Law Summary
Scope of Application
- Applies to development of microgrid systems nationwide in unserved and underserved areas.
Key Definitions
- Authority to operate (ATO): License issued by ERC to microgrid providers for integrated power services.
- Competitive selection process (CSP): Transparent procedure (e.g., auction, Swiss challenge) to award service contracts.
- Decentralized power generation (DPG): Small-scale local power generation units connected to microgrids.
- Distribution system: Network delivering electricity from transmission or generation facilities to end-users.
- Distribution utility (DU): Entities with franchise to operate distribution systems, including electric cooperatives and LGUs.
- DU operated microgrid system: Microgrid run by a DU in unserved areas within its electrification roadmap.
- Electric Cooperative (EC): Distribution utility organized under presidential decree or law.
- End-user: Person or entity consuming electricity.
- Grid: High voltage backbone transmission system.
- Grid-tied microgrid system: Microgrid connected to DU distribution system, capable of synchronized or island mode.
- Island mode: Grid-tied microgrid operating independently from the main grid.
- Isolated microgrid system: Microgrid operating independently without connection to DU distribution.
- Local total electrification roadmap (LTER): DU’s strategic electrification plan and annual work program.
- Microgrid system: Interconnected loads and generation facilities operating as integrated power generation and distribution.
- Microgrid system service contract (MSC): Contract between MGSP and NPC for missionary electrification and subsidized service.
- Microgrid system provider (MGSP): Entity providing installation, operation, and maintenance of microgrids.
- National total electrification roadmap (NTER): National strategic electrification plan integrating LTERs and Distribution Development Plans.
- NPC Graduation Plan: NPC strategy to increase private sector participation in its service areas.
- Synchronized mode: Grid-tied microgrid operations at same frequency as DU distribution system allowing power flow.
- Underserved area: Area with less than 24-hour electricity supply due to various causes, failing ERC performance evaluations.
- Universal charge for missionary electrification (UCME): Non-bypassable charge from end-users to subsidize electrification.
- Unserved area: Area with no existing electricity access or distribution extensions.
Microgrid Operations in Unserved and Underserved Areas
- MGSPs may provide integrated generation and distribution services in DU identified unserved areas and DOE declared areas after CSP.
- Only isolated or grid-tied microgrids operating in island mode are permitted.
- Areas with existing GAA-electrification appropriations are excluded from DU and DOE unserved area lists.
Microgrid System Providers (MGSPs)
- Operating microgrids is not deemed public utility activity; no congressional franchise required.
- MGSPs must secure ERC ATO prior to operation.
- Eligible MGSPs include private companies, LGUs, cooperatives, generation companies, and DUs.
- Entities cannot subsidize their MGSP business and must maintain separate accounts per ERC rules.
- Existing Qualified Third Parties under RA 9136 are renamed MGSPs.
Waiver of Distribution Obligations by DUs
- Awarded MGSPs in DOE or DU identified areas waive the DU’s obligation to provide distribution and supply.
- Waiver does not alter the DU franchise; MGSP has exclusive rights during MSC period on behalf of NPC.
Competitive Selection Process (CSP)
- DOE annually declares unserved and underserved areas and subjects them to CSP.
- CSP prioritizes renewable, low-cost, indigenous energy sources.
- Process based on DOE’s area lists and aligned with DU LTERs, DDPs, and the NTER.
- CSP must be simple, uniform, transparent, completed within 90 calendar days.
- DUs may tender lower offers in CSP within 7 days of winning announcement.
- Award and MSC execution provide provisional authority to MGSP for rate collection.
- ERC shall hear applications within 30 days and render decisions within 135 days.
- If no MGSP awarded, NPC continues missionary electrification until a future CSP award.
Electrification Procedure for DU Identified Unserved Areas
- DU may identify unserved areas in LTER for microgrid electrification.
- DOE annually publishes these identified areas; MGSPs submit all-in price offers within 30 days.
- DU may tender a lower all-in price offer within 7 days of publication.
- DU must electrify if lower offer awarded within 18 months.
- If no DU lower offer, MGSP with lowest offer awarded MSC.
- Without MGSP offers, DU shall electrify within 18 months.
- Process must prioritize renewables, be streamlined, transparent, completed within 90 days.
- Award and MSC execution confer provisional authority pending ERC approval.
Universal Charge for Missionary Electrification (UCME)
- Only MGSPs and DU-operated microgrids in unserved and off-grid underserved areas may avail of UCME subsidies.
- DOE and ERC rationalize UCME distribution to promote equity and economic progress.
Powers and Responsibilities of the Energy Regulatory Commission (ERC)
- Provide simplified permitting for MGSPs and DU microgrid systems.
- Issue ATOs within prescribed time frames.
- Develop and promulgate technical and performance standards compatible with existing grid codes.
- Review and approve MSCs.
- Exercise rate-making including cost, subsidy, and trade retail rates.
- Monitor compliance of MGSPs with ATO obligations.
- Exclusive jurisdiction over disputes arising under this Act, except competition cases under the Philippine Competition Act.
Powers and Responsibilities of the Department of Energy (DOE)
- Publish annual NTER in consultation with stakeholders.
- Simplify permitting processes.
- Determine DU clusters for LTER and DDP submissions and CSPs.
- Set timeframes for compliance with LTERs and DDPs.
- Receive petitions from end-users to declare unserved/underserved areas.
- Identify and publish lists of such areas annually with NPC, NEA aid.
- Validate unserved/underserved areas outside DU LTERs before declaration.
- Prepare standard MSC templates.
- Conduct CSPs for DOE declared areas, authorize NPC/NEA to assist or conduct.
- Monitor MGSP operations and MSC compliance; review on reasonable grounds.
- Establish transition procedures for service handover.
Functions of the National Electrification Administration (NEA)
- Assist Electric Cooperatives with LTER preparation.
- Verify unserved and underserved areas lists submitted by ECs.
- Submit recommendations to DOE annually.
Functions of the National Power Corporation (NPC)
- Prepare and execute graduation plan to encourage private sector participation.
- Continue missionary electrification in areas without MGSP.
- Conduct CSPs when authorized by DOE.
- Administer and collect UCME from DUs.
- Simplify UCME subsidy claim procedures and provide timely subsidy release.
Functions and Responsibilities of Distribution Utilities (DUs)
- May enter joint ventures for microgrid installation and operation; must maintain separate accounting.
- Joint ventures with at least 51% DU ownership considered DU-operated microgrids.
- May impose separate rates for microgrid-served areas; cross-subsidies prohibited.
- Must prepare and submit validated LTERs integrated into Distribution Development Plans.
Responsibilities of MGSPs and DU Operated Microgrid Systems
- Build, operate, maintain, and control microgrids as per MSC and laws.
- Meet supply requirements and comply with electrification programs.
- Submit reports to ERC and DOE as required.
- Ensure end-user safety and protection.
- MGSPs exempt from public listing and market share limitations under RA 9136.
- End-users in unserved and off-grid underserved areas exempt from paying feed-in tariffs and universal charges.
Contract Expiration and Transition
- Upon MSC expiration and distribution grid extension, DU may acquire microgrid assets and resume supply obligations, subject to ERC approval.
- If DU does not acquire or no grid extension occurs, CSP is conducted to determine next service provider.
- Expiring MGSP has right to tender lower offer within 7 days of CSP award.
- ERC determines subsidy entitlement post-transition.
Non-Disqualification for Franchise Renewal
- Presence of MGSP does not affect DU’s eligibility to renew public service certificates or franchise extensions.
Permitting Process and Regulatory Support
- RA 11234 applies with modified (halved) time frames for MGSP permitting processes.
Institutional Strengthening
- DOE to strengthen and expand its Electric Power Industry Management Bureau for Act implementation.
- ERC to create a special division dedicated to this Act’s implementation.
- Organizational structures and budget requirements to be determined accordingly.
Transitory Provisions
- Existing benefits or incentives for Qualified Third Parties under unchanged laws remain effective.
- Existing rights under prior laws, contracts, and agreements are preserved.
Prohibited Acts
- Refusing installation of microgrid systems compliant with law.
- Refusing transfer of integrated power services to MGSP or supply to DU.
- Refusing DU acquisition of microgrid systems per law.
- Imposing unauthorized contractual terms or charges.
- Failure to comply with obligations and time frames under the law.
Penalties for Violations
- Significant imprisonment (2 to 8 years) and fines (up to 100 million pesos) depending on severity.
- Liability extends to persons aiding, and in corporations to responsible officers.
- Government officers face administrative sanctions including suspension and dismissal for repeated offenses.
Congressional Oversight
- JCEC exercises oversight over law implementation.
- DOE and ERC to submit annual comprehensive reports including legislative gap analysis.
Rulemaking and Amendment Clauses
- DOE to issue Implementing Rules and Regulations within 60 working days of effectivity.
- Act amends several provisions in Public Service Act, RA 9136, and others to align with new provisions.
Separability and Repeal
- Unconstitutional provision