# DC2021-09-0030 — CSP Amendments (2021) **Department Circular No. DC2021-09-0030** Amending Certain Provisions of and Supplementing Department Circular No. DC2018-02-0003 on the Competitive Selection Process in the Procurement by the Distribution Utilities of Power Supply Agreement for the Captive Market Issued: September 24, 2021 Secretary: Alfonso G. Cusi *Note: The PDF on the DOE legacy site is filed as `dc2021-10-0030.pdf`. The document heading confirms the issuance number as DC2021-09-0030.* --- ## WHEREAS Clauses - EPIRA §2(b)(c)(f): state policy on quality, reliability, affordability, transparent prices, and consumer protection. - EPIRA §37(p): DOE mandated to formulate rules and regulations implementing EPIRA objectives. - DOE previously issued DC2004-01-001 (CSP for off-grid DUs) and DC2015-06-0008 (mandatory CSP for all DUs' captive market). - DOE mandate reaffirmed by the Supreme Court in *Alyansa Para sa Bagong Pilipinas v. Energy Regulatory Commission, et al.* (G.R. No. 227670, 3 May 2019). - EPIRA IRR Rule 11 §5(b): no DU may source more than 50% of total demand from an Affiliate in generation through bilateral contracts. - RA 11234 (EVOSS Act): online platform for power project permitting. - DC2018-02-0003 (1 February 2018): original mandatory CSP policy; industry participants recommended various improvements. - DOE recognizes other procurement modalities that ensure competition and transparency. --- ## SECTION 1 — Scope, Application and Exemption (amends DC2018-02-0003 §2) ### 2.1 Scope and Application **2.1.1** This Circular applies to all **DUs and Power Suppliers** in the procurement of electric power supply. **2.1.2** All PSAs shall be procured through CSP, consistent with the latest reviewed Distribution Development Plan (DDP) and Power Supply Procurement Plan (PSPP) and consistent with the principles in DC2018-02-0003 §1 and the principle of **technology neutrality**. ### 2.2 Exemption from CSP **2.2.1** The following instances warrant a **Certificate of Exemption from CSP (COE-CSP)** from the DOE: **2.2.1.1 — Grants/donations:** Generation projects funded by grants or donations that will become fully owned, operated, and controlled by the DU within its franchise area, subject to ownership and market-share limitations. The DU may infuse internally generated funds provided the DU's share does not exceed **30% of total project cost excluding taxes**. The generation project must be structurally and financially unbundled from the DU's business segment. The generation project shall not be transferred or assigned to an affiliate or subsidiary Power Supplier. **2.2.1.2 — Emergency Power Supply Agreement (EPSA):** Negotiated procurement of emergency power supply with cooperation period **not exceeding one (1) year**. The EPSA shall be filed immediately before the ERC upon issuance and within the effectivity of the COE-CSP. The DU must prove it performed due diligence and solicited a proposal from at least one (1) Power Supplier to address the emergency. Rate shall be **equivalent to or lower than the latest ERC-approved generation tariff** for the same or similar technology in comparable areas. **2.2.1.3 — Embedded indigenous energy RE plant:** Any generating plant to be embedded in the DU utilizing indigenous energy resources in the DU's franchise area, subject to ownership and market-share limitations, unless it intends to sell generated power outside the embedded area (in which case it undergoes CSP for excess power). Maximum capacity: **10 MW per Luzon DU** and **5 MW per Visayas and Mindanao DU**. **2.2.1.4 — NPC off-grid supply:** Provision for power supply by NPC in off-grid areas prior to and until the entry of New Power Providers (NPPs), and in emergency circumstances. A copy of the PSA between the Electric Cooperative (EC) and NPC shall be submitted to the DOE and NEA (for ECs). **2.2.1.5 — PSALM bilateral contracts:** Provision for power supply by PSALM Corporation or its successors through bilateral contracts for power from undisposed generating assets and IPP contracts. Request for exemption must be submitted to DOE at least **three (3) months prior to expiration** of the Contract of Supply of Electric Energy (CSEE) or intended cooperation period. **2.2.1 (close):** The COE-CSP shall be issued by the DOE within **thirty (30) calendar days**, subject to complete submission of requirements (Annex A). **2.2.2:** For EPSAs under §2.2.1.2, the grant of COE-CSP authorizes the DU to immediately implement the EPSAs without prejudice to ERC evaluation and final decision. **2.2.3:** The DOE shall furnish NEA (for ECs), NPC, and PSALM with a copy of the COE-CSP issued. --- ## SECTION 2 — Definitions (amends DC2018-02-0003 §3) New and amended definitions: | Term | Definition | |---|---| | Competitive Selection Process (CSP) | Process wherein a Power Supplier (or off-grid NPP) is chosen to supply a DU's electric power requirements through transparent and competitive bidding or alternative mode of procurement | | Emergency Power | Power required when DU actual supply falls below load demand due to Force Majeure or Fortuitous Events beyond DU control, which cannot be addressed through reasonable means or WESM, subject to DOE determination | | Certificate of Posting (COP) | Certificate issued by the DOE manifesting that relevant bidding documents for a specific CSP are allowed to be posted in the DOE CSP E-based Portal | | EVOSS | Online system (RA 11234) allowing coordinated submission and synchronous processing of permit applications for generation, transmission, or distribution projects | | Force Majeure / Fortuitous Event | Extraordinary event not foreseeable or avoidable; caused by nature (fire, flood, typhoon, acts of God) or acts of man (war, emergency, revolution, riot, insurrection); may also cover power system emergencies affecting DU continuity | | Indigenous Energy Resources | Any extraction of energy products from natural resources within the franchise area of the DU to a usable form | | New Technology | A technology that is novel or a novel use of existing technology not yet commercially operating or applied in the country at effectivity of the Circular; compliant with international test standards | | Power Supplier | Any entity recognized by ERC to: (a) sell, broker, market or aggregate electricity to DUs; and/or (b) own and operate electricity generation facilities | | True Cost of Generation Rate (TCGR) | Full efficient cost of generating power in an area | | Unsolicited Proposal (USP) | Power supply proposal submitted by a Power Supplier to a DU not in response to a solicitation; may cover uncontracted requirement of the DU | --- ## SECTION 3 — PSPP Content (amends DC2018-02-0003 §4.2) The PSPP shall contain: 1. Historical data on peak demand, supply contracts, energy sales, and energy purchases 2. 10-year monthly peak demand forecast; energy sales; existing contracts (expiration dates) 3. Committed energy and demand for CSP and load factor computation 4. Currently approved TCGR for Off-Grid DUs 5. Projected Load Factor or Load Profile 6. Distribution Impact Study / Load Flow Analysis as basis for TOR 7. Current supply and demand status of the DU 8. Indicative schedule for CSP, considering required construction period for new plants 9. Any other information the DOE may require The TPBAC/TPA (or authorized representative) shall submit the PSPP, consistent with the latest reviewed DDP, which shall be uploaded in the DOE CSP E-based Portal. The DU shall furnish the ERC with a copy of the DDP. --- ## SECTION 4 — TPBAC Composition (amends DC2018-02-0003 §5) ### 5.1 Third Party Bids and Awards Committee (TPBAC) **Composition (5.1.2):** - One lawyer - One finance officer or accountant with knowledge on electricity pricing - One technical person with knowledge and/or experience in local or international competitive bidding - Two (2) captive customer representatives One of the first three (lawyer, finance, technical) shall represent the DU. If the DU cannot find qualified professionals after proof of unavailability, the TPBAC may designate captive customer members with knowledge in accounting, economics, finance, law, engineering, or procurement. **Captive customer representatives (5.1.4):** Must not be employed by the DU, must not have been engaged by the DU within one (1) year of the CSP, must not be related within the fifth degree of consanguinity or affinity to any director or officer of the DU, and must not be affiliated with any Power Supplier. Selection process submitted to DOE for approval. **BOD role (5.1.5-5.1.6):** BOD may intervene on justifiable and reasonable grounds. BOD reserves the right to reject all bids or declare failure of bidding in case of: (1) prima facie collusion; (2) failure to follow prescribed bidding procedures; (3) any justifiable ground where award will not redound to consumer benefit — subject to DOE approval. **Quorum and voting:** Simple majority of all members constitutes quorum; majority of members present decides. ### 5.5 EVOSS Application The following shall be submitted to the DOE via EVOSS for TPBAC/TPA selection approval: 1. Letter to DOE Secretary (attention: Usec for Power and EPIMB Director) 2. Selection process for the two (2) captive customer representatives, including criteria, qualifications, and documentary requirements 3. DU Board Resolution or Secretary's Certificate approving the selection process 4. MOA in case of Aggregated DUs with Joint TPBAC 5. If clarification or additional documents needed: DU has three (3) calendar days to comply; failure terminates the application --- ## SECTION 5 — TPA Accreditation Mandate (amends DC2018-02-0003 §6.3) The DOE shall issue guidelines for the **accreditation of TPA within one hundred twenty (120) calendar days** upon effectivity of this Circular. *(This mandate was fulfilled by DC2022-06-0027, issued 20 June 2022.)* --- ## SECTION 6 — CSP Observers (amends DC2018-02-0003 §§7.3–7.7) - Observers have no right to vote; their absence does not nullify CSP proceedings. - Invitations extended in writing at least **seven (7) working days** before each CSP stage. - Observers invited to all stages: Pre-bid Conferences, Submission and Opening, Bid Evaluation, Post-qualification, Awarding, Contract Signing. - Observers have unrestricted access to: minutes, abstract of bids, post-qualification report, video recordings, opened proposals, draft PSA, bid documents. - Observers may submit written comments within **seven (7) working days** from each CSP activity. - Observers may request bidding results before ERC approval of the PSA. --- ## SECTION 7 — Competitive Selection Process (amends DC2018-02-0003 §8) ### Track A — Competitive Public Bidding **8.1 Preparation of Bid Documents:** TOR, Invitation to Bid, Instruction to Bidders (containing: corporate profile, technical and financial proposal requirements, evaluation criteria, bidding procedure, awarding and contract signing, bid/performance securities, timelines, PSA template, notarized statement, protest mechanism, other requirements). **8.2 DOE/NEA Review:** DOE reviews TOR and draft Instruction to Bidders before issuing COP for publication. For ECs, NEA conducts preliminary review and submits recommendations to DOE. DU may accede to DOE proposals (revised TOR posted) or retain original version (retained TOR plus DOE comments posted). **8.3 Publication:** Upon COP issuance, TOR uploaded to DOE CSP E-based Portal and DU website next working day. Invitation to Bid posted for at least **fifteen (15) calendar days** on DU website, DOE portal, and conspicuous places at DU offices. Invitation published in a newspaper of general circulation once weekly for **two (2) consecutive weeks**. **8.4 Pre-Bid Conference:** At least one (1) Pre-Bid Conference within **fourteen (14) calendar days** after Invitation to Bid publication. Supplemental/Bid Bulletins issued at least **fourteen (14) calendar days** before bid submission deadline. **8.6 Bid Evaluation:** Two-envelope system (legal/technical + financial). Post-qualification of lowest calculated bid. TPBAC recommends award to BOD within **five (5) calendar days** of TWG recommendation. **8.7 Completion Period:** Each CSP shall be completed within **one hundred eighty (180) calendar days** from posting/publication of Invitation to Bid until award and signing of PSA. Non-observance subjects the DU to ERC penalties. **8.8 PSA Filing:** Within **thirty (30) calendar days** upon PSA signing, the DU and winning bidder shall jointly file the PSA with the ERC (copy furnished to DOE and NEA for ECs). ### Track B — Alternative Mode of Procurement (USP for New Technology) As a general rule, DUs shall use Track A. Alternative procurement (Unsolicited Proposals) is reserved **exclusively for New Technology** as defined in this Circular. **Capacity cap:** At any given year, capacity procured through USP shall **not exceed 25% of the DU's peak demand** for the year of required commercial operations minus capacity previously procured through USP for the same year. **8.10.1 Conditions for USP:** (a) USP submitted before any CSP bidding has started for the same requirement; (b) Proposal consistent with DU's latest reviewed PSPP; (c) No on-going CSP for the same demand requirement; (d) Resulting PSA will not cause over-contracting; and (e) USP shall exclude any subsidy. **8.10.3 Evaluation Process:** - TPBAC review within **seven (7) days** for document completeness - BOD confirms eligibility → TPBAC notifies USP proponent - TPBAC conducts detailed evaluation/negotiation within **thirty (30) calendar days** - If acceptable: TPBAC recommends OP declaration; BOD confirms → DU submits draft TOR to DOE within **five (5) days** **8.10.4 Competitive Challenge:** - After DOE review, TPBAC prepares Comparative Bid Document (CBD) in **fourteen (14) days** - Published per §8.3 requirements; submitted within **thirty (30) calendar days** of publication - Pre-Bid Conference within **seven (7) days** of complete publication - TPBAC determines lowest calculated comparative proposal - **Original Proponent (OP) has fifteen (15) days** to match the lowest calculated bid - If OP matches → PSA awarded to OP; if OP fails to match → PSA awarded to lowest calculated bidder - PSA signed within **thirty (30) days** of award; jointly filed with ERC --- ## SECTION 8 — Direct Negotiation in Failed CSPs (amends DC2018-02-0003 §9) **9.3:** For Alternative Mode of Procurement (USP), direct negotiation may be made to the OP after **two (2) failed comparative biddings** with no outstanding disputes. **9.4:** A comparative bidding is failed when: (a) no comparative bid was received; or (b) bids failed to meet requirements. --- ## SECTION 9 — Compliance with RE Law (amends DC2018-02-0003 §10) DUs, Power Suppliers, and Retail Electricity Suppliers shall comply with RA 9513 (RE Act) and all relevant rules and regulations including the Rules on the **Green Energy Auction Program (GEAP)** (pending issuance at this time). --- ## SECTION 10 — Regulatory Support (amends DC2018-02-0003 §12) **12.1:** ERC shall formulate a penalty mechanism and impose fines/penalties for non-compliance with CSP Guidelines. **12.2:** ERC shall review and determine compliance with CSP requirements. **12.3 — 120-day ERC mandate:** Within **one hundred twenty (120) calendar days** of effectivity, ERC shall develop rules and procedures to: (a) Address disputes arising from CSP conduct; (b) Review and approve DU's pass-on generation charge based on PSAs from COE-CSP; and (c) Provide the PSA Template for industry participants. **12.4:** ERC shall ensure that DU-owned generation facilities funded by grants and donations do not form part of the DU's electricity rate applications. **12.5:** NEA shall develop rules and procedures to support this Circular within **sixty (60) calendar days** of effectivity. --- ## SECTION 11 — Protest Mechanism (amends DC2018-02-0003 §13) **13.1:** TPBAC/TPA decisions may be questioned by filing a written request for reconsideration within **three (3) calendar days** of written or verbal notification. TPBAC/TPA decides within **seven (7) calendar days**. **13.2:** If reconsideration is denied, protest may be filed to the BOD or its authorized officer within **seven (7) calendar days** from receipt of denial, via a verified position paper. A non-refundable protest fee (set by TPBAC/TPA) is required. **13.4:** Protests resolved within **seven (7) calendar days**. BOD decision is final. No protest shall stay or delay the CSP process; protests must be resolved before any award is made. Court action via Rule 65 (2019 Amendments) only after BOD resolution with finality. --- ## SECTION 12 — Transitory Provision Upon effectivity, all prospective PSAs shall be procured per DC2018-02-0003 and this Circular. All PSAs procured and executed prior to this Circular (including those pending ERC) shall be honored. DUs with on-going CSP activities prior to effectivity shall continue under the 2018 CSP Policy. --- ## SECTION 13 — Repealing Clause All rules and regulations, or any portion thereof, inconsistent with this Circular are repealed or modified. Provisions of DC2018-02-0003 not affected by this Policy shall remain in effect. --- ## SECTION 15 — Effectivity This Circular shall take effect **fifteen (15) calendar days** upon publication in at least two (2) newspapers of general circulation. Copies filed with UP Law Center — ONAR. --- ## ANNEX A — Minimum Requirements for COE-CSP Application **A. Emergency Power (§2.2.1.2):** 1. DU letter to DOE Secretary requesting COE 2. BOD Resolution indicating capacity to be procured and EPSA duration 3. Justification for COE-CSP 4. One-year supply-demand projection showing power shortage 5. Distribution or System Impact Study 6. Rate Impact of Emergency Power 7. Draft PSA or TOR **B. PSALM Bilateral (§2.2.1.5):** 1. DU letter to DOE requesting COE-CSP 2. BOD Resolution indicating capacity and CSEE duration 3. DU letter to PSALM requesting power supply 4. PSALM letter to DU granting/approving the request --- ## ANNEX B — Standard TOR Template (Minimum Terms) **General Information:** DU name, area to be served (on-grid/off-grid), current year of filing, pre-requisites for TOR submission (DOE-approved TPBAC selection, NEA-endorsed DDP and PSPP, NEA Notice to Proceed for ECs), target publication date. **Requirements:** 1. General Supply Description: purpose (PSPP-scheduled, emergency, RPS compliance), supply type (firm/non-firm), supply side (baseload/mid-merit/peaking/load following) 2. Terms of Supply: Contract MW/year, Minimum Energy Off-take, Contract MWh/year, delivery period 3. Cost and Tariff Structure: levelized Capacity Payment (PhP/kW/month) and Energy Payment (PhP/kWh) for capacity-based; Energy Payment only for energy-based; detailed cost breakdown (capital, fuel, O&M); other applicable charges (connection, wheeling, metering, comms, taxes) 4. Payment Modalities: mode, currency (Philippine Pesos), billing period 5. Outage Allowance: maximum scheduled and forced outage days; no carry-over of unutilized outage allowances 6. Replacement Power: Power Supplier provides replacement for delays or excess outage; cost formula specified 7. Force Majeure: defined per DOE CSP Policies; no capacity fee during outage due to force majeure 8. Grounds for Contract Termination: event of default, expiration, failure to achieve COD, mutual agreement, extended force majeure, changes in circumstances 9. Liquidated Damages: present value of Capacity Payment for remaining PSA term; discount rate specified 10. Reduction of Contract Capacity: allowed for RCOA customer loss or special circumstances; requires ERC approval 11. DU Obligations: assist winning bidder in permit processing 12. Bidder's Qualifications: all business forms including JVs; constitutional ownership for RE; EPIRA capacity limits; for new suppliers, experience of personnel and operational management plan