The Energy Regulatory Commission (ERC) is working with the Securities and Exchange Commission (SEC) on the development of a regulatory framework that will hasten the initial public offering (IPO) of the country’s power generation companies and distribution utilities.

The two government agencies held fresh round of talks last week to flesh out the parameters how they can work together in crafting an acceptable structure or scheme for the shares listing of the power firms.

That meeting which was led by ERC Chairperson Monalisa C. Dimalanta and SEC Commissioner Kelvin Lester K. Lee had been intended to “explore avenues of collaboration in order to streamline regulatory processes” for the public listing of warranted entities in the restructured electricity sector.

“We have been discussing many initiatives with them actually. First is: data sharing arrangement so that ERC can directly obtain corporate filings of power stakeholders which are required for ERC permits. This will make compliance much smoother for power industry players,” Dimalanta conveyed.

On the required stocks listing of power firms, she qualified that the discussion centered on “the listing particularly of GenCos that are not part of listed parent companies,” with the ERC chief noting that “the SEC will come out with its draft rules on this.”

The power industry regulator indicated that “the POR (public offering requirement) is less than 50% for the generation sector alone;” and the figure for distribution utilities (DUs) had also been less than desired, especially for the electric cooperatives.

With the targeted ERC-SEC joint framework, the regulatory body emphasized that such could “simplify the registration process for covered entities to facilitate increased compliance to the POR.”

Section 43 (t) of the Electric Power Industry Reform Act (EPIRA) and Rule 3 Section 4 (m) of its implementing rules and regulations (IRR) prescribed that, the GenCos as well as DUs are mandated “to offer or sell to the public a portion of not less than 15-percent of their common shares of stock.”

The timeframe for the required stock offering should have been five (5) years from the effectivitiy of the law – or it should have been as early as 2006, but that turned out to be a moving target given the heaps of legal clarifications being sought on rules and policies; coupled with wobbly industry developments that have been affecting market conditions.

In a ruling in 2019, the ERC stipulated then that other than IPO, there are other parameters that the GenCos can employ so they can comply with the EPIRA-mandated stock offering.

The ERC, in part, has sought legal shelter from an opinion earlier issued by the SEC stating that a “public offering” under the Securities Regulation Code (SRC) “does not necessarily require listing and selling in the PSE or any exchange for that matter, since listing is just one form of public offering.”

The SEC has cited provisions of the 2015 implementing rules and regulations (IRR) of the SRC, which defines public offering as “any offering of securities to the public or to anyone, whether solicited or unsolicited.”

The SEC similarly specified the extent and requirements that must be complied with in the “solicitation or presentation of securities for sale.”

Nevertheless, a counter-opinion was issued in 2021 by Senate Committee on Energy Vice Chairman Sherwin T. Gatchalian, when he batted for the lifting of the IPO requirements for GenCos, as he perceived that such mandate could hamstring capital influx in the power sector - primarily for smaller-scale renewable energy ventures.

The legislator decreed that there is a need to relax some policies in the power industry, and he wants the IPO requirement scrapping to be one of those, because he sees that to be “burdensome to generation companies.”