PE2 submits new post-PubCon comments on ESCO certification guidelines

Date Published: 
June 5, 2020
  • Screenshot from DOE presentation during the PubCon on 29 May 2020. (Image: DOE)
    Screenshot from DOE presentation during the PubCon on 29 May 2020. (Image: DOE)

MAKATI CITY, 5 June 2020 – The Philippine Energy Efficiency Alliance (“PE2”) submitted to the Department of Energy (DOE) earlier today its additional comments on the Draft Department Circular on the Guidelines, Rules and Procedures in the Administration, Classification and Certification of Energy Service Companies (ESCOs), as presented by DOE during the First Virtual Public Consultation (PubCon) on the said guidelines on 29 May 2020

The PE2 letter of 5 June 2020, issued by its president Alexander Ablaza, was submitted to DOE Secretary Alfonso G. Cusi, through Director Patrick T. Aquino of the Energy Utilization Management Bureau (EUMB), exactly a week after the PubCon.

Officially transmitting the PE2 comments articulated during the PubCon, PE2 forwarded the following recommendations to DOE:

1. Requiring ESCOs to be duly registered under the laws of the Philippines

While the EE&C Law 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 of not less than Two Hundred Thousand US Dollars (USD200,000.00), in accordance with the Foreign Investments Act.  PE2 believes that having a sufficient capital investment in the Philippines is a sufficient disincentive for foreign corporations to abandon energy efficiency projects that they have contracted.

In order to mitigate this risk, there is a need for the applicable regulations 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.

To implement this restriction, PE2 recommends the revision of Section 4 of the Draft ESCO Certification Guidelines as follows:

“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”.

First, this proposed revision seeks to accommodate the goal of the DOE to accommodate various types of entities, including sole proprietorships duly registered with the Department of Trade and Industry (“DTI”) as ESCOs.

Second, for foreign corporate entities, it also ensures that foreign-owned ESCOs are established only as either (a) duly registered foreign-owned domestic corporations with the SEC or (b) duly licensed branch offices by the SEC.

The inclusion of this revision emphasizes the need to comply with the rule under the Foreign Investments  Act which requires that small and medium-sized domestic market enterprises which are over forty percent (40%) foreign owned must have a paid-in equity capital of not less than Two Hundred Thousand US Dollars (USD200,000.00).

2. Revisions to Application Requirements

PE2 further suggests the following recommendations in relation the required documentation process:

a.         Section 5.1. Duly accomplished ESCO Application Form

PE2 notes that the ESCO Application Form should be revised to include information pertaining to the energy efficiency-related part of the business. PE2 thus recommends to revise Annex “A” as follows:

“Assurances:

By signing this application form and this set of assurances, I hereby acknowledge the following conditions of the Energy Utilization Management Bureau (EUMB)/Energy Efficiency and Conservation Program Management and Technology Promotion Division (EPMPD) and agree to abide by them if this application is accredited.

1.        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.”

b.         Section 5.2.1. Requiring Business Permits for Sole Proprietorships

Considering that sole proprietorships are also required to secure Mayor’s/Business Permits from the appropriate local government unity, PE2 also recommends the following revision to Section 5.2.1.

“5.2.1  For sole proprietorship entity, Business Registration the following documents

i.   Business Registration
ii.  Business Permits”

 

3. Relaxation on Requirement to Employ Certified Energy Auditors

Finally, PE2 submits that while it does not contest the need for ESCOs to hire Certified Energy Auditors as essential requisite for ESCO Registration and Certification, PE2 notes that there are currently no certified energy auditors available in the Philippine human resource market.

Hence, it is recommended that this requirement be deferred until appropriate regulations are in place for the certification of energy auditors.

PE2 recommends the insertion of notes in the technical requirements of both the Registered ESCO and Certified ESCO stating that:

“Compliance with this requirement shall be deferred until the appropriate regulations are in place for the registration or certification of Energy Auditors.”

Ablaza closed the letter with: “PE2 is committed to being a strong and active partner of the Philippine Government in ensuring the effective implementation of energy efficiency and conservation projects throughout the country.”

About PE2

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

Learn More

Republic Act 11285

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

RA 11285 - Text

RA 11285 - Signed

IRR - Signed

Working Together to Bridge an Energy Efficiency Financing Gap

Infographics

PE2 Infographics on Energy Efficiency and Conservation Roadmap Targets

Infographics on Roadmap Targets for Energy Efficiency and Conservation

» View | Download

Join PE2 Now!

We would love to have you on board

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

Learn More

PE2 Secretariat

  • Philippine Energy Efficiency Alliance, Inc. (PE2)
    19/F Philippine AXA Life Centre 
    Senator Gil Puyat Avenue 
    corner Tindalo Street 
    Makati City, Metro Manila 
    Philippines 1200
  • +63 2 7989 3007 
  • secretariat@pe2.org 
Signup to our newsletter:

To prevent automated spam submissions leave this field empty.