FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF TFIE PHILIPPINES 
) 
First Regular Session 
1 
S E N A T E  
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
This bill seeks to provide impetus for the government's efforts to promote 
renewable energy thru legislation that would institutionalize its use, develop the 
national and local capabilities in the use of renewable energy systems and provide fiscal 
and non-fiscal incentives to participants in the renewable energy sector. 
In the years 2004-2006, international oil prices have hit an all-time high largely 
due to steep demand from China and India in light of their increased economic 
activities and other factors such as the declining spare production, refining capacity and 
speculative trading activities such as terror alerts in the United States, unresolved tax 
problems between Yukos and the Russian Government, and sabotage activities on Iraqi 
pipelines. As government has no control over international oil price surges and has no 
resources to subsidize oil prices, there are the resulting increases in the domestic prices 
of oil products. Consequently, prices of basic commodities and transportation fare rose, 
as fuel prices have direct effects on the power and transport sector. 
After such episode, energy independence became the government's priority. The 
development of renewable energy potential to sustain efficient energy supply and 
demand chain and the use of alternative fuels and technologies to promote fuel 
efficiency, reduce dependence on imported fuel, generate forex savings from fuel 
displacement, expand opportunity for coconut and sugar farmers, and improve air 
quality were seriously considered. 
In the Philippine Energy P h i  for 2004-2010, one of the main strategies for energy 
independence is the development of renewable energy. For renewable energy 
development, the government has to strive to be the geothermal energy world leader, 
largest producer of wind power and solar manufacturing hub in Southeast Asia and 
pursue the development of hydropower plants and biomass projects. Renewable energy 
includes, but not limited to, geothermal energy, wind energy, solar energy, hydropower 
energy, biomass and clean development mechanism and the emerging carbon market. 
Legislation that will provide the necessary mechanism and infrastructure is 
needed to promote and enhance the development, utilization and commercialization of 
renewable energy resources in the country. This bill aims to respond to such need by 
enacting a Renewable Energy Act of 2007. 


Under this proposed measure, renewable energy resources refer to energy 
resources that do not have upper limit on the total quantity to be used. Such resources 
are renewable on a regular basis, and whose renewal rate is relatively rapid to consider 
availability over an indefinite period of time. These include among others biomass, 
solar, wind, geothermal, ocean energy, and run-of-river hydropower conforming to 
internationallv-accepted norms and standards on dams, and other emerging energy 
technologies. 
Furthermore, to encourage suppliers of electricity to contribute to the growth of 
renewable energy market, a renewable portfolio standard (RPS) is hereby imposed on 
all suppliers of electricity, requiring them to source an agreed portion of their energy 
supply from eligible renewable energy resources. 
Moreover, to promote participation in the utilization and development of 
renewable energy, the following incentives in proportion to their renewable energy 
components shall be given to developers of renewable facilities, including hybrid 
systems: 
1. within the first 10 years of a renewable energy operating contract, importation of 
machinery and equipment, and materials and parts thereof, including its control 
and communication equipment, shall not be subject to tariff duties and value- 
added tax; 
2. for the first 6 years of its commercial operations, the renewable energy operating 
contract holder shall be exempt from income taxes levied by the National 
Government. 
Finally, this proposed measure establishes a Renewable Energy Trust Fund 
(RETF) administered by the Department of Energy to enhance the development and 
greater utilization of renewable energy to finance the research, development, 
demonstration and promotion of the widespread and productive use of renewable 
energy systems for power and non-power applications. 
In view of the foregoing, immediate passage of this bill is earnestly requested. 
Senator 


FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
Introduced by Senator Loren Legarda 
AN ACT 
PROMOTING AND ENHANCING THE DEVELOPMENT, UTILIZATION AND 
COMMERCIALIZATION OF RENEWABLE ENERGY RESOURCES 
Be it enacted by fhe Senate and the Honse of Representutiwes of the Philippines in 
Congress assembled: 
CHAPTER I 
TITLE AND DECLARATION OF POLICIES 
SECTION 1. Short Title -This Act shall be known as the "Reneuiable Energy Act of 
2007" 
SECTION 2. Declarah'on of Policies. - It is hereby declared the policy of the 
State to: 
a) Promote the development of renewable energy resources to further 
reduce the country's reliance on generation systems powered by 
imported fuels to minimize exposure of the economy to price 
fluctuations in the international markets, the effects of which spiral 
down to almost all sectors of the economy; 
b) Increase the utilization of renewable energy by institutionalizing its 
use, including the development of national and local capabilities in the 
use of renewable energy systems, by providing fiscal and non-fiscal 
incentives; and, 
c) Establish the necessary infrastructure and mechanism to carry out the 
mandates specified in this Act and other existing laws. 
SECTION 3. Scope. - This Act shall establish the framework for the advancement 
and accelerated development of renewable energy resources, including the grant of 
fiscal and non-fiscal incentives to all renewable energy activities; and the program to 
increase its utilization. 


SECTION 4. Definition of Terns. - The following terms as used in this Act shall 
be defined as follows: 
a. 
b. 
C. 
d. 
e. 
f. 
g. 
h. 
i. 
1. 
k. 
1. 
Biomass Energy Systems refer to energy systems which use biomass 
resources to produce heat, steam, mechanical power or electricity through 
either thermochemic-!, biochemical or physico-chemical processes; 
Biomass Resources refer to natural or processed plants and plant 
materials, trees, crop residues, wood and bark residues, and animal 
manure or any organic or biodegradable matter that can be used in 
bioconversion process; 
Board of Investments (BOI) refers to an attached agency of the 
Department of Trade and Industry created under Republic Act No. 5 186, 
as amended; 
Co-generation systems refer to facilities which produce electrical and/or 
mechanical energy and forms of useful thermal energy such as heat or 
steam which are used for industrial, commercial heating or cooling 
purposes through the sequential use of energy; 
Department of Energy (DOE) refers to the government agency created 
pursuant to Republic Act No. 7638 whose functions are expanded in 
Republic Act No. 91% and further expanded in this Act, which shall be 
the lead agency mandated to implement the provisions of this Act; 
Department of Environment and Natural Resources (DENR) refers to the 
government agency created pursuant to Executive Order No. 192 
Department of Finance @OF) refers to the government agency created 
pursuant to Executive Order No. 127, as amended; 
Department of Science and Technology (DOST) refers to the government 
agency created pursuant to Executive Order No. 128; 
Department of Trade and Industry (DTI) refers to the government agency 
created pursuant to Executive Order No. 133; 
Distributed generation refers to a system of small generation entities 
supplying directly to the distribution grid, any one of which shall not 
exceed 100 kW in capacity; 
Distribution of Electricity refers to the conveyance of electricity by a 
Distribution Utility through its distribution system pursuant to the 
provision of Republic Act No. 9136 and its implementing rules and 
regulations, 
Distribution Utility (DU) refers to any electric cooperative, private 
corporation, government-owned utility or existing local government unit 
which has an exclusive franchise to operate a distribution system in 
accordance with its franchise and Republic Act No. 9136; 


m. 
Energy Regulatory Commission (ERC) refers to the independent quasi- 
judicial regulatory agency created pursuant to Republic Act No. 9136; 
Generation Company refers to any person or entity authorized by the ERC 
to operate facilities used in the generation of electricity 
n. 
0. Generation Facility refers to a facility for the production of electricity 
and/ or thermal energy such as but not limited to steam, hot or cold water; 
p. Geothermal Energy refers to all geothermal fluids whether existing 
naturally or formed by the artificial introduction of fluids into naturally 
hot formation, heat energy in the earth, and any by-product derived from 
them; 
q. Geothermal Energy Systems refers lo machines or other equipment that 
converts geothermal energy into useful power, 
r. Geothermal Resources refers to mineral resources, classified as renewable 
energy resource, in the form of: (a) all products of geothermal processes, 
embracing indigenous steam, hot water, and hot brines; (b) steam and 
other gases, hot water, and hot brines resulting from water, gas, or other 
fluids artificially introduced into geothermal formations; (c) heat or 
associated energy found in geothermal formations; and (d) any by- 
product derived from them; 
s. 
Government Share refers to the amount due the National Government 
and Local Government Units from the exploitation, development, and 
utilization of naturally occurring renewable energy resources; 
Green Energy Option refers to the mechanism to empower end-users to 
choose renewable energy in meeting their energy requirements; 
Grid refers to the high voltage backbone system of interconnected 
transmission lines, substations, and related facilities, located in each of 
Luzon, Visayas, and Mindanao, or as may otherwise be determined by the 
ERC in accordance with the implementing rules and regulations of 
Republic Act No. 91 36; 
t. 
u. 
v. 
Hybrid Systems refer to any power or energy generation facility which 
makes use of two or more types of technologies utilizing both 
conventional and/or renewable fuel sources, such as, but not limited to, 
integrated solar wind systems, biomadfossil fuel systems, hydro/fossil 
fuel systems, integrated solar biomass systems, integrated wind/ fossil 
fuel systems, with a minimum of ten (10) megawatts or ten percent (10%) 
of the annual energy output provided by the RE component; 
w. 
Hydroelectric Power Systems or Hydropower Systems refer to water- 
based energy systems which produce electricity by utilizing the kinetic 
energy of falling or running water to turn a turbine generator; 
x. 
Hydroelectric Power Development or Hydropower Development refers 
to the construction and installation of a hydroelectric power-generating 


Y. 
2. 
aa. 
bb. 
cc. 
dd. 
ee. 
ff. 
gg. 
gg. 
ii. 
jj. 
plant and its auxiliary facilities, such as diversion structure, headrace, 
penstock, substation, transmission, and machine shop, among others; 
Hydroelectric Powti Resources or Hydropower Resources refer to water 
resources found technically feasible for development of hydropower 
projects which include rivers, lakes, waterfalls, irrigation canals, springs, 
ponds, and other water bodies; 
Micro-scale Project refers to an RE project with capacity not exceeding 
one hundred (100) kilowatts; 
Missionary Electrification refers to the provision of basic electricity 
service in unviable areas with the aim of bringing the operations in these 
areas to viability levels; 
National Power Corporation refers to the government corporation 
created under Republic Act No. 6395, as amended by Republic Act No. 
9136; 
National Transmission Corporation (TRANSCO) refers to the 
corporation created pursuant to Republic Act No. 9136 responsible for the 
planning, construction, and centralized operation and maintenance of 
high voltage transmission facilities, including grid interconnection and 
ancillary services; 
Net Metering refers to a system, appropriate for distributed generation, 
in which a distribution grid user has a two-way connection to the grid 
and is only charged for his net electricity consumption and is credited for 
any overall contribution to the electricity grid; 
Ocean Energy Systems refer to energy systems which convert ocean or 
tidal current, ocean thermal gradient or wave energy into electrical or 
mechanical energy; 
Off-Grid Systems refer to electrical systems not connected to the wires 
and related facilities of the On-Grid Systems of the Philippines; 
On-Grid System refers to electrical systems composed of interconnected 
transmission lines, distribution lines, substations, and related facilities for 
the purpose of conveyance of bulk power on the Grid of the Philippines; 
Philippine Electricity Market Corporation (PEMC) refers to the 
Corporation incorporated upon the initiative of the DOE composed of all 
WESM Members and whose Board of Directors will be the PEM Board; 
Renewable Energy (Systems) Developers or RE Developers refer to 
individual or a group of individuals formed in accordance with existing 
Philippine Laws engaged in the exploration, development and 
utilization of RE resources and actual operation of RE systems/facilities; 
Renewable Energy Market (REM) refers to the market where the 
trading of the RE certificates equivalent to an amount of power 
generated from RE resources is made; 


kk. 
Renewable Energy Policy Framework (REPF) refers to the long-term 
Policy developed by the DOE which identifies among others, the goals 
and targets for the rlwelopment and utilization of renewable energy in 
the country; 
Renewable Energy Portfolio Standards (REPS) refer to a market-based 
Policy that requires electricity suppliers to source an agreed portion of 
their energy supply from eligible RE resources; 
11. 
mm. Renewable Energy Service (Operating) Contract (RE Contract) refers to 
nn. 
00. 
PP. 
44. 
rr. 
the service agreement between the Government, thru the DOE, and RE 
Developer over a period in which the RE Developer has the exclusive 
right to a particular RE area for exploration and development. The RE 
Contract shall be divided into two (2) stages: the pre-development stage 
and the development/commercial stage. The preliminary assessment 
and feasibility study up to financial closing shall refer to the pre- 
development stage. The construction and installation of facilities up to 
operation phase shall refer to the development stage; 
Renewable Energy Resources (RE Resources) refer to energy resources 
that do not have ar Jlpper limit on the total quantity to be used. Such 
resources are renewable on a regular basis, and whose renewal rate is 
relatively rapid to consider availability over an indefinite period of time. 
These include, among others, biomass, solar, wind, geothermal, ocean 
energy, and run-of-river hydropower conforming with internationally- 
accepted norms and standards on dams, and other emerging energy 
technologies; 
Renewable Energy Systems (RE Systems) refer to energy systems which 
convert RE resources into useful energy forms, like electrical, mechanical, 
etc.; 
Republic Act No. 9136 or Electric Power Industry Reform Act of 2001 
refers to the law mandating the restructuring of the electric power sector 
and the privatization of the NPC; 
Rural Electrification refers to the delivery of basic electricity services, 
Consisting of power generation, sub-transmission, and/or extension of 
associated power &!.-livery system that would bring about important 
social and economic benefits to the countryside; 
Solar Energy refers to the energy derived from solar radiation that can be 
converted into useful thermal or electrical energy; 
ss. Solar Energy Systems refer to energy systems which convert solar energy 
into thermal or electrical energy; 
tt. Small Power Utilities Group (SPUG) refers to the functional unit of the 
NPC mandated under Republic Act No. 9136 to pursue missionary 
electrification function; 
uu.Supplier refers to any person or entity authorized by the ERC to sell, 
broker, market or aggregate electricity to the end-users; 


vv. Transmission of Electricity refers to the. conveyance of electric power by 
TRANSCO or its buyer/concessionaire in accordance with its franchise 
And Republic Act No. 9136; 
ww. Wind Energy refers to the energy that can be derived from wind that is 
converted into useful electrical or mechanical energy; 
xx. Wind Energy Systems refer to the machines or other related equipment 
that convert wind energy into useful electrical or mechanical energy; 
Wholesale Electricity Spot Market (WESM) refers to the wholesale 
electricity spot market to be created pursuant to Republic Act No. 9136. 
xx. 
CHAPTER I1 
ON-GRID RENEWABLE ENERGY DEVELOPMENT 
SECTION 5. Renewable Portfolio Standard (RPS). - All stakeholders in the 
electric power industry shall contribute to the growth of the REM of the country. To 
provide impetus in the acknowledged market-driven electric power industry, an RPS is 
hereby imposed on all suppliers of electricity. Towards this end, the DOE shall, upon 
the recommendation of the National Renewable Energy Board (NREB) created under 
Section 18 of this Act, formulate and promulgate the RPS Rules on a per grid basis 
within three (3) years upon the effectivity of this Act which shall include, but not be 
limited to, the following: 
a) Types of RE resources and identification and certification of generating 
facilities using said resources that shall be required to comply with the RPS 
obligation; 
b) Yearly minimum RPS requirements upon the establishment of the RPS Rules; 
c) Annual minimum incremental percentage of electricity sold by each 
electricity supplier which is required to be sourced from eligible RE resources 
and which shall not be less than one percent (1%) 
per year over the next ten 
(10) years; and, 
' 
d) Means of compliance by mandated electricity suppliers of the minimum 
percentage set by the government to meet the RPS requirements including 
direct generation from eligible RE resources, contracting for energy sourced 
from eligible RE facilities, or trading in the REM under Section 6 of this Act. 
Immediately upon effectivity of this Act, DOE shall, jointly with electric power 
industry participants, likewise develop and implement a preparedness program to 
irdorm, educate and prepare all stakeholders in the industry. 
The ERC shall enforce the implementation of the RPS Rules by undertaking 
necessary activities such as certifying generating facilities using eligible RE resources, 
prescribing reportorial obligations related to RPS compliance and administration of 
penalties for non- compliance or violation of RF'S Rules, among others. Further, ERC 
shall be responsible for the handling of complaints that may arise between and among 
parties from any transactions related to RPS compliance by electricity suppliers. 


The R E  shall apply only to newly-installed capacity upon the effectivity of this 
Act and may be complied with tp either directly generating from renewable sources, 
Contracting for energy sourced from RE facilities or trading for renewable energy in the 
REM. 
SECTION 6. Renewable Energy Market (REM). - To facilitate compliance with 
Section 5 of this Act, the DOE shall establish the REM and shall direct PEMC to 
implement changes to the WESM Rules in order to incorporate the rules specific to the 
operation of the REM under the WESM. 
The PEMC shall, under the supervision of the DOE, establish a RE Registrar that 
shall issue, keep and verify RS Certificates corresponding to energy generated from 
eligible RE resources. Such certificates will be used for compliance with the RPS. For 
this purpose, a transaction fee, agreed upon by the industry participants, may be 
imposed by PEMC. 
SECTION 7. Green Energy Option. - The DOE shall establish a Green Energy 
Option program which provides end-users the option to choose RE resources. In 
consultation with the NREB, the DOE shall promulgate the appropriate implementing 
rules and regulations which art. Liecessary, incidental or convenient to achieve the 
objectives set forth herein. 
Upon the determination of the DOE of its technical viability, end users with a 
monthly average of at least 1 0 0  kW may directly contract for RE based energy. 
Consistent herewith, TRANSCO, DUs, PEMC and all relevant parties are hereby 
mandated to provide the mechanisms for the physical connection and commercial 
arrangements necessary to ensure the success of the Green Energy Option. 
SECTION 8. Net-metering for Renewable Energy. - Subject to technical 
considerations and without discrimination and upon request by distribution end-users, 
the distribution utilities shall enter into net-metering agreements with qualified 
distribution grid users up to a distributed generation market share of one percent (1 %) 
of peak distribution grid demand. 
The ERC, in consultation with electric power industry participants, shall 
establish net metering interconnection standards and pricing methodology within six 
(6) months upon the effectivity of his Act. 
The distribution utility shall be entitled to any RE Certificate resulting from RE 
distributed generation for sale or use in the US. 
The DOE, ERC, TRANSCO, DUs, PEMC and all relevant parties are hereby 
mandated to provide the mechanisms for the physical connection and commercial 
arrangements necessary to ensure the success of the Net-metering for Renewable 
Energy program, consistent with the Grid and Distribution Codes. 
SECTION 9. Transmission and Distribution System Development. - TRANSCO 
or its buyer/concessionaire and all DUs, shall include the required connection facilities 
for RE- based power facilities in the Transmission and Distribution Development Plans, 
provided that such facilities are economically-viable, subject to the approval of the 
DOE. The connection facilities of RE power plants, including the extension of 


transmission and distribution lines, shall not be subject to deep-connection charging 
policies in rate-making. 
CHAPTER I11 
OFF-GRID RENEWABLE ENERGY DEVELOPMENT 
SECTION 10. Off-Grid Areas. - Within two (2) years from the effectivity of this 
Act, NPC-SPUG or its successors-in-interest and/or qualified third parties in off-grid 
areas shall, in the performance of its mandate to provide missionary electrification, 
source a minimum percentage of its total annual generation upon recommendation of 
the NREB from available RE resources in the area concerned, as may be determined by 
the DOE. 
As used in this Act, successors-in-interest refer to entities deemed technically and 
financially capable to serve/ take over existing NPC-SPUG areas. 
Eligible RE generation in missionary areas shall be eligible for the provision of 
RE Certificates defined in Section 6 of the Act. 
CHAPTER IV 
GOVERNMENT SHARE 
SECTION 11. Government Share. - The government share on RE development 
projects shall be equal to at least one and one-half percent (1.5%) of the gross proceeds 
for all RE resources except for geothermal which shall be at least two percent (2%) of the 
gross proceeds. 
To further promote the development of RE projects, the government hereby 
waives its share from the proceeds of micro-scale projects for communal purposes and 
non-commercial operations, which are not greater than one hundred (100) kilowatts. 
CHAPTER V 
ENVIRONMENTAL COMPLIANCE 
SECTION 12. Compliance with Environmental Regulations. - All RE 
explorations, development, utilizati.on, and RE systems operations shall be conducted in 
accordance with existing environixntal regulations as prescribed by the DENR and/or 
any other concerned government agency. 
CHAPTER VI 
GENERAL INCENTIVES 
SECTION 13. Incentivesfor Renewable Energy Projects and Activities. - As duly 
certified by the DOE, RE developers of renewable facilities, including hybrid systems, 
for both power and non-power applications, shall be entitled to the following incentives 
in proportion to their RE components: 
a. Value-Added Tax, Duty-free Importation and Subsequent Sale of RE 
Machinery, Equipment and Materials. - Within the first ten (10) years of an 
RE operating contract, importation of machinery and equipment, and materials 
and parts thereof, including its control and communication equipment, shall not 


be subject to tariff duties and value-added tax; Provided, however, That the said 
machinery, equipment, materials and parts are: 
1. Not manufactured domestically nor locally available in reasonable 
quantity and quality; 
2. Directly and actually needed and used exclusively in the RE facilities for 
transformation into energy, and transmission of electric energy to the 
point of 'use; and, 
3. Covered by shipping documents in the name of the duly registered 
Operator to whom the shipment will be directly delivered by customs 
authorities: 
Provided further, That approval by the DOE is obtained before the 
importation of such machinery, equipment, materials and parts are made. 
Approval of the DOE must be secured before any sale, transfer or 
disposition of'the imported capital equipment, machinery or spare parts is 
made; Provided, however, That if such sale, transfer or disposition is made 
within the first five'(5) years from the date of importation, any of the 
following conditions must be present: 
(1) If made to another RE developer enjoying tax and duty exemption on 
imported capital equipment; 
(2) If made to another RE developer, upon payment of any taxes and 
duties due on the net book value of the capital equipment to be sold; 
(3) Exportation of the capital equipment, machinery, spare parts or source 
document or those required for RE development; and 
(4) For reasons of proven technical obsolescence. 
When the aforementioned saie, transfer or disposition is made under any 
of the conditions provided for in the foregoing paragraphs other than 
paragraph (2), the RE developer shall not pay the taxes and duties waived 
on such items; Providedfurther, That if the RE developer sells, transfers or 
disposes the aforementioned imported items without prior approval 
within five (5) years from the date of importation, the RE deve!3per and 
the vendee, transferee, or assignee shall be solidarily liable to pay twice 
the amount of tax and duty exemption given it: Provided, finally, That 
even if the saie, transfer or disposition of the capital equipment, 
machinery or spare parts is approved after five (5) years from the date of 
importation, the RE developer is still liable to pay the taxes and duties 
based on the net book value of the capital equipment, machinery or spare 
parts if it has violated any of its registration terms and conditions. 
Otherwise, it shall no longer be subject to the payment of the taxes and 
duties waived thereon. 
b. Tax Credit on Domestic Capital Equipment and Services. - A tax credit 
equivalent to one hundred percent (100%) of the value of the value-added tax 
and custom duties that would have been paid on the RE machinery, equipment, 


materials and parts had + b e  items been imported shall be given to an RE 
operating contract holder who purchases machinery, equipment, materials, and 
parts from a domestic manufacturer for purposes set forth in this Act; ?rovided, 
That prior approval by the DOE was obtained by the local manufacturer; 
Provided further, That the acquisition of such machinery, equipment, materials, 
and parts shall be made within the validity of the RE operating contract. 
c. Special Realty Tux Rates on Equipment and Machiney. - Any law to the 
contrary notwithstanding, realty and other taxes on civil works, equipment, 
machinery, and other improvements of a registered RE developer actually and 
exclusively used for RES facilities shall not exceed two and a half percent (2.5%) 
of their original cost. 
d. Income Tax Holiday (ITH) and Exemption. - For the first six (6) years of its 
commercial operations, the RE operating contract holder shall be exempt from 
income taxes levied by the National Government; Provided, That the RE 
developer complies with the following: (1) large capital investments or sizeable 
employment generation, or (2) use high level of technology, or (3) located in less 
developed areas as defined !;y the NREB. 
Additional investments in the project shall be entitled to ITH equivalent to such 
investments and may be entitled to additional income tax holiday for as long as 
investment is made in the same project, upon approval by the DOE: Provided, 
That the entitlement period for additional investments shall not exceed three 
times the period of the initial availment of the ITH. The Bureau of Internal 
Revenue (BIR) shall require an RE developer availing of the ITH or Net 
Operating Loss Carry-Over (NOLCO) to secure a certificate of eligibility from the 
DOE before filing an official copy of its Income Tax Return (ITR) with the BOI. 
Failure to secure certification and/or file the ITH or NOLCO availment for 
validation by the BO1 within forty-five (45) days from the last day of statutory 
filing date for ITR shall cause the forfeiture of the availment for the taxable 
period. 
e. Net Operating Loss Cavy-Over (NOLCO). - The NOLCO of the RE developer 
during the first three (3) years from the start of commercial operation which had 
not been previously offset as deduction from gross income shall be carried over 
as a deduction from gross hr6ome for the next five (5) consecutive taxable years 
immediately following the year of such loss: Provided, however, That operating 
loss resulting from the availment of incentives provided for in this Act shall not 
be entitled to NOLCO. RE developers availing of the ITH as in this Act provided 
shall not be entitled to avail of the NOLCO. 
f. Accelerufed Depreciation. - If, and only if, an RE project fails to receive an ITH 
before full operation, may it apply for Accelerated Depreciation in its tax books 
and be taxed based on such; Provided, That if it applies for Accelerated 
Depreciation, the project or its expansions shall no longer be eligible for an ITH. 
Accelerated depreciation of plant, machinery, and equipment that are reasonably 
needed and actually used for the exploration, development and utilization of RE 
resources may be depreciated using a rate not exceeding twice the rate which 
would have been used had the annual allowance been computed in accordance 
with the rules and regulations prescribed by the Secretary of the Department of 
Finance and the provisions of the National Internal Revenue Code (NIRC) of 
1997, as amended. . 


SECTION 14. Hybrid and Cogeneration Systems. - The tax exemptions and f or 
incentives provided for in Section 13 of this Act shall be availed of by RE operating 
contract holders of hybrid and cogeneration systems utilizing both RE sources and 
conventional energy; Provided, however, That the tax exemptions and incentives shall 
apply only to the equipment, machinery and/or devices utilizing RE resources. 
SECTION 15. Intermittent RE resources. - TRANSCO, in consultation with 
stakeholders, shall determine the maximum penetration limit of the Intermittent RE- 
based power plants to the Grid, through technical and economic analysis. Subject to 
limitations imposed by the need to ensure reliability and safety of the grid and taking 
into account any economic impact, qualified RE generating units with intermittent RE 
resources shall enjoy the benefit of priority dispatch in accordance with the WESM 
Rules, as amended. 
As used in this Act, RE generating unit with intermittent RE resources refers to a 
RE generating unit or group of units connected to a common connection point whose 
energy resource is location-specific and has a natural variability which renders the 
output unpredictable and the availability of the resource inherently uncontrollable, 
which include plants utilizing wind or ocean energy. 
SECTION 16. Incentives for RE Commercialization. - All manufacturers, 
fabricators and suppliers of locally-produced RE equipment and components duly 
recognized and accredited by the DOE, in consultation with DOST, DOF and DTI, shall 
be entitled to the following privileges: 
a. Tax and Duty-free Importation of Components, Parts and Materials. - All 
shipments necessary for the manufacture and/or fabrication of RE equipment 
and components shall be exempted from importation tariff and duties and value 
added tax: Provided, howe-cler, That the said components, parts and materials are: 
(i) not manufactured domestically in reasonable quantity and quality at 
competitive prices; (ii) directly and actually needed and shall be used 
exclusively in the manufacture/fabrication of RE! equipment; and (iii) covered 
by 
shipping 
documents 
in 
the 
name 
of 
the 
duly 
registered 
manufacturer/fabricator to whom the shipment will be directly delivered by 
customs authorities; Provided further, That prior approval of the DOE was 
obtained before the importation of such components, parts and materials; 
b. Tax Credit on Domestic Capital Components, Parts and Materials. - A tax credit 
equivalent 
to one hundred percent (100%) f the amount of the VAT and 
custom duties that would have been paid on the components, parts and 
materials had these items been imported shall be given to an RE equipment 
manufacturer, fabricator, and supplier duly recognized and accredited by the 
DOE who purchases RE components, parts and materials from a domestic 
manufacturer; Provided, That such components, and parts are directly needed 
and shall be used exclusively by the RE manufacturer, fabricator and supplier for 
the manufacture, fabrication and sale of the RE equipment. Provided further, That 
prior approval by the DOE was obtained by the local manufacturer, 
c. Income Tax Holiday and Exemption. - For six (6) years starting from the date 
of recognition/accreditation, an RE manufacturer, fabricator and supplier of RE 
equipment shall be fully exempt from income taxes levied by the National 
Government. 


SECTION 17. Period of Grant of Fiscal Incentives.- The fiscal incentives granted 
under this Act shall apply only to the first 2,500 MW of new RE capacity upon the 
effectivity of this Act or within twenty (20) years from the effectivity of this Act, 
whichever comes first. Thereafter, the tax treatment applicable on the parties concerned 
prior to the passage of this Act shall apply. 
CHAPTER VI1 
GENERAL PROVISIONS 
SECTION 18. Creation of the National Renewable Energy Board (NREB)). - The 
N E B is hereby created. It shall be composed of the Secretary of the DOE or his 
designated Undersecretary as chairman and the Secretaries or the designated 
Undersecretaries or Assistant Secretaries of the DTI, DOF and DENR, the Presidents or 
the duly designated representatives of the NPC, TRANSCO and PEMC; and one (1) 
representative each from the following sectors: RE developers, Government Financial 
Institutions (GFIs), private distribution utilities, electric cooperatives, suppliers, and 
non-governmental organizations, duly endorsed by their respective industry 
associations and appointed by the President of the Republic of the Philippines. 
The DOE Secretary or his designated Undersecretary, in his capacity as 
Chairman, shall, within one (1) month from the effectivity of this Act, convene the 
NREB. 
The NREB shall be assisted by a Technical Secretariat from the Energy Utilization 
Management Bureau of the DOE, thru the RE Management Division (REMD), and shall 
directly report to the Office of the Secretary or the Undersecretary of the Department, as 
the case maybe, on matters pertaining to the activities of the NREB. The number of staff 
of the Technical Secretariat and the creation of corresponding positions necessary to 
complement and/or augment the existing plantilla of the REMD shall be determined by 
the Board, subject to approval by the Department of Budget and Management (DBM) 
and to existing civil service rules and regulations. 
The NREB shall have the following powers and functions: 
(a) Evaluate and recommend to the DOE the mandated RPS and minimum RE 
generation capacities in off-grid areas, as it deems appropriate; 
(b) Recommend specific actions to facilitate the implementation of the National 
Renewable Energy Program (NREP) to be executed by the DOE and other 
appropriate agencies of government; 
(c) Monitor and review the implementation of the NREP, including compliance 
with the RPS and minimum RE generation capacities in off-grid areas; 
(d) Oversee and monitor the utilization of the Renewable Energy Trust Fund 
created pursuant to Section 19 of this Act and administered by the DOE; and, 
(e) Perform such other functions, as may be necessary, to attain the objectives of 
this Act. 


SECTION 19. Renewable Energy Trust Fund (RETF). - A RETF is hereby 
established to enhance the development and greater utilization of renewable energy. It 
shall be administered by the DOE as a special account in any of the GFIs. The RETF 
shall be exclusively used to: 
a) Finance the research, development, demonstration, and promotion of the 
widespread and productive use of RE systems for power and non-power 
applications; 
b) Support the development and operation of new RE resources to improve their 
competitiveness in the market; Provided, That the grant thereof shall be done 
through a competitive and transparent manner; 
c) Conduct nationwide resource and market assessment studies for the power 
and non-power applications of RE systems; 
d) Propagate RE know1ed.g- by accrediting, tapping, training, and providing 
benefits to institutions, entities and organizations which can extend the 
promotion and dissemination of RE benefits to the national and local levels; and, 
e) Fund such other activities necessary or incidental to the attainment of the 
objectives of this Act. 
Use of the fund may be through grants, loans, equity investments, loan 
guarantees, insurance, counterpart fund or such other financial arrangements necessary 
for the attainment of the objectives of this' Act; Provided, That the use or allocation 
thereof shall, as far as practicable, be done through in a competitive and transparent 
manner. 
The RETF shall be funded from: 
a) Proceeds from the emission fees collected from all generating facilities 
consistent with Republic Act No. 8749 or the Philippine Clean Air Act; 
b) One and 1/2 percent (1.5%) of the net annual income of the Philippine Charity 
Sweepstakes Office; 
c) One and 1/2 percent (1.5%) of the net annual income of the Philippine 
Amusement and Gaming Corporation; 
d) One and 1/2 percent (1.5%) of the net annual dividends remitted to the 
National Treasury of the Philippine National Oil Company and its subsidiaries; 
e) Contributions, grants and donations: Provided, That all contributions, grants 
and donations made to the RETF shall be tax deductible subject to the provisions 
of the National Internal Revenue Code. Towards this end, the BIR shall assist the 
DOE in formulating the Rules and Regulations to implement this provision; 
f) One and 1/2 percent (1.5%) of the proceeds of the Government share collected 
from the development and use of indigenous non-renewable energy resources; 
g) Any re<enue generated from the utilization of the RETF; and, 


h) Proceeds from the fines and penalties imposed under this Act. 
SECTION 20. Financial Assistance Program. - Government financial institutions 
such as the Development Bank of the Philippines (DBP), Land Bank of the Philippines 
(LBP), Phil-Exim Bank and other government financial institutions shall, in accordance 
with and to the extent allowed by the enabling provisions of their respective charters or 
applicable laws, provide preferential packages for the development, utilization and 
commercialization of RE projects as duly recommended and endorsed by the DOE. 
CHAPTER VI11 
FINAL PROVISIONS 
SECTION 21. Implementing Rules and Regulations (IRR). - Within six (6) 
months from the effectivity of this Act, the DOE shall, in consultation with the Senate 
and House Committees on Energ;:, relevant government agencies and RE stakeholders, 
promulgate the IRR of this Act. 
SECTION 22. Prohibited Acts. - The following acts shall be prohibited 
a) Non-compliance or violation of the RF'S rules; 
b) Willful refusal to undertake net metering arrangements with qualified 
distribution grid users; 
c) Falsification or tampering of public documents or official records to avail of 
the fiscal and non-fiscal incentives provided under this Act; and 
d) Non-compliance with the established guidelines that DOE will adopt for the 
implementation of this Act. 
SECTION 23. Pe?taIty Clause. - Any person, who willfully aids or abets the 
commission of a crime prohibited herein or who causes the commission of any such act 
by another shall be liable in the salite manner as the principal. 
In the case of association, partnership or corporations, the penalty shall be 
imposed on the partner, president, chief operating officer, chief executive officer, 
directors or officers responsible for the violation. 
The commission of any prohibited acts provided for under Section 23, upon 
conviction thereof, shall suffer the penalty of imprisonment of from one (1) year to five 
(5) years, or a fine ranging from a minimum of One Hundred Thousand Pesos 
(P100,OOO) to One Hundred Million Pesos (Pl,OOO,OOO.OO), 
or twice the amount of 
damages caused or costs avoided for non-compliance, whichever is higher, or both 
upon the discretion of the court. 
The DOE is further empowered to impose administrative fines and penalties for 
any violation of the provisions of this Act, its IRR and other issuances relative to this 
Act. 
This is without prejudice to the penalties provided for under existing 
environmental regulations prescfibed by the DENR and/or any other concerned 
government agency. 


SECTION 24. Official Development Assistance (ODA). - The provision of 
Executive Order No. 230 of 1986 and the rules and regulations governing the evaluation 
and authorization for the availment of ODA notwithstanding the privatization of RE 
facilities as provided for in this Act, shall be eligible for foreign loans and grants 
without further evaluation by the NEDA Board, subject to Section 21, Article XI1 of the 
Constitution. 
SECTION 25. Separability Clause. - If any provision of this Act is held invalid or 
unconstitutional, the remainder of the Act or the provision not otherwise affected shall 
remain valid and subsisting. 
SECTION 26. Repeazing Clause. - Any law, presidential decree or issuance, 
executive order, letter of instruction, administrative, rule or regulation contrary to or 
inconsistent with the provisions of this Act is hereby repealed, modified or amended 
accordingly. 
SECTION 27. Effectivity Clause. - This Act shall take effect fifteen (1 5) days 
after its publication in at least two (2) newspapers of general circulation. 
APPROVED,