Structural And Functional Unbundling Of Electric Power Industry Participants

Section 1. Guiding Principle.

Consistent with the last paragraph of Section 36 , any Electric Power Industry Participant shall structurally and functionally unbundle its business activities in accordance with Section 5 , namely: generation, transmission, distribution and supply. Structural unbundling shall mean the separation of different activities through the creation of separate divisions or departments within a single company or, at the option of any Electric Power Industry Participant, a separation into different juridical entities, with a clear separation of accounts between regulated and non-regulated business activities. Functional unbundling shall mean the separation of functions into different components.

For this purpose, business activities resulting from the initial unbundling process may be further unbundled to widen the scope for competitive activities. The ERC shall formulate the appropriate guidelines and shall ensure full compliance with this provision.

Section 2. Scope of Application

This Rule shall apply to all Electric Power Industry Participants that are currently engaged or will be engaged in any of the following business activities:

(a) Power generation; (b) Transmission; c) Distribution; (d) Supply of Electricity including collection and metering; (e) Related businesses which utilize the generation, transmission, distribution or supply assets for non-electricity related services; and (f) Other electricity related services that may be identified and authorized by the ERC.

The ERC may relax or eliminate the unbundling requirements for specified business activities if such activity operates in a competitive market.

Section 3. Procedures for the Structural and Functional Unbundling of Business Activities.

The following shall govern all Electric Power Industry Participants in undertaking the structural and functional unbundling of its business activities:

• a) An Electric Power Industry Participant shall identify its business activities according to each major business function as defined in Section 2 of this Rule.
• b) An Electric Power Industry Participant shall prepare and submit for approval by the ERC its Business Separation and Unbundling Plan (BSUP) on or before 31 December 2002. (c) The BSUP shall contain among others, the following information: (i) A complete description of the separation of books and records, including but not limited to, sources of revenues, costs as allocated, asset transferred, and information systems separation; (ii) A comprehensive description of the functional, structural or juridical separation of generation, distribution and supply as provided for in the BSUP; (iii) Milestones and highlights of the planned structural and functional unbundling of the business activities in which the Electric Power Industry Participant is currently engaged: Provided, That in any case, no Electric Power Industry Participant that has not completed structural and functional unbundling of the business shall be eligible to participate in Retail Competition and Open Access; (iv) A plan for complying with all Code of Conduct provisions specified by ERC, including training or developmental programs for its employees to help ensure compliance; and (v) Other documents or information as may be required by the ERC. Page 40 of 100(d) The ERC may adopt the Electric Power Industry Participant’s BSUP, recommend modifications to the BSUP, or reject the BSUP for revision and direct the concerned Electric Power Industry Participant to file a new BSUP based on its comments. In any case, ERC shall render its decision within six (6) months from filing of the BSUP. (e) Upon receipt of the ERC decision, the Electric Power Industry Participant shall implement said decision fully and promptly. (f) The ERC shall provide for appropriate fines and penalties for any Electric Power Industry Participant that fails to comply with its decision in full. Section 4. Guiding Principles for Business Separation of Distribution Utilities. (a) Once a Distribution Utility has separated and unbundled its business activities, the Distribution System portion of its business shall no longer provide competitive energy services, i.e. generation and supply. A Distribution Utility, which has not structurally and functionally unbundled its business activities shall be prohibited from operating in a Contestable Market. (b) ECs shall follow the structural and functional unbundling procedures set forth in these Rules except that such unbundling shall be implemented no later than 26 June 2006, the start of Retail Competition and Open Access in the Franchise Areas of ECs.