EIGHTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
SENATE
3f tl); 
:rs tiiri>
S'tuatr
•19 
JUL-2 PI ;13
S.B. No.
Introduced by SEN. WIN GATCHALIAN
AN ACT
PROMOTING THE USE OF MICROGRID SYSTEMS FOR THE TOTAL 
ELECTRIFICATION OF UNSERVED AND UNDERSERVED AREAS
EXPLANATORY NOTE
Access to electricity affects productivity, health, education, climate change, food and 
water safety, and communication services. Due to the encompassing effect of 
energy access in communities and countries as a whole, one of the sustainable 
development goals of the United Nations is ^Affordable and Oean Energy*' Where 
countries are encouraged to accelerate the transition to an affordable, reliable, and 
sustainable energy system by investing in renewable energy resources, prioritizing 
energy 
efficient 
practices, 
and 
adopting 
clean 
energy 
technologies 
and 
infrastructure.1 
President Rodrigo Roa Duterte, in his Report to the People, 
recognized the crucial role of energy access when he emphasized the necessity of 
reliable energy to support the growing industries of the country. His administration 
aims to achieve 100% household electrification level by 2022 that would benefit 
13.32 million households in Luzon, 4.40 million households in Visayas, and 5.27 
million households in Mindanao.2
Despite this, an alarming number of 2,779,530 households or 11.7% of the total 
number of households nationwide still have no access to electricity.3 The
' United Nations. "Sustainable Development Goals". Goal 7: Affordable and Oean Energy
J THE PRESIDENTS REPORT TO THE PEOPLE 2016-2017: Laying the Foundation Towards a Comfortable Life for All. 
Published by the Office o f the President - Presidential Management Staff in cnllaboratinn with the national government 
departments and agencies. (2017) Page 53.
3 DOE. T o ta l Electrification Strategy" presentation on Senate Committee on Energy hearing on SRN 695 and SRN 753 
conducted on 13 August 2018.


government has stated that total electrification in unserved areas cannot be done by 
traiditional grid extension atone but non-tradition ai means such as microgrid systems 
are needed.4 The problem of energy access is also a concern even in "electrified" 
areas with limited electricity service, also referred to as underserved areas. For 
example, just last year, of the 171 areas serviced by the National Power Corporation 
- Small Power Utilities Group, 83 or 48.5% of areas received only 4 to 8 hours of 
electricity service, while 34 or 19.9% of areas received only 9 to 16 hours of 
electricity service.5
The government has tapped the private sector as partner in delivering electricity and 
improving the quality of service in unserved and underserved areas. However, there 
are significant barriers to entry because of tedious bureaucratic processes, lack of 
information on prospective areas for electrification, and difficulties in obtaining 
waivers from incumbent utility franchise holders.6
This bill addresses acceleration of total electrification and the provision of reliable 
electricity service in unserved and underserved areas. The salient provisions of this 
bill include (1) mandating the Department of Energy to annually release and update 
the list of unserved and underserved areas for prospective Microgrid Service 
Providers (MSPs), (2) creating a streamlined process for MSPs with clear timelines 
and stiff sanctions, and (3) removing the requirement of (totathmg waivers from 
incumbent franchised utilities for MSPs to provide ejearicity in urtser^/ed and 
underserved areas. Given the foregoing, the immedi^e passaged this measure is 
sought.
IN
4 Hearing on Senate Resolution No. (SRN) 695 conducted on 16 April 2018 where NPC-SPUG manifested that microgrid 
systems are viable solutions for rural electrification of remote and unviable areas as well as hearing on SRN 695 and SRN 753 
conducted on 13 August 2018 where the DOE manifested its intenbon of crafting and promulgating an Executive Order for the 
President's approval and signature which would allow and promote private sector participation in microgrid systems. In the 
same August 2018 hearing, the NEA presented the Strategized Sitio Electrification Program (SSEP) which utilizes self-contained 
power systems such as mini-grids, confined to small geographic areas, powering up distant clusters of houses or villages and 
the Strategized Household Electrification Program (SHEP) which
utilizes solar home systems that target dispersed households with no nrrf^<: to the grid.
5 Hearing on Senate Resolution No. (SRN) 695 conducted on 16 April 2018.
6 European Union (EU) - Access to Sustainable Energy Programme (ASEP). Draft on "Encouraging Private Sector 
Participation Through Policy Reforms in Offgrid Areas" (2018)


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¥
EIGHTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
SENATE
S.B. No. 
175
o( tl).
*19 JUL-2 P I-13
R ECE'\'':0 EV.
Introduced by Senator W IN GATCHALIAN
AN ACT
PROMOTING THE USE OF MICROGRID SYSTEMS FOR THE TOTAL 
ELECTRIFICATION OF UNSERVED AND UNDERSERVED AREAS
Be it enacted by the Senate and the House o f Representatives o f the Philippines in 
Congress assembled:
1 
Section 1. Title. -  This Act shall be referred to as the "Microgrid Systems Act."
2 
Sec. 2. Declaration o f Policy. -  It is hereby declared the policy of the State
3 
to:
4 
a) Pursue rural development and poverty reduction towards nation building
5 
through energy access;
6 
b) Accelerate total electrification and the provision of reliable electricity service in
7 
unserved and underserved areas;
8 
c) Promote private sector participation in electrification not only of remote and
9 
unviable areas in particular but also of unserved and underserved areas in
10 
general;
11 
d) Provide a competitive environment and level-playing field for different kinds of
12 
energy sources; and
13 
e) Ensure that electricity consumers will benefit from technologies and
14 
innovations in the electric power industry.
15 
Sec. 3. Scope and Application. -  This Act shall apply to the development of
16 
microgrid systems in unserved and underserved areas nationwide.


1 
Sec. 4. Definition o f Terms. -  For purposes of this Act, the following terms
2 
shall be defined as stated below:
3 
a) Annual penetration limit refers to the maximum total capacity of grid tied
4 
microgrid systems that can electrically connect to a specific distribution
5 
utility's system, and as a result, buy and sell from the grid taking into account
6 
the distribution utility's Distribution Development Plan and existing power
7 
supply 
agreements. 
Transmission 
Development 
Plan, 
distribution 
and
8 
transmission 
system, 
and 
other 
technical 
considerations 
as 
may 
be
9 
determined by the Energy Regulatory Commission (ERC);
10 
b) Benchmark rate refers to the maximum retail rate or generation rate,
11 
whenever applicable, that an MSP can charge and collect from end users
12 
taking into account the microgrid system's technology, capacity, number o f
13 
off-takers, and other technical, financial, and economic considerations as may
14 
be determined by ERC;
15 
c) Distributed energy resource (DER) refers to smaller power sources that could
16 
be aggregated to provide power necessary to meet regular demand;
17 
d) Distribution system refers to the system of wires and associated facilities
18 
belonging to a franchised distribution utility, extending between the delivery
19 
points on the transmission, subtransmission system, or generating plant
20 
connection and the point of connection to the premises of the end user;
21 
e) Distribution utility (DU) refers to any electric cooperative, private corporation,
22 
or government-owned utility which has a franchise to operate a distribution
23 
system including those whose franchise covers economic zones;
24 
f) End user refers to any natural or juridical person requiring the supply and
25 
delivery of electricity for its own use;
26 
g) Grid refers to the 
high 
voltage 
backbone 
system 
of interconnected
27 
transmission lines, substations and related facilities;
28 
h) Grid tied refers to a situation in which a microgrid system is connected to the
29 
distribution system for main or backup power source;
30


1 
i) Island mode refers to a situation in which a microgrid system is electrically
2 
isolated from the grid, and the isolated system is energized by embedded
3 
generation or DER;
4 
j) Microgrid system refers to a group of interconnected loads and DER with
5 
clearly defined electrical boundaries that acts as a single controllable entity
6 
with respect to the distribution, subtransmission, or transmission grid,
7 
whichever is applicable, and can connect and disconnect from the grid to
8 
enable it to operate in both grid tied or island mode;
9 
k) Micro grid system provider (MSP) refers to a natural or juridical person whose
10 
business includes the installation of microgrid systems, power generation
11 
assets, 
or other associated 
power delivery 
systems 
in 
unserved 
or
12 
underserved areas nationwide;
13 
I) National Power Corporation - Small Power Utilities Group (NPC-SPUG) areas
14 
refers to a geographical area currently being served by the NPC-SPUG or by a
15 
new power provider, and may be an underserved area;
16 
m) New power provider (NPP) refers to MSPs who have taken over the function
17 
of National Power Corporation - Small Power Utilities Group (NPC-SPUG)
18 
through the mechanism of privatization provided by the Department of
19 
Energy (DOE) consistent with Republic Act No. 9136, otherwise known as the
20 
Electric Power Industry Reform Act of 2001, and whose functions are further
21 
defined under this Act;
22 
n) Qualified Third Party (QTP) refers to MSPs which serve as the alternative
23 
electric service provider authorized to serve remote and unviable areas under
24 
Republic Act No. 9136, and whose functions are further defined under this Act
25 
o) Remote and unviabie area refers to a geographical area within the franchise
26 
of a DU where immediate extension of distribution lines is not feasible, and
27 
may be an unserved or underserved area;
28 
p) Universal charge refers to a non-bypassable charge which shall be passed on
29 
and collection from all end users on a monthly basis by the distribution
30 
utilities pursuant to Republic Act No. 9136;
31


1 
q) Underserved area refers to an area currently served by home power systems,
2 
microgrids, or DUs whose electricity services are less than twenty-four (24)
3 
hours daily because of non-implementation of applied capital expense
4 
projects, non-compliance with the service parameters of the Philippine
5 
Distribution Code, or any other reason, resulting to an overall failing mark
6 
based on the latest annual technical evaluation of performance of distribution
7 
systems in relation to ERC's imposed targets; and
8 
r) Unserved area refers to an area with no electricity access, no distribution
9 
system lines, no home power systems, or no connection to any microgrid.
10 
Sec. 5. Microgrid Systems in Unserved or Underserved Areas. - Microgrid
11 
systems shall be installed in unserved or underserved areas by accredited MSPs after
12 
the conduct of a competitive selection process in accordance with Sections 6 and 7
13 
of this Act: Provided, That the installation shall not require a waiver from the
14 
concerned DU and shall not revoke the DU's franchise over the said area: Provided
15 
further, That the installation of grid tied MSPs shall be within the annual penetration
16 
limit determined by the ERC in accordance with Section 6 of this Act: Provided
17 
finaiiy, That the permitting process of all MSPs shall comply with the time frames
18 
specified in this Act and with the provisions of Republic Act No. 11234, otherwise
19 
known as the Energy Virtual One Stop Shop Act.
20 
Accredited MSPs that operate in NPC-SPUG areas as NPPs, or remote or
21 
unviable areas as QTPs shall be subsidized through the universal charge for
22 
missionary electrification. Accredited MSPs that operate in unserved or underserved
23 
areas which are not NPC-SPUG areas or remote or unviable areas shall be
24 
unsubsidized.
25 
All rates charged by accredited MSPs, whether subsidized or unsubsidized,
26 
shall be equal to or lower than the applicable benchmark rate as determined by ERC
27 
in accordance with Section 6 of this Act: Provided, That transmission, distribution,
28 
wheeling, and universal charges imposed on end users, whenever applicable, shall
29 
continue to be regulated by the ERC.
30


1 
Sec. 6. Duties and Functions o f the Energy Regulatory Commission. -  In
2 
addition to its functions under Republic Act No. 9136, the ERC shall:
3 
a) Develop, establish, and promulgate the following within six (6) months from
4 
the effectivity of this Act, in consultation with the DOE, the National
5 
Transmission Corporation, the transmission concessionaire, the National
6 
Electrification Administration, the National Power Corporation, and other
7 
relevant government agencies and private stakeholders in the electric power
8 
industry:
9 
i. 
Parameters for the determination of the annual penetration limit and
10 
each DU's annual penetration limit: Provided, That DUs shall be
11 
necessary parties in the determination of their respective annual
12 
penetration limits. The ERC shall conduct a regular review of these
13 
parameters, and shall release all the annual penetration limits not later
14 
than December 15 of each preceding year;
15 
ii. 
Technical and service standards for microgrid systems, whether grid
16 
tied or on 
island 
mode both for operations 
in 
unserved 
and
17 
underserved areas: Provided, That these standards shall be compliant
18 
with the Philippine Distribution Code, Philippine Grid Code, and other
19 
relevant rules and regulations;
20 
lii. 
Rules for grid tied microgrid systems to buy and sell from the grid,
21 
whenever applicable: Provided, That this shall not result to increased
22 
retail rates for other end users, or compromise grid stability; and
23 
iv. 
An accreditation mechanism for MSPs: Provided, That such procedure
24 
shall be no longer than thirty (30) calendar days: Provided further,
25 
That the list of accredited MSPs shall be updated, published, and
26 
posted on the ERC and DOE websites not later than January 15 of
27 
every year.
28 
b) Monitor the operations of all awarded MSPs and their respective contracts:
29 
Provided, That the ERC, upon complaint or motu proprio, can conduct a
30 
review of an awarded MSP's operations and the corresponding contract


1 
should it find reasonable grounds for non-compliance with the benchmark
2 
rate and other provisions of the standardized contract; and
3 
c) Exercise its rate making power through the determination of benchmark rates
4 
for different microgrid systems and 
standardized contracts based 
on
5 
technology, capacity, and other considerations: Provided, That the list of
6 
benchmark rates shall be updated, published, and posted on the ERC and
7 
DOE websites not later than December 15 of each preceding year.
8 
Sec. 7. Duties and Functions o f the Department o f Energy. -  In addition to its
9 
functions under Republic Act No. 7638, otherwise known as the Department of
10 
Energy Act of 1992, the DOE shall:
11 
a) Release and update a list of unserved and underserved areas as well as NPC-
12 
SPUG areas and remote or unviable areas: Provided, That the list shall be
13 
updated, published, and posted on the ERC and DOE websites not later than
14 
January 15 of each preceding year;
15 
b) Create an annual schedule of competitive selection process based on the list
16 
of unserved and underserved areas: Provided, That the schedule shall be
17 
published and posted on the ERC and DOE websites not later than January 15
18 
of the current year;
19 
c) Establish and conduct a simple, uniform, and streamlined process for
20 
competitive selection of MSPs, whether subsidized or unsubsidized: Provided,
21 
That the entire procedure from commencement to submission to the ERC of
22 
the awarded contract shall be no longer than ninety (90) calendar days:
23 
Provided further. That information on interested MSPs and their respective
24 
proposed systems and rates shall be made available to end users in the
25 
concerned area within five (5) days from the MSP’s submission of the intent
26 
to participate; and
27 
d) Determine a detailed procedure for the transition of electricity service from
28 
DUs to awarded MSPs in underserved areas: Provided, That such transition
29 
shall not exceed three (3) months from the award of the contract through no
30 
fault of the awarded 
MSP.
31


1 
Sec. 8. Microgrid Systems ofEiectric Power Industry Participants. - Generation
2 
companies, DUs, retail electricity suppliers, and their respective subsidiaries or
3 
affiliates may engage in the business of MSPs in unserved and underserved areas:
4 
Provided, That a separate account is maintained for such business undertaking.
5 
Sec. 9. Effect o f Grid Extension. - In the event that the grid is extended to
6 
previously unserved, NPP, or QTP areas, the DU shall have the option to acquire the
7 
distribution system of the MSP upon the expiration of the MSP contract, subject to
8 
the approval of the ERC.
9 
Sec. 10. Prohibited Acts. -  Any person, natural or juridical, is prohibited from 
10 
the following acts:
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
a) Refusal to allow the installation of any microgrid system: Provided, That the 
requirements under Sections 5, 6, and 7 of this Act are complied with;
b) Imposition of new charges and contractual terms on the end user which are 
not part of the benchmark rate and awarded MSP contract;
c) Refusal to allow a DU to acquire an MSP distribution system: Provided, That 
the DU has a franchise over the area and the acquisition is in accordance with 
Section 9 of this Act; and
d) Failure to comply with the duties, obligations, and time frames specified in 
Sections 6 and 7 of this Act.
Sec. 11. Penalties. -  The responsible officers and employees of any 
establishment or organization, whether public or private, who commits the following 
prohibited acts of this Act shall, upon conviction, suffer the following penalties:
a) Violation of Section 11 (a) - Imprisonment of six (6) years to eight (8) years, 
or a fine ranging from a minimum of Seventy five million pesos 
(P75,000,000.00) to One hundred million pesos (PI00,000,000.00), upon the 
discretion of the court;
b) Violation of Section 11 (b) - Imprisonment of four (4) years to six (6) years, 
or a fine ranging from a minimum of Fifty million pesos (P50,000,000.00) to 
Seventy five million pesos (P75,000,000.00), upon the discretion of the court; 
and


1 
c) Violation of Section 11 (c) - Imprisonment of two (2) years to four (4) years,
2 
or a fine ranging from a 
minimum of Twenty five million pesos
3 
(P25,000,000.00) to Fifty million pesos (P50,000,000.00), upon the discretion
4 
of the court.
5 
Any person who willfully aids or abets the commission of these prohibited acts
6 
or who causes the commission of any such act by another shall be liable in the same
7 
manner as the principal. In cases of an association, partnership, or corporation, the
8 
penalty shall be imposed on the member, partner, president, chief operating officer,
9 
chief executive officer, director, or officer responsible for the violation.
10 
Any person found guilty of violating Section 11 (d) of this Act shall be
11 
penalized as follows:
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
a) First offense - Thirty (30) days suspension without pay and mandatory 
attendance in Values Orientation Program;
b) Second offense -Three (3) months suspension without pay; and
c) Third offense - Dismissal and perpetual disqualification from public service, 
and forfeiture of retirement benefits.
Sec. 
12. 
Congressional Oversight. -  The Joint Congressional Energy 
Commission shall exercise oversight powers over implementation of this Act. The 
DOE and ERC shall submit annually to the Joint Congressional Energy Commission a 
thorough report on the implementation of this Act not later than 15 March of every 
year: Provided, That the report shall include identification of legislative gaps, if any, 
and recommended ways forward.
Sec. 13. Implementing Rules and Regulations. -  The DOE, in consultation 
with the appropriate government agencies mentioned herein and electric power 
industry stakeholders, shall issue the implementing rules and regulations of this Act 
within sixty (60) days upon its effectivity.
27


2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
1
Sec. 14. Amendatory Clause. -  This Act amends Section 43 of the Electric 
Power Industry Reform Act of 2001 insofar as the rights, obligations, and powers of 
the ERC are concerned.
Sec. 15. Separability Clause. -  If any portion or provision of this Act is 
declared unconstitutional, the remainder of this Act or any provisions not affected 
thereby shall remain in force and effect.
Sec. 16. Repealing Clause. -  Any law, presidential decree or issuance, 
executive order, letter of instruction, rule or regulation inconsistent with the 
provisions of this Act is hereby repealed or modified accordingly.
Sec. 17. Effectivity Clause. - This Act shall take effect fifteen (15) days 
following its complete publication in the Official Gazette or a newspaper of general 
circulation.
Approved,