THIRTEENTH CONGRESS OF THE REPUBLIC 
1 
First Regular Session 
1 
OF THE PHILIPPINES 
) 
"(")4 Ll]-l;J 30 ,:-';2:@) 
I ,. 
Introduced by Senator Flavier 
EXPLANATORY NOTE 
Over-dependence of the Philippine economy on oil-based sources of 
energy has made it vulnerable to the effects of energy shortages due to natural 
and man-made calamities and to our general inability to procure required 
equipment and quantities of petroleum. A large outlay of government foreign 
exchange currency is used to purchase imported oil and related products. 
We should strive for self-sufficiency in energy by developing and utilizing 
our alternative indigenous resources. 
By so doing, we can ensure enough 
energy supply to fuel a growing economy, at less cost in terms of foreign 
reserves, and at the same time protect our endangered environment. 
Residents in areas where conventional sources of energy are based and 
proposed have voiced their concern for the enormous pollution problems and 
damages these systems impact upon the environment. 
Where effective 
protection measures are either not put in place or properly implemented, 
ecological imbalance occurs, thereby constituting a threat to life and the 
environment. 
Most non-conventional energy systems are environment-safe, as in wind 
and solar energy systems, and even environment-enhancing, as in systems for 
recycling waste into gas and biomass. Isolated groups and individuals have 
persisted and triutnphed in their efforts to harness non-conventional sources of 
energy for daily home and industrial use. The Philippines is not lacking in such 
forward-looking and enterprising citizens, who have sometimes deplored the 
perceived lack of genuine government interest in their work. 
Government must act soonest to pool these valuable talents and 
technologies together in an earnest and sustained effort to promote the 
nationwide development and utilization of economically viable non-conventional 
energy systems. The passage of this till, which provides a comprehensive 
program towards the realization of this objective, is therefore, most urgently 
recommended. 


THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
1 
*ia4 ./tiid 30 
:ij9 
First Regular Session 
) 
S E N A T E  
Introduced by Se.rafor Flavier 
AN ACT 
PROVIDING INCENTIVES FOR DEVELOPING, MANUFACTURING AND 
PURPOSES 
ESTABLISHING A NATIONAL NON-CONVENTIONAL ENERGY PROGRAM, 
USING OF NON-CONVENTIONAL ENERGY SYSTEMS, AND FOR OTHER 
Be it enacted by the Senate and House of Representatives of the 
Philippines in Congress assembled: 
SECTION I. 
Short Tit/e. - This Act shall be known as the “National Non- 
Conventional Energy Program Act”. 
SEC. 2. Declaration of Policies. - 
The State shall achieve self-reliance in the country’s energy 
requirements through the exploitation, not only of indigenous 
conventional energy resources but also, of non-conventional energy 
resources such as, but not limited to, biomass, solar, wind, micro- 
hydro and ocean energy as inexhaustible energy sources which can 
bring economic, social, and environmental benefits to the country. 
The State shall set up the institutional infrastructure and provide key 
government inputs to develop local capabilities in the use of non- 
conventional 
energy 
systems, 
encourage 
their 
widespread 
commercial applications, and promote their efficient utilization. 


c) 
The State shall promote the use of non-conventional energy systems 
to supply energy required in the rural areas for basic needs of home 
and industry through a comprehensive energy program. 
SEC. 3. Definition of Terms. -- When used in this Act: 
a) 
“Non-conventional Energy Systems” or non-con energy systems or 
“NES”, shall refer to energy systems which use renewable energy 
resources applying new energy conversion or utilizing innovative 
technologies. These systems can be characterized as indigenous, 
small-scale, decentralized and modular; 
“Renewable energy resources” shall refer to resources which do not 
have an upper limit on the total quantity to be used. The resources 
are renewed on a regular basis and the renewable rate is rapid 
enough to consider availability over an indefinite period of time. 
b) 
Examples are biomass, solar, wind, geothermal, hydro and ocean 
energy; 
c) 
“Biomass energy systems” shall refer to energy systems which use 
biomass resources such as fuelwood from forests, agricultural and 
industrial wastes, animal manure, fast-growing tress for charcoal 
production, and sugarcane for ethanol fuel production through 
thermo-chemical, biochemical or physico-chemical processes to 
produce heat, steam, mechanical power or electricity; 
“Solar energy systems” shall refer to energy systems which directly 
convert solar radiation, either through solar collectors into heat for 
various applications, or through photovoltaic panels into electricity; 
“Wind energy systems” shall refer to energy systems which use wind 
turbines to convert the energy in the wind to rotary motion which in 
d) 
e) 


turn produces mechanical power, as in windmills or electrical power in 
wind turbine systems; 
“Micro-hydro power systems” shall refer to small hydro-based energy 
systems which utilize water turbines with an installed capacity of not 
more than 50kw as may be determined by the Office of Energy 
Affairs, to convert the energy from running or falling water; 
“Ocean energy systems” shall refer to energy systems which convert 
ocean current to electrical energy, otherwise known as wave and tidal 
power systems or ocean thermal energy conversion (OTEC) systems 
which convert thermal gradient from the ocean surface to the bottom 
into electrical energy; and 
“Conventional Gnergy systems” shall refer to energy systems using 
commercially-traded modern fuels such as petroleum products, coal 
and electricity produced from such fuels, including large-scale hydro 
and geothermal power plants. 
f) 
g) 
h) 
SEC. 4. 
Implementing Agency/Powers and Functions. 
-- 
The 
Department of Energy (DOE) shall formulate and implement the National Non- 
Conventional Energy Program (NEP). 
In this regard, DOE shall have the 
following powers and functions: 
a) 
Promulgate rules and regulations necessary to implement the 
objectives of this Act; 
b) 
Formulate and direct the implementation of a comprehensive 
national energy program, which shall include among others, a Non- 
conventional Energy Promotion and Commercialization PrograT,and 
an Affiliated Non-conventional Energy Centers Program; 


c) 
Integrate, coordinate with, and provide the necessary guidelines to 
all government agencies and instrumentalities including government- 
owned and controlled corporations involved in non-conventional 
energy activities, projects and programs; 
d) 
Review and approve all on-going or planned non-con energy 
activities and projects supported or planned to be supported by 
government fund or funds obtained elsewhere through government 
intercession or assistance; 
e) 
Formulate criteria for determining priority for proposed research, 
development and utilization projects on non-conventional energy and 
accordingly identify and select the schemes for execution, financing, 
and funding without the necessity of prior approval by the National 
Economic and Development Authority; 
9 Designate project implementers, and coordinate and monitor the 
progress of all'planned and on-going projects of NEP funded by the 
program's grants-in-aid fund; 
g) 
Provide necessary and appropriate support services to the national 
non-con energy program such as facilitation of entry of suitable 
foreign expertise and resources in order to accelerate the pace of 
technology transfer and development to local expertise, the 
launching of a vigorous information and promotion drive, and the 
institution of delivery mechanisms for the dissemination of viably- 
proven a p p I ica t ions ; 
h) 
Develop 
and 
implement 
specific 
policies 
encouraging 
the 
participation in the program of the private sector; 


i) 
Propose and recommend in consultation with the Board of 
Investments, such incentives necessary and appropriate to 
institutions, enterprises, organizations and individuals participating in 
the activities and projects of the non-con energy program; and 
Perform such other functions necessary to achieve the objectives of 
this Act. 
j) 
SEC. 5. Program Concept. -- The National Non-Conventional Energy 
Program (NEP) shall consist of the following: 
a) The Technology Program for developing commercial competitiveness 
of laboratory-proven non-con energy systems and for maintaining such 
competitiveness by conducting technical research projects, in 
cooperation with public and private research institutions; 
b) The Promotion and Commercialization Program to accelerate the 
development of a market environment conducive for commercial use 
of non-con energy and to strengthen the market by provision of 
incentives towards a more significant participation of the private sector; 
and 
c) The Affiliated Non-Con Energy Centers (ANECs) Program for setting 
up and/or accrediting an institution that comprehends a mechanism for 
promoting the use of noncom energy in rural and remote areas 
through a decentralized project planning and implementation strategy 
of establishing ANECs in provincial universities and agricultural 
colleges or among cooperatives and other people’s organizations that 
will serve as rural extension arms of OEA. 
SEC. 6. Responsibilities of OEA. -- The responsibilities of OEA, among 
others, are as follows: 


a) Set the criteria which shall be the basis for accrediting ANECs until 
such time that the OEA can independently operate, supervise and 
coordinate ANECs operations, and evaluate ANECs performance with 
regard to continued participation with the program; 
b) Conduct energy technology assessment studies to provide research 
directions for the Technology Program, establish joint projects with 
public or private Cooperating Research Institutions (CRls), coordinate 
the activities of these various CRls and provide financial and technical 
support to strengthen CRI capability to do non-con energy research 
work; and 
c) Conduct activities and projects towards a conducive 
market 
environment for non-con energy use and greater private sector 
participation such as market studies, information dissemination, local 
manpower development, institutional linkages, and provision of 
financing and other incentives. 
SEC. 
7. 
Responsibilities of ANECS. - The ANECs shall provide 
extension support to OEA in the development and implementation of provincial- 
level rural noncon energy programs. The primary responsibilities are: 
(a) conduct rural energy survcys; 
(b) undertake area-based energy supply-demand studies; 
(c) conduct NES project feasibility studies; 
(d) carry out community organizing activities needed for project 
implementation; 
(e) prcvide local training in basic operation and maintenance of 
NES in their areas; 
(9 provide expert advise to local NES users; 


(9) monitor program implementation and user’s feedbacks; and 
(h) such other responsibilities the OEA may deem necessary. 
SEC. 8. Responsibilities of the CRls. - Cooperating Research 
Institutions (CRls) are public or private research institutions designated by OEA 
who shall jointly implement with OEA activities and projects under the technology 
program. Their primary responsibilities are: 
(a) conduct pilot studies and demonstration projects; 
(b) provide technical support and consultancy services to NES 
users; 
(c) assist OEA in developing quality standards for NES equipment 
and devices; 
(d) provide services for consultancy and technical training; and 
(e) such other responsibilities the OEA may deem necessary. 
SEC. 9. 
Information Management Role of the OEA. - The CRls, 
ANECs and the private sector involved in the NEP shall provide the OEA with 
information requirea for the effective monitoring, management and development 
of the program. 
SEC. I O .  
Privileges of the Local Manufacturers, Dealers and 
Noncon Energy Users. - Any local manufacturer or dealer of NES equipment 
and devices or non-con energy user shall have the following privileges: 
a) All incentives as provided for by Section 39 of the Omnibus 
Investment Code or E.O. 226; 
b) At the option of*the taxpayer and in accordance with the procedure 
established by the Bureau of Internal Revenue, fixed assets acquired 
by the local manufacturer and the non-con energy user for establishing 


its capability to manufacture non-con energy system equipment and 
devices may be; 
I) 
Depreciated to the extent of not more than twice as fast as 
normal rate of depreciation if expected life in ten ( I O )  years or 
less; or 
2) Depreciated over any number of years between five (5) years 
and expected life, if the latter is more than ten (IO) years, and 
depreciation thereon allowed as deduction from taxable income: 
Provided, That the taxpayer notifies the Bureau of Internal 
Revenue at the beginning of the depreciation period which 
depreciation rate allowed by this Section will be used by it. 
SEC. 11. 
lncentives to ANECs and CRls. - Any school or institution 
designated by OEA either as an ANEC or a CRI, whether a public or a private 
agency, can be a recipient of donations from OEA so as to develop and 
strengthen their capabilities to perform their responsibilities under the NEP. Such 
may include funds, technical services, NES equipment and devices, and 
laboratory facilities. 
SEC. 12. 
lncentives to Faculty Members and Students of ANECs 
and CRIs. - Any faculty member or student involved in any ANEC or CRI 
activity shall be granted the following incentives: 
a) Tasks petformed by technical staff or faculty members for ANEC or 
CRI activity in connection with the NEP shall be credited as additional 
workload and they will be provided for with honoraria in accordance 
with guidelines defined by OEA. 
b) Students petforming tasks for ANEC or CRI activity in connection with 
the NEP can obtain academic credits for such activities subject to the 


approval of the school authorities. The students will also be financially 
compensated for the tasks performed in accordance with the 
guidelines set by OEA. 
SEC. 13. 
Financial Assistance Programs. - Government financial 
institutions such as the Development Bank of the Philippines (DBP), the 
Philippine National Bank (PNB), the Government Service Insurance System 
(GSIS), the Land Bank of the Philippines (LBP), and such other government 
institutions as are now engaged or may hereafter engage in financing of 
investment operations shall in accordance with and to the extent allowed by the 
enabling provisions of their respective charters or applicable laws, accord high 
priority 
to 
applications 
for 
financial 
assistance 
by 
individuals/enterprises/industries participating in the NEP as duly recommended 
and endorsed by the OEA. 
SEC. 14. 
Program Appropriation. - The amount necessary for the 
implementation of this Act shall be taken from the current fiscal year 
appropriations of the Office of Energy Affairs. Thereafter, such sums as may be 
needed for the operation and maintenance of the Non-Conventional Energy 
Affairs under the annual General Appropriations Act. 
SEC. 15. 
Assistance by Other Government Agencies, Offices and 
Corporations. - All government agencies and instrumentalities including 
government-owned and controlled corporations in addition to being implementors 
of the comprehensive national energy program when so designated, shall extend 
whatever assistance may be required by the Office of Energy Affairs including, 
but not limited to, the detail to the Office of their employees, scientists and 
technical personnel. 


SEC. 16. 
Penalty Clause. - Any person who willfully violates any 
rule or regulation promulgated pursuant to the authority granted in this Act shall, 
upon conviction, be punished by a fine of not less than One hundred thousand 
pesos (P100,000.00), or by imprisonment of not less than two (2) years or not 
more than five (5) years, or both, at the discretion of the court: Provided, That if 
the violation is committed by a juridical person, the penalty provided shall be 
imposed on the official or employee thereof responsible for the violafion: 
Provided, further, That if the violation is committed by a government official or 
employee including those in government-owned or controlled corporations, he 
shall in addition to the penalty provided, be subject to disciplinary administrative 
proceedings and penalties. 
SEC. 17. 
Separability Clause. - If for any reason any provision of 
this Act is declared unconstitutional or invalid, such parts not affected thereby 
shall remain in full force and effect. 
SEC. 18. 
Repealing Clause. - All laws, orders, decrees, rules and 
regulations or part thereof inconsistent with the provisions of this Act are hereby 
repealed or modified accordingly. 
SEC. 19. 
Effectivity Clause. - This Act shall take effect fifteen (15) 
days after its complete publication in at least two (2) newspapers of general 
circulation. 
Approved,