DEPARTMENT CIRCULAR NO.

2015-06-0008

“MANDATING ALL DISTRIBUTION UTILITIES TO UNDERGO

COMPETITIVE SELECTION PROCESS IN SECURING POWER
SUPPLY AGREEMENTS”

OI C-Undersecretary M ylene C. Capongcol

Departm ent of Energy

2016 N EA-EC N ational Legal Conclave

Hotel N ovotel M anila Araneta Center , Quezon City
19 M ay 2016
Scope of Presentation

o Background
o DOE Circular No.2015-06-0008
 General Provisions
 Salient Features
o DOE and ERC Issuances
 Joint DOE and ERC Resolution No.1, Series of 2015
 ERC Resolution No.13, Series of 2015
 ERC Resolution No.1, Series of 2016
o Next Steps
Policy Framework

Republic Act No. 9136 (EPIRA)

o Efficiency, Transparency and

Competition
o Effective Governance and
Regulations
o Consumer Empowerment and
Protection
 Competitive Selection Process (CSP)

o CSP is not new.

 First mandated in off-grid areas through DC2004-01-001,
issued on 24 Jan 2004, introduced Private Sector Participation
(PSP) in Existing NPC-SPUG Areas.

o Complemented by the Regulator.

 Issued ERC Resolution No. 11, Series of 2005, “Adopting the
Guidelines for the Setting and Approval of Electricity
Generation Rates and Subsidies for Missionary Electrification
Areas.”
Competitive Selection Process

o PSP in SPUG Areas (DC No. 2004-01-001)

 Competitive process to be used to select one or more
New Private Providers (NPPs) to supply power to area

 DU options in managing competitive process—

• Use a Transactions Advisor
• NPC-SPUG assigns its PSA with the Distribution Utility
(DU) to NPP through a competitive process
• The DU manages competitive selection process by
itself
DOE Issuances
Ensuring Energy Security and Transparency in Rates and Processes

Department Circular No.

Department Circular No.
No.DC2015-06-0010,
DC2015-06-0009,
“Providing Policies to
“Providing for Additional
Facilitate the Full
Guidelines for DUs in
Implementation of RCOA in
Complying with their
the Philippine Electric
Mandate to Ensure Supply
Power Industry”
Security”
Enhancing
PSAs for
Captive
Customers
Protection
Mandatory
CSP for all
Department Circular No. DUs
Dc2015-06-0008,
“Mandating All DUs to Undergo
Competitive Selection Process (CSP) In
Securing PSAs”
DEPARTMENT CIRCULAR NO. DC2015-06-0008
“Mandating All Distribution Utilities to
Undergo Competitive Selection Process (CSP)
In Securing PSAs”
 Department Circular No. DC2015-06-0008
“Mandating All DUs to Undergo CSP in Securing PSAs”

Highlights:

• Signed on 11 June 2015 and published on 30 June 2015 at the

Philippine Daily Inquirer and The Philippine Star.
• Will not apply to PSAs with tariff rates already approved
and/or have been applied for approval by the ERC before
the effectivity of the Circular.
• There shall be enforcement and compliance monitoring by
the DOE, and with penalty provision through ERC.
Department Circular No. DC2015-06-0008
“Mandating All DUs to Undergo CSP in Securing PSAs”

Salient Features
o Requires all DUs to conduct CSP, through a Third Party duly
recognized by the DOECIRCULAR
DEPARTMENT and ERC.NO.
In 2015-06-
the case for Electric
008
Cooperatives, shall be
MANDATING recognized
ALL by the NEA;
DISTRIBUTION
UTILITIES TO UNDERGO
o CSP shall COMPETITIVE
conform with the following:
SELECTION PROCESS
(CSP) IN SECURING
 Aggregation of DUs AGREEMENTS
POWER SUPPLY un-contracted demand requirement;
 Annual conduct of CSP; and
 Uniform PSA Template on the terms and conditions to be
issued by the ERC and DOE
Department Circular No. DC2015-06-0008
“Mandating All DUs to Undergo CSP in Securing PSAs”

Salient Features
o ERC and DOE to issue Implementing
DEPARTMENT Guidelines (IG) within
CIRCULAR NO. 2015-06-
120 days from
008 the effectivity of the Circular (i.e., 27 October
MANDATING ALL DISTRIBUTION
2015) UTILITIES TO UNDERGO
COMPETITIVE SELECTION PROCESS
o IG shall contain specific
(CSP) IN details on the process of
SECURING
aggregation of un-contracted
POWER demand requirements
SUPPLY AGREEMENTS of DUs
and accreditation of Third Party authorized to conduct CSP

o ERC to issue supplemental guidelines and procedures on the

design and execution of the CSP
SUBSEQUENT ISSUANCES
BY DOE AND ERC ON CSP
 JOINT DOE & ERC RESOLUTION NO.1 (2015)
“A Resolution Enjoining All Distribution Utilities to Conduct
Competitive Selection Process (CSP) in the Procurement of
Supply for Their Captive Market”
Salient Provisions

o Signed on 20 October 2015 and published on 07

November 2015 at the Philippine Daily Inquirer and The
Philippine Star
DEPARTMENT CIRCULAR NO. 2015-06-
008
o DOE and MANDATING
ERC recognize that CSP in the procurement of
ALL DISTRIBUTION
PSAs by the DUs engenders
UTILITIES TO UNDERGO transparency, enhances
security of supply, and
COMPETITIVE ensure stability
SELECTION PROCESS of electricity
(CSP) IN SECURING
prices to POWER
captiveSUPPLY
electricity end-users in the long-term
AGREEMENTS

o ERC to issue the appropriate regulations to implement

the CSP
 ERCDEPARTMENT
RESOLUTION NO.13 (2015)
CIRCULAR NO. 2015-06-
“A Resolution 008
Enjoining All Distribution Utilities to Conduct
MANDATING ALL DISTRIBUTION
Competitive
UTILITIESSelection
TO UNDERGOProcess (CSP) in the
Procurement of Supply
COMPETITIVE for Their
SELECTION Captive Market”
PROCESS
(CSP) IN SECURING
POWER SUPPLY AGREEMENTS
 Salient Provisions

o Signed on 20 October 2015 and published on 06

November 2015 at the Philippine Daily Inquirer
o Prescribes the following:
DEPARTMENT CIRCULAR NO. 2015-06-
008
 PSA shallMANDATING
be awarded to the winning Generation
ALL DISTRIBUTION
UTILITIES TO UNDERGO
Company followingSELECTION
COMPETITIVE a successful transparent and
PROCESS
competitive selection process or by Direct
(CSP) IN SECURING
POWER SUPPLY AGREEMENTS
Negotiation;
 DU may adopt any accepted form of CSP;
Salient Provisions

o Direct Negotiation maybe made by the DU after at least two

(2) failed CSPs:

 DU didDEPARTMENT
not
008
receive CIRCULAR NO. 2015-06-
any proposal;
 Only one supplierALL
MANDATING submit proposal; and
DISTRIBUTION
UTILITIES TO UNDERGO
 Competitive proposal
COMPETITIVE from prospective
SELECTION PROCESS suppliers failed to
meet the TOR
(CSP) requirements as determined by the DU’s
IN SECURING
BAC. POWER SUPPLY AGREEMENTS

o Will not apply to PSAs already filed with the ERC as of the
effectivity of the Resolution
 ERCDEPARTMENT
RESOLUTION
008 NO.1 (2016)
CIRCULAR NO. 2015-06-

“A Resolution Clarifying the Effectivity of ERC

MANDATING ALL DISTRIBUTION
UTILITIES TO UNDERGO
Resolution
COMPETITIVENo.13, series
SELECTION of 2015”
PROCESS
(CSP) IN SECURING
POWER SUPPLY AGREEMENTS
Salient Provisions

o Signed on 15 March 2016

o Effective DEPARTMENT
30 April 2016,CIRCULAR
all DUs shall conduct CSP for the
NO. 2015-06-
supply of 008
their Captive Market
MANDATING ALL DISTRIBUTION
UTILITIES TO UNDERGO
o There should be at least
COMPETITIVE two (2) qualified
SELECTION PROCESS bids for the CSP to
be considered
(CSP) as successful
IN SECURING
POWER SUPPLY AGREEMENTS
o DUs shall adopt the Terms of Reference prescribed in Section
2 of ERC Resolution No.13, series of 2015
Salient Provisions

o On PSAs with provisions on automatic renewal or

extension of term:

DEPARTMENT CIRCULAR NO. 2015-06-

 PSAs approved
008
by ERC or filed before the effectivity of
Resolution No.1, may
MANDATING have one (1) automatic renewal or
ALL DISTRIBUTION
extension for aTO
UTILITIES period not exceeding one (1) year from
UNDERGO
COMPETITIVE SELECTION PROCESS
the end of their respective terms;
(CSP) IN SECURING
POWER SUPPLY AGREEMENTS

 There will be no automatic renewal or extension of PSAs

upon effectivity of Resolution No.1
Next Steps

o DOE and ERC to re-convene the CSP Technical

WorkingDEPARTMENT
Group to prepare
CIRCULAR the Supplemental
NO. 2015-06-
Guidelines
008 on CSP
MANDATING ALL DISTRIBUTION
UTILITIES TO UNDERGO
o ConductCOMPETITIVE
of public consultations
SELECTION PROCESS
(CSP) IN SECURING
POWER SUPPLY AGREEMENTS
o Issuance of Supplemental Guidelines on CSP
 THANK YOU!
DEPARTMENT CIRCULAR NO. 2015-06-008
“MANDATING ALL DISTRIBUTION UTILITIES TO UNDERGO COMPETITIVE
SELECTION PROCESS IN SECURING
POWER SUPPLY AGREEMENTS”

OIC-Undersecretary Mylene C. Capongcol

Department of Energy

2016 NEA-EC National Legal Conclave

Hotel Novotel Manila Araneta Center , Quezon City
19 May 2016