pre-feasibility study on the regulations for implementing ... · power plants in the philippines...

Study on Economic Partnership Projects in Developing Countries in FY2017

Pre-Feasibility Study on the Regulations for Implementing Quality Electricity Infrastructure in the Philippines

Final Report

March 2018KPMG AZSA LLC

Ministry of Economy, Trade and Industry Trade Finance DivisionFinancial Cooperation Office Trade and Economic Cooperation Bureau

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Document Classification: KPMG Confidential

© 2018 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Contents

Page0 Introduction 5

1 Study of regulations of electricity business in the Philippines 8

1.1 Procedures and regulations for constructing and operating power plant in the Philippines 8

1.2 Summary of the organizations involved in 1.1 (Personnel, capabilities) 46

1.3 The details of the standards apply to generation facilities 57

2 Quality problems of the electricity infrastructure in the Philippines 61

3 Identifying issued barring the implementation of quality electricity infrastructure 64

4 Formulation of a schedule towards solving the issues identified 71

5 Introducing Japanese technologies to assist the Philippines power sector 75

※This report has been formulated based on the study items as agreed upon the consignment contract as of 18 August, 2017. The procedures undertaken as part of this study is agreed between METI and KPMG AZSA LLC, and henceforth KPMG AZSA LLC bears no liabilities to third parties, regardless of whether those third parties obtained this report through a copy or disclosure by METI.

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Abbreviations


APEC Asia Pacific Economic Cooperation

ATP Authoriy to Print

BIR Bureau of Internal Revenue

BOI Board of Investment

CDC Clark Development Authority

CENRO Community Environment and Natural Resources Officer

CEZA Cagayan Economic Zone Authority

CLOA Certification of Landownership Award

COC Certificate of Compliance

CPA Certified Public Accountant

DAR Department of Agrarian Reform

DENR Department of Environment and Natural Resources

DMC Distribution Management Committee

DOBM Department of Budget and Management

DOE Department of Energy

DOLE Department of Labor and Employment

DTI Department of Trade and Industry

DU Distribution Utility

EC Electric Cooperatives

ECC Environmental Compliance Certificate

ECP Environmentally Critical Project

EIA Environmental Impact Assessment

EO Executive Order

EPC Engineering Procurement Construction

EPIM Electric Power Industry Management Bureau

EPIRA Electric Power Industry Reform Act

ERC Energy Regulatory Commission

FIT Feed in Tariff

GMC Grid Management Committee

GIS General Information Sheet

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Abbreviations


IPP Independent Power Producer

IPP-A Independent Power Producer Administrator

ISO International Organization for Standardization

KPI Key Performance Indicator

LCC Life Cycle Cost

LGU Local Government Unit

LUC Land Use Conversion

MARO Municipal Agrarian Reform Officer

MERALCO Manila Electric Company

METI Ministry of Economy Trade and Industry

NGCP National Grid Corporation of the Philippines

NPC National Power Corporation

O&M Operation and Maintenance

OATS Open Access Transmission Service

PCA Philippines Competition Act

PCC Philippines Competition Commission

PDP Power Development Plan

PEMC Philippines Electricity Market Corporation

PEZA Phillipine Economic Zone Authority

PHP Philippine Peso

PSALM Power Sector Asset and Liability Management corporation

PSMD Power System Maintenance Department

PTO Permit to Operate

RE Renewable Energy

SBMA Subic Bay Metropolitan Authority

TIN Tax Identification Number

TRANSCO National Transmission Corporation

WESM Wholesale Electricity Market Corporation

0 Introduction

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【0. Intro】

• The Philippines is one of the countries in Asia showing the highest economic growth, and the electricity demand will increase along with the growth. Accordingly, sufficient capacity additions to meet the increasing electricity demand will be required.

• Electricity rates are high compared to other Asian countries, and some regions such as Mindanao Island is still faced with low electrification.

• The Philippines-Japan Meeting on January 2017, Prime Minister Abe declared the formulation of the Power Sector Action Plan in the Philippines. In this regard, th Ministry of Economy, Trade and Industry (METI) of Japan formulated the said Action Plan and delivered it to the Philippine government at the first Philippines-Japan Joint Committee on Infrastructure Development and Economic Cooperation held in March 2017.

• The Power Sector Action Plan in the Philippines aims to solve the issues in the Philippine power sector by implementing quality electricity infrastructure.

The Power Sector Action Plan in The Philippines

The objectives of the Project

This Project aims to seek an desirable regulatory environment enabling quality infrastructure in the Philippines through the smooth implementation of the Action Plan with the Philippine government. The examination of the existing regulations and the actual qualitative issues and the proposals for further reform would be conducted.

The objectives, contents and the results of the project

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The objectives, contents and the results of the project【0. Intro】

（１）Study of regulations of electricity business in the Philippines（２）Example of trouble that occurred due to the lack of quality electricity

infrastructure（３）Identifying issued barring the implementation of quality electricity

infrastructure（４）（３）Formulation of a schedule towards solving the issues identified（５）Introducing Japanese technologies to assist the Philippines power sector

The findings of the study will be explained from the next page onward.

Contents of the project

The findings of the study

1 Study on the regulations of electricity business in the Philippines

1.1 Procedures and regulations for constructing and operating power plants in the Philippines

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1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesThe organizations regulating the power sector are described in the following diagram.

【1. Study of regulations of electricity business in the Philippines】

Department of Energy

Philippines Electricity Market Corporation (independent entity)

Department of Environment and Natural Resources

Department of agrarian reform

RegulationTransaction

1)grid code, distribution code

2)WESM Rules

TRANSCO (regulating the transmission concessionaire)

2)

1)

Energy regulatory Commission (Independent regulating agency)

Users

Generation

Transmissi

on and

distributio

n

WESM

IPPIPP-A (Transactions with IPPs based on PPAs by

NPC)

PSALM※Manages NPC and settles its assets and liabilities

NGCP(Transmission)

DUs such as MERALCO

Authorizing tariffs, assessing compliance

Authorizing construction of new power plants

1)

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The foreign investment negative list in the Philippines allow 100% foreign investment for the electricity generation business (except for renewable energy generation). Renewable energy generation, transmission and distribution businesses, on the other hand, are subject to 40% foreign equity cap.The cap is applicable to both greenfield and brownfield projects.


Sector Foreign Equity Cap

Electricity Generation

Conventional (other than renewable energy) Maximum 100％ Foreign equity

Renewable energy Maximum 40％ Foreign equity

Electricity Distribution Maximum 40％ Foreign equity

Electricity Transmission Maximum 40％ Foreign equity

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With respect to how a Japanese company participates in the electricity generation business in the Philippines, the following two options can be considered:

a. To establish a subsidiary as either a 100% foreign equity company or a JV with local companiesb. To purchase the assets of existing generation company.

The requisite procedures for each option are summarized below.


Procedures for generation business(P13〜P33)

Procedures for incorporating a company(P34〜P39)

Procedures forM&A(P40)

Procedures for operating generation business(P41〜P46)

Participationin greenfield projects

Incorporate a 100% foreign equity company

✔ ✔ - ✔

Incorporate a JV with local companies

✔ ✔ - ✔

Purchasing an existing generation company

✔(Can be partly

omitted)

✔(If incorporating a Philippine-based

company)

✔ ✔

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Generation companies are to obtain the following from DOE( Energy Investor’s Guidebook(DOE))


BOI(Board of Investment) Certificate of Endorsement for BOI Registration

EPIM Endorsement to Securities and Exchange Commission

Certificate of Endorsement, COE

Clearance to Undertake Grid Impact Study

DOE

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1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesApplication for the construction of generation facilities(DOE)


BOI (Board of Investment) Certificate of Endorsement for BOI Registration

To Department of Energy Investment Promotion Office

required documents

1. Letter of request2. Company Profile / Background

• Briefly describe the company, its history and the sector in which it operates• List of Key Officials• List and Overview of the major power projects accomplished by the company if applicable

3. SEC/DTI Registration (SEC Certified Articles of Incorporation, By-laws and General Information Sheet) current or latest

4. Project Profile• Project background (exact location, official name of the facility, commissioning date, commercial

operation date, and off-taker of electricity)• Feasibility study• Technical Description• Total Investment Cost (include breakdown of the entire project cost and assumptions)• Financial Statement - 5-year financial projection (use BOI pro forma for the financial statement)• For Coal Plants, please indicate sources of coal and percentage of its sources• For Diesel Plants, please provide certificate from fuel supplier indicating compliant with the biodiesel

blend requirement and the Fuel Supply Agreement5. Additional requirements for power plants located in the SPUG Areas

• Copy of the Energy Supply Agreement• Competitive Selection Process (CSP) Certification endorsed by DOE

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EPIM Endorsement to Securities and Exchange CommissionTo Department of Energy Electric Power Industry Management Bureau

Required documents

1. Letter of request2. SEC Cover Sheet3. Articles of Incorporation/Amended Articles of Incorporation4. Director's Certificate duly signed

ERC Certificate of Endorsement, COETo Department of Energy Electric Power Industry Management Bureau

Required documents

1. Letter of request addressed to the Director of Electric Power Industry Management Bureau2. Company Profile3. Project background or description ( please include: exact location, official name of the

facility, commissioning date and off-taker of the electricity)4. SEC Registration Certificate and Articles of Incorporation5. Historical Generation Data (only for existing generating facility)6. Service/Operating Contract (for RE-based projects)7. Signed Memorandum of Agreement for the Trust Fund for the ER 1-94

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Clearance to Undertake Grid Impact StudyTo Department of Energy Electric Power Industry Management Bureau

Requireddocuments

1. Letter of request2. Project Profile (Capacity, Location and commissioning date of the project)3. Service/Operating contract from REMB (for RE Projects)

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1.1 Procedures and regulations for constructing and operating power plant in the Philippines

Generators are required to undergo the following procedures with ERC, NGCP and the Department of Agrarian Reform（ Energy Investor’s Guidebook（DOE））

【1. Study of regulations of power generation business in the Philippines】

Obtain a certificate of compliance for Generating Companies

Submit Transmission Service Application

Energy Regulatory Commission

NGCP

Department of Agrarian Reform

Apply for the land use conversion

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1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesApplication for the construction of generation facilities (ERC)


Certificate of compliance for Generating Companies

To Energy Regulatory Commission

Requireddocuments

1. Entities with Self-Generating Facilities (SGFs) with less than 1 MW aggregate in installed capacity accomplish the following:• Form 1 - Application for COC• Form 2 - Company Profile

2. Entities with Self-Generating Facilities (SGFs) with 1 MW and above aggregate installed capacity accomplish the following:• Form 1 - Application for COC• Form 2 - Company Profile• Form 3 - Three-year Operational History• Other documentary requirements

i. SEC Registrationii. Articles of Incorporationiii. General Information Sheet (SEC Form)iv. DOE /NPC Certification of Accreditation if applicablev. DENR - Environmental Compliance Certificate /Permit to Operate (PTO)

3. Independent Power Producer/DU owned power plant operational as of June 26, 2001 (existing power plants), accomplish the following:• Form 1 - Application for Certificate of Compliance (COC)• Form 2 - Company Profile• Form 3 - Three-year Operational History• Form 4 - Affidavit of Compliance with Philippine Grid Distribution Codes (PGDC)• Form 5 - Affidavit of Compliance with WESM Rules

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RequiredDocuments(Continued)

• Form 7 - General Plant Description• Other documentary requirements

i. SEC Registrationii. Articles of Incorporationiii. General Information Sheet (SEC Form)iv. DOE /NPC Certification of Accreditation if applicablev. DENR - Environmental Compliance Certificate /Permit to Operate (PTO)vi. Audited Financial Statement for the last two (2) years

4. Independent Power Producer/DU owned power plant operational after June 26, 2001 (new power plants), accomplish the following:• Form 1 - Application for COC• Form 2 - Company Profile• Form 3 - Three-year Operational History• Form 4 - Affidavit of Compliance with Philippine Grid Distribution Codes (PGDC)• Form 5 - Affidavit of Compliance with WESM Rules• Form 6 - Affidavit of Compliance with Cross Ownership and Market Share Restrictions• Form 7 - General Plant Description

Other common document requirements as follows:i. SEC Registrationii. Articles of Incorporationiii. General Information Sheet (SEC Form)iv. DOE /NPC Certification of Accreditation if applicablev. DENR - ECC/PTOvi. Audited Financial Statement for the last two (2) years

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1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesApplication for the construction of generation facilities (NGCP)


Transmission Service Application

To NGCP

RequiredDocuments

1. Letter of Application for Transmission Service2. ERC Load Approval3. DOE Accreditation (Generator)4. System Impact Assessment

• Proposed Connection Point and Vicinity Map• Load Forecast

5. Offer of Service for Grid Impact Studies (optional)6. Grid Impact Study (Generator and other Loads)

• Generator Data• Down payment (30%)• Remaining Balance (70%)

7. Offer of Service for Facilities Study/ Contract for Technical Services (optional)• Scope of Work (as requested)• Cost of Services• Duration

8. Connection Agreement9. Submission of Statement of Readiness to Connect10. Issuance of Certificate of Technical Requirements

• District Office Clearance• MSG Clearance• PSMD Clearance• SO Clearance (if applicable)

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RequiredDocuments(continued)

11. Serving of Transmission Service Agreement (TSA)12. Relevant Schedules

• Open Access Transmission Service (OATS) Services• Standard Planning Data• Detailed Planning Data (for Generator Customers)• Electrical Drawings• Connection Point Drawings• Asset Boundary• Protection Arrangement and Settings• Metering Requirements• Notices• Provisional Maintenance Schedule• Testing and Commissioning (new del. Pt)• Load Shedding• Contingency Actions• Critical Events List• Statement of Readiness to Connect (new del. Pt.)

13. Issuance of Approval to Connect14. Energization of Customer's Facilities15. Payment of Security Deposit

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1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesApplication for the construction of generation facilities (Department of Agrarian Reform)


Land use conversion

To Department of Agrarian Reform

required documents

1. Official receipt showing proof of payment of filing fee and inspection cost.2. Official receipt showing proof of posting bond or an original copy of the GSIS surety bond in accordance with the terms

and conditions set forth in Section 24 of DAR AO No.1, Series of 2002.3. Sworn application for Land Use Conversion. (Form No.1)4. True copy of the Original Certificate of Title (OCT) or Transfer Certificate of Title (TCT) of the subject land, certified by

the Register of Deeds not earlier than thirty (30) days prior to application filing dat.In case of untitled land, the following shall required in lieu of a title.

4.1 Certification from the Department of Environment and Natural Resources- Community Environment and Natural Resources Officer (DENR-CENRO) that the landholding has been classified as alienable and disposable; and

4.2 Certification from the DENR-CENRO (for administrative confirmation of imperfect title) or the Clerk of Court (for judicial confirmation of imperfect title) that the tilting process/ proceedings has commenced and there are no adverse claimants

5. True copy of the Certificate of Title of the subject land as of 15 June 1988, and all successor Titles until the present. Title referred to in No. 4 hereof if applicable.

6. True copy of the current Tax declaration covering the subject properly.7. Project feasibility study.8. Joint venture agreement or any other business arrangement on the use of land between landowner and the developer

(if the developer is other than the landowner) or between the Emancipation Patent/Certification of Landownership Award (EP/CLOA) holders and the developer (if the land was awarded under the agrarian reform program).

9. Narrative description of the development plan describing in detail the activities, program components, phasing, schedule, work and financial plan, all duly certified by a licensed engineer, architect or land use planner.

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required documents

10. Proof of financial and organizational capability of the developer to develop land, including the following information:10.1 Statement of project cost and availability of potential funding source(s) for the development of the

proposed project;10.2 Profile of the developer;10.3 Most recent financial statement, not later than the year before application, duly authenticated by a

certified public accountant; and10.4 If the developer is a corporation or partnership, a copy of its Certificate of Registration and the recent

General Information Sheet (GIS) for the immediately preceding year, certified by the Securities and Exchange Commission (SEC), or in lieu of the latter, a duly accomplished GIS sworn to before a notary public, provided that if the land is to be used for socialized housing by the LGU under EO 124-1993, a Sanggunian Resolution appropriating funds for the project and authorizing the LGU to undertake the same shall be required. Provided further that if the socialized housing shall be undertaken by other government agencies such as the National Housing Authority and the like, a board resolution approving the project and appropriating funds therefore shall likewise be submitted.

11. Socio-Economic Benefit-Cost Study of the proposed project.12. Photographs, size 5R (five [5] inches by seven [7] inches, using color film, and taken on the land holding

under sunlight. The applicant shall attach the pictures to a paper background and the photographer who took said pictures shall sign on said paper background to certify the authenticity of the pictures. On each background paper shall be written a short description of each picture. The pictures shall consist of:12.1 At least four (4) photographs taken from the center of the landholding: one (1) facing north, one (1)

facing east, one (1) facing south, and one (1) facing west;12.2 At least one (1) photograph per corner, taken from each corner of the landholding's borders.12.3 At least two (2) photographs of each for all distinct man-made structure existing in on the land, taken

from opposite angles.12.4 At least two (2) photographs each of the front view of the billboard(s) required in Section 11 of DAR

A.O No. 1 Series of 2002. Second copy will be used for submission to the Municipal Agrarian Reform Officer (MARO); and

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required documents

12.5 Sufficient number of photographs of the most conspicuous landmarks from the nearest barangay center and leading to and from the ingress and egress routes at the subject landholding, for the purpose of assisting the ocular inspection team in the in the locating site.

13. Affidavit/Undertaking in a single document of the applicant (LUC Form No.2)14. MARO Certification (LUC Form No.3) and Notice of Land Use Conversion in English language (LUC Form

No.4) and in local dialect (LUC Form No. 4A).15. Certification from the Housing and Land Use Regulatory Board (HLURB) Regional Officer on the actual

zoning or classification of the land subject of the application based on the approved comprehensive land use citing: (a) the municipal or city zoning ordinance number, and (b) resolution number and date of approval by the HLURB or the Sangguniang Panlalawigan concerned, as the case may be. (LUC Form No.5).

16. Certification from the Department of Agriculture (DA) official stating, among others, the classification of the property under the NPAAAD and SAFDZ whether or not the subject property is within five (5) percent limit of the SAFDZ allowed for conversion, the status of irrigation coverage of the subject properly and whether the land has ceased to be economically feasible and sound for agricultural purposes.

17. Certification from the authorized DENR official stating among others whether or not the subject land is within the National Integrated Protected Area System (NIPAS), mossy and virgin forests, riverbanks, or swamped forests and marshlands; within an Environmentally Critical Area (ECA), or will involve the establishments of an Environmentally Critical Project (ECP). (LUC Form No.6)

18. Environmental Compliance Certificate (ECC) when the subject land is within an ECA or will involve the establishment of an ECP.

19. Special Power of Attorney (SPA), if applicable.20. Notarized secretary's certificate of a corporate/cooperative Board Resolution authorizing the representative,

if applicable.21. Concurrence letter of the mortgage (if the property is encumbered), if applicable.

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required documents

22. If applicable, endorsement from the concerned government agency, when the application involves a priority development areas or project such as:a) NEDA-NLUC endorsement if under EO 124-1993; orb) HLURB endorsement if socialized housing (LUC Form No 7); orc) PEZA Board Resolution approving the project for Eco zone project

23. If applicable, Land Bank of the Philippines (LBP) Certification attesting that the applicant- landowner has fully paid his obligations to the LBP, when the applicant-landowner is a beneficiary of the agrarian reform program. (LUC Form No. 8)

24. If applicable, Provincial Agrarian Reform Officer (PARO) Certification attesting that the applicant-landowner acquired the subject land from a landed-estate or under the Voluntary Land Transfer / Direct Payment Scheme (VLT/ DPS) and he has already fully paid his obligation there under, when the applicant-landowner is a beneficiary of the agrarian reform program (LUC Form No.9).

25. Vicinity map and a lot plan prepared by a duly-licensed geodetic engineer indicating the lots being applied for and their technical descriptions, name of owner/s, lot number and area. The map shall highlight the specific area applied for conversion if the application covers less than the total lot area.

26. Directional sketch map showing the orientation of the subject property in relation to adjoining lands and nearest provincial and/or national and/or feeder roads, to facilitate and determine the location of the property for the purpose of ocular inspection. Indicate in the map the existing infrastructure and/or improvements thereon including any house or tillage thereupon for any occupant therein, landmarks within a one (1) kilometer radius and owners of adjacent properties. No need to draw map in scale.

27. Map of site development plan.28. Topographic Map if the subject properly is within upland, hilly or mountainous area.

Note: The applicant shall submit all the foregoing applicable requirements from Nos. 1 to 28 hereof at the time of fling of application to the CLUPPI/RCLUPPI. However, for applications involving housing projects under EO-45-2001, requirements mentioned in Nos. 15 to 18 maybe submitted at a later time.

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List of the filing and inspection fees by size of the land (Department of Agrarian Reform)


AREA APPLIED FILING FEE INSPECTION COST

Five (5) hectaresand below

PHP 1,000.00

PHP10,000.00 ‐ if the subject landholding iswithin the same islandas thatof theOffice oftheRegionalDirector.PHP 15,000.00 ‐ if the subject landholding is not within the same islandas thatof theOfficeof theRegionalDirector.

More than five (5)hectares

PHP 2,000.00

PHP10,000.00 ‐ if the subject landholding iswithin themain islandof Luzon(exceptBicolPeninsula);PHP 15,000.00 ‐ if the subject landholding is within Regions I to IV but is not located within the main island of Luzon.PHP15,000.00 ‐if thesubject landholdingisinBicolPeninsula or VisayasGroupof Islands; orPHP20,000.00 ‐if thesubject landholding is in theMindanao groupof Islands

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Bond (Department of Agrarian Reform)Cash bond(1 or 2 below) shall be submitted upon application to assure no premature development will take place. Performance bond will be submitted at the time of authorization to assure development will be completed within the given period. The cash bond, unless forfeited, may be converted to performance bond.


Land use conversionTo Department of Agrarian Reform

required documents

1. The cash bond shall be computed at two and 5/10 percent (2.5%) of the zonal value of the land as per latest issuance of the Bureau of Internal Revenue in the form of cash or manager's/cashier check.

2. In lieu of a cash bond, the applicant may post a surety bond issued by the GSIS equivalent to fifteen percent (15%) of the total zonal value of the land per latest issuance of the BIR, indicating the following conditions at the minimum that:• the bond is callable on demand;• the DAR shall forfeit the bond in favor of the Agrarian Reform Fund when it finds the

applicant carrying out any premature conversion activity; and• the validity of the bond shall be for a period of one (1) year but renewable on a year to

year basis, if necessary.*Lands are classified in to Areas non-negotiable for conversion, areas highly restricted from conversion, priority development areas and projects, and consideration to the land status should be given.

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1.1 Procedures and regulations for constructing and operating power plant in the PhilippinesGenerators are required to apply for the permits exemplified below to the Department of Environment and Natural Resources. (Energy Investor’s Guidebook (DOE))


Environmental Compliance Certificate

Permit to Operate-Air pollution source and control installation

Hazardous Waste Generator ID

Application for Special Use of Forest lands for Energy projects

Department of Environment and Natural Resources Environmental Management Bureau

Mechanical installation/ fabrication of industrial facilities (requirement for installing boilers and unfired pressure Vessels)

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1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesApplication for the construction of generation facilities


Environmental Compliance Certificate

To Department of Environment and Natural Resources Environmental Management Bureau

required documents

1. Environmental Impact Assessment (EIA) Report focusing only on the most essential information for specific project type. The Basic Outline of the required EIA report for Proposed (New) Single Projects, for New Programmatic Applications, for Single Project Expansion/Modification and for Programmatic Expansion.

Proof of compatibility with the existing Land Use Plan, if necessary Proof of ownership or authority over the project site Accountability Statements of the proponent and the EIS preparers Photographs or plate of the project site, impact areas and affected areas and communities Duly Accomplished Project Environmental Monitoring and Audit Prioritization Scheme (PEMAPS) Questionnaire Copy of previous ECC (if any) Latest Self Monitoring Report (if with previous ECC, Compliance Monitoring Report (CMR) Format)Note : No other documents shall be required as pre-requisite to ECC applications.

2. For projects below the threshold of coverage based on the existing procedural manual for DAO 2003-30, CNC applications shall no longer require submission of Project Description Reports (PDR). The prescribed 1-Page Application Form to be processed in the Automated Processing System (APS) is sufficient.

3. The EIA Report requirement for ECC applications shall concentrate and focus on the environmental aspects of the project that have scientific basis are verifiable. Environmental Impact related concerns of the local community in the project area which may be secured through public scoping, public consultation or any other form of public participation methods for EIS-based ECC applications shall be considered in the review of the ECC applications.

The decision on the ECC Application shall be issued within the following timeframes after the official acceptance of application documents and payment of the required processing and review fees:

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Permit to Operate-Air pollution source and control installationTo Department of Environment and Natural Resources Environmental Management Bureau

required documents

1. Duly accomplished and certified application form2. Engineering Report3. Plans and specifications of the installation and its control facilities4. Air Quality Analysis using Bureau approved computer dispersion models and techniques5. Vicinity map6. A compliance plan for sources not meeting regulatory requirements

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Hazardous Waste Generator IDTo Department of Environment and Natural Resources Environmental Management Bureau

required documents

1. Duly accomplished Application Form2. Registration fee of hazardous waste generator amounting to P6003. Process flow diagram, all waste streams4. Mass balance of manufacturing process5. Description of existing waste management plan6. Analysis of waste(s)7. Other relevant information, e.g. planned changes in production processes of output,

comparison with related operation8. If on-site treatment is present, submit the A-4 form for every treatment, storage and

disposal

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Application for Special Use of Forest lands for Energy projects


required documents

1. Application form duly accomplished and notarized (3) copies2. Application Fee - PHP 500.003. Map of the area applied for;4. Pertinent documents showing proof that the applicant is a legitimate entity qualified to be a holder of a

forestland tenurial instrument or agreement;5. For individual applicant, certified copy of his/her Certificate of Naturalization;6. For an association, corporation, cooperative or partnership, certified copy of SEC registration certificate

and Articles of Incorporation/Partnership, and resolution of the corporate governing body (Board of Directors, Board of Trustees, etc.) designating the authorized representative of said corporation, association or partnership to apply/sign documents for and in behalf of the company; For cooperative, certified, certified copy of certificate of registration with Cooperative Development Authority (CDA).

7. Indicative Management Plan8. Initial Environment Examination (IEE) as basis for issuances of ECC9. Appropriate clearance from NCIP10. If application is in Palawan, SEP clearance from Palawan Council for Sustainable Development Authority

(PCSD)11. Annual rental for Energy Projects : PHP 3,000.00/ha. and fraction thereof and be increased cumulatively by

10% every year.12. Forestry Bond - Twice the amount of annual rental but not less than Php10,000.00*There are two types of land use permit, Special Land Use Permit and Forest Land Use Permit, with period of 3 years with 3 years renewal option and 25 years with 25 years renewal option respectively. Same Documents are required with different level of personnel authorizing.

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Boilers and Unfired Pressure Vessels


required documents

1. Covering/Transmittal Letter with contact name and tel./cell phone number (to be retained at Director's Office only.

2. Four (4) sets of application forms and drawings for each unit of mechanical equipment;3. All plans and application forms are to be signed and sealed by a professional mechanical engineer (PME);4. All plans and application forms are to be signed by the owner/manager or his/her authorized representative;5. Indicate the company TIN in the application forms;6. Photocopy of the current PRC ID and PTR of the PME;7. Certificate of appearance of the PME

In the event that said PME has not yet obtained a certificate of appearance, he is required to appear personally at the Bureau or at the DOLE Regional Office so that the corresponding certificate of appearance, duly signed by the Bureau Director, the Regional Director or the Asst. Regional whichever is applicable will be issued;

8. The following shall be incorporated in the plans/drawings:a. Location plan;b. Room layout;c. Installation drawings of equipment showing plan, section/elevationsd. Foundation design calculation;e. Detailed foundation construction drawings; andf. Equipment specifications.

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1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesStarting-up a electricity generation company requires various applications to the following authorities.(Energy Investor’s Guidebook (DOE))


Registration of corporationSEC

(Securities Exchange Commission)

Barangay

Barangay Clearance

Locational Clearance

Mayorʼs / Business Permit

Bureau of internal Revenue

Tax Identification Number, TIN No.

BIR Registration of New Taxpayer

Authority to Print

Employer RegistrationSocial Security system Office

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1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesMajor applications for the formulation of a company (SEC)


General Registration for CorporationTo SEC (Securities Exchange Commission)

required documents

1. Name Verification slip ( secure online or from SEC Name Verification Unit);2. Articles of Incorporation and By-Laws;3. Treasurer's Affidavit; and4. Joint affidavit of two incorporators undertaking to change corporate name, as provided in its

Articles of Incorporation or as amended thereafter, immediately upon receipt of notice or directive from the Securities and Exchange Commission that another corporation, partnership, or person has acquired a prior right to the use of that name or that name has been declared misleading, deceptive, confusingly similar to a registered name, or contrary to public morals, good customs, or public policy. (not required if the Articles of Incorporation have a provision on this commitment).

5. Endorsement/clearance from other government agencies, if applicable i.e. Certificate Endorsement from Department of Energy for energy related business activity.

6. For corporations with foreign equity: Proof of remittance by non-resident aliens and foreign corporate subscribers who want to register their investment with the Bangko Sentral ng Pilipinas (BSP) or an affidavit that they will not register their investment with the BSP.

7. For corporations with more than 40% foreign equity: application form (SEC Form No. F-100} required by the Foreign Investments Act of 1991 {Rep. Act 7042, as amended}.

8. For corporations with applications with the Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), Clark Development Corporation (CDC), Cagayan Economic Zone Authority (CEZA) or other economic zones attach Certificate of Authority or Endorsement from said government agencies.

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Major applications for the formulation of a company (Local government units)


Barangay Clearance

To Barangay

required documents

1. Photocopy of SEC Registration2. Articles of Incorporation/Partnership3. By-Laws4. Locational Map of the Business Site5. Lease of Contract/Agreement/Certificate

Clearance Application Form*Barangay clearance will be obtained annually, on January.

Locational Clearance

To Barangay

required documents

1. Location Map2. Barangay Clearance3. Lease Contract4. SEC Registration documents5. Occupancy Permit (Building / Unit)

Business Permit Application Form*Barangay refers to the smallest local government unit in the Philippines

36



1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesMajor applications for the formulation of a company (Barangay)


Mayorʼs / Business Permit

To Mayor

required documents

1. Accomplished Business Permit Application Form2. SEC registration documents or DTI - Business Name Certificate3. Sketch of the business location4. Locational Clearance5. Fire Safety Inspection Clearance6. Sanitary Permit (from City Health Officer)7. Barangay Clearance8. If leased, Lease Contract and attach Mayor's Permit registration of the building owner/ landlord as Real

Estate Lessor9. If owned, attach Transfer Certificate of Title (TCT) or Tax Declaration (photocopy)10. Registration fee (the amount depends on the type of business)11. Community Tax Certificate12. Land Tax Clearance13. Police Clearance14. City Trial Court Clearance15. Health Certificate16. Tax Identification Number*Mayor’s permit/ Business permit is to be obtained before start of business. It is also subject to renewal every January and failure to do so result in penalties.

37




Major applications for the formulation of a company (Bureau of Internal Revenue)


BIR Registration of New TaxpayerTo Bureau of Internal Revenue

required documents

1. Application for Registration• Application for Authority to Use Loose-leaf/Computerized Books of Accounts and/or

Accounting Record (Form No. 1900)• Application for Registration for Corporations/Partnerships (Taxable/Non-Taxable) including

LGUs (Form No. 1903)• Application for Registration Information Update (Form No. 1905)• Application for Authority to Print Receipts and Invoices (ATP) (Form No. 1906)2. TIN Application Form3. Sketch of business site of taxpayer, if necessary4. Registration fee, if applicable5. Photocopy of the following:• Mayor's Permit & municipal license• SEC Certificate of Registration for corporation or partnership or DTI Certificate of

Registration of business for single proprietorship• Articles of Incorporation or Partnership

38





Authority to PrintTo Bureau of internal Revenue

required documents

1. BIR Form 1906 - Application to Print Receipts and Invoices;2. BIR Form No. 0605 - Annual Registration Fee for both taxpayer and printer;3. BIR Form No. 1556/2306 - Certificate of Registration of taxpayer and printer;4. Previously issued ATP (if applicable);5. Job Order;6. Authority to use loose-leaf (if applicable); and7. Sample forms.

Employer RegistrationTo Social Security System Office

required documents

1. Accomplished R1 form in 2 copies2. Accomplished Employment Report (SS form R1-A)3. Specimen Signature Card (SS form L-501)4. Sketch of the business location5. Certificate of Operation from the main office signed by the President, Chairman or

Corporate Secretary6. Miscellaneous Payment Return (SSS Form R6) and special Bank Receipt

39



1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesAccording to the Implementing Rules and Regulations for the Philippines Competition Act, the following procedures are indicated.


Consultations preceding the submission of notification

Related parties of M&A subject to notifying the Philippines Competition Commission (PCC) may consult with PCC before the actual notification process. The advice the parties receive from PCC are non-binding. The parties are to inform PCC of the names of the parties, contact info, type of transaction and business in order to request a meeting with PCC.

Preparing a Notification Form

Prepare a Notification form stating the business and transaction. This form is to be signed by the officer of the corporation to certify the correctness of the contents.While the name is ʻNotification form,̓ it is possible that PCC will ban the transaction based on anti-trust perspectives.

Submission of form

Upon submission of the Form, the Commission shall determine within 15 days whether the Form and other relevant requirements have been completed in accordance with applicable rules or guidelines.

Phase I Review Within thirty (30) days from commencing Phase I review, PCC shall, if necessary, inform the parties of the need for a more comprehensive and detailed analysis under a Phase II review, and request other information relevant to its review.

Phase II Review

Based on additional information , PCC determines if the transaction can be approved. The maximum period of the Phase II review is 60 days after the additional information reaches PCC, and the parties may not commence their transaction during this period.

Effect of Notification

PCC has the authority to impose the followings. If PCC does not mandate any of the actions below in 90 days after receiving the documents submitted by the parties, the parties may proceed their transaction.• Prohibit the implementation of the agreement• Prohibit the implementation of the agreement unless and until it is modified by changes specified by

the Commission• Prohibit the implementation of the agreement unless and until the pertinent party or parties enter into

legally enforceable agreements specified by the Commission

40



1.1 Procedures and regulations for constructing and operating power plants in the PhilippinesMajor rules and regulations related to the operation of electricity generation facilities include the following:


• REPUBLIC ACT NO. 9136 AN ACT ORDAINING REFORMS IN THE ELECTRIC POWER INDUSTRY, AMENDING FOR THE PURPOSE CERTAIN LAWS AND FOR OTHER PURPOSES

• RULES AND REGULATIONS TO IMPLEMENT REPUBLIC ACT NO. 9136, ENTITLED "ELECTRIC POWER INDUSTRY REFORM ACT OF 2001"

• Grid Code• Philippine Electrical Code• Distribution Code

• Wholesale Electricity Spot Market Rules• Distribution Services and Open Access Rule

• dc_2010-03-0003• dc_2017-05-0008

Reform act, Rules and Regulations

for implementation

Codes

Rules

DOE Circular

41




Electricity generation business in the Philippines is fully liberalized and open to the private sector according to EPIRA and its implementating rules and regulations.


All of the power sector in the Philippines was a monopoly of National Power Company (NPC). This was due to the NPC contracting with IPP operators at high price in an attempt to address power supply shortage, while politically they were required to supply electricity at lo price, leading to insolvency of NPC.The EPIRA was enacted to address this issue. It aimed to liberalize the power sector by selling the assets of NPC through Power Sector Assets & liabilities Management Corporation (PSALM) and to reduce electricity cost by creating competition in the then monopoly market.

ELECTRIC POWER INDUSTRY REFORM ACT OF 2001 (EPIRA)

RULES AND REGULATIONS TO IMPLEMENT REPUBLIC ACT NO. 9136, ENTITLED "ELECTRIC POWER INDUSTRY REFORM ACT OF 2001"

The Rules and regulations for implementation states the detail of EPIRA. It states the procedures of privatizing NPC, the roles of various government agencies, rules of each power sector, among others.

42




Generators are required to comply with the Grid code and the Philippines Electrical Code.


The Grid code mainly addresses the grid system of the Philippine, setting forth rules and standards. Generators must comply with this grid code also. Generators seeking to connect their assets to the grid must adhere to the Power Quality Standards, and any equipment used at connection points must be designed and produced in compliance with ISO 9000.

Grid Code

The Philippines Electrical Code is a rule to ensure the safety of persons and facilities from disasters that can occur to electricity infrastructure. It applies to installation of electrical conductors, equipment, and raceways; signaling and communications conductors, equipment, and raceways; and optical fiber cables and raceways installed by generators.

Philippine Electrical Code

The Distribution Code sets rules and standards for distribution. Generators in dispersed locations fall under this code.

Distribution Code

43




Power quality and the quality of equipment is stated in the Grid Code and the Philippines electrical code.


Description The state of “power qualityproblem”

Frequency Variations

During normal operating conditions, the Grid Frequency shall be within the limits specified in 60Hz.

The Power System Frequency has deviated from the nominal value of 60 Hz.

Voltage Variations Voltage Variation shall be defined as the deviation of the root-mean-square (RMS) value of the Voltage from its nominal value, expressed in percent. Voltage Variation will either be of short duration or long duration.

• Voltage magnitudes are outside their allowable range of variation.

• High-Frequency overvoltage's are present in the grid.

Harmonics Harmonics shall be defined as sinusoidal voltages and currents having frequencies that are integral multiples of the fundamental Frequency.

Harmonic Frequencies are present in the Power System.

Voltage Unbalance

The Negative Sequence Unbalance Factor shall be defined as the ratio of the magnitude of the negative sequence Component of the voltages to the magnitude of the positive sequence Component of the voltages, expressed in percent.

Harmonic Frequencies are present in the Power System.

Voltage Fluctuation and Flicker Severity

Voltage Fluctuations shall be defined as systematic variations of the Voltage envelope or random amplitude changes where the RMS value of the Voltage is between 90 percent and 110 percent of the nominal voltage.

Voltage Fluctuations cause Flicker that is outside the allowable Flicker Severity Limits.

44




WESM Rules are implemented so that WESM can function properly.


WESM refers to the Wholesale Electricity Spot Market which was established according to EPIRA, and aims to create a competitive, transparent electricity market. The WESM Rules have been established to ensure a functioning market, by means of propelling competition, providing a transparent market, reducing security risks arising in the market standards for participating in the market, among others.Generators seeking to connect to the Grid must register as a WESM participant.

Wholesale Electricity SpotMarket Rules

The purpose of the DSOAR is to set forth the terms and conditions related to theprovision of Connection Assets and Services, service to the Captive Market,Supplier of Last Resort (“SoLR”) service to the Contestable Market, andunbundled Distribution Wheeling Service (“DWS”) provided to the ContestableMarket.

Distribution Services and Open Access Rule

45




In addition to the laws and rules, DOE has issued some circulars relevant to the quality of electricity infrastructure.


All generation companies are to comply with the below.• Operate in accordance with their maximum available capacity• Oil-based generation companies shall maintain an adequate in country• stocks of fuel equivalent to at least 15-days running.• Coal power plants shall ensure the required 30-day coal running• Thermal power plant operators shall report to the DOE the status of the fuel

inventory• Geothermal, natural gas fired thermal and hydro electric power plant

operators shall submit to the DOE a report stating the current and forecast of their plant

• The shut down of equipment is to be reported to DOE and system operator beforehand

DOE Circular dc_2010-03-0003

The DOE will be conducting a performance assessment and audit of the power sector, mainly focusing on compliance with dc_2010-03-0003. It aims to assess the current situation of the generation, transmission and distribution, compliance with laws and codes, considering a future plan for incentives and penalties to propel enhancement of the power sector.

DOE Circulardc_2017-05-0008

1 Study of regulations of electricity business in the Philippines

1.2 Summary of the organizations involved in 1.1 (Personnel, capabilities)

47



1.2 Summary of the organizations involved in 1.1 (Personnel, capabilities)Department of Energy, DOEResponsible for developing policies related to the energy in the Philippines. The following roles of DOE pertain to electricity. Key roles as follows


• Formulate policies for the planning and implementation of a comprehensive program for the efficient supply and economical use of energy

• Develop and update annually the existing Philippine Energy Plan, hereinafter referred to as PEP, which shall provide for an integrated and comprehensive exploration, development, utilization, distribution, and conservation of energy resources, with preferential bias for environment-friendly, indigenous, and low-cost sources of energy.

• Prepare and update annually a Power Development Program (PDP) and integrate the same into the PEP. The PDP shall consider and integrate the individual or joint development plans of the transmission, generation, and distribution sectors

• Ensure the reliability, quality and security of supply of electric power• Encourage private sector investments in the electricity sector and promote development of indigenous and

Renewable Energy Sources including small-scale renewable energy generating sources• Facilitate and encourage reforms in the structure and operations of Distribution Utilities for greater

efficiency and lower costs.• Jointly with the Electric Power Industry Participants, establish the Wholesale Electricity Spot Market

(WESM) and formulate the detailed rules governing the operations thereof• Develop policies and procedures and, as appropriate, promote a system of energy development incentives

to enable and encourage Electric Power Industry Participants to provide adequate capacity to meet demand including, among others, reserve requirements.

48



1.2 Summary of the organizations involved in 1.1 (Personnel, capabilities)Department of Energy, DOE)Organizational Chart


SECRETARY

OFFICE OF THEUNDERSECRETARY

ASSISTANTSECRETARY

Director III

InvestmentPromotion Staff

Consumer Welfare &Promotion Staff

Public Affairs Staff

Internal AuditDivision

ENERGY RESOURCEDEVELOPMENT BUREAU

RENEWABLE ENERGYMANAGEMENT BUREAU

ENERGY UTILIZATIONMANAGEMENT BUREAU

OIL INDUSTRYMANAGEMENT BUREAU

ENERGY POLICY ANDPLANNING BUREAU

ELECTRIC POWERINDUSTRY

MANAGEMENT BUREAU

LUZON FIELDOFFICE

VISAYAS FIELDOFFICE

MINDANAO FIELDOFFICE

INFORMATION TECHNOLOGY& MANAGEMENT SERVICES

LEGAL SERVICES FINANCIAL SERVICES ADMINISTRATIVESERVICES

ENERGY RESEARCHTESTING &

LABORATORY SERVICES

Source: DOE website

49



1.2 Summary of the organizations involved in 1.1 (Personnel, capabilities)Department of Energy, DOEpersonnel


Number of Number of Number ofPositions Amount Positions Amount Positions Amount

Permanent PositionsKey Positions

Department Secretary 1 1,080 1 1,405 1 1,828Department Undersecretary 4 3,788 4 4,624 4 5,644Department Assistant Secretary 3 2,631 3 3,177 3 3,831Director IV 6 4,872 6 5,814 6 6,936Director III 15 11,280 15 13,305 15 15,705Head Executive Assistant 1 752 1 887 1 1,047Attorney V 3 1,935 3 2,232 3 2,574Internal Auditor V 1 597 1 679 1 773Information Technology Officer III 2 1,194 2 1,358 2 1,546Financial Analyst V 1 597 1 679 1 773Chief Science Research Specialist 29 17,313 29 19,691 29 22,417Chief Investments Specialist 1 597 1 679 1 773Chief Administrative Officer 5 2,985 5 3,395 5 3,865Chief Accountant 1 597 1 679 1 773

Total Key Positions 73 50,218 73 58,604 73 68,485Other Positions

Administrative 248 58,436 248 61,822 248 65,423Support to Technical 92 30,377 92 32,536 92 34,875Technical 457 167,043 457 179,142 457 192,184

Total Other Positions 797 255,856 797 273,500 797 292,482For the difference between the Authorized and Actual Salaries

Total Permanent Positions 870 312,101 870 339,282 870 369,434Total Permanent Filled Positions 666 233,458 687 237,767 687 297,244

2015 2016 2017

8,4677,1786,027

Source: DOBM website

Amount in thousand PHP

50




Energy Regulatory Commission, ERCERC is the regulatory authority of the power sector. ERC disseminates rules, guidelines, enforce the rules and provides authorizations.


• Pursuant to Section 43 of the Act, the ERC shall have the responsibility of promoting competition, encouraging market development, ensuring customer choice, and penalizing abuse of market power in the electric power industry.

• Formulate the Grid code, distribution code so as to ensure efficient and reliable service will be provided to end users.

• ERC shall enforce the rules and regulations governing the operations of WESM and the activities of the WESM Operator and other WESM Participants.

• The ERC shall perform such other regulatory functions as are appropriate and necessary in order to ensure the successful Restructuring and modernization of the electric power industry, such as, but not limited to, the rules and guidelines under which Generation Companies, Distribution Utilities, which are not publicly listed, shall offer and sell to the public a portion not less than fifteen percent (15%) of their common shares of stocks

• The ERC shall have the original and exclusive jurisdiction over all cases contesting rates, fees, fines and penalties imposed in the exercise of its powers, functions and responsibilities and over all cases involving disputes between and among participants or players in the energy sector relating to the foregoing powers, functions and responsibilities.

51



1.2 Summary of the organizations involved in 1.1 (Personnel, capabilities)Electricity Regulatory Commission, ERCOrganizational Chart


CommissionChair

Commissioners

Investigation and Enforcement

DivisionInternal Audit Unit

Regulatory Operation Service

Mindanao OfficeVisayas Office

Chief Executive Officer

Executive Director

General Counsel and Secretariat to the Commission

Customer Affairs Service

Planning DivisionManagement and

Information Services Division

Planning and Information

ServiceLegal Services

Financial and Administration

Service

Licensing and Market Monitoring

Division

Standards and Compliance

Monitoring Division

Consumer Services Division

Contestable Market Division

Spot Market Division

Tariffs and Rates Division Meter Division

Administration DivisionFinancial Division Public Information

Division

Market Operation Service

Source :ERC website

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1.2 Summary of the organizations involved in 1.1 (Personnel, capabilities)Philippine Electricity Market Corporation, PEMCPEMC was established in 2003. Its purpose is to manage and operate WESM.


• PEM Board consists of 15member, consisting of representatives of organizations such as generation, transmission, distribution, ECs and DOE.

• The WESM Committee manages the activities of PEMC and WESM. Committees consist of the following.

1. PEM Audit CommitteeProvides annual audit to the market operator, and propose changes to the WESM Rulesaccording to the results of the audit. (as of February 2018, PEMC is in their process to consign their role as a market operator to an independent party)

2. Rules Change CommitteeProposes changes to the WESM Rules to the DOE.

3. Dispute Resolution AdministratorFacilitates the resolution based on WESM rules regarding any disputes arising between WESM

members.4. Market Surveillance Committee

Monitors WESM to make sure adequate competition is in place and efficient market operation is in place.

5. Technical CommitteeMonitors the compliance of participants with the WESM Rule, Grid code, Distribution code. The committee consists of personnel with technical knowledge of IT, metering data among others.

53




The roles of PEMC as a market operator are mandated by EPIRA to be consigned to an independent non-profit organization.The operation of managing WESM is carried out by Market Assessment Group and Enforcement & Compliance Office. The former serves as a secretariat of the committee and monitors the market, while the later investigates violations. Organizational chart


PEMC Board of Directors

Office of the PresidentOffice of the Corporate Secretary

Corporate Planning and Communications DepartmentTrading Operations DepartmentCorporate Services DepartmentEnforcement and Compliance OfficeLegal DepartmentInformation Systems andTechnology Department Source: PEMC website

54



Renewable Energy Act provides both fiscal and non-fiscal incentives to renewable energy developers and suppliers. The Board consists of a Chairman, vice-chairman, voting members and non-voting members. Voting members include DOE, NPC, NGCP, TRANSCO, PEMC and renewable energy developers along with other government agencies. Non-voting members include ERC and NEA. The below table states the roles of NREB, DOE and ERC regarding renewable energy.

1.2 Summary of the organizations involved in 1.1 (Personnel, capabilities)National Renewable Energy Board, NREBNREB was established to effectively carry out the Renewable Energy Act 2008 and National Renewable Energy Program (NREP).


NREB DOE ERCRecommend to ERC FIT foreach RE resource

Approve RE Contractsapplications

Establish FIT Rules

Recommend and monitor National REProgram (NREP)

Establish and implement NREP Approve FIT petition filed byNREB

Recommend and monitorRenewable Portfolio Standards(RPS)

Draft and implement RPS Establish FIT-Allowanceannually based on NGCPpetition

Oversee RE Trust Fund Establish RE Market Rules andTrust Fund

Review and adjust FIT asappropriate

Source: NREB

55




National Transmission Corporation, TRANSCO

In accordance with 2001 EPIRA, TRANSCO was segregated from NPC and operated the grids since 2003. currently a regulatory body of NGCP. Rules and Regulations to implement EPIRA


EPIRA included segregation of transmission sector from NPC and organizing TRANSCO along with privatization of the sector.In accordance with EPIRA a bid took place in 2007, and National Grid Corporation (NGCP) became the concessionaire.The assets are owned by TRANSCO, and as the owner of assets performs the below.

• Ensure that NGCP operates according to the concession agreement and DOE policies, and interest of the government is ensured.

• Deal with projects that existed before the consignment.• Distribute the secondary transmission assets to technically and financially high quality DUs.• Provide operation, maintenance and consulting services for the Philippine Economic Zone Authority

56



1.2 Summary of the organizations involved in 1.1 (Personnel, capabilities)National Transmission Corporation, TRANSCOOrganizational Chart


TransCo Board

President & CEO

Internal AuditDepartment

Office of theCorporate Secretary

Concession ContractManagement Group

Corporate ServicesGroup

Legal, ROW & LandManagement Services Group

Compliance MonitoringDepartment

AdministrationDepartment

Utility ManagementDepartment

Legal, CounselingDepartment

Sub-TransmissionDivestment Department Finance DepartmentRight-of-Way & Land

Management ServicesDepartment

Grid Code Compliance & TDPMonitoring Department Litigation Department

Source: TRANSCO website

1 Study of regulations of electricity business in the Philippines

1.3 The details of the standards apply to generation facilities

58



• The grid code mandates any assets used to connect the generator to the grid is to be designed and produced in compliance with ISO 9000.

• The Electrical code regulates rules for generators and motors, and mandates generator comply with both. The contents are as follows.

1.3 The details of the standards applicable to generation facilitiesTechnical standards related to generating facility in the Philippines is set in the grid Code and the Philippines electrical code.


• Generators shall be of a type suitable for the locations in which they are installed. They shall also meet the requirements for motors

• Each generator shall be provided with a nameplate giving the manufacturer’s name, the rated frequency, power factor, number of phases if of alternating current, the sub transient and transient impedances, the rating in kilowatts or kilovolt amperes, the normal volts and amperes corresponding to the rating, rated revolutions per minute, insulation system class and rated ambient temperature or rated temperature rise, and time rating.

• Overcurrent Protection• Constant-Voltage Generators. Constant-voltage generators, except ac generator exciters, shall be protected

from overloads by inherent design, circuit breakers, fuses, or other acceptable overcurrent protective means suitable for the conditions of use.

• Two-Wire Generators. Two-wire, dc generators shall be permitted to have overcurrent protection in one conductor only if the overcurrent device is actuated by the entire current generated other than the current in the shunt field. The overcurrent device shall not open the shunt field.

• 65 Volts or Less. Generators operating at 65 volts or less and driven by individual motors shall be considered as protected by the overcurrent device protecting the motor if these devices will operate when the generators are delivering not more than 150 percent of their full-load rated current.

Generator

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1.3 The details of the standards applicable to generation facilities 【1. Study of regulations of electricity business in the Philippines】

Generators (continued)

Motor

• Balancer Sets. Two-wire, dc generators used in conjunction with balancer sets to obtain neutrals for 3-wire systems shall be equipped with overcurrent devices that disconnect the 3-wire system in case of excessive unbalancing of voltages or currents.

• Three-Wire, Direct-Current Generators. Three-wire, dc generators, whether compound or shunt wound, shall be equipped with overcurrent devices, one in each armature lead, and connected so as to be actuated by the entire current from the armature. Such overcurrent devices shall consist either of a double-pole, double-coil circuit breaker or of a 4-pole circuit breaker connected in the main and equalizer leads and tripped by two overcurrent devices, one in each armature lead. Such protective devices shall be interlocked so that no one pole can be opened without simultaneously disconnecting both leads of the armature from the system.

• The ampacity of the conductors from the generator terminals to the first distribution device(s) containing overcurrent protection shall not be less than 115 percent of the nameplate current rating of the generator.

• Live parts of generators operated at more than 50 volts to ground shall not be exposed to accidental contact where accessible to unqualified persons.

• Generators shall be equipped with disconnect(s) by means of which the generator and all protective devices and control apparatus are able to be disconnected entirely from the circuits supplied by the generator except where both of the following conditions apply: (1) The driving means for the generator can be readily shut down. (2) The generator is not arranged to operate in parallel with another generator or other source of voltage.

• Ventilation and Maintenance. Motors shall be located so that adequate ventilation is provided and so that maintenance, such as lubrication of bearings and replacing of brushes, can be readily accomplished.

• Open motors that have commutators or collector rings shall be located or protected so that sparks cannot reach adjacent combustible material.

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1.3 The details of the standards applicable to generation facilities

The Grid code mandates prior to connecting to the grid, generators shall submit the following information to NGCP.


• Safety Rules• Test Commissioning Program• Electrical Diagrams• Statement of Readiness to connect• Certificate of approval to connect• Specifications of major equipment• Electrical diagrams of the users equipment• information for the transmission provider to prepare drawings of connecting point• all safety rules and local safety instructions, including the name of safety coordinators• list and telephone numbers of authorized representatives• Proposed Maintenance Program• Test and Commissioning procedures

Information to be submitted to NGCP prior to connection

2 Quality problems of the electricity infrastructure in the Philippines

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2. Quality problems of the electricity infrastructure in the PhilippinesAs a result of interviews with Japanese companies involved in electricity generation business in the Philippines, the following cases has been identified.

【2. Quality problems of the electricity infrastructure in the Philippines】

• The construction completion delayed a whole year. Another case was the delivered unit

nonconforming with drawings. (Two same units were ordered, and they had different

configuration such as the location of bolts.)

• While the Philippines electricity is 60Hz, 50Hz equipment were delivered.

• The liability cap exceeded thresholds and involved parties simply abandoned the project.

Possible reason is that supplier, EPC and test commissioning are all different parties and the

responsibility became ambiguous.

• One site was seen, despite being a recent facility, one out of two units was always on outage.

• While solar power generation was implemented, configuring the interconnection with existing

diesel power plants is becoming an issue.

• Some islands, with so many mega solar plants, frequency is becoming difficult to sustain. The

FIT is one reason for the growth of solar power.

Problems occurred on generation equipment

Issues in renewable

energy

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2. Quality problems of the electricity infrastructure in the PhilippinesInterviews with power sector regulatory agencies revealed the following examples related to the distribution and transmission sector.

【2. Quality problems of the electricity infrastructure in the Philippines 】

• As a result of congestion in the grid, existing power plants face decreasing efficiency, and inefficient obsolete power plants are utilized (as the WESM price rise, low efficient power plants continue to operate). High WESM price also means a cost burden for customers.

• San Jose 500Kv line stopped operation on 26 March 2011, resulting in isolation of three more 750MVA transformers. This led to the tripping of several power plants, and DUs were directed to reduce their load.

• On 15 November 2016, incident occurred in San Jose transformer resulted in tripping of several power plants in Luzon. As a result, ALD and MLD were implemented to sustain frequency and preventing blackout. More than 1.7 million customers were affected.

• NGCP frequently uses ALD and MLD to maintain frequency. (For example, 23 ALDs were implemented in the period of Jan-Oct 2017.

Problems occurred in

transmission and

distribution

3 Identifying issued barring the implementation of quality electricity infrastructure

65



3 Factors barring the implementation of quality electricity infrastructureBased on the APEC Guideline for quality electric power infrastructure, quality electricity infrastructure can be defined as the sum of Initial performance, Supply stability, ability to smoothly stop and recover, environmental and social consideration, safety and LCC.

【3. Identifying issued barring the implementation of quality electricity infrastructure】

Components3E+S

Ability to smoothly stop and recover

Initial performance

Supply stability

Environmental and social consideration

Safety

Energy Security

Environment

Safety

The quality of electric power

infrastructure

The quality of infrastructure

Stable supply of electric

power

LCCEconomic Efficiency

Source: APEC Guideline for quality electric power infrastructure

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3 Factors barring the implementation of quality electricity infrastructure


• In order to start the operation of a power plant, a developer is required toobtain approximately 200 permits and authorizations. Chapter 1 stated themajor permits required for generation projects based on DOEs EnergyInvestors Guidebook, there are additional minor matters that must beaddressed. Furthermore, there are cases where the start of constructioncommenced four years after starting application.

Difficulties in addressing authoritative requirements

Difficulties in site selection

• Site selection of power plant is one difficulty. There are several power plantsturning out to be inoperable due to existing other infrastructure nearby afterconstruction completion. Another is the case where power plantsconstructed in islands and insufficient grid investment at that timeconstrained power supply.

Enhancing power sector governance

• To address the difficulty of site selection, Cohesion of DOE/ERC with othergovernmental departments/agencies is one possible reform, making siteselection for private sector easier along with optimal grid.

• DOE has declared via the circular dc_2017-05-0008 that a PerformanceAssessment and Audit of the Power Sector will be carried out. It isimportant to align this action with ERCs inspection and audit, whilecompiling useful information for the future.

67





• The ERC has been engaged in regulating the power sector, utilizingspecialists such as economists, engineers and CPAs. However, due to thegrowth of demand of electricity backed with the economic growth of thecountry, the demand for specialists of the private power sector is alsogrowing high, leading to an outflow of personnel from ERC. According to asurvey by ERC, the average salary of ERC is approximately 25% of theprivate sector, and ERC is requesting adjusting the difference to around 70%.

• The large number of private entities subject to regulation is also a difficultyfor ERC.

Inadequate human

resources at ERC

Consulting local

community

• In certain islands, citizens do not consent to a construction of coal-fired thermalpower plant and that power be supplied via a submarine cable.

Quality ofrenewableenergyequipment

• The Philippines renewable energy has been successfully implemented as planned.However, that was due to prosperous investments backed by FIT and otherincentives, and the quality of each equipment are not stable. 30% of the solar panelimplemented lately has not generated.

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• It is possible that Concessionaire of the grid faces little incentives to makeinvestments focused on the best interests of users to the grid, due to the fact that as a concessionaire the assets will be returned to TRANSCO at the end of 25 years.

• The fee decision mechanism for the Concessionaire may be inconsistent with user needs, since congestion costs are transferred to load customers.

Issues of operating the grid

Transmission congestion

Increase in WESM spot prices

Generators gain larger revenues while increased prices are borne by final customers.

Possible issues of Concessionaires KPI

• DUs are subject to complaints from final customers, but transmission planning is Concessionaire’s scope of work, hence DUs can not make any improvements for themselves.

• There is a possibility that the current KPIs for Concessionaire is not sufficient to address congestion, and does not provide sufficient incentive towards the Concessionaire for making investment to address congestion issues.

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3 Issues of the Philippines power sector and the recommended measuresPossible proposals of institutional arrangements to address the issues are as follows.


Issues of the Philippines power sector infrastructure Examples of troubles

Merit to the PhilippinesPower Sectorby solving issues

Regulationswithin the Philippines

Recommended regulatory actions

• Inadequate incentives towards implementing efficient technologies (since generators tend to seek short-term profit and do not have motivation to implement quality technologies involving higher initial cost in the fully-liberalized environment)

―

• Electricity cost

• Reduction of electricity rates

―

• Implementing benchmarking regulation

• Providing financial incentives towards efficient generation technology (subsidies, allocating part of universal service charge, tax benefits etc.)

• Lack of optimal transmission plan (or such a plan is not fully carried out)• Transmission congestion causes increase in WESM prices (leading to increased cost burden of final customers).

• Congestion in the grid requires thedispatch of inefficient generating plants instead of efficient ones.

• Electricity cost


―

• Setting incentives to mitigate transmission congestion (e.g., considering congestion as a KPI for the fee mechanism regarding transmission operator)

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3 Issues of the Philippines power sector and the recommended measures


Issues of the Philippines power sector infrastructure

Examples of troubles

Merit to the PhilippinesPower SectorBy solving issues

Regulations within the Philippines

Recommended regulatoryactions

Degradation of existing T&Dinfrastructure

• San Jose 500Kv line stopped operation on 26 March 2011, resulting in isolation of three more 750MVA transformers. This led to the tripping of several power plants, and DUs were directed to reduce their load.

• On 15 November 2016, incident occurred in San Jose transformer resulted in tripping of several power plants in Luzon. As a result, ALD and MLD were implemented to sustain frequency and preventing blackout. More than 1.7 million customers were affected.

• NGCP frequently uses ALD and MLD to maintain frequency. (For example, 23 ALDs were implemented in the period of Jan-Oct 2017.

• Enhancedelectricity supply quality (such as reduced number of supply interruptions)


• ERC audit by GMC and DMC, performance assessment and audit of the power sector by DOE

• More strict performance standard, enhancing evaluation capabilities

Degradationof existing power plant

―

• Electricity cost• Reduction of

electricity rates

• ERC audit by GMC, performance assessment and audit of the power sector by DOE

• More strict performance standard, enhancing evaluation capabilities

4 Formulation of a schedule towards solving the issues identified

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A road map based on the current situation and projection of the Philippines and the possible fields/capabilities of Japanese cooperation

Under the projection of the current PDP that by 2022 peak demand will exceed committed additions, institutionalizing and strengthening regulatory capabilities by 2020.

【4. Formulation of a schedule towards solving the issues identified】

Contents 2017 2018 2019 2020 2021 2022 2023

Generation

Analysis of the current situation(Demand and supply, price and regulatory environments)Identifying issuesMeasures against issues(Regulations and organizational)Measures against issues(strengthening regulatory capabilities)Designing and implementing rules to facilitate of quality electricity power infrastructure

Technical cooperation project(management, regulatory and govern system reinforcement)Long-term specialist (management, regulatory and operating & maintenance) dispatchOther programs by METI(O&M training, diagnosis of plants, etc.)

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A road map based on the current situation and projection of the Philippines and the possible fields/capabilities of Japanese cooperationTowards institutionalization by 2020, stratified study approach will be taken.


Measures against issues(institutional and actual)

• Based on the institutional and organizational issues found in this project, FY2018 will aim to identify and consider on more substantial issues in depth and aim to formulate a plan and arrange it with related organizations.

Measures against issues (management, regulatory and govern system reinforcement)

• Identify measures to Substantiate the identified management and govern system for stable supply of quality power supply, consult and reach an agreement with relevant organization in 2018, aiming to complete the process by 2020.

Formulating and implementing a system for facilitating quality electricity infrastructure

• Based on the above measures, consider an institution system to facilitate quality electricity infrastructure from 2019 to 2021.

Generation

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A road map based on the current situation and projection of the Philippines and the possible fields/capabilities of Japanese cooperation

Utilizing assistance schemes of METI and other governmental agencies, carry out continuous supporting programs such as personnel dispatch and training.


Technical cooperation project(management, regulatory and govern system reinforcement)

Long-term specialist (management, regulatory and operating & maintenance) dispatch

• In order to substantiate the overall governance arm of the Philippines power sector, dispatch an expert in this field from 2019, carry out technical transfer projects.

• In order to sustain quality electric power infrastructure in a systematical manner after the target year 2020, continuous effort to enhance quality such as long term expert dispatch and technical cooperation will be considered.

Other programs by METI(training, diagnosis, etc.)

• Cooperation with other relevant projects of METI, shall be considered to aid institutionalization by 2020.

5 Introducing Japanese technologies to assist the Philippines power sector

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Implementing indication detection software

Early findings of trouble through indication detecting software

【5 Introducing Japanese technologies to assist the Philippines power sector】

• a study of trouble cases occurred from 1996-2017 on a Certain thermal power plant in the Philippines led to the finding that a relatively frequent trouble with availability-wise critical effect was “boiler tube leak”. The below are the number of leaks.

Generation

unit

Number of boiler tube leaks from 1996 to

2017

Unit 1 ６

Unit 2 ５

• Because a boiler tube leak require days to recover, early detection of signs of leakage and minimizing damage will enhance availability and reduction of repair cost, thus enhancing the reliability of the Philippines power sector.

*Boiler tube refers to a thin pipe installed inside the generating boiler used to circle steam.

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Verification of early detection by software


• According to a verification procedure of early detection of software, a trouble was detected 8 hours prior to shutdown which would not have been detected using a normal censor.

The projection (red) and actual (blue) showed difference, and detection of trouble was made possible.

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Introduction of utilizing indication detection software in Japanese thermal power plantsIn thermal power plants in Japan, early detection of trouble has been successfully carried out, and detected troubles are not limited to boiler tube leaks which is one of the more critical factor to reliable operation. The below tables are examples of trouble detection in a thermal power plant in Japan (2 units).


Prevention of plant/ facility outage, 2

Propose change to O&M plan, 1

Others, 2

Unit1Prevention of plant/ facility

outage, 1

Propose changes to O&M plan, 3

Others, 3

Unit2

Total of 5 Total of 7

Number of detections in a Japanese thermal power plant (Data period of 1 month)

• The Utilization of this software can detect various troubles including boiler tube leak faster than an operator will realize of the damage in the operation room without the software, and will aid in reduction of repair cost and enhanced reliable operation of power plant.



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