TERMS OF REFERENCE CONSULTING SERVICES FOR THE … · TOR (Development of RAB Handbook) FINAL (2 Aug 2020) (clean) d. Data Gathering Conduct actual and on-site gathering of relevant

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.

2 4. TOR (Development of RAB Handbook) FINAL (2 Aug 2020) (clean)

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.


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


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


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


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).


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.


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



Submission of Recommendations on the Comments on Draft RAB Handbook



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:


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.


● 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


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


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%


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


with Section 41 of R.A. 9184 and its IRR, without thereby

incurring any liability to the affected bidder or bidders.


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.


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%

Documents

TERMS OF REFERENCE CONSULTING SERVICES FOR THE … · TOR (Development of RAB Handbook) FINAL (2 Aug 2020) (clean) d. Data Gathering Conduct actual and on-site gathering of relevant