Supply Sector

Section 1. Guiding Principles

• a) As per Section 29 , the Supply of Electricity to End-users is a business affected with public interest. (b) The Supply of Electricity to End-users in Contestable Market requires a license from the ERC except for the Supply of Electricity by DUs within their Franchise Areas and Persons authorized to supply electricity within their respective EZs.

Section 2. Scope of Application

This Rule shall apply to all Suppliers.

(b) Subject to the qualifications set by the ERC, any of the following may obtain a license to become a Supplier: (i) (ii) (iii) (iv) (v) A Generation Company or Affiliate thereof; An Affiliate of a Distribution Utility with respect to the latter’s Contestable Market within or outside its Franchise Area; Aggregators; An IPP Administrator; and Any other Person authorized by the ERC to engage in the selling, brokering or marketing of electricity to the Contestable Market, consistent with the Act and these Rules. Section 3. Ownership Limitation and Restrictions. (a) A Supplier or Affiliate thereof or any stockholder, director or officer or any of their relatives within the fourth civil degree of consanguinity or affinity, legitimate or common law, shall not own any interest, directly or indirectly, in TRANSCO or its Buyer or Concessionaire, or IMO. (b) Except for ex-officio government-appointed representatives, no Person who is an officer or director of the TRANSCO or its Buyer or Concessionaire shall be an officer or director of any Supplier. Section 4. Obligations of a Supplier. (a) A Supplier shall secure a license from the ERC prior to engaging in the Supply of Electricity to End-users in any Contestable Market. (b) A Supplier, where applicable, shall functionally and structurally unbundle its supply business activities and rates from its generation and distribution businesses, if any, as presented in Rule 10 on Structural and Functional Unbundling of Electric Power Industry Participants. Page 33 of 100(c) A Supplier shall identify and segregate the components of its Supplier’s Charge, as required by the Act and further provided in Rule 15 on Unbundling of Rates. (d) A Supplier shall comply with the WESM Rules. (e) A Supplier shall comply with any reportorial requirements prescribed by the ERC for monitoring purposes. (f) A Supplier shall comply with the Competition Rules to be prescribed by the ERC concerning abuse of market power, cartelization, and any other anti-competitive or discriminatory behavior. (g) A Supplier that fails to comply with any of these obligations shall be subject to fines and penalties imposed by the ERC and, as so required to protect the public interest, may have its license suspended, revised or revoked. Section 5. Licensing of Suppliers. The ERC shall issue the appropriate licensing rules, guidelines and procedures for the issuance of licenses to Suppliers, which shall include but not limited to the following: (a) (b) General Procedures for License Applications and Monitoring. (i) The applicant shall submit all pertinent information and documents required by ERC for purposes of evaluating the application for a license to supply electricity to End-users in a Contestable Market. (ii) Upon receipt of all the information required to evaluate compliance with the requirements applicable to obtaining a license to supply electricity to End-users in a Contestable Market, and upon demonstration of compliance with such requirements, the ERC shall issue the necessary resolution, order, and/or the appropriate license as a Supplier. (iii) The ERC shall monitor the compliance of Suppliers with the requirements of their respective licenses and the rules and regulations applicable to Suppliers. Qualification Criteria (i) Compliance with Section 3 of this Rule 8. (ii) Technical and Financial Standards, Creditworthiness Criteria and such financial security to secure proper performance as a Supplier as may be determined by the ERC to protect the interests of End-users in Contestable Markets. (iii) Such other qualification or criteria as may be determined by the ERC to protect the public interest.