RA 11646 — Microgrid Systems Act of 2022

Republic Act 11646, the Microgrid Systems Act of 2022 (MGSA), was signed into law on 21 January 2022 (effective 24 January 2022 per §30). It bolsters the government’s pursuit of total electrification by promoting microgrid systems in both unserved and underserved areas — including areas without electricity access, without distribution lines, with home power systems only, or receiving less than 24 hours of electricity services [PEP 2023-2050 Vol. II, p.107, 2023].

The MGSA’s core policy orientation favors low-cost, indigenous, renewable, and environmentally friendly energy resources for microgrid systems and creates a competitive, regulated environment for private sector participation in electrification [PEP 2023-2050 Vol. II, p.107, 2023].

Chapter I — General Provisions (§1–4)

Section 2 — Declaration of Policy

[RA 11646, Section 2, 2022]

Section 4 — Key Definitions

[RA 11646, Section 4, 2022]

Chapter II — Microgrid System Provider Framework (§5–10)

Section 5 — Scope

MGSPs may provide integrated services in DU-identified unserved areas (§9 process) and shall provide services in DOE-declared unserved/underserved areas (§8 CSP). Only isolated microgrids and grid-tied microgrids in island mode are allowed — synchronized mode is not permitted for off-grid service under this Act. Areas with existing GAA appropriations for electrification at effectivity are excluded [RA 11646, Section 5, 2022].

Section 6 — MGSP Legal Status

An MGSP’s operation is not a public utility. MGSPs are not required to secure a congressional franchise — an ATO from ERC is sufficient authorization. All existing QTPs providing alternative electric service under EPIRA §59 are hereby renamed and reclassified as MGSPs [RA 11646, Section 6, 2022].

Any entity is eligible as MGSP: private corporations, LGUs, cooperatives, NGOs, generation companies and their subsidiaries, and DUs and their subsidiaries — with the condition that they maintain separate accounts for MGSP business and that parent entities do not subsidize their MGSP subsidiaries.

Section 7 — DU Waiver Mechanism

Award of a DOE-declared or DU-identified area to an MGSP constitutes a waiver by the DU of its obligation to provide distribution services and supply electricity to that area. The waiver does not transfer, abandon, or modify the DU’s franchise — it grants the MGSP the exclusive right and obligation (on behalf of NPC) to serve the area during the MSC period [RA 11646, Section 7, 2022].

Section 8 — CSP for DOE-Declared Areas

DOE conducts the CSP for DOE-declared unserved/underserved areas. Process requirements [RA 11646, Section 8, 2022]:

• Prioritize low-cost, indigenous, renewable, and environment-friendly sources
• Published on ERC and DOE websites not later than September each year
• Simple, uniform, streamlined, transparent — 90-day maximum from pre-qualification until contract submission to ERC
• DU right to match within 7 calendar days of winning MGSP announcement
• Provisional authority begins on operation start (not waiting for ERC final decision); ERC must schedule hearing within 30 days; final decision within 135 calendar days of complete application
• If no participant or no award, NPC continues missionary electrification until next CSP

Section 9 — Procedure for DU-Identified Unserved Areas

DUs identify unserved areas in their LTER; DOE publishes list. Process [RA 11646, Section 9, 2022]:

• MGSP all-in price offers accepted within 30 calendar days of DOE publication
• DU right to match within 7 days of DOE publishing all offers (must deliver within 18 months from award)
• If no MGSP offers, DU must electrify via DU-operated microgrid within 18 months from lapse of 30-day period
• 90-day maximum entire procedure from publication

Section 10 — UC-ME Eligibility

Only MGSPs and DU-operated microgrid systems that operate in unserved areas and underserved areas not connected to the grid (or within a franchise area where the DU distribution system is not connected to the grid) may avail of UC-ME as determined by ERC. DOE rationalizes UC-ME availment in consultation with DUs, considering equity and continued economic progress [RA 11646, Section 10, 2022].

Chapter III — Agency Powers and Functions (§11–15)

Section 11 — ERC Powers and Functions

In addition to EPIRA functions, ERC shall [RA 11646, Section 11, 2022]:

• Simplified and streamlined ATO permitting; develop minimum technical/service standards within 120 calendar days of effectivity
• Rate-making: determine full cost, approved subsidy, and retail rate for MGSPs; provide equitable recovery mechanism for MGSP assets at MSC expiration; review DU acquisition applications
• Monitor MGSP compliance with ATOs
• Exclusive original jurisdiction over all disputes under this Act — except Philippine Competition Act (RA 10667) cases

Section 12 — DOE Powers and Functions

In addition to RA 7638 functions, DOE shall [RA 11646, Section 12, 2022]:

• Prepare and publish annually the NTER upon consultation with stakeholders
• Determine DU clustering for quarterly LTER/DDP submissions and CSPs
• Receive and verify petitions from end-users not in a DU’s LTER to declare their area as unserved/underserved
• Declare unserved/underserved areas not later than September each year
• Prepare standard MSC templates; conduct all CSPs (may authorize NPC or NEA)
• Monitor MGSP operations and MSC compliance; conduct reviews for noncompliance
• Detail transition procedures (DU → MGSP, MGSP → DU/new MGSP; max 90 calendar days from CSP completion)

Section 13 — NEA Functions

NEA shall assist ECs in preparing LTERs and evaluate/verify unserved/underserved areas submitted by ECs, submitting recommendations to DOE by 15 March each year [RA 11646, Section 13, 2022].

Section 14 — NPC Functions

NPC shall [RA 11646, Section 14, 2022]:

• Prepare and execute an annual NPC Graduation Plan to attract private sector participation
• Continue missionary electrification mandate in areas with no MGSP
• Conduct CSPs when authorized by DOE
• Execute MSCs with awarded MGSPs using DOE-approved templates
• Exclusively collect, administer, and apply the UC-ME (collected from DUs)
• Simplify UCME subsidy claim procedure: streamlined process not more than 45 calendar days; release subsidy within 45 calendar days of complete claim submission

Section 15 — DU Functions

DUs may enter JVs for microgrid installation and operation — ≥51% DU ownership = DU-operated microgrid (treated as DU’s MGSP) [RA 11646, Section 15, 2022]. DUs may impose a separate rate in their microgrid-served areas, provided no cross-subsidy between microgrid and main-franchise end-users.

DUs must prepare and integrate an LTER into their DDP containing: (a) validated inventory of all areas planned for electrification with time frames; (b) annual work plan; (c) inventory of all unserved and underserved areas.

Chapter IV — MGSP Obligations and End-User Protections (§16–18)

Section 16 — MGSP Obligations and Statutory Exemptions

MGSP obligations: build, operate, maintain, and control microgrid per MSC and law; supply load requirements; comply with reporting; ensure end-user safety [RA 11646, Section 16, 2022].

MGSP exemptions (from EPIRA):

• Exempt from §28 RA 9136 (public listing requirement for generation companies)
• Exempt from §45(a) RA 9136 (market share limitation on generation companies)

End-user exemptions (unserved/underserved areas not connected to grid):

• Exempt from FiT allowance under §7 RA 9513 (RE Act)
• Exempt from universal charges under §34 RA 9136 (EPIRA)

The end-user exemptions ensure off-grid communities do not cross-subsidize on-grid RE deployment (FiT) or on-grid infrastructure (UC).

Section 17 — MSC Expiration

When the MSC expires and distribution grid extension has occurred, the DU may acquire the MGSP’s microgrid and resume service, subject to ERC approval and DOE transition procedure. If the DU acquires and its system becomes grid-connected, end-users in that area lose UC-ME eligibility [RA 11646, Section 17, 2022].

If the DU passes, or if no grid extension occurs, a new CSP is held. The incumbent MGSP has the exclusive right to match the winning offer within 7 days.

Chapter V — Permitting, Institutional, and Final Provisions (§19–30)

Section 19 — Permitting (EVOSS with Halved Time Frames)

RA 11234 (Energy Virtual One-Stop Shop Act) applies to all MGSP permitting — but with time frames reduced to half of the normal EVOSS timelines, unless a shorter specific time frame is already provided in this Act [RA 11646, Section 19, 2022].

Sections 20–21 — Institutional Strengthening

DOE shall strengthen and expand the Electric Power Industry Management Bureau (EPIMB) for effective implementation. An ERC Special Division is created attached to the appropriate Service Department [RA 11646, Sections 20–21, 2022].

Section 22 — QTP Transition

All benefits and incentives extended to QTPs under laws not amended by this Act remain in full force. No provision diminishes any right vested under existing laws, contracts, or agreements [RA 11646, Section 22, 2022].

Sections 23–24 — Prohibited Acts and Penalties

Government officers: first offense — 30-day suspension + Values Orientation Program; second — 3-month suspension; third — dismissal + perpetual disqualification + forfeiture of retirement [RA 11646, Section 24, 2022].

Section 25 — Congressional Oversight

The Joint Congressional Energy Commission (JCEC) exercises oversight. DOE and ERC submit annual implementation reports to JCEC by 15 March each year, including identification of legislative gaps [RA 11646, Section 25, 2022].

Section 26 — IRR

DOE to issue IRR within 60 working days of effectivity, in consultation with relevant agencies and stakeholders [RA 11646, Section 26, 2022].

Section 27 — Amendatory Clause

RA 11646 amends [RA 11646, Section 27, 2022]:

• CA 156 §16(c) (Public Service Act) — removes microgrid/MGSP from public utility classification
• EO 172 Series 1987 §8 (ERC creation law)
• RA 9136 §§28, 43, 45(a), 51(l), 59, and 70 (EPIRA) — §59 (QTP provision) is the most significant: QTPs are renamed MGSPs
• RA 11234 §§13–16 (EVOSS time frames halved)

Implementing Rules and Regulations

IRR issued via DC2022-05-0017 on 24 May 2022 [PEP 2023-2050 Vol. II, p.107, 2023].

Microgrid System Providers (MGSPs)

Eligible Entities

Qualified to apply as MGSP [PEP 2023-2050 Vol. II, p.107, 2023]:

• Private corporations
• Local Government Units (LGUs)
• Cooperatives
• Non-government organizations (NGOs)
• Generation companies and their subsidiaries
• Distribution utilities and their subsidiaries

All prospective MGSPs must comply with technical, financial, and other requirements and undergo CSP.

Transition from QTPs

All existing Qualified Third Parties (QTPs) providing alternative electrification services are now classified as MGSPs under Section 6 of the MGSA. All incentives extended to QTPs under existing laws not amended or repealed by the MGSA remain in force [PEP 2023-2050 Vol. II, p.109, 2023].

Area Classification

Unserved and underserved areas offered to MGSPs fall into three categories [PEP 2023-2050 Vol. II, p.107, 2023]:

MGSP-CSP Process

The DOE conducts the CSP for prospective MGSPs unless it authorizes NPC or NEA to act on its behalf. A CSP is deemed successful upon receipt of at least one bid. If no interested participants or a CSP fails, NPC (DOE-declared) or the DU (DU-identified) continues to provide electricity until the next CSP [PEP 2023-2050 Vol. II, pp.107, 132, 2023].

First MGSP-CSP: Invitation to bid for 98 areas (15,645 total households) released 27 October 2023. These areas represent 39% of total unserved/underserved households deemed viable for microgrids based on household count, density, and demand. Notice of Awards expected end of March 2024 [PEP 2023-2050 Vol. II, p.108, 2023].

Total Electrification Steering Committee (TESC)

Created by DO 2022-12-0016 (21 December 2022) as the oversight body for electrification plans and programs. DOE chairs; NEA, NPC, and TransCo are members [PEP 2023-2050 Vol. II, p.108, 2023]. See National Total Electrification Roadmap (NTER) 2023-2032 .

Existing MGSP Operators (as of June 2023)

[PEP 2023-2050 Vol. II, Table 54, 2023]

PALECO CSP (April 2022): Prior to the MGSA IRR, PALECO conducted a CSP for 63 unserved areas in Palawan under DC2019-11-0015. A Notice of Award was given to Archipelago Renewable Corporation (ARC) — a special purpose vehicle of Maharlika Clean Power Holdings Corporation consortium with Clean Grid Partners Pte. Ltd. and WEnergy Global PTE Ltd. — for 12 lots [PEP 2023-2050 Vol. II, Table 55, 2023].

Strategic Role

RA 11646 fills the electrification gap for areas where national grid interconnection is not viable within the planning timeline. As of June 2023 (NTER basis), 2.45 million households remain unserved. Microgrids — particularly hybrid solar-diesel-battery systems — are the most practical and cost-effective solution for geographically isolated and disadvantaged areas (GIDAs) [PEP 2023-2050 Vol. II, pp.103–108, 2023].

See National Total Electrification Roadmap (NTER) 2023-2032 for national electrification targets and Universal Charge for Missionary Electrification (UC-ME) for the UC-ME subsidy context that microgrids help phase out.

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