Republic of the Philippines

DEPARTMENT OF ENERGY
(Kagawaran ng Enerhiya)

DEPARTMENT CIRCULAR NO. 0C20220JOOFtr

RULES AND REGULATIONS TO IMPLEMENT REPUBLIC ACT NO. 11646
(MICROGRID SYSTEMS ACT)

WHEREAS, Section 9 of the 1987 Constitution of the Philippines declares as a policy

that the State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty through
policies that provide adequate social services, promote full employment, a rising
standard of living, and an improved quality of life for all;

WHEREAS, Section 20 of the 1987 Constitution of the Philippines also provides that the
State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments:

WHEREAS, Section 2 (a) and (b) of Republic Act (RA) No. 9136 or the "Electric Power
Industry Reform Act (EPIRA)", declares that it is the policy of the State to ensure and
accelerate the total electrification of the country; and, to ensure quality, reliability,
security, and affordability of the supply of electric power (U) ensure transparent and
reasonable prices of electricity in a regime of free and fair competition and full public
accountability; (iii) enhance the inflow of private capital and broaden the ownership base
of the power generation, transmission and distribution sectors: (iv) protect the public
interest as it is affected by the rates and services of electric utilities and other providers
of electric power; and (v) encourage the efficient use of energy and other modalities of
demand-side management;

WHEREAS, Section 2 (f) and (h) of the EPIRA states that it is also the policy of the
State to protect the public interest as it is affected by the rates and services of electric
utilities and other providers of electric power; and, to promote the utilization of
indigenous and new and renewable energy resources in power generation in order to
reduce dependence on imported energy;

WHEREAS, on 21 January 2022, Republic Act No. 11646 entitled "An Act Promoting
the Use of Microgrid Systems to Accelerate the Total Electrification of Unserved and
Underserved Areas Nationwide" also known as "Microgrid Systems Act" (Act) was
approved;

WHEREAS, Section 26 of Republic Act No. 11646 states that the Department of Energy
(DOE) shall issue the implementing rules and regulations of this Act within sixty (60)
working days upon its effectivity;

WHEREAS, the DOE in compliance with Section 26 of the Act, issued Special Order
S02022-02-0004 on 21 February 2022 creating the Technical Working Group (TWG)
composed of the Department of Energy, National Power Corporation, National
Electrification Administration, National Transmission Corporation, and the Energy
Regulatory Commission to formulate the Implementing Rules and Regulations;

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WHEREAS, the DOE together with the TWG conducted a virtual public consultation with
the stakeholders to discuss the proposed implementing rules and regulations on 08 April
2022.

NOW, THEREFORE, in consideration of the foregoing, the DOE, pursuant to Section 26

of Republic Act No. 11646, in consultation with appropriate government agencies such
as the Energy Regulatory Commission (ERC), National Electrification Administration
(NEA), National Power Corporation (NPC), National Transmission Corporation
(TRANSCO) and Electric Power Industry Stakeholders, hereby issues, adopts and
promulgates the following rules and regulations to implement the provisions of the Act.

PART I. General Provisions

SECTION 1. Title

This Department Circular shall be known as the "Implementing Rules and Regulations
(IRR) of Republic Act No. 11646, otherwise known as the "Micro Grid Systems Act" and
hereinafter referred to as the "IRR".

SECTION 2. Declaration of PolIcies

It is hereby declared the policy of the State to:

2.1. Pursue sustainable rural development and poverty reduction towards nation
building through energy access;

2.2. Accelerate total electrification and ensure the provision of quality, reliable, secure,
and affordable supply of electric power in unserved and underserved areas;

2.3. Promote private sector participation in the electrification of unserved and

underserved areas;

2.4. Provide a competitive environment and level playing field for different kinds of
energy sources with a preference for low-cost, indigenous, renewable, and
environment-friendly sources of energy; and,

2.5. Ensure the adoption of a dynamic regulatory environment that allows end users to
benefit from technologies and innovations in the electric power industry.

SECTION 3. Scope

In accordance with Section 3 of the Act, this IRR shall apply to the development of
niicrogrid systems in unserved and underserved areas nationwide.

SECTION 4. Definition of Terms

As used in the Act and this IRR, the following terms shall be defined as follows:

4.1. AuthorIty to Operate (ATO) refers to the document issued by the Energy
Regulatory Commission (ERC) to the microgrid system provider, which shall
constitute the latter's license to provide integrated power generation and distribution
services to unserved or underserved areas;

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4.2. Certificate of Compliance (COC) refers to a license issued by the ERC in favor
of a person or entity to operate a power plant or other facilities used in the generation
of electricity pursuant to Section 6 of RA 9136 and Section 4 of the Implementing
Rules and Regulations of RA 9136;

4.3. Competitive Selection Process for Microgrid System Provider (CSP) refers to
the procedure wherein an entity is awarded the contract to provide integrated power
generation and distribution services to an unserved or underserved area through a
transparent and competitive procedure, such as but not limited to, an auction.
unsolicited proposal, or Swiss challenge, taking into consideration the requirements
of the Act and other applicable laws;

4.4. Decentralized Power Generation (DPG) refers to small-scale power generation

facilities which operate locally and are connected to the distribution system of the
microgrid or end-user that could be aggregated to provide electric power necessary
to meet demand, including, but not limited to. mini-wind turbines connected to a
microgrid, energy storage. and solar photovoltaic rooftop of an end-user;

4.5. Distribution System refers to the system of wires and associated facilities
extending between the delivery points on the transmission, sub transmission
system, or power generation facility connection and the point of connection to the
premises of the end-user, whichever is applicable;

4.6. Distribution Utility (DU) refers to any electric cooperative, private corporation,
government-owned utility, or existing local government unit which has a franchise to
operate a distribution system including those whose franchise covers economic
zones;

4.7. DU Operated Microgrid System refers to a microgrid system owned and

operated by a DU in a DU identified unserved area in its local total electrification
roadmap;

4.8. Electric Cooperative (EC) refers to a DU organized pursuant to Presidential

Decree No. 269, as amended, or as otherwise provided in the Act;

4.9. End-user refers to any natural or juridical person requiring the supply and delivery
of electricity for its own use;

4.10. Grid refers to the high voltage backbone system of interconnected transmission
lines, substations, and related facilities, located in each of Luzon, Visayas, and
Mindanao;

4.11. Grid-tied Microgrid System refers to a microgrid system that is electrically

connected to the distribution system of a DU and can operate in synchronized mode
or in island mode;

4.12. Island Mode refers to a grid-tied microgrid system operating as a stand-alone

system in supplying and delivering electric power to connected end-users;

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4.13. Isolated Microgrid System refers to a microgrid system that is not electrically
connected to a distribution system of a DU and is operating as a stand-alone system
in supplying and delivering electric power to connected end-users;

4.14. Local Total Electrification Roadmap (LTER) refers to a DU's comprehensive 10-
year strategic plan with an annual work plan to accelerate total electrification in its
franchise area, to be updated annually;

4.15. Microgrid System refers to a group of interconnected loads and a generation

facility or DPG with clearly defined electrical boundaries that acts as an integrated
power generation and distribution system, whether or not connected to a distribution
or transmission system;

4.16. Microgrld System Provider Service Contract (MSC) refers to the contract
between the microgrid system provider and the National Power Corporation (NPC)
whereby the microgrid system provider performs the missionary electrification
function on behalf of the NPC and provides integrated power generation and
distribution services in an unserved or underserved area, and to receive subsidy
whenever applicable;

4.17. Microgrld System Provider (MGSP) refers to a natural or juridical person whose
business includes the installation, operation, and maintenance of microgrid systems
in unserved or underserved areas nationwide;

4.18. MGSP Proponent refers to any entity that is eligible to provide integrated power
generation and distribution services in unserved and underserved areas;

4.19. National Total Electrification Roadmap (NTER) refers to a comprehensive

national strategic plan including a work plan to accelerate total electrification in the
country taking into account the various LTERs and the Distribution Development
Plans (DDPs). It shall be incorporated in the Philippine Energy Plan;

4.20. NPC Graduation Plan refers to a comprehensive and detailed strategy of the NPC
to attract private sector participation in areas purely served by the NPC;

4.21. Philippine Distribution Code (PDC) refers to the set of rules, requirements,
procedures, and standards governing Distribution Utilities and Users of Distribution
System in the operation, maintenance, and development of the Distribution System.
It also defines and establishes the relationship of the Distribution System with the
facilities or installations of the parties connected thereto;

4.22. Philippine Small Grid Guidelines refer to the rules, procedures, and
requirements for the generation scheduling, dispatch, and control of active power,
including provisions of ancillary service, if any, which are required to ensure power
quality, reliability, and security of the Small Grid;

4.23. Private Investor-Owned Utility (PIOU) refers to private business organization

which has an exclusive franchise to operate a distribution system;

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4.24. Qualified Third Party (QTP) refers to the alternative electric service provider duly
qualified and authorized by the ERC to serve Unviable Areas pursuant to Section
59 of the EPIRA and Rule 14 of the EPIRA-IRR;

4.25. Swiss Challenge refers to a competitive procurement system to be followed when

projects are procured through unsolicited proposals from the MGSP Proponent:

4.26. Synchronized Mode refers to the operation of grid-tied rnicrogrid systems whose
generation facility or DPG is able to operate in the same frequency at its connection
point to the distribution system of a DU, and allows the grid-tied microgrid system
to supply to or draw power from the grid:

4.27. Underserved Area refers to a currently served area whose supply of electricity is
less than twenty-four (24) hours daily because of the non-implementation of the
approved capital expenditure projects, noncompliance with the service parameters
of the PDC, or any other reason resulting to an overall failing mark based on EROs
latest annual technical evaluation of the performance of distribution systems:

4.28. Universal Charge for Missionary Electrification (UC-ME) refers to the portion of
the non-bypassable charge passed on and collected from all end-users on a
monthly basis by the DUs pursuant to RA 9136, a portion of which is allocated for
the provision of integrated power generation and distribution services in unserved
and underserved areas not connected to the grid or within a franchise area where
the distribution system is not connected to the grid:

4.29. Unserved Area refers to an area, upon the effectivity of the Act, with no electricity
access, no distribution system lines, no home power systems, no connection to any
microgrid system, or for which no distribution grid extension has been developed or
implemented by the DU; and

4.30 Unsolicited Proposal (USP) refers to the proposal for the provision of electricity
service in the unserved and underserved areas, submitted by an MGSP Proponent
to the NPC, which is not in response to a solicitation or request issued by the latter.

PART II - Identification and Declaration of Unserved and

Underserved Areas

SECTION 5. Identification of Unserved Areas and Underserved Areas

5.1. Consistent with Section 15 of the Act, the DUs shalt submit to the DOE and integrate
into its annual DDP, the LTER, which shall include a detailed inventory of all
unserved and underserved areas within its franchise.

5.2. The NPC and NEA, in consultation with the DUs, shall recommend to the DOE the
template of the LTER within thirty (30) calendar days from the effectivity of IRR,
thereafter, the DOE shall issue the final template within fifteen (15) calendar days
upon receipt of the recommended template. The LTER shall contain the following,
among others:

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 5.2.1. A validated detailed inventory of all Areas within a DUs franchise that it plans
to electrify including a specific time frame for electrification, including DU
Identified Unserved Areas for electrification through DU operated microgrid
systems;

5.2.2. A validated annual work plan for electrification; and

5.2.3. A validated detailed inventory of all Unserved and Underserved areas within
its franchise.

5.3. All projects in each annual work plan shall be completed not later than eighteen (18)
months from submission to the DOE or, in the case of DU Identified Unserved Areas,
from the lapse of the thirty (30) calendar day period for MGSP5 to tender an all-in
price offer pursuant to Section 14 of this IRR. For the DU Identified Underserved
Areas included in the work plan, the submission shall include, but is not limited to,
the following:

5.3.1. Technical and Financial Proposal;

5.3.2. Load profile (projected total energy sales, peak demand, growth rate, etc);
5.3.3. Proposed Rate;
5.3.4. Demographic profile; and
5.3.5. Existing electricity provider.

5.4. All LTERs shall be submitted by the DUs to the DOE or by the NEA, in the case of
ECs, not later than the 15th of March every year. In the case of ECs, the NEA shall
include its recommendations in the submission of the LTER.

5.5. The DOE shall receive and validate any petitions from End-users pursuant to
Section 6 of this IRR, and nominations from MGSP Proponents pursuant to Section
15 of this IRR, in consultation with NEA and NPC prior to the DOE's declaration of
Unserved and Underserved areas.

5.6. The DOE shall prepare the NTER and publish it on the DOE website, no later than
30 September of every year.

5.7. Unserved and Underserved Areas that already have an appropriation for
electrification in the General Appropriations Act (GAA) at the time of the effectivity
of the Act shall not be included in the list of DOE Declared Unserved and
Underserved areas and DU Identified Unserved areas.

SECTION 6. End-User Petition of Unserved and Underserved Areas

6.1. Any End-user residing in unserved or underserved areas not identified or included
by the DU in its LTER or not declared by the DOE may file a petition to the DOE for
possible declaration as unserved or underserved areas. The said petition shall
include the following:

6.1.1. Full name;

6.1.2. Complete address;
6.1.3. Contact details;
6.1 .4. Government-issued ID or other competent identifications; and
6.1.5. Electricity service situation of the areas where the petitioner is residing.

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6.2. The DOE, in coordination with NPC, NEA, franchised DU, and other agencies shall
verify the subject area/s qualification for possible inclusion in the list of DOE
declared unserved and underserved areas. The verification shall not be longer than
thirty (30) calendar days from the receipt of the petition.

6.3. The NEA/NPC shall submit to the DOE its verification report including its proposed
action to address the end-users petition.

SECTION 7. Declaration of Unserved and Underserved Areas

7.1. DOE shall declare Unserved and Underserved areas indicated/identified in the
following:

7.1.1 All Unserved and Underserved areas in the DU's LTER not identified for DU
Operated Microgrid System;

7.1.2 NPC-SPUG areas identified in their Graduation Plan pursuant to Section

16.3 of this lRR;

7.1.3 Verified petitioned areas pursuant to Section 6 of this lRR; and

7.1.4 Nominated areas pursuant to Section 15 of this IRR.

The said declaration shall be published on the DOE website no later than the 30th
of September every year.

7.2. Unserved areas identified for electrification by DU Operated Microgrid Systems in

their LTER shall be published by the DOE as DU Identified Unserved areas and
shall undergo CSP pursuant to Section 14 of this IRR.

7.3. The DOE Declared Unserved and Underserved areas or DU Identified Unserved
areas which are awarded to MGSPs pursuant to Sections 13 and 14 of this IRR 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 concemed. 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 and underserved area during the period of
the MSC, consistent with the NPC's missionary electrification function. The DU and
the MGSP shall come to an agreement on the use of existing facilities and
distribution system in the area awarded to the MGSP, either by way of sale, lease
or usufruct or any other manner, during the term of the MGSP without jeopardizing
the affordability of electricity rates in the said area.

PART Ill. Qualification of MGSP

SECTION 8. EligibIlity Requirements

8.1. The participation as an MGSP shall be open to any party including private
corporations, local government units, cooperatives, non-government organizations,

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 generation companies, and their subsidiaries, and DU's and their subsidiaries who
have demonstrated the capability and willingness to comply with the relevant
technical, financial, and other requirements as prescribed under the competitive
selection process for MGSP; and

8.2. The ownership and operation of a microgrid system in Unserved and Underserved
areas shall not be a public utility operation. The MGSP shall not be required to
secure a franchise from Congress but shall secure an ATO and COC from the ERC
prior to its operation.

Section 9. Guidelines for DUe Joint Venture

9.1. A DU may enter into a joint venture for the installation and operation of microgrid
systems. 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. Only a joint venture for the installation and operation of a microgrid
system where the DU with a franchise in the area of operations owns at least fifty-
one (51%) of capital shall be considered as a DU-operated microgrid system or a
DU's MGSP.

9.2. The NEA shall issue guidelines for the ECs entering into a joint venture within sixty
(60) calendar days from the effectivity of this IRR.

9.3. A DU's MGSP may participate in a CSP in a DOE Declared Unserved and
Underserved area. It shall have the right to tender a lower offer within the DU's
franchise area, except where the CSP is conducted in view of an expiring MSC
under Section 21 of this IRR, in which case the MGSP with the expiring MSC over
the area shall have the exclusive right to tender a lower offer.

PART IV. Procedure for Electrification of Unserved and Underserved Areas

through Microgrid System

SECTION 10. Authorized Entity for the Conduct of CSP

The DOE shall conduct the CSP, unless it has authorized the NPC or NEA to conduct the
CSP, for the DOE Declared Unserved and Underserved Areas and the DU Identified
Unserved Areas in the DU franchise area, pursuant to this IRR and subject to the
delegated authority given by the DOE.

SECTION 11. Bids and Awards Committee for MGSP

11.1. MGSP Bids and Awards Committee (MGSP BAG)

A MGSP BAG shall be established and composed of members with verified proof of
expertise or knowledge on procurement, finance or economics, law, and the Philippine
electrical system.

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 11.1.1. An independent MGSP BAC shall be established to spearhead and manage
the CSP for MGSP. The MGSP BAC shall comply with the policy and
procedures in the conduct of CSP for MGSP, as provided for in this IRR.

11.1.2. The MGSP BAC shall be composed of five (5) members.

11.1.3. The Chair and Vice-Chair shall be selected by the members of the MGSP
BAC. The Chairman shall only vote in case of a tie.

11.1.4. A quorum of the MGSP BAC shall be composed of a simple majority of all
voting members of the MGSP SAC.

11.1.5. The MGSP SAC shall be posted on the DOE, NEA and NPC websites.

11.2. MGSP BAC Technical Working Group (TWG) and Secretariat

The MGSP SAC TWG and MGSP SAC Secretariat shall be composed and headed by a
regular or permanent employee, preferably an officer, to assist the MGSP SAC in the
performance of its functions.

11.2.1. The MGSP SAC TWG shall be composed of technical, legal, and financial
personnel.

11.2.2. The MGSP SAC TWG shall assist the MGSP SAC in the technical
components of the CSP for MGSP, such as the development of the MSC,
TOR, eligibility screening, evaluation of bids, and post-qualification.

11.2.3. The MGSP SAC Secretariat shall provide administrative support to the
MGSP SAC for this purpose and serve as the keeper of all records and
documents relating to all CSP for MGSP conducted.

11.2.4. The MGSP SAC Secretariat shall fully document each step of the CSP for
MGSP and prepare and keep written minutes and unedited video recordings
of all the MGSP SAC meetings and proceedings.

11.3. Observers in the CSP for MGSP

To assure all parties to the selection of MGSP that the process employed is conducted in
an open, transparent, effective, efficient, and equitable manner, Observers will be invited
in accordance with this IRR.

11.3.1. In any conduct of a CSP, the ERC, NPC or NEA shall serve as Observers.

11.3.2. Observers shall not participate in the proceedings and shall have no right to
vote;

11 .3.3. Observers shall be given invitations in writing and transmitted formally

through any available modes at least seven (7) calendar days before the
date of the procurement stages;

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 11.3.4. The invitations to the Observers shall be extended in all of the following
stages of the CSP for MGSP: Pre-bid Conferences, Submission and
Opening of Bids, Bid Evaluation, Post-qualification, Awarding, and Contract
Signing;

11.3.5. Observers shall be allowed unrestricted access to the following documents

upon their request: (a) minutes of CSP meetings; (b) Abstract of Bids; (c)
post-qualification summary report; (d) video recording of CSP for MGSP
proceedings; (e) opened proposals; (f) draft MSC template; (g) Bid
Documents and other related documents;

11.3.6. Observers may submit their written comments and recommendations within
seven (7) calendar days from the end of the CSP for MGSP activity or from
the receipt of the documentation of the proceedings;

11.3.7. The absence of Observers will not nullify the CSP for MGSP proceedings;
and

11.3.8. Observers may request the result of the bidding and other pertinent
documents related to the conduct of the CSP for MGSP proceedings. Such
a request shall be made before the approval of the ERC of the MSC.

SECTION 12. Preparation of Bid Documents for the CSP for MGSP.

12.1. The Bidding Documents to be prepared shall include at the minimum the following:

12.1.1. Invitation to Bid;

12.1.2. Bidding Schedule;
12.1.3. Terms of Reference include, but are not limited to:

12.1.3.1. Load Profile (projected total energy sales, peak

demand, growth rate, etc.);
12.1 .3.2. Proposed Rate;
12.1 .3.3. Demographic profile of the subject Area including the
existing electricity provider;
12.1.3.4. Potential renewable energy resources;
12.1.3.5. Target date of project commissioning;
12.1.3.6. Plan for compliance with the Philippine Small Grid
Guidelines; and
12.1.3.7. Plan for compliance with the Renewable Portfolio
Standard Guidelines of Off-grid Areas.
12.1.4. Draft MSC.

12.2 The Bid Documents and TOR shall be prepared within forty-five (45) calendar days
after the date of publication of the DOE Declared Unserved and Underserved Areas
and the DU Identified Unserved Areas. If the NPC andlor NEA is authorized for the
conduct of the CSP, the said Bid Documents and TOR shall be submitted to the DOE
for review and evaluation. The DOE shall recommend changes to the Bid Documents
and the TOR when necessary, within thirty (30) calendar days upon receipt from the
NPCINEA.

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SECTION 13. CSP for MGSP in DOE Declared Unserved and Underserved Areas

13.1. Publication and Posting.

The Invitation to Bid shall be:

13.1.1. Issued within twenty (20) calendar days from the finalization of the bidding
documents;

13.1.2. Published in a newspaper of general circulation once weekly for two (2)
consecutive weeks, and in addition, be published at least once in a
newspaper of local circulation in the province where the unserved and
underserved areas are located;

13.1.3. Posted continuously in the websites of the DOE, NPC, and NEA in case of
ECs, for fifteen (15) consecutive calendar days upon publication; and

13.1.4. Posted at any conspicuous places within the concerned DU's main office
premises for fifteen (15) consecutive calendar days upon publication.

13.2. Pre-bid Conference

13.2.1. The MGSP BAC shall conduct a pre-bid conference to address the queries
from the prospective bidders.

13.2.2. The pre-bid conference shall discuss, among other things, the eligibility
requirements, the TOR, and the technical, legal, and financial components
of the MSC to be bid out.

13.2.3. The MGSP BAC shall reply to the written queries or clarifications of the
MGSP Proponents in the form of Supplemental/Bid Bulletins.

13.2.4. Decisions of the MGSP BAC amending any provision of the Bidding
Documents shall be issued in writing through a Supplemental/Bid Bulletin at
least seven (7) calendar days before the deadline for the submission and
receipt of bids.

13.2.5. Supplemental/Bid Bulletins may be issued in the following circumstances:

13.2.5.1. A request of the MGSP Proponents for clarification(s) on or for an

interpretation of any part of the Bid Documents; and

13.2.5.2. Upon the initiative of the MGSP BAC for purposes of clarifying or
modifying any provision of the Bidding Documents. Any
modification to the Bid Documents shall be identified as an
amendment.

13.3. Receipt and Opening of Bids

13.3.1. An MGSP proponent shall submit its sealed bid proposal on or before the
date and time indicated in the Invitation to Bid, which must be within forty-

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 five (45) calendar days to sixty (60) calendar days from its publication and
posting.

13.3.2. The opening of bids shall take place in the presence of qualified bidders and
the MGSP BAC.

13.3.3. The MGSP BAC shall open the bids after the deadline for the submission
and receipt of bids. The time, date, and place of the opening of bids shall be
specified in the Bidding Documents. The MGSP Proponents or their duly
authorized representatives may attend the opening of bids. The MGSP BAC
shall ensure the integrity, security, and confidentiality of all submitted
proposals.

In case the proposals cannot be opened as scheduled due to justifiable

reasons, the MGSP SAC shall take custody of the bids submitted and
reschedule the opening of bids on the next working day or at the soonest
possible time through the issuance of a Notice of Postponement to be
posted in the DOE or NPC's website if any, and the NEA's website for ECs.

13.4. Bid Evaluation Criteria and Process

13.4.1. The MGSP BAC shall proceed with the determination of the winning MGSP
using the evaluation criteria prescribed in the Bid Documents.

13.4.2. A bid that fails to meet all requirements in the Invitation to Bid shall not be
considered. The first part of the bid shall undergo a pass/fail criteria based
on financial, technical, and legal qualifications, while the second part shall
consider the lowest price.

13.4.3. The lowest calculated bid shall be subjected to a post-qualification process

to determine whether the concerned bidder complies with and is responsive
to all the requirements and conditions as specified in the TOR and other
pertinent bidding documents. The following shall be the minimum criteria in
the evaluation of the Technical and Financial Proposals:

13.4.3.1. Qualification of the Proponent — to include among others, the

technical capacities and experiences of the key personnel/staff
to execute the design & engineering, construction works and
set up appropriate operations and management system, as well
as the financial position of the proponent to undertake the
project;

13.4.3.2. Proposed Technology — compliance with applicable rules and

policies contained in the Philippine Small Grid Guidelines
issued by the ERC and the Renewable Energy Portfolio
Standards in Off-Grid Areas. The technology should be the
least-cost option in providing 24/7 electricity service and will
result in 100% household electrification in the area over the
project term.

13.4.3.3. Institutional Arrangements — refer to the operation and

maintenance arrangements, including billing and collection, and
disconnection, among others.

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 13.4.3.4. Financial Proposal to include assumptions used in the prolect
costing, adequate financing, life-cycle cost estimate, and
formulation of its proposed full cost.

13.4.4. Upon MGSP BAC's determination of the winning MGSP, the DU's MGSP
shall have the right to tender a lower all-in price offer within seven (7)
calendar days after the MGSP BAG publishes all price offers it has received
on its website. Such tender shall be submitted to the DOE or its authorized
entity, whichever is applicable, and the winning bidder; or,

Should the DU's MGSP tender a lower offer, the MGSP BAC shall
recommend the award for electrification of the unserved or underserved area
using the Microgrid System to the DU's MGSP. Otherwise, the MGSP BAC
shall recommend the award to the winning MGSP.

13.4.5. The NPC and the winning MGSP shall execute the MSC within fifteen (15)
calendar days after the conduct of a successful CSP, in accordance with the
minimum terms and conditions as provided in the template.

Text 13.4.6. The entire procedure from pre-qualificatiori of MGSPs until the submission
to the ERG of the awarded contract shall be no longer than ninety (90)
calendar days after all the published requirements are completely submitted.

13.4.7. The award by the DOE or its authorized entity to the MGSP/DU, the
execution of the MSC, and the filing of a complete application with the ERC
shall be the basis of the issuance of a Notice/Acknowledgement or similar
document and shall constitute the provisional authority of the MGSP/DU to
start a collection of the rate specified in the award, the MSC, and the
application upon the start of the MGSP's operation.

Accordingly, 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; and the ERC shall issue the
final decision within one hundred thirty-five (135) calendar days from receipt
of the complete application.

13.4.8. The Competitive Bidding for MGSP is deemed successful when it receives
at least one (1) qualified bid. However, in the event that there are no
participants or there is no awarded MGSP in the CSP for a particular DOE
declared unserved or underserved area, the NPG shall perform its
missionary electrification mandate in the said area until an MGSP takes part
or is awarded in the next CSP.

SECTION 14. CSP for MGSP in DU Identified Unserved Areas

14.1. Publication and Posting.

The Invitation to Bid shall be:

14.1.1 Issued within twenty (20) calendar days from the finalization of the bidding
documents;

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 14.1.2 Published in a newspaper of general circulation once weekly for two (2)
consecutive weeks, and in addition, be published at least once in a
newspaper of local circulation in the province where the unserved and
underserved areas are located;

14.1.3 Posted continuously on the websites of the DOE, NPC, and NEA in the case
of the ECs, for fifteen (15) consecutive calendar days upon publication; and,

14.1.4 Posted at any conspicuous places within the concerned DUe main office
premises for fifteen (15) consecutive calendar days upon publication.

14.2. Pre-bid Conference

14.2.1. The MGSP BAC shall conduct a pre-bid conference to address the queries
from the prospective bidders.

14.2.2. The pre-bid conference shall discuss, among other things, the eligibility
requirements, the TOR, and the technical, legal, and financial components
of the MSC to be bid out.

14.2.3. The MGSP BAC shall reply to the written queries or clarifications of the
MGSP Proponents in the form of Bid/Supplemental Bulletins.

14.2.4. Decisions of the MGSP BAC amending any provision of the Bidding
Documents shall be issued in writing through a Supplemental/Bid Bulletin at
least seven (7) calendar days before the deadline for the submission and
receipt of bids.

14.2.5. Supplemental/Bid Bulletins may be issued in the following circumstances:

14.2.5.1. A request of the MGSP Proponents for clarification(s) on or for an

interpretation of any part of the Bid Documents; and,

14.2.5.2. Upon the initiative of the MGSP BAG for purposes of clarifying or
modifying any provision of the Bidding Documents. Any
modification to the Bid Documents shall be identified as an
amendment.

14.3. Receipt and Opening of Bids

14.3.1. A MGSP proponent shall submit its sealed bid proposal on or before the
date and time indicated in the Invitation to Bid, which must be within forty-
five (45) to sixty (60) calendar days from its publication and posting.

14.3.2. The opening of bids shall take place in the presence of qualified bidders
and the MGSP BAC.

14.3.3. The MGSP BAG shall open the bids after the deadline for the submission
and receipt of bids. The time, date, and place of the opening of bids shall
be specified in the Bidding Documents. The MGSP Proponents or their
duly authorized representatives may attend the opening of bids. The

14
 MGSP BAC shall ensure the integrity, security, and confidentiality of all
submitted proposals.

In case the proposals cannot be opened as scheduled due to justifiable

reasons, the MGSP BAG shall take custody of the bids submitted and
reschedule the opening of bids on the next working day or at the soonest
possible time through the issuance of a Notice of Postponement to be
posted in the DOE or NPC's website if any, and the NEA's website for ECs.

14.4. Bid Evaluation Criteria and Process

14.4.1. The MGSP BAG shall publish all price offers from the MGSP Proponent it
has received on its website.

14.4.2. A bid that fails to meet all requirements in the Invitation to Bid shall not be
considered. The first part of the bid shall undergo a pass/fail criteria based
on financial, technical, and legal qualifications, while the second part shall
consider the lowest price.

14.4.3. The DU shall have the right to tender a lower all-in price offer within seven
(7) calendar days after the MGSP BAG publishes all price offers.

14.4.4. Should DU tender a lower offer, the MGSP BAC shall recommend the
award for electrification of the unserved area using the Microgrid System
tothe DU.

Otherwise, the MGSP BAG shall recommend the MGSP proponent with the
lowest all-in price offer as the winning MGSP. The winning MGSP shall be
subjected to a post-qualification process to determine whether the
concerned bidder complies with and is responsive to all the requirements
and conditions as specified in the TOR and other pertinent bidding
documents. The following shall be the minimum criteria in the evaluation of
the Technical and Financial Proposals:

14.4.4.1. Qualification of the Proponent — to include among others, the

technical capacities and experiences of the key personnel/staff
to execute the design & engineering, construction works, and set
up an appropriate operations and management system, as well
as the financial position of the proponent to undertake the project;

14.4.4.2. Proposed Technology — compliance with applicable rules and

policies contained in the Philippine Small Grid Guidelines issued
by the ERC and the Renewable Energy Portfolio Standards in
Off-Grid Areas. The technology should be the least-cost option in
providing 24/7 electricity service and will result in 100%
household electrification in the area over the project term;

14.4.4.3. Institutional Arrangements — refer to the operation and

maintenance arrangements, including billing and collection, and
disconnection, among others.; and,

14.4.4.4. Financial Proposal to include assumptions used in the project

costing, adequate financing, life-cycle cost estimate, and
formulation of its proposed Full Cost Recovery Rate (FCRR).

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 14.4.5. The NPC and the winning MGSP/DU shall execute the MSC within fifteen
(15) calendar days after the conduct of a successful CSP, in accordance
with the minimum terms and conditions as provided in the template.

14.4.6. The entire procedure from pre-qualification of MGSPs until the submission
to the ERC of the awarded contract shall be no longer than ninety (90)
calendar days after the publication by the DOE of the list of DU identified
unserved areas.

14.4.7. The award by the DOE or its authorized entity to the MGSP/DU, the
execution of the MSC, and the filing of a complete application with the ERC
shall be the basis of the issuance of a Notice/Acknowledgement or similar
document and shall constitute the provisional authority of the MGSP/DU to
start a collection of the rate specified in the award, the MSC, and the
application upon the start of the MGSP's operation.

Accordingly, 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; and the ERC shall issue the
final decision within one hundred thirty-five (135) calendar days from
receipt of the complete application.

14.4.8. The Competitive Bidding for MGSP is deemed successful when it receives
at least one (1) qualified bid. 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.

SECTION 15. Nomination of Areas by MGSP Proponents

The Swiss Challenge for Unsolicited Proposal (USP) may be adopted as an alternative
mode in selecting the MGSP in accordance with the guidelines prescribed under this IRR.

15.1. Requisites for Unsolicited Proposal

The USP shall be considered when the target area is currently assigned to or served
by the NPC or all of the following conditions exist:

15.1.1. The target area is an unserved or underserved area; and

15.1.2. The target area is not yet published as DOE declared unserved or
underserved area or DU identified unserved area in the DOE's NTER.

15.2. Submission of a Complete USP

The MGSP proponent shall submit the following USP documents to the DOE or its
authorized entity, whichever is applicable:

15.2.1. Cover letter expressing its interest;

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 15.2.2. Proof of Eligibility, as provided in Annex "A" "Checklist of Requirements for
MGSP; and,

15.2.3. Project Proposal which shall contain the following, at the minimum:

15.2.3.1. Proposed electrification solution or technology to be applied for

the target area including the system design for the generation
and distribution lines and proposed plans for dealing with major
operating contingencies such as failure of its generating plant
or a major fault on its distribution system;

15.2.3.2. Number of potential and target household connections;

15.2.3.3. Proposed institutional and commercial arrangements (i.e.,

meter reading, billing and collection, disconnection policies.
etc.)

15.2.3.4. Expected date of commissioning/commercial operation of the

project;

15.2.3.5. Work Plan with target dates, detailing the schedule of the
significant activities to be taken towards project completion
including the target date of application with the ERC for the
issuance of the Authority to Operate (ATO); and

15.2.3.6. Proposed FCRR and other charges to end-users.

15.3. Receipt and Acceptance of the USP

15.3.1. Upon receipt of the USP, the MGSP BAC shall check the presence or
absence of the required documents as provided under Section 15.2. of this
IRR. The MGSP BAC shall only accept the USP with complete documents.

15.3.2. The MGSP BAC shall inform the Proponent of the completeness of the
submitted documents within five (5) calendar days from receipt. For
incomplete submissions, all documents shall be returned to the Proponent.

15.3.3. In case the first USP is not accepted, the MGSP BAC shall proceed to
check the completeness of the submitted documents under Section 15.2
of this IRR of the other MGSP Proponents, if any, using the First-In-Time
Approach pursuant to Section 15.4.3.

15.4. Evaluation of the USP

15.4.1. The following shall be the minimum criteria in the evaluation of the
Technical and Financial Proposals:

15.4.1.1. Qualification of the Proponent — to include among others, the

technical capacities and experiences of the key personnel/staff
to execute the design & engineering, construction works and set
up appropriate operations and management system, as well as
the financial position of the proponent to undertake the project;

15.4.1.2. Proposed Technology — compliance with applicable rules and

policies contained in the Philippine Small Grid Guidelines
issued by the ERC and the Renewable Energy Portfolio

17
 Standards in Off-Grid Areas. The technology should be the
least-cost option in providing 24/7 electricity service and will
result in 100% household electrification in the area over the
project term;

15.4.1.3. Institutional Arrangements — refer to the operation and

maintenance arrangements, including billing and collection, and
disconnection, among others; and

15.4.1.4. Financial Proposal to include assumptions used in the project

costing, adequate financing and life-cycle cost estimate, and
formulation of its proposed FCRR.

15.4.2. The MGSP BAC shall evaluate and inform the Proponent whether the USP
is qualified or not within thirty (30) calendar days from receipt of USP
pursuant to Section 15.3.1. For unqualified USP, all documents shall be
returned to the MGSP Proponent. The MGSP BAC may proceed with the
evaluation of another MGSP proponent. If none of the MGSP Proponents
will qualify, a CSP shall be conducted pursuant to Section 13 of this IRR
after the posting of the area as DOE declared an unserved or underserved
area.

15.4.3. In case the MGSP BAC receives more than one USP involving the same
target area prior to the declaration of the first USP as the "Original
Proposal", the MGSP SAC shall evaluate the proposals using the First-In-
Time approach.

15.4.3.1. Under the First-In-Time approach, the complete USP first

received by the MGSP BAC shall primarily be evaluated and
decided upon. Subsequent submitted USP will only be
evaluated if the first one is not qualified, based on the order of
their submission.

15.4.3.2. The MGSP SAC shall acknowledge the USP submissions of

other MGSP Proponents for a similar target area and advise the
said MGSP Proponents of the existence of similar proposal(s)
and its rank/position based on the date of receipt.

15.4.3.3. If the USP has been declared as the "Original Proposal", other
proposals shall be returned to the respective proponents
unopened.

15.4.4. The MGSP BAC shall subsequently declare the MGSP Proponent as the
Original Proponent and its accepted USP as the "Original Proposal", and
shall prepare the TOR and the corresponding Bidding Documents.

15.5. Preparation and Review of Bid Documents

15.5.1. The MGSP BAG shall prepare the Bid Documents based on the Original
Proposal of the Original Proponent which includes at the minimum the
following:

15.5.1.1. Invitation to Bid;

15.5.1.2. Bidding Schedule;

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 15.5.1.3. Terms of Reference that include, but are not limited to, the
following data from the USP:

i. Projected load profile;

ii. Type of offered technology;
iii. Proposed energy generated for the term period;
iv. Target number of households;
v. Demographic profile of the target area including the existing
electricity provider;
vi. Full Cost Rate; and
vii. Target date of Commercial Operations.

15.5.1.4. Draft MSC in accordance with the template provided by the

DOE.

15.5.2. The Bid Documents and TOR shall be prepared within forty-five (45)
calendar days after the date of publication of the Declared Unserved and
Underserved Areas and the DU Identified Unserved Areas. If the NPC
and/or NEA is authorized for the conduct of the CSP, the said Bid
Documents and TOR shall be submitted to the DOE for review and
evaluation. The DOE shall recommend changes to the Bid Documents and
the TOR when necessary, within thirty (30) calendar days upon receipt from
the NPC/NEA.

15.6. Swiss Challenge for Unsolicited Proposal

The Original Proposal shall be subjected to a Swiss Challenge.

15.6.1. Publication and Posting

The target area shall be published and posted on the DOE websites and
be included in the list of DOE declared unserved or underserved areas.
Such publication shall also serve as the Invitation to Bid.

15.6.2. Pre-bid Conference

15.6.2.1. The MGSP BAC shall conduct at least one (1) Pre-Bid
Conference to address the queries of the prospective bidders
within fourteen (14) calendar days after the publication of the
Invitation for Comparative Proposal.

15.6.2.2. The pre-bid conference shall discuss, among other things, the
eligibility requirements, the TOR and technical, legal, and
financial components of the MSC to be bid out.

15.6.2.3. Requests for clarification to the MGSP BAG from the

prospective MGSP Proponents shall be made in writing or
through electronic mail before the conduct of the Pre-bid
Conference, or after three (3) calendar days from the scheduled
Pre-bid Conference, and through manifestation(s) during the
Pre-bid Conference.

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 15.6.2.4. The MGSP BAC shall reply to the written queries or
clarifications of the MGSP Proponents in the form of
Bid/Supplemental Bulletins.

15.6.2.5. Decisions/clarifications of the MGSP BAC amending any

provision of the Bidding Documents shall be issued in writing
through a Supplemental/Bid Bulletin at least seven (7) calendar
days before the deadline for the submission and receipt of bids.

15.6.2.6. Supplemental/Bid Bulletins may be issued in the following

circumstances:

15.6.2.6.1. Request of the MGSP Proponents for

clarification(s) on or before an interpretation of
any part of the Bid Documents; and,

15.6.2.6.2. Upon the initiative of the MGSP BACfor purposes

of clarifying or modifying any provision of the
Bidding Documents. Any modification to the Bid
Documents shall be identified as an amendment.

15.6.2.7. Pre-bid Conference shall be conducted within fourteen (14)

calendar days upon the posting of the invitation for comparative
proposal.

15.6.2.8. The MGSP BAC shall ensure that all clarifications and queries
must be clarified by the issuance of Supplemental/Bid Bulletins,
and shall avoid any delay in the conduct of the Swiss Challenge.

15.6.3. Receipt and Opening of Comparative Proposals

15.6.3.1. An MGSP Proponent shall submit its sealed comparative

proposal on or before the date and time indicated in the
Invitation to Bid, which must not be later than forty-two (42)
calendar days from its publication and posting. Comparative
proposals submitted after the deadline shall no longer be
accepted.

15.6.3.2. The MGSP Proponents shall submit their proposals through

their duly authorized representative using the forms specified in
the Bidding Documents in two (2) separate sealed bid
envelopes which shall be submitted simultaneously. The first
shall contain the technical component of the bid, including the
eligibility requirements, and the second shall contain the
financial component of the bid.

15.6.3.3. The MGSP BAC shall open the bids after the deadline for the
submission and receipt of bids. The time, date, and place of the
opening of bids shall be specified in the Bidding Documents.
The MGSP Proponents or their duly authorized representatives
may attend the opening of bids. The MGSP BAC shall ensure
the integrity, security, and confidentiality of all submitted
proposals.

In case the proposals cannot be opened as scheduled due to

justifiable reasons, the MGSP BAC shall take custody of the

20
 bids submitted and reschedule the opening of bids on the next
working day or at the soonest possible time through the
issuance of a Notice of Postponement to be posted in the DOE
or NPC's website if any, and the NEA's website for ECs.

15.6.3.4. The opening of bids shall take place in the presence of qualified
bidders, Observers, and the MGSP BAC. The absence of an
MGSP Proponent shall not be a ground for the postponement
of the opening of bids or disqualification of the MGSP
Proponent.

15.6.4. Bid Evaluation of the Comparative Proposals

15.6.4.1. The MGSP BAC, after the submission of the comparative

proposal, shall undergo a qualification and evaluation process
of the legal, technical, and financial requirements submitted by
proponents using the criteria indicated in the Bidding
Documents.

15.6.4.2. The MGSP BAC shall recommend, in fourteen (14) calendar

days, the declaration of the lowest comparative proposal as
the lowest calculated bid. Upon the declaration, the MGSP
BAC shall immediately notify in writing the Original Proponent,
if not present.

15.6.4.3. The Original Proponent shall have the right to match such price
proposal within fifteen (15) calendar days from receipt of the
notification from the MGSP BAC of the result of the
comparative bid.

15.6.4.4. In case the Original Proponent fails to match the price proposal
of the lowest calculated bid within the specified period, the
comparative proponent/lowest calculated bidder shall be the
winning bidder.

On the other hand, if the Original Proponent matches the price

proposal of the comparative proponent/lowest calculated
bidder within the specified period, the Original Proponent shall
be the winning bidder.

15.6.4.5. The Original Proponent shall be the winning bidder in case of

the following conditions;

15.6.4.5.1. No comparative bid was received by the MGSP

BAC; or,

15.6.4.5.2. Comparative bids failed to meet the

requirements prescribed in the bid documents.

15.6.4.6. The MGSP BAC shall conclude the selection of the winning
MGSP within fifty (50) calendar days from the opening of the
Comparative Bids and correspondingly recommend the
issuance of the Notice of Award,

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 15.6.4.7. The NPC and the winning MGSP shall execute the MSC within
fifteen (15) calendar days after the conduct of the successful
bidding, in accordance with the template provided by the DOE.

SECTION 16. NPC Missionary Electrification

16.1. In the event that there are no participants or there is no awarded MGSP in the CSP
pursuant to Section 13 of this IRR, and upon declaration of failed CSP, the NPC
shall continue to perform its missionary electrification function by energizing the
said area within eighteen (18) months from the availability of funding source,
provided it shall be given priority by the NP Board. NPC shall continue to energize
the area until an MGSP takes part or is awarded in the next CSP.

16.2. The NPC shall source the funding for the energization from the National
Government or other identified fund sources and grants.

16.3. The NPC shall prepare and submit to the DOE a comprehensive and detailed
Graduation Plan within one hundred eighty (180) calendar days upon effectivity of
this IRR and shall be updated annually. The said plan shall include, but is not
limited to, the following:

16.3.1. Areas to be included in the list of DOE declared Unserved and

Underserved Areas; and,

16.3.2. Criteria for inclusion of areas in the DOE are declared Unserved and
Underserved areas.

PART V. Regulatory Framework

SECTION 17. Permitting Process

17.1. A Notice or Acknowledgement or similar document shall constitute the provisional

authority to be issued by the ERO within seventy-five (75) calendar days upon
award by the DOE or its authorized entity to the MGSP/DU, the execution of the
MSC, and the receipt of a complete application by the MGSP/DU with the ERC.

17.2. A hearing shall be scheduled and conducted by the ERC within thirty (30) calendar
days from receipt of the complete application, upon publication and notice to all
affected parties.

17.3. The final decision relative to the application for ATO shall be issued by the ERC
within one hundred thirty-five (135) calendar days from receipt of the complete
application.

17.4. A COC shall be secured from the ERC prior to the commercial operation of the
MGSP.

17.5. 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 frame shall be reduced to half of the time frame indicated in

22
 Sections 13, 14,15, and 16 of Republic Act No. 11234 unless the specific time
frame is provided in the Act or in this lRR.

SECTION 18. Issuance of Rates

18.1. The ERC shall evaluate and determine an MGSP or DU-operated microgrid
system's full cost, approved subsidy if applicable, and retail rate imposed on end-
users of unserved and underserved areas.

18.2. The ERC shall issue rules on the UC-ME availment in accordance with DOE's
existing policy on subsidy rationalization within one hundred twenty (120) calendar
days upon effectivity of this IRR.

SECTION 19. Technical and Services Performance Standards

The ERC shall develop, establish, and promulgate in consultation with the DOE, NPC,
NEA and other relevant government agencies and private stakeholders in the electric
power industry, the minimum technical and service performance standards for microgrid
systems within one hundred twenty (120) calendar days from the effectivity of the Act:
Provided, That these standards shall be compliant with the PDC, Philippine Small Grid
Guidelines, Philippine Grid Code, and other relevant rules and regulations

PART VI. Administration of UC-ME Subsidy

SECTION 20. Collection and Disbursement Procedure

20.1. The ERC within ninety (90) calendar days upon effectivity of this IRR, shall issue
a resolution on the recovery, collection, and availment of UC-ME by NPC for the
microgrid.

20.2. The NPC shall submit to the ERC, within sixty (60) calendar days upon effectivity
of this lRR, the guidelines for the disbursement of UC-ME to MGSP5.

20.3. The procedure for the release of the UC-ME subsidy shall not be more than forty-
five (45) calendar days from submission to the NPC of the UC-ME subsidy claim
with complete documentary requirements.

PART VII. Procedure for the Transition of Service

SECTION 21. Expiration of MSC

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 Section 22 of this IRR.

Should there be no distribution grid extension upon the expiration of an MSC, a CSP shall
be conducted pursuant to Sections 13 or 14 of this IRR, whichever is applicable: 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.

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SECTION 22. Detailed Transition of Service Procedure

The DOE together with the NPC shall issue, within one hundred eighty (180) calendar
days upon effectivity of this IRR, a detailed procedure for the transition of service from
the NPC or a DU to an MGSP, or from an existing MGSP to a DU or another MGSP.
Provided, that such transition shall not exceed ninety (90) calendar days from the
completion of the CSP.

PART VIII. Functions and Responsibilities

SECTION 23. DOE

The DOE shall:

23.1. Prepare and publish annually on its website the NTER, upon consultation with
public and private stakeholders;

23.2. Determine, in consultation with DUs, the time frame for compliance with their
respective LTERs and DDPs: Provided, that all projects in each annual work plan
shall be completed not later than eighteen (18) months from submission to the
DOE or, in the case of DU identified unserved areas, from the lapse of the thirty
(30) calendar day period for MGSP5 to tender an all-in price offer pursuant to
Section 14 of the lRR;

23.3. Receive and verify petitions from end-users, who are currently residing in an
unserved or underserved area not identified or included by the DU in its LTER or
not declared by the DOE as such, to declare such area as an unserved or
underserved area;

23.4. Identify and declare regularly unserved and underserved areas;

23.5. Conduct all CSPs for the DOE Declared Unserved and Underserved areas and the
DU Identified Unserved areas with the assistance of the NPC and NEA in
accordance with Section 10 of this IRR.

23.6. Monitor the operations of all awarded MGSPs and their respective MSCs:
Provided, That the DOE, motu proprio or upon complaint, may conduct a review of
an MGSP's operation and its corresponding MSC should it find reasonable
grounds for noncompliance with the minimum technical and service performance
standards and other provisions of the MSC;

23.7. Determine a detailed procedure for the transition of service from the NPC or a DU
to an MGSP, or from an MGSP to a DU or another MGSP, whichever is applicable;

23.8. Provide support to the ERC in the development and promulgation of the minimum
technical and service performance standards for microgrid systems consistent with
Section 19 of this IRR:

23.9. Modify the timelines regarding submissions of documents in consultation with the
concerned stakeholders and in compliance with the provisions of the Act; and,

24
23.10. Perform such other powers and functions as may be necessary to attain the
objectives of the Act.

SECTION 24. ERC

The ERC shall:

24.1. Provide for a simplified and streamlined permitting process for MGSPs and DU
operated microgrid systems in accordance with the time frame specified in Section
17 of this lRR, and issue an ATO and COC to an MGSP pursuant to such process;

24.2. Develop, establish, and promulgate in consultation with the DOE, the NPC, the
NEA, and other relevant government agencies and private stakeholders in the
electric power industry, the minimum technical and service performance standards
for microgrid systems within one hundred twenty (120) calendar days from the
effectivity of the Act: Provided, that these standards shall be compliant with the
PDC, PSGG, Philippine Grid Code, and other relevant rules and regulations;

24.3. Review and act on all MSCs entered into within the time frame consistent with
Section 17 of this IRR;

24.4. Exercise its rate-making power through the evaluation and determination of the
following, within the applicable time frames provided under Section 17 of this IRR:

24.4.1. An MGSP or DU operated microgrid system's full cost, approved subsidy

if applicable, and retail rate imposed on end-users of unserved and
underserved areas;

24.4.2. An equitable recovery mechanism, if applicable, for an MGSP's assets to

ensure just compensation at the expiration of the MSC pursuant to
Section 17 of the Act; and,

24.4.3. In the event of a distribution grid extension, upon the expiration of the
MSC, and upon the decision of the DU to acquire the microgrid system,
review the application of the DU before the ERC to connect the microgrid
system to the distribution grid pursuant to the equitable recovery
mechanism provided in this section provided that any connection that
results in an increase in rates shall have to be approved by the ERC.

24.5. Monitor the compliance of all MGSPs with their obligations under their respective
ATOs and COCs;

24.6. Issue rules for the UC-ME availment of MGSPs in accordance with the DOE
Rationalization Policy for UC-ME;

24.7. Issue a resolution on the recovery, collection, and availment of UC-ME by the NPC
for microgrid;

24.8. Exercise original and exclusive jurisdiction over all cases involving the exercise of
the abovementioned powers, functions, and responsibilities, and overall cases

25
 involving disputes arising from the Act, except in competition cases under Republic
Act No. 10667, otherwise known as the "Philippine Competition Act"; and,

24.9. Process any DU's application for renewal of Certificate of Public Convenience and
Necessity even with the presence of an MGSP in its franchise area pursuant to
Section 18 of the Act.

SECTION 25. NEA

The NEA shall:

25.1. Assist ECs in the preparation of their respective LTER5;

25.2. Evaluate and verify the unserved and underserved areas submitted by ECs as part
of its LTER and submit its recommendations to the DOE not later than the 15th of
March of every year;

25.3. If authorized by the DOE to conduct CSPs pursuant to Section 10, strictly comply
with the procedure, guidelines and timeframe for CSPs pursuant to Sections 11 to
15 of this IRR.

25.4. Provide support to the ERC in the development and promulgation of the minimum
technical and service performance standards for microgrid systems consistent with
Section 19 of this IRR;

25.5. Provide support in the DOE's issuance of Guidelines of the Technical, Financial,
and other requirements for an MGSP in coordination with the NPC and TRANSCO;
and,

25.6. Issue guidelines for the Joint Venture engagement of ECs.

SECTION 26. NPC

The NPC shall:

26.1. Prepare and execute annually an NPC Graduation Plan pursuant to Section 16.2
of this IRR;

26.2. Continue to perform its missionary electrification mandate, including areas with no
participating or awarded MGSP during a CSP pursuant to Section 16.1 of this IRR;

26.3. If authorized by the DOE to conduct CSPs pursuant to Section 10, strictly comply
with the procedure, guidelines and timeframe for CSPs pursuant to Sections 11 to
15 of this IRR.

26.4. Execute the MSC with the awarded MGSP/DU in accordance with the minimum
terms and conditions as provided in the template;

26.5. Exclusively collect from the DUs, administer, and apply the UC-ME;

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26.6. Provide simplified and streamlined procedures and requirements for the
processing of UC-ME subsidy claims, upon consultation with public and private
stakeholders;

26.7. Release the UC-ME subsidy within forty-five (45) calendar days from submission
to the NPC of the UC-ME subsidy claim with complete documentary requirements:

26.8. Provide support in the DOE's issuance of Guidelines of the Technical, Financial,
and other requirements for an MGSP in coordination with the NEA, and
TRANSCO;

26.9. Provide support to the ERC in the development and promulgation of the minimum
technical and service performance standards for microgrid systems consistent with
Section 19 of this lRR; and,

26.10. Provide support in the determination and establishment of a detailed procedure for
the transition of service from the NPC or a DU to an MGSP, or from an MGSP to
a DU or another MGSP, whichever is applicable.

SECTION 27. DU

The DU shalt:

27.1. Develop the LTER to be submitted annually to DOE or through the NEA in the case
of the ECs;

27.2. Integrate the LTER in its DDP; and

27.3. DU may enter into a joint venture for the installation and operation of microgrid
systems consistent with the requirements of Section 15 of the Act.

SECTION 28. MGSP Proponent

The MGSP Proponent shall:

28.1. Secure the necessary permits and licenses from the relevant govemment
agencies: and,

28.2. Comply with all provisions, including the financial, technical, environmental, and
other performance standards for the MGSP including the provision of the MSC
entered into with the NPC.

SECTION 29. MGSP and DU's MGSP

The MGSP and DU's MGSP shall:

29.1. Build, operate, maintain, and control its microgrid system in accordance with its
MSC, the Act, and other applicable laws, rules, regulations, and codes;

29.2. Supply the load requirements of its area of operation, faithfully implement its
electrification work program, and comply with all its obligations under its MSC, if
applicable;

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29.3. Prepare and submit any report required by the ERC and DOE pursuant to their
powers under Sections 11 and 12 of the Act;

29.4. Ensure end-user safety and protection at all times; and,

29.5. In the case of MGSPS, be exempt from the following:

29.5.1. The public listing requirement under Section 28 of RA 9136, and,

29.5.2. The market share limitation requirement under Section 45(a) of RA 9136.

29.6. 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:

29.6.1. The payment of feed-in-tariff (FIT) allowance under the FIT system in
Section 7 of Republic Act No. 9513, otherwise known as the "Renewable
Energy Act of 2008", and,

29.6.2. The payment of universal charges under Section 34 of RA 9136.

SECTION 30. StrengthenIng and Expansion of the Electric Power Industry

Management Bureau in the Department of Energy

Within one hundred eighty (180) calendar days from the effectivity of the IRR, the
Secretary of the DOE shall submit the organizational structure and staffing complement,
which shall be effective upon the approval of the Department of Budget and Management,
consistent with existing civil service rules and regulations.

Pending the approval of the organizational structure and staffing complement, the
Secretary of the DOE may designate personnel from EPIMB and its support units to
perform the duties, functions, and responsibilities under the Act and its IRR.

SECTION 31. 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 the 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 the 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 GM.

SECTION 32. NPC's Authority to Secure Required Resources

To effectively perform its mandate under this IRR, NPC is hereby authorized to secure
resources, including but not limited to financial, human, and logistics, among others to
fully comply with its duties and responsibilities.
SECTION 33. TransItion from Revised QTP Guidelines

On-going selection of Qualified Third Party pursuant to Department Circular Nos.

DC2004-06-006, DC2005-12-01 I and DC2019-1 1-0015, shall only proceed when the

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DOE or DU conducted its bid opening and a qualified QTP has been selected on or before
the effectivity of this IRR.

PART IX. Prohibited Acts and Criminal and Administrative Penalties

SECTION 34. Prohibited Act

Any person, natural or juridical1 is prohibited from the following acts:

34.1. Refusal to allow the installation of any microgrid system by an MGSP: Provided,
That the requirements under Sections 5,6.7.8, and 9 of the Act are complied with;

34.2. Refusal to turn over the provision of integrated power generation and distribution
services to an MGSP, or distribution services and connection and supply of
electricity to a DU, whichever is applicable;

34.3. Refusal to allow a DU to acquire a microgrid system pursuant to Section 17 of the

Act;

34.4. Imposition of new contractual terms and charges on the end-user which are not
part of the MSC or not approved by the ERC, whichever is applicable; and,

34.5. Failure to comply with the functions, responsibilities, and time frames in Sections
5 to 19 of the Act.

SECTION 35. Criminal and Administrative Penalties

35.1. 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:

35.1.1. Violation of Section 23(a), (b), and (c) - Imprisonment of six (6) years
to eight (8) years, or a fine ranging from a minimum of Seventy-five
million pesos (P75,000,000.00) to One hundred million pesos
(P100,000,000.00), upon the discretion of the court;

35.1.2. Violation of 23(d) - Imprisonment of four (4) years to six(S) years, or a

fine ranging from a minimum of Fifty million pesos (P50,000,000.00) to
Seventy-five million pesos (P75,000,000.00); and

35.1.3. Violation of Section 23(e) - Imprisonment of two (2) years to four (4)
years, or a fine ranging from a minimum of Twenty-five million pesos
(P25,000,000.00) to Fifty million pesos (P50,000,000.00), upon the
discretion of the court.

Any person who willfully aids or abets the commission of these prohibited acts or
who causes the commission of any such act by another shall be liable in the same
manner as the principal. In cases of 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.

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35.2 Without prejudice to the aforementioned criminal liabilities, any government officer,
or employee who violates Section23(e) of the Act shall be held administratively
liable, as follows:

35.2.1. First offense - Thirty (30) calendar days suspension without pay and
mandatory attendance in Values Orientation Program;

35.2.2. Second offense - Three (3) months suspension without pay; and,

35.2.3. Third offense - Dismissal and perpetual disqualification from public

service, and forfeiture of retirement benefits.

PART X. Final Provision

SECTION 36. Amendatory Clause

This IRR amends Section 16(c) of Commonwealth Act No. 146 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 Rule.

SECTION 37. Separability Clause

If any portion or provision of this IRR is declared unconstitutional, the same shall not affect
the validity or the legality of the other provisions.

SECTION 38. 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 Rule is hereby repealed or modified accordingly.

SECTION 39. EffectIvity

These Rules shall take effect fifteen (15) calendar days following its complete publication
in at least two (2) newspapers of general circulation. Copies thereof shall be filed with
the University of the Philippines Law Center — Office of National Administrative Register
(UPLC-ONAR).

Issued on MA 2 1, 2022 at Energy Center, Bonifacio Global City, Taguig City.

Repobuc of It,e PbIIppnes

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 Annex A

Republic of the Philippines

DEPARTMENT OF ENERGY
Energy Center, Rizal Drive corner 34th Street
Bonifacio Global City, Taguig City
Metro Manilla

CHECKLIST OF REQUIREMENTS FOR MICROGRID SYSTEM PROVIDERS

A. Legal Requirements Document Format

1. Individual or Proprietorship
o Birth Certificate issued by the Philippine Statistics Authority Original or PSA Certified Copy
o Current Business Permit Certified True Copy
o Department of Trade and Industry (DII) Registration (if applicable) Certified True Copy
o Special Power of Attorney to Negotiate and Enter into MGSP Original Copy
Service Contract with EC

2. Corporation! Joint Venture! Consortium! Cooperative

o By-Laws (BL) and Articles of Incorporation (Aol), and BL and AOl of Original SEC-Certified or CDA-
its corporate stockholders Certified or NEA-Certified
o Board Resolution authorizing its representative to negotiate and Original Copy
enter into QSC with the DU!NPC
o Latest General Information Sheet (GIS) and latest 615 of its Certified True Copy of SEC-
corporate stockholders Received
o Current Business Permit Certified True Copy
o organizational Chart of the Company Certified True Copy

3. Passport ID or any valid government-issued ID of the authorized

representatives, i.e., signatory and witness under the QSC Certified True Copy

B. Technical Requirements

1. Full details of the technical skills and experience of the key Print Copy
management team responsible for the operation of the system.
These details should include relevant technical and business
management qualifications as well as full descriptions of experience
relevant to the technical and commercial operation of electric power
generation and supply systems.

2. Details of the proposed arrangements for the acquisition, training Print Copy
and contracting of the necessary expertise that the applicant does
not possess at the time of application.
3. A statement certifying that the applicant intends to design, Notarized Copy
construct, operate and maintain its generation and distribution
systems in full compliance with the relevant requirements prescribed
under the applicable laws including EPIRA and its attendant rules and
regulations

C. Financial Requirements
o Latest Annual Report and!or Audited Financial Statements (FS) for the last Original or Certified
two (2) years from the filing date and latest Unaudited FS duly signed by the True Copy
responsible official such as the President and4lor Chief Finance Officer if the
Audited FS is more than six (6) months old at the time of filing.
o Bank certification to substantiate the cash balance in the Audited FS or Original Copy
unaudited FS

o Projected Cash Flow Statement for next two (2) years, except for geothermal Original Copy
and large hydro resources which should be five (5) years, showing the fund
sources and uses of funds for the particular offered area, other applied RE
areas, existing service/operating contracts with DOE and other existing
business, if applicable, with supports from
either of the following:

o Sworn Letter of Commitment from stockholders for additional Original Copy

equity/cash infusion

o Bank approved loan/credit line earmarked for the proposed operation Certified True Copy

For applicants with insufficient funds to finance the proposed operations:

o Newly organized corporation (existing for two (2) years or less from date of Original Copy
registration with SEC) should be supported by parent company's financial
documents per items 1 and 2 above and Letter of Guaranty by the parent
company to fund the work program.

o subsidiary corporation (existing for more than two (2) years from date
of registration with SEC) should be supported by the following:

o Notarized Letter of Guaranty from the majority shareholder/s and Original Copy
Original Bank proof of capacity to satisfy the said Guaranty
Certification; or

o Parent company's financial documents per items land 2 above and Original Copy
Letter of Guaranty by the parent company to fund the work
program/plan

o In case of domestic parent company, the Letter of Guaranty Notarized Copy

should be duly notarized.

o In case of foreign parent company, the documents shall be duly Consularized Copy
authenticated by the Philippine Consulate Office that has jurisdiction
over the said parent company.