AN ACT PROMOTING THE USE OF MICROGRID SYSTEMS TO ACCELERATE THE TOTAL ELECTRIFICATION OF UNSERVED AND UNDERSERVED AREAS NATIONWIDE

Eighteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-sixth day of July, two thousand twenty one.

[ REPUBLIC ACT NO. 11646, January 21, 2022 ]

AN ACT PROMOTING THE USE OF MICROGRID SYSTEMS TO ACCELERATE THE TOTAL ELECTRIFICATION OF UNSERVED AND UNDERSERVED AREAS NATIONWIDE

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Title. – This Act shall be referred to as the “Microgrid Systems Act”.

Section 2. Declaration of Policy. – It is hereby declared the policy of the State to:

Section 3. Scope and Application. – This Act shall apply to the development of microgrid systems in unserved and underserved areas nationwide.

Section 4. Definition of Terms. – For purposes of this Act, the following terms shall be defined as stated below:

Section 5. Microgrid Systems in Unserved and Underserved Areas. – MGSPs may provide integrated power generation and distribution services in DU identified unserved areas following the procedure in Section 9 of this Act, and shall provide the same in the Department of Energy (DOE) declared unserved and underserved areas after the conduct of a CSP in accordance with Sections 8, 11, and 12 of this Act: Provided, That only isolated microgrid systems and grid-tied microgrid systems operating in island mode shall be allowed: Provided, further, That unserved and underserved areas that already have an appropriation for electrification in the General Appropriations Act (GAA) at the time of the effectivity of this Act shall not be included in the list of DU identified unserved areas and DOE declared unserved and underserved areas.

Section 6. Microgrid System Providers. – The ownership and operation of a microgrid system in unserved and underserved areas pursuant to this Act shall not be considered a public utility operation. For this purpose, any MGSP shall bot be required to secure a franchise from Congress, but shall secure an ATO from the ERC prior to its operation. All qualified third parties (QTPs) providing alternative electric service pursuant to Section 59 of Republic Act No. 9136 are hereby renamed and shall hereafter to be known as MGSPs.

Any party, including private corporation, local government units, cooperatives, nongovernment organizations, generation companies and their subsidiaries, and DUs and their subsidiaries who have demonstrated the capability and willingness to comply with the relevant technical financial, and other requirements, may be an MGSP: Provided, That these entities shall not subsidize their respective MGSPs and shall maintain a separate account for such business undertaking pursuant to ERC’s applicable rules and guidelines on business separation and unbundling, whenever applicable.

Section 7. Waiver of Obligation to Provide Distribution Services and Connections and to Supply Electricity. – DOE declared unserved or underserved areas or DU identified unserved areas which are awarded to MGSPs pursuant to Sections 8 and 9 of this Act shall be deemed waived by the DU insofar as its obligation to provide distribution services and connections to end-users and supply electricity to the area concerned. The waiver shall not transfer, abandon, or modify the DU’s franchise but bestows upon the awarded and compliant MGSP the exclusive right and obligation during the existence of the MSC, on behalf of the NPC, to provide integrated power generation and distribution services to the unserved or underserved area during the period of the MSC, consistent with the NPC’s missionary electrification function.

Section 8. Competitive Selection Process for Electrification and Service of DOE Declared Unserved and Underserved Areas by Microgrid System Providers. – The DOE shall declare unserved and underserved areas for electrification and service by MGSPs pursuant to Section 12 of this Act. The DOE declared unserved and underserved areas shall be subjected to CSP. All CSPs shall:

A DU’s MGSP may tender a lower offer in every CSP it participates in within its franchise area, unless otherwise provided in Section 17 of this Act, within seven (7) calendar days from the announcement of the winning MGSP in the CSP: Provided, That such tender shall be submitted to the DOE or its authorized entity, whichever is applicable, and the winning MGSP.

The award by the DOE or its authorized entity to the MGSP, the execution of the MSC, and the filing of a complete application with the ERC shall comprise the provisional authority of the MGSP to start collection of the rate specified in the award, the MSC, and the application upon the start of the MGSP’s operation: Provided, That the ERC shall schedule and conduct a hearing therein within thirty (30) calendar days from receipt of the complete application, upon publication and notice to all affected parties: Provided, further, That the final decision shall be issued within one hundred thirty-five (135) calendar days from receipt of the complete application.

In the event that there are no participants or there is no awarded MGSP in the CSP for a particular unserved or underserved area, the NPC shall perform its missionary electrification mandate in the said area until an MGSP takes part or is awarded in the next CSP.

Section 9. Procedure for Electrification of DU Identified Unserved Area Through Microgrid System. – The DU may identify unserved areas for electrification by DU operated microgrid systems in its LTER. The list of DU identified unserved areas shall be annually published by the DOE on its website.

The DOE, or the NPC if authorized by the DOE, may receive from MGSPs all-in price offers to provide integrated power generation and distribution services in a particular Du identified unserved area within thirty (30) calendar days from the publication of the list of DU identified unserved areas: Provided, That the DU shall have the right to tender a lower all-in price offer within seven (7) calendar days after the DOE or the NPC publishes all price offers it has received on its website: Provided, further, That in the event the DU tenders a lower all-price offer, it shall electrify that DU identified unserved area through a DU operated microgrid system within eighteen (18) months from the award by the DOE or the NPC: Provided, finally, That if the Du does not tender a lower all-price offer, the DOE or the NPS shall award the MGSP with the lowest all-in price offer to electrify the DU identified unserved area and the NPC shall enter into an MSC with such MGSP. In the event there are no offers from any MGSP for a particular DU identified unserved area, the DU shall electrify the area through a DU operated microgrid system within eighteen (18) months from the lapse of the thirty (30) calendar day period for MGSPs to tender an all-in price offer. This entire procedure shall:

The award by the DOE or the NPC to the DU or the MGSP, the execution of the MSC if applicable, and the filing of a complete applications with the ERC shall comprise the provisional authority of the DU or MGSP to start collection of the rate specified in the award, the MSC, and the application upon the start of the DU or MGSP’s operation: Provided, That the ERC shall schedule and conduct a hearing thereon within thirty (30) calendar days from receipt of the complete application, upon publication and notice to all affected parties: Provided, further, That the final decision shall be issued within one hundred thirty-five (135) calendar days from receipt of the complete application.

Section 10. Availment of the UCME. – Only MGSPs and DU operated microgrid systems that operate in unserved areas and underserved areas not connected to the grid or within a franchise area where the distribution system is not connected to the grid may be entitled to avail of the UCME as determined by the ERC. The availment of the UCME shall be rationalized by the DOE in consultation with the DUs taking into consideration equity and continued economic progress in these areas.

Section 11. Powers, Functions, and Responsibilities of the Energy Regulatory Commission. – In addition to its functions under Republic Act No. 9136, the ERC shall:

Section 12. Powers, Functions, and Responsibilities of the Department of Energy. – In addition to its functions under Republic Act No. 7638, otherwise known as the “Department of Energy Act of 1992”, as amended, the DOE shall:

Section 13. Functions and Responsibilities of the National Electrification Administration. – The NEA shall:

Section 14. Functions and Responsibilities of the National Power Corporation. – The NPC shall:

Section 15. Functions and Responsibilities of Distribution Utilities. – A DU may enter into a joint venture for the installation and operation of microgrid systems: Provided, That the DU shall maintain a separate account for such business undertaking pursuant to the ERC’s applicable rules and guidelines on business separation and unbundling: Provided, further, That only a joint venture for the installation and operation of microgrid systems where the DU owns at least fifty-one (51%) of capital shall be considered as a DU operated microgrid systems or a DU’s MGSP.

DUs shall be allowed to impose a separate rate in DU identified unserved areas served by a DU operated microgrid system or DOE declared unserved and underserved areas served by a DU’s MGSP: Provided, That any cross-subsidy between the end-users of the DU operated microgrid system or the DU’s MGSP and the other end-users of the DU shall be prohibited.

The DU pursuant to the directive to pursue the total electrification of their franchise areas shall prepare and submit its LTER which shall contain the following, among others:

The DU shall integrate the LTER in its DDP.

Section 16. Functions and Responsibilities of an MGSP and a DU Operated Microgrid System. – An MGSP and a DU operated microgrid system shall:

The end-users in unserved areas and underserved areas not connected to the grid or within a franchise area where the distribution system is not connected to the grid shall be exempt from the following:

Section 17. Expiration of Microgrid System Provider Service Contract. – In the event of a distribution grid extension upon the expiration of an MSC, the DU shall have the option to acquire the microgrid system of the MGSP, and resume its obligation to provide distribution services and connection, and supply electricity to the said area subject to the approval of the ERC and pursuant to the detailed transition procedure of the DOE provided in Sections 11 and 12 of this Act. If a DU’s distribution system is connected to the grid, the resumption of the DU’s obligation over the area shall no longer entitle the end-users in the said area to the UCME.

Should the DU choose not to exercise its option, or should there be no distribution grid extension upon the expiration of an MSC, a CSP shall be conducted pursuant to Section 8 and 12 of this Act to determine who shall provide integrated power generation and distribution services in the area: Provided, That the MGSP with the expiring MSC over the area that participates in such CSP shall have the exclusive right to tender a lower offer within seven (7) calendar days from the announcement of the winning MGSP in the CSP: Provided, further, That such tender shall be submitted to the DOE or its authorized entity, whichever is applicable, and the winning MGSP. The ERC shall determine whether the awarded MGSP shall be entitled to subsidy in accordance with Section 10 of this Act.

Section 18. Non-Disqualification from Extension of Franchise. – The presence of an MGSP in the franchise area of a DU shall not disqualify the said DU from seeking a renewal of its Certificate of Public Convenience and Necessity from the ERC or an extension of the term of its franchise from Congress.

Section 19. Permitting Process. – Republic Act No. 11234, otherwise known as the “Energy Virtual One-Stop Shop Act”, shall apply to the permitting process of all MGSPs: Provided, That the applicable time frames shall be reduced to half of the time frames indicated in Sections 13, 14, 15, and 16 of Republic Act No. 11234 unless the specific time frame is provided in this Act.

Section 20. Strengthening and Expansion of the Electric Power Industry Management Bureau in the Department of Energy. – The DOE shall strengthen and expand the Electric Power Industry Management Bureau (EPIMB) for the effective implementation of this Act. The new organizational structure and staffing complement for the EPIMB shall be determined by the DOE Secretary, in consultation with the Department of Budget and Management, and in accordance with existing civil service rules and regulations. The budgetary requirements shall be taken from the current appropriations of the DOE. Thereafter, the funding for the expanded EPIMB shall be included in the annual GAA.

Section 21. Creation of a Special Division in the Energy Regulatory Commission. – A Special Division attached to the appropriate Service Department in the ERC is hereby created for the effective implementation of this Act. The new organizational structure and staffing complement shall be determined by the Commission and approved by the Office of the President in accordance with existing laws, rules, and regulations. The budgetary requirements shall be taken from the current appropriations of the ERC. Thereafter, the funding for the dedicated division shall be included in the GAA.

Section 22. Transitory Provision. – Benefits or incentives extended to QTPs under existing laws not amended or repealed under this Act shall remain in full force and effect. No provision of this Act shall be taken as to diminish any right vested by virtue of existing laws, contracts, or agreements.

Section 23. Prohibited Acts. – Any person, natural or juridical, is prohibited from the following acts:

Section 24. Criminal and Administrative Penalties. – The responsible officers and employees of any private corporation or government agency who commit the following prohibited acts shall, upon conviction, suffer the following penalties:

Any person who willfully aids or abets the commission of these prohibited acts or who cause the commission of any such act by another shall be liable in the same manner as the principal. In cases f an association, partnership, or corporation, the penalty shall be imposed on the member, partner, president, chief operating officer, chief executive officer, director, or officer responsible for the violation.

Without the prejudice to the aforementioned criminal liabilities, any government officer or employee who violates Section 23(e) of this Act shall be held administratively liable, as follows:

Section 25. Congressional Oversight. – The Joint Congressional Energy Commission (JCEC) shall exercise oversight powers over the implementation of this Act. The DOE and ERC shall submit annually to the JCEC a thorough report on the implementation of this Act not later than 15 March of every year: Provided, That the report shall include identification of legislative gaps, if any, and recommended ways forward.

Section 26. Implementing Rules and Regulations. – The DOE, in consultation with the appropriate government agencies mentioned herein and electric power industry stakeholders, shall issue the implementing rules and regulations of this Act within sixty (60) working days upon its effectivity.

Section 27. Amendatory Clause. – This Act amends Section 16(c) of Commonwealth Act No. 156 otherwise known as the “Public Service Act”; Section 8 of Executive Order No. 172 Series of 1987, entitled “Creating the Energy Regulatory Board”; Sections 28, 43, 45(a), 51(l), 59, and 70 of Republic Act No. 9136; Sections 13, 14, 15, and 16 of Republic Act No. 11234; and any other law, presidential decree or issuance, executive order, letter of instruction, rules, and regulations inconsistent with the provisions of this Act.

Section 28. Separability Clause. – If any portion or provision of this Act is declared unconstitutional, the remainder of this Act or any provision not affected thereby shall remain in force and effect.

Section 29. Repealing Clause. – Any law, presidential decree or issuance, executive order, letter of instruction, rules and regulations, and legislative or administrative franchises inconsistent with the provisions of this Act is hereby repealed or modified accordingly.

Section 30. Effectivity. - This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation.

Approved,

This Act which is a consolidation of Senate Bill No. 1928 and House Bill No. 8203 was passed by the Senate of the Philippines and the House of Representatives on November 9, 2021 and November 17, 2021, respectively.

Approved: JAN 21 2022

(SGD.) RODRIGO ROA DUTERTE
President of the Philippines