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Republic of the Philippines
| 1 DEPARTMENT OF ENERGY
(Kagawaran ng Enerhiya)

BAGONG PILIPINAS

DEPARTMENT CIRCULAR NO. _0C 2024 -0%- 0929 w

PROMULGATING THE REVISED GUIDELINES GOVERNING THE ALLOCATION,
REMITTANCE, MONITORING AND AUDIT OF FINANCIAL BENEFITS TO HOST
COMMUNITIES PURSUANT TO SECTIONS 6, 7, 10 AND 11 OF
DEPARTMENT CIRCULAR (DC) NO. DC2018-08-0021

WHEREAS, on 26 July 2018, the Department of Energy (DOE) issued Depariment
Circular (DC) No. DC2018-08-0021, titled “Providing for the Amendments to Rule 29
Part (A) of the Implementing Rules and Regulations of Republic Act No. 91 36,” which
took effect on 23 August 2018, and establishes the rules and guidelines for the
administration of financial benefits under the Energy Regulation No. 1-94 (ER 1-94)
Program, in order to promote efficiency in the government processes and ensure that
the financial benefits are properly allocated and availed of,

WHEREAS, DOE DC No. DC2018-08-0021 further provides that the utilized financial
benefits shall be subject to post-audit by the following:

4. The National Electrification Administration - Commission on Audit (NEA-
COA) Resident Auditor for the Electrification Fund (EF) utilized by electric
cooperatives;

2. An entity, to be determined under a Memorandum of Agreement (MOA) for
the EF utilized by private distrioution utilities (DUs); and

3. An entity, to be determined under the MOA for Development and Livelihood
Fund (DLF) and Reforestation, Watershed Management Health, and/or
Environment Enhancement Fund (RWMHEEF), utilized by the Host
Indigenous Cultural Communities (ICCs) / Indigenous Peoples (IPs).

WHEREAS, on various occasions, the DOE has received inquiries and requests for
clarification regarding the allocation of the provincial share from Generation Company
or Facilities (GenCos) and/or Energy Resource Development (ERD) facilities located
within Highly Urbanized Cities (HUCs) in the National Capital Region (NCR), as the
current remittance scheme tends to leave the provincial share stranded;

WHEREAS, Section 7 of DOE DC No. DC2018-08-0021 provides guidance to the
GenCos and/or ERD facilities regarding the requirements and timeline for remitting ER
1-94 funds to the concerned DUs and host beneficiaries;

WHEREAS, on 14 June 2019, the DOE issued DC No. DC2019-06-0010, titled
“Prescribing the Administrative Operating Guidelines for the Availment and Utilization
of Financial Benefits by the ICCs/IPs pursuant to DOE Department Circular No.
DC2018-03-0005";

WHEREAS, Section 14 of DOE DC No. DC2019-06-0010 further provides that the
utilized financial benefits shall be subject to post-audit by the COA or in accordance
with the MOA between Host ICCs/IPs and the GenCos and/or ERD facilities,
whichever is applicable;

Energy Center, Rizal Drive cor. 34th Street, Bonifacio Global City, Taguig City, Philippines 1632
Tel. No. (Trunkline) (632) 8479-2900
Website: http://www.doe.gov.ph; E-mail: infocenter@doe.gov.ph

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DC on Promulgating the Revised Guidelines Governing the Allocation, Remittance, Monitoring and Audit of
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WHEREAS, on various dates, the DOE transmitted clarificatory letters to the COA
regarding the audit on the utilization of ER 1-94 funds by the concerned DUs and Host
ICCs/iPs;

WHEREAS, after consultation, it is imperative for the DOE to issue this Circular to
align related policy issuances in the implementation of the ER 1-94 Program, as
follows:

a) Clarify further the allocation of ER 1-94 financial benefits accruing from the
operations of GenCos and/or ERD facilities located within HUCs in NCR and
other regions;

b) Harmonize the reportorial and remittance obligations of GenCos and/or ERD
facilities with the new policies and procedures;

c) Monitor the compliance of GenCos and/or ERD facilities with the ER 1-94 fund
remittance timeline and requirements; and

d) Provide guidance on the audit of utilized ER 1-94 financial benefits by the
concerned DUs and Host ICCs/IPs.

WHEREAS, the DOE conducted consultations on the proposed policy to solicit
comments and inputs from concerned stakeholders, as follows:

Public Consultation with the Metro Manila Development
Authority, and concerned National Capital Region Local
Government Units Generation Companies

14 November 2022

Various Dates Consultation with COA Special Audit Office, and DOE
Resident COA Auditor

26 February — Virtual Public Consultations

08 March 2024

NOW, THEREFORE, in consideration of the foregoing, the DOE hereby issues and
promulgates the following amendatory provisions:

Section 1. Section 2 (Scope of Application) of DC No. DC2018-08-0021 is revised to
read as follows:

“This Circular shall apply to Generation Facilities (GenCos) and/or Energy
Resource Development (ERD) facilities located in all barangays, cities, or
municipalities, cities or Highly Urbanized Cities, provinces, and ancesiral
lands/domains of the ICCs/IPs.”

Section 2. Section 6 of DC2018-08-0021 (Allocation and Application of Financial
Benefits Fund) is revised to read as follows:

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“The GenCos and/or Energy Resource Developers xxx

6.1. Xxx

6.2. Xxx

The DLF and RWMHEEF shall be allocated in the following manner:

XXX

6.3.

6.2.1. Community and People Affected - 5%

6.2.2. Host Barangay/s - 20%
6.2.3. Host Municipality/ies or City/ies - 35%
6.2.4. Host Province/s - 30%
6.2.5. Host ICCs/IPs - 5%
6.2.6. Host Region/s - 5%

For the allocation of DLF and RWMHEEF Provincial Share for HUCs, it
shall be determined based on the following conditions:

6.3.1. HUCs within a Province where it is geographically located, the
financial benefits shall be allocated in the following manner:

6.3.1.1.. Community and People Affected - 5%
6.3.1.2. Host Barangay/s - 20%
6.3.1.3. Host City/ies - 35%
6.3.1.4. Host Province/s - 30%
6.3.1.5. Host ICCs/IPs - 5%
6.3.1.6. Host Region/s - 5%

6.3.2. HUCs situated in NCR and in Zamboanga Peninsula, the financial
benefits shall be applied in the following manner:

6.3.1.7. Host Barangay/s - 25%
6.3.1.8. Host City/ies - 35%
6.3.1.9. Host Region/s - 40%

Section 3. Section 7 (Remittance of Financial Benefits) of said DC is hereby modified
to read as follows:

dah

7.2.

The EF shall be remitted by the GenCos and/or ERD facilities to the DUs,
while the DLF and RWMHEEF shail be remitted to the Host Local
Government Units (LGUs), Host ICCs/IPs, and identified LGUs for the
Host Region/s.

The remittance of Financial Benefits shall be subject to the compliance
of the Host LGUs and ICCs/IPs with their submission of the following:

7.2.1. Established Trust Accounts submitted to GenCos and/or ERD
facilities pursuant to the MOA on the Establishment of Trust
Accounts;

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7.4.

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7.2.2. Validation by GenCos and/or ERD facilities validation of Annual
Work Plan (AWP) to ensure that the identified project cost is
within the available ER 1-94 funds; and

7.2.3. A copy of the duly signed Liquidation Report by the Accountant
of the Designated Beneficiaries, along with proof that it has been
stamped received by the concerned COA Resident Auditor, as
applicable.

In the event of non-compliance of the concerned DUs, Host LGUs, and
Host ICCs/IPs with any of the requirements for the remittance of
Financial Benefits, the corresponding funds shall be set aside and
remitted to the dedicated trust accounts established by the GenCos
and/or ERD facilities as provided in Section 8 of DOE DC No. DC2018-
08-0021.

For non-host communities benefiting from the Region Share, the
GenCos and/or ERD facilities shall remit the financial benefits to the
General Fund Account (GFA) of the identified LGU, subject to a MOA
for project implementation of the Regional Development Council (RDC),
and GenCos and/or ERDs.

Section 4. Section 10 of DC No. DC2018-08-0021 (Allocation and Application of
Financial Benefits Fund) is revised to read as follows:

10.1.

10.2.

XXX

XXX

The AWP shall be prepared by the concerned DUs, Host LGUs,
ICCs/IPs, and the concerned RDC of the Host Region as follows:

40.2.1. The Host LGUs, ICCs/IPs, as well as the non-hosi

communities, as endorsed by RDC, shall prepare their
respective AWP for DLF and RWMHEEF, at any given month
of the year, whenever the funds are sufficient to finance the
proposed projects. The AWP shall be submitted in both print
and electronic copies to the concerned GenCos and/or ERD
facilities.

10.2.2. For EF, the AWP shall be prepared by the concerned DUs
and submitted in both print and electronic copy to the GenCos
and/or ERD facilities not later than 15" of March of every year.
The electrification projects identified in the AWP shall be
prepared by the DU in accordance with its Local Total
Electrification Roadmap.
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Section 5. Section 11 (Audit of Financial Benefits and Project Monitoring and Audit of
AWP) of DC2018-08-0021 is revised to read as follows:

11.1.

Electricity Sales Audit

The DOE, through its Power Compliance Division (PCD) — Financial
Services (FS), shall conduct periodic audits and reviews of reported
electricity sales, fund allocation, and remittances of Financial Benefits of
the GenCos and/or ERD facilities to the concerned DUs, Host LGUs,
ICCs/IPs and identified LGU beneficiary for Host Region. The DOE shall
maintain a database of the reported/validated electricity sales and
remitted Financial Benefits.

The GenCos and/or ERD facilities shall ensure that the COA Special
Audit Team, in coordination with DOE, has full access to pertinent books
of accounts and other relevant documents relative to the ER 1-94
Program allocation and remittances to their designated beneficiaries.
Furthermore, the GenCos/ERDs facilities shall maintain a database of
reported and validated electricity sales.

2. Monitoring of AWP Implementation

For policy development and formulation, as well as continued evaluation
of the ER 1-94 Program implementation, the GenCos and/or ERD
facilities shall submit the required information on the Validated AWP of
the Host Communities through the DOE-Electric Power Data
Management System.

_ Audit of Project Implementation under Validated AWP

The utilization of ER 1-94 funds, considered as public funds, shall follow
the usual government accounting and auditing rules and regulations and
shall be audited by the COA.

41.3.1. Audit of DLF and RWMHEEF

41.3.1.1. Host LGUs and Regional Share LGU Beneficiaries’
fund utilization and disbursement shall be audited by
their respective COA Resident Auditors.

41.3.1.2. Host ICCs/IPs fund utilization and disbursement shall
be audited by the COA Special Audit Team through a
special audit engagement.

The Host ICC/IP Accounting Officer or its duly designated
Accountant shall prepare and sign the Fund Utilization Report
(FUR), duly approved by the ICC/IP Chieftain/Leader, along
with fully accomplished supporting documenis.

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The repository and/or custodian of liquidation reports and other
supporting documents submitted by the Host ICCs/IPs, LGUs
and concerned DUs shall be the authorized officials of their
respective units for the duration of five (5) years. They shall
ensure that all records and documents are properly labeled,
including the disbursement vouchers relative to the utilization
of funds, to facilitate easy access and retrieval during the audit
of COA Special Audit Team.

11.3.2. Audit of EF

41.3.2.1. The audit of EF utilized by the concerned DU shall be
conducted by the COA Special Audit Team through a
special audit engagement.”

Section 6. Administrative Sanctions. The GenCos and/or ERD facilities shall
comply with the mandatory requirements under DOE DC No. DC2018-08-00271, its
Advisories, and this DC. Failure to comply, without justifiable reason, shall constitute
grounds for the DOE to recommend to the Energy Regulatory Commission the
imposition of administrative sanctions in accordance with its rules and regulations.

Section 7. Separability Clause. If for any reason, any section or provision of this DC
is held unconstitutional or invalid, such parts not affected shall remain in full force and
effect.

Section 8. Repealing Clause. All prior issuances, rules, regulations, or parts thereof
that are inconsistent with this DC are hereby repealed, revoked, amended, or modified
accordingly. The provisions of DOE DC No. DC2018-08-0021 not affected by this DC
shall remain in effect.

Section 9. Effectivity. This DC shall take effect within fifteen (15) days after its
complete publication in two (2) newspapers of general circulation. A copy of this DC
shall be filed with the University of the Philippines Law Center — Office of National
Administrative Register (UPLC-ONAR).

Issued on SEP 1 0 2024 at the DOE, Energy Center, Rizal Drive cor. 34
Street, Bonifacio Global City, Taguig City.

BM Sein

RAPHAEL P.M. LOTILLA <#tee2i*!
Secretary