Republic of the Philippines
ENERGY REGULATORY COMMISSION
San Migue! Avenue, Pasig City
RESOLUTION NO. __13___, Series of 2006
A RESOLUTION ADOPTING THE GUIDELINES TO GOVERN THE
SUBMISSION, EVALUATION, AND APPROVAL OF ELECTRIC CAPITAL
PROJECTS
WHEREAS, Section 43 (f) of Republic Act No. 9136 (The Electric Power
industry Reform Act of 2001 or the EPIRA) provides that any significant operating
costs or projects investments of the National Transmission Corporation
{TRANSCO) and Distribution Utilities (DUs) which shall become part of the rate
base shall be subject to verification by the Commission to ensure that the
contracting and procurement of the equipment, assets and services have been
subjected to lansparent and accepted industry procurement and purchasing
practices to protect the public interest;
WHEREAS, the Distribution Services and Open Access Rules (DSOAR)
and Section 20 (b) of Commonwealth Act No. 146, as amended, require any
public service to establish, construct, maintain, and operate any reasonable
extension of its existing facilities, where, in the judgment of the Commission,
such extension is reasonable and practicable and will furnish sufficient business
to justify the construction and maintenance of the same, and wher the financial
condition of the said public service reasonably warrants the original expenditure
required in making and operating such extension:
WHEREAS, on Aprit 1, 2005, April 27, 2005, and August 18, 2005 the
Commission conducted public consultations for the adoption and promulgation of
the “Guidelines to Gover the Submission, Evaluation and Approval of Electric
Distribution Capital Projects”,
WHEREAS, the Guidelines seek to: (1) provide the Distribution Utilities
with a uniform system for filing applications for the approval of Capital Projects;
{2) ensure that capital projects are in compliance with the Philippine Grid Code
and the Philippine Distribution Code; (3) protect the public interest as it is
affected by the rates and services of Electric Utilities and other providers of
electric power, (4) ensure the economic, orderly and efficient development of
Electric Utilities’ resources that concern public interest; and {5} ensure the
procurement of equipment, materials and services are transparent and compliant
with the applicable !aws and accepted industry practices and standards.
NOW THEREFORE, the Commission, after thorough and due deliberation,
hereby RESOLVED, as it hereby RESOLVES to APPROVE and ADOPT the set
of Guidelines to Govern the Submission, Evaluation and Approval of Electric
Distribution Capital Projects herein attached as “ANNEX A" and made an integral
part of this Resolution.
Se KGResolution No.__13 Series of 2008
A Resolution Adopting the Guidelines to Govern the Submission, Evaluation, and
Approval of Electric Capital Projects
Page 2 of 2
This Resolution shall take effect fifteen (15) days following its publication
in a newspaper of general circulation in the country.
Pasig City, March 8, 2006
RODOLFO B. ALBANO, JR.
Chairman
(On Officiat Leave)
OLIVER B. BUTALID C
Commissioner Commissioner
(On Official Leave}
RAUF A. TAN. EJANDRO Z.
Commissioner CommissionerANNEX “A”
Republic of the Philippines
ENERGY REGULATORY COMMISSION
San Miguel Avenue, Pasig City
(GUIDELINES TO GOVERN THE SUBMISSION, EVALUATION
AND APPROVAL OF ELECTRIC DISTRIBUTION CAPITAL PROJECTS
Pursuant to Section 43 of Republic Act No. 9136 otherwise known as the
Electric Power Industry Reform Act of 2001 (EPIRA), Rules 6 and 7 of its
implementing Rules and Regulations, the Distribution Services and Open Access
Rules (DSOAR), and Section 20 (b) of Commonwealth Act No. 146, as amended,
the Energy Regulatory Commission (ERC) hereby adopts and promulgates the
following Guidelines to Govern the Submission, Evaluation and Approval of
Electric Distribution Capital Projects.
wa
ARTICLE |
GENERAL PROVISIONS
Objectives
Vd
1.1.2
14.5
To provide the Distribution Utilities with a uniform system for filing
applications for the approval of Capital Projects;
‘To ensure that capital projects are in compliance with the Philippine
Grid Code (PGC) and the Philippine Distribution Code (PDC);
To protect the public interest as it is affected by the rates and
services of Electric Utilities and other providers of electric power;
To ensure the economic, orderly and efficient development of
Electric Utilities’ resources that concern public interest;
To ensure that the procurement of equipment, materials and
services are transparent and compliant with the applicable laws and
accepted industry practices and standards.
a
AS i Zo
( A iA2
L1.3
Guiding Principles
Provisions in Chapter 6 of the PGC and Chapter 6 of the PDC directed the
Grid Owner and the Distribution Utilities to conduct grid and distribution
planning for the preparation and evaluation of distribution system
reinforcement projects and for the preparation of the Distribution
Development Plans. Distribution Utilities are mandated to prepare and
submit their annual 5-year Distribution Development Plans to the DOE.
Individual development projects found within the DOP shail be reviewed
by the ERC.
Any plan for expansion or improvement of distribution facitities shall be
reviewed and approved by the ERC to ensure that all Capital Projects are
optimized and that the contracting and procurement of the equipment,
assets and services have been subjected to transparent and competitive
bidding and purchasing processes to protect public interest.
Scope of Application
1.3.1 Electric Cooperatives;
1.3.2 Privately-Owned Distribution Utilities;
1.3.3 Local Government Unit Qwned-and-Operated Distribution Systems:
1.3.4 Entities duly authorized to operate within the Economic Zones;
1.3.5 Qualified Third Parties (QTPs) operating in waived areas of a
franchised Distribution Utility;
1.3.6 Utilities who are under the Perlormance-based rate setting
methodology shall not be subject to this Guidelines
Definition of Terms
Connection Assets Distribution Connection Assets as defined
in the DSOAR.
Department of Energy / The government agency created pursuant
DOE to Republic Act No, 7638 whose expanded
functions are provided in the Act.
Distribution The five-year development plan submitted
Development Plan by the Distribution Utilities to the DOE not
later than the fifteenth (15°) of March of
wzDistribution
Management
Committee (DMC)
Distribution System
DSOAR
Economic Zone (EZ)
every year, pursuant to Section 23 of R.A.
No. 9136 and Rule 7, Section 4(p) of its
IRR. In the case of Electric Cooperatives,
such plans shali be submitted through the
NEA for review and consolidation, in
preparation of the National Electric
Cooperatives Distribution Development
Plan.
The committee established by the ERC to
monitor the implementation of the
Philippine Distribution Code and to
perform other functions mentioned in
Section 2.2.1 of the Philippine Distribution
Code.
The system of wires and associated
facilities belonging to a franchised
distribution utility, extending between the
defivery points on the transmission, sub-
transmission system, or generating plant
connection and the point of connection to
the premises of the end-user.
The Distribution Service and Open Access
Rules as promuigated by the ERC.
The selected areas which are being
developed into agro-industrial, industrial,
tourist, recreational, commercial, banking,
investment and financial centers. An EZ
may refer to any of the following: Industrial
Estates, Export Processing Zones, Free
Trade Zones, information Technology
Parks and Tourist / Recreational Centers,
such as but not limited to, those managed,
administered, or operated by the Bases
Conversion Development Authority
{BCDA), Cagayan Economic Zone
Authority {CEZA), Clark Development
Corporation (CDC), Subic Energy Zone
(SEZ), Philippine Economie Zone Authority
(PEZA), Phividec Industrial Authority (PIA),
and Zamboanga City Economic Zone
Authority (ZCEZA).
‘\. Ve
4Electric Capital
Projects
Electric Cooperative
Electric Utility
Force Majeure
Non-electric Capital
Projects:
Performance Based
Regulation (PBR)
Philippine Distribution
Code (PDC)
Philippine Energy Plan
(PEP)
These are projects needed to serve
forecasted future loads and to maintain
good electric service to existing and future
customers satisfying the utility's technical
criteria for capacity, reliability, quality and
safety.
A Distribution Utility organized pursuant to
Presidential Decree No. 269, as amended
or as otherwise provided in Republic Act
No. 9136.
All electric Distribution Utilities as stated in
Section 3 of Article 1 of these Guidelines.
Any act of God, act of the public enemy,
terrorist acts, insurrection, riot, fire,
earthquake, labor strike or work stoppage,
storm or flood, breakage or accident to
machinery or equipment, any order or
regulation or restriction imposed by the
cour, governmentai, military or lawfully
established civilian authority, or any other
cause beyond the Electric Utilities’ control.
Refers to projects other than Electric
Capital Projects that are essential in the
conduct and operation of electric service
business.
The rate setting methodology as approved
by the ERC.
The set of basic rules, requirements,
procedures, and standards to ensure the
safe, reliable, secured and efficient
operation, maintenance, and development
of the Distribution Systems in the
Philippines. It also defines and
establishes the technical aspects of the
working relationship of the Distribution
Utilities and all users of the Distribution
System.
The overall energy program formutated
and updated yearly by the DOE and
arPhilippine Grid Code
(PGC)
Power Development
Program (PDP)
Qualified Third Party
(QTP)
Splitting of Major
Projects
submitted to Congress pursuant to
Republic Act No. 7638,
The set of basic rules, requirements,
procedures, and standards that will ensure
the safe, reilable, secured and efficient
operation, maintenance, and development
of the high-voltage backbone transmission
system in the Philippines. It identifies and
recognizes the responsibilities and
obligations of the Grid Owner, System
Operator, and the Market Operator.
The indicative plan for managing electricity
demand through energy-efficient programs
and for the upgrading, expansion,
rehabilitation, repair, and maintenance of
power generation and transmission
facilities, formulated and updated yearly by
the DOE in coordination with the
generation, transmission, and Distribution
Utility companies.
The alternative electric service provider
authorized to serve remote and Unviable
Areas pursuant to Section 59 of the Act
and Rule 14 of its Implementing Rules and
Regulations. It shall refer to persons who
meet the qualifications set by the DOE and
who obtained the necessary permits from
the ERC and any other agency as may be
required to be an indirect beneficiary of a
person of the Universal Charge for
Missionary Electrification.
The division, separation or partition of one
project into several phases, stages or
minor projects.
hy
Sz1S
Classification of Capital Projects
1.5.1
15.2
Major Capital Projects
These are Electric or Non-electric Capital Projects with costs that
are substantial in terms of the nature and scope of work. These
exclude connection assets covered by the DSOAR.
All Major Capital Projects that qualify under the following conditions
shall be filed for approval with the ERC:
a) For a Private Distribution Utility, the total project cost of each
Major Capital Project included in the DDP for a given year
shall be more than or equal to 0.25% of the recorded amount
of Total Net Property and Equipment in Service in its iatest
audited Balance Sheet.
b) For an Electric Cooperative, the total project cost of each
Major Capital Projects included in the DDP for a given year
shall be more than or equal to 0.25% of the recorded amount
of Total Net Property and Equipment in Service in its latest
audited Balance Sheet, or PhP500,000.00 whichever is
higher. «
Major Capital Projects as indicated in the DDP shall be filed for
review and approval of the ERC before they are implemented.
Splitting of major projects is prohibited except with prior
authorization from the ERC.
Minor Capital Projects
These are Electric or Non-Electric Capital Projects that do not
qualify as Major Capital Projects.
An Electric Utility shall not be required to file formal application for
ERC approval of Minor Capital Projects to be implemented in a
given year. An Electric Utility shall report to Ihe ERC in writing one
1 month after the start of the implementation of Minor Capital
Projects, by indicating the following:
a) Project / Program / Activity Description;
b) Justification/s or Benefits to be delivered;
¢) Estimated Project / Program / Activity Costs;
d) Project / Program / Activity Schedule
9 f
oe OZ
WALMinor Capital Projects shall be deemed approved by the ERC upon
their implementation.
Minor Capital Projects are subject to verification by the ERC for the
purpose of determining any significant discrepancies or deviations
from the submitted documents.
1.5.3 Emergency Capital Projects
These are Electric Capital Projects that require immediate
implementation during an event of force majeure in order to
maintain safe, reliable, secure and efficient operation of the power
system. These projects shall be deemed provisionally approved by
the ERC upon their implementation provided that, in case of
emergency capital projects which are classified as major projects,
an Electric Utility shall file a formal application within sixty (60) days
after start of construction.
Emergency Capital Projects that do not qualify as Major Capital
Projects shail be reported toe the ERC in writing one (1) month after
the start of construction, by indicating the following:
a) Project / Program / Activity Description;
b) Justification/s or Benefits to be delivered;
c) Estimated Project / Program / Activity Casts;
d) Project / Program / Activity Schedule
ARTICLE
APPLICATIONS AND REQUIREMENTS
Application for Major Electric Capital Projects
The application for the approval of any Major Electric Capital Project/s
shail be verified by an authorized representative of the Electric Utitity,
which has to present Board Resolution or Secretary's Certificate to show
proof of his / her being the designated representative of the Board of
Directors and shall be filed with the ERC together with properly labeled
three (3) hard copies and three (3) electronic copies of the following
requirements:
244 Description of the Project;
Tah.2.1.2
24.3
2.1.5
21.6
217
218
219
2.4.10
2.4.41
2.4.42
21.13
Justifications for the Project {include the adverse effects of
the non-implementation of the proposed Project(s) and
impact or benefits of the proposed Project(s) on the system);
Options / Alternatives considered in lieu of the proposed
Project(s);
5-year Historical and Forecast Planning Data consistent with
the DDP;
Technical Analysis (Simulation and/or Computation);
Projected Financial & Economic Cost Analysis;
i. impact / effect on rate base of the proposed Project(s);
ii, Net Present Value, [Internal Rate of Return and
Benefi/Cost Ratio analysis (include analysis for the
alternatives);
Conceptual Engineering Design and Drawings;
Project Cost Estimates which has to be in reference te a
specified design and bill of materials in the latest Manual of
Construction Standards submitted to the ERC.
Project Financing Plan;
Proposed Gantt Chart Schedule (include Bidding and
Procurement Schedule);
Board resolution or Secretary’s Certificate approving the
proposed Project(s);
Sworn Statement from the authorized representative of the
Electric Utility that an application for approval from the
concerned agencies that may have interest in the proposed
project has been filed / or shall be filed by (specify date of
filing and furnish ERC a copy within 5 days upon filing);
Sworn Statement from the authorized representative of the
Electric Utility that the proposed major capital project is
consistent with the DDP. Projects which are not included in
the DDP need justification.
« Ao2.2
Application for Major Non-Electric Capital Projects
The application for the approval of any Major Non-Electric Capital
Projeci/s shall be verified by an authorized representative of the Electric
Utility, which has to present Board Resolution or Secretary's Certificate to
show proof of his / her being the designated representative of the Board of
Directors and shail be filed with the ERC together with properly labeled
three (3) hard copies and three (3) electronic copies of the following
requirements:
2.24 Description of the Project;
2.2.2 Justification for the Project ,
2.2.3 As-built Design and Drawings, it applicable,
2.2.4 Actual Project Cost,
2.2.5 Projected Financing Plan,
2.28 Gantt Chart Schedule,
227 Board Resolution or Secretary's Certificate approving the
proposed project/s; and
2.28 Sworn Statement from the authorized representative of the
Electric Utility that an application for approval from the
concerned agencies that may have interest in the proposed
project has been filed or shail be filed, if applicable.
2.3 Evaluation and Approvat
Within fifteen (15) days from receipt of an application, the ERC shall verify
the completeness of the documents submitted, and notify the results of its
findings in writing the Electric Utility concerned. in so doing, the ERC shail
undertake either of the following:
i Notify the concerned Electric Utility to submit missed out
documents using the requirements stipulated in this
guidelines as basis, if some requirements were found
lacking; or
O24
ii. Notify the concerned Etectric Utility to pay the required filing
fee as docketing requirement, if all the submitted
requirements were found in order.
Upon filing of the application, the Commission may, on its own or upon
motion, grant the issuance of a Provisional Authority (PA) based on the
allegations of the application and on such other documents attached
thereto or submitted by the parties. The Commission, if necessary, may
schedule a hearing for the issuance of a PA not later than thirty (80) days
from the filing of the application. Thereafter, the Commission shall issue a
ruling either granting or denying the PA stating clearly the reasons
therefore, within seventy five (75) days from the fiting of the application.
During the ERC review, the staff may request additional information from
the Electric Utility on issues that the ERC believes need more clarification.
Any petition, application or action to be filed herein shall be governed by
the existing Rules of Practice and Procedure Governing Hearings before
the ERC, ihe pertinent provisions of the Act or its IRR and other related
laws.
Any application for the approval of Major Capital Projects and/or Major
Emergency Capital Projects shail be decided by the ERC within ninety
(90) days from the time the applicant formally offers its evidence;
otherwise, it is deemed that the application shal! have been approved.
For the authorization and approval of Major Capital Projects and/or Major
Emergency Capital Projects, an Electric Utility shail be required to pay a
permit fee based on the existing schedule of ERC Fees and Charges.
The ERC may refer to the DMC or engage the services of a consultant at
a reasonable cost, in the evaluation of any Major Capital Project/s
application submitted to the ERC for approval. The concerned Electric
Utility shall be charged an amount equivalent to the expenses incurred by
the ERC in engaging the services of the consultant, and said expenses
shall be recovered by the concerned Electric Utility as part of the capital
expenditure of the project being evaluated.
Reportorial Requirements
A privately-owned Etectric Utility and an Electric Cooperative shall submit
the Plan for Right-of-Way (if applicable) and result/s of the competitive
bidding which include proposais and purchase orders of major equipment
utilized for the particular project/s (if applicable) after completion of a
Major Capita Project,
O
Ww J jor
uf
\For other government-owned Electric Utilities, the submission of the
result/s of the competitive bidding which include proposals and purchase
orders of materials and/or equipment utilized for the particular project/s
shall be in accordance with the Implementing Rules and Regulations of
R.A, No. 9184, or known as “Government Procurement Reform Act’.
An Electric Utility shall be required to submit actual project costs of the
Major Capital Project thirty (30) days after its full completion.
Any significant or substantial change in the conceptual engineering
design, specifications and/or increase/decrease in the bill of materials that
will result in a cumulative variation order beyond 10% on top of the
allocated contingency due to extraordinary inflation and currency
exchange rate of the original project cost shall be reported to ERC in
writing within fifteen (15) days before implementing the variation order,
The ERC shail render its decision within thirty (30) days from receipt of the
report, otherwise, it is deemed that the revision/s shall have been
approved. Failure to submit a report within the said period shall constitute
@ waiver by the Electric Utility for any claim.
The Electric Utility shall submit to the ERC a written report, together with
justifications, if it decides to defer or cancel approved Major Capital
Projects. .
ARTICLE It
ADMISTRATIVE SANCTIONS
Violations of this Guidelines shall be subject to the penalty which the
Commission may impose in accordance with the Guidelines to Govern the
Imposition of Administrative Sanctions in the Form of Fines and Penalties
pursuant to Section 46 of Republic Act 9136.
ARTICLE IV
TRANSITORY PROVISIONS
Major Capital Projects that are in the implementation process or which were
recently completed and have not been covered by any application filed before the
ERC, shali be submitted to the ERC for approval within three (3) months from the
date of effectivity of these Guidelines.
2AHowever, capital projects, which have already been included in the applicant's
rate base, as approved by the ERC, or those that were already filed for inclusion
in the rate base and presently being evaluated by the ERC, shall be excluded
from the application of these Guidelines.
ARTICLE V
SEPARABILITY CLAUSE
If for any reason, any provision of these Guidelines is declared unconstitutional
or invalid by final judgment of a competent court, the other parts or provisions
hereof which were not affected thereby shall continue to be in full force and
effect.
ARTICLE VI
REPEALING CLAUSE
Any rule or regulation inconsistent with the provisions of these Guidelines is
hereby repeaied and modified accordingly.
ARTICLE Vii
EFFECTIVITY
These Guidelines shall take effect fifteen (15) days upon its publication in a
newspaper of nationwide circulation.
Pasig City, March 8, 2006.
RODOLFO B. AL/BANO, JR.
(On Official Leave) ee
OLIVER B. BUTALID JESUS'N. ALCORDO
Commissioner Commissions
(On Official Leave) Lid
RAUF A. TAN ANDRO Z. BAI
Commissioner Commissioner
122