Rules on Mini-Hydroelectric Power Plant Operations

"Avoided cost": Cost NAPOCOR incurs if it generated the power instead of buying.
"Capacity": Electric load rating in kilowatts (kw).
"Electric cooperative": Authorized cooperatives supplying electricity.
"Electric utility": Includes cooperative, local government, or private operators within NAPOCOR grids or others.
"End-user": Recipient of electricity generated by mini-hydro power plants.
"Feasibility study": Site-specific study for project viability.
"Franchised area": Geographical area franchised to an electric utility.
"Grid operator": Operators of interconnected transmission lines and plants.
"Hydroelectric power": Electricity from kinetic energy of falling or running water.
"Mini-hydroelectric power developer": Person or entity constructing or operating plants with capacity between 101 kw to 10,000 kw.
"Mini-hydroelectric power plant": A plant that uses run-of-river water flow, with capacity limits as stated.
Other terms include NAPOCOR, OEA, wheeling (transmission service), person (Filipino-owned entities), and water resource.

Any qualified Filipino citizen or entity with at least 60% Filipino ownership may apply.
Existing permit holders at the time of rules may register within six months to avail incentives.

Written, verified application with jurisdictional facts, project description, water usage, power to be generated, and location.
Documents required:
- SEC certificate or DTI certification.
- Proposed power purchase and wheeling agreements.
- Comprehensive feasibility study covering technical, economic, social, environmental, hydrologic, layout, and financial aspects.
- Project description compliant with DENR guidelines including environmental impacts and watershed plan.
- Construction schedule, economic evaluation, operation manual, and operation rules.
- Processing fee: Php 1.00 per kilowatt of installed capacity.
- Other documents as required by OEA.

OEA informs defects within 2 days; applicant must correct within 15 working days or application abandoned.
Extension possible for good cause.

Project should promote public interest.
Applicant must be technically and financially capable.
Construction must not close existing water outlets.
Compliance with safety and environmental certificates required.
Project must fulfill purposes of R.A. 7156.
OEA resolves application within 4 months if all documents and conditions are met.

Seven-year income tax exemption from commercial operation start.
Seven-year exemption from tariff duties and VAT on importation of machinery and equipment, subject to conditions.
100% tax credit on VAT and duties for domestically purchased machinery within 7 years.
Special realty tax rate capped at 2.5% on equipment cost.
Exemption from 10% VAT on gross receipts from electricity sales.

Perform operations, commence construction within 12 months (extension up to 12 months allowed).
Secure legal and regulatory compliance, including labor, health, safety, and environmental laws.
Implement good operational practices, watershed protection, and cooperate with DENR.
Provide OEA with reports, maintain records, and allow inspections.
Respect rights of other utilities and users; restore any disrupted water outlets at own expense.
Maintain and allow access to meters and equipment.
Operate plant at maximum efficiency and report quarterly.
Negotiate interconnection agreements and install safety protective devices.
Maintain hygiene and environmental safeguards.
Obtain OEA approval for major work program changes.
Allow BIR and OEA auditors access to financial records.
Be subject to income tax after 7 years; provide proof of tax payments.
Prioritize Filipino employment and training, with reasonable allowance for foreign experts.
Post bond or guarantee for faithful performance.

Delays caused by force majeure excuse performance with extension of time equal to delay.
Continuous force majeure over 3 months allows contract termination by either party.
Includes acts of God, war, riots, strikes, natural disasters.

Development of less than 50% of site potential is nonexclusive.
OEA can grant full development rights after evaluation, with original developer having right of first option.
Successor developer reimburses original developer based on prior investments if option is forfeited.
OEA may issue nonexclusive permits for 3-month reconnaissance studies on a first-come, first-served basis.

NAPOCOR must purchase all power if no other connection is possible.
Transmission lines of NAPOCOR and electric utilities must be accessible for power delivery under agreed or OEA-set terms.
Purchase rates based on agreed prices reflecting NAPOCOR or utility avoided costs.
Costs of new transmission facilities to be negotiated and possibly shared.

OEA has jurisdiction over conflicts arising from R.A. 7156 implementation except debtor-creditor disputes.