All our strategies are aligned with our Vision which is to become Asia’s benchmark of excellence in power regulation, and our Mission to promote and protect the long-term consumer interests in terms of quality, reliability, and reasonable pricing of sustainable supply of electricity. Thank you.

BASIC PUBLIC INFORMATION CONCEPTS ABOUT THE ELECTRIC POWER INDUSTRY REFORM ACT (EPIRA) & THE ENERGY REGULATORY COMMISSION (ERC) ATTY. FRANCISCO VILLA, JR. ERC, Director for Planning & Information Cebu City 10 July

Ensuring progress through exemplary power regulation. Vision and Mission VISION: Ensuring progress through exemplary power regulation. MISSION: A technically competent and professional ERC committed, through the exercise of its regulatory authority, to be the driving force in the transformation of the electric power industry in ensuring reasonable electricity rates, enhancing market competition, promoting long-term consumer interest, and assuring that electricity industry participants provide and maintain safe, adequate, reliable, and efficient electric service. Our vision is “Ensuring progress through exemplary power regulation.”   Our mission is “A technically competent and professional ERC committed, through the exercise of its regulatory authority, to be the driving force in the transformation of the electric power industry in ensuring reasonable electricity rates, enhancing market competition, promoting long-term consumer interest, and assuring that electricity industry participants provide and maintain safe, adequate, reliable, and efficient electric service.” 2014 Budget

Electric Power Industry Reform Act (EPIRA) Republic Act No. 9136 Republic Act No. 9136 Electric Power Industry Reform Act (EPIRA) Signed: 8 June 2001 Effectivity: 26 June 2001 Implementing Rules & Regulations Signed: 27 February 2002 Cebu City 10 July

End goal of the EPIRA: Competitive Electricity Prices The goal of the EPIRA is a vibrant power industry with healthy competition creating competitive prices of electricity for the benefit of the consumer. Cebu City 10 July

SECTION 2. Declaration of Policy SECTION 2. Declaration of Policy. – It is hereby declared the policy of the State: The 11 Declarations: To ensure and accelerate the total electrification of the country; To ensure the quality, reliability, security and affordability of the supply of electric power; To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market; Cebu City 10 July

SECTION 2. Declaration of Policy. The 11 Declarations: To enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors; 5. To ensure fair and non-discriminatory treatment of public and private sector entities in the process of restructuring the electric power industry; To protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power; Cebu City 10 July

SECTION 2. Declaration of Policy. The 11 Declarations: To assure socially and environmentally compatible energy sources and infrastructure; To promote the utilization of indigenous and new and renewable energy resources in power generation in order to reduce dependence on imported energy; To provide for an orderly and transparent privatization of the assets and liabilities of the National Power Corporation (NPC); Cebu City 10 July

SECTION 2. Declaration of Policy. The 11 Declarations: To establish a strong and purely independent regulatory body and system to ensure consumer protection and enhance the competitive operation of the electricity market; and To encourage the efficient use of energy and other modalities of demand side management. Cebu City 10 July

SOURCES PERCENTAGES NATION-WIDE ENERGY MIX – per DOE 2013 SOURCES PERCENTAGES NATION-WIDE Cebu City 10 July

Cebu City 10 July

PH Energy Mix Cebu City 10 July INSTALLED DEPENDABLE

SOURCES PERCENTAGES LUZ-VIS-MIN GRIDS ENERGY MIX – per DOE 2013 SOURCES PERCENTAGES LUZ-VIS-MIN GRIDS Cebu City 10 July

Cebu City 10 July

% SHARE LUZON VISAYAS MINDANAO Cebu City 10 July

Objective of EPIRA RESTRUCTURING PRIVATIZATION OPEN ACCESS & RETAIL COMPETITION RESTRUCTURING PRIVATIZATION R.A. 9136 (EPIRA) The BLUEPRINT of the electricity industry. Cebu City 10 July

RESTRUCTURING Before the reforms… Pre-2001 NATIONAL POWER CORPORATION PLANTS & IPPs TRANSMISSION DISTRIBUTION END USERS 18 PRIVATE UTILITIES 2 LOCAL GOVERNMENT UNITS 120 ELECTRIC COOPERATIVES OTHER IPPs SYSTEMS OPERATIONS END USERS Cebu City 10 July

RESTRUCTURING After the reforms SUPPLY GENERATION TRANSMISSION DISTRIBUTION SUPPLY POWER PLANTS & IPPs NATIONAL TRANSMISSION CORPORATION/NGCP END USERS DISTRIBUTION SUPPLY TRANSMISSION OTHER IPPs MARKET OPERATOR 18 PRIVATE UTILITIES 2 LOCAL GOVERNMENT UNITS 120 ELECTRIC COOPERATIVES END USERS SYSTEMS OPERATIONS OTHER IPPs Cebu City 10 July

RESTRUCTURING Performance Based Regulation Benchmarking Competition at the wholesale & retail level Cebu City 10 July

 RESTRUCTURING Existing contractual arrangements Generators TRANSCO/NGCP Distribution Utility End-users  Cebu City 10 July

  RESTRUCTURING Transaction flow under Open Access Regime NGCP WESM Generators  TRANSCO NGCP Distribution Utility End-users Cebu City 10 July

NPC DAYS BUNDLED vs. UNBUNDLED SAMPLE RESIDENTIAL BILL MAY 2001 Front and Back Pages BUNDLED NPC DAYS Cebu City 10 July

Cebu City 10 July

PRIVATIZED PLANTS AND WESM BUNDLED vs. UNBUNDLED SAMPLE RESIDENTIAL BILL JULY 2013 Front and Back Pages UNBUNDLED PRIVATIZED PLANTS AND WESM Cebu City 10 July

Cebu City 10 July

COMPARISONS 2001 vs. 2013 Bill Formats Cebu City 10 July

Creation of the ERC Sec. 38 of EPIRA “There is hereby created an independent, quasi-judicial regulatory body to be named the Energy Regulatory Commission (ERC).” Cebu City 10 July

EPIRA – RA 9136 Sec. 41. Promotion of Consumer Interests. – The ERC shall handle consumer complaints and ensure the adequate promotion of consumer interests Cebu City 10 July

OUR MAJOR TASKS: Generation Transmission Distribution Supply Tariffs of NGCP TRANSCO Philippine Grid Code CAPEX plans Ancillary services Certificate of Compliance Generation tariffs (Bilateral PSA) SPUG (Missionary Electrification) WESM monitoring Competition Rules Distribution Supply Tariffs of distribution utilities Philippine Distribution Code Lifeline rate Franchise for consortium of sub- transmission assets Stranded contract cost Systems loss CPCN Spot inspections/ audits Bilateral power supply contracts CAPEX plans Magna Carta and DSOAR enforcement *Loan Condonation Suppliers’ licenses Issuance of needed rules for retail competition Declaration of open access and retail competition Competitive Natural Monopolies Cebu City 10 July

Chief Executive Officer Administrative Service Regulatory Operations Our ORGANIZATION COMMISSION Chair Commissioner General Counsel & Secretariat of the Commission Chief Executive Officer (Chair) Internal Audit Unit Investigation & Enforcement Division Executive Director Field Offices Financial and Administrative Service Legal Service Planning and Information Service Regulatory Operations Service Market Operations Service Consumer Affairs Service Cebu City 10 July

Open Access and Retail Competition The Journey Open Access and Retail Competition Transfer of NPC-IPP Contracts Privatization of NPC Establishment of WESM Cross Subsidy Removal Unbundling of Rates Cebu City 10 July

Retail Competition Timeline LUZON-VISAYAS GRIDS 750 kW – 999 kW Aggregation within contiguous area allowed 1 MW & above Household level Year 1 DEC 2012 Transition period (26 December 2012 – 25 June 2013) Initial commercial operations (26 June 2013 – 25 December 2013) 2 Year 3 Year 10 Cebu City 10 July

Ensuring progress through exemplary power regulation. Vision and Mission VISION: Ensuring progress through exemplary power regulation. MISSION: A technically competent and professional ERC committed, through the exercise of its regulatory authority, to be the driving force in the transformation of the electric power industry in ensuring reasonable electricity rates, enhancing market competition, promoting long-term consumer interest, and assuring that electricity industry participants provide and maintain safe, adequate, reliable, and efficient electric service. Our vision is “Ensuring progress through exemplary power regulation.”   Our mission is “A technically competent and professional ERC committed, through the exercise of its regulatory authority, to be the driving force in the transformation of the electric power industry in ensuring reasonable electricity rates, enhancing market competition, promoting long-term consumer interest, and assuring that electricity industry participants provide and maintain safe, adequate, reliable, and efficient electric service.” 2014 Budget