QuestionsQuestions (Republic Act No. 11357)
It is a nonexclusive franchise, granted subject to the Constitution and applicable laws, to construct, install, establish, operate, and maintain Distributed Energy Resources (DERs) and microgrids using renewable energy technology (or a hybrid), to provide electric power to customers/end users in remote and unviable, unserved, or underserved areas specified in the Act.
DERs are smaller power sources that can be aggregated to meet demand. They may include demand-side and supply-side resources deployed throughout a network service provider system, including renewable facilities, managed loads (e.g., EV charging), energy storage, and other measures necessary to incorporate renewables, such as load management and ancillary services (reserves, voltage control, reactive power, and black start capabilities).
A microgrid is a group of interconnected loads and DERs within clearly defined electrical boundaries that acts as a single controllable entity. It may connect to the grid to operate in both grid-connected mode and island mode.
Remote and Unviable Area: where immediate extension of distribution lines is not economically feasible due to distance from nearest facilities. Unserved Area: no electricity access, no distribution system lines, no solar PV home systems, or no connection to any microgrid. Underserved Area: served but less than 24 hours daily service; or noncompliant with Philippine Distribution Code parameters; or interrupted at least 12 times in the 12 months before determination; or other reasons resulting in failing marks based on the latest annual evaluation of distribution system performance vs ERC targets.
The Department of Energy (DOE) determines those areas in accordance with Sections 1 and 2 of the Act.
It must secure the necessary certificate(s) of public convenience and necessity and other applicable permits/licenses from the ERC, DOE, or any other government agency with jurisdiction over its operations, consistent with existing rules under RA 9136 and RA 9513.
The grantee may excavate or lay conduits in public places/roads/highways/etc. subject to prior approval of DPWH or the concerned LGU, in accordance with the Grid Code or Distribution Code as applicable.
Any disturbed/altered portion must be repaired or replaced in a workmanlike manner at the grantee’s expense according to DPWH or LGU standards. If, after a 15-day notice, the grantee fails to repair/replace, DPWH or the LGU may do it and charge the grantee double the costs and expenses.
The grantee must operate DERs/microgrids in the least-cost manner and improve facilities for efficient and reliable service and reduced electricity costs as feasible. It must charge reasonable and just power rates approved by the ERC for all consumer types, and comply with regulatory rules of DOE and ERC under RA 9136 and RA 9513.
The retail rate charged to end users must be the true cost and it is not entitled to government subsidy. Retail rates are regulated and subject to ERC approval, must be made public and transparent, and the bill must segregate rate components pursuant to RA 9136 (unless amended). The grantee must also implement lifeline rates for marginalized end users as mandated by RA 9136.
The grantee must establish a consumer desk to handle complaints and ensure adequate protection of consumer interests, and must act with dispatch on all complaints brought before it.
The President may, in times of war, rebellion, public peril, calamity, emergency, disaster, or disturbance of peace and order, temporarily take over and operate the grantee’s facilities or authorize temporary government use/operation upon due compensation during the period of such operation.
Yes, subject to legal limitations and procedures. The grantee may exercise eminent domain insofar as reasonably necessary for construction, installation, establishment, efficient operation, and maintenance of DERs/microgrids, and may install/maintain facilities over/across public property, but proper condemnation proceedings must be instituted and applicable rules complied with; the taking must result in greater public benefit.
The term is 25 years from the Act’s effectivity unless sooner cancelled or revoked. It is ipso facto revoked if the grantee fails to operate continuously for two (2) years.
Yes. The Act states it shall not revoke existing franchises. It also clarifies no waiver of rights from franchised distribution utilities is necessary to operate DERs/microgrids in remote/unviable, unserved, or underserved areas as determined by DOE.
It does not affect DOE’s duty to promote private sector participation. Other qualified third parties may continue to participate in competitive selection to operate in those areas as determined by DOE, even without a similar franchise from Congress.
The grantee must submit an annual report on or before April 30 of the succeeding year to the ERC, DOE, and Congress (through specified House and Senate committees) on compliance and operations. The report must include rollout updates, audited financial statements, latest SEC General Information Sheet if applicable, DOE certification on permit/operation status, and ownership dispersal update if applicable.
Failure to submit the annual report to Congress: fine of PHP 5,000 per working day of noncompliance collected by DOE. Service obligations: after ERC notice, grantee must remedy within a maximum of 30 days. Continued noncompliance beyond 30 days after written notice is a basis for ERC financial penalties payable within 60 days from demand; penalties are not considered an expense of the grantee.
The grantee cannot sell, lease, transfer, grant usufruct of, or assign the franchise/rights, nor merge, nor transfer controlling interest, without prior approval of Congress. Congress must be informed within 60 days after completion of the transaction. Failure to report renders the franchise ipso facto revoked, and transferees must be subject to the Act’s same conditions.