TERMS OF REFERENCE
CONSULTING SERVICES FOR THE DEVELOPMENT OF THE
RAB HANDBOOK TO INCLUDE THE STANDARDIZATION OF
THE REPLACEMENT COSTS AND ASSET LIVES FOR
PRIVATELY-OWNED DISTRIBUTION UTILITIES AND FIELDWORK FOR THE TRUE UP VALUATION REPORT
A. RATIONALE / OBJECTIVE
The Energy Regulatory Commission (ERC) is the
independent, quasi-judicial regulatory body created under the
Republic Act No. 9136, otherwise known as the “Electric Power
Industry Reform Act of 2001”. It is mandated, among others, in the
public interest, to establish and enforce a methodology for the
setting of transmission and distribution wheeling rates and retail
rates in the Philippine electric power industry.
The ERC is in the process of resetting of the distribution
wheeling rates of privately-owned distribution utilities. The
Commission intends to develop the standard rates and asset lives
taking into account the asset valuations carried out on all Regulated
Entities during the Previous Regulatory Period as well as further
evidence collected on standard asset replacement costs throughout the Philippines.
With its existing organizational structure vis-à-vis its
mandates over regulated entities, the ERC will require the
assistance of a Consultant, who may be a person/s or entity engaged
in consulting services, that has the technical expertise and capability
to develop a RAB handbook for privately-owned distribution
utilities and to conduct MERALCO true-up valuation report through
fieldwork.
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B. SCOPE OF WORK
The development of the RAB Handbook will be designed based on the objectives of the project.
The scope of work is consistent with the ERC’s issuances such
as the Rules for Setting Distribution Wheeling Rates (RDWR), the
Issues Paper and the Position Paper. It is therefore essential that all
parties are familiar with these documents before submitting their proposals.
The Consultant must provide a detailed description of the
scope of services offered, demonstrating clear understanding of the requirements of the Commission and the Regulatory Reset Process.
Specifically, the scope of the project will be:
a) Develop Standard Replacement Costs and Asset Lives
The new standard asset replacement costs to be developed shall
be utilized by the ERC in its application of the reasonability test as
provided for in the “Regulatory Asset Base Roll Forward Handbook
for Privately-Owned Electricity Distribution Utilities” (RAB Handbook).
The services required shall be as follows:
1. Update current standard asset replacement costs as provided for
in the “Valuation Handbook for Optimized Depreciated
Replacement Cost Valuation of System Fixed Assets of
Privately-Owned Distribution Utilities Operating under Performance Based Regulation” dated July 2010; and
2. Determine standard asset replacement costs for assets without
replacements costs in the “Valuation Handbook for Optimized
Depreciated Replacement Cost Valuation of System Fixed Assets
of Privately-Owned Distribution Utilities Operating Under
Performance Based Regulation” dated July 2010 especially power transformers and switchgears.
The new replacement costs shall be developed taking into
account the asset valuations carried out during the Third Regulatory
Period, the asset value submissions of the DUs to the ERC during
the “RAB Handbook” project and other further evidence that will be collected during the course of the project.
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The basis for setting new standard asset replacement costs shall
be those costs that would be incurred by an efficient new entrant
constructing an electricity distribution network in a brownfield
situation, with efficient economies of scale and largely using standard assets commonly in use throughout the Philippines.
b) True up Valuation for MERALCO RAB
Following the Order dated July 6, 2011 in ERC Case No. 2010-
069RC1, on the valuation of MERALCO’s RAB for the Third
Regulatory Period, statistical field work analysis would have to be
undertaken to assess the quality and accuracy of MERALCO’s field
assets in comparison with MERALCO’s Valuation Report2 in compliance thereof.
The services required shall be as follows:
1. Perform field inspections of randomly selected assets. The
sampling method applied shall be based on a statistically valid
sampling methodology, resulting in a confidence level not lower
than 95% with a margin of error below 5%. Assets to be inspected
shall include: Poles, Overhead Conductors, Service Drops and Asset Additions; and
2. Based on the results from the field inspections and the results of
the work undertaken during the Roll Forward Handbook project,
update MERALCO’s asset values and propose to the ERC the
asset values to be used in calculating the RAB for the Third Regulatory Period.
The Consultant is expected to provide the following:
1. Reports
1.a. An inception report that reviews the relevant
information to be provided by the DUs, identifies the
issues to be validated and discusses the approach that
1 In the Matter of the Application for the Approval of the Annual Revenue Requirement and
Performance Incentive Scheme for the Third Regulatory Period (2011-2015) in Accordance with the
Provisions of the Rules for Setting Distribution Wheeling Rate (RDWR) as amended– Manila Electric
Company (MERALCO)- Applicant.
2 Compliance dated 12 July 2019 submitted by MERALCO under ERC Case No. 2010-069RC
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the Consultant proposes to use in order to complete the
project in accordance with the ERC’s requirements. The
report should identify any required information that
should be provided in the submission, including a
timeline that the Consultant will follow to complete the review.
The inception report is to be presented to the ERC prior to the first clarificatory meeting;
1.b. Submission of weekly progress report outlining work
undertaken and discussing the problems or issues encountered; and
1.c. Compilation of dataset and the final edit and lay-out of the printable version of the final report.
2. Presentation and Meetings
2.a. Preparation and presentation to the ERC of a detailed
report (initial/draft report) presenting the findings of
the Consultant with regard to his/her analyses of the
RAB Handbook and true up valuation of MERALCO
RAB. The report must highlight any recommended
adjustments to the RAB Handbook and true up
valuation of MERALCO RAB, with the reasons for these
recommendations, and clearly show the reward and
penalty recommended as a result of the review and how
these recommended reward and penalty were derived; and
2.b. Attendance at clarificatory meetings, explanatory public
consultation sessions, expository and evidentiary
hearings where the performance review are further
explained and defended.
3. Documentation
3.a. Documentation of all the functions performed in
evaluating the data provided and of the reasons for
coming up with the recommendations, including full
details of the changes recommended to specific RAB items; and
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3.b. Maintenance of detailed documentation of the review
process followed, data used, modifications made to the
data, the justification for these modifications, the
benchmarking or alternative methodologies used to
develop RAB Handbook and valuation of MERALCO
RAB, data used in the RAB review comparisons, and the justification for the final recommendations.
Electronic copies of all relevant documents gathered in this
project, including the detailed spreadsheets containing the
Consultant’s analyses, must be contained/stored in a USB flash
drive (in MS Word and MS Excel format) and must be delivered to the Commission, while reports can be submitted via email.
C. RESPONSIBILITIES OF THE CONSULTANT
a. Close Cooperation with the ERC
Close coordination and regular liaison with the ERC
Commission En Banc, official and/or staff will therefore be an
integral part of the scope of work. The Consultant will also be
required to prepare weekly progress reports, attend regular progress
monitoring meetings, clarificatory meetings, explanatory public
consultation sessions, expository and evidentiary hearings and,
from time to time, present progress reports directly to the Commission.
Any important issues arising from the work should be
immediately brought to the attention of the ERC, with appropriate
recommended action. This requires presentations to the Commission.
Meetings with ERC and presentations to the Commission will
adhere to the ERC schedules and procedures. Only in exceptional cases will requests for special Commission meetings be considered.
Close coordination and communication of the Consultant with
the ERC throughout the project is mandatory. The Consultant must
conduct monthly meetings with ERC and shall be available for
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consultations at least once a month or as the need arises, physically or via online platforms, throughout the duration of the review.
The Commission and the ERC shall have full access to any
information, data, documents or working records acquired or used by the Consultant during the course of the project.
The Commission or any of its authorized representatives may
participate on project meetings and join the Consultant during
onsite inspections or meetings with the Distribution Utilities (DU). Communication with the DUs shall be conducted through the ERC.
b. Knowledge Transfer
The project requires that knowledge transfer on the new RAB
Handbook and the MERALCO True-up Valuation Review be
conducted either through workshop or training using either actual
physical presence or webinar to the ERC. All costs related to the
conduct of physical or webinar workshop or training shall be for the account of the Consultant.
The Consultant shall submit knowledge transfer
program/plan to the ERC. In the event that the ERC may be required
to travel to the office of the Consultant, the full transport,
accommodation and subsistence costs associated therewith are to be included in this proposal.
The training/workshop may also involve regulated entities to
ensure their sufficient compliance to the technical requirements of
the ERC in accordance to its framework. However, any related cost
on the aforesaid activities shall be on the account of the regulated entities.
c. Security
It should be noted that some of the fieldworks are likely to be
carried out in areas where additional security arrangements may be
required. While the DUs will provide personnel to accompany the
Consultant(s) during these audits, any additional security
arrangements will be to the account of the Consultant. (Note that
the ERC does not accept any responsibility for the security or
wellbeing of the Consultant(s) during or after the execution of this project).
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d. Data Gathering
Conduct actual and on-site gathering of relevant data; and ensure data consistency and interpret the results.
e. Confidentiality
The Consultant shall not release any information or data
obtained in the course of this project to any person without written consent from the ERC.
f. Intellectual Property
All intellectual property, including studies, reports or other
materials, models, spreadsheets or otherwise, prepared, developed
or produced by the Consultant shall belong to and remain the
property of the ERC. The Consultant should not retain a copy of such documents and software, for any purposes.
D. RESPONSIBILITIES OF ERC
The ERC shall facilitate development of the RAB Handbook
and the conduct of MERALCO true up valuation by providing the
following:
a. Assistance in coordinating with the DUs to solicit comments and
inputs related to the work;
b. Technical and Secretariat support to the work such as but not
limited to, coordination meetings and public consultation; and
c. Determine the acceptability of the deliverables and shall be the
approving authority for all operations-related activities.
E. TIMELINES/DELIVERABLES
The project shall be completed within ninety (90) days,
commencing from the date of the NTP to the Consultant. An Inception
report shall be submitted by the Consultant within fourteen (14) days
and final outputs shall be submitted at the end of ninety (90) days.
Except specifically provided in the Terms of Reference or Contract, the
Consultant shall be released from its commitment to the contract not
more than fourteen (14) days upon acceptance of the final outputs by ERC.
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The Consultant shall adhere to the following timelines:
Outputs/Deliverables Timeline
Inception Report (4 hard copies with electronic
copy), which includes, among others, the work
plan that identifies in detail the design and
procedures/processes to be utilized for the validation
Within two (2) weeks
from the date of receipt of the NTP.
Delivery of Initial Field Inspection Report (MERALCO)
Within sixty (60) days
from the date of the receipt of the NTP
Submission of Initial/Draft RAB Handbook
Report and Preliminary MERALCO True Up Valuation Review Report
Within sixty (60) days
from the date of the receipt of the NTP
Submission of Recommendations on the Comments on Draft RAB Handbook
Within sixty (60) days
from the date of the receipt of the NTP
Submission of Final RAB Handbook with Supplemental RC
Within seventy five
(75) days from the
date of the receipt of the NTP
Submission of Final MERALCO True Up Valuation Review Report
Within ninety (90)
days from the date of the receipt of the NTP
F. QUALIFICATION REQUIREMENTS
1. Qualification Requirement. The validation shall be
undertaken by a reputable Consultant, who may be a person/s or
entity engaged in consulting services. The Consultant shall
mobilize key personnel, i.e., a principal/lead consultant and at
least five (5) experts. The Consultant, as well as the
principal/lead consultant and experts, must meet the following
qualifications:
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QUALIFICATIONS
MINIMUM REQUIREMENTS
Quality of the
Consultant ● Knowledgeable in fields of
accountancy, economics, finance, law, engineering or other related disciplines to undertake the tasks required for this consultancy services.
● It is strongly encouraged that
the Consultants are composed of local (Filipino) and/or foreign consultants in the team, both with the view to support the project at hand, but also as part of an action to establish local sources of experts that can become involved with regulatory activities in the future
● Involvement in similar
and/or relevant consulting or professional services of complexity and technical specialty comparable to the job under consideration
● Recognized competence in
the reset process of Performance Based Regulation in the Philippines or of similar jurisdiction.
● Must have been involved in
the asset valuation of utilities under the Performance-Based-Regulation Methodology in the Philippines or in other jurisdictions; knowledgeable with the different methodology used in asset valuation or with the RAB Handbook of Privately-Owned Electricity Distribution Utilities.
● Expertise in the field of economics, finance, accountancy, engineering or other related disciplines
● Must have been engaged in similar or relevant professional and consulting services
● Must be highly competent in the reset
process of Performance Based Regulation in the Philippines or of similar jurisdiction.
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● The Team Leader and at least one (1) Key Personnel must have previous exposure to regulatory practices of Asset Valuation under the PBR methodology for the last ten (10) years; and at least five (5) years of experience in undertaking projects under the Performance-Based-Rate Methodology or Reset Process.
Education ● Educational attainment in law,
accounting, economics, finance, engineering and/or related fields, with strong background in accounting process and reset process of ERC-PBR rate setting
Professional Experience ● The Consultants must have 5
years of extensive background in the valuation in rate setting for distribution utilities or under the Performance Based Regulation Methodology, or actual exposure to the best practices of other jurisdictions;
● The Consultants must have extensive knowledge with the Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA) and its Implementing Rules and Regulations (IRR), and of the Performance-Based-Regulation Methodology in Rate making;
Involvement in a consulting or professional service similar and/or related to the job under consideration
Lead Consultant: At least an MA/MS degree holder, PhD will be an advantage. Experts: At Least BS/BA degree holder, MS/MA an advantage. Lead Consultant: At least five (5) years of experience in reset process of Performance Based Regulation and asset valuation of privately-owned electric distribution utilities in the Philippines. Experts: At least two (2) years of experience in reset process of Performance Based Regulation and asset valuation of privately-owned electric distribution utilities in the Philippines. Lead Consultant: Must have been involved in similar or related work engagement with at least two (2) Certificates of Satisfactory Service from completed similar or related projects. Experts: At least one (1) similar or related work engagement.
Training
Lead Consultant: Must have at least 40 hours training on asset valuation for privately-owned distribution utilities and reset process of Performance Based
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Regulation of ERC and other similar and/or relevant trainings Experts: At least 24 hours training on asset valuation for privately-owned distribution utilities and reset process of Performance Based Regulation of ERC and other similar and/or relevant trainings
Financial Capacity of the
Consulting Firm
This is measured in terms of the following formula:
𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 =[ 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 − 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠] − [𝑐𝑜𝑠𝑡 𝑜𝑓 𝑜𝑛𝑔𝑜𝑖𝑛𝑔 𝑎𝑛𝑑 𝑐𝑜𝑚𝑚𝑖𝑡𝑡𝑒𝑑 𝑝𝑟𝑜𝑗𝑒𝑐𝑡𝑠]
𝑐𝑜𝑠𝑡 𝑜𝑓 𝐴𝐵𝐶
The shortlisting and selection of qualified candidates is rated based
on the attached criteria in ANNEX B.
2. Criteria for Selection. The consultant shall be selected using
the Quality-Based Evaluation (QBE) procedure as
prescribed under Section 33 of the 2016 Revised Implementing
Rules and Regulations (IRR) of Republic Act (RA) No. 9184 and
based on the following criteria:
a. Technical Proposal: 60%
b. Financial Proposal: 40%
G. MODE OF PROCUREMENT
The procurement of the consulting services shall be
undertaken through competitive bidding pursuant to. RA No. 9184
and its 2016 Revised IRR.
H. FUND SOURCE AND APPROVED BUDGET FOR THE
CONTRACT (ABC)
1. Fund for this engagement shall be sourced from the continuing
Appropriation for the fiscal year 2019 of the ERC.
2. The ABC for the project is TEN MILLION NINE HUNDRED
THOUSAND PESOS (PhP10,900,000.00), inclusive of all
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government taxes, fees and charges, and other incidental and
administrative costs, which shall be paid on an output basis (e.g.,
meetings, consultations, materials, etc.)
3. Note that this consulting contract shall be a fixed price contract.
Any extension of contract time shall not involve any additional
cost to the ERC except due to the fault of the latter.
4. All manuals, reports, materials, databases, references, etc.
acquired through the conduct of the project shall be turned over
to ERC at the conclusion of the undertaking and shall not be
released to any person without prior written consent from ERC.
I. PAYMENT SCHEME/SCHEDULE
1. An amount of TEN MILLION NINE HUNDRED
THOUSAND PESOS (PhP10,900,000.00) shall be
allocated for the cost of conducting the project, including
remuneration of the consultant. This shall be in accordance with
the following delivery schedule and subject to the usual
government accounting and auditing requirements:
DELIVERABLES Payment
Allocation and Amount
Upon submission and acceptance of Final Inception Report/ Work Plan
15%
Upon submission and acceptance of
Initial Field Inspection Report (MERALCO)
20%
Upon submission of Draft RAB Handbook Report and Preliminary MERALCO True Up Report
20%
Upon submission of recommendations on the Comments on Draft RAB Handbook
20%
Upon submission and acceptance Final RAB Handbook with Supplemental RC
15%
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Upon submission and acceptance Final MERALCO True Up Report
10%
2. Since all the above payments shall be subject to the usual
government accounting and auditing requirements, the
Consultant is expected to be familiar with the Government
Accounting and Auditing Manual (GAAM).
3. The Consultants shall have the flexibility to allocate the budgets
for expenditures made in the performance of the Services but
shall not exceed the ABC.
J. LIQUIDATED DAMAGES
1. Where the Contractor refuses or fails to satisfactorily complete
the work within the specified contract time, plus any extension
time duly granted, and is thereby in default under the contract,
the Contractor shall pay ERC for liquidated damages, and not by
way of penalty, an amount, as provided in the conditions of the
contract, equal to one tenth (1/10) of one percent (1%) of the cost
of the unperformed portion for every day of delay. Once the
cumulative amount of liquidated damages reaches ten percent
(10%) of the amount of the contract, the ERC may rescind or
terminate the contract, without prejudice to other courses of
action and remedies available under the circumstances such as
but not limited to forfeiture of performance security and/or
blacklisting of the Contractor.
2. For entitlement to such liquidated damages, ERC need not prove
the damages actually incurred. Said damages in any amount shall
be deducted from any money due or which may become due the
Contractor under the Contract and/or collect such liquidated
damages from the retention money or other securities posted by
the Contractor at the ERC’s convenience.
K. RESERVATION CLAUSE
The Energy Regulatory Commission (ERC) reserves the right to
reject any and all bids, declare a failure of bidding or not award
the contract at any time prior to contract award in accordance
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with Section 41 of R.A. 9184 and its IRR, without thereby
incurring any liability to the affected bidder or bidders.
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ANNEX B: CRITERIA FOR SHORTLISTING/SELECTION OF
PROSPECTIVE BIDDERS FOR THE PROCUREMENT OF
CONSULTING SERVICES FOR THE DEVELOPMENT OF THE
RAB HANDBOOK TO INCLUDE THE STANDARDIZATION OF
THE REPLACEMENT COSTS AND ASSET LIVES FOR
PRIVATELY-OWNED DISTRIBUTION UTILITIES AND FIELDWORK FOR THE TRUE UP VALUATION REPORT
CRITERIA/PARTICULARS POINTS
I. Education and Expertise 30
Education, training, and expertise of the
experts and exposure in the electricity industry
II. Experience and Capability of Consultant
30
Consultancy experience, engage in projects
of same nature and have similar projects on
asset valuation of RAB under the PBR methodology
III. Plan of Approach and Methodology 40
Project approach and methodology and projects completed, awarded and on-going
GRAND TOTAL 100
Hurdle Rate 70
Note: Only the top five (5) ranked candidates with at least 70% rating based on the
short listing criteria will be invited to submit the Technical and Financial Proposals.
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Points Multiplier
I. 30%
A)
50 10%
with Masteral 75 10%
with Ph Degrees 100 10%
B)
6-10 years 100 10%
1-5 years 50 10%
B)
10%50
25
5
50 10%
II. 30%
A)
5 - 10 years 50
25 10%
Other Consultant/s
50 10%
25 10%
B)
Yes 100 10%
No 0 10%
C)
Yes 100 10%
No 0 10%
III. 40%
A)
40 20%
20 20%
Experience: >5 years’ experience 25 20% <5 years’ experience 10 20%
Lead Consultant - ar least 40 hours training 25 20%Experts - at least 24 hours training 10 20%
15 20%Well defined responsibility per member 7.5
Well defined delivery schedules 7.5
15 20%
B)
25 20%
25 20%
20%
Projects completed, awarded and on-going - 10%
1. Contracts are similar in nature
2. Contracts are similar in complexity
5. Organizational chart
3-5 years
1-2 years
Must be have similar contracts involved in the asset valuation of utilities under the Performance-Based-
Regulation Methodology in the Philippines or in other jurisdiction
Must have 5 years extensive background in the valuation in rate setting for distribution utilities under
the PBR or actual exposure to the best practices of other jurisdiction
Plan of Approach & Methodology
Approach and Methodology -30%
Must have trainings on review and setting of Perfromace Standards for regulated entities in the Philippines or other
similar and/or relevant trainings
1. Detailed Work plan and schedule
2. Accessibility of Principal/key personnel to the project
3. Qualification of personnel assigned
Exposure of key personnel to the regulatory reset process of electricity distribution utilities
4. Work load assignment
Quality of Consultancy Firm/Consultant/s
Work Experience of Principal/Key Staff - 10%
Fieldwork for the True-Up Valuation Report
Education and field expertise of Principal/Key Staff- 10%
Knowledge in fields of accountancy, economics, finance, law, engineering or other related disciplines to
undetake the tasks
College Graduate
1 - 5 years
1. Knowledge of Performance-Based-Rate Methodology
Consultancy Services for the Development of the RAB Handbook to include the Standardization
of the Replacement Costs and Assets Lives For Privately-Owned Distribution Utilities and
ELIGIBILTY FACTORS CONSIDERED:
Exposure in electricity industry - 10%
Team Leader
With the industry for >10 years
With the industry for >5 years
With the industry for <5 years
2. Highly familiar with the RA 9136 (EPIRA) and its Implementing Rules & Regulations
Experience & Capability of Consultancy Firm/Consultant/s
Team Leader and at least one (1) Key personnel must have previous exposure to regulatory practices of
Asset Valuation under the PBR methodology - 10%