ERC Removes TCOS Factor, Eases Financial Rules for RES Licensing

The Energy Regulatory Commission (ERC) has amended the financial capability standards for Retail Electricity Suppliers (RES) under the Omnibus Rules for Customer Choice Programs. Issued pursuant to the Electric Power Industry Reform Act (EPIRA), the Resolution forms part of the ERC’s ongoing efforts to update regulatory requirements, address implementation issues, and enhance consumer protection under the Retail Competition and Open Access (RCOA) and the Green Energy Option Program (GEOP).

The key amendment revises how the Average Expected Annual Expense (AEAE) is calculated for RES license applications and renewals. The ERC has removed the Total Cost of Sales (TCOS) from the computation, determining that its inclusion created excessive and burdensome financial requirements. The AEAE will now be based solely on Total Operating Expenses (TOE) projected over the five-year license term, ensuring the financial thresholds focus on operational costs rather than sales volume.

Despite this change, the core standard remains: RES applicants must maintain a Tangible Net Worth (TNW) of at least PHP 15 million or the redefined AEAE, whichever is higher. The ERC also declined stakeholder proposals to allow substitutes such as Standby Letters of Credit, reaffirming TNW as the most reliable indicator of financial strength. Other financial ratios may be reviewed but cannot replace the TNW/AEAE requirement.

The Resolution takes effect immediately upon publication and is intended to promote a more competitive and accessible retail electricity market by reducing unnecessary regulatory burdens while ensuring RES entities remain financially resilient.