<!-- source: OCR (tesseract) -->
DEPARTMENT CIRCULAR NO. DC2023-05-0015

PRESCRIBING THE AMENDMENTS TO DEPARTMENT CIRCULAR NO. DC2017-
12-0015 OR THE RENEWABLE PORTFOLIO STANDARDS (RPS) RULES FOR
ON-GRID AREAS

WHEREAS, Republic Act (RA) No. 7638 or the Department of Energy (DOE) Act of
1992 declares the policy of the State, among others, to ensure a continuous, adequate,
and economic supply of energy through the integrated and intensive exploration,
production, management, and development of the country's indigenous energy
resources;

WHEREAS, RA 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA)
declares the policy of the State to ensure the quality, reliability, security and affordability
of the supply of electric power;

WHEREAS, RA 9513 or the Renewable Energy Act of 2008 (RE Act) declares the
policy of the State to increase the utilization of RE by institutionalizing the development
of national and local capabilities in the use of RE systems, and promoting its efficient
and cost-effective commercial application by providing fiscal and nonfiscal incentives;

WHEREAS, pursuant to Section 6 of the RE Act, the DOE upon recommendation of
the National Renewable Energy Board (NREB), promulgated Department Circular
(DC) No. DC2017-12-0015, titled "Promulgating the Rules and Guidelines Governing
the Establishment of the Renewable Portfolio Standards for On-Grid Areas" or the
"RPS On-Grid Rules";

WHEREAS, the Philippine Energy Plan (PEP) 2020-2040 and the National Renewable
Energy Program (NREP) 2020-2040 have set the goal of attaining 35% RE share in
power generation mix by 2030 and 50% by 2040;

WHEREAS, Sections 8 and 9 of the RPS On-Grid Rules initially set the minimum
annual RE percentage increment (Km) at one percent (1%) to be applied to the Net
Electricity Sales of the Mandated Participant for the previous year, and thereafter to
be adjusted by the DOE as necessary to ensure that the objectives of the RE Act are
achieved;

WHEREAS, the DOE through DC No. DC2022-09-0030 issued and promulgated the
Adjusted Annual Incremental RE Percentage (Km), which effectively increased the Km
from 1% to 2.52% starting 2023 to meet the aspirational targets of increasing the RE
share in the power generation mix;

WHEREAS, the DOE through DC No. DC2021-11-0036 issued and promulgated the
Revised Guidelines for the Green Energy Auction Program (GEAP) in the Philippines,
which is intended to provide an additional market for RE through competitive electronic
bidding of RE capacities, and at the same time support the compliance by Mandated
Participants in meeting their RPS requirements;

WHEREAS, while implementing the RPS On-Grid Rules and considering the latest
development in consumer empowerment, the DOE deemed it necessary to enhance
the RPS policies and guidelines towards greater efficiency and effectiveness;

NOW, THEREFORE, pursuant to its authority under the RE Act and the RPS On-Grid
Rules, the DOE hereby adopts, issues, and promulgates the following amendments to
the RPS On-Grid Rules:

Section 1. A new term, to be designated as Section 5(k), is hereby inserted under
the RPS On-Grid Rules, to be defined as follows:

"Section 5. Definition of Terms. As used in this Circular, the
following terms shall be defined as follows:

XXX XXX XXX

(k) 'Generation Mix' refers to the combination of the various
fuels and technologies used to generate electric power to
supply the electricity demand of a given geographic region;"

Section 2. Section 5(n) of the RPS On-Grid Rules, on the definition of "Net Electricity
Sales," is hereby amended, to read as follows:

"(n) 'Net Electricity Sales' refers to the Mandated
Participant's actual/metered energy purchased/supplied
less system losses and own-use reckoned from
26 December of the preceding year to 25 December of the
current year, consistent with Section 3 of this Circular;"

Section 5(f) of the RPS On-Grid Rules is hereby deleted. The other subparagraphs of
Section 5 are hereby renumbered accordingly.

Section 3. To clarify the prescribed parameters for calculating the minimum RPS
requirement for each Mandated Participant, Section 7 of the RPS On-Grid Rules is
hereby amended, to read as follows:

"Section 7. Minimum Annual RPS Requirement. The annual
incremental RE percentage shall be computed based on the
aspirational target of attaining 35% RE share in the country's
Generation Mix by 2030 and 50% by 2040, subject to review as
set forth in Section 14 of the RPS On-Grid Rules.

The minimum annual RPS requirement per Mandated Participant
shall be computed by the Composite Team in coordination with the
NREB; Provided, That the annual RPS requirement for each
Mandated Participant shall be calculated in accordance with the
following formula, all expressed in MWh:

  RPS(n) = ES(n-1) * Σ(m=0 to n) Km

Where:
  m        = Year 0 to n, excluding the Transition Period
  n        = the Year of the RPS requirement starting at
             Compliance Year 1 (Year 2020) and excluding
             Transition Period (Year 2019)
  RPS(n)   = RPS for the Year n for each Mandated Participant
             starting at Compliance Year 1 (in MWh, rounded
             down to the nearest MWh)
  K0       = the percentage of total energy sales from plants
             under the FIT System to the total energy sales of
             all Mandated Participants at Year 0 (2018)
  Km       = Minimum Annual Incremental RE percentage, as
             per Section 8 of the RPS On-Grid Rules, for all
             Mandated Participants at year m
           = Incremental RPS percentage requirements for the
             Mandated Participants in Luzon, Visayas and
             Mindanao shall be at one percent (1%) for Years
             2018-2022, and 2.52% starting Year 2023
             onwards, until extended or modified by the
             DOE, based on the annual review of the
             Composite Team such that the Target RE Share in
             the power generation mix shall be achieved
             (K is not constant)[1]
  ES(n-1)  = Net Electricity Sales in previous Year for each
             Mandated Participant (in MWh, rounded down to
             the nearest MWh). For avoidance of doubt, ES(n-1)
             at Year 1 shall be the Net Electricity Sales of
             Year 0. For clarity, the following shall be
             excluded in the computation of ES:

             (a) Sales of the Supplier under a Multiple
             Suppliers Arrangement/Scheme;
             Provided, That the concerned MWh sales
             are already accounted in the sales of the
             Primary Supplier;

             (b) Corresponding MWh sales for the energy
             supplied to the Contestable Customer if it
             is already a Supplier of Last Resort (SOLR)
             transaction.

Year 0 shall be the year 2018, the RPS Compliance Year 1
shall be the Year 2020 and the intervening period shall be the
Transition Period.

The calculation of RPS requirements for each DU shall be included
as an integral part of the Distribution Development Plan."

[1] Promulgated on 23 September 2022, the minimum annual RE percentage increment was increased
from 1% to 2.52% starting year 2023 under DC No. DC2022-09-0030 or the Adjusted Km.

Section 4. Section 12 of the RPS On-Grid Rules is hereby amended, to read as
follows:

"Section 12. RPS Mandated Participant. The following entities
are mandated to comply with the RPS On-Grid Rules:

XXX

All Mandated Participants, in complying with their respective RPS
requirements, shall comply with the least-cost sourcing of power
supply such as the Competitive Selection Process (CSP) policy
and regulations set by the DOE and the Energy Regulatory
Commission (ERC). In the case of DUs, the ERC shall within
sixty (60) calendar days from effectivity date of this Circular
issue the rules on least-cost mandate with respect to the
procurement of RE generation supply for their Captive
Market, as part of complying with their minimum RPS
requirements."

Section 5. To clarify RPS compliance mechanisms, Section 15(f) of the RPS On-Grid
Rules is hereby inserted, to read as follows:

"Section 15. Compliance Mechanisms. In complying with the
Rules, the Mandated Participant shall use Renewable Energy
Certificates (RECs) from any, a combination, or all of the following:

XXX
(f) Such other mechanisms, including but not limited to GEAP
and/or its Opt-In Mechanism and Distributed RE Resources,
to be determined by the DOE upon recommendation of the
RPSCT, and in consultation with the stakeholders."

Section 6. A new guideline on the issuance of REC, to be designated as Section
17(f)(v), is hereby inserted under the RPS On-Grid Rules, to read as follows:

"Section 17. General Principles on the Establishment of the
RE Market and the RE Registrar. The following principles shall
be considered in the establishment of the rules and guidelines
governing the RE Market and the RE Registrar:

XXX
(f) REC shall be issued based on the following:

i. On the energy produced or generated by Eligible RE
Facilities under Multiple Suppliers
Arrangement/Scheme, the RECs shall be allocated to
the Suppliers based on the actual/metered quantities of
energy supplied by the individual Suppliers to the End-
User. For clarity, the gross energy consumption of the
End-User shall be the sum of the actual/metered
quantities of energy supplied by the individual
Suppliers."

Section 7. Section 17, subparagraphs (f)(i), (m) and (n) of the RPS On-Grid Rules is
hereby amended, to read as follows:

XXX
(f) REC shall be issued based on the following:

i. On the output of Eligible RE Facilities not under the FIT
System, the RECs shall be issued to the Mandated
Participant to the extent of its PSA with the Eligible RE
Facility; Provided, That if the generation of the Eligible
RE Facility is dispatched beyond the contracted
energy under any PSA, then the RECs shall be issued
to the owner of the Eligible RE Facility; Provided,
further, That RE Facilities should have been in
commercial operations after the effectivity of the RE Act
of 2008 to be eligible for attribution of RECs;

XXX

(m) Compliance with the Annual RPS Requirement shall be on
an annual basis. The compliance period shall be from 26
December of the current year to 25 December of the
following year. Each Mandated Participant shall ensure its
submission of sufficient RECs to the RE Registrar through its
RPS Account on or before December 25 of the following year
for each compliance period. For purposes of clarity, the
timeframe to submit RECs to the RE Registrar for
Compliance Year 1 (2020), is from 26 December 2020
until 25 December 2021.

(n) During the first three (3) years of the RPS Program,
commencing from the start of the Compliance Year, and
every other year thereafter, the DOE shall review the
implementation of the RPS and the REM for possible
revisions based on the rate of compliance of the Mandated
Participants, RE Market activity and general success in
meeting the RPS goals."

Section 8. To provide clarification on a Mandated Participant's request to carry-over
its RPS compliance, Section 25 of the RPS On-Grid Rules is hereby amended, to read
as follows:

"Section 25. Carry-Over of Compliance. The DOE may allow a
Mandated Participant to carry-over its RPS compliance shortfall in
any given year to the next succeeding year only, in accordance
with the procedure below.

The request to carry-over the RPS compliance shall be addressed
to the RPS Composite Team (RPSCT) with the following
supporting documents:

(a) Proof of over-contracting and/or existence of force majeure:

i. If the request is based on over-contracting, the
Mandated Participant's Power Supply-Demand Outlook
for the ten (10)-year planning period, status of Power
Supply Agreements (PSAs) filed before the Energy
Regulatory Commission (ERC), and other relevant data
and information which establish that the Mandated
Participant's compliance with the minimum annual RPS
requirement will result in over-contracting of power
supply contracts;

ii. If the request is based on force majeure, a certification
from the RE Registrar confirming that in the
Compliance Year subject of the request,
circumstance/s beyond the control of the Mandated
Participant exist/s, to wit:

(1) That the supply from Eligible RE Facilities are
inadequate to meet the RPS requirement;

(2) That the RECs are inadequate to meet the RPS
requirement; and/or

(3) That the supply from Eligible RE Facilities cannot
be delivered to the grid due to unavailable
capacity at both transmission and relevant
distribution network;

iii. If the circumstances cited as force majeure are not
among those mentioned in the immediately preceding
subsection, proof establishing a causal relation
between circumstance, consideration, or condition,
economic or otherwise, and the Mandated Participant's
RPS compliance shortfall, with a narrative of the
Mandated Participant's efforts to comply with the RPS
requirement.

(b) RPS Compliance Plan for the one (1)-year carry-over period
(i.e., RPS requirement for the year plus RPS compliance
shortfall) duly adopted by the Mandated Participant through
Board Resolution or its equivalent, as certified by its
Corporate Secretary or its President, if unincorporated.

Upon recommendation of the RPSCT, the DOE may approve the
request and the RPS Compliance Plan. The request to carry-over
RPS compliance shall be deemed approved by the DOE after the
lapse of sixty (60) days from submission of complete supporting
documents; Provided, That from the date of the notice to the
Mandated Participant to rectify its submission, the 60-day period
shall be paused and shall continue to run only on the date of
submission of the rectified documents.

XXX"

Section 9. To provide clarification on the timelines of implementation of the RPS
program, Section 26 of the RPS On-Grid Rules is hereby amended, to read as follows:

"Section 26. Transition Period. A Transition Period of one (1)
year from the effectivity of these Rules starting Year 0 (Year
2018), is hereby provided to ensure an orderly, efficient and
effective imposition of the RPS On-Grid Rules. The said period will
allow the Mandated Participants to prepare all the information and
data required in the establishment of the baseline to be determined
by the DOE, prepare their respective compliance mechanisms, as
well as prepare the consumers for the impact of the RPS On-Grid
Rules.

XXX"

Section 10. To provide the significance of regulatory framework towards the
successful implementation of the RPS Program, Section 30 (Regulatory Support) is
hereby amended, to read as follows:

"Section 30. Regulatory Support. The Energy Regulatory
Commission (ERC) shall provide regulatory support for the
effective implementation of this Circular. Towards this end, the
ERC is hereby enjoined to, within sixty (60) calendar days from the
effectivity of this Circular, establish a Regulatory Framework in
consideration of the following, among others:

(a) Determination of potential impacts of a Mandated
Participant's compliance with its minimum annual RPS
requirements;

(b) Calculation of attendant costs arising from a Mandated
Participant's compliance with its RPS requirements; and

(c) Rationalization of cost recovery mechanism, when
applicable."

Section 11. Separability Clause. If any provision of this Circular is declared invalid
or unconstitutional, the other provisions not affected thereby shall remain valid and
subsisting.

Section 12. Repealing Clause. All previous issuances, rules and regulations
inconsistent with this Circular are hereby repealed, amended or modified accordingly.

Section 13. Effectivity. This Circular shall take effect fifteen (15) days after
publication in at least two (2) newspapers of general circulation. A copy of this Circular
shall be filed with the University of the Philippines Law Center — Office of the National
Administrative Register.

Issued this May 23, 2023 at the DOE, Energy Center, Rizal Drive cor. 34th
Street, Bonifacio Global City, Taguig City.

RAPHAEL P.M. LOTILLA
Secretary