^E unt?
of ll’f £.»rrr?‘ arp
SEVENTEENTH CONGRESS OF THE 
]
REPUBLIC OF THE PH ILIPPINES 
]
FIRST REGULAR SESSIO N  
]
SENATE
S e n a te  B ill No. _i_308 
In tro d u c e d  by S en. W in G a tc h a lia n
AN ACT
INSTITUTIONALIZING REFORM S 
IN THE PROCUREM ENT BY DISTRIBUTION UTILITIES 
OF SUPPLY FOR THE CAPTIVE MARKET
EXPLANATORY NOTE
Republic Act No. 9136 or the Electric Power Industry Reform Act of 
2001 declares it the policy of the State to ensure the quality, reliability, 
security, and affordability of the supply of electric power, to ensure 
transparent and reasonable prices of electricity in the regime of free and 
fair competition and full public accountability, and to protect the public 
interest as it is effected by the rates and services of electric utilities and 
other providers of electric power.
The use of a competitive process to cultivate private sector 
participation in the generation sector has long been recognized by the 
D epartm ent of Energy (DOE). 
In 2004, the first Competitive Selection 
Process (CSP) was m andated in National Power Corporation — Small 
Power Utilities Group (NPC-SPUG) areas.1 In 2015, the scope of the CSP 
was extended to all distribution utilities in procuring their respective 
power supply agreem ents.2 
The DOE and the Energy Regulatory
D° E C irc u it DC2004-01-001 entiUed ‘Prescribing the Rules and Procedures for Private Sector Participation 
m Existuig NPC-SPUG Areas Pursuant to Rule 13 of the Implementing Rules and Regulations of the Electric 
Power Industry Refonn Act of 2001.” 26 January 2004.
LDOE C,1f^li1.ar DC20 15-06-008 entitled ‘Mandating All Distriution Utilities to Undergo Competitive Selection 
Process (CSP) m Securing Power Supply Agreements (PSA). 11 June 2015.


Commission (ERC) then released a Joint Resolution3 entrusting to the 
latter the responsibility of issuing the appropriate regulations to 
implement the CSP and pending the issuance of such regulations, ERC 
has allowed distribution utilities to conduct CSPs on their own, subject 
to the review of the regulatory body.4
Toweirds this end, this bill seeks to institutionalize the CSP in 
order to enhance first, competition and second, transparency.
For competition, a centralized CSP, to be conducted by a Third 
Party Auctioneer, shall be required for all the uncontracted demand of 
the captive market. 
Also, the CSP can only be undertaken if it is in 
accordance with the approved Power Supply Procurement Management 
Plan of each distribution utility. While for transparency, power supply 
agreements, contracts, and forms shall be standardized for ease of review 
and comprehension. Furthermore, these, as well as other information 
related to the CSP, shall be available to the public through an online 
electronic portal.
All the foregoing are towards the enhancement of the security of 
supply and ultimately the attainment of optimal generation charges for
the consumer. Thus, the immediate passage of thi^^m ^sure is sought.
GATCHALIAN
DOE ERC Joint Resolution No. 1 entitled “A Resolution Enjoining All Distribution Utilities to Conduct 
Competitive Selection Process (CSP) in the Procurement of Supply for their Captive Market". 20 October 2015. 
* ERC Resolution No. 13 entitled "A Resolution Directing All Distribution Utilities (DUs) to Conduct a 
Competitive Selection Process (CSP) in the Procurement of their Supply to Captive Market.’ 4 November 2015.


a?cnal,?
if'i’fii'f nf li'r £»?fiftarf
V
*17 
JAN 31 
P 4  '22
SEVENTEENTH CON GRESS OF THE 
] RrcEl'/rOE/
REPUBLIC OF THE PH ILIPPINES 
]
FIRST REGULAR SESSIO N  
]
SENATE
S e n a te  Bill No. 
1 3 0 8
In tro d u c e d  by S en. W in G a tc h a lia n
AN ACT
INSTITUTIONALIZING REFORM S 
IN THE PROCUREM ENT BY DISTRIBUTION UTILITIES 
OF SUPPLY FOR THE CAPTIVE MARKET
EXPLANATORY NOTE
Republic Act No. 9136 or the Electric Power Industry Reform Act of 
2001 declares it the policy of the State to ensure the quality, reliability, 
security, and affordability of the supply of electric power, to ensure 
transparent and reasonable prices of electricity in the regime of free and 
fair competition and full public accountability, and to protect the public 
interest as it is effected by the rates and sen/ices of electric utilities and 
other providers of electric power.
The use of a competitive process to cultivate private sector 
participation in the generation sector has long been recognized by the 
Departm ent of Energy (DOE). 
In 2004, the first Competitive Selection 
Process (CSP) was m andated in National Power Corporation -  Small 
Power Utilities Group (NPC-SPUG) areas. i In 2015, the scope of the CSP 
was extended to all distribution utilities in procuring their respective 
power supply agreements.2 
The DOE and the Energy Regulatory
• Dp E r lrCUw^r-DcCD^?.?4A0 1 2 ‘0 0 1 entiUed "Prescribing the Rules and Procedures for Private Sector Participation 
m ExisUrig NPC-SPUG Areas Pursuant to Rule 13 of the Implementing Rules and Regulations of the Electric 
Power Industry Reform Act of 2001.” 26 January 2004.
2 DOE Circular DC2015-06-008 enUUed “Mandating AU DistriuUon UtiliUes to Undergo Competitive Selection 
Process (CSP) m Securmg Power Supply Agreements (PSA). 11 June 2015.


Commission (ERC) then released a Joint Resolution3 entrusting to the 
latter the responsibility of issuing the appropriate regulations to 
implement the CSP and pending the issuance of such regulations, ERC 
has allowed distribution utilities to conduct CSPs on their own, subject 
to the review of the regulatory body.4
Towards this end, this bill seeks to institutionalize the CSP in 
order to enhance first, competition and second, transparency.
For competition, a centralized CSP, to be conducted by a Third 
Party Auctioneer, shall be required for all the uncontracted demand of 
the captive market. 
Also, the CSP can only be undertaken if it is in 
accordcince with the approved Power Supply Procurement Management 
Plan of each distribution utility. While for transparency, power supply 
agreements, contracts, and forms shall be standardized for ease of review 
and comprehension. Furthermore, these, as well as other information 
related to the CSP, shall be available to the public through an online 
electronic portal.
All the foregoing are towards the enhancement of the security of
the consumer. Thus, the immediate passage of tW s'm ^sure is sought.
lGATCHALIAN
3 DOE ERC Joint Resolution No. 1 entitled *A Resolution Enjoining AU Distribution Utilities to Conduct 
Competitive Selection Process (CSP) in the Procurement of Supply for their Captive Market". 20 October 2015.
4 ERC Resolution No. 13 entitled "A Resolution Directing All Distribution Utilities (DUs) to Conduct a 
Competitive Selection Process (CSP) in the Procurement of their Supply to Captive Market." 4 November 2015.


^
 
Sjcirntr
of llir fjprrflflrjJ
SEVENTEENTH CONGRESS OF THE 
]
REPUBLIC OF THE PHILIPPINES 
]
F irst R egular S ession 
]
'17 
JAN 31 . P 4 2 2
R E a iV E O  BY:
SENATE
S.B. No. 
1 3 0 8
Intro d u ced  by SEN. WIN GATCHALIAN
AN ACT
INSTITUTIONALIZING REFORMS 
IN THE PROCUREMENT BY DISTRIBUTION UTILITIES 
OF SUPPLY FOR THE CAPTIVE MARKET
Be it enacted by the Senate and the House of Representatives of the 
Philippines in Congress assembled:
1
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3
CHAPTER I
GENERAL PROVISIONS
4 
SECTION 1. 
Title.
5 
Procurement Act of 2016”.
-  This Act shall be known as the “Energy
7 
SECTION 2. D eclaration of Policy. -  It is hereby declared the policy
8 
of the State to ensure the quality, reliability, security, and affordability of


1 
supply of electric power. To protect public interest, as it is affected by the rates
2 
and services of electrical utilities and other providers of electric power, the
3 
State recognizes that a Competitive Selection Process in the procurement of
4 
Power Supply Agreements by distribution utilities engenders transparency,
5 
enhances security of supply, and ensures stability of electricity prices to
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captive electricity end-users in the long term.
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SECTION 3. Scope and A pplication. - 
This Act shall apply to any 
distribution utility that owns, operates, or controls one or more distribution 
systems in the main grid and off-grid in the procurement of supply for their 
captive market, the matter in which the procurement is to be undertaken, the 
review process to be required, and the timelines to be observed in such 
processes.
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SECTION 4. D efinition of Term s. -  For purposes of this Act, the
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following shall be defined as:
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a) Aggregated Demand -  refers to the distribution utilities’ consolidated 
level of hourly, daily, monthly, or annual electric power demeuid;
b) Captive Market -  refers to the electricity end-users who do not have the 
choice of a supplier of electricity, as may be determined by the ERC, in 
accordance with EPIRA;
c) Competitive Selection Process (CSP) -  refers to a process wherein a 
generation company is selected through transparent and competitive 
bidding undertaken by a distribution utility to secure supply of power at 
the least cost;
d) Competitive Bidding -  refers to a method of procurement which is open 
to participation by generation companies and distribution utilities and 
which consists of the following process: advertisement or publication.


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pre-qualification conference, eligibility screening, determination of price 
for the procurement through competition of participating bidders, 
evaluation, post-qualification, and award of contract;
e) Demand Aggregation -  refers to the process where distribution utilities 
group together to combine their demand or energy requirements in order 
to subject it to a CSP;
f) Distribution Utility -  refers to any electric cooperative, 
private 
corporation, government-owned utility, existing local government unit 
which has an exclusive franchise to operate a distribution system in 
accordance with EPIRA, multi-purpose cooperatives duly authorized by 
appropriate government agencies to operate electric power system, or any 
other duly authorized entity engaged in the distribution of electricity to 
captive customers;
g) Energy Regulatory Commission -  refers to the regulatory body created 
pursuant to EPIRA;
h) EPIRA -  refers to Republic Act No. 9136, otherwise known as the Electric 
Power Industry Reform Act of 1991;
i) Electric Cooperative -  refers to a distribution utility organized pursuant 
to Presidential Decree No. 269, as amended, or as otherwise provided in 
EPIRA;
j) Generation Company -  refers to any person or entity authorized to 
operate facilities used in the generation of electricity;
k) Grid -  refers to the high voltage backbone system of interconnected 
transmission lines, substations and related facilities;
l) Power Supply Agreement (PSA) -  refers to a contract between a 
generation company and a distribution utility whereby the latter 
purchases power from the former;
m) Power Supply Procurement Management Plan (PSPMP) -  refers to a 
distribution utility’s assessment of a variety of its demand side and 
supply side resources to cost-effectively meet customer electricity service 
needs; and


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CHAPTER II
COMPETITIVE SELECTION PROCESS
SECTION 
5. 
C om petitive 
Selection 
Process 
(CSP). 
-  All
7 
distribution utilities axe mandated to subject all the uncontracted demand of
8 
their captive market to a CSP in accordance with this Act, its implementing
9 
rules and regulations (IRR), and the CSP framework. All PSAs shall only be 
awarded after the conduct of a CSP except as otherwise provided in this Act: 
Provided, That the entire CSP process shall not exceed sixty (60) days from the 
advertisement or publication of the call for bidders, unless exigent 
circumstances warrant the extension of the period.
The CSP shall be conducted by a Third Party Auctioneer and shall be
15 
operational not later than six (6) months from the effectivity of this Act. To this
16 
end, the DOE shall establish a CSP framework which, at the minimum, shall
17 
contain the following:
a) 
Procedure and schedule for a centralized CSP which shall incorporate 
the competitive bidding rules and design;
b) 
Comprehensive terms of reference, pa3rment structure, and prohibited 
acts as well as corresponding fines and penalties for the Third Party 
Auctioneer;
c) 
Standardized forms and bid documents which shall contain, among 
others:
i) Requirement for eligibility of prospective bidders,
ii) Required Capacity and/or Energy Volumes,
iii) Generation sources, if applicable,
iv) Load requirement (base load, mid-merit, or peaking), if applicable,
v) Method of procurement for fuel, if applicable,
vi) Cooperation/Contract Period (short-term, medium-term, long­
term).


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d)
e)
f)
g)
h)
i)
j)
vii) An unbundled tariff structure including but not limited to capacity 
fees, variable and fixed operating and maintenance fee, fuel fee, 
and others, including the derivation of each component, base fee 
adjustment formula, if any,
viii) The form and method of payment,
ix) Bonds and guarantees,
x) Penalties for delay, non-performance of contract, and breach of 
confidentiality, and
xi) For greenfield power generation projects, the grid impact study 
and/or similar requirements prescribed by DOE;
Standardized PSA and any other necessary contracts for the CSP;
Qualification criteria to determine the winning bidder;
Procedure for the Swiss Challenge Procurement;
Timelines to be observed;
Instances, requirements, and procedures for demand aggregation;
Procedure and requirements for expedited CSP for emergency
procurements by distribution utilities; and
Other such procedures that will ensure an open, transparent, and
competitive bidding.
The CSP framework shall be regularly reviewed by the DOE to reflect 
existing policies and to facilitate a more streamlined and transparent CSP for 
distribution utilities.
23 
The ERC shall have the power to review whether the parties have
24 
complied with the requirements of CSP established under this Act, its IRR, and
25 
the CSP freimework, as provided for under Section 14 of this Act.
26
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SECTION 6. Sw iss C hallenge P rocurem ent. -  Upon two (2) failed
28 
CSPs, a generation company may submit an unsolicited proposal to a
29 
distribution utihty which shall then invite competitive counterproposals in


1 
such manner as may be provided in the IRR and CSP framework. 
Thereafter,
2 
the original bidder shall be given the opportunity to match the best bid which
3 
comes out of the counterproposals.
4 
A CSP is considered failed when, during its conduct, any of the following
5 
circumstances exists:
6 
a) Only one generation company submitted an offer; or
7 
b) Generation companies failed to meet the requirements to participate as a
8 
bidder, as determined by the Third Party Auctioneer.
9 
Upon failure of each CSP, the Third Party Auctioneer shall submit a report
10 
to the DOE and the ERC, the contents of which shall be provided in the IRR.
11
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SECTION 7. Power Supply P rocurem ent M anagem ent Plan. -  Every
13 
distribution utility shall develop its Power Supply Procurement Management
14 
Plan (PSPMP) and undertake a cost-benefit analysis of the power supply
15 
requirements for the captive market taking into consideration, among others,
16 
prevailing price in the market, energy demand forecasting, load matrix, and
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existing DOE policies.
18 
The PSPMP shall be updated annually and approved by the Board of
19 
Directors of the distribution utility and submitted to the ERC and DOE on or
20 
before the 31st of March every year. In the case of electric cooperatives, the
21 
report shall also be submitted to the NEA. In all cases, ERC, DOE, and NEA
22 
shall act on the submission within sixty (60) days from receipt of the PSPMP.
23 
For purposes of transparency, the approved PSPMPs shall be posted by the
24 
DOE in the electronic portal as provided for under Section 12 of this Act.
25 
The contents of the PSPMP shall include but shall not be limited to the
26 
following information:


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a) Planning and acquisition period (short-term, medium-term, and long­
term);
b) Demand forecast, forecasted load profile, and load duration curve, if 
applicable;
c) Additional resource requirements, if applicable;
d) Resource acquisition plan, if applicable;
e) Demand side management programs, if applicable;
f) Mandated renewable energy quota pursuant to the incentive mechanisms 
under the Renewable Energy Act, if applicable; and
g) Any additional information that DOE may require.
No CSP shall be undertaken unless it is in accordance with the approved 
PSPMP of a distribution utility. 
In cases of aggregated demand, concerned 
distribution utilities shall prepare documentation to demonstrate that the 
demand subjected to CSP is consistent with their respective approved 
individual PSPMPs.
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SECTION 8. T hird Party A uctioneer. -  The Third Party Auctioneer 
shall undertake the CSP in accordance with this Act, its IRR, and the CSP 
framework and shall ensure that parties abide by the standards set forth in the 
same. Within sixty (60) days after the close of a competitive bidding, the Third 
Party Auctioneer shall prepare a CSP Monitoring Report and submit it to the 
ERC as part of its CSP review process. The DOE and ERC shall provide the 
contents and coverage of the said report in the IRR.
The Third Party Auctioneer shall be the Market Operator: Provided, That 
after five (5) years from the effectivity of this Act, the DOE shall review the 
performance of the Market Operator according to a Performance Monitoring 
and Evaluation Plan (PMEP) incorporated in the CSP framework.


1 
Should the DOE find that the Market Operator did not substantially meet
2 
the performance targets in the PMEP, it may procure a new Third Party
3 
Auctioneer in compliance with all laws and IRRs related to government
4 
procurement. In this case, the DOE may determine the terms of reference of
5 
the new Third Party Auctioneer: Provided, That it shall be a team of private
6 
individuals or a private corporation duly recognized in the Philippines, with no
7 
direct or indirect interest in any generation company and/or distribution
8 
utility, 
having vast experience in competitive bidding, 
comprehensive
9 
knowledge of the electric power industry, and a demonstrated ability to manage
10 
and conduct the CSP while complying with the terms of reference and other
11 
additional qualifications provided for in the CSP framework: Provided, further,
12 
That the performance of the new Third Party Auctioneer, and any other Third
13 
Party Auctioneer thereafter, shall be reviewed by the DOE after every five (5)
14 
years according to the PMEP.
15
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SECTION 9. O bservers. -  The Third Party Auctioneer shall, in all
17 
stages of the CSP, ensure that there shall be present at least one (1) observer
18 
from the DOE, ERC, the Philippine Competitive Commission (PCC), or the
19 
Commission on Audit (COA), or in the case of electric cooperatives, a member
20 
of the NEA, in its proceedings: Provided, That the said person/s do not have
21 
any direct or indirect interest in the PSAs subject to CSP.
22 
The observers shall keep all information acquired by virtue of the
23 
proceedings confidential while the competitive bidding is still on going. Any
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observer who commits a breach of confidentiality shall be subject to the
25 
administrative disciplinary action under this Act, without prejudice to any civil
26 
or criminal action. 
Upon finality of the competitive bidding, the observer/s
27 
shall, jointly or separately, file a report indicating their observations on the
28 
procurement activities and submit it to DOE and ERC.
29


1 
SECTION 10. S tan d ard izatio n  of C o n tracts, P rocesses, and
2 
Form s. -  All PSAs, contracts, forms and documents used during the CSP shall
3 
be standardized and unified. For this purpose, the DOE, with the assistance of
4 
ERC, shall develop generic forms, standard bidding documents, PSAs, and
5 
other contracts which, upon issuance, shall be mandatory among generation
6 
companies and distribution utilities.
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SECTION 11. Access To Inform ation. -  In all stages of CSP, the 
generation companies and distribution utilities shall ensure equal access to 
information: Provided, That prior to their official release, no aspect of the 
documents used in any CSP shall be divulged or released to any prospective 
generation company, distribution utility, or any other person or entity having 
direct or indirect interest in the PSAs subject of CSP.
SECTION 12. E lectronic Portal. -  To further ensure transparency 
and efficiency in all transactions, information and communications technology 
shall be utilized in the conduct of CSP. The DOE shall develop a portal which 
shall serve as the primary source of information on CSP, including the PSPMP: 
Provided, That the DOE shall ensure the integrity, security, and confidentiality 
of all documents submitted through the portal.
22 
SECTION 13. Ju risd ic tio n . -  The ERC shall have primary and
23 
exclusive jurisdiction over all contests and cases involving and relating to the
24 
conduct of the CSP.
25
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SECTION 14. ERC Review of PSAs. -  For PSAs executed pursuant to
27 
this Act and its IRR, the ERC review shall be limited to a determination of


1 
whether or not there has been strict compliance with all the requirements
2 
established: Provided, That the ERC may issue additional regulations to apply
3 
to:
4 
a) The review of PSAs procured through a Swiss Challenge;
5 
b) Cases where the parties to the PSA under review are related parties; or
6 
c) Other analogous cases.
7 
In the three (3) abovementioned cases, the review will call for a cost-
8 
based evaluation of the agreed pricing structure or winning bid as reflected in
9 
the PSA or benchmarking of generation prices.
10 
The ERC shall issue the final decision on its review of all PSAs submitted
11 
to it pursuant to this Act within thirty (30) days from filing thereof.
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CHAPTER III
PROHIBITED ACTS AND PENALTIES
SECTION 15. A dm inistrative O ffenses. -  The following acts, when 
committed by a government official and/or employee, shall be considered 
administrative offenses:
a) Breach of confidentiality as provided under Section 9 of this Act;
b) Willful acts which delay the operationalization of the CSP; and
c) Failure to comply with the mandated timelines prescribed to perform 
specific acts defined under this Act.
SECTION 16. P en alties. -  Any person found guilty of the Act stated in 
Sec. 15 ^), on the first offense shall be suspended from service for six (6) 
months and one (1) day to one (1) year without pay, and on the second offense
10


1 
shedl be dismissed from service and shaill be perpetually disqualified from re-
2 
employment in any government agency or instrumentality.
3 
Any person found guilty of the Act stated in Sec. 15 (b), on the first
4 
offense shall be suspended from service for six (6) months and one (1) day to
5 
one (1) year without pay, and on the second offense shall be dismissed from
6 
service and shall be perpetually disqualified from re-employment in any
7 
government agency or instrumentality.
8 
Any person found guilty of the Act stated in Sec. 15 (c), on the first
9 
offense shall be reprimanded, on the second offense shall be suspended from
10 
service for one (1) to thirty (30) days, and on the third offense shall be
11 
dismissed from service and shall be perpetually disqualified from re-
12 
employment in any government agency or instrumentality.
13
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15
16
CHAPTER IV 
FINAL PROVISIONS
17 
SECTION 17. T ran sitory Provision. -  Pending the creation and
18 
effectivity of the IRR and the CSP framework, the existing ERC Resolution
19 
requiring a CSP shall continue to apply: Provided, That the ERC shall observe
20 
the thirty (30) day period of approval of PSAs as provided for under this Act.
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SECTION 18. Im plem enting R ules and R egulations. -  Within 
sixty (60) days from the effectivity of this Act, the DOE, in coordination with the 
ERC, NEA, and the PCC, shall promulgate the necessaiy rules and regulations 
to implement the provisions of this Act. Furthermore, the DOE shall 
promulgate the CSP framework within sixty (60) days from the promulgation of 
the IRR.
11


2 
SECTION 19. S eparability C lause. -  If, for any reason, any provision
3 
of this Act is declared to be unconstitutional or invalid, the other sections or
4 
provisions hereof which are not affected thereby shall continue to be in full
5 
force or effect.
1
7 
SECTION 20. R epealing C lause. -  All laws, decrees, orders, rules
8 
and regulations or parts thereof which are inconsistent with or contrary to the
9 
provisions of this Act are hereby repealed, amended or modified accordingly.
10
11 
SECTION 21. Effectivity. -  This Act shall take effect fifteen (15) days
12 
after its publication in at least two (2) national newspapers of general
13 
circulation.
Approved,
12