The Energy Regulatory Commission (ERC) has proposed a reexamination of the public offering rule for power generating companies under the Electric Power Industry Reform Act (EPIRA) of 2001.
ERC chairperson Francis Saturnino Juan submitted proposed guidelines to implement Section 43(t) of EPIRA, which he described as a “way forward to ensure the successful restructuring and modernization of the electric power industry.”
The proposal says that while Section 43(t) of EPIRA has not been repealed, the ERC is bound to implement it. However, it argues that the commission has the discretion to “rationalize its implementation or altogether defer it” as part of its delegated authority.
The EPIRA provision grants the ERC the power to “perform such other regulatory functions as are appropriate and necessary in order to ensure the successful restructuring and modernization of the electric power, such as but not limited to the rules and guidelines under which generation companies and distribution utilities which are not publicly listed shall offer and sell to the public a portion of not less than 15 percent of their common shares of stock.”
The law also states that existing companies must implement the public offering no later than five years from the act’s effectivity.
The ERC previously deferred the public offering requirement (POR). “Now, 24 years into EPIRA implementation, the ERC and the power industry still struggle to find a clear path forward,” the proposal noted.
Instead of issuing certificates of compliance (COCs), the ERC has issued one-year provisional authorities to operate (PAOs) to generating companies (gencos) based on affidavits of undertaking submitted during COC renewal applications.
This practice has created additional work for the ERC and difficulties for some gencos whose lenders require regular COCs rather than PAOs, it said.
Juan said that in support of his position, the POR was enacted under a specific context.
“Developments and successes in EPIRA implementation over the years have dramatically changed the power industry landscape, calling for a re-examination of whether the POR remains relevant and valid,” he said.
Juan said that the mandatory five-year timeline only applies to gencos that existed when EPIRA took effect. He said this was intended to “complement restructuring of the power industry and privatization and expedite transition to a competitive industry structure during the transition years or the initial years of EPIRA implementation.”
According to Juan, this timeline does not apply to gencos that were created after the EPIRA’s effectivity.
“Even with the use of ‘shall’ in the last sentence of Section 43(t), the law can still be interpreted to be permissive as what the ERC has done in the past when it deferred implementation of its POR Guidelines,” he said.
He said the ERC’s delegated authority to issue rules on public offerings includes the power to decide on timelines for post-EPIRA gencos. The commission can also determine the thresholds and market conditions that would trigger compliance, such as the number of shareholders, asset value, financial performance, and nature of plant operations.
Indiscriminately enforcing the POR on all gencos would “be anti-competitive, as it will impose additional barriers to entry; benefit a handful of generators, but discriminate the others; and increase electricity costs without commensurate economic benefits,” Juan said.
He also suggested the ERC could revisit the period for which the POR should be in force, given that the power industry’s generation sector has transitioned into a fully competitive market over the past two decades.
“I urge the Commission to revisit its POR guidelines, either motu proprio or as part of the pending Rule-Making Petition that proposes amendments thereto, docketed as ERC Case No. 2021-004RM,” Juan said.
