The Energy Regulatory Commission (ERC) has granted distribution utilities the right of first refusal (ROFR) over renewable energy capacity generated within their franchise areas to help them meet annual Renewable Portfolio Standards (RPS) requirements.
The directive is part of the amended guidelines for the procurement, execution and evaluation of power supply agreements (PSAs) between distribution utilities and power generators serving the captive market.
To ensure transparency, the ERC mandated that all utilities must publish their RPS compliance status for the previous year and their latest compliance plans on their websites by Jan. 15 of each year. These postings notify developers of the host utility’s ROFR before any offers are submitted elsewhere.
Under the new rules, renewable energy developers should first offer available capacity from existing, expanded or new plants to their host distribution utility.
The host utility has a period of three months to exercise its ROFR after receiving a written notice from the developer. If the utility declines the offer or the three-month period expires, the developer may then offer the capacity to other offtakers, provided the rate and contract terms remain the same.
The ERC said this right does not apply to capacity already committed under the Green Energy Option Program or the Competitive Retail Electricity Market.
Capacities covered by existing PSAs, shareholder agreements or joint ventures intended for exclusive retail supply are exempt from the ROFR requirement.
The move aims to address complaints from local government units that they do not directly benefit from power plants in their jurisdictions, as the electricity is often sold directly to the grid rather than to the host distribution utilities.
The ERC noted that under the new framework, the price of renewable energy will be measured by per kilowatt-hour to ensure competitive pricing for consumers.
ERC chairperson Monalisa Dimalanta said the policy helps ensure that “host communities directly benefit from the clean energy resources developed in their own backyards.”
