DOE adopts PE2 inputs for ESCO certification guidelines in 2nd PubCon

Date Published: 
July 9, 2020
  • (Screenshots: PE2, DOE)
    (Screenshots: PE2, DOE)

MAKATI CITY, 9 July 2020 – The Department of Energy (DOE), through its Energy Utilization Management Bureau (EUMB), confirmed during the 2nd Public Consultation (PubCon) held earlier today for the energy service company (ESCO) certification guidelines that most of the officially submitted recommendations of the Philippine Energy Efficiency Alliance (PE2) were incorporated in the draft Department Circular (DC) on the  Guidelines in the Administration, Classification and Certification of Energy Service Company.

PE2 noted that the draft DC incorporates the Alliance’s previous recommendation that all ESCOs, regardless of ownership by nationality, be registered under the laws of the Philippines.

In an earlier letter dated 5 June 2020, PE2 explained that while the EE&C Act allows both Filipino and foreign-owned enterprises to be ESCOs, to participate in energy efficiency projects, and to avail of the available incentives, especially considering the country’s desire to grow the energy efficiency and conservation industry, there is a legitimate concern involving the need to prevent foreign fly-by-night entities which are unable to seriously sustain their ESCO businesses in the Philippines from abandoning their contracts with their customers eroding the customers’ confidence in the industry, and raising doubts on the credibility of the ESCO performance contracting business model.

It is PE2’s position that in order for any foreign-owned ESCO to faithfully deliver its obligations under long-term ESCO performance contracts, there is a need to ensure that foreign-owned ESCOs should be duly registered or licensed to operate under the appropriate sufficiently capitalized business entity under Philippine law. Particularly, such entities which have more than forty percent (40%) foreign ownership must have a paid-in equity capital in accordance with the Foreign Investments Act.

PE2 saw the need for the guidelines to limit the registrable foreign-owned entities to: (a) domestic corporations with foreign equity duly registered with the Securities and Exchange Commission (“SEC”) and (b) branch offices of foreign corporations duly licensed by the SEC, with both compliant with pertinent capitalization requirements set by law.

PE2 noted that DOE has reworded Section 4.0, adopting the PE2-recommended definition of the legal entity:

“Section 4. Classification of ESCO. Businesses seeking to be classified as an ESCO, whether fully Filipino-owned or up to fully foreign-owned, must be duly registered with the Securities and Exchange Commission or the Department of Trade and Industry or licensed as a branch office by the Securities and Exchange Commission, in compliance with the applicable laws of the Philippines, including Republic Act No. 11232 or the Revised Corporation Code and Republic Act No. 7042 or the Foreign Investments Act.”

Recognizing the diversity of service offerings of various ESCOs, PE2 also thanked DOE for adopting PE2’s recommended language for the first Assurance under Annex A of the draft guidelines, which reads:

“I represent that the applicant is a business duly registered or licensed under the laws of the Philippines, and intends to engage in the business of an Energy Service Company (“ESCO”) as regulated by Republic Act No. 11285 and its implementing rules and regulations. I further represent that as an ESCO, the applicant seeks to offer its clients services which may include one or more of the following activities: energy supply and management, energy investment, technical engineering expertise and consultancy, equipment supply, installation, operation, maintenance and upgrade, and/or monitoring and verification of performance and savings.”

DOE likewise adopted the PE2 suggestions in a follow-up letter dated 1 July 2020 to correct minor editorial oversights such as the inclusion of business registration as a documentary requirement of sole proprietorships and the insertion of language deferring the requirement of Energy Auditors for both Registered ESCO and Certified ESCO until after the certification guidelines would be in place for Energy Auditors.

DOE however did not accept PE2’s resubmitted recommendation for a non-profit ESCO association to endorse ESCO applications, citing the need of DOE to process applications under the timelines allotted under Ease of Doing Business regulations.

The DOE discussions were led by EUMB Director Patrick T. Aquino. The 2nd PubCon was opened with messages from Senior Undersecretary Jesus Cristino P. Posadas and Assistant Secretary Gerardo D. Erguiza, Jr.

PE2 representatives were led by Alexander Ablaza, Theresa Acedillo-Lapuz, Raymond A. Marquez, Bienvenido C. Gonzales and Luigi Eusebio of the PE2 Secretariat. PE2 member representatives in the Zoom meeting included Lester Pelaez (MServ), Mycel Lava-Olesco (Engie Services), Niño Falamig (CCAC) and John Charles Altomonte (Green Bay). Other PE2 member firms such as OSP ESCO International, Daikin and Newton Electrical participated by FB video live stream.

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Philippine Energy Efficiency Alliance Inc. (PE2), is a non-stock, non-profit organization of energy efficiency market stakeholders.

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R.A. 11285 - An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, and Granting Incentives to Energy Efficiency and Conservation Projects

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