QuestionsQuestions (BIR REVENUE MEMORANDUM CIRCULAR NO. 74-90)
They govern the filing and processing of applications for authority to construct and operate mini-hydroelectric power plants, including the terms and conditions of the operating contracts concluded pursuant thereto.
Any individual, cooperative, corporation, or association engaged in or intending to engage in construction/installation/operation of a hydroelectric plant with installed capacity of not less than 101 kW nor more than 10,000 kW.
An electric-power-generating plant that (a) uses kinetic energy of falling/running water (run-of-river) to turn a turbine generator, and (b) has installed capacity from 101 kW to 10,000 kW.
Any “person” as defined (at least 60% Philippine-owned/citizenship for corporations/stock ownership), not otherwise disqualified by law.
By registering with the OEA and paying the application fee within six (6) months from the effectivity of the rules; registration and payment are sufficient bases for granting operating contracts.
It must be in writing, verified, accomplished in two copies, and must show jurisdictional facts, applicant name/address, a brief project description (including how water will be used, amount of water needed, power to be generated), and the proposed project location.
Among others: (1) SEC registration (and AOI/DTI certification for single proprietorship), (2) proposed memorandum of agreement on power purchase and wheeling (as applicable), (3) comprehensive feasibility study covering technical/economic/financial/social/administrative viability with detailed items listed, (4) processing fee of P1.00 per kW estimated installed capacity, and (5) other papers required by OEA.
It must include planned activities such as data collection/review, detailed survey/program of investigations (e.g., topographic surveys, geologic mapping, gauging stations), site inspections, hydrologic/hydraulic studies, plant O&M studies, marketability assessment (grid-connected or isolated), alternative layouts/design optimization, detailed quantity/cost estimates, DENR-aligned environmental project description and watershed plan with LGU endorsement, construction schedule, economic/financial evaluation with sensitivity analysis, and a plant operations manual (plus dispatch rules if selling to the grid).
At least minimum working capital of P35,000 per kW to support first two years’ work program, ability to raise additional working capital of at least 60% of estimated project cost for remaining works and plant operations; current ratio 1.5:1; and debt-equity ratio 3:1 (plus other factors).
The OEA must inform the applicant within two days in writing, giving 15 working days from receipt to correct deficiencies. Failure to do so means the application is deemed abandoned and returned. The period may be extended for good cause upon written request before the deadline expires.
Four (4) months from receipt, provided all documents/clearances contemplated are timely submitted and no objections are raised by concerned parties.
25 years, renewable for another 25 years. The license is co-terminous with the operating contract term.
Examples: failure to comply with conditions/requirements under which the license was issued; violation of provisions of the operating contract or R.A. 7156.
Full exemption from national government income taxes for seven years from start of commercial operations; exemption from tariff duties and VAT on certain imports of machinery/equipment (subject to conditions and OEA prior approval); and exemption from 10% VAT on gross receipts from sale of electric power (wheeled through NAPOCOR grid or existing utility lines).
Commence construction within 12 months from contract awarding (extension possible for another 12 months for justifiable reasons); secure and comply with all legal requirements related to construction (including labor/health/safety/ecology); and safeguard the watershed area against illegal logging/forest destruction, assist DENR, and report socio-economic programs to OEA.
Avoided cost is the cost of the affected grids had NAPOCOR generated the equivalent power itself before disposing it to third parties. Rates for the purchase of electricity by NAPOCOR/utilities must be based on the agreed price based on NAPOCOR’s or the utility’s avoided cost.
Except for debtor-creditor relations, conflicts/disputes are under the jurisdiction of the OEA.