PE2 submits review comments on GEEP template contracts to DOE

Date Published: 
July 14, 2020
  • Representatives of Government agencies and LGUs pose with DOE, EU-ASEP and ADB officials during an energy efficiency forum in Mandaluyong City in November 2019. (Photo: PIA)
    Representatives of Government agencies and LGUs pose with DOE, EU-ASEP and ADB officials during an energy efficiency forum in Mandaluyong City in November 2019. (Photo: PIA)

MAKATI CITY, 14 July 2020 – The Philippine Energy Efficiency Alliance (PE2) submitted earlier today its comments on: (a) the draft Template Energy Savings Performance Agreement for Solicited Build-Operate-Transfer (BOT) Projects under the BOT Law; and, (b) the draft Template Joint Venture Agreement (JVA) for Government Energy Efficiency Projects (GEEPs) under the National Economic Development Authority (NEDA) Joint Venture (JV) Guidelines.

The PE2 comments were prepared by the PE2 Policy Committee chaired by PE2 president Alexander Ablaza, through its ESCO Sub-Committee members, Raymond A. Marquez, Jose O. de Jesus and Ronaldo R. Torres and Legal review team members Maria Concepcion P. Simundac, Richard Henrick I. Beltran and Efren R. Resurreccion II, all of Villaraza & Angangco Law.

In its 14 July 2020 letter to the Department of Energy (DOE) Energy Utilization Management Bureau (EUMB), PE2 provided its general and specific comments on the draft template contracts.

Ablaza recognized the diligent efforts of DOE-EUMB to drive the pace of formulating, consulting, and issuing specific guidelines and codes under Department Circular No. DC2019-11-0014 or the Implementing Rules and Regulations of the Energy Efficiency and Conservation (EE&C) Act, as evidenced by the successful policy issuances even through the community quarantine periods. The Alliance saw the drafting of template BOT Contract and JVA Contract for GEEPs as DOE’s intent to enable innovative financing modalities through energy service companies (ESCOs) for GEEPs with minimal delay.

The Alliance noted that while templates have been prepared for contracts governed by the BOT Law and the NEDA JV Guidelines, it observes that no similar template has been drafted for contracts governed by the Government Procurement Reform Act (GPRA).

While PE2 understands that the GPRA contracts generally follow the form provided by the Government Procurement Policy Board (GPPB) under the applicable General Conditions of Contract (GCC) and Special Conditions of Contract (SCC), PE2 believes that it is still advisable for the DOE, with the support of international ESCO contract expertise sourced through a foreign-assisted program (e.g. EU Access to Sustainable Energy Programme or UK Prosperity Fund ASEAN Low Carbon Emission Programme) to prepare a template for the Terms of Reference (TOR) given that the TOR contains details such as: (a) Background; (b) Objectives; (c) Scope of the Services; (d) Training (when appropriate); (e) Reports and Time Schedule; and (f) Data, Local Services, Personnel, and Facilities to be provided by the Procuring Entity. The TOR may be used to guide procuring entities on specialized terms that are applicable in cases of procured energy performance services.

PE2 also recommended that a broader multi-professional team of international contract specialists be mobilized by DOE, not only to draft the template TOR under GPRA, but also to prepare template annexes for both the BOT Contract and JV Contract. The multi-professional team will not only engage experienced lawyers specializing in government procurement, but also include international experts in the field of ESCO performance contracting, measurement and verification (M&V) protocol and government procurement of ESCO services, incorporating, where possible, lessons learned from more mature ESCO markets. It was also recommended that the team involve potential creditors, especially government financial institutions (GFIs) in the review of the template agreements, as it should be the objective of the Government to offer concessional financing through GFI sub-commercial interest rates, longer loan tenors, relaxed collateral requirements and ESCO-friendly risk evaluation frameworks by reducing credit risks arising from the standard terms of the BOT Contract and the JVA Contract.

In addition, PE2 provided DOE its comments on specific provisions of the draft template BOT Contract and JVA Contract. Among the salient PE2 inputs were:

  • Government should provide all ESCO bidders a full copy of the Energy Audit Report.
  • The ESCO should be supported and assisted by Government and not held solely responsible in cases where Government requests for design changes.
  • Subcontractors for construction works should be PCAB-licensed. The requirement for PCAB licenses for subcontractors should be relaxed for non-construction works, including operation and maintenance services.
  • Clarification was sought on flexibility of Government policies for disposal of existing equipment assets.
  • Specific language for Notice of Termination was proposed.
  • ESCOs need sixty (60) days to correct savings performance deficiencies. Penalties are to be amortized across ten (10) months.
  • PE2 seeks stiff penalties for poaching of employees by the other party.
  • PE2 proposes the use of E.O. 1008 or the Construction Industry Arbitration Law as initial means of dispute settlement for construction-related disputes. Otherwise, non-construction disputes should be settled under the Alternative Dispute Resolution Act of 2004.

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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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