Department
Circular No. 2004-06-006
PRESCRIBING
THE QUALIFICATION CRITERIA FOR THE QUALIFIED THIRD PARTY PURSUANT TO SECTION 59
OF THE ELECTRIC POWER INDUSTRY REFORM ACT OF 2001, AND
ITS
IMPLEMENTING RULES AND REGULATIONS
WHEREAS, it is the policy of the State to
ensure and accelerate the total electrification of the country;
WHEREAS, Section 59 of
Republic
Act No. 9136, otherwise known as the Electric Power
Industry Reform Act of 2001 or EPIRA, has opened
to other Qualified Third Parties (QTPs) the provision of electric service in
remote and unviable areas that the franchised Distribution Utility is unable to
service;
WHEREAS, pursuant to Rule 13 of the Implementing Rules and Regulations (IRR) of EPIRA or
EPIRA-IRR, the
Department
of Energy (DOE) is tasked to issue specific guidelines on how to encourage the
inflow of private capital and the manner whereby other parties can participate
in the missionary electrification projects set forth in the Missionary
Electrification Development Plan (MEDP);
WHEREAS, pursuant to Rule 14 of the
EPIRA-IRR, the
DOE
shall set the criteria for determining QTPs that may participate in providing
electricity to remote and unviable areas which may include financial,
technical, environmental, and other indices of performance;
WHEREAS, the
DOE
deems it appropriate to broaden its approach to rural and missionary
electrification through the creation of a market-based environment that is
conducive to private sector investment and participation and encourages
technology transfer, and research and development;
NOW,
THEREFORE, FOR AND IN CONSIDERATION OF THE FOREGOING PREMISES, the
DOE
hereby promulgates the following guidelines setting out the qualification
criteria for the determination of QTPs that may be authorized to participate in
missionary electrification program of the Government as set out in the
EPIRA and its
IRRs.
Section
1. Definition of Terms.
Unless the
context otherwise indicates, the terms used in this Circular shall have the
following meanings:
(a) Distribution
Utility refers to any electric cooperative, private corporation,
government-owned utility or existing local government unit, which has an
exclusive franchise to operate a distribution system in accordance with its
franchise and the
EPIRA;
(b) Missionary
Electrification refers to the provision of basic electricity service
in unviable areas with the ultimate aim of bringing the operations in these
areas to viability levels;
(c) Missionary
Electrification Development Plan or MEDP refers to the
five-(5) year plan of the
DOE, updated
annually, to implement missionary electrification program of the Government and
serves as basis for the determination by the
ERC
of the Universal Charge for Missionary Electrification (UC-ME);
(d) Person
refers to a natural or juridical person, as the case may be;
(e) Qualification
Criteria refers to the set of financial, technical, and other indices
of performance prescribed by the
DOE as
basis for determining QTP/s to serve Unviable or Waived Area/s;
(f) Qualified
Third Party or QTP refers to the alternative electric
service provider authorized to serve remote and unviable areas pursuant to
Section 59 of the
EPIRA and Rule 14 of the
EPIRA-IRR;
(g) Unviable
Area refers to a geographical area within the franchise area of
Distribution Utility where immediate extension of distribution line is not
feasible; and
(h) Waived
Area refers to an area within the franchise area of a Distribution
Utility declared as unviable and cannot be served for any reason by the
Distribution Utilities.
Section
2. Declaration of Policies.
It is
hereby declared the policies of the
DOE
that:
(a) Any Person
who meets the Qualification Criteria set forth in this Circular shall be
accredited as a QTP.
(b) All
QTPs shall comply with the technical, financial, reporting, environmental, and
other performance standards, which the
DOE
and/or
ERC may prescribe relative to the
provision of electricity services to remote and Unviable Areas.
(c) No
Person shall be allowed to serve Waived Areas unless it is first accredited as
a QTP by the
DOE.
Section 3.
Guiding Principles in Accrediting QTPs.
(a) Any Person, who intends to serve a Waived Area,
may apply with the
DOE through the Electric Power Industry
Management Bureau (EPIMB) for accreditation as a QTP. The
DOE shall evaluate an application based on
the Qualification Criteria set forth in this Circular.
(b)
DOE may impose upon any Person limitations
of its accreditation as a QTP, including limitations as to the size of an area
a QTP is allowed to apply to serve (where size will be measured by number of
potential customers and/or probable peak demand).
Section 4.
Eligibility Criteria for Qualified Third Party.
(a) General
(i) To be accredited as a QTP, a Person must
demonstrate that it is financially and technically capable, and of good
standing in the business community.
(ii) Any Person registered with the Philippine
Securities and Exchange Commission which
meets the criteria set forth in this Circular may be accredited as a QTP.
(iii) Organizations eligible for accreditation may
include, without limitation, private firms, Local Government Units,
Cooperatives, Non-Government Organizations, Generation Companies or its
subsidiaries, or subsidiaries of Distribution Utilities.
(b) Limitation on Accreditation
The
DOE may restrict the type or size of
system that a QTP will be allowed to construct and operate. Such restrictions may include, without
limitation, (i) restrictions on the size of system, (ii) restrictions on the
location of the system; and (iii) restrictions on the generating technology to
be used. Where the size of the system is
restricted, such restriction may be expressed in terms of generation capacity,
technology, and/or number of connections to be served.
(c) Technical Criteria
(i) To be accredited as a QTP, an interested Person
must demonstrate that it has the technical skills and capacity to operate a
power generation facility and/or an electric power distribution system for
public supply.
(ii) In order to demonstrate the required skills and
capacity, applicants must provide:
(1) Full details of the technical skills and
experience of the key 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 and contracting of the necessary expertise that the
applicant does not possess at the time of application.
(3) Details of how the applicant proposes to design,
construct, operate, and maintain the generation and associated distribution
system to be used in its operations, including its proposed plans for dealing
with major operating contingencies such as a failure of its generating plant or
a major fault on its distribution system.
(4) Details of the procedures that the applicant
proposes to put in place for the billing to and collection of payment from
customers and maintain accounting records of its commercial operations. An undertaking that the applicant will allow
DOE and/or
ERC to open its accounting records relating to its
operations, when necessary.
(5) A statement certifying that the applicant intends
to design, 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.
In addition to the above mandatory information requirements an applicant
may provide additional supporting documents, such as evidence indicating
experience in related areas and operation of other utility or infrastructure
businesses. The
DOE may, at its discretion, take such information into
account when deciding whether or not to approve the application, or whether or
not to impose a limitation on accreditation in accordance with Section 4(b) of
this Circular.
(d) Financial Criteria
(i) To be accredited as a QTP, an interested Person must
demonstrate that it has the financial capacity to finance a power generation
facility and electric power distribution system of the size likely to be
required for the operations. The
DOE may impose a limitation, in accordance
with Section 4(b) of this Circular, on the size of system that the applicant
may install and operate, consistent with its financial capacity.
(ii) Proof of financial capacity may include, among
others:
(1) Evidence of the total net assets of the
organization;
(2) A letter of credit or letter of intent to invest
from a bank or another organization provided that the
DOE is satisfied that the other party has adequate
financial capacity and indeed has the intent to invest or provide credit;
(3) The most recent annual report or financial
accounts of the applicant duly certified as correct by a registered auditor or
accountant; and
(4) Proof of adequate insurance coverage and
compliance with all Philippine labor laws.
(iii) Any Person, which cannot meet the financial
criteria outlined above, may be accredited if they can demonstrate to
DOE the capacity to finance a system of
the proposed size.
Factors, which
DOE would consider, would include:
(1) History of operating profitably a generation,
distribution or other utility business of comparable size.
(2) History of developing infrastructure projects of
similar size.
(3) A letter of testimonial from a reputable
financial institution attesting that the Applicant and/or members of the
consortium are banking with them, that they are in good financial standing and
that they have adequate resources.
(4) Other clear indications of ability to access the
required finance.
(e) Good Standing
Any interested Person seeking accreditation may be
accredited if they can demonstrate to
DOE the capacity to finance a system of a
size likely to be authorized for the provision of electric service to Waived
Area/s and was able to submit proof that it is in good standing with the
business community in which it operates.
Factors, which could lead
DOE to determine that an organization is not in good
standing may include:
(i) The involvement in the proposed key management
team or in a management position in the organization of anyone who:
(1) Is an undischarged bankrupt;
(2) Has been convicted of any crime involving fraud
or dishonesty committed in the last ten (10) years; and
(3) Has been successfully sued for fraud, breach of
directors duties or any similar action.
(ii) Being currently suspended or blacklisted by
NPC, or by any other government agency, whether
in its capacity as an individual or partnership or corporation or as a member
of a joint venture or consortium.
(iii) Has a negative slippage of more than fifteen
(15) percent in any of its ongoing contracts with the Government,
NPC or any electric utility or generation
companies, or record of unsatisfactory past performance particularly non
compliance with contract terms, plans and specifications, defective
workmanship, abandonment of work and similar deficiencies.
(f) Local Enterprises and Renewable Technologies.
Consistent with Government policies in relation to
the development of local enterprises and renewable technologies,
DOE will encourage local enterprises and
organizations with expertise in renewable technologies to operate as QTPs. Such local enterprises and organizations may
be given limited accreditation in accordance with Section 4(b) of this
Circular, consistent with the extent to which they demonstrate technical,
financial capacity and good standing criteria.
Section 5.
Repealing Clause.
All pertinent issuances, circulars and memoranda
inconsistent with this Circular are hereby amended or repealed accordingly.
Section 6.
Saving Clause.
(a) If for any reason, any provision of this Circular
is declared unconstitutional or invalid, the other parts or provisions hereof
which are not affected thereby shall continue to be in full force and effect.
(b) The implementation of this Circular shall not
exempt the parties from complying with applicable laws and government rules and
regulations.
Section 7.
Effectivity.
This Circular shall take effect within fifteen (15)
days upon publication in newspaper of general circulation.
VICENTE S.
PΙREZ, JR.
Secretary
Fort Bonifacio, Taguig
Metro Manila, Philippines
18 June 2004
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