ERC Issued Distributed Energy Resources Rules

The Energy Regulatory Commission (“ERC”) on 19 October 2022 issued ERC Resolution No. 11, series of 2022, to adopt the Distributed Energy Resources (“DER”) Rules. DER are power sources connected to the distribution system or electrical system of the End-Users, that could be aggregated to meet a demand. The DER Rules aim to encourage the development and utilization of DER, promote energy quality, reliability, security, affordability, and sustainability, with the end view of achieving the objectives of the Electric Power Industry Reform Act of 2001 (“EPIRA”), Renewable Energy (“RE”) Law and other relevant laws, rules and regulations. 

Licensing

Prior to its operation, any End-User, Owner and/or Operator of a DER using renewable energy sources, or non-renewable energy sources solely for its own use, shall secure a Certificate of Compliance (“COC”) from the ERC. The grantee of the COC shall comply with the terms and conditions thereof. 

The application for COC shall be filed at least thirty (30) days prior to the targeted start date of Test and Commissioning of the DER. No COC shall be issued without a technical inspection having been conducted and completed by ERC on the DER. The conduct of the technical inspection may also be done through videoconferencing, which may still be subject to further physical technical inspection, if necessary. 

A COC issued in respect of DERs that are solely for End-Users/Owner’s own consumption shall be valid for a period of five (5) years unless sooner revoked by the ERC after due notice and hearing. On the other hand, COC issued in respect of DERs that are for End-User’s consumption and likewise exporting shall be co-terminus with the Renewable DER agreement of the End-User with the Distribution Utility (“DU”). 

Commercial Arrangements

The End-User, Owner, or Operator of the DER may enter into any of the following commercial arrangements:

1. For the sale of all the energy produced by the DER, without any transfer of ownership of the DER for the duration of the term. In this case, the COC shall be issued in the name of the DER, Owner and/or Operator.
2. For the sale of all the energy produced by DER wherein the ownership of the DER shall transfer to the End-User at the end of the term of the agreement. In this case, the COC shall be issued in the name of the Owner and/or Operator until such time the full ownership is transferred to the End-User, whereby the COC shall be issued to the End-User thereafter.
3. For the lease of the DER, with the End-User acquiring all the energy produced during the term of the agreement. In this case the COC shall be issued in the name of the Owner and/or Operator, provided that the COC issued in the name of the Owner and/or Operator is deemed revoked upon expiration of the lease.
4. For sale of all energy produced by the DER wherein the DER Owner has entered into an Operations and Maintenance (“O&M”) Agreement with an Operator. In this case, the COC shall be issued in the name of the Owner or Operator depending on the terms of the O&M agreement.
5. Any other type of commercial agreement analogous to the foregoing, subject to the limitations as provided under existing laws, rules and regulations. 

A DU may be allowed to be the Owner and/or Operator of a DER to supply its own requirements only, unless otherwise allowed under the rules issued by the ERC and relevant laws. 

On-grid pricing.

The DU shall compensate a Renewable DER’s exported energy based on the DU’s monthly blended generation rate in relation to its Renewable DER rated capacity which shall be computed as follows:

1. 75% of the blended generation rate for above 100kW to 500kW;
2. 60% of the blended generation rate for above 500kW to 1MW.

The costs incurred by the DU to compensate the End-User/Owner and/or Operator for energy exports shall be included in the DU’s total generation cost to be recovered from all its customers as part of the adjusted generation rate pursuant to Section 2 of ERC Resolution No. 16, series of 2009.

Off-grid pricing. 

The DU shall compensate a Renewable DER’s exported energy based on its applicable Subsidized Approved Generation (“SAGR”). As regards exported energy, the DER End-User/Owner and/or Operator shall not be entitled to Universal Charge- Missionary Electrification subsidy. 

The costs incurred by the DU to compensate the End-User/Owner and/or Operator for energy exports shall be included in the DU’s total generation cost to be recovered from all its customers as part of their generation rate subject to the applicable SAGR.

Billing Charges. 

The net amount payable by or creditable to the End-User shall be obtained by subtracting from the subtotal amount for import energy, the following: a) the subtotal peso amount for export energy, and b) the peso amount credited in the previous month, if any. If the resulting peso amount credited in the previous month, if any. If the resulting peso amount is positive, the End-User shall pay this positive peso amount to the DU. If the resulting peso amount is negative, the DU shall credit the negative peso amount to the End-User’s electric bill in the immediately succeeding billing period.

Reduction of DU’s contracted energy volumes

1. Upon determination of the DU that absorption of supply exported by DERs will result in the need to reduce its existing contracted capacity under ERC-approved Power Supply Agreement/s, the DU concerned shall reduce its contracted capacity under its PSA/s in a manner that complies with its obligation to supply at least cost to its captive customers.
2. The DU shall submit to ERC a monthly report showing that such reduction of contracted capacity has demonstrated compliance with least-cost supply obligation to its captive customers. The ERC shall evaluate the submission to validate that the DU has complied with its least cost supply obligation.
3. In no case shall the reduction of contracted capacity require or be conditioned upon the End-User contracting with or transferring its supply requirements to the DU’s PSA counterparty whose contracted capacity is subject to reduction.
4. The DU may opt to sell its excess contracted supply to the WESM, subject to the provisions of ERC Resolution No. 16, series of 2016 and any amendment/s thereto.
5. The DU shall consider in its demand forecasting any indicative DER to avoid stranded contract capacities.

Payment subsidies. 

The basis for the payment of the Lifeline Subsidy Rate, Senior Citizen Subsidy Rate and other relevant subsidies shall be the End-User’s actual energy consumption which shall include the imported energy and End-User’s energy consumption. 

Interconnection Standards

The DER must be compliant with the applicable standards set by the Philippine Electrical Code, Philippine Distribution Code, Distribution Service Open Access Rules, Philippine Small Grid Guidelines, Institute of Electrical and Electronics Engineers 1547 and the DER Interconnection Standards attached in the Resolution as Annex A-1; any amendment/s thereto; and such other standards pertinent to the operation and ownership of DERs. 

The DER for End-User’s consumption and export shall be equipped with a bi-directional meter. A bi-directional meter installed for new customers shall be at the expense of the DU. 

The DU shall also furnish and install a Renewable Energy Certificate meter in proximity to all Renewable DER, for purposes of measuring the total RE generated, for compliance with the Renewable Portfolio Standards Program under the Renewable Energy Act, and the actual energy consumption for the determination of a) payment of the Lifeline Subsidy Rate; b) payment of Senior Citizen Subsidy Rate; and c) other relevant subsidies mandated by law.

To ensure the safety, power quality and reliability of the Distribution System, a Distribution Impact Study (“DIS”) shall be conducted by the DU prior to the installation of an exporting DER.

The DU may inspect and test the protective devices and read or test the meters and other facilities, subject to at least three (3) days prior written notice to the End-User, Owner and/or Operator. The DU may limit the operation and/or disconnect, or require the disconnection of the DER under any of the following circumstances:

1. Routine maintenance, repairs or modifications of the DU’s distribution facilities;
2. If the DU determines that the DER is not compliant with the PEC, PDC, DSOAR, IEEE 1547, DER Interconnection Standards, other applicable national and international standards, and any amendment/s thereto; and
3. Upon termination of the Connection Agreement, subject to the termination provisions thereof.

For emergency cases where the DU concludes that a hazardous condition exists, it may limit the operations or altogether disconnect the DER to ensure public safety, upon serving reasonable notice to the End-User, Owner or Operator.