Power sector development plays an invaluable role in fuelling the economy and nation building.

The country’s electric power industry is governed by Republic Act (RA) No. 9136 or the Electric
Power Industry Reform Act (EPIRA) of 2001 that envisions a regime of a liberalized power industry
towards fully achieving a competitive and a market-driven electricity sector. EPIRA’s goals and
objectives were further strengthened by RA No. 9513 or the Renewable Energy (RE) Act of 2008
that pushes the utilization of indigenous and new renewable energy resources to increase energy
self-sufficiency and reduce dependence on imported fuels.

As the power sector continuously evolves along with technology innovation, the DOE remains
committed with its mandate of formulating plans, programs, and policies to usher the sector’s
unimpeded growth. This translates to a number of benefits such as ensuring economic stability,
creation of wealth for communities and the people, and consumer empowerment, among others.

To heed the Administration’s call for inclusive growth and development, the DOE aligns its power-
related development plans with the Philippine Development Plan (PDP) 2017-2022, the “Build,
Build, Build, Infrastructure” Program and Ambisyon 2040, as a converging strategy to fast-track the
attainment of the President’s priority thrusts and agenda.

In addition, the DOE crafted power sector roadmaps that encapsulates the generation,
transmission, distribution and supply subsectors, including missionary and household
electrification. The subsector roadmaps outline the various strategies and approaches of the DOE,
which are targeted for implementation in the short- up to the long-term period. Each of the
roadmaps are anchored on the power sector’s overall objectives by 2040 which aims to: 1) ensure
quality, reliable, affordable and secure supply; 2) expand access to electricity; 3) ensure a
transparent and fair playing field in the power industry; and 4) accelerate total electricity access in
the country.

A. EXISTING POWER SYSTEM

The Philippines is an archipelago made up of 7,641 islands. With its geographical nature, the
country’s electricity network is characterized by grid and off-grid power systems. The main grid is
composed of three (3) sub-grids, namely, the Luzon and Visayas grids that are already
interconnected via submarine cable, and the Mindanao grid which remains an independent grid
anticipating the completion of the Mindanao-Visayas Interconnection Project (MVIP). Once

PHILIPPINE ENERGY PLAN 2018-2040 88

 completed, the major grids can benefit from sharing of available capacities as a “One Grid
Philippines”.

▪ Main Grid

In 2018, the main grid recorded a peak demand of 14,782 megawatts68 (MW). There are 235
generating facilities that operates and supplies power, with a total installed capacity of 23,281
MW69 and a dependable capacity of 20,825 MW. Gross power generation in the same period stood
at 98,308 gigawatt-hour70 (GWh). More than half (52.8 percent) of the electricity produced were
sourced from coal-fired power plants while 21.7 percent came from natural gas. Renewable-based
generation such as geothermal, hydro, biomass and variable solar and wind power plants
contributed 23.7 percent of total power generation. Meanwhile, roughly 1.8 percent of electricity
generated were supplied by oil-based power plants.

Electricity generated by the power plants is delivered at a higher voltage through the transmission
system. The existing transmission assets with total substation capacity of 34,852 Megavolt-
Ampere (MVA) and combined transmission line length of 20,505 circuit-kilometers (ckt-kms) are
owned by the Government through the National Transmission Corporation (TransCo). It is being
operated and maintained by privately-owned National Grid Corporation of the Philippines (NGCP)
by virtue of RA 9511 or the NGCP Franchise Law for a period of 50 years. Under the said franchise,
the initial concession agreement between NGCP and the Government is for a duration of 25 years
that can be renewed for another 25 years.

Distribution Utilities (DUs) distributes electricity to the end-users. As of 2018, the National
Electrification Administration (NEA) supervises the operation of 100 Electric Cooperatives (ECs),
while the 24 Private Investor Owned Utilities (PIOUs) and Enerzones71 including the two (2) LGU-
Owned Utilities (LGUOUs) directly reports to DOE. During the period, total electricity sales or the
amount of electricity consumed by the end-users of DUs in the main grid was 76,359 GWh72. The
residential and commercial sectors are among the largest power users, which accounts for 36.2
percent and 31.1 percent of total consumption, respectively. Electricity consumption of the
industrial sector closely follows at 30.5 percent, while the remaining 2.3 percent was accounted for
the “others” sector that corresponds to the electricity used by public buildings and streetlights.

▪ Off-Grid

Off-grid power systems or “missionary areas” are those that are not yet connected to the main
grid. These are typically small islands and isolated grids (SIIGs) whose electricity supply is being
provided majority by the National Power Corporation (NPC), privately-owned New Power
Providers (NPPs) for relatively large off-grid islands and some Qualified Third Party (QTP) providers
servicing far-flung and remote areas.

For the period in review, there are 181 power generation facilities in missionary areas. Of the total
power plants, 13973 are from NPC-SPUG, 32 from NPPs, six (6) are DU-owned and four (4) from
QTPs. Existing power plants have a total installed capacity of 534 MW and a dependable capacity
of 416 MW74. In terms of power generation, total power produced reached 1,456 GWh75. About

68 In 2019, the main grid recorded a peak demand of 15,581 MW

69 In 2019, the main grid has a total installed capacity of 25,006 MW and total dependable capacity of 22,317 MW
70 The 2019, gross power generation of the main grid reached 104,417 GWh
71 Enerzones are duly authorized entities operating within economic zones
72 In 2019, electricity sales of the main grid were 81,237 GWh, excluding directly connected customers (DCC)
73 Excluding the 135 small-scale power plants in the PRES mini-grids
74 In 2019, off-grid power plants have a total installed capacity of 526 MW and a dependable capacity of 419 MW
75 In 2019, gross power generation in off-grid areas reached 1,623 GWh

89 PHILIPPINE ENERGY PLAN 2018-2040

97.1 percent were sourced from oil-based power plants, with a little portion from RE-based
generation facilities particularly mini-hydro that contributed about 2.9 percent of the gross
generation.

Aside from generating facilities, NPC owns, manages and operates the transmission and substation
assets of the Government, with total substation capacity of 185 MVA and 776 ckt-kms of
transmission lines. On the other hand, NEA administers and supervises 21 Off-grid ECs while the
DOE directly oversees one (1) Multi-purpose Cooperative (MPC) and one (1) LGUOU that act as local
distribution utilities in SIIGs.

The 2018 electricity consumption of the off-grid end-users was 1,16376 GWh, which is 1.5 percent
compared to the electricity consumption of the main grid. Of these total, the residential sector
accounts for the largest share of 55.9 percent. Meanwhile, the shares of the commercial, industrial
and other sectors accounted for 25.7 percent, 7.9 percent and 10.5 percent of total power
consumption, respectively.

B. GENERATION
The power generation sector’s roadmap articulates short- to long-term strategies anchored on the
government’s overarching thrust and energy agenda of achieving power supply security, reliability,
and sustainability throughout the country. It forms as an integral part of the holistic approach
towards realizing the full restructuring and reform of the electric power industry in support of
national development.

ASSESSMENT

For the short-term period, the DOE has taken strategic strides to attain these key targets outlined
in the roadmap. Relatedly, the electric power industry also welcomed milestone developments,
new policy directions and crucial interventions that are instrumental in meeting the envisioned
goals and outcomes of the sector.

1. Declare Power Projects as Project of Through this landmark executive issuance, the
National Significance establishment of a simplified and streamlined
regulatory process essentially benefited the
The promulgation of Executive Order No. 30 electric power industry investors in pursuing
(EO30) titled “Creating the Energy Investment and expediting the implementation of
Coordinating Council (EICC) in Order to proposed power infrastructure projects that
Streamline the Regulatory Procedures Affecting are vital in ensuring the country’s energy
Energy Projects” is a paramount development security.
in the energy sector, particularly in securing a
conducive business environment for energy Two (2) power generation projects have been
investments. The EO’s Implementing Rules granted with a Certificate of Energy Project of
and Regulations (IRR) was issued in April 2018 National Significance (CEPNS), namely:
to provide the framework and guidelines,
including the process flow in reviewing, ▪ The Atimonan One Energy 2 x 600 MW
evaluating and endorsing energy projects as Coal-fired Power Project, and
“Energy Project of National Significance” ▪ The Energy World Corporation 650 MW
(EPNS). Combined Cycle Gas Turbine Power
Project with Liquefied Natural Gas

76 In 2019, total electricity sales in off-grid areas reached 1,278 GWh

PHILIPPINE ENERGY PLAN 2018-2040 90

 (LNG) Import Terminal and contracts with the Government Owned and
Regasification Facility. Controlled Corporations (GOCCs). It also
intends to relieve the burden of the privatized
▪ Exempt Real Property Tax (RPT) and Local IPPs that are yearly encountering problems on
Taxes the assessment and payment of real property
tax to the concerned LGUs. This initiative is in
In fulfillment of its mandate to provide a relation to the administration of IPP contracts,
sustainable and reasonably-priced energy for as part of the major functions of the Power
the people, the DOE continues to establish Sector Assets and Liabilities Management
strategies to make electricity costs more (PSALM) Corporation wherein the DOE sits as
competitive. Among the identified measures one of the agency’s Board of Directors.
being considered by the DOE include the
relaxation of government tariffs, such as ▪ Grant Business Permits and Licenses to
exemption from real property and other local Operate
taxes being imposed by the Local Government
Units (LGUs) to the power generation The DOE evaluates, processes and issues
companies. necessary endorsements and certifications
including permits and licenses to operate,
In 2018, the DOE fully supported the which form part of the basic requirements of
Department of Finance (DOF) in proposing for other government agencies relative to the
an Executive Order mandating the reduction construction of new power generating
and condonation of real property taxes, facilities. For the period in review, the DOE
interests and penalties for CY2017. The granted a total of 272 clearances in 2017 and
proposed EO will cover the power generation endorsed 261 power projects in 2018 as
facilities of the Independent Power Producers presented in Table 29.
(IPPs) under the Build-Operate-Transfer (BOT)

Table 29. NUMBER OF CLEARANCES/ENDORSEMENTS ISSUED TO POWER GENERATION COMPANIES, 2017-2018

Requesting Agency Type of Clearance/Certificate 2017 2018

Securities and Exchange Commission Certificate of Endorsement (COE) for

160 117
(SEC) Company Registration/Incorporation

National Grid Corporation of the Clearance to Undertake System Impact

73 84
Philippines (NGCP) Study (SIS)

COE for the issuance of ERC Certificate of

Energy Regulatory Commission (ERC) 30 46
Compliance (COC)

National Commission on Indigenous Certificate of Non-Overlap (CNO) /

9 14
Peoples (NCIP) Certificate of Precondition (CP)

Total 272 261

2. Institute Power Mix Policy for Power Generation towards Optimal Portfolio

The DOE remains cognizant with its crucial role in empowering the nation by ensuring the delivery
of stable, secure, sufficient and accessible energy supply. In carrying out this mandate, the DOE
firms up its strategies by instituting an appropriate power mix for electricity generation, which
considers an optimal supply portfolio that meets the growing electricity demand including the
reserve requirements of the grid. The optimal portfolio constitutes the required baseload, mid-
merit and peaking power plant capacities based on least-cost options.

91 PHILIPPINE ENERGY PLAN 2018-2040

Parallel with this policy thrust, the DOE regularly formulates, on an annual basis, the power
demand-supply outlook using a simulation software that provides optimal capacity addition
planning. The draft Power Outlook 2018-2040 was presented in the E-Power Mo campaign held in
Iloilo City last 09 October 2018.

3. Lead in the Plant Performance Assessment/Benchmarking of Power Generation Facilities

On 03 May 2017, the DOE promulgated the Department Circular (DC) No. 2017-05-0008 titled
“Providing for the Policies and Guidelines on the Conduct of Performance Assessment and Audit
for All Power Generation, Transmission and Distribution Systems and Facilities.” The DC provides
the policy for the conduct of performance assessment and audit (PAA) of all facilities related to
the power system – power generation, transmission, and distribution systems and facilities. In
support of this issuance, DC2017-12-0016 titled, “Adopting the Guidelines for the Performance
Assessment and Audit of All Power Generation, Transmission and Distribution Systems and
Facilities” was then issued on 28 December 2017, embodying the implementing guidelines of all
PAA activities of the DOE.

These Circulars are enforced to serve as effective guideposts to evaluate the overall performance
and efficiency of power facilities with respect to their mandated operational standards. In
addition, these policies are also aimed at identifying existing gaps and challenges in the policies
and regulations in the electric power industry, as well as the necessary action plans that are
instrumental for the review and development of corrective policy measures.

In the last quarter of 2018, the DOE’s Performance Assessment and Audit Team on Power
Generation Facilities (PAAT-PGF) spearheaded the conduct of PAA in the following grid-connected
power generation facilities listed in Table 30.

Table 30. LIST OF COMPLETED PAA ACTIVITIES ON GRID-CONNECTED POWER GENERATION FACILITIES

Grid Facility Date of PAA

Luzon Tiwi Geothermal Power Plant 21 November 2018

Visayas Bohol Diesel-fired Power Plant 13-14 November 2018

Janopol Mini-Hydroelectric Power Plant 13-14 November 2018

Mindanao Therma South Inc. (TSI) Coal-fired Power Plant 16-17 October 2018

Likewise, the DOE is firming up the engagement of professional consultants to strengthen the
sustainability, institutional capacity and the overall improvement of the program. In line with this,
the DOE has completed the procurement process for the Consultancy Services that is responsible
for enhancing the PAA implementing guidelines, including the accreditation of the third-party
independent auditors.

4. Periodic Monitoring of Power Generation Projects

As part of its regular function, the DOE closely monitors the development phase of power
generation projects that are currently in the pipeline to ensure that these capacity additions are
timely commissioned based on their scheduled commercial operations.

PHILIPPINE ENERGY PLAN 2018-2040 92

 In 2018, new generating capacities totaling 934 MW were commissioned during the period as
enumerated in Table 31. Of the total capacity, 720 MW were coal-fired, while 87 MW were oil-based
plants. On the other hand, capacity additions from RE-based generation facilities reached 126 MW,
comprised of 80 MW hydropower, 34 MW biomass and 12 MW geothermal. About 71.0 percent of
these newly installed capacities are located in Luzon, and the remaining in Mindanao. Meanwhile,
Visayas maintained a stable power supply despite no additional capacities that came online in the
region.

Table 31. LIST OF NEWLY COMMISSIONED POWER PLANTS in 2018 (On-Grid)

Capacity (MW)
Facility Operator Location
Installed Dependable
LUZON 659.90 636.40
Coal 570.00 555.00
Pagbilao Unit 3 Pagbilao Energy Corporation Pagbilao, Quezon 420.00 420.00
(PEC)
SCPC Unit 3 SMC Consolidated Power Limay, Bataan 150.00 135.00
Corporation (SCPC)
Oil-based 50.00 46.00
SLPGC Unit 3 Southwest Luzon Power Calaca, Batangas 25.00 23.00
Generation Corporation (SLPGC)
SLPGC Unit 4 SLPGC Calaca, Batangas 25.00 23.00
Geothermal 12.00 12.00
Maibarara Unit 2 Maibarara Geothermal Inc. Sto. Tomas, Batangas 12.00 12.00
Hydropower 8.50 8.00
Maris 1 Main Canal SN Aboitiz Power Magat, Inc. Ramon, Isabela 8.50 8.00
Biomass 19.00 15.40
ACNC Asian Carbon Neutral Power Tarlac City, Tarlac 2.00 0.60
Corporation
BBEC Bicol Biomass Energy Corporation Pili, Camarines Sur 5.00 4.00
(BBEC)
SJCI Power Phase II San Jose City I Power Corporation San Jose City, Nueva 12.00 10.80
Ecija
MINDANAO 274.10 255.00
Coal 150.00 135.0
SMC Malita Unit 2 San Miguel Consolidated Power Malita, Davao Occidental 150.00 135.00
Corporation
Diesel 37.30 34.70
KEGI-Jimenez King Energy Generation Brgy. San Isidro, Jimenez 7.80 7.50
Incorporated (KEGI)
PBI Peak Power Bukidnon Inc. (PBI) Bukidnon 10.40 10.40
PSFI 2 Peak Power San Francisco (PSFI) San Francisco, Agusan 5.20 5.20
del Sur
PSI 2 Peak Power Soccsargen (PSI) General Santos City 13.90 13.90
Hydropower 71.80 71.80
New Bataan HEPP Euro Hydro Power (Asia) New Bataan, 3.00 3.00
Holdings, Incorporated Compostela Valley
Manolo Fortich Unit 1 Hedcor Bukidnon, Incorporated Santiago, Bukidnon 43.40 43.40
Manolo Fortich Unit 2 Hedcor Bukidnon, Incorporated Santiago, Bukidnon 25.40 25.40
Biomass 15.00 13.50
Lamsan Power Lamsan Power Corporation Maguindanao 15.00 13.50
Corporation
Total 933.60 880.60

93 PHILIPPINE ENERGY PLAN 2018-2040

PLANS AND PROGRAMS
Figure 54. POWER GENERATION ROADMAP
Mindful of its crucial role in
powering the nation, the DOE is
poised to buckle up concrete
strategies under the generation
roadmap for greater power
supply security, grid stability, and
increase sustainability in the long-
run. In pursuit of this goal, the
DOE continues to bring forth
suitable policy regulations
coupled with pragmatic
mechanisms to promote full
competition and increase
transparency in the power sector
(Figure 54).

1. Formulate and Update Power Demand and Supply Outlook as Reference for Investments

To upkeep the DOE’s societal contributions toward national development, the formulation and
periodic updating of the country’s power demand and supply outlook remains as a priority
program. In carrying out this mandate, the DOE stays vigilant in developing its electricity
projections giving due consideration on optimal power mix, technology neutral approach, and fuel
diversity.

Apart from serving as a guidepost for economic planners, the power outlook serves as a firm
reference for enticing more investments in the electric power industry, and as a responsive
measure to meet the dynamic needs of surging economy. The positioning of landmark policies and
regulations aimed at revamping the rigid business processes and transaction-making in the
government are seen to revitalize the private sector’s investment interest with a big appetite for
the energy sector. These remarkably flag a turning point to attract more investors and infuse the
much-needed capital, particularly in the power generation business.

2. Monitor implementation of power generation projects

To support the power outlook, the DOE constantly monitors the committed and indicative power
projects to facilitate its timely completion to fill up the requirement of the grid. As of 31 December
2018, a total of 45 committed power projects with corresponding total installed capacity77 of 6,329
MW were listed in the private sector initiated power projects of DOE. On a per grid basis, the
committed power projects in Luzon have an aggregated installed capacity of 4,775 MW, Visayas
with 766 MW, and Mindanao with 788 MW as shown in Figure 55 and Table 32.

77 Installed capacity is the rated or nameplate capacity of the power plan

PHILIPPINE ENERGY PLAN 2018-2040 94

 Among fuel sources, capacity from conventional power plant type (coal, oil-based and natural gas)
totals 5,813 MW, constituting more than 90.0 percent of the installed capacity. Meanwhile,
renewable energy sources (geothermal, hydro, solar, wind, and biomass) make up a little less than
10.0 percent of the total capacity, or 516 MW.

Figure 55. COMMITTED POWER PROJECTS (As of 31 December 2018)

Hydro
0.5% Biomass
Geothermal 0.1%
0.6%

Natural Gas
13.6%

LUZON Solar
0.2%
VISAYAS MINDANAO
Hydro 3.5%
4,774.8 765.9 Coal 788.3
MW MW 56.8 MW

Coal Coal
82.7 88.8%
%

Table 32. SUMMARY OF COMMITTED POWER PROJECTS (As of 31 December 2018)

Plant Luzon Visayas Mindanao Philippines
Type No. of Rated No. of Rated No. of Rated No. of Rated
Projects Capacity Projects Capacity Project Capacity Projects Capacity
(MW) (MW) s (MW) (MW)
Coal 6 3,950.0 2 435.0 2 700.0 10 5,085.0
Oil-based - - 2 78.0 - - 2 78.0
Natural Gas 1 650.0 - - - - 1 650.0
Geothermal 1 31.0 1 50.0 - - 2 81.0
Hydropower 8 22.6 2 23.1 2 33.0 12 78.7
Solar 1 115.0 3 1.2 1 25.0 5 141.2
Wind - 0.0 - - - - - -
Biomass 2 6.2 6 178.6 5 30.4 13 215.1
Total 19 4,774.8 16 765.9 10 788.3 43 6,329.0

In the same reference period, the DOE is tightly monitoring 291 indicative power projects with a
total capacity equivalent to 33,199 MW. Of the total, 26,805 MW are lined up in Luzon, 3,903 MW
in Visayas and 2,491 MW in Mindanao (Figure 56).

95 PHILIPPINE ENERGY PLAN 2018-2040

 Figure 56. INDICATIVE POWER PROJECTS (As of 31 December 2018)

BESS
0.7% Biomass BESS
1.5% 2.0%

Coal
15.1%
Coal Coal
33.1% 34.2%

Solar
31.7%
LUZON Wind VISAYAS MINDANAO
26,804.7 39.4% Hydro Solar
2,491.4
3,903.4 18.3% 29.7%
MW MW
MW
Oil
Oil 0.2%
1.3% Hydro
Solar 22.2%
21.2%

Geothermal
0.5%

Table 33. SUMMARY OF INDICATIVE POWER PROJECTS BY ISLAND GRID (As of 31 December 2018)
Plant Type Luzon Visayas Mindanao Philippines
No. of Rated No. of Rated No. of Rated No. of Rated
Projects Capacity Projects Capacity Projects Capacity Projects Capacity
(MW) (MW) (MW) (MW)
Coal 12 8,935.0 2 600.0 3 928.0 17 10,463.0
Oil-based 3 346.0 4 63.5 1 5.9 8 415.4
Natural Gas 5 4,060.0 - - - - 5 4,060.0
Geothermal 3 130.0 1 40.0 1 30.0 5 200.0
Hydropower 62 3,344.2 19 728.2 19 603.2 100 4,675.6
Solar 59 8,550.0 15 843.7 20 805.0 94 10,198.6
Wind 11 1,275.4 13 1,568.0 - - 24 2,843.4
Biomass 14 164.0 5 60.0 8 119.4 27 343.4
BESS 8 200.0 4 80.0 2 220.0 14 500.0
Total 177 26,804.7 63 3,903.4 54 2,491.4 294 33,199.5

By fuel type, RE-based generation facilities sum up at 18,261 MW, accounting for 55.0 percent of
the total indicative capacity, mostly from solar (Table 33). On the other hand, fossil-based fuels,
composed of coal and natural gas, represent 31.5 percent and 12.2 percent shares, respectively.
Meanwhile, 14 projects using battery energy storage system (BESS) are also included in the
indicative projects with an aggregate capacity of 500 MW. The detailed list of the committed and
indicative power projects as of 31 December 2018 can be found in Annex __.

3. Review and Evaluate for Possible Endorsements of Power-related Projects

Considering the positive economic outlook of the country, the DOE deems it vital to have adequate
and sufficient capacity additions across the grids. To realize this, the DOE stringently reviews,
evaluates and endorses power-related projects with due diligence consistent with existing policies
and regulatory framework. In conjunction, the DOE continually processes and issues pertinent
clearances and endorsements, and oversees project implementation to ensure the timely
completion and commercial operations of the power generation projects.

4. Develop Policies on the Entry of New Emerging Technologies for Power Generation

The policy direction of the DOE on fuel source diversity aims to address the reliance of the power
sector to a particular fuel source towards electricity supply security. In parallel with this thrust, the

PHILIPPINE ENERGY PLAN 2018-2040 96

 DOE is set to pursue the formulation of enabling policies to push for the strategic pacing and
mainstreaming of advanced and emerging technologies for power generation, such as ocean
thermal energy conversion (OTEC), fuel cells, nuclear energy, and energy storage system (ESS),
among others.

To initiate the development of the policy framework on the adoption of ESS in the country, the
DOE steered several FGDs and consultations nationwide among energy agencies, electric power
industry participants, and stakeholders. Inputs for the said FGDs and Public Consultations form
part of the DC No. 2019-08-0012 entitled “Providing a Framework for Energy Storage System in the
Electric Power Industry”, which was signed on 1 August 2019. The implementation of the DC is
timely for the medium- to long-term targets of the roadmap.

Another technology that the DOE monitors is the development of Liquefied Natural Gas (LNG) in
the power sector. In 2017, the DOE issued a policy for the Philippine Downstream Natural Gas
Regulation (PDNGR) which aims to expedite the entry of LNG to the country in time for the
depletion of the Malampaya Natural Gas reservoir.

Meanwhile, initiatives for the development of administrative policies on other emerging

technologies for power generation is already underway and remains as a continuing target of the
roadmap within the planning period.

5. Develop Resiliency Policies for Power Generating Facilities

Ensuing the promulgation of the universal framework for Energy Resiliency Policy, the DOE also
focuses on developing the governing policies to reinforce the resiliency of power generation
facilities. The policy broadly grasps operational protocols and contingency measures to make
power facilities withstand from all forms of natural and human-induced calamities and immediately
restore the electricity service.

Said policy is primarily aimed at mitigating and adapting to adverse impacts of climate change and
strengthen safety and dependability of the power system of the country. It is seen as an imperative
strategy for continuous delivery of power services amidst uncontrollable disruptive events.

6. Monitor and Assess Power Demand and Supply Situation

In the performance of its regular function, the DOE constantly monitors and assesses power
demand and supply situation, which is imperative for conveying timely, strategic, and proactive
measures for the sector. Learning from previous experiences, the DOE ardently executes full
authority over mandated industry participants to ensure quality, reliability, affordability and
security of supply of electric power across the country.

7. Monitor Compliance to Reportorial Requirements

The DOE upholds its supervisory role to all electric power industry participants, including energy
stakeholders, by monitoring their compliance to reportorial requirements set forth by existing laws
policies and regulations of the government. These reports serve as decisive platform and effective
tool to strengthen and improve the DOE’s planning and policy making functions.

97 PHILIPPINE ENERGY PLAN 2018-2040

 C. TRANSMISSION
The Transmission Development Roadmap is a clear and comprehensive pathway that directly
supports the national goal of achieving reliability and integrity of the country’s transmission grid.
This roadmap assessment highlights the implementation of the commitments set forth in the
short-term (2017-2018) linked to realizing the target goals for medium- to long-term.

ASSESSMENT

1. Timely Completion of Transmission Projects

With the growing load and steadily increasing demand, the timely completion and commissioning
of transmission infrastructures remain high in the DOE’s agenda in pursuit of decongesting the
existing transmission facilities and enabling the connection of new power projects to the grid
allowing greater market competition.

For the short-term assessment, the NGCP focused on upgrading substation capacities and
expanding transmission backbones to support entry of new generating facilities. From 2017 to
2018, the NGCP completed a total of 552.24 circuit-kilometer (ckt-km) of overhead transmission
lines, installed 851 megavolt amperes (MVA) additional substation capacities, and added 35
megavolt amperes reactive (MVAR) or reactive power for voltage improvement (Table 34).

To ensure timely completion of the planned projects, the DOE endorsed a total of 48 transmission
projects of the NGCP as “Energy Projects of National Significance.” To date, all these projects have
already been issued with CEPNS by the EICC, and thus, entitled to all the rights and privileges under
EO30. (Please see Annex _ for the List of Projects with CEPNS). With priority status, expeditious
implementation and development of transmission projects is expected.

Table 34. LIST OF COMPLETED PROJECTS, 2017-2018

Date of
CKT-
Project Name / Components Purpose MVA MVAR Completion /
KM
Energization
LUZON
Luzon S/S Expansion Project 4 To add substation capacity to
- Daraga S/S accommodate load growth. 100 - - May 2017
- Gamu S/S (transferred from 50 Jul 2017
Santiago S/S)
To add capacity and provide N-1
Las Piñas S/S Expansion Project security to adequately and Jun 2017
reliably meet the increasing load 300 - -
in Metro Manila.
To provide N-1 contingency for the
Santiago–Tuguegarao 230kV T/L existing transmission corridor
serving Isabela - - 118 Sep 2017
and Cagayan.
Luzon Voltage Improvement To maintain the voltage profile at
Project 3 various substations within the - 35 - Sep 2017
- Laoag S/S prescribed limits.
Eastern Albay 69 kV T/L, Stage 1 To provide a more reliable
- Daraga–Sto. Domingo T/L transmission corridor in the Dec 2017
- Daraga S/S eastern coast of Albay 10 - 21 Dec 2017
- Sto. Domingo LES Dec 2017

PHILIPPINE ENERGY PLAN 2018-2040 98

Bataan 230 kV Reinforcement To accommodate the
- Reconductoring of Mexico– connection of the committed
Hermosa T/L & Mexico– 300 MW SMC CPC CFPP
Cabanatuan “Cut in” Cruz na project to the Luzon Grid 36 Mar 2018
Daan Line 1 & 2 - -
- Reconductoring of Hermosa–Limay 38 Jun 2018
T/L Line 1 & 2
Luzon Substation Reliability 1 To add substation capacity that
50 - - Jun 2018
- Labo S/S will provide N-1 contingency
VISAYAS
Culasi–San Jose 69 kV T/L Schedule To provide N-1 contingency
2A & 2B for the existing corridor. - - 31.5 Jan 2017
Visayas S/S Reliability Project 1 To provide N-1 contingency
- Samboan S/S transformers at various 50 - - Mar 2017
- Bacolod S/S Substations. 100 Apr 2017
To address system limitation and
Upgrading of Panitan-Nabas 138 kV improve the reliability of the
T/L Panitan-Nabas 139 kV - - - Mar 2017
Transmission Line.
Upgrading of Ormoc/Tongonan- To address system limitation
Isabel 138kV T/L (Typhoon Yolanda) and improve the reliability of
- Ormoc–Isabel Line 1 the Ormoc/Tongonan- Isabel - - -
- Tongonan–Isabel Line 1 138 kV Transmission Line. May 2017
- Tongonan–Isabel Line 2 Jul 2017
Sep 2017
Visayas S/S Reliability Project 1 To provide N-1 contingency
- Amlan S/S transformers at various 50 - - Dec 2017
substations.
Eastern Panay Transmission Line To provide a more reliable
Project transmission service to Eastern
- Concepcion–Barotac Viejo 138 Panay and accommodate entry 42 Nov 2017
kV T/L 1 of PCPC’s 270 MW - -
- Concepcion–Tapping pt. near Sara CFPP. 14.2 Sept 2018
69 kV OHTL
Ormoc–Babatngon 138 kV To provide N-1 contingency for
Transmission Line the existing corridor by installing
- Ormoc–Babatngon T/L a second circuit. - - 78.54 8 Dec 2018
- Ormoc Substation Exp.
- Babatngon Substation Exp.
MINDANAO
Aurora–Polanco 138 kV T/L To serve the growing demand of
- Aurora–Polanco T/L Line 1 Dipolog City and neighboring
Line 2 load centers as well as ensure 20 Jun 2018
- Aurora Substation Exp. continuous and reliable power 22 Jul 2018
- Polanco S/S (New) supply in the Zamboanga Del 75 - 158 20 Jun 2018
Norte area. 20 Jun 2018
Manolo Fortich Switchyard 138 kV To enable the full capacity
Switchyard Project dispatch of the
- HBI Hydro Power Plant – Manolo 68.8 MW Manolo Fortich 66 - 15 28 May 2018
Fortich Switchyard T/L Hydroelectric Power Plant
- Manolo Fortich S/S
Agus 6 Switchyard Upgrading / To upgrade the existing obsolete
Rehabilitation Project and aging primary and secondary
equipment and devices - - - 31 Oct 2018
in Agus 6 Switchyard
Total 851 35 552.24
Source: NGCP

In addition, the DOE also endorsed to the National Commission on Indigenous People (NCIP) for
the issuance of a Certification Precondition/Certificate of Non-Overlap (CO/CNO) for the following
major transmission projects:

99 PHILIPPINE ENERGY PLAN 2018-2040

 ▪ Mindanao-Visayas Interconnection Project;
▪ Nabas-Caticlan-Boracay Transmission Project;
▪ Cebu-Negros-Panay 230 KV Backbone Project (Stage 3); and,
▪ Tiwi Substation Upgrading Project.

2. Power Plants Siting

As part of continuous enhancement in the formulation of Transmission Development Plan (TDP),

the NGCP has included in the Plan the ideal locations of power plants to maximize the capability of
the existing network and to serve as a guide for investors in power generation (Figures 57, 58, 59).
The recommended connection points are the areas with existing substations that can still
accommodate additional connection of new power plants without the need for any transmission
reinforcement. Future siting of power plants reduces the need for major transmission
reinforcement to address congestion, as well as to cater bulk generation capacity addition.

Figure 57. IDEAL LOCATION OF POWER PLANTS, Luzon

PHILIPPINE ENERGY PLAN 2018-2040 100

 Figure 58. IDEAL LOCATION OF POWER PLANTS, Visayas

Figure 59. IDEAL LOCATION OF POWER PLANTS, Mindanao

101 PHILIPPINE ENERGY PLAN 2018-2040

3. Interconnect Major Grids

For the short-term, the DOE is committed to facilitate the interconnection of the three (3) major
grids (Luzon, Visayas, and Mindanao) to ultimately achieve the longstanding goal of a unified
national grid. Hence, the project with the highest priority among other interconnection projects is
the Mindanao - Visayas Interconnection Project (MVIP).

Considered as one of the biggest power infrastructure projects, the implementation of MVIP is in
the close watch of the DOE. In July 2017, the NGCP was granted by the ERC the provisional authority
to implement the project. In May 2018, the project qualified as an EPNS and was issued with CEPNS
by the EICC. With this, the issuance of regulatory and documentary requirements by the different
local and national government agencies will be expedited to meet the target completion date of
December 2020.

4. Monitor Compliance with Transmission Development Plan

As part of its continuing activities, the DOE is closely monitoring the implementation of projects
identified in Transmission Development Plan 2016-2040. The projects are mainly consisting of
continuous upgrading, rehabilitation, and expansion of existing transmission lines, substations and
other related facilities. Currently, one of the monitoring mechanisms is through the NGCP’s
submission of monthly status report of transmission projects that indicates the progress of various
project items including securing permits and clearances.

5. Resiliency Planning

With the introduction of the Resiliency Policy by the DOE, one of the key highlights of TDP is the
planning considerations for resiliency to improve the ability of the power system to withstand the
effects of adverse environmental conditions, man-made power interruptions, and other system
disturbances. To make the transmission system resilient, the NGCP included in its resiliency
planning the enhancement of transmission line and substation site selection, increase of
transmission towers strength and capacity, and security of transmission assets.

PLANS AND PROGRAMS

Figure 60. POWER GENERATION ROADMAP
To fulfill the vision of a strong,
unified electricity transmission
network that can meet the
country’s increasing power
needs until 2040, the DOE
warrants the formulation of a
responsive Transmission
Development Plan through
NGCP giving due importance on
continuous transmission system
upgrades and expansion,
generation siting with no
reinforcement requirement,
island interconnections, and
building necessary transmission
infrastructures to enable the
connection of renewable energy plants.

PHILIPPINE ENERGY PLAN 2018-2040 102

 It is critical that appropriate Figure 61. TRANSMISSION BACKBONES AND ISLAND INTERCONNECTIONS
transmission projects are
developed and commissioned on
time to reliably and efficiently
deliver electricity to the
consumers. Responding to the
need to upgrade and expand the
existing transmission system, the
DOE continues its initiative to
monitor and facilitate the timely
completion of transmission
projects in reference to the
Transmission Development Plan
2019-2040, a 22-year roadmap for
the expansion of the Philippine
power grid. As shown in Table 35
and Figure 61, part of the priority
projects is the development of
new transmission backbones and
island interconnections that are geared towards the DOE and NGCP’s vision to build the strongest
power grid in Southeast Asia and improving the country’s transmission network consistent with
the long-term Transmission Master Plan (TMP).

Table 35. TMP PROPOSED PROJECTS, 2019-2040

Expected Time
Project Name Provinces
of Completion
Luzon
Metro Manila 500 kV Backbone Loop Taguig Sept 2021
Bolo to Laoag 500kV Backbone Ilocos Sur, La Union, Pangasinan Dec 2024
Batangas-Mindoro Interconnection Project Batangas, Oriental Mindoro, and Occidental Dec 2024
Mindoro
Palawan-Mindoro Interconnection Project Mindoro and Palawan Dec 2024
Western Luzon 500 kV Backbone Pangasinan, Zambales Jun 2025
Luzon-Visayas HVDC Bipolar Operation Camarines Sur and Leyte Dec 2030
Nagsaag to Kabugao 500kV Backbone Isabela, Pangsinan, and Apayao Dec 2035
Visayas
Cebu-Negros-Panay 230 kV Backbone Cebu, Negros Occidental, Iloilo Dec 2020
Cebu-Bohol-Leyte 230 kV Backbone Cebu, Bohol, and Leyte Dec 2035
Metro Cebu 230kV Backbone Loop Cebu Dec 2040
Mindanao
Mindanao 230 kV Backbone Mindanao Island Mar 2019
Mindanao-Visayas Interconnection Project Cebu, Lanao del Norte, Zamboanga del Norte Dec 2020
Eastern Mindanao 230 kV Transmission Agusan Del Norte, Agusan Del Sur, Compostella Jan 2025
Backbone Valley
Western Mindanao 230 kV Transmission Zamboanga del Sur, Sultan Kudarat, Dec 2040
Backbone Maguindanao, South Cotobato

Since some of the segments of these huge and complicated backbone projects included in the TMP
are still subject for detailed studies, the DOE focuses more attention to the following significant
projects programmed for completion up to 2025 and considered crucial in the development of the
grid:

103 PHILIPPINE ENERGY PLAN 2018-2040

1. Metro Manila 500 kV Backbone Loop

The only Extra High Voltage Figure 62. METRO MANILA TRANSMISSION OUTLOOK
(EHV) drawdown facilities
servicing Metro Manila are the
two existing 500 kV
substations located in San Jose
del Monte City, Bulacan and
Dasmariñas, Cavite. These
become critical nodes in the
grid as capacity expansion and
space limitations in these
substations could result in grid
congestion. For a more
efficient power network, part
of the proposed long-term
expansion plan for Metro
Manila is the development of
the new 500 kV substations,
such as the Taguig EHV
Substation. Taguig City is
considered as the priority site Figure 63. BOLO TO LAOAG 500 KV
BACKBONE
due to its proximity to the load
center. The development of
Taguig EHV Substation
including its associated 500 kV
Lines will support the load
growth and strengthen the
grid by forming loop
configurations. Aside from
Taguig EHV Substation, major
500/230 kV drawdown
substations will be developed
around the area – the Marilao
500 kV Substation and Silang
500 kV Substation including its
associated 500 kV lines (Figure
62).

2. Bolo to Laoag 500 kV Backbone

The development of Bolo to Laoag 500 kV Transmission Line addresses the entry of the proposed
coal, hydro, and wind power generating plants in the north eastern part of the grid (Figure 63). The
backbone development is consists of two projects: (1) Bolo–Balaoan 500 kV Transmission Line to
support the entry of large generation capacity, such as the 4x335 MW Luna Coal Plant in La Union,
and the 500 MW Pumped- Storage Hydro Power Plant in Benguet; and (2) Balaoan–Laoag 500 kV
Transmission Line to accommodate the additional wind farm project in Ilocos Area and address the
overloading of the San Esteban–Laoag 230 kV Line during N-1 contingency.

PHILIPPINE ENERGY PLAN 2018-2040 104

 3. Batangas-Mindoro Interconnection Figure 64. CONNECTION CONFIGURATION OF BMIP
Project (BMIP)

The project intends to develop a 230 kV

interconnection via submarine cable
between the island of Mindoro and
main Luzon grid. This allows the island
to have access on bulk generation
sources in the main grid, while at the
same time, export possible excess
power once the generation potentials
within the island have been developed.
Based on the conducted transmission
line route investigation, the nearest
connection substation is the proposed
Pinamukan 500 kV Substation in
Batangas. The expected improvement
in supply reliability can result in better
economic growth as the island could
attract more investors for industrial and
commercial loads, and for the tourism industry (Figure 64).

4. Palawan-Mindoro Interconnection Figure 65. CONNECTION CONFIGURATION OF PMIP

Project (PMIP)

The envisioned Batangas-Mindoro

Interconnection Project gives rise to
the proposed interconnection of
Palawan to the Luzon Grid through the
Mindoro Grid. The Palawan Mindoro
Interconnection Project (PMIP) aims to
provide the Mainland Palawan a more
reliable supply of power and to address
the power quality issues, which result in
frequent blackouts experienced by the
customers. The project development
will be implemented in a stage-by-stage
basis. Stage 1 covers the conduct of
detailed studies to determine the
submarine cable route as well as the
preparation of the Mindoro Backbone
through the development of Calapan–San Jose 230 kV Transmission Line Backbone and San Jose
230 kV Substation in Occidental Mindoro. Stage 2 involves the physical implementation of the
PMIP (Figure 65).

5. Western Luzon 500 kV Backbone

The first stage of this grid expansion project is the construction of Castillejos-Hermosa 500 kV
Transmission Line to accommodate the bulk generation in Zambales, such as the 2X300 MW RP
Energy Coal-Fired Power Plant. The new line will be initially energized at 230 kV voltage level and
will form part of the proposed long-term plan for 500 kV backbone loop development from Bolo

105 PHILIPPINE ENERGY PLAN 2018-2040

(Kadampat) down to Hermosa Figure 66. WESTERN LUZON 500 KV BACKBONE
Substation. The second stage will
complete the reinforcement of the
capacity of the western corridor
presently consisting of a single-
circuit line from Labrador down to
Botolan to Hanjin then to
Olongapo which involves the
construction of a new Castillejos
Substation, Bolo Substation, and
the Castillejos-Bolo 500kV
transmission line, creating the
Bolo–Castillejos–Hermosa 500 kV
transmission line backbone in
Western Luzon (Figure 66). The
long-term development plan
considers providing higher level of
reliability up to N-2 contingency for
the 500 kV backbone system of the Luzon grid.

6. Cebu-Negros-Panay 230 kV Backbone

The development of 230 kV transmission Figure 67. CEBU-NEGROS-PANAY 230 KV BACKBONE

backbone from Cebu up to Panay Island is
divided into three stages. The development
of high capacity transmission corridor via
submarine cable between Negros and
Panay forms part of the first stage of the
project. The submarine cable component
was already energized in October 2016
addressing the congestion and market
issues brought about by the limited capacity
of the existing single-circuit 138 kV link
(Figure 67).

The second stage involves the construction

of 230 kV facilities in the existing Cebu 138
kV Substation. It aims to facilitate the
termination of the proposed overhead
transmission line from the 300 MW coal-
fired power plant of Therma Visayas, Inc. in
Toledo City, Cebu.

To enable the sharing of power supply among the three islands, the last stage includes the
development of 230 kV facilities extending from Barotac Viejo Substation in Panay to a new
Magdugo Substation in Cebu. It is intended to accommodate the transmission of excess power
from Panay and Negros Islands toward the rest of the Visayas grid and possibly Luzon grid.

PHILIPPINE ENERGY PLAN 2018-2040 106

 7. Mindanao 230 kV Transmission Figure 68. MINDANAO 230 KV TRANSMISSION BACKBONE
Backbone

This backbone project aims to further

strengthen the entire Mindanao grid
upon the entry of new generating
plants. It entails two major activities –
the construction of the 230 kV
Transmission Line traversing Matanao-
Toril-Bunawan route, and the
energization of the existing Mindanao
Transmission Backbone (Balo-i-
Villanueva-Maramag-Bunawan) to 230
kV voltage level. Energizing the
Mindanao Backbone to 230 kV voltage
level allows full dispatch of the new
large power plants and eliminate the
vulnerability of power supply to
hydropower (Figure 68).

8. Mindanao-Visayas Interconnection Project (MVIP)

Formerly known as the Visayas-Mindanao Figure 69. CONNECTION CONFIGURATION OF MVIP

Interconnection Project, the change to
MVIP aims to highlight the importance
and priority given to Mindanao grid, which
has long been isolated. The project aims
to realize a single, unified national grid by
connecting the Mindanao grid to the
Visayas grid. Based on the desktop study
and results of the hydrographic survey,
the recommended route traverses the
country’s western seaboard through the
Zamboanga del Norte-Cebu
interconnection (Figure 69).

The project’s potential benefits is on

reduced investments in power generation
due to sharing of system reserves, lesser
investment in power generation in either
the Visayas or Mindanao to maintain the
one-day Loss of Load Probability (LOLP),
and reduction of operating cost due to
economic dispatch of generators. Further,
it will help optimize the use of available
energy resources and additional
generation capacities in the country in
support to the operation of the electricity
market to include the Mindanao grid.

107 PHILIPPINE ENERGY PLAN 2018-2040

9. Eastern Mindanao 230 kV Transmission Line

The project entails reinforcement of the Figure 70. EASTERN MINDANAO 230 KV TRANSMISSION
existing 138 kV single circuit transmission
line serving the substations of Butuan,
San Francisco, Bislig and Nabunturan in
eastern Mindanao, which already lacks
the single outage contingency
requirement as prescribed in the
Philippine Grid Code. This development
addresses the anticipated power quality
problems caused by possible operations
of huge mining loads in the area. More
so, it serves as an initial step in
establishing a higher transmission
corridor in the north eastern Mindanao
Area. The implementation of the project
requires a total of 282.68 km of new 230
kV transmission lines, required power
circuit breaker (PCBs) and associated
equipment (Figure 70).

The list of transmission projects identified in the TDP are summarized in Annexes _-_, detailing all
ongoing and future projects including the expected completion dates.

From a number of transmission projects that are part of the TDP, the DOE embarks to keep a tight
watch on the implementation of MVIP to fully realize the vision of one Philippine grid in 2020.
Similarly, the interconnection of emergent island-grids to the main grid are also envisioned to be
implemented by building new interconnection facilities that link the isolated islands to the main
grids (Annex _).

The DOE is also set to monitor and assess forced outages and significant incidences of transmission
facilities to avoid major system disturbances causing power interruptions and transmission-related
outages. To efficiently address the damage brought by natural and man-made disasters to
transmission lines and facilities, the grid operator and the DOE will continue to disaster-proof the
country’s transmission network for long-term resilience through developing climate-resilient
transmission infrastructures and implementing resiliency policies and programs specific for
transmission subsector.

The DOE deems it necessary to continuously enhance the transmission policies to achieve the
targets specified for medium- to long-term and carry out the implementation schemes in the TDP.

D. DISTRIBUTION
The DOE provides continuous support to DUs in increasing their capacities and improving the
quality of service provided to their franchise areas through new policies and programs. These
include the issuance of a policy on the conduct of PAA on the distribution system and facilities and
the drafting of DCs directing amendments and additional guidelines on the Distribution
Development Plan (DDP).

PHILIPPINE ENERGY PLAN 2018-2040 108

 Policy on the conduct of Competitive Selection Process (CSP), framework for the uniform monthly
electric bill format, and the rules governing the review and evaluation of direct connection
applications were also issued in accordance with DOE’s mandate in ensuring transparent and a
reasonable price of electricity.

ASSESSMENT

1. Distribution Development Plan

To effectively implement the DC2004-02-002 titled “Prescribing the Guidelines for the Formulation
of a Five-Year Distribution Development Plan” pursuant to Section 2 of DC2003-12-011, “Enjoining all
Distribution Utilities to Supply Adequate, Affordable, Quality and Reliable Electricity,” the DOE
drafted a DC directing amendments and providing additional guidelines to DC2004-02-002.

The draft guidelines will require DU’s additional information on the existing and potential
contestable customers for Retail Competition and Open Access (RCOA), available renewable
resources and the number of customers with net-metering in preparation for the Renewable
Portfolio Standards (RPS) and the Green Energy Option Program (GEOP). Information on the
capital expenditure projects and financing requirements should also be reflected in their
respective five-year DDPs. Through these provisions, the DOE will be able to closely monitor, in
close coordination with ERC, the operability of all distribution facilities and the progress in project
implementation.

In 2018, the DOE completed the Distribution Development Plan 2017-2026, which outlines the 10-
year demand outlook and supply requirements of the DUs and their contracted supply mix. The
plan highlights the annual average growth rate (AAGR) of peak demand over the 10-year planning
period, as well as the main drivers of projected load growth. It also presents a comparative
analysis of the estimated values for 2016 on the number of customers, energy sales and system
loss from the previous DDP 2016-2025 vis-a-vis the actual 2016 data as indicated in the DDP 2017-
2026.

2. Uniform Monthly Electric Bill Framework

To protect public interest affected by rates and services of the DUs and electricity supply providers,
the DOE promulgated the Framework for the Uniform Monthly Electric Bill Format, which was
published through DC2018-08-0026 on 14 September 2018. The framework provides that all
entities issuing electricity bills – Private-Investor Owned Utilities (PIOUs), Electric Cooperative (ECs),
Local Government-Owned Utilities (LGOUs) and other entities authorized by law to distribute and/or
supply electricity, including the Retail Electricity Suppliers – shall use a uniform bill format. The
uniform bill should reflect all corresponding charges, such as, but not limited to generation,
transmission and ancillary services, distribution, supply and metering charges, universal charges
and bill deposits, subject to the rules and regulations that the ERC may promulgate. In June 2018,
four (4) public consultations on the draft DC were conducted in Mandaluyong City, General Santos
City, Cebu City and Puerto Princesa City, Palawan.

Efforts to continuously empower electricity consumers with greater understanding on monthly

electricity bill, the DOE has prepared regular statistics on electricity charges on generation rates,
transmission rates, unbundled distribution costs and WESM prices, which can be accessed via the
DOE website ([Link]).

109 PHILIPPINE ENERGY PLAN 2018-2040

3. Competitive Selection Process Policy

With the government’s thrust of ensuring that all DUs must supply an adequate power and
reserves to serve its respective captive market in the least cost manner, the Competitive Selection
Process (CSP) Policy through DC2018-02-0003 titled “Adopting and Prescribing for the Competitive
Selection Process in the Procurement by the Distribution Utilities of Power Supply Agreement for the
Captive Market” was issued on 01 February 2018. The policy prescribes the conduct of CSP as a
clear, transparent and fair supply procurement process that will promote competition and greater
private sector participation in the provision of least-cost, reliable and adequate supply of
electricity. It addresses the power supply contracting of the electric power utilities serving both
on-grid and off-grid areas in the country.

In compliance with its provisions, DUs are required to establish a Third-Party Bids and Awards
Committee (TPBAC) or Joint TPBAC or may opt to engage a Third-Party Auctioneer in lieu of the
TPBAC or Joint TPBAC. Further, the selection process of the TPBAC or Joint TPBAC captive
customer representatives must be submitted to DOE for approval. As of December 2018, the DOE
has already approved the selection process of 16 DUs.

During the initial implementation of the policy, 16 DUs (15 DUs and 1 PIOU) were granted a
Certificate of Exemption as of December 2018 as listed in Table 36.

Table 36. LIST OF DUS GRANTED EXEMPTIONS FROM THE CONDUCT OF CSP
DU CSP Exemption Date Approved
Ifugao Electric Cooperative Inc. 5 September 2018
(IFELCO)
Manila Electric Company (MERALCO) One-Year PSA with Therma Mobile, Inc. 11 September 2018
Romblon Electric Cooperative, Inc. Cobrador Solar-Diesel Battery Hybrid Power 18 September 2018
(ROMELCO) Generation System
Northern Samar Electric Cooperative, Contract for the Supply of Electric Energy 6 November 2018
Inc. (NORSAMELCO) (CSEE) with PSALM for the period 26
December 2018 to 25 December 2019
Iloilo III Electric Cooperative, Inc. PSA with National Power Corporation (NPC) 27 November 2018
(ILECO III) for Gigantes Island, Iloilo for the period 26
December 2017 to 25 December 2022
Leyte II Electric Cooperative, Inc. CSEE with PSALM for the period 26 December 27 November 2018
(LEYECO II) 2018 to 25 December 2019
Leyte IV Electric Cooperative, Inc. CSEE with PSALM for the period 26 December 27 November 2018
(LEYECO IV) 2018 to 25 December 2019
Bohol I Electric Cooperative, Inc. CSEE with PSALM for the period 26 December 27 November 2018
(BOHECO I) 2018 to 25 December 2019
Samar I Electric Cooperative, Inc. CSEE with PSALM for the period 26 December 27 November 2018
(SAMELCO I) 2018 to 25 December 2019
Don Orestes Romualdez, Electric CSEE with PSALM for the period 26 December 27 November 2018
Cooperative, Inc. (DORELCO) 2018 to 25 December 2019
Eastern Samar Electric Cooperative, Inc. 27 November 2018
(ESAMELCO)
Biliran Electric Cooperative, Inc. 11 December 2018
(BILECO)
Southern Leyte Electric Cooperative, 11 December 2018
Inc. (SOLECO)

Samar II Electric Cooperative, Inc. 20 December 2018

(SAMELCO II)
Isabela I Electric Cooperative, Inc. 20 December 2018
(ISELCO I)

PHILIPPINE ENERGY PLAN 2018-2040 110

 4. Performance Assessment and Audit

To implement the PAA for the Table 37. PAA ACTIVITIES CONDUCTED in 2018
distribution system, the Grid Facility
Luzon Masbate Electric Cooperative, Inc. (MASELCO)
Performance Assessment and
First Catanduanes Electric Cooperative, Inc. (FICELCO)
Audit Team on Distribution Oriental Mindoro Electric Cooperative, Inc. (ORMECO)
System Facilities (PAAT-DSF) has Albay Electric Cooperative, Inc. (ALECO)
been created under DC2017-05- Visayas Bohol I Electric Cooperative, Inc. (BOHECO I)
0008. The PAAT-DSF is chaired Bohol II Electric Cooperative, Inc. (BOHECO II)
Bohol Light Company, Inc. (BLCI)
by DOE and composed of NEA,
Mindanao Davao Light and Power Company (DLPC)
Distribution Management
Committee, TransCo and PEMC. The list of 2018 PAA conducted activities for distribution system is
shown in Table 37.

Findings and recommendations from PAA activities were presented on 21 May 2019 during a
workshop organized by the DOE in coordination with the NPC and NEA. The workshop was
intended to have a common understanding of the situation, and to ensure implementation of the
recommended policies, programs and strategies through an action Plan.

5. Direct Connection Applications of Industrial, Commercial and Other Electricity End-Users

Pursuant to Section 9 of Electric Power Industry Reform Act (EPIRA), which states that TransCo or
its Buyer/Concessionaire shall provide open and non-discriminatory access to its transmission
system to all electricity users, the DOE issued DC No. 2018-08-0025 on 24 August 2018 “Prescribing
the Rules Governing the Review and Evaluation of Direct Connection Applications of Industrial,
Commercial and Other Electricity End-Users”. The DC allows transparent guidelines on the
assessment of applications for direct connections to the Grid or sub-transmission assets that are
still owned by TransCo. Applications were previously being reviewed by the ERC until the Supreme
Court ruled that the distribution of energy resource, specifically direct supply of electricity is not
within the authority of ERC but falls within the DOE’s jurisdiction. In May 2014, the ERC endorsed
to the DOE all direct connection applications.

The DC also provides the creation of Direct Connection Review and Evaluation Committee (DREC)
with primary mandate to evaluate all applications and recommend for the approval of the DOE
Secretary. As of October 2018, 15 applications were reviewed and evaluated by the DREC, of which,
two (2) applications were approved, namely Summit Iron and Pueblo de Panay Technopark (Table
38).

Table 38. STATUS OF APPLICATIONS FOR DIRECT CONNECTION as of 28 October 2018

No. of Projects
Approved 2
Denied 1
Confirmed 4
Terminated 8
Total 15

111 PHILIPPINE ENERGY PLAN 2018-2040

PLANS AND PROGRAMS
Figure 71. POWER DISTRIBUTION ROADMAP
The initiatives implemented in the
short-term remain as continuing
agenda for the DOE in the medium-
to long-term period. Realization of
infrastructure projects is a priority
undertaking of the government
coupled with effective policy
framework and reinforced
strategies and programs. These
efforts are expected to improve
the operations and quality of
services provided to the electricity
end-users.

1. Enhance Distribution Utility’s

Development Planning

A draft circular directing amendment and providing additional guidelines to DC No. 2004-02-002,
titled “Prescribing the Guidelines for the Formulation of a Five-Year Distribution Development Plan,”
is expected to be adopted and promulgated within the medium-term. The corresponding manual
of instructions will be drafted and disseminated to properly guide the DUs in filling up the new DDP
form (DOE-EPIMB Form 2018-01-01), which is composed of four major sections, namely; (1)
Introduction and Legal Basis; (2) Objective; (3) Forms and Annexes; and (4) Summary Outputs.

In accordance with the timeline set forth in the EPIRA, the DOE-EPIMB Form 2018-01-01 shall be
submitted every 25th of January each year. A series of workshops will also be conducted to ensure
that the DUs conform with the new guidelines as prescribed.

2. Monitor timely implementation of necessary Distribution Facilities projects

To ensure reliability, security and sustainable delivery of electricity to the consuming public, the
DOE will facilitate the timely completion of the following infrastructure projects as indicated in the
DDP 2017-2026:

▪ 19,934 Megavolt Ampere (MVA) additional substation capacity;

▪ 5,156 ckt-km for the expansion and rehabilitation of sub-transmission lines;
▪ 39,944 ckt-km for the expansion and rehabilitation of distribution lines.

Distribution line upgrades and expansion programs also form part of the medium- to long-term
strategies to safeguard the power distribution network across the country. Interceding barriers,
such as right-of-way issues, that hinder sustainable development will also be properly addressed.

3. Monitor accountability of the DUs on reportorial requirements

Improving data quality and developing more robust in-country monitoring and reportorial of the
distribution systems will also be a major concern of the DOE within the planning period to ensure
progress in the implementation of projects by the DUs. An appropriate template/matrix will be
promulgated to guarantee reportorial compliance and performance indicator of the DUs.

PHILIPPINE ENERGY PLAN 2018-2040 112

 As provided under DC2017-12-0016 (guidelines for performance assessment and audit or PAA), the
DUs need to submit the compliance audit form, to effectively implement the PAA of distribution
system. This enables the thorough inspection and evaluation of the operations and facilities, and
adheres to the principle of efficiency, effectiveness, appropriateness and safety of the distribution
network.

4. Enhance and implement policies toward operational efficiency and good governance of the DUs

Recognizing the importance to have a secured supply and delivery of electricity to propel economic
activities, the DOE continues to espouse policies to improve the operational efficiency of the
distribution system in the country. Creating better working conditions further improve
performance, and thus achieve developmental objectives, including enhancing cooperation within
the distribution network.

5. Strengthen institutional cooperation to ensure transparent and effective Competitive Selection

Process

In support of the government’s call for greater transparency and competition in the power supply
procurement process of the DUs, the DOE institutionalizes collaboration among participating
entities under the CSP policy to effectively implement the governing principles stipulated in the
DC. Allowing equal opportunity and wide dissemination of bid opportunities to eligible and
qualified generation companies encourage greater participation. This will also gather wide range
and broad-based support and cooperation among energy stakeholders.

6. Ensure equitable access to electricity services

Enabling access to basic electricity services brings significant economic benefits to communities.
This redounds to increased business activities, economic productivity and income. Mindful of this,
the DOE continues to look for strategic solutions and pragmatic approaches to achieve sustainable
development towards the delivery of an affordable and reliable electricity services across the
country.

E. RETAIL ELECTRICITY SUPPLY

The DOE is keen on the full implementation of RCOA to allow electricity end-users to buy electricity
from the suppliers of their choice. Being the conduit between the suppliers and end-users of
electricity, the DUs recovers their investments through the imposition of distribution wheeling
charges. The move toward RCOA is pursuant to Section 31 of EPIRA. RCOA took effect when the
ERC declared compliance to the conditions set forth in EPIRA, which are: a) establishment of the
WESM; b) approval of unbundled transmission and distribution wheeling charges; c) initial
implementation of cross subsidy removal scheme; d) privatization of at least 70.0 percent of the
generating assets of the NPC in Luzon and Visayas; and, e) transfer of the management and control
of at least 70.0 percent of the total energy output of power plants under contract with the NPC to
the Independent Power Producer Administrators (IPPA).

In continuing pursuit of the objectives of EPIRA, the Supply Sector Roadmap for the short-term
(2017 – 2018) resulted in promulgation of policies that facilitated the following: a) mandatory
contestability for one (1) Megawatt (MW) and up electricity end-users; b) full open access for 750
kilowatt (kW) and above contestable customers; c) retail aggregation for minimum of 750 kW
aggregated demand; and d) conduct market studies for lowering contestability to 500 kW.

113 PHILIPPINE ENERGY PLAN 2018-2040

ASSESSMENT

1. Retail Competition and Open Access

With the electricity industry having complied with the conditions as stipulated in EPIRA, RCOA was
introduced on 26 June 2013 and allowed electricity end-users of 1.0 MW and above to choose their
electricity suppliers. The end-users categorized as contestable customers are permitted to source
their supply from retail electricity suppliers (RES) and the use of transmission and distribution
systems and associated facilities subject to the payment of distribution wheeling charges duly
approved by the ERC. The implementation of RCOA presented a voluntary participation from
contestable customers. It was only in December 2016 that the mandatory participation of the
contestable customers with an average demand of 1.0 MW and above was directed.

A Supreme Court Order on RCOA prompted the DOE to revert to voluntary participation. To
advance RCOA’s implementation, the threshold was reduced to 500 kW in December 2018. The
implementation of retail aggregation78 was intended to commence last December 2018 subject to
the issuance of relevant guidelines.

The DCs promulgated by the DOE for RCOA’s transparent and efficient implementation are
highlighted in Table 39.

Table 39. DEPARTMENT CIRCULARS ISSUED ON RCOA IMPLEMENTATION 79

DC No. Title
2011-06-0006 Creating the Steering Committee Defining the Policies for the Commencement of Retail
Competition and Open Access
2012-05-0005 Prescribing the General Policies for the Implementation of Retail Competition and Open
Access
2012-02-0002 Designating the Philippine Electricity Market Corporation as the Central Registration
Body
2012-11-0010 Providing for Additional Guidelines and Implementing Policies for Retail Competition and
Open Access and Amending DC No. 2012-05-0005
2013-01-0002 Promulgating the Retail Rules for the Integration of the Retail Competition and Open
Access in the Wholesale Electricity Spot Market
2013-05-0006 Enjoining all GenCos, DUs, Suppliers and Local Suppliers to Ensure an Effective and
Successful Transition Towards the Implementation of the Retail Competition and Open
Access.
2013-07-0014 Promulgating the Retail Manuals for the Implementation of the and Providing for
Transitory Arrangement
2013-07-0013 Providing Supplemental Policies to Empower the Contestable Customers under the
Regime of Retail Competition and Open Access and Ensure Greater Competition in the
Generation and Supply Sectors of the Philippine Electric Power Industry
2015-06-0010 Providing Policies to Facilitate the Full Implementation of Retail Competition and Open
Access in the Philippine Electric Power Industry
2016-04-0004 Providing Timelines for Compliance with the Full Implementation of Retail Competition
and Open Access in the Philippine Electric Power Industry
2017-12-0013 Providing Policies on the Implementation of the Retail Competition and Open Access for
Contestable Customers in the Philippine Electric Power Industry
2017-12-0014 Providing Policies on the Implementation of the Retail Competition and Open Access for
Retail Electricity Suppliers in the Philippine Electric Power Industry
2018-04-0009 Adopting Further Amendments to the Retail Rules and its Market Manual on Metering
Standards and Procedures for the Implementation of Enhancements to WESM Design
and Operations

78 Allows customers in a contiguous area whose aggregate demand is not less than 500 kW to source their electricity supply requirement on a group basis
from a licensed supplier.
79 On 29 July 2019, the DOE issued Department Circular No. 2019-07-0011, entitled Amending Various Issuances on the Implementation of the Retail

Competition and Open Access” in order to address gaps and ensure the implementation of RCOA.

PHILIPPINE ENERGY PLAN 2018-2040 114

 As of April 2019, the total prospective participants for RCOA already reached 2,033, an increase of
112 percent from 961 participants during RCOA’s initial commercial operation (Table 40).
Contestable customers comprised 93.0 percent (1,884) of the prospective participants, 3.0 percent
(55) are suppliers (including local retail electricity suppliers80) and the remaining 4.0 percent (94)
are RCOA service providers.

Table 40. SUMMARY OF RCOA REGISTRATION

Membership Category Prospective* Registered**
Jun 2013 April 2019 Increase Jun 2013 April 2019 Increase
Contestable D ≥ 1MW 892 1,356 52% 239 999 318%
Customers 750kW ≥ D > 0 528 0 241
1MW
Total 892 1,884 111% 239 1,240 419%
Suppliers RES 19 30 58% 15 30 100%
LRES 13 25 92% 3 14 367%
Total 32 55 72% 18 44 144%
SOLR 9 46 411% 0 24
RMSP 28 48 71% 18 48 167%
Grand Total 961 2,033 112% 275 1,356 393%

For the same period, the total RCOA participants registered with the Central Registration Body
(CRB) stood at 1,35681. From the registered contestable customers, 81.0 percent (999 customers)
is within the 1.0 MW threshold, and the rest (19.0 percent or 241 customers) is within the 750 kW –
1 MW.

Policy and regulatory issuances relating to RCOA were also promulgated in 2018 and these are ERC
Resolution No. 9 Series of 201882 and the DOE DC 2018-04-001083. The former specifies that the
customer may choose its payment option whether single or multiple billing scheme. It also
provides that the contestable customers have the option to contract on its own directly to RES
and/or WESM for their supply and to the network service provider for metering services. In such
setup, customers are billed separately for the services. Meanwhile, the latter clarifies the
application and treatment of retail market participants under the WESM rules and specifies the
application of standards under the DUs
Figure 72. POWER SUPPLY ROADMAP
to the contestable customers.

PLANS AND PROGRAMS

As a continuing action plan that spans

from the medium- to long-term, the
supply subsector will be resolute in the
monitoring and development of
policies to enhance RCOA participation
(Figure 72).

The policies to be developed further

the realization for electricity end-users
to secure their preferred supply

80 Local Retail Electricity Suppliers (LRES) refer to DUs authorized by the ERC to serve contestable customers.
81 Contestable customers, suppliers and RCOA service providers are required to register in the CRB. The new designated CRB is IEMOP, the current IMO
which assumed the market operator function of PEMC in 25 September 2018.
82 Resolution Adopting the ERC Rules Supplementing the Switching and Billing Process and Adopting a Disconnection Policy for Contestable Customers.
83 Adopting Further Amendments to the Wholesale Electricity Spot Market (WESM) Rules, Retail Rules and Retail Market Manual on Metering for
Clarifications on Retail Market Integration.

115 PHILIPPINE ENERGY PLAN 2018-2040

sources – those within the thresholds of 1.0 MW and above, 750 kW – 1.0 MW, and 500 kW – 749 kW.
Once the end-users (contestable customers) have the power of choice, it marks a turning point for
the industry.

The retail aggregation covering the 750 kW–1.0 MW demand accordingly relies on ERC’s
promulgation of requisite guidelines to ensure proper application. In addition, the DOE and ERC
are bent on formulating/developing policies to lower the threshold to 500 kW and aggregation for
the specified demand.

F. WHOLESALE ELECTRICITY SPOT MARKET DEVELOPMENT

The Market Development Roadmap identified a number of action plans to be carried out in the
short-term (2017 – 2018) geared towards enhancing the implementation of WESM. Specifically,
strategies are anchored on developing policies and monitoring compliance on the following: a)
WESM design improvements / new market management system (NMMS); b) appointment of
independent market operator (IMO); c) privatization of the NPC assets; d) policy for embedded
generators; e) establishment of the Mindanao Electricity Market; f) development of a roadmap
and policy on the utilization of smart grid and other technologies; g) Renewable Energy Market or
REM in line with RPS implementation; h) reserve/energy market co-optimization; i) demand
bidding in the WESM; and j) forwards market/financial transmission rights/day-ahead
market/derivatives market.

Enhancing the electricity market through policy development is a continuing action plan and
covers the period from the short- to long-term (2017 – 2040). Policies were also aligned with the
requirements of RA 9513, which mandates the preferential treatment and higher utilization of RE.

ASSESSMENT

1. WESM Design improvements / NMMS

The start of WESM’s commercial operation in Luzon was on 26 June 2006 while Visayas grid’s
integration in the WESM commenced on 26 December 2010. The market serves as the venue for
trading electricity as a commodity and a clearing house to reflect the economic value of electricity
for a particular period as indicated by a spot price.

The electricity market’s key features are: a) a gross pool system for scheduling contracted and
uncontracted generation and balancing supply and demand; b) a price determination process,
which sets the marginal value of all electricity produced and consumed by time and location at all
nodes; and c) a financial settlement process in which the customers pay for electricity purchases
and generators receive payments for electricity produced.

The DOE’s promulgation of DC 2015-10-0015 titled “Providing Policies for Further Enhancement of
the WESM Design and Operations” in November 2015 instigated the move to develop WESM design
and operations enhancements. The enhanced WESM design features the following changes: a)
shortening of scheduling and pricing intervals from one (1) hour to five (5) minutes, and ex ante
only pricing to better reflect the changes in supply and demand, and potentially reduce the
requirement for frequency regulation reserve; b) automatic re-runs when prices reflect constraint
violations to provide timely disclosure of settlement-ready prices; and, c) hour-ahead projections
(in addition to the week-ahead and day-ahead projections) to facilitate commitment decisions of
trading participants.

PHILIPPINE ENERGY PLAN 2018-2040 116

 PEMC as the Market Operator (MO) procured the New Market Management System (NMMS) that
bears the changes and capable of: a) automatically detecting non-compliances to WESM rules,
specifically must-offer rule and conformity to dispatch standards; and, b) accommodating
additional market products (e.g. reserve market and forwards market).

The MO also procured, side by side with the NMMS, the Central Registration and Settlement
System (CRSS), which automates registration and settlement processes for both wholesale and
retail transactions.

In 2018, the MO carried out the following activities related to the market system: a) roll-over of
software certification audit activities of the NMMS; b) parallel operations of the NMMS in Luzon
and Visayas and Trial Operations in Mindanao; and c) soft launch of the CRSS in Luzon and Visayas
and Trial Operations in Mindanao. The DOE also continued to monitor the completion of the
software certification audit of the NMMS and carried out various activities to assist the MO in the
successful deployment of its NMMS and CRSS. It should be noted that NMMS’ operation is
dependent on the approval of the amended WESM price determination methodology (PDM),
which reflects the enhancements in WESM design made by the ERC.

To date, the Independent Electricity Market Operator of the Philippines (IEMOP), in collaboration
with PEMC, DOE and ERC, is finalizing the independent certification audit of the NMMS and CRSS
to ensure that the new developed software and systems are in accordance with the market rules.
Further, PEMC together with IEMOP conducted market readiness and assessment (MRA) through
an independent consultant and the final report was presented to the Philippine Electricity Market
(PEM) Board last 31 July 2019. IEMOP has been continuously implementing the NMMS parallel
operation to further test and familiarize the market participants with the new NMMS and CRSS.

As mandated by EPIRA, the DOE continually reviews and promulgates proposed changes to the
WESM Rules, Retail Rules and Market Manuals to ensure consistency of amendments with the
objectives of EPIRA, WESM and RCOA. Under the action plan of developing policies related to
WESM design improvements and NMMS, the DOE promulgated nine (9) related DCs in 2018 as
shown in Table 41.

Table 41. PROMULGATED DCS RELATED TO WESM AMENDMENTS TO ENHANCE MARKET DESIGN, DISPUTE
RESOLUTIONS AND RULES CHANGE PROCESS
DC No. Title Objective
2018-04- Adopting Further Amendments to the Facilitates the implementation of the new market features
0007 WESM Rules and Market Manual on pursuant to the DOE policies on enhancements to market design
Dispatch Protocol for the Implementation and operations and the amended WESM Rules for NMMS through
of Enhancements to WESM Design and DC Nos. 2015-10-0015 and 2016-10-0014.
Operations
2018-04- Adopting Further Amendments to the Facilitates the implementation of the new market features
0008 WESM Market Manuals on Billing and pursuant to the DOE policies on enhancements to market design
Settlement and Load Forecasting and operations and the amended WESM Rules for the NMMS.
Methodology for the Implementation of
Enhancements to WESM Design and
Operations
2018-04- Adopting Further Amendments to the Aligns the provisions of the Retail Manual on Metering Standards
0009 Retail Rules and its Market Manual on and Procedures with the Retail Rules and relevant regulatory
Metering Standards and Procedures for the issuances for the smooth implementation of RCOA. Amendments
Implementation of Enhancements to reflect the enhancements to the design and operations of the
WESM Design and Operations WESM.
2018-04- Adopting Further Amendments to the Provides changes in the publication of market information
0011 WESM Market Manual on Market Operator classification, categories and requirements for the
Information Disclosure and Confidentiality implementation of the new market features as provided under the
for the Implementation of Enhancements DOE policies on enhancements to market design and operations
to WESM Design and Operations and the amended WESM Rules for the NMMS.

117 PHILIPPINE ENERGY PLAN 2018-2040

2018-04- Adopting Further Amendments to the Corrects the calculation of price adjustments for customers during
0012 WESM Market Manuals on Price market intervention or suspension. Clarifies provisions on
Determination Methodology and additional compensation for Must-Run Units and constrained-on
Constraint Violation Coefficients and generating units.
Pricing Re-Run for the Implementation of
Enhancements to WESM Design and Provides details and additional constraints on transmission
Operations equipment, revise the order and nomenclature of constraint
violation coefficients (CVCs) for consistency with the newly
amended Philippine Grid Code.
2018-05- Adopting Further Amendments to the Addresses possible instances when main revenue meters fail and
0015 WESM Rules and Market Manuals for the enhance documentation and metering processes to address
Implementation of Enhancements to independent market operations audit findings. Aims to enhance
WESM Design and Operations (Provisions the performance rating of the WESM Metering Services Provider,
for Metering, Market Trading Node and clarify the location of metering points in the WESM for the
Scheduling Point) improvement on the accounting of system losses, consider the
implementation of enhancements to the design and operations of
the WESM and update the affected Market Manuals, which
include Market Network Model Development and Maintenance –
Criteria and Procedures and Registration, Suspension and De-
registration Criteria and Procedures.
2018-05- Adopting Further Amendments to the Enhances the procedures in the WESM mediation and arbitration
0016 WESM Rules and Market Manual on and updates the provisions for schedule of arbitration fees and
Dispute Resolution administrative costs.
2018-07- Adopting Further Amendments to the Reflects the revised procedures for the approval of amendments
0018 WESM Rules and Market Manual on to the WESM Rules and Market Manuals as set out in DC 2015-07-
Procedures for Changes to the WESM 0013.
Rules, Retail Rules and Market Manuals
2018-08- Adopting Further Amendments to the Provides a framework for the WESM participation of emerging
0022 WESM Rules and Market Manuals on the electrical resources such as the battery energy storage systems
Participation of Battery Energy Storage and pumped-storage units. Includes amendments on the
Systems and Pumped-Storage Units in the provisions for registration, dispatch protocol and market network
WESM model.

2. Appointment of an Independent Market Operator

The creation of an IMO stems from the EPIRA provision on WESM (Section 30). Part of Section 30
explicitly mentions that the WESM shall be implemented by a market operator (MO) in accordance
with the WESM rules. The MO shall be an autonomous group, to be constituted by DOE, with
equitable representation from electric power industry participants, initially under the
administrative supervision of the TRANSCO. The MO shall undertake the preparatory work and
initial operation of the WESM. Not later than one (1) year after the implementation of the WESM
an independent entity shall be formed and the functions, assets and liabilities of the market
operator shall be transferred to such entity with the joint endorsement of the DOE and the electric
power industry participants.

WESM establishment paved the way for the creation of PEMC84 which served as the Autonomous
Group Market Operator (AGMO) from August 2004 to 25 September 2018. The DOE in coordination
with PEMC undertook several activities to ensure compliance with the required establishment of
an IMO, one of which is the conduct of studies on appropriate arrangements and consultations
with the various stakeholders and the Joint Congressional Power Commission (JCPC).

On 17 January 2018, the DOE issued DC 2018-01-0002 titled “Adopting Policies for the Effective and
Efficiency Transition to the Independent Market Operator for the Wholesale Electricity Spot
Market,” which reiterates that the IMO shall be an independent entity incorporated as a private
corporation under the Corporation Code of the Philippines. The IMO shall execute the functions

84 Incorporated in November 2003 as a non-stock and non-profit corporation. Designated as AGMO in August 2004.

PHILIPPINE ENERGY PLAN 2018-2040 118

 of the MO as espoused in EPIRA and its IRR, WESM Rules and Market Manuals and other relevant
rules/regulations and issuances. The governance function is retained by PEMC as it will still be
responsible for overseeing and monitoring the activities of the IMO for it to perform its obligations
as set out in the WESM Rules and Market Manuals.

The industry participants of PEMC during its membership meeting on 6 February 2018 endorsed
the transition to IMO with the approval of the “Plan for Transition to the IMO of the Philippine
WESM.” IEMOP85 was incorporated on 15 May 2018 under the Securities and Exchange Commission
(SEC) with a Company Registration No. CN201807379, and will function separately from PEMC.
IEMOP’s incorporation was made by individuals who are independent from the electric power
industry participants and from the government. The initial IEMOP Board was selected and
confirmed by the PEM Board and the DOE Secretary last 25 June 2018 during the first PEMC annual
membership meeting. The seven (7) Board of Directors designated are listed in Table 42.

Table 42. IEMOP BOARD OF DIRECTORS

Name Positions
Lt. Gen. Ralph A. Villanueva AFP (Ret) Chairman
Atty. Francis Saturnino C. Juan President and CEO
Atty. Caroll U. Tang Director and Corporate Secretary
Atty. Richard J. Nethercott Director and Treasurer
Engr. Jose Mari T. Bigornia Director and COO
Engr. Jose Rodelio Varilla Mangulabnan Director
Maj. Gen Vicente M. Porto AFP (Ret) Director

An operating agreement was signed between PEMC and IEMOP on 19 September 2018 for the
transfer of assets, liabilities, personnel and market operator related functions. This agreement
defines the parties’ rights and obligations in relation to the transfer and outlines the parties’ roles
and functions (Table 43). The functions of the MO as provided in the EPIRA and its IRR, WESM
Rules, WESM Market Manuals and other official issuances was assumed and performed by IEMOP
on 26 September 2018 at 00:00 H.

Table [Link] AND RESPONSIBILITIES OF IEMOP AND PEMC

IEMOP PEMC
1. Market Operator Services and Market Retains all its other assets and associated liabilities
Operator Performance Standards that are not included in the assets and liabilities
transferred to IEMOP, including but not limited to
the systems and infrastructures being used to
support its governance function.
2. Other Services
a. Central Registration Body
b. Mindanao Transactions
c. Training of market participants, PEMC,
DOE, ERC, PCC and other stakeholders
d. Other participant services
3. Renewable Energy Market Registrar

To evaluate the effectiveness of the current IMO policies, DO 2019-03-0009 promulgated on 18

March 2019 created a Special Task Force that will assess the performance of WESM under its
current structure of operations. Such assessment covers the following as stated in Section 2: a)
assessment of PEMC as the governance arm of the WESM; b) assessment of the performance of
IEMOP as the IMO; and c) over-all performance of WESM.

85 Name for the IMO Company. Non-stock and non-profit corporation that is separate from PEMC.

119 PHILIPPINE ENERGY PLAN 2018-2040

The Interim Board of IEMOP has a limited term of one (1) year, which expired last 24 June 2019.
However, the PEM Board recommended to keep the existing Interim Board to prevent disruption
of services and ensure continued operations of WESM until the assessment results are put into
place or until a regular Board has been duly elected. The DOE is also in agreement with the said
recommendation.

3. Establishment of the Wholesale Electricity Spot Market in Mindanao

With WESM already established in Luzon and Visayas, Mindanao remains without an electricity
market on operation.

On 04 May 2017, the DOE issued DC 2017-05-0009 titled “Declaring the Launch of Wholesale
Electricity Spot Market (WESM) in Mindanao and Providing for Transition Guidelines.” Said DC
provides for the following: a) commencement of registration of WESM participants; b) application
of the Interim Mindanao Dispatch Protocol until commercial operations is declared by the DOE;
and, c) termination of the Interim Mindanao Electricity Market (IMEM).

On 28 June 2017, WESM was formally launched in Mindanao and it is seen as a medium for providing
an efficient scheduling, dispatch and settlement of energy withdrawal and injections in the grid.
The market also embodies competition and transparency that is aimed at the Mindanao electricity
consumers. This also signaled the commencement of the Trial Operations Program (TOP) that was
participated in by the MO, SO and trading participants.

For its part, the DOE monitors all preparatory activities related to the full commercial operation of
WESM in Mindanao. The declaration of full commercial operation will be made once the criteria
set forth is complied with – systems and procedure, TOP, operationalization, trainings, PDM and
NMMS. The DOE also continues to work with both MO and SO to ensure the systems and
infrastructure readiness for WESM’s commercial operation. Corollary to this, major interface links
between the two (MO and SO) have been established and tested for consistency, accuracy and
redundancy. The NGCP has also installed WESM compliant metering and real-time monitoring
facilities in most trading participants’ sites in Mindanao.

Another significant criterion in the declaration of commercial operation of WESM in Mindanao is

the registration of power industry participants. A total of 81 participants or 94.0 percent of the
expected total participants have started the registration process with MO (as of 11 June 2019). The
TOP for the participants scored an overall execution of 34.0 percent.

Given the DOE’s readiness assessment, the commercial operation of WESM in Mindanao is
expected by 3rd quarter of 2019 pending the ERC’s approval of the PDM adopting the five-minute
dispatch interval.

4. Policies on Embedded Generators, Ancillary Service and Demand Bidding in the WESM

Policy development is an integral component in the power sector’s roadmap. In the short-term,
the Department formulated policies covering embedded generators and ancillary services (AS).
Discussions were also started on demand bidding in the WESM.

PHILIPPINE ENERGY PLAN 2018-2040 120

 ▪ Embedded Generators

Embedded generators (EGs) pertain to generating units that are indirectly connected to the grid
through the DUs lines or industrial generation facilities that are synchronized with the grid.

With the influx in the use of EGs, the DOE needed to clarify the policies governing decentralized
generation considering the benefits it may provide, while ensuring that these are operated within
the framework of centralized power system. To set the context in relation to its optimal operation
or utilization, the DOE issued on 8 February 2019 DC 2019-02-0003 titled “Providing for the
Framework Governing the Operations of Embedded Generators.”

As embodied in the DC, EG shall operate within the following framework: a) provision of central
dispatch by SO to EGs with material impact to grid operations in the interest of achieving economic
operation and maintenance of quality, stability, reliability and security of the transmission system;
b) compliance to the EPIRA and its IRR, Philippine Grid Code (PGC), Philippine Distribution Code
(PDC), WESM Rules and its Market Manuals, Philippine Electrical Code and other pertinent
issuances by the DOE, ERC and other relevant government instrumentalities having authority over
the grid reliability and supply security; and c) market share and bilateral contracts limitation under
Section 4586 of EPIRA and other relevant regulations issued by the ERC concerning abuse of market
power and competition.

The DC also specified the requirements for licensing, connection, market registration and
participation. It also covers the EGs’ provision of ancillary, as well as metering services. The DC
also provides for the delineation of responsibilities and support of DUs, MO, Transmission Network
Provider, SO and ERC.

▪ General Framework Policy for Ancillary Services

As a means to effectively utilize ancillary services in the grid, the DOE drafted a DC in 2019 on
adopting a general framework on the provision and utilization of such services. As defined,
ancillary service refers to the services necessary to support the transmission of capacity and energy
from resources to loads, while maintaining reliable operation of the transmission system in
accordance with good utility practice and the Grid Code to be adopted in accordance with EPIRA.

The DC was promulgated on 04 December 2019 as Department Circular No. DC2019-12-0018. The
policy provided a general framework for ancillary service encompassing the issues identified, which
include among others the following: a) harmonization of the guidelines, rules, and regulations
concerning the operation of the grid; b) proper accountability among concerned entities in the
efficient and transparent operation of the grid; c) transparent and cost-effective procurement of
ancillary services taking into account compliance to reserve requirements of each grid; d) co-
optimization of energy and reserves in WESM, through central dispatch and the commercial
operation of the WESM Reserve Market; and e) transparent accreditation process for ancillary
services.

The DC also established the creation of a Technical Working Group (TWG), chaired by the DOE and
ERC. The TWG is a recommendatory body to assist in the implementation of the DC.

86 Cross Ownership, Market Power Abuse and Anti-Competitive Behavior

121 PHILIPPINE ENERGY PLAN 2018-2040

 ▪ Demand Bidding in the WESM

The DOE’s initiatives on demand side bidding are based on the initial discussions made with PEMC
and on the matter of market derivatives.

A derivative is a contract between two or more parties whose value is in accordance with the
agreed-upon underlying financial asset (like a security) or set of assets (like an index). The most
common instruments include bonds, commodities, currencies, interest rates, market indexes and
stocks. Derivatives are secondary securities whose value is solely based (derived) on the value of
the primary security that they are linked to. Commonly used derivatives are futures contract,
forward contracts, options, swaps and warrants. Derivatives are used either to mitigate risk
(hedging) or assume risk with the expectation of commensurate reward (speculation)87.

Applying this on the sector leads to the energy derivatives, which are financial instruments wherein
the underlying assets are energy products including oil, natural gas and electricity. These are
traded either on an exchange or over-the-counter. Moreover, energy derivatives can be options
for futures or swap agreements. The value of the derivative varies as a result of the changes in
price of the energy product88.

5. Review and Develop Power Generation Policies including Rewards-and-Penalty System

The generation sector plays a critical role in maintaining the demand and supply balance of the power
system. With the goal of enforcing full accountability of the power industry players during forced
outages, the DOE explored mechanisms that aimed to penalize power generation companies for
lapses and negligence incurred from their end. This measure is viewed not only to provide safety nets
to the consumers but also to ensure power supply security to prevent unwanted disruptions and
mitigate impacts to the power grid.

As early as 2017, the DOE initiated a policy review on the “Causer Pay Policy Program” and subjected
the same to several focus group discussions (FGDs) and public consultations among the concerned
stakeholders in the electric power industry. In the same period, the DOE drafted and finalized the DC
on “Causer Pays Mechanism.” Under the proposed DC, the penalty system imposes the incremental
costs of procuring higher priced electricity to the generation companies (GenCos), Distribution Utilities
(DUs) and the System Operator (SO), provided that such forced outages are intentional or has
transpired as a result of negligent or incompetent operations.

Recognizing the need to align the draft DC with other cross-cutting policies, the DOE embarked on the
formulation of a general policy framework for ancillary service.

6. Develop Roadmap, Policy Utilization for Smart Grid and Other Technologies

According to the United States-Department of Energy (US-DOE), making the grid “smarter” can be
achieved through the use of cutting-edge technologies, equipment and controls that communicate
and work together to deliver electricity more reliably and efficiently. This reduces the frequency
and duration of power outages, limits storm impacts, and restore service faster when outages
occur89.

In 2013, the DOE created an Inter-Agency Steering Committee to develop a smart grid roadmap
with the issuance of DC 2013-03-003 titled “Creating an Inter-Agency Steering Committee for the
87 Source: [Link]
88 Source: [Link]
89 Source: [Link]

PHILIPPINE ENERGY PLAN 2018-2040 122

 Development and Formulation of a Comprehensive and Holistic Smart Grid Policy Framework and
Roadmap for the Philippine Electric Power System.”

Among the deliverables of the Inter-Agency Steering Committee as postulated in Section 3 are: a)
propose a National Strategy for Smart Grid for the period until 2030 with major consideration on
the possible impact to the price of electricity; b) formulate and prepare the transition policies and
guidelines for the effective implementation of Smart Grid by all electric power industry
participants; c) prepare a roadmap for Smart Grid implementation; and, d) formulate customer
education and information framework for countrywide Smart Grid.

Table 44. SG-TWG DOE LEADS

TWG DOE Lead Bureau/Service/Office
1. Power Systems Operation Electric Power Industry Management Bureau (EPIMB)
2. Sustainable and Renewable Energy Renewable Energy Management Bureau (REMB)
3. ICT and Cyber Security Information Technology and Management Services (ITMS)
4. Standardization Energy Utilization Management Bureau (EUMB)
5. Regulatory Support Legal Services (LS)
6. Consumer Empowerment Consumer Welfare and Promotion Office (CWPO)

Taking off from the DC, the DOE is cognizant that it is timely to formulate a Smart Grid Policy
Framework that has a twofold objective: a) ensure and encourage greater participation from
power sector stakeholders; and, b) promote technology innovation, business growth and job
creation. The DOE also created the Smart Grid–Technical Working Groups (SG-TWG), which
focuses on six (6) key areas: a) power systems operations; b) sustainable and renewable energy;
c) ICT and cyber security; d) standardization; e) regulatory support; and f) consumer
empowerment (Table 44).
Figure 73. PROPOSED ROADMAP FOR DISTRIBUTION SECTOR

A Smart Grid Forum was initiated by the DOE in 2017 and followed by one-on-one workshops with
the leading DUs as well as FGD with energy agencies, PIOUs and ECs. The results of these
discussions are aimed to serve as inputs to the DC to be formulated, which is targeted to be issued
and promulgated by 2019. The proposed Smart Grid Roadmap specifically for the Distribution
Sector is shown in Figure 73.

123 PHILIPPINE ENERGY PLAN 2018-2040

7. Policy Issuances

One of the policies that will impact consumers or end-users is RCOA. The policy empowers
consumers because they can opt for their preferred electricity supplier, provided they belong to
the right threshold of contestable customers. Having the freedom of preference for electricity
supply has a bearing on electricity cost reduction and expands transparency in the electricity
industry.

PLANS AND PROGRAMS

Figure 74. MARKET DEVELOPMENT ROADMAP
The course of the medium-
term implies that the sector
still needs to undertake policy
development to supplement
the initiatives accomplished in
the short-term. These policies
aspire to enhance the already
established initiatives – WESM
design improvements/NMMS,
embedded generators,
establishment of WESM
Mindanao, Reserve/Energy
Market Co-optimization,
demand bidding in the WESM,
Forwards Market/Financial
Transmission Rights/Day-ahead
market/Derivatives market.

In the long-term, the market development subsector undertakes monitoring of several initiatives
that were carried out in the short-term and for continuous implementation in the medium-term,
including new efforts. Policy development is steadily pursued to improve further transparency
and competitiveness of the electricity market. Specifically, this covers WESM rules changes,
periodic audit on market operations, market operator performance standards, compliance to WESM
rules, metering service provider performance standard, enforcement, and compliance to WESM rules
and IMO. Throughout the planning period, the DOE warrants a regular capacity-building for WESM
monitoring and assessment.

G. INSTITUTIONAL AND SUPPORT MECHANISM

The institutional and support mechanism was put in place to sustain the implementation of the
action plans identified in each power subsector for the planning horizon. As a cross-cutting and
cross-sectoral initiative, it is primarily attuned to assist in the fulfilment of the EPIRA objectives.

ASSESSMENT

The action plans completed in the short-term dwelled on the following: a) improvement of public
and stakeholder understanding through information, education and communications (IEC)
campaign; b) provision of support in the conduct of audit and review of WESM relative to market
operations, WESM rules, market manuals and retail rules; c) maintenance of the electric power
database management including the development of interim systems and preparation of market

PHILIPPINE ENERGY PLAN 2018-2040 124

 operations and variable renewable energy monitoring reports; d) submission of reports to
oversight – Joint Congressional Power Commission (JCPC) – to ensure compliance to the
requirements of EPIRA and other laws; and e) enhancement of power planning, specifically in
generation and transmission with the aid of modelling tools and optimization software.

PLANS AND PROGRAMS

Figure 75. INSTITUTIONAL AND SUPPORT MECHANISM ROADMAP
Over the medium-term, the
objective is twofold – develop
smart grid roadmap and policy
framework and enhance power
development planning. The action
plans from the medium- to long-
term mirror what were initially
implemented and accomplished
in the short-term. It is deemed
fundamental to be continuously
executed to bring about
performance efficiency in the
industry so that services delivered
to stakeholders and consumers
adhere to quality, reliability,
affordability, and security.
Moreover, these action plans put emphasis on the realization of EPIRA’s objectives for the
electricity industry.

1. Smart Grid Roadmap and Policy

The smart grid policy and roadmap are among the action plans specified under market
development for the short-term. Advancing from DC 2013-03-00390 wherein an Inter-Agency
Steering Committee was created, the DOE led various discussions with concerned stakeholders of
which the results were incorporated as inputs in the draft DC. The draft Smart Grid DC was
presented to public consultations and posted on DOE’s website for further comments of
stakeholders. Correspondingly, an initial roadmap has been created for the distribution sector,
known as the National Smart Distribution Utility Roadmap (SDUR). The Smart Grid Policy is targeted
to be implemented by fourth quarter of 2019.

2. Enhance Power Development Planning

As a continuing action plan over the planning period, enhancement of power development
planning is critical in the DOE’s mandate. The DOE is required to formulate and update annually
the PDP, which details the electricity demand and supply outlook of the country. Moreover,
improvement in supply expansion planning capability entails the procurement and application of
power planning tools, specific for generation and transmission.

90 “Creating an Inter-Agency Steering Committee for the Development and Formulation of a Comprehensive and Holistic Smart Grid Policy Framework
and Roadmap for the Philippine Electric Power System.”

125 PHILIPPINE ENERGY PLAN 2018-2040

3. Assess Industry Stakeholder’s Performance and Develop Policies and Programs for Greater
Efficiency

As an approach in the evaluation of industry performance, the DOE is set to continue conducting
PAA activities. It also functions as a mechanism to gauge the performance and efficiency of power
facilities based on mandated operational standards.

4. Monitor, Review and Evaluate EPIRA implementation

The DOE after reviews and series of focus group discussions and public consultations with the
stakeholders, drafted a department circular entitled, “Amending Certain Provisions of the Rules
and Regulations to Implement Republic Act No. 9136, entitled “Electric Power Industry Reform Act
of 2001”.

The draft department circular propose to among others, (a) Clarify the responsibilities of the DOE,
ERC, TRANSCO and its buer/concessioner relative to the TDP; (b) Clarification on the mandated of
NEA relative to its authority and responsibility over the ECs towards viably operating in the
deregulated electricity market and ensuring the total electrification of the country; (c) Alignment
of the ERC mandate to ensure that Suppliers would comply to rules concerning anti-competitive
behavior and market share limitations, including unbundling provisions as required under Section
36 of the Law; (d) Emphasis on the compliance of generation companies including embedded
generators and distribution utilities to Philippine Grid Code (PGC), Philippine Distribution Code
(PDC) and Wholesale Electricity Spot Market (WESM) Rules; (e) Rationalization of the subsidies for
missionary electrification; (f) Authority for TransCo or its Buyer/Concessionaire to operate,
maintain, and develop the transmission system in any Small Power Utility Group (SPUG) area that
has been identified by the DOE as viable; (g) Separation of accounts of related business of
distribution and transmission utilities subsidization among related businesses; (h) Determination
of remote and unviable areas for the provision of electricity; (i) Exemption from the imposition of
universal charge for self-generating entities; (j) Rationalization of lifeline rates subsidy; and (k)
Clarification on the PSALM mandates on the administration of universal charge.

▪ Privatization of NPC Assets Figure 76. PRIVATIZATION OF GENERATION (As of April 2019)

EPIRA mandates the overall restructuring of

the country’s electricity industry and calls for For
Privatization
the privatization of NPC. The move for 12.96%
privatization was deemed to introduce
competition and level the playing field in
both generation and supply sectors. The
government’s privatization efforts primarily
pinpoint to power generating facilities, as
well as the power supply contracts. Majority
of the privatization activities done by the
government were from 2007–2016 wherein Privatized
Assets
major assets of NPC, IPP Contracts and 87.04%
transmission assets were turned over to the
private sector.

PHILIPPINE ENERGY PLAN 2018-2040 126

 The privatization level of the NPC’s generating Figure 77. PRIVATIZATION OF IPP CONTRACTS (As of April 2019)
assets in Luzon and Visayas is already at 87.0
percent as of April 2019 wherein 4,364.30 MW
of the 5,014.30 MW are already privatized
(Figure 76). The remaining 13.0 percent for
privatization is the Malaya Thermal Power For
Privatization
Plant (MTPP) with a capacity of 650 MW. 21.73%

On the IPP contracts, privatization was

recorded at 78.3 percent of the total Privatized IPP
Contracts
contracted capacities and this is equivalent to 78.27%
3,415.00 MW of the 4,362.92 MW (Figure 25).
This covers coal (Sual and Pagbilao), hydro
(San Roque, Bakun), natural gas (Ilijan) and
geothermal (Unified Leyte Strips Energy).

The revenue generated by PSALM from the

privatization of generation assets, transmission business and IPP contracted capacities totaled PhP
910.16 Billion. Actual collections as of April 2019 stood at PhP 571.43 Billion and with a collectible
balance of PhP 338.73 Billion91. PSALM was able to achieve 100 percent collection stemming from
the auctioned generating assets and decommissioned plants. The remaining collectibles are from
the balances of TransCo’s transmission assets (concession fees) and appointment of IPPA. The
utilization of the privatization proceeds was solely used for the liquidation of PSALM’s financial
obligations as provided under EPIRA.

▪ Malaya Thermal Power Plant92

The privatization package of MTPP in line with DOE’s directive to PSALM and as relayed by the
latter to DOF includes the land underlying the plant with an estimated area of 26.28 hectares (ha)
consisting of five parcels of land registered under the Republic of the Philippines.

Four bidders were declared compliant by PSALM-Bids and Award Committee (BAC) on 28
November 2018 with all the requirements of the documentary deliverables. The compliant bidders
are: 1) AC Energy Inc.; 2) D.M. Wenceslao & Associates, Inc.; 3) DMCI Power Corporation; and 4)
FGEN Reliable Energy Holdings, Inc. The Final Asset Purchase Agreement was issued to the
qualified bidders, after a meeting held with them. PSALM also issued Supplemental Bid Bulletin
No. 6 amending the bid submission deadline from 24 April 2019 to 14 June 2019. This was
considered in time for the issuance of the Notice to Proceed (NTP) to the Third-Party Consultant
for the valuation of the MTPP.

▪ Procurement of the Third-Party Consultant for the Valuation of MTPP

PSALM’s Board of Directors directed the procurement of a third-party consultant to undertake the
valuation of assets. Three bidders participated during the bidding held on 04 March 2019, namely
a) Price Waterhouse Coopers (PWC), b) Beyond Energy, Inc. (BEI), and c) Lantau Group.

On 15 March 2019, the PSALM-BAC declared PWC as the winning bidder with the highest rated
technical proposal, and subsequently approved by the Head of the Procuring Entity. PSALM issued

91 Source: [Link]
92 PSALM EPIRA Status Report for December 2018

127 PHILIPPINE ENERGY PLAN 2018-2040

the Notice of Award to PWC on 22 April 2019. In line with this, the timeline for MTPP’s privatization
activities has also been adjusted.

▪ Privatization Schedule

To date, eight (8) generating assets are still up for privatization with a total capacity of 1,651.1 MW
(Table 45). The privatization of the Agus-Pulangi hydro complexes will be subject to consultation
with Congress and PSALM Board’s policy direction. On the appointment of IPPAs, there are still
three plants remaining with a total capacity of 1,225.92 MW, the largest of which is the Caliraya-
Botocan-Kalayaan (CBK) hydroelectric power plant with a capacity of 797.92 MW (Table 46).
Table 45. INDICATIVE PRIVATIZATION SCHEDULE FOR GENERATION ASSETS, 30 April 2019
Plant Name Rated Capacity (MW) Bid Date
Malaya Thermal Power Plant 650.00 2019
Agus 1 & 2 HEPP 260.00 For rehabilitation.
Agus 4 & 5 HEPP 213.10 Privatization is subject to consultation with
Congress and PSALM Board's policy direction.
Agus 6 & 7 HEPP 273.00
Pulangi 4 HEPP 255.00
Total 1,651.10
Source: [Link]

Table 46. INDICATIVE PRIVATIZATION SCHEDULE FOR THE APPOINTMENT OF IPPAS, 30 April 2019

Plant Name Rated Capacity (MW) Bid Date

Caliraya-Botocan-Kalayaan (CBK) HEPPs 797.92 2020
Casecnan HEPP 228.00 2021
Mindanao Coal-fired Thermal Power Plant (CFTPP) 200.00 2022
Total 1,225.92
Source: [Link]

H. MISSIONARY ELECTRIFICATION

Consistent with its overall mandate and the policy objectives of EPIRA, the DOE remains firm in
fulfilling its commitment to perform missionary electrification functions throughout the country.
In pursuit of this thrust, the DOE continues to develop key policies, programs and strategic
measures to ensure the delivery of quality, reliable, secure and affordable electricity service in
marginalized communities located in far flung and remote areas.

On the other hand, in support of the Government’s total electrification agenda, the DOE is putting
best efforts to bring missionary areas into commercial viability level, to contribute in attaining
inclusive growth and development. Relatedly, to realize policy reforms in the power sector, the
DOE is exploring for feasible measures to rationalize the subsidy mechanism, introduce necessary
improvements in system operations including the modernization and entry of emerging and
efficient technologies across all small island grids.

PHILIPPINE ENERGY PLAN 2018-2040 128

 ASSESSMENT

1. Development of the Omnibus Guidelines for Off-Grid Areas

The DOE crafted the Omnibus Guidelines for Off-Grid Areas anchored on three main objectives that
aims to: (1) accelerate access to sustainable energy; (2) rationalize the Universal Charge for
Missionary Electrification (UCME); and (3) improve the efficiency, sufficiency and reliability of
electricity services in off-grid areas.

Prior to its approval and signing on 25 January 2019, the DC has gone through a series of
preparatory activities, such as FGD and public consultations, which were participated in by
government agencies, electric power industry participants and other stakeholders involved in
missionary electrification as presented in Table 47. On the other hand, the Omnibus Guidelines for
Off-Grid Areas became effective on 10 March 2019 following its publication in the Business World
and the Daily Tribune on 22 February 2019.

Table 47. PREPARATORY ACTIVITIES CONDUCTED FOR THE OMNIBUS GUIDELINES FOR OFF-GRID AREAS
Activity Stakeholders Date Venue
Focus Group NEA, NPC, DOF, NEDA, ERC, PSALM, TransCo, NGCP, 03 Aug. 2018 DOE AVR,
Discussion Distribution Management Committee (DMC), Access to Taguig City
Sustainable Energy Programme (ASEP)

Public Existing and potential New Power Providers (NPPs) 03 Oct. 2018 The Legend Villas,
Consultation and Qualified Third Party (QTP) Providers interested in Mandaluyong City
Missionary Electrification

Public Luzon Electric Cooperatives (ECs) 04 Oct. 2018 Sulo Riviera Hotel,
Consultation Quezon City
Public Visayas ECs 19 Oct. 2018 Cebu Parklane Hotel,
Consultation Cebu City

Public Mindanao ECs 24 Oct. 2018 The Marcian Hotel,

Consultation Zamboanga City

Meeting Busuanga Island Electric Cooperative, Inc. (BISELCO), 12 Nov. 2018 NPC Boardroom,
NEA and NPC Quezon City

As a comprehensive policy governing off-grid power development, the completion of the Omnibus
Guidelines encapsulates the key accomplishments based on the short-term targets under the
missionary electrification roadmap.

▪ Ensure Adequate Supply in Off-Grid Areas

To date, the NPC-Small Power Utilities Group (NPC-SPUG) still supplies majority of the power
requirements in the off-grid areas despite having a Private Sector Participation (PSP) Program in
place. As such, the timely completion and implementation of capacity additions and uprating
projects are imperative to sustain power supply security in the islands.

Along with this effort, NPC-SPUG took advantage of EO30 by applying 32 of its power generation
projects in missionary areas as EPNS. With foreseen contributions of bringing positive economic
impacts to the off-grid islands, the proposed power generation projects have been granted with
CEPNS as listed in Table 48.

129 PHILIPPINE ENERGY PLAN 2018-2040

 Table 48. LIST OF NPC POWER PROJECTS ISSUED WITH CEPNS
Plant Type Name of Project Type of CEPNS Date Issued
Oil-based Hikdop, Surigao del Norte (1 x 200kW) Commerciality 16 Jan. 2019
Oil-based Talicud, Davao del Norte (3 x 200 kW) Commerciality 16 Jan. 2019
Oil-based Balut, Davao del Sur (1 x 300 kW and 2 x 200 kW) Commerciality 16 Jan. 2019
Oil-based Sacol, Zamboanga (1 x 200 kW) Commerciality 16 Jan. 2019
Oil-based Basilan DPP, Basilan (5 x 1,000 kW) Commerciality 16 Jan. 2019
Oil-based Ninoy Aquino (1 x 500 kW) Commerciality 16 Jan. 2019
Oil-based Palimbang (1 x 300 kW) Commerciality 16 Jan. 2019
Oil-based Kalamansig DPP (3 x 1,500 kW) Commerciality 16 Jan. 2019
Oil-based Balimbing (1 x 300 kW and 1 x 200 kW) Commerciality 16 Jan. 2019
Oil-based Tandubas (1 x 300 kW and 2 x 100 kW) Commerciality 16 Jan. 2019
Oil-based Sibutu (2 x 300 kW) Commerciality 16 Jan. 2019
Oil-based Manuk Mangkaw (2 x 200 kW) Commerciality 16 Jan. 2019
Oil-based Tandubanak (2 x 300 kW) Commerciality 16 Jan. 2019
Oil-based Gibusong Island, Loreto, Dinagat (2 x 50 kW) Commerciality 16 Jan. 2019
Oil-based Sibanag Island, Dinagat (2 x 50 kW) Commerciality 16 Jan. 2019
Oil-based Dinagat Island, Dinagat (2 x 1.50 MW) Commerciality 16 Jan. 2019
Oil-based Sarangani DPP (1 x 100 kW and 1 x 200 kW) Commerciality 16 Jan. 2019
Oil-based Tausan Pilas Island, Haji Muhtama (2 x 100 kW) Commerciality 16 Jan. 2019
Oil-based Tictabon (1 x 90 kW) Commerciality 16 Jan. 2019
Oil-based Manalipa (1 x 40 kW) Commerciality 16 Jan. 2019
Oil-based Tumaloptap (1 x 40 kW) Commerciality 16 Jan. 2019
Oil-based Sitangkai DPP, Tawi-Tawi (1 x 500kW) Commerciality 16 Jan. 2019
Oil-based Great Sta. Cruz (1 x 10 kW) Commerciality 16 Jan. 2019
Oil-based West Simunul (2 x 600 kW) Commerciality 29 Jan. 2019
Oil-based Pangapuyan (1 x 10 kW) Commerciality 29 Jan. 2019
Oil-based Ninoy Aquino DPP, Sultan Kudarat (2 x 500 kW) Commerciality 29 Jan. 2019
Oil-based Cagayan De Tawi-Tawi (Mapun), Tawi-Tawi (2 x 600 kW) Commerciality 29 Jan. 2019
Oil-based Tampakan Dampong DPP, Tawi-Tawi (1 x 150 kW) Commerciality 29 Jan. 2019
Oil-based Taganak Turtle Island DPP, Tawi-Tawi (1 x 150 kW) Commerciality 29 Jan. 2019
Oil-based Lugus Island, Sulu (1 x 150 kW) Commerciality 29 Jan. 2019
Oil-based Saluping Island DPP, Basilan (1 x 150 kW) Commerciality 29 Jan. 2019
Oil-based Tapiana Island DPP, Basilan (1 x 150 kW) Commerciality 29 Jan. 2019

On the other hand, one private power provider, the DMCI Power Corporation has also been
granted with a CEPNS for its 15-MW coal power plant project in Masbate.

Meanwhile, as CEPNS holders, NPC-SPUG and DMCI Power Corporation are entitled to the full
benefits of EO30 that warrants a more accelerated timeframe to implement their proposed off-
grid power generation projects.

▪ Conduct Policy Studies on Optimal Energy Mix for Off-grid Areas

As part of its continuing advocacy to identify and establish the optimal energy mix for small islands
and isolated grids, the DOE endeavors the formulation of a sound Missionary Electrification
Development Plan (MEDP). Relative to this, the policy on optimal energy mix is embodied in the
priority goals and objectives of the MEDP, in conjunction with DC2018-08-0024 or the “Renewable
Portfolio Standards for Off-Grid”. Currently, the DOE has on-going efforts focused on the

PHILIPPINE ENERGY PLAN 2018-2040 130

 generation planning for the five island provinces namely, Mindoro, Palawan, Masbate, Marinduque
and Romblon.

Along with this thrust, the DOE is assisted by the European Union – Access to Sustainable Energy
Programme (EU-ASEP) in conducting studies and facilitating capacity building activities to help
improve off-grid operations as part of the Programme’s Technical Assistance (TA) component.
Among the activities undertaken by DOE and ASEP in 2018 include the study to improve the
efficiency of NPC-SPUG diesel power plants, and the training on the enhanced Simplified Planning
Tool (SPT) for the optimization of supply mix.

▪ Rationalize and improve UCME Subsidy System

As a key intervention to attain countryside development, off-grid areas are intensely supported by
a subsidy mechanism through the UCME, which is being passed on to all electricity consumers.
With the objective of easing power rates that burden all end-users, the rationalization of existing
tariffs including the phase-out of the UCME subsidy mechanism is one of the salient provisions
underscored in the Omnibus Guidelines for Off-Grid Areas.

In line with this, the DOE identified feasible measures to propel the rationalization of the UCME
mechanism, which include: (a) tariff differentiation among customers and missionary areas; (b)
methodology review for the determination of the True Cost Generation Rate (TCGR) and
Subsidized Approved Generation Rate (SAGR) for the NPP Program; (c) methodology review for
determination of the Full Cost Recovery Rate (FCRR) and Subsidized Approved Retail Rate (SARR)
for the QTP Program; (d) provisional review of the cash generation-based incentive for RE
Developers aligned with the context and objectives of UCME; and (e) interconnection of SPUG
islands to the main grids of Luzon, Visayas and Mindanao or intra-connection among adjacent small
islands not connected to the main grids.

▪ Performance Assessment and Benchmarking

With the goal of improving small grid power system operations, the DOE has undertaken PAA
activities in three off-grid areas in Luzon. These activities enabled the DOE to wholly assess the
power situation including the operational efficiencies of the generation, transmission and
distribution system facilities serving small islands and isolated grids.

During the conduct of PAA in MASELCO on 18-29 June 2018

As a priority measure, the main results of the off-grid PAA were instrumental in the formulation of
the Omnibus Guidelines for Off-Grid Areas that facilitated the establishment of benchmark data
and information with respect to technical standards and operating guidelines of small grid
systems.

131 PHILIPPINE ENERGY PLAN 2018-2040

Along with this initiative, the DOE piloted its first off-grid PAA in Oriental Mindoro Electric
Cooperative, Inc. (ORMECO) in November 2017 followed by a post-audit activity which was
conducted in the last quarter of 2018. Likewise, the DOE implemented the same undertaking in
Masbate Electric Cooperative, Inc. (MASELCO) on 18-29 June 2018. On the other hand, the last off-
grid PAA was carried out in the First Catanduanes Electric Cooperative, Inc. (FICELCO) held on 23-
30 July 2018.

Meanwhile, as a continuing program of the Department, the results of future PAA activities will
primarily serve as firm basis in identifying appropriate policy measures and programs to further
improve the reliability, efficiency and modernization of off-grid power systems.

PLANS AND PROGRAMS Figure 78. MISSIONARY ELECTRIFICATION ROADMAP

The issuance of the Omnibus

Guidelines for Off-Grid Areas is a
bold move of the Government
in setting a clear track for
power development in small
islands and isolated grids and
unviable areas. Now that the
governing policy is already in
place, the DOE concentrates on
harmonizing efforts among
energy agencies, including the
stakeholders mandated with
missionary electrification
functions, to ensure the timely
and effective implementation
of the said policy within the medium- to long-term horizons.

At the early stage of the policy execution, the DOE prioritizes the rationalization and the
enhancement of the UCME subsidy mechanism to cushion the potential and encumbering impacts
to electricity users in off-grid areas. As an instrument of social justice, the UCME subsidy
mechanism will be reviewed and reformulated to enable the marginalized consumers to afford the
cost of electricity and use it efficiently.

Considering also that a number of off-grid islands are regularly stricken by calamities, the DOE
pushes for resiliency policies to fortify existing and upcoming power facilities serving small island
grids. Coherent with the DOE’s energy resiliency thrust, this action plan also serves as a
complementing strategy to ensure energy security in the off-grid areas.

And to address the pressing concern for a stable power supply in the small islands, the DOE strictly
advocates for stronger institutional cooperation between NEA and NPC-SPUG towards the
fulfilment of their sworn mandates. Essential in their mandates are the timely programming and
delivery of respective plans, programs, and missionary electrification related projects in off-grid
areas, among others. Likewise, full compliance to administrative and regulatory policies to include
the fair and transparent execution of CSP for power supply sustainability needs to be efficiently
enforced.

PHILIPPINE ENERGY PLAN 2018-2040 132

 As a continuing program of the DOE, the MEDP is periodically formulated to embark on the
generation and overall planning for off-grid areas. Along with this, the DOE undertakes various
capacity building programs to boost the technical competencies of the DUs in off-grid with respect
to power development planning. Relatedly, the DOE will develop and maintain a suitable off-grid
power monitoring system, and work on the necessary improvements accordingly, and as the need
arises.

In the long run, the DOE firmly monitors the implementation of the Omnibus Guidelines for Off-
Grid Areas and conducts policy review to assess its applicability, consistency and relevance with
the overall energy agenda of the DOE.

I. TOTAL ELECTRIFICATION PROGRAM

The government continues to put premium on the importance of expanding electricity access as
this remains in the energy sector development agenda. Viewed as a tool that improves the quality
of life of Filipinos, the sector is driven with the goal of attaining 100 percent electrification of
unserved and underserved93 areas in the country by 2022 based on 2015 Census of Population. The
government has formulated the Total Electrification Program (TEP) with the main objective of
providing electricity to all households by 2040.

With the President’s directive to accelerate electrification by 2020, the Total Electrification Master
Plan has been crafted under the TEP. As a concrete step, the Task Force E-Power Mo! (TFEM) was
created by virtue of the Department Order (DO) No. 2018-05-0010 signed on 24 May 2018. The Task
Force, chaired by the DOE, is responsible for overseeing the government’s TEP and ensuring that
electricity reaches the unserved and underserved communities within the franchise areas of DUs
and ECs. The TFEM is also tasked to develop the National Unified Strategy for TEP based on the
consolidated and reviewed comprehensive Total Electrification Master Plans of the individual
DUs/ECs. The plan likewise pushes for increased private sector participation (PSP) specifically on
areas where the DUs/ECs cannot perform their responsibilities.

The TFEM has identified three (3) major forms of electrification programs – household
electrification, grid electrification and off-grid electrification. Household and grid electrification
programs include the following strategies: a) the provision of house wiring subsidy for unenergized
households situated in areas with distribution facilities such as DOE’s Nationwide Intensification of
Household Electrification (NIHE); b) extension of distribution line facilities to unserved areas such
as NEA’s Sitio Electrification Program (SEP) and the Barangay Line Enhancement Program (BLEP).

On the other hand, off-grid electrification programs include: a) DU’s installation of individual
photovoltaic – solar home systems (PV-SHS) under DOE and European Union’s (EU) Access to
Sustainable Energy Program (ASEP) PV Mainstreaming; b) implementation of mini/micro-grid
system thru potential entry of private sector as Qualified Third Party (QTP), partner in a joint
venture agreement (JVA), and the NPC-Small Power Utilities Group (SPUG) Mini-Grid Scheme.

The obligation of providing electricity service to areas throughout the country lie in the DUs.
Electricity must be supplied in the least cost manner to its captive market subject to the collection
of retail rate duly approved by ERC.94 The provision of universal service by DUs also includes
unviable areas and if there is no viable solution, these areas may be transferred to another DU (if
any is available). The performance of DUs particularly its obligation in electrification of its franchise
area overseen by NEA.

93 Underserved area refers to those areas with less than 24-hour electricity service.
94 Section 23 of RA 9136

133 PHILIPPINE ENERGY PLAN 2018-2040

The electrification solution is opened to QTPs if DUs are unable to serve the remote and unviable
villages.95 The DOE has the responsibility of declaring these remote and unviable areas that cannot
be served by DUs. As support to the total electrification program and for an environment that is
more conducive to private sector participation particularly in unviable areas, the DOE issued DC
2019-11-0015 or the Revised QTP Guidelines on 22 November 2019. The policy basically updates and
revises the existing guidelines on QTP participation.

The NPC-SPUG’s role in electrification comes when neither a DU nor QTP cannot provide electricity
service in an area. It is responsible for providing power generation and its associated power
delivery systems in areas that are not connected to the grid and cannot be serviced by DUs and
other QTPs.96

The short-term targets espoused in the TEP are as follows: a) process, evaluate and approve
projects that contribute to the attainment of 90.0 percent household electrification by 2017 (based
on 2010 Census97); b) monitoring of household electrification development plan (HEDP) programs;
c) establish off-grid database management system; and d) develop proposal for NIHE Phase 2.

ASSESSMENT

1. Process, Evaluate and Approve Projects that Contribute to the Attainment of Household
Electrification Target by 2017

The energy sector in the Figure 79. HOUSEHOLD (HH) ELECTRIFICATION, December 2017
short-term was guided
with the goal of
attaining its household
electrification target –
that is 90.0 percent of
the total households in
the country have
electricity access by
2017.

95 Section 59 of RA 9136
96 Rule 13 Section 3 of EPIRA-IRR
97 The base year for the current electrification targets is based on the 2015 Census of Population (POPCEN 2015) of PSA

PHILIPPINE ENERGY PLAN 2018-2040 134

 As early as December 2016, the DOE together with NEA has already reach the 90 percent household
electrification level based on the 2010 Census of Population.

In December 2017, the Figure 80. HOUSEHOLD (HH) ELECTRIFICATION, December 2018
country posted a
household
electrification level of
91.1 percent wherein a
total of 20,936,498
households out of the
potential 22,984,97198
have access to
electricity. This is
translated to 2,048,473
households without
electricity service
throughout the
country. Luzon Note: Luzon recorded more than 100 percent household electrification level as the target household
is based on 2015 Census of Population from PSA
registered the highest
electrification level at 99.9 percent, while Visayas and Mindanao had 89.5 percent and 70.2 percent
electrification levels, respectively (Figure 79 and Table 49).

Table 49. HOUSEHOLD (HH) ELECTRIFICATION, December 2017

Total HH Energized HH Unenergized HH Electrification Level (%)

Luzon 13,318,261 13,304,567 13,694 99.90

Visayas 4,401,698 3,937,317 464,381 89.45
Mindanao 5,265,012 3,694,614 1,570,398 70.17
Philippines 22,984,971 20,936,498 2,048,473 91.09

The country’s electrification level improved by 4.0 percentage points in December 2018 at 95.3
percent. Of the total households99, 21, 896,816 now have electricity, leaving only 1,088,155 without
access to this basic service. Luzon is now 100 percent energized. Visayas’ electricity level already
reached 94.0 percent, while Mindanao still had the lowest at 78.2 percent (Figure 80 and Table
50)100.

Table 50. HOUSEHOLD (HH) ELECTRIFICATION, December 2018

Total HH Energized HH Unenergized HH Electrification Level (%)
Luzon 13,318,261 13,640,593 -322,332 102.42
Visayas 4,401,698 4,137,125 264,573 93.99
Mindanao 5,265,012 4,119,098 1,145,914 78.24
Philippines 22,984,971 21,896,816 1,088,155 95.27

98 Total potential households based on the 2015 Census of Population (POPCEN 2015).
99 Total potential households based on the 2015 Census of Population (POPCEN 2015). The 2018 data reflected as of 15 May 2019. The DOE is still awaiting
the submission of DUs/ECs of their DDP for 2019.
100 Electrification level in December 2019 stood at 92.96 percent indicating that 23,229,866 households are with electricity service. The remaining 1,618,264

households without electricity are based on actual unserved households of DUs throughout the country. Electrification level on a per grid basis is as
follows: Luzon (97.78 percent), Visayas (93.88 percent) and Mindanao (79.99 percent).

135 PHILIPPINE ENERGY PLAN 2018-2040

Shown in Table 51 are the electrification projects, as approved by the DOE, contributing to
expanding electricity access throughout the country. These projects include NIHE, Energy
Regulations (ER) 1-94, PV mainstreaming – Government of Philippines (GOP) counterpart, PV
Mainstreaming under the ASEP and QTP.

Table 51. ELECTRIFICATION PROGRAMS WITH APPROVED PROJECTS, 2018

Program Name Program Description No. of Approved Projects
Locally-Funded Provision of service connection is a grant subsidy amounting to 78 projects (344,090
Project (LFP) – PhP 3,750 per household which includes house wiring materials households)
NIHE (at least two (2) bulbs and one (1) convenience outlet), service
(2015 – 2018) drop wire and kilowatt-hour meter.
ER 1-94 The provision of benefits to communities hosting generating 57 projects
facilities or energy resource development projects as stated in (7 EF, 26 DLF and 24
Section 5 (i) of RA 7638, Section 66 of RA 9136 and Rule 29 of RWMHEEF)
the EPIRA-IRR. Utilization of 50% of the one centavo per
kilowatt-hour (PhP 0.01/kWh) of the total electricity sales of all
generation facilities as financial benefits (electrification fund).
LFP - PVM Adopts a fee-for-service business model in which ECs install PV 6 projects (9,984 households)
(2017 – 2018) – solar home systems (SHS) in unelectrified households within
its franchised area that are unviable for grid extension.
PVM – ASEP Adopts a fee-for-service business model in which ECs install PV 10,000 of 40,500 households
(2017 – 2018) – solar home systems (SHS) in unelectrified households within in four provinces
its franchised area that are unviable for grid extension. Funded
by ASEP.
QTP Serves unviable and waived areas by DUs. Responsible for 6 sites endorsed to ERC with
generation of power and its equivalent distribution. 1,342 households

2. Develop Proposal for NIHE Phase 2

Table 52. APPROVED NIHE PROJECTS, 2018
Electric Cooperative No. of Households
The NIHE program was implemented from 2015 to
ISECO 3,367
2017. However, with the need to further expand the IFELCO 478
program, the DOE carried out a review and PANELCO III 6,636
evaluation of its existing mechanism to further MARELCO 4,118
enhance and streamline the requirements. In the ANTECO 3,122
later part of 2017, the DOE issued the ILECO III 3,886
implementation guidelines that included the ILECO II 7,651
streamlined process in project approval, LEYECO V 11,500
implementation and monitoring. In effect, approval ANECO 2,177
was made to 13 out of the 18 projects under 2018 MOELCI 1,344
NIHE with a total beneficiary of 81,770 households. MORESCO I 5,927
The ECs with approved projects are: Ilocos Sur SURSECO I 9,296
Electric Cooperative (ISECO), Ifugao Electric ZAMSURECO 22,268
Cooperative (IFELCO), Pangasinan III Electric Total 81,770
Cooperative (PANELCO III), Marinduque Electric
Cooperative (MARELCO), Antique Electric Cooperative (ANTECO), Iloilo III Electric Cooperative
(ILECO III), Iloilo II Electric Cooperative (ILECO II), Leyte V Electric Cooperative (LEYECO V), Agusan
del Norte Electric Cooperative (ANECO), Misamis Occidental Electric Cooperative (MOELCI),
Misamis Oriental I Electric Cooperative (MORESCO I), Surigao del Sur I Electric Cooperative
(SURSECO I), and Zamboanga del Sur I Electric Cooperative (ZAMSURECO I) (Table 52). These ECs
have signed a Memorandum of Agreement (MOA) with the DOE for the project implementation
within their franchise areas.

PHILIPPINE ENERGY PLAN 2018-2040 136

 3. Policy Issuances

The targeted as well as identified beneficiaries in the underserved and unserved areas in the
Government’s electrification program are considered as consumers, given they have been
provided with electricity service. Electrification’s considerable impact to the people (would be
consumers) is its ability to uplift living conditions and serve as a conduit for the delivery of basic
services to those who have been deprived of electricity access.

Consumers who have electricity service are helping other consumers or would be consumers as a
portion of the payment in electricity bills (the Universal Charge – Missionary Electrification) is
utilized in subsidizing electricity in
Figure 81. ELECTRIFICATION ROADMAP
missionary or off-grid areas.
Electrification is a program that
enhances local development and
transcends to every consumer.

PLANS AND PROGRAMS

For the medium-term, the Total

Electrification Program (TEP) has the
objective of developing and
implementing plans and programs in
the attainment of total electrification
of targeted households by 2022
(based on 2015 Census). In the long-
term, it is envisioned that electricity
service is provided to all households
throughout the country. Continuing action plans will be pursued within the medium- to long-term
period, which include: a) monitoring of implementation of total electrification plans and programs;
and b) provision of support and assistance to communities hosting generating facilities and/or
energy resources.

1. Development, Monitoring and Implementation of Total Electrification Plans and Programs

Cognizant of the total electrification target by 2022, the DOE is unwavering in the implementation
of its identified electrification strategies in both grid and off-grid areas. This entails the
management of the DOE approved projects and programs covering the following: a) TEP, in
collaboration with NEA and NPC-SPUG, as the project implementer; b) PV Mainstreaming both by
the DOE and EU-ASEP; c) Electrification Fund (EF) projects under ER 1-94 of the DUs; and d) QTP.

The TFEM continuously ensures that electricity access reaches communities that remain unserved
and underserved by the DUs. Thus, the DUs are enjoined to execute their respective Total
Electrification Masterplans outlining the appropriate electrification strategies and fund resources.

A pragmatic and timely approach in project implementation greatly contributes in attaining the
objective of providing electricity access to the targeted households in the country.

137 PHILIPPINE ENERGY PLAN 2018-2040

2. Provide support and assistance to Communities Hosting Generating Facilities and/or Energy
Resources

On ER 1-94101, the DOE is on the standpoint to continue providing support and assistance to host
communities from medium- to long-term period. It may be noted that in 2018, two pertinent
policies on ER 1-94 were issued – the DC. No. 2018-03-0005102 and DC No. 2018-08-0021103. The former,
promulgated on 20 March 2018, recognizes the rights of indigenous cultural communities (ICCs) /
indigenous peoples (IPs) in their ancestral domains to have equitable share from the financial
benefits under ER 1-94. Meanwhile, the latter, promulgated on 23 August 2018, effects the transfer
of financial benefits to the DUs/ECs and to host local government units (LGUs) and ICCs/IPs. The
DC stipulates that the electrification Fund (EF) component will be remitted directly to the DUs/ECs,
while the development and livelihood fund (DLF) and reforestation, watershed management,
health and/or environment enhancement fund (RWMHEEF) will be remitted to the host LGUs and
ICCs/IPs.

To guide the ICCs/IPs in availing their share, the DOE issued DC No. 2019-06-0010104 on 14 June 2019
specifying the administrative operating guidelines (AOG) to facilitate the transfer and utilization of
financial benefits by the ICCs/IPs whose ancestral domains are host to generation facilities and/or
energy resources.

▪ ER 1-94 Status

The ER 1-94 is a program that intends to recompense Table 53. ER 1-94 Funds Remitted by DOE to Host
LGUs (Sept 2019 - 12 August 2020)
for the contribution made by communities hosting
energy generating facilities and/or energy Fund Type Amount
resources. The promulgation of DC 2018-08-0021 on (Billion PhP)
August 2018 provided the guidelines on the direct EF 1.452
remittance of financial benefit to host beneficiaries DLF 0.748
while DC 2019-06-0010 specified the AOG to RWMHEEF 0.714
facilitate the transfer and utilization of the funds. Total 2.913

As a means for Host LGUs to have additional fund source in addressing the COVID-19 pandemic,
the DOE issued DC 2020-04-0008 entitled “Rationalizing the Utilization of ER 1-94 by LGUs in
Response to COVID-19 Public Health Emergency” on 7 April 2020. The Circular stipulates that all
available and unremitted ER 1-94 Funds (as of December 2019) that is with DOE and concerned
power generation companies (GenCos) shall be immediately distributed to host LGUs in order to
have a readily available fund for undertaking COVID-19 related responses. An Advisory was also
issued last 14 July 2020 for the implementation of the DC and to provide clarification on particular
sections as well as for the continuity of processes and activities.

For the period September 2019 to 12 August 2020, the DOE remitted a total of PhP 2.9 Billion of ER
1-94 funds to host LGUs with half of the remitted amount (50%) comprising the EF (Table 53).

101 The provision of benefits to communities hosting generating facilities or energy resource development projects is stipulated in Section 5 (i) of RA 7638,
Section 66 of RA 9136, and Rule 29 of the EPIRA-IRR.
102 “Prescribing the Guidelines Recognizing the Rights of Indigenous Cultural Communities (ICCs) / Indigenous Peoples (IPs) in their Ancestral Domain and
Access to the Financial Benefits as Host Communities under the ER 1-94 Program and Rule 29 (A) of the Implementing Rules and Regulations of Republic
Act No. 9136 otherwise known as Electric Power Industry Reform Act of 2001”
103 “Providing for the Amendments to Rule 29 Part (A) of the Implementing Rules and Regulations of RA 9136”
104 “Prescribing the Administrative Operating Guidelines for the Availment and Utilization of Financial Benefits by the Indigenou s Cultural

Communities/Indigenous Peoples pursuant to DOE Department Circular No. 2018-03-0005”

PHILIPPINE ENERGY PLAN 2018-2040 138

 J. INVESTMENT AND EMPLOYMENT OPPORTUNITIES

Investments on power sector must be highly promoted to ensure that power supply remains
steadily available for the production and delivery of electricity to fuel economic growth. One
important aspect for the future of power sector is the need to meet the necessary investment
requirements for expansion of power generation capacity and development of required additional
infrastructure to strengthen the existing power system.

The restructuring of the country’s power sector paved the way for a more competitive electricity
supply market as the government opened the opportunities of financing power projects to private
investors. Considering that power projects are highly leveraged investment undertaking, building
up substantial portfolios of investment in the sector should be of greater interest to encourage
greater capital investments and private sector participation.

Table 54 shows the investment requirement in the generation sub-sector to support the expanding
electricity demand. The estimated financing needs is slated for building new power plants to
augment existing capacities and ensure adequate and reliable power supply. Under the BAU
Scenario, the total capital investment needed to develop additional generation capacities amounts
to PhP ____ million. With higher shares of renewables in the capacity addition, the CES is expected
to be more expensive by __ percent, reaching PhP ___million due to high upfront cost in building
more renewable power plants.

Table 54. INVESTMENT REQUIREMENTS FOR GENERATION PROJECTS (in Million Pesos)
BAU CES
Capacity Investment Cost Capacity Investment Cost
Committed Power Plants
Indicative Power Plants
Capacity Addition
Total
Note: The list of committed and indicative power plants is summarized in Annexes _-_.

To increase the grid capacity and complement the entry of new generating facilities, the
transmission sub-sector will need to invest PhP 893,700.34 million mostly comprised of upgrade
and expansion of transmission backbones and development of island interconnections. Of total
allocations, almost 60.0 percent is allotted to “Projects for Implementation” or those projects with
target completion up to 2022 (Table 55).

Note that the investment for transmission development only pertains to projects up to 2025 since
other future projects still need further assessment to estimate the total project cost for
engineering, procurement, and construction.

Table 55. INVESTMENT REQUIREMENTS FOR TRANSMISSION PROJECTS (in Million Pesos)
Luzon Visayas Mindanao Total
Projects for Implementation 378,507.43 57,870.00 79,139.00 515,516.43
Proposed Projects up to 2025 49,660.91 378,183.91
Total 598,839.43 166,061.00 128,799.91 893,700.34
Note: The list of transmission projects is summarized in Annexes _-_, detailing the expected completion dates and investment cost.

139 PHILIPPINE ENERGY PLAN 2018-2040

For the benefit of the customers, increasing network efficiency and improving the performance of
distribution services also necessitate large amounts of new investments to achieve long time
reliability. Table 56 enumerates the needed investments for distribution development projects
planned to be implemented in the next ten years (2019-2028).

The estimated capital spending to further develop the country’s distribution sector amounts to
PhP821,127 million. More than half (54.2%) of total cost is allotted for electrification projects. This is
followed by network projects taking 40.0 percent (Php 328,553 million) mostly consist of additional
substation and sub-transmission facilities and upgrading and rehabilitation of the existing
distribution system. The remainder is shared out to non-network projects which range from
acquisition of property, equipment, safety gadgets, software, vehicles, and others that assist
electric cooperatives in its operations and delivery of services.

Table 56. INVESTMENT REQUIREMENTS FOR DISTRIBUTION PROJECTS (in Million Pesos)
Capital Expenditures Luzon Visayas Mindanao Total
Network Assets 253,590 25,180 49,782 328,553
Sub-transmission Facilities 13,208 1317 7631 22,155
Distribution Facilities 147,123 9460 14978 171,562
Substation Capacities 50,661 3689 10221 64,570
Other Network Assets 42,599 10714 16953 70,266
Non-Network Assets 32,120 4161 11487 47,768
Electrification Projects 148,170 1855 294782 444,807
Total 433,880 31,196 356,051 821,127
It is understood that investments on the power sector have been instrumental on the stability and
growth of the country’s economy as it stimulates potential job creations related to construction
and operation of power sector infrastructure or services. Moreover, it is important to notice that
power sector’s skilled workforce generally have higher level of incomes thus contributing more
absolute spending per capita to the economy. Such only implies how the employment in power
sector influences economic growth.

As shown in Table 57, the total potential employment associated with power sector investments is
approximately _____ for the BAU scenario. However, a shift to the CES would create an additional
____ jobs in comparison to BAU. Since CES has more capacity additions due to high share of
renewables, the required workforce will considerably increase especially during the construction
and installation phases. Furthermore, renewable energy technologies tend to be more labor
intensive as revealed by several available literatures.

Table 57. ESTIMATED JOB GENERATION

Sub-sector Job Generation
BAU CES
Generation
Committed Power Plants
Indicative Power Plants
Capacity Addition
Transmission
Projects for Implementation
Proposed Projects up to 2025
Distribution
Total

The employment opportunities within the sector is of considerable significance for a developing
country like the Philippines in order to achieve substantial economic gains and consequently,

PHILIPPINE ENERGY PLAN 2018-2040 140

 advance the living standards of its people. Given that these employments could further create
more additional jobs as income expands, it must be noted that the job generation presented only
reflects the estimated number of direct jobs for the pre-development, construction, and operation
and maintenance activities.

141 PHILIPPINE ENERGY PLAN 2018-2040