bank facilities. Likewise, the RES shall berequired to pay its customers an annual interest on collected depositsequivalent to the interest earnings (net of tax) of the amount in Escrow.Such interest may also be deducted from the customer's current billing.

The above notwithstanding, the RES may draw sufficient funds from therelevant account in case the customer commits a breach of its obligationsto the RES, details of which should be agreed upon by both parties andshould be consistent with the process under Section 4.8-4.3, Article IV ofthe Distribution Services and Open Access Rules. On the other hand, ifthe RES fails in its obligation to supply the customer, as provided in theirretail supply contract, the latter may also be_entitled to refund its depositand interest earned, less any outstanding obligations, subject to theprovisions of the Escrow Agreement and the Retail Supply Contract.

ARTICLE IIILIMITATIONS AND RESTRICTIONS

ON A RETAIL ELECTRICTIYSUPPLIER

Section 1. Ownership Limitations and Restrictions

a. An RES or Affiliate thereof or any stockholder, director or officer orany of their relatives within the fourth (4th) civil degree ofconsanguinity or affinity, legitimate or common law, shall not own

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any interest in, nor employed directly or indirectly with thePhilippine Electricity Market Corporation (PEMC) and the IMO.

b. Except for ex-officio government-appointed representatives, noPerson who is an officer or director of the TRANSCO or NGCP shallbe an officer or director of any RES.

c. An RES or its stockholders, directors or officers thereof, or any oftheir relatives within the fourth civil degree of consanguinity andtheir respective spouses, shall not be allowed to hold any shares ofstock in NGCP: Provided, That the cross-ownership prohibitionunder this provision shall not apply to a relative by blood ormarriage, if such relative of any stockholder, director or officer ofNGCP has no employment, consultancy, fiduciary, contractual,commercial or other economic relationship or interest in NGCP, orconversely, if such relative of any stockholder, director or officer ofan RES has no employment, consultancy, fiduciary, contractual,commercial or other economic relationship or interest in the RES:Provided, further, That this prohibition on cross-ownership shallnot apply to: (a) ownership of shares of stock in a company listedin the Philippine Stock Exchange (PSE) even if such listedcompany is an RES, if such share ownership is not more than oneper centum (1%) of the total outstanding shares of such listed RES;or (b) ownership of shares of stock which is not more than one percentum (1%) in a company listed in the PSEwhich owns or controlsshares of stock in NGCP: Provided, moreover, That such owner ofshares of stock in the listed corporate stockholder of the NGCPshall not own more than one per centum (1%) of the shares of stockor equity interest in any RES.

ARTICLE IVOBLIGATIONS OF RETAIL ELECTRICITY SUPPLIERS

Section 1. An RES that is also engaged in other electricity relatedbusinesses shall ensure that its supply business activities and rates arefunctionally and structurally unbundled, as provided for in Rule 10 of theIRR of the Act on the Structural and Functional Unbundling of ElectricPower Industry Participants. In the said unbundling, the RES shallensure that there is no cross subsidization between and among its

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business activities, in accordance with the ERC-approved BusinessSeparation and Unbundling Plan.

Such RES shall submit in a timely manner, without need of furthernotice, the annual reportorial requirements provided in Article II,Section 2.12 of the Business Separation Guidelines (BSG), as amendedsuch as: the Accounting Separation Statements, Compliance Report, theAuditor's Report, and other documents provided in the said rules.

Section 2. An RES shall maintain its own website linked to the ERCand DOE websites. Such RES websites shall provide updatedinformation including indicative or average prices under its RetailSupply Contracts (RSCs) and value-added services to enable theContestable Customers to make informed choices.

Section 3. An RES shall, at all times, adopt the business to business(B2B)interface system approved by ERC.

Section 4. An RESshall identify and segregate in its bills to End-usersthe components of the Retail Rate as follows: Supplier's Charge(composed of Generation & Others); DU's passed-on Charges;Transmission Charges; and other related charges for electric service.

Section 5. An RESshall complywith the Creditworthiness Criteria andsuch financial security deposits as required by these Rules to secureproper performance as an RES as provided in Section 3, Article II ofthese Rules and as may be determined by ERCto protect the interest ofthe Contestable Customers.

Section 6. An RES shall ensure that the advance deposits collectedfrom its customers are sufficiently covered by an EscrowAccount, or aRestricted Account/Holdout Agreement with the Contestable Customer.Advance deposits may be adjusted on an annual basis based on the RES'customers' average twelve-month bills.

Section 7. An RES,which sources power from the wholesale electricityspot market, shall complywith the WESMRules at all times.

Section 8. An RES shall comply with the Competition Rules andComplaint Procedures as may be prescribed by the ERC concerningabuse of market power, cartelization and any other anti-competitive ordiscriminatory behavior.

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Section 9. An RES is required to collect illUniversal Charge and (ii)FITAll Charges, where applicable, from all of its customers on a monthlybasis, and shall comply with the Rules Governing the Collection ofUniversal Charge and the Guidelines, Procedures GoverningRemittances and Disbursements of Universal Charge, and the Feed-InTariff (FIT) Rules issued by the ERC.

Section 10. An RES shall inform the ERCof any material change to theinformation supplied in its documentary requirements under Article IIand Vhereof within three (3) days from the occurrence of such event.

Section 11. An RES shall comply with the provisions of the Act and itsImplementing Rules and Regulations, the applicable provisions of theBusiness Separation Guidelines, Philippine Distribution Code, theDistribution Services and Open Access Rules (DSOAR),AsAmended, theCode of Conduct for Competitive Retail Market Participants, and allapplicable rules and regulations prescribed by ERC, including thereportorial requirements prescribed in these 2015 RES Rules.

Section 12. An RES shall comply with the limitations on ownershipand control prescribed in the Act and its IRR.

Section 13. An RES that intends to cease operations shall notify theERC at least thirty (30) days prior to ceasing operations and shallprovide proof of refund of any monies owed to its customers, as well as asettlement plan or proof of payment of any amount owed to a DU, NGCP,WESM or a Generation Company. Thereafter, the RES License is deemedcancelled.

ARTICLE VREQUIREMENTS AND PROCEDURES

Section 1. The Applicant shall secure an RES License from the ERCprior to engaging in the Supply of Electricity to Contestable Customers.Provided all the requirements shall have been complied with, the ERCshall approve, disapprove, or reject an application within sixty (60)working days from the date of application unless ERC shall haverequired the submission of additional information, or ordered onreasonable grounds, the postponement of final action on an application.

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Section 2. Basic Requirements for an RESlicense application.The following documents and information are required to be submittedby an Applicant:

a. Duly accomplished RES Information Sheet;

b. Articles of Incorporation/Partnership with Certificate ofRegistration (for juridical person);

c. Certified true copies of audited financial statements for the twomost recent twelve-month periods, or for the life of the business ifit has been in existence for less than two (2) years, if applicable;

d. If an Affiliate under Section 3(b), Article II, certified true copies ofaudited financial statements for the two most recent years of itsparent company, as submitted in its annual reports toshareholders;

e. Projected Five-year Financial Statements and Five-year BusinessPlan (outline available at the ERC website). The Business Planshould adequately explain how the applicant will launch andoperate its business specifically business strategies and its value-added services;

f. General Information Sheet of the Applicant and its Affiliatesengaged in the generation, distribution and retail supply ofelectricity, and their corresponding business addresses;

g. Documents referred to in Sections 2 and 3, Article II hereof(Technical and Managerial Standards and Credit Standards andSecurity Deposit);

h. Business Permit / Mayor's Permit;

1. Proof of payment of applicable fees; and

J. Such other information or documents that the ERCmay require.

Section 3. Renewal of RESLicense. In case of renewal of its RESLicense, the RES shall submit the following requirements:

a. Letter of Intent to renew the RES license;

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b. Duly accomplished RES Information Sheet (form available at theERCwebsite);

c. Updated Five-year Business Plan reflecting the business activitiesto be implemented in its new RES License term;

d.Accomplishment Report vis-a.-vis previous Five-year BusinessPlan; .

e. Latest Audited Financial Statement;

f. Proof of Security Deposit commensurate to amount collected fromcustomers, if applicable;

g. Business Permit / Mayor's Permit;

h. Proof of Payment of applicable fees; and

i. Such other information or documents that ERCmay require.

Section 4. All submissions shall be certified under oath by theApplicant or any duly authorized officer in case of a juridical person.

Section 5. Failure to submit the above requirements to the ERC shallbe a ground for denial of application or renewal of license.

Section 6. In order to avoid potential customer abuse by an RES, theERC may revoke or refuse to renew an RES license for just causes asdefined below:

a. Providing false or misleading information to customers and theERC;

b. Failure to maintain and/or submit credit standards in accordancewith Section 3, Article II hereof;

c. Bankruptcy, insolvency, or the inability to meet financialobligations on a reasonable and timely basis;

d.A pattern of not responding to ERC inquiries or customercomplaints in a timely fashion;

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e. Conviction of the licensee, a person controlling the RES, or aprincipal employed by the RES, of any crime involving fraud, theft,or deceit related to the RES' service;

f. Failure to provide service to any customer and failure tocontinuously operate for a total period of one (1) year from thetime of the issuance of an RES license; and,

g. Other significant violations, including the failure or a pattern offailures to comply with applicable laws, these Rules and other retailcompetition rules and ERC issuances.

ARTICLE VIPAYMENT OF FEES

The Applicant shall pay the application fee of Three Thousand Pesos(PhP3,OOO.oo) upon its filing of application or renewal of license. Uponissuance or renewal of an RES License, the Applicant shall likewise paythe RES License fee equivalent to, whichever is higher, among thefollowing:

a. Seventy five (P 0.75) centavos for each one hundred pesos ofwhichever is applicable of the following:

1. The capital stock subscribed and paid up of thecorporation or if the applicant is a Partnership or SoleProprietorship, the capitalization or the total capitalinvested into the business; or

2. In the event an Applicant has two or more businesses, thecapitalization allocated for the supply business. Shouldthe Applicant have two or more businesses which areelectricity related, the capitalization shall be based on theERC-approved BSUP; or

b. Ten Thousand Pesos (PhPlO,OOO.oo).

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ARTICLE VIITERM OF LICENSE

The RES License issued by the ERC after the promulgation of these 2015RES Rules shall have a term of five (5) years, renewable at the end ofevery term. The RES License shall be non-transferable and shall besubject to revocation by the ERC for any violation of these 2015 RESRules and other applicable laws and issuances.

The RES shall apply for a renewal of license not later than sixty (60) daysbefore the expiration of its current license.

ARTICLE VIIIREPORTORIAL REQUIREMENTS

Section 1. Each RES shall submit a quarterly report every 15th day of thesubsequent month after the quarter on the following information:

a. Average prices (Total revenue [excluding passed-on charges]divided by total kWh sales to Contestable Customers);

b. Revenues. Total revenues from kilowatt-hour sales to ContestableCustomers;

c. Customers. List of customers served and amount of deposits thathave been collected from each customer, if applicable;

d. Bank certification from a Commercial Bank, if any, stating theamount deposited in escrow under the RES' account. Suchescrow amount shall be reconciled every close of each month toensure that it is equal to the customer's cash deposit at the end ofthe month, and shall be maintained until the next reconciliation;

e. Security deposits collected from contestable customers (ifapplicable); and

f. Other information that the ERC deems necessary or useful III

carrying out its duties and obligations.

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Section 2. All licensed RES shall submit the following documents every20th of January of each year, on an annual basis, without need of furthernotice:

a. Completed Contract Information Sheet summarizing the existingRetail Supply Contracts, particularly indicating the following:

1. List of customers and actual demand of eachcustomer;

ll. Contract duration;

iii. Contract rate per contestable customer;

iv. RES actual demand purchased from a GenCo; and,

v. Other additional charges (if any)

b. Mayor's permit for the current year.

Within thirty (30) days from the filing of its Income Tax Return with theBureau of Internal Revenue (BIR), the RES shall submit a complete setof its Audited Financial Statements (Le. balance sheet, incomestatement, statement of cash flows, notes), including the audit opinion,the statement of management's responsibility on the financialstatements.

Section 3. Confidentiality. The ERC shall accord certain informationdisclosed by the Applicant or identified by the RES such level of strictconfidentiality by subjecting the same to appropriate protectivemeasures, if applicable.

ARTICLE IXSANCTIONS

Any Person acting as an RES without a valid license issued by ERC,except those exempt from this requirement shall be subjected toappropriate sanctions provided under existing laws, rules andregulations.

The ERC shall impose the appropriate fines and penalties, including therevocation or suspension of license, for any violation or non-compliancewith these 2015 RES Rules, pursuant to the "Guidelines to Govern the

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()

Imposition of Administrative Sanctions in the Form of Fines andPenalties Pursuant to Section 46 of RA. 9136" .

ARTICLE XMONITORING

The ERC shall monitor the compliance of RES with the terms andconditions of their Licenseand the provisions of these 2015 RESRules.

ARTICLE XISEPARABILITY

If for any reason, any section of these 2015 RES Rules is declaredunconstitutional or invalid, other parts or sections hereof not affectedthereby shall continue to be in full force and effect.

ARTICLE XIIREPEALING CLAUSE

Resolution No. 22, Series of 2013 and Resolution No. 17, Series of 2014respectively entitled "Resolution Adopting Amendments to Article I, IIand III of the Revised Rules for the Issuance of Licenses to RetailElectricity Suppliers" and "A Resolution Suspending the Issuance ofRetail Electricity",respectivelyare hereby repealed accordingly..

ARTICLE XIIIEFFECTIVITY

These 2015 RES Rules shall take effect on the fifteenth (15th) dayfollowing its publication in a newspaper of general circulation in thecountry.

Pasig City,__ November 2015.

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JOSE VICENTE B. SALAZARChairman

GLORIA VICTORIAC. YAP-TARUCCommissioner

ALFREDO J. NONCommissioner

JOSEFINA PATRICIA A. MAGPALE-ASIRIT

Commissioner

lalo/lnj/dtl/FSCl

GERONIMO D. STA. ANACommissioner

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