FOURTEENTH CONGRESS OF THE REPUBLIC) 
First Regular Session 
OF THE PHILIPPINES 
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7 JLII.15 ?1:)5 
SENATE 
I_” 
S.B.No. 1234 
Introduced by Senator JUAN PONCE ENRILE 
EXPLANATORY NOTE 
The Electric Power Industry Reform Act, also known as the EPIRA law, was enacted iuto 
law in 2001 to ensure the quality and reliability of the supply of electric power that would 
translate to lower consumption costs. 
However, the passage of the law was accompanied by increases in electric bills, 
confusion in the implementation and enforcement of the provisions of the law and inevitably 
caused a haphazard market behavior in the electric power industry. 
The EPIRA law became evidently anti-poor, anti-people, benefiting only a selected 
number of power generators and distributors. It resulted in electricity cost that is more 
burdensome on the part of the consumers. At the same time, the issues the law originally 
intended to resolve were not properly addressed. 
It is therefore in our national interest to pass an amendatory bill that will clarify vague 
and conflicting provisions of the law, afford protection to end-users of electricity and to level the 
playing field for all the industry players. We need a pragmatic and substantial solution to make 
the cost of electricity affordable to the consumers while recognizing the right of the electric 
power industry players to a just and reasonable return on their investments. 
This bill seeks to lessen the hardship on electricity consumers by preventing certain 
industry players to pass on the costs of their inefficiencies, mistakes and questionable onerous 
contracts or dealings. 
In view of the foregoing, approval of this bill is earnestly sought. I 


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FOURTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PHILIPPINES 
1 
First Regular Session 
1 
Introduced by Senator JUAN PONCE ENRILE 
AN ACT 
AMENDING SECTIONS 4,20, 21,26,30,31,32,33,34,38,41,43,46 OF REPUBLIC ACT NO. 
9136 ENTITLED "AN ACT ORDAINING REFORMS IN THE ELECTRIC POWER 
INDUSTRY AND FOR OTHER PURPOSES" 
Be it enacted by the Senate and House of Representatives of the Philiopines in Connress 
assem bled: 
Section 1. Section 4, Chapter 1, of Republic Act No. 9136, otherwise known as the Electric 
Power Industry Reform Act of 2001, hereinafter referred to as "the Act", is hereby amended to 
read as follows: 
"SEC. 4. 
(A) "AFFILIATE"I"ASS0CIATED ENTITY OR PERSON" REFERS TO 
ANY ENTITY OR PERSON WHICH, ALONE OR TOGETHER WITH ANY 
OTHER ENTITY OR PERSON, DIRECTLY OR INDIRECTLY, THROUGH 
ONE OR MORE INTERMEDIARIES, CONTROLS, IS CONTROLLED BY, OR 
IS UNDER COMMON CONTROL WITH ANOTHER ENTITY OR PERSON. 
DeJinition of Terms. - 
[(a)l (B) 
"Aggregator" refers to a person or entity[, engaged] WHICH, 
WITHOUT A LEGISLATIVE FRANCHISE, IS DULY LICENSED BY THE 
COMMISSION TO ENGAGE in consolidating electric power demand of end-users OF 
ELECTRICITY in [the] A contestable market[,] WITHIN A FRANCHISE 
TERRITORY OF ANOTHER PARTY for the purpose of purchasing and reselling 
electricity TO SUCH END-USERS on a group basis; 
[@)I (C) 
"Ancillary Services" refer to those services that are necessary to 
support the transmission of capacity and energy from resources to loads while 
maintaining reliable operation of the transmission system in accordance with good utility 
practice and the Grid Code to be adopted in accordance with this Act; 
Kc)l (D) 
"Captive Market" refers to [electricity end-users who do not have 
the choice of a supplier of electricity, as may be determined by the Energy Regulatory 
Commission (ERC) in accordance with this Act;] THAT MARKET, WHICH SHALL 
BE DETERMINED BY THE COMMISSION IN ACCORDANCE WITH THIS 
ACT, AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
FRANCHISE TERRITORY OF A DISTRIBUTION UTILITY THAT CANNOT 
CHOOSE THEIR SUPPLIER OF ELECTRICITY: 
HEARING, CONSISTING OF 
END-USERS OF ELECTRICITY IN A 


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Kd)l (E) 
"Central Dispatch" refers to the process of issuing direct 
instructions to electric power industry participants by the grid operator to achieve the 
economic operation, and maintenance of quality, stability, reliability, and security, of the 
transmission system; 
[(ell (F) 
"Co-Generation Facility" refers to a facility which produces 
electrical and/or mechanical energy and forms of useful thermal energy, such as heat or 
steam, which are used for industrial, commercial heating or cooling purposes through the 
sequential use of energy; 
[(Ql (GI 
"Commission" refers to the decision-malting body of the [ERC] 
ENERGY REGULATORY COMMISSION (ERC) composed of a Chairman and four 
(4) members as provided under Section 38 [hereofj OF THIS ACT[;]. 
FOR 
PURPOSES OF CONSTRUING AND INTERPRETING THE RELEVANT 
PROVISIONS OF THIS ACT, THE TERMS "COMMISSION", "ENERGY 
REGULATORY COMMISSION", AND 
"ERC" SHALL, UNLESS THE 
CONTEXT CLEARLY INDICATES OTHERWISE, SHALL REFER TO THE 
ONE AND THE SAME ENTITY; 
[(dl (HI 
"Concession Contract" refers to the award by the government to a 
qualified private entity of the responsibility for financing, operating, expanding, 
maintaining, and managing specific Government-owned assets; 
[(h)l (1) 
"Contestable Market" refers to [the electricity end-users who have 
a choice of a supplier of electricity, as may be determined by the ERC in accordance with 
this Act;] THAT MARKET, WHICH SHALL BE DETERMINED BY THE 
COMMISSION IN ACCORDANCE WITH THIS ACT, AFTER DUE NOTICE TO 
USERS 
OF ELECTRICITY WITHIN A FRANCHISE TERRITORY OF A 
DISTRIBUTION UTILITY THAT CAN CHOOSE THEIR SUPPLIER OF 
ELECTRICITY; 
ALL INTERESTED PARTIES AND PUBLIC HEARING, CONSISTING OF END- 
(J) "CONTROL" REFERS TO THE POWER TO DIRECT OR CAUSE 
THE DIRECTION OF THE MANAGEMENT POLICIES OF AN ENTITY OR 
PERSON BY CONTRACT, AGENCY, OR OTHERWISE. 
[(ill (Io 
"Customer Service Charge" refers to the component in the retail 
rate intended for the cost recovery of customer-related services including, but not limited 
to, meter reading, billing administration and collection; 
I(i)l (L) 
"Demand Side Management" refers to measures, undertaken by 
distribution utilities to encourage end-users in the proper management of their load to 
achieve efficiency in the utilization of fixed infrastructures in the system; 
[(k)] (M) 
"Department of Energy" or "DOE" refers to the government 
agency created pursuant to Republic Act No. 7638 whose expanded functions are 
provided herein; 
[(1)1 (N) 
"Department of Finance" or "DOF" refers to the government 
agency created pursuant to Executive Order No. 127; 
[(m)] (0) 
"Distribution Code" refers to a compilation of rules and regulations 
governing electric utilities in the, operation, and maintenance of their distribution 
systems, which includes, among others, the standards for service and performance, and 
defines and establishes the relationship of the distribution systems with the facilities or 
installations of the parties connected thereto; 


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Kn>l (P) 
"Distribution of Electricity" refers to the conveyance of electric 
power by a distribution utility through its distribution system pursuant to the provisions 
of this Act; 
[(o)] (Q) "Distribution System" refers to the system of wires and associated 
facilities belonging to a franchised distribution utility, extending between the delivery 
points on the transmission or sub-transmission system or generator connection and the 
point of connection to the premises of the end-user; 
[(p)] (R) "Distribution Wheeling Charge" refers to the cost or charge regulated by 
the ERC for the use of a distribution system and/or the availment of related services; 
KS)l (S) 
"Distribution Utility" refers to any electric cooperative, private 
corporation, government-owned utility, or existing local government unit, which has an 
exclusive franchise to operate a distribution system in accordance with this Act; 
[(r)l (TI 
"Electric Cooperative" refers to a distribution utility organized 
pursuant to Presidential Decree No. 269, as amended, or as otherwise provided in this 
Act; 
[(s)l (U) 
"Electric Power Industry Participant" refers to any person or entity 
engaged in the generation, transmission, distribution, or supply of electricity; 
Kt)l (V) 
"End-user" refers to any person or entity requiring the supply and 
delivery of electricity for its own use; 
[(u)] (W) 
"Energy Regulatory Board" or "ERB" refers to the [independent,] 
NOW DEFUNCT quasi-judicial regulatory body created under Executive Order No. 
172, as amended; 
[(VI1 (X) 
"Energy Regulatory Commission" or "ERC" refers to the 
regulatory agency created herein; 
I(w)l cy) 
"Franchise Area refers to a geographical area exclusively assigned 
or granted to a distribution utility for distribution of electricity; 
KX)l (a 
"Generation Company" refers to any person or entity authorized by 
the ERC to operate facilities used in the generation of electricity; 
[(y)] (AA) 
"Generation of Electricity" refers to the production of electricity 
by a generation company, or a co-generation facility, pursuant to the provisions of this 
Act: 
[(z)] (BB) 
"Grid" refers to the high voltage backbone system of 
interconnected transmission lines, substations, and related facilities; 
[(aa)] (CC) 
"Grid Code" refers to the set of rules and regulations governing 
the safe, and reliable operation, maintenance, and development, of the high voltage 
backbone transmission system and its related facilities; 
"Independent Power Producer" or "IPP" refers to an existing 
[power generating entity] GENERATION COMPANY, which is not owned by NPC[;] 
AND WITH WHOM NPC OR A DISTFUBUTION UTILITY HAS A VALID AND 
EXISTING PURCHASED POWER CONTRACT; 
[(bb)] (DD) 
[(cc)] (EE) 
"Inter-Class Cross Subsidy" refers to an amount charged by 
distribution utilities to industrial and commercial end-users as well as to other subsidizing 


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customer sectors in order to reduce electricity rates of other customer sectors , such as 
the residential end-users, hospitals, and streetlights; 
[(dd)] (FF) 
"Inter-Regional Grid Cross Subsidy" refers to an 
amount 
embedded in the electricity rates of NPC charged to its customers located in a viable 
regional grid in order to reduce the electricity rates in a less viable regional grid; 
[(ee)] (GG) 
"Intra-Regional Grid Cross Subsidy" refers to an 
amount 
embedded in the electricity rates of NPC charged to diseibution utilities and non-utilities 
with higher load factor and/or delivery voltage in order to reduce the electricity rates 
charged to distribution utilities with lower load factor and/or delivery voltage located in 
the same regional grid; 
[(ff)] (HH) 
"IPP Administrator" refers to 
qualified independent entities 
appointed by PSALM Corporation who shall administer, conserve, and manage the 
contracted energy output of NPC IPP contracts; 
[(gg)] (11) 
"Isolated Distribution System" refers to the backbone system of 
wires and associated facilities not directly connected to the national transmission system; 
[(hh)] (JJ) 
"Lifeline Rate" refers to the subsidized rate given to low-income 
captive market end-users who cannot afford to pay at full cost; 
[(ii)] (KK) 
"National Electrification Administration" or "NEA" refers to the 
government agency created under Presidential Decree No. 269, as amended, and whose 
additional mandate is further set forth herein; 
[(jj)] (LL) 
"National Power Corporation" or "NPC" refers to the government 
corporation created under Republic Act No. 6395, as amended; 
[(!&)I 
(MM) "National Transmission Corporation" or "TRANSCO" refers to 
the corporation organized pursuant to this Act to acquire all the transmission assets of the 
NPC; 
"Open Access" refers to the [system of allowing] PRIVILEGE 
GRANTED TO any qualified person [the use of] TO USE THE transmission[, and/or] 
distribution system and associated facilities OF ANY PUBLIC OR PRIVATE 
PERSON OR ENTITY, subject to the payment of JUST AND REASONABLE 
transmission and/or distribution [retail] wheeling [rates] CHARGES duly approved by 
the ERC, AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
HEARING; 
[(ll)] (NN) 
AND SUB-TRANSMISSION FACILITIES AND ASSETS AND/OR THE 
[(mm) ] (00) "Philippine Energy Plan" or "PEP" refers to the overall energy 
program formulated and updated yearly by the DOE and submitted to Congress pursuant 
to Republic Act No. 7638; 
[(nn)] (PP) 
"Power Development Program" or "PDP" refers to the indicative 
plan for managing electricity demand through energy-efficient programs and for the 
upgrading, expansion, rehabilitation, repair, and maintenance of power generation and 
transmission facilities, formulated and updated yearly by the DOE in coordination with 
the generation, transmission and distribution utility companies; 
[(oo)] (QQ) 
"Power Sector Assets and Liabilities Management Corporation" or 
"PSALM Corp." refers to the corporation created pursuant to Section 49 hereof; 
[(pp)] (RR) "Privatization" refers to the sale, disposition, change, and transfer 
of ownership and control of assets and IPP contracts, from the Government or a 
government corporation to a private person or entity; 


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(SS) 
"PUBLIC 
HEARING" 
REFERS 
TO 
A 
PROCEEDING 
CONDUCTED BY 
THE COMMISSION AFTER ITS MEMBERS ARE 
FORMALLY CONVENED TO HEAR, AFTER DUE NOTICE TO ALL 
INTERESTED PARTIES, THE TESTIMONY OF WITNESSES UNDER OATH, 
FORMALLY RECEIVE DOCUMENTARY EVIDENCE, IN ORDER TO 
DISPOSE ANY ISSUE BROUGHT TO THE ATTENTION 
OF THE 
COMMISSION THROUGH MOTIONS, COMPLAINTS OR PETITION FILED 
WITH THE COMMISSION. 
SUBJECT TO CROSS-EXAMINATION BY 
ADVERSE PARTIES, AND TO 
[(qq)] (TT) 
"Renewable Energy Resources" refers to energy resources, that do 
not have an upper limit on the total quantity to be used. Such resources are renewable on 
a regular basis and the renewable rate is rapid enough to consider, availability over an 
indefinite time. These include, among others, biomass, solar, wind, hydro, and ocean 
energy; 
[(rr)] (UU) 
"Restructuring" refers to the process of reorganizing the electric 
power industry in order to introduce higher efficiency, greater innovation and end-user 
choice. It shall be understood as covering a range of alternatives enhancing exposure of 
the industry to competitive market forces; 
[(ss)] (VV) 
"Retail Rate" refers to the total price paid by end-users consisting 
of the charges for generation, transmission and related ancillary services, distribution, 
supply, and other related charges for electric service; 
[(tt)] 
(WW) 
"Small Power Utilities Group" or SPUG" refers to the functional 
unit of NPC created to pursue missionary electrification function; 
[(uu)] (XX) 
"Stranded contract costs of NPC or OF A distribution utility" refer 
to the excess of the contracted cost of electricity under [eligible contracts] THE 
ELIGIBLE INDEPENDENT POWER PRODUCER (IPP) CONTRACTS OF NPC 
OR OF A DISTRIBUTION UTILITY over the actual selling price of [the contracted 
energy output of such contracts in the market. Such contracts shall have been approved 
by the ERB as of December 31, 2000;] THAT CONTRACTED ELECTRICITY 
FROM SUCH IPP CONTRACTS IN THE MARKET: PROVIDED, THAT IPP 
CONTRACTS, TO BE DEEMED ELIGIBLE, HAD BEEN APPROVED BY THE 
ERE ON OR BEFORE DECEMBER 31,2000; 
[(vv)] (YY) 
"Stranded Debts of NPC" refer to [any] ITS unpaid financial 
obligations [of NPC which have not been liquidated by the proceeds from the sales and 
privatization of NPC assets;], WHICH HAVE NOT BEEN LIQUIDATED OR 
OFFSET BY THE PROCEEDS FROM THE SALE, DISPOSITION, AND/OR 
TRANSMISSION ASSETS AND FACILITIES, REAL ESTATE ASSETS, OTHER 
DISPOSABLE ASSETS, AND IPP CONTRACTS; 
PRIVATIZATION OF NPC'S GENERATION, TRANSMISSION AND SUB- 
[(ww)] (ZZ) "Sub-transmission Assets" refer to the facilities related to the 
power delivery service below the transmission voltages and, based on the functional 
assignment of assets including, but not limited to, step-down transformers used solely 
by load customers, associated switchyard/substation, control and protective equipment, 
reactive compensation equipment to improve customer power factor, overhead lines, and 
the land where such facilitiedequipment are located. These include NPC assets linking 
the transmission system and the distribution system which are neither classified as 
generation nor transmission; 
[(xx)] (AAA) "Supplier" refers, to any person or entity authorized by the ERC to 
sell, broker, market, or aggregate electricity to the end-users; 


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[(yy)] (BBB) "Supplier's Charge" refers to the charge imposed by electricity 
excluding the charges for generation 
suppliers for the sale of electricity to end-users, 
transmission and distribution wheeling; 
[(zz)] (CCC) "Supply of Electricity" [means the sale of electricity by a party 
other than a generator or a distributor in the franchise area of a distribution utility, using 
the wires of the distribution utility concerned;] SHALL REFER, UNLESS THE 
CONTEXT SUGGESTS OTHERWISE, TO THE BUSINESS OF BUYING AND 
SELLING, BROI(ERING, MARKETING ELECTRICITY BY A PERSON OR 
ENTITY, OTHER THAN A GENERATION COMPANY OR A DISTRIBUTION 
UTILITY, TO END-USERS OF ELECTRICITY, OR OF AGGREGATING 
DEMANDS FOR SUCH END-USERS OF ELECTRICITY, IN THE FRANCHISE 
TERRITORY OF A DISTRIBUTION UTILITY, USING FOR THE PURPOSE 
THE WIRES AND 
FACILITIES OF THE DISTRIBUTION UTILITY 
CONCERNED; 
[(aaa)] (DDD) "Transmission Charge" refers to the regulated cost or charges for 
the use of a transmission system which may include the availment of ancillary services; 
[(bbb)] (EEE)"Transmission Development Plan" or "TDP" refers to the program 
for managing the transmission system through efficient planning for the expansion, 
upgrading, rehabilitation, repair, and maintenance, to be formulated by DOE and 
implemented by the TRANSCO pursuant to this Act; 
[(ccc)] (FFF) "Transmission of Electricity" refers to the conveyance of 
electricity through the high voltage backbone system; and 
[(ddd)l (GGG) 
"Universal Charge" refers to the charge, if any, [imposed 
for the recovery of the stranded cost and other purposes pursuant to Section 34 hereof.] 
TO BE DETERMINED, FIXED, AND APPROVED BY THE COMMISSION, 
AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
HEARING, 
IN 
ACCORDANCE 
WITH 
AND 
FOR 
THE 
PURPOSES 
MENTIONED IN SECTION 34 OF THIS ACT. 
Sec 2. Section 20, Chapter I1 of the Act is hereby amended to read as follows: 
"SEC. 20. TRANSCO Related Businesses. - THE TRANSCO [may] IS 
HEREBY AUTHORIZED TO engage, DIRECTLY OR INDIRECTLY, in any 
BUSINESS related TO ITS MAIN business [which maximizes] IN ORDER TO 
MAXIMIZE THE utilization of its assets[:] AND RESOURCES: Provided, That 
WHERE ASSETS FORMING PART OF THE RATE BASE OF THE TRANSCO 
ARE UTILIZED IN SUCH RELATED BUSINESS, a portion of the net income 
derived from such [undertaking utilizing assets which form part of the rate base] 
RELATED BUSINESS, WHICH PORTION SHALL NOT BE LESS THAN FIFTY 
PERCENT (50%) OF SUCH NET INCOME, shall be used to reduce THE 
transmission RATE OR wheeling [rates as determined by the ERC. Such portion of net 
income used to reduce the transmission wheeling rates shall not exceed fifty percent 
(50%) of the net income derived from such undertaking.] CHARGE PASSED-ON TO 
THE END-USERS OF ELECTRICITY. 
Separate accounts shall be maintained for each RELATED business 
[undertaking] to ensure that the transmission business shall neither subsidize in any way 
such RELATED business [undertaking] nor encumber [its] THE TRANSCO'S 
transmission assets in any way to support such RELATED business. 


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Sec 3. Section 21 of the Act is hereby amended to read as follows: 
"SEC. 21. 
TRANSCO Privatization. - Within six (6) months from the 
effectivity of this Act, the PSALM Corp. shall submit a plan ON THE 
PRIVATIZATION OF THE TRANSCO for the endorsement by the Joint 
CONGRESSIONAL Power Commission TO, and FOR the approval of, the President of 
the Philippines. [The] THEREAFTER, THE President of the Philippines [thereafter] 
shall direct THE PSALM Corp. to [award, in] CONDUCT AN open competitive 
PUBLIC bidding, AND AWARD THE OWNERSHIP AND CONTROL OF THE 
TRANSCO THROUGH A CONTRACT OF SALE, OR AWARD THE 
ADMINISTRATION, MANAGEMENT, OPERATION, AND MAINTENANCE, 
AS WELL AS THE PRESERVATION, IMPROVEMENT, AND/OR EXPANSION 
OF the transmission ASSETS AND facilities, including THE grid interconnections and 
ancillary services THROUGH A CONCESSION CONTRACT to [a] THE qualified 
[party either through an outright sale or a concession contract.] WINNING BIDDER. 
The buyer/concessionaire, AS THE CASE MAY BE, shall be responsible for the 
EFFICIENT 
ADMINISTRATION, 
MANAGEMENT, 
OPERATION, 
AND 
MAINTENANCE, AS WELL AS FOR THE PRESERVATION, improvement, 
AND/OR expansion[, operation, and/or maintenance of its] OF THE transmission assets 
and [the] FACILITIES, INCLUDING THE GRID INTERCONNECTIONS AND 
ANCILLARY SERVICES AND THE ADMINISTRATION, MANAGEMENT, 
AND FOR THE operation of any related business[.] OR BUSINESSES. The award 
[shall result in maximum] TO THE QUALIFIED WINNING BIDDER MUST BE 
BASED ON THE MOST ADVANTAGEOUS, BENEFICIAL, AND OPTIMAL 
present value [of proceeds] to the national government. In case a concession contract is 
awarded, the concessionaire shall [have a] BE GIVEN AN INITIAL CONCESSION 
contract period of twenty-five (25) years, subject to review and renewal for a maximum 
period of another twenty-five (25) years. 
IF ALL OR A CONTROLLING PORTION OF THE SHARES OF STOCK OF 
TRANSCO ARE SOLD, THE BUYER OR BUYERS WILL NOT NEED A 
CONGRESSIONAL FRANCHISE SEPARATE FROM THAT OF TRANSCO TO 
OPERATE THE BUSINESS OF THE LATTER PROVIDED HOWEVER, THAT THE 
NATIONALITY REQUIREMENTS OF THE CONSTITUTION MUST BE COMPLIED 
WITH. 
IF THE AWARDEE OF THE CONCESSION CONTRACT IS MERELY 
HIRED UNDER A COMPENSATION SCHEME TO ADMINISTER, MANAGE, 
OPERATE, MAINTAIN, PRESERVE, AND TO FINANCE AND SUPERVISE 
THE IMPROVEMENTS AND/OR EXPANSIONS 
OF THE ELECTRIC 
TRANSMISSION 
ASSETS 
AND 
FACILITIES 
AND 
THE 
GRID 
INTERCONNECTIONS AND THE ANCILLARY SERVICES FOR THE 
TRANSCO, THE AWARDEE OF THE CONCESSION CONTRACT SHALL NOT 
BE REQUIRED TO OBTAIN A NATIONAL FRANCHISE, AND NEITHER 
SHALL HE OR IT BE REQUIRED TO QUALIFY UNDER THE NATIONALITY 
REQUIREMENTS OF THE CONSTITUTION FOR PUBLIC UTILITY 
OPERATORS. 
HOWEVER, IF THE WINNING BIDDER OR AWARDEE OF THE 
CONCESSION CONTRACT TAKES OVER THE POSSESSION AND CONTROL OF 
THE ELECTRIC TRANSMISSION ASSETS AND FACILITIES AND THE GRID 
INTERCONNECTIONS AND ANCILLARY SERVICES, AS BUYER OR 
LESSEE 
THEREOF, AND ADMINISTERS, MANAGES, MAINTAINS, OPERATES, IMPROVES, 
AND EXPANDS THEM AS HIS OR ITS OWN BUSINESS, THEN IN THAT CASE THE 
AWARDEE OF THE CONCESSION CONTRACT MUST OBTAIN A NATIONAL 


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FRANCHISE THEREFOR, AND HE OR IT MUST QUALIFY UMDER THE 
NATIONALITY REQUIREMENTS OF THE CONSTITUTION FOR PUBLIC UTILITY 
OPERATORS. 
[In any case, the awardee shall] THE AWARDEE, WHETHER UNDER A 
CONTRACT OF SALE OR UNDER A CONCESSION CONTRACT, MUST 
comply with the Grid Code and the TDP [as approved]. The CONTRACT OF sale 
[agreement/concession] OR THE CONCESSION contract, AS THE CASE MAY BE, 
shall [include, but not limited to, the provision for] PROVIDE, AMONG OTHERS, 
SUCH performance and financial guarantees or [any] other covenants [which] THAT the 
national government may require. [Failure to comply with such obligations shall result in 
the imposition of appropriate sanctions or penalties by the ERC.] THE FAILURE OF 
THE AWARDEE TO COMPLY WITH ANY OF SUCH GUARANTEES OR 
COVENANTS SHALL CONSTITUTE A DEFAULT ON THE PART OF THE 
AWARDEE AND SHALL CAUSE THE IMMEDIATE RESCISSION AND 
CANCELLATION OF THE CONTRACT OF SALE OR OF THE CONCESSION 
CONTRACT AND, IN ADDITION, THE IMPOSITION OF APPROPRIATE 
SANCTIONS, 
FINES, 
OR 
PENALTIES BY 
THE 
COMMISSION 
IN 
ACCORDANCE WITH SECTION 44 OF THIS ACT. 
The awardee [shall] MUST be financially and technically 
capable AND 
SOUND, with proven domestic and/or international experience and expertise as a leading 
transmission system operator. Such experience must be with a transmission system of 
comparable capacity and coverage as THAT OF the Philippines. 
Sec. 4. Section 26 of the Act is hereby amended to read as follows: 
"SEC. 26. 
Distribution Related Businesses. - [Distribution utilities] 
SUBJECT TO THE APPROVAL OF THE COMMISSION, AFTER DUE NOTICE 
TO ALL INTERESTED PARTIES AND PUBLIC HEARING, A DISTRIBUTION 
UTILITY may, directly or indirectly, engage in any BUSINESS related TO ITS MAIN 
business [undertaking which maximizes] IN ORDER TO MAXIMIZE the utilization of 
[their] ITS assets[:] AND RESOURCES: 
Provided, That WHERE ASSETS 
FORMING PART OF THE RATE BASE ARE UTILIZED IN SUCH RELATED 
BUSINESS, a portion of the net income derived from such [undertaking utilizing assets 
which form part of the rate base] RELATED BUSINESS, WHICH PORTION SHALL 
NOT BE LESS THAN FIFTY PERCENT (50%) OF SUCH NET INCOME, shall be 
used to reduce its distribution wheeling [charges] CHARGE AND RETAIL RATE [as 
determined] APPROVED by the [ERC: Provided, further, That such portion of net 
income used to reduce their distribution wheeling charges shall not exceed fifty percent 
(50%) of the net income derived from such undertaking: Provided, finally, That separate 
accounts are maintained for each business undertaking to ensure that the distribution 
business shall neither subsidize in any way such business undertaking nor encumber its 
distribution assets in any way to support such business.] COMMISSION. 
SEPARATE ACCOUNTS SHALL BE MAINTAINED FOR EACH 
RELATED BUSINESS TO ENSURE THAT THE DISTRIBUTION BUSINESS 
SHALL NEITHER SUBSIDIZE, IN ANY WAY, SUCH RELATED BUSINESS 
NOR ENCUMBER, IN ANY WAY, ITS DISTRIBUTION ASSETS TO SUPPORT 
SUCH RELATED BUSINESS. 


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Sec. 5. Section 30 of the Act is hereby amended to read as follows: 
“SEC. 30. Wholesale Electricity Spot Market. - Within one (1) year from the 
effectivity of this Act, the DOE shall establish a wholesale electricity spot market, 
HEREINAFTER REFERRED TO AS THE WESM, composed of the [wholesale 
electricity spot market] WESM participants. The market shall provide the mechanism for 
identifying and setting the price of actual variations from the quantities transacted under 
contracts between sellers and purchasers of electricity. 
Jointly with the electric power industry participants, the DOE shall formulate the 
detailed rules for the wholesale electricity spot market.. Said rules shall provide the 
mechanism for determining the price of electricity not covered by bilateral contracts 
between sellers and 
purchasers of electricity users. [The price determination 
methodology contained in said rules] THE METHOD CONTAINED IN THE SAID 
RULES FOR DETERMINING THE PRICE OF ELECTRICITY IN THE WESM 
shall be subject to the approval of 
[ERC.] THE COMMISSION, AFTER DUE 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING. Said rules 
shall also reflect accepted economic principles and provide a level playing field to all 
electric power industry participants. The rules shall provide, among others, procedures 
for: 
(a) 
Establishing the merit order dispatch instructions for each time period; 
PROVIDED HOWEVER, THAT IN EVERY CASE, AS A GENERAL RULE, 
THE CHEAPER ELECTRICITY SHALL BE DISPATCHED AHEAD OF THE 
HIGHER PRICED ELECTRICITY. 
(b) 
(c) 
Administering the market, including criteria for admission to [and 
termination] OR DISMISSAL from the market [which includes], AS WELL AS ANY 
REQUIRED security or performance [bond requirements] BOND, voting rights of the 
participants, surveillance, [and] asswance of compliance [of] BY the participants with the 
rules, and the formation of the [wholesale electricity spot market governing body] 
GOVERNING BODY OF THE WESM; 
Determining the market-clearing price for each time period; 
(d) 
Prescribing guidelines for the market operation in system emergencies; 
and 
(e) 
Amending the rules. 
The wholesale electricity spot market shall be implemented by a market operator 
in accordance with the wholesale electricity spot markets rules. The market operator shall 
be an autonomous group, to be constituted by DOE, with equitable representation from 
electric power industry participants, initially under the administrative supervision of the 
TRANSCO. The market operator shall undertake the preparatory work and initial 
operation of the wholesale electricity spot market. Not later than one (1) year after the 
implementation of the wholesale electricity spot market , an independent entity shall be 
formed and the functions, assets and liabilities of the market operator shall be transferred 
to such entity with the joint endorsement of the DOE and the electric power industry 
participants. Thereafter, the administrative supervision of the TRANSCO over [such 
entity shall cease.] THE WESM AND THE INDEPENDENT MARKET 
OPERATOR SHALL CEASE AND TERMINATE. 
. 
Subject to the compliance with the membership criteria, all generating 
companies, distribution utilities, suppliers, bulk consumers/end-users and other similar 
entities authorized by the ERC shall be eligible to become members of the wholesale 
electricity spot market. 


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The ERC may authorize other similar entities to become eligible as members, 
either directly or indirectly, of the wholesale electricity spot market. All generating 
companies, distribution utilities, suppliers , bulk consumers/end-users and other similar 
entities authorized by the ERC, whether direct or indirect members of the wholesale 
electricity spot market, shall be bound by the wholesale electricity spot market rules with 
respect to transactions in that market. 
NEA may, in exchange for adequate security and a guarantee fee, act as a 
guarantor for purchases of electricity in the wholesale electricity spot market by any 
electric cooperative or small distribution utility to support their credit standing consistent 
with the provisions hereof. For this purpose, the authorized capital stock of NEA is 
hereby increased, to Fifteen billion pesos (PI 5,000,000,000.00). 
All electric cooperatives which have outstanding uncollected billings to any local 
government unit shall report such billings to NEA which shall, in turn, report the same to 
the Department of Budget and Management (DBM) for collection pursuant to Executive 
Order 190, issued on December 21, 1999. 
The cost of administering and operating the wholesale electricity spot market 
shall be recovered by the market operator through a charge imposed to all market 
members: Provided, That such charge shall be filed with and approved by the [ERC.J 
COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND 
PUBLIC HEARING. 
In cases of national and international security emergencies or natural calamities, 
the ERC is hereby empowered to suspend the operation of the wholesale electricity spot 
market or declare a temporary wholesale electricity spot market failure. 
TO ENCOURAGE AND PROMOTE THE DEVELOPMENT OF THE 
WESM, DISTRIBUTION UTILITIES WITH DEMAND LEVELS OF NOT LESS 
THAN 100 MEGAWATTS ARE REQUIRED, FOR THE FIRST THREE (3) 
YEARS IMMEDIATELY FOLLOWING THE ESTABLISHMENT OF THE 
WESM, TO SOURCE FROM THE WESM AT LEAST TEN PERCENT (10%) OF 
THEIR SUPPLY OF ELECTRICITY FOR RETAIL TO END-USERS. THE 
COMMISSION MAY, FROM TIME TO TIME, REVIEW THE APPROPRIATE 
LEVEL OF DEMAND TO BE SOURCED FROM THE WESM AND, IN 
MERITORIOUS 
INSTANCES, 
WAIVE IMPLEMENTATION 
OF 
SUCH 
REQUIREMENT, SUBJECT TO A PUBLIC HEARING. 
Sec. 6. Section 3 1 of the Act is hereby amended to read as follows: 
“SEC. 3 1. 
Retail Competition and Open Access. - Any law to the contrary 
notwithstanding, retail competition and open access on distribution wires shall be 
implemented not later than three (3) years upon the effectivity of this Act, subject to the 
following conditions: 
(a) Establishment of the wholesale electricity spot market ; 
(b) Approval of unbundled transmission and distribution wheeling charges; 
(c) Initial implementation of the cross subsidy removal scheme; 
(d) Privatization of at least [seventy (70%) percent] FIFTY PERCENT (50%) 
of the total capacity of [generating] THE GENERATION assets of NPC in Luzon and 
Visayas; and 


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(e) Transfer of the management and control of at least [seventy percent (70%)] 
FIFTY PERCENT (50%) of the total energy output of power plants under contract 
with NPC to the IPP Administrators. 
Upon the initial implementation of open access, the [ERC] COMMISSION shall 
[allow] CONSTITUTE IN A FORMAL ORDER TO BE ISSUED AFTER DUE 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING all 
[electricity] end-users OF ELECTRICITY with a monthly average peak demand of [at 
least] NOT LESS THAN one megawatt (IMW) for the IMMEDIATELY preceding 
twelve (12) BILLING months to be the contestable market. [Two] AFTER TWO (2) 
years 
[thereafter,] 
IMMEDIATELY 
FOLLOWING 
THE 
INITIAL 
IMPLEMENTATION OF OPEN ACCESS, the threshold level for the contestable 
market shall be reduced to seven hundred fifty kilowatts (75OkW). At [this] THAT level, 
aggregators shall be allowed to supply electricity to end-users whose aggregate demand 
within a contiguous area is at least seven hundred fifty ldowatts (750kW). [Subsequently 
and every] EVERY year thereafter, the [ERC] COMMISSION shall REVIEW AND 
evaluate the performance of the CONTESTABLE market[. On] AND, ON the basis of 
such YEARLY REVIEW AND evaluation, [it] THE COMMISSION shall gradually 
reduce the threshold level until [it reaches] THE CONTESTABLE MARKET SHALL 
FINALLY COVER the household [demand level.] END-USERS OF ELECTRICITY. 
In the case of electric cooperatives, retail competition and open access shall be 
implemented not earlier than five (5) years upon the effectivity of this Act. 
Sec. 7. Section 32 of the Act is hereby amended to read as follows: 
“SEC. 32. 
NPC Stranded Debt and Contract Cost Recovery. - [Stranded 
debt] THE STRANDED DEBTS of NPC [shall] refer to [any] ITS unpaid financial 
obligations [of NPC.], WHICH ARE NOT LIQUIDATED OR OFFSET BY THE 
PROCEEDS FROM THE SALE, DISPOSITION, AND/OR PRIVATIZATION OF 
NPC’S GENERATION ASSETS, TRANSMISSION AND SUBTRANSMISSION 
ASSETS AND FACILITIES, REAL ESTATE ASSETS, OTHER DISPOSABLE 
ASSETS, AND IPP CONTRACTS. 
[Stranded] THE STRANDED contract costs of NPC [shall] refer to the excess of 
the contracted cost of electricity under THE eligible [IPP] INDEPENDENT POWER 
PRODUCER (IPP) contracts of NPC WITH ITS IPPs over the actual selling price of 
[the] THAT contracted [energy output of such contracts] ELECTRICITY FROM 
SUCH IPP CONTRACTS in the market. [Such contracts shall] INDEPENDENT 
POWER PRODUCER CONTRACTS OF NPC SHALL BE DEEMED ELIGIBLE 
CONTRACTS TO APPLY FOR STRANDED CONTRACT COSTS RECOVERY 
ONLY IF SUCH CONTRACTS have been approved by the ERB [as of] ON OR 
BEFORE December 3 1,2000. 
The national government shall directly assume a portion of the financial 
obligations of NPC in an amount not [to exceed] LESS THAN Two hundred billion 
pesos (P200,000,000,000.00). 
The [ERC] COMMISSION shall verify the reasonable [amounts and determine 
the manner and duration for the full recovery of stranded debt and stranded contract costs 
as defined herein:], ACTUAL, AND AGGREGATE AMOUNTS OF THE 
STRANDED DEBTS AS WELL AS THE JUST AND REASONABLE, ACTUAL, 
AND AGGREGATE AMOUNTS OF THE STRANDED CONTRACT COSTS OF 
NPC THAT MUST BE RECOVERED, IF ANY, AND SHALL APPROVE AND 
DETERMINETHEMANNERANDDURATIONFORTHEFULLRECOVERY 
OF BOTH, AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND 


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PUBLIC HEARING: Provided, That the duration for such FULL recovery shall not be 
[shorter] LESS than fifteen (15) years nor [longer] MORE than twenty-five (25) years. 
The [ERC] COMMISSION shall, at the end of the first year [ofJ FROM the 
implementation of [stranded cost recovery] THE STRANDED DEBTS AND 
STRANDED CONTRACT COSTS RECOVERY, and every year thereafter, conduct a 
review OF ALL RELEVANT FACTS to determine whether there [is] HAS BEEN AN 
under-recovery or over-recovery [and adjust (true-up) the level of stranded cost recovery 
charge accordingly.] FROM THE STRANDED DEBTS AND THE STRANDED 
CONTRACT COSTS RECOVERY CHARGE. 
IN THE EVENT OF UNDER- 
RECOVERY OR OVER-RECOVERY, THE COMMISSION SHALL, AFTER 
DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING, 
ADJUST THE RATE OF THE SAID STRANDED DEBTS AND STRANDED 
CONTRACT COSTS RECOVERY CHARGE ACCORDINGLY. Any amount [to be 
included for stranded cost recovery] REPRESENTING THE STRANDED DEBTS 
AND STRANDED CONTRACT COSTS RECOVERY CHARGE shall be reflected 
as a separate item in the [consumer billing statement.] ELECTRIC END-USER'S 
MONTHLY BILLING STATEMENTS. 
IN CASE OF OVER-RECOVERY, THE AMOUNT OVER-RECOVERED 
AREAS WHERE THE OVER-RECOVERY OCCURRED, WITH INTEREST 
EQUAL TO THE NATIONAL GOVERNMENT'S NINETY-DAY TREASURY 
SHALL BE REFUNDED TO THE END-USERS OF ELECTFUCITY IN THE 
BILL BORROWING RATE, COMPUTED ON THE BASIS OF THE AMOUNT 
RECOVERED AMOUNT IS FULLY REFUNDED. THE COMMISSION IS 
HEREBY AUTHORIZED TO ADOPT SUCH FAIR AND REASONABLE 
FORMULA AND PROCEDURE TO EFFECT THE SAID REFUND. 
OF EACH MONTHLY BILLING STATEMENT UNTIL THE TOTAL OVER- 
Sec. 8. Section 33 of the Act is hereby amended to read as follows: 
"SEC. 33. 
Distribution Utilities Stranded Contract Costs Recovery. - 
[Stranded] THE STRANDED contract costs of A distribution [utilities shall] UTILITY 
refer to the excess of the contracted cost of electricity under THE eligible 
INDEPENDENT POWER PRODUCER (IPP) contracts of [such utilities] THE 
DISTRIBUTION UTILITY WITH ITS IPPs over the actual selling price of [such 
contracts] 
THAT 
CONTRACTED 
ELECTRICITY 
FROM 
SUCH 
IPP 
CONTRACTS in the market. [Such contracts shall] 
INDEPENDENT POWER 
PRODUCER CONTRACTS OF THE DISTRIBUTION UTILITY SHALL BE 
DEEMED ELIGIBLE CONTRACTS TO APPLY FOR STRANDED CONTRACT 
COSTS RECOVERY ONLY IF SUCH CONTRACTS have been approved by the 
ERB [as ofl ON OR BEFORE December 3 1,2000. 
A distribution utility [shall] WITH ELIGIBLE IPP CONTRACTS MAY BE 
ALLOWED TO recover ITS stranded contract costs[: Provided, however,That] ONLY 
IF such STRANDED CONTRACT costs [of the IPPs of distribution utilities are 
subject to] ARE FOUND, AFTER A THOROUGH review by [ERC in order to 
determine fairness and reasonableness] THE COMMISSION, TO BE FAIR AND 
REASONABLE in relation to OR IN COMPARISON WITH the average price of 
SIMILAR OR COMPARABLE land-based [IPP projects] IPP CONTRACTS entered 
into by NPC, at the time [they were contracted. The ERC] OR AS NEAR A TIME AS 
THE SAID IPP CONTRACTS OF THE DISTRIBUTION UTILITY WERE 
CONCLUDED. IN REVIEWING AND COMPARING THE SAID AVERAGE 
PRICE OF ELIGIBLE IPP CONTRACTS OF THE DISTRIBUTION UTILITY, 
THE COMMISSION shall take into consideration all RELEVANT factors that affect 
the total cost of NPC IPP generation projects, including direct or indirect subsidies or 
incentives provided by the Government. 


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Within one (1) year from the start of open access, any distribution utility that 
[seeks] INTENDS TO SEEK THE recovery of stranded contract costs shall file with the 
[ERC] COMMISSION A notice of such intent [together with], STATING WITH 
SUFFICIENT PARTICULARITY an estimate of THE AGGREGATE AMOUNT 
OF such [obligations, including the] STRANDED CONTRACT COSTS AND ITS 
present value [thereofl and SUBMITTING AT THE SAME TIME such [other] 
supporting EVIDENCE AND/OR data as may be required by the [ERC.] 
COMMISSION TO ASSESS AND DETERMINE THE MERIT AND VALIDITY 
OF THE ALLEGED STRANDED CONTRACT COSTS. Any distribution utility that 
does not file SUCH NOTICE OF INTENT, WITH THE NECESSARY 
SUPPORTING EVIDENTIAL REQUIREMENTS, within the [date] specified 
PERIOD OF TIME shall not be [eligible for such recovery.] ENTITLED TO 
RECOVER ANY STRANDED CONTRACT COSTS. 
Any distribution utility [which seeks] THAT INTENDS to recover stranded 
[cost] CONTRACT COSTS shall have a duty to mitigate BEFOREHAND its potential 
stranded contract costs by making [reasonable best] REAL efforts to: 
(a) Reduce the costs of its existing contracts with [IPPs] ITS INDEPENDENT 
POWER PRODUCERS (IPPS) to [a level not exceeding] AN EXTENT AT LEAST 
EQUAL TO the average buying price [of] FROM other COMPARABLE land-based 
electric power [generators;] GENERATION COMPANIES; and 
(b) Submit to an annual [earnings] FINANCIAL review AND AUDIT by the 
[ERC and use] COMMISSION UNTIL THE END OF THE STRANDED 
CONTRACT COSTS RECOVERY PERIOD SO THAT its earnings above its 
authorized rate of return, IF ANY, SHALL BE USED to reduce the book value of 
[contracts until the end of the stranded cost recovery period.] ITS IPP CONTRACTS. 
BILATERAL CONTRACTS CONCLUDED BY A DISTRIBUTION 
UTILITY WITHOUT OPEN COMPETITIVE PUBLIC BIDDING, SPECIALLY 
WITH SISTER OR AFFILIATED GENERATION COMPANY OR COMPANIES, 
MUST BE SUBJECTED TO STRINGENT MITIGATION EXAMINATION TO 
ELIMINATE ABOVE MARKET PRICES, INDICES, COST FACTORS, OTHER 
PREFERRED PROVISIONS AND ARRANGEMENTS THAT WILL INCREASE 
THE PASS-ON COSTS TO THE END-USERS OF ELECTRICITY. 
THE STRANDED CONTRACT COSTS RECOVERIES ALLOWED 
COLLECTED ONLY FROM CUSTOMERS OF THE DISTRIBUTION UTILITY 
CONCERNED IN ITS OWN FRANCHISE TERRITORY, AFTER THE 
AFTER THE ABOVE-MENTIONED MITIGATION EXAMINATION SHALL BE 
ELIMINATION OF THE INTER-GRID SUBSIDIES. 
[Other] IN CONDUCTING THE REVIEW OF THE STRANDED 
CONTUCT COSTS OF A DISTRIBUTION UTILITY, THE COMMISSION 
MAY UTILIZE FOR THAT PURPOSE OTHER mitigating measures which are 
reasonably known and generally accepted within the electric power industry [shall be 
utilized]. The [ERC] COMMISSION shall not require the distribution utility to take a 
loss to reduce ITS stranded contract costs or TO divest ITSELF OF assets, unless the 
divestiture is imposed as a penalty [as provided herein.] IN ACCORDANCE WITH 
THE APPLICABLE PROVISIONS OF THIS ACT. 
The [relevant] distribution utility CONCERNED shall submit to the [ERC] 
COMMISSION quarterly reports showing the amount of THE stranded CONTRACT 
costs ALREADY recovered and the REMAINING balance [remaining], IF ANY, YET 
to be recovered. 


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Within three (3) months [from] IMMEDIATELY FOLLOWING the 
submission of the application for THE stranded [cost] CONTRACT COSTS recovery 
by the [relevant] distribution [utilities,] UTILITY CONCERNED, the [ERC] 
COMMISSION shall verify the JUST AND reasonable [amounts] AMOUNT TO BE 
RECOVERED, IF ANY, and SHALL APPROVE THE SAME AND determine the 
manner and duration for the full recovery of THE stranded contract costs [as defined 
herein:], AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
HEARING: Provided, That the duration for such recovery shall not be [shorter] LESS 
than fifteen (15) years nor [longer] MORE than twenty-five (25) years. Any amount [to 
be included for stranded cost recovery] REPRESENTING THE STRANDED 
CONTRACT COSTS RECOVERY CHARGE shall be reflected as a separate item in 
the [consumer billing statement.] ELECTRIC END-USER'S MONTHLY BILLING 
STATEMENTS. 
The [ERC] COMMISSION shall, at the end of the first year [of] FROM the 
implementation of THE stranded [cost] CONTRACT COSTS recovery, and every year 
thereafter, conduct [a] AN ANALYSIS AND review OF ALL RELEVANT FACTS to 
determine whether there [is] HAS BEEN AN under-recovery or over-recovery FROM 
THE STRANDED CONTRACT COSTS RECOVERY CHARGE and adjust [(true- 
up) the level ofJ THE RATE OF THE SAID stranded [cost] CONTRACT COSTS 
recovery charge accordingly. In case of an over-recovery, the [ERC] COMMISSION 
shall ensure that any excess amount shall be remitted to the Special Trust Fund created 
under Section 34 hereof. A separate TRUST account shall be created for these amounts, 
which shall be held in trust for any future claims of distribution utilities for stranded 
[cost] CONTRACT COSTS recovery. At the end of the stranded [cost] CONTRACT 
COSTS recovery period, any remaining amount in [this] THE SAID TRUST account 
shall be used to reduce the electricity rates CHARGED to the 
end-users[.] OF 
ELECTRICITY. 
Sec. 9. Section 34 of the Act is hereby amended to read as follows: 
"SEC. 34. 
Universal Charge. - Within one (1) year from the effectivity of 
this Act, a universal charge to be determined, fixed, and approved by the [ERC,] 
COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND 
PUBLIC HEARING, shall be imposed on all 
[electricity] end-users OF 
ELECTRICITY, ON THE BASIS OF THE NUMBER OF KILOWATT HOURS 
OF ELECTRICITY RESPECTIVELY CONSUMED BY THEM, for the following 
purposes: 
(a) 
Payment for the stranded debts OF NPC in excess of the amount TO BE 
assumed by the National Government [and] AS PROVIDED UNDER SECTION 32 
OF THIS ACT, FOR THE PAYMENT OF JUST AND REASONABLE AMOUNT 
OF stranded contract costs of NPC [and as well as qualified] FROM ITS 
INDEPENDENT POWER PRODUCER 
CONTRACTS, AND 
FOR THE 
PAYMENT OF JUST AND REASONABLE AMOUNT OF stranded contract costs of 
distribution utilities 
[resulting from] THAT MAY ARISE FROM THEIR 
RESPECTIVE ELIGIBLE IPP CONTRACTS BECAUSE OF the restructuring of the 
ELECTRIC POWER industiy; 
(b) 
Missionary electrification; 
(c) 
The equalization of the taxes and royalties applied to indigenous or 
renewable sources of energy vis-&vis imported energy fuels; 
(d) 
An environmental charge equivalent to one-fourth of one centavo per 
kilowatt-hour (PO.O025/kWh), which shall accrue to an environmental fund to be used 


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solely for watershed rehabilitation and management. Said fund shall be managed by NPC 
under existing arrangements; and 
(e) 
A charge to account for all forms of cross-subsidies for a period not 
exceeding three (3) years. 
The universal charge [shall be a] UNDER THIS SECTION [non-bypassable 
charge which] shall be passed on and collected PER BILLING MONTH BY THE 
DISTRIBUTION UTILITIES from all THEIR RESPECTIVE end-users OF 
ELECTRICITY on [a monthly] THE basis [by the distribution utilities.] OF THE 
NUMBER 
OF 
KILOWATT 
HOURS 
OF 
ELECTRICITY 
ACTUALLY 
BILLING MONTH. Collections by the distribution utilities and the TRANSCO in any 
given BILLING month shall be remitted to the PSALM Corp. on or before the fifteenth 
(15th) DAY of the succeeding month, net of any amount due to the distribution utiIity. 
[Any end-user or self-generating entity not connected to a distribution utility shall remit 
its corresponding universal charge directly to the TRANSCO.] 
CONSUMED BY EACH OF SUCH END-USERS OF ELECTRICITY PER 
THE SELF-GENERATED ELECTRICITY OF AN END-USER WHO OR 
WHICH IS NOT DIRECTLY CONNECTED TO THE DISTRIBUTION SYSTEM 
OF A DISTRIBUTION UTILITY OR TO THE TRANSMISSION GRID AND ITS 
SUBTRANSMISSION FACILITIES SHALL NOT BE SUBJECT TO OR LIABLE 
FOR THE UNIVERSAL CHARGE IMPOSED IN THIS SECTION, EXCEPT 
FOR THE PAYMENT OF THE OBLIGATIONS SPECIFIED IN (b) AND (d) IF 
THE SELF GENERATED ELECTFUCITY OF THE END USER COMES FROM 
THE UTILIZATION AND EXPLOITATION OF THE NATURAL RESOURCES 
OF THE COUNTRY. 
HOWEVER, EVEN IF THE END USER WHO OR WHICH GENERATES 
ELECTRICITY FOR ITS OWN USE FROM ITS OWN GENERATION 
FACILITY IS CONNECTED TO THE DISTRIBUTION SYSTEM OF A 
DISTRIBUTION UTILITY OR TO THE TRANSMISSION SYSTEM OF 
TRANSCO, THE SAME SHALL NOT BE SUBJECT TO THE UNIVERSAL 
CHARGE IF THE SELF GENERATED ELECTRICITY DOES NOT PASS 
THROUGH THE DISTRIBUTION SYSTEM OF A DISTRIBUTION UTILITY 
OR OF THE TRANSMISSION SYSTEM OF TRANSCO, EXCEPT FOR THE 
PAYMENT OF THE OBLIGATIONS SPECIFIED IN (b) AND (d) IF THE SELF 
GENERATED ELECTRICITY OF THE END USER COMES FROM THE 
UTILIZATION AND EXPLOITATION OF THE NATURAL RESOURCES OF 
THE COUNTRY. 
The PSALM Corp., [as] BEING THE CUSTODIAN AND administrator of the 
[Eund,] UNIVERSAL CHARGE HEREIN PROVIDED, shall create a Special Trust 
Fund ACCOUNT, which shall be USED, AND FROM WHICH SHALL BE disbursed 
only SUCH AMOUNTS AS MAY BE NEEDED STRICTLY, for the purposes 
specified [herein] IN THIS SECTION in an open and transparent manner. PSALM 
SHALL APPOINT A CONSUMER 
REPRESENTATIVE ACTIVE IN THE 
ELECTRICITY INDUSTRY WHO SHALL MONITOR THE DISBURSEMENT 
OF FUNDS. All amounts collected for the universal charge shall be ALLOCATED 
AND 
distributed 
EXPEDITIOUSLY 
FOR 
THE 
PAYMENT 
OF 
THE 
OBLIGATIONS SPECIFIED IN (A), (B), (C), (D), AND (E) ABOVE AND to [the] 
THEIR respective beneficiaries, within [a] SUCH reasonable period [to be provided by 
the ERC.] OF TIME AS SHALL BE DETERMINED BY THE COMMISSION. 


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Sec. 10. Section 38, Chapter IV, of the Act is hereby amended to read as follows: 
“SEC. 38. 
Creation of the Energy Regzdatory Commission, - [There is 
hereby created an independent, quasi-judicial regulatory body to be named the Energy 
Regulatory Commission (ERC). For this purpose, the existing Energy Regulatory Board 
(Em) created under Executive Order No. 172, as amended, is hereby abolished.] THE 
ENERGY REGULATORY BOARD (ERB) CREATED UNDER EXECUTIVE 
ORDER NO. 172, AS AMENDED, IS HEREBY ABOLISHED. 
IN LIEU 
THEREOF, THERE IS HEREBY CREATED AN IMPARTIAL, INDEPENDENT, 
REGULATORY COMMISSION (ERC), WHICH FOR PURPOSES OF THIS ACT 
IS REFERRED TO AS THE “COMMISSION”. 
ALL THE POWERS 
FORMERLY VESTED IN THE ENERGY REGULATORY BOARD UNDER 
EXECUTIVE ORDER NO. 172, AS AMENDED, THAT ARE CONSISTENT 
WITH THE PROVISIONS OF THIS ACT MAY BE EXERCISED BY THE 
COMMISSION. 
AND QUASI-JUDICIAL REGULATORY BODY TO BE NAMED THE ENERGY 
The Commission shall be composed of a Chairman and four (4) members to be 
appointed by the President of the Philippines. The Chairman and the members of the 
Commission shall be natural-born citizens and residents of the Philippines, persons of 
good moral character, at least thirty-five (35) y’ears of age, and of 
recognized 
competence in any of the following fields: energy, law, economics, finance, commerce, 
or engineering, with at least three (3) years actual, and distinguished experience in their 
respective fields of expertise: Provided, That out of the four (4) members of the 
Commission, at least one (1) shall be a member of‘the Philippine Bar with at least ten 
(10) years experience in the active practice of law, and one (1) shall be a certified public 
accountant, with at least ten (10) years experience in active practice. 
Within three (3) months from the creation of the ERC, the Chairman shall submit 
for the approval by the President o f  the Philippines the new organizational structure and 
plantilla positions necessary to carry out the powers and functions of the ERC. 
The Chairman of the Commission, who shall be a member of the Philippine Bar, 
shall act as the Chief Executive Officer of the Commission. 
All members of the Commission shall have a term of seven (7) years: Provided, 
That for the first appointees, the Chairman shall hold office for seven (7) years, two (2) 
members shall hold office for five (5) years; and the other two (2) members shall hold 
office for three (3) years: Provided, further, That appointment to any future vacancy shall 
only be for the unexpired term of the predecessor: Provided, Jinally, That there shall be 
no reappointment and in no case shall any member serve for more than seven (7) years in 
the Commission. 
The Chairman and members of the Commission shall assume office at the 
beginning of their terms: Provided, That, if upon the effectivity of this Act, the 
Commission has not been constituted, and the new staffing pattern and plantilla 
positions have not been approved and filled-up, the current Board and existing personnel 
of ERB shall continue to hold office. 
The existing personnel of the E m ,  if qualified , shall be given preference in the 
filling up ofplantilla positions created in the ERC, subject to existing civil service rules 
and regulations. 
Members of the Commission shall enjoy security of tenure, and shall not be 
suspended or removed from office except for just cause as specified by law. 


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The Chairman and the members of the Commission [or any of] AND their 
relatives within the fourth civil degree of consanguinity or affinity, WHETHER SUCH 
PERSONAL RELATIONS ARE legitimate, [or] common law, [shall be] OR 
OTHERWISE, ARE prohibited from holding any interest whatsoever, either as 
investor, stockholder, officer, or director, in any company or entity engaged in the 
business of transmitting, generating, supplying, AGGREGATING, or distributing [any 
form of energy and must, therefore, divest through sale or legal disposition of any and all 
interests in the energy sector upon assumption of office.] ELECTRICITY. 
UPON THE ASSUMPTION BY THE CHAIRMAN AND THE ASSOCIATE 
MEMBERS OF THE COMMISSION OF THEIR RESPECTIVE POSITIONS, 
THE CHAIRMAN AND THE ASSOCIATE MEMBERS OF THE COMMISSION 
AND THEIR RESPECTIVE RELATIVES WITHIN THE PROSCRIBED 
DEGREE OF PERSONAL WLATIONS MUST DIVEST THEMSELVES OF ALL 
THEIR PROHIBITED INTEREST, THROUGH REAL ARMS LENGTH 
TRANSACTIONS OR OTHER VALID FORMS OF DISPOSITION, WITH 
CORRESPONDING PAYMENT OF ALL TAXES DUE, IF ANY, ON SUCH 
TRANSACTION OR OTHER FORMS OF DISPOSITION AND WITHOUT ANY 
PROVISION GRANTING A RIGHT TO THE TRANSFEROR OF SUCH 
PROHIBITED INTEREST TO REPURCHASE SUCH TRANSFERRED OR 
DISPOSED PROHIBITED INTEREST, AND MUST RESIGN FROM ALL THEIR 
PROSCRIBED POSITIONS IN THE ELECTRIC POWER INDUSTRY. 
The presence of at least three (3) members of the Commission shall constitute a 
quorum and the majority vote of two (2) members in a meeting where a quorum is 
present shall be necessary for the adoption of any rule, ruling, order, resolution, decision 
or other act of the Commission in the exercise of its quasi-judicial functions: Provided, 
That in fixing rates aid tariffs, an affirmative vote of three (3) members shall be 
required. 
Sec. 1 1. Section 41 of the Act is hereby amended as follows: 
"SEC. 41. 
PROTECTION AND Promotion of Consumer RIGHTS AND 
Interests. - [The ERC shall handle consumer complaints and ensure the adequate 
promotion of consumer interests.]THE COMMISSION SHALL ENSURE THE 
ADEQUATE PROTECTION AND PROMOTION OF THE INTERESTS OF THE 
ELECTRICITY CONSUMERS AND UPHOLD THEIR BASIC RIGHTS AS 
FOLLOWS: 
TO HAVE QUALITY, RELIABLE, AFFORDABLE, SAFE, AND 
REGULAR SUPPLY OF ELECTRIC POWER; 
TO BE ACCORDED COURTEOUS, PROMPT, AND NON- 
DISCRIMINATORY SERVICE BY THE ELECTRIC SERVICE 
PROVIDER; 
TO BE GIVEN A TRANSPARENT, NON-DISCRIMINATORY AND 
REASONABLE PRICE OF ELECTRICITY CONSISTENT WITH 
THE PROVISIONS OF THIS ACT. 
TO BE AN INFORMED ELECTRIC CONSUMER AND GIVEN 
ADEQUATE ACCESS TO INFORMATION ON MATTERS 
AFFECTING THE ELECTRIC SERVICE OF THE CONSUMER 
CONCERNED; 


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TO BE ACCORDED PROMPT AND SPEEDY RESOLUTION OF 
COMPLAINTS BY 
BOTH THE DISTRIBUTION UTILITY 
AND/OR THE COMMISSION; 
TO KNOW AND CHOOSE THE ELECTRIC SERVICE RETAILER 
UPON THE IMPLEMENTATION OF RETAIL COMPETITION; 
AND 
TO 
ORGANIZE 
THEMSELVES 
AS 
A 
CONSUMER 
ORGANIZATION IN THE FRANCHISE AREA WHERE THEY 
BELONG AND 
WHERE THEY ARE SERVED BY 
THE 
DISTRIBUTION 
UTILITY 
OR 
AS 
A 
NETWORK 
OF 
ORGANIZATION. 
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The [ERC] COMMISSION shall [handle] ATTEND AND RESPOND 
EXPEDITIOUSLY TO THE [consumer] complaints OF END-USERS OF 
ELECTRICITY, and IT SHALL ensure AND SAFEGUARD the adequate, 
EFFECTIVE, AND SUSTAINED promotion [of consumer interests.] 
AND 
PROTECTION OF THE INTERESTS OF END-USERS OF ELECTRICITY. 
THE COMMISSION SHALL ALSO ENSURE THAT DISTRIBUTION 
UTILITIES SHALL SUPPLY THE LEAST COST ELECTRICITY FOR THEIR 
CAPTIVE END-USERS. 
Sec. 12. Section 43 of the Act is hereby amended as follows: 
“SEC. 43. 
COMMISSION shall, AMONG OTHERS, [(l)] promote competition[,]; [(2)] 
encourage market development[,]; [(3)] PROTECT END-USERS OF ELECTRICITY 
FROM DISCRIMINATORY, UNFAIR, OR CONFISCATORY RATES; [(4)] 
ensure [customer], UPON THE ESTABLISHMENT OF THE CONTESTABLE 
MARKET, END-USER’S choice; and [(5)] CONTROL, PREVENT, AND penalize 
abuse of market power in the restructured [electricity] ELECTRIC POWER industry. 
Functions of the [ERC.] COMMZSSZON. - The [ERC] 
[In appropriate cases, the ERC] THE COMMISSION is authorized to issue A 
cease and desist order, WHENEVER IT IS NEEDED TO SERVE THE INTEREST 
OF THE PUBLIC OR THE INTEREST OF JUSTICE, after due notice TO ALL 
INTERESTED PARTIES and PUBLIC hearing. 
THE COMMISSION, ACTING AS A QUASI-JUDICIAL BODY, SHALL 
CONDUCT PUBLIC HEARlNGS ON ALL APPLICATIONS FOR RATE 
INCREASE AND ON ANY ISSUE, THE RESOLUTION OF WHICH, WILL 
AFFECT PRIVATE RIGHTS OR IMPOSE OBLIGATIONS OR WILL RESULT 
IN ANY INCREASE IN THE PRICE OF ELECTRICITY TO THE CONSUMERS. 
HENCEFORTH, NO PROVISIONAL AUTHORITY FOR ELECTRICITY RATE 
INCREASE MAY BE ISSUED. 
[Towards this end, it shall] IN ADDITION, THE COMMISSION SHALL 
PERFORM AND EXERCISE AND be responsible for the following [key] POWERS 
AND functions [in the restructured industry]: 
(a) 
(b) 
Enforce the implementing rules and regulations of this Act; 
Within six (6) months from the effectivity of this Act, promulgate and 
enforce, in accordance with law, a National Grid Code and a Distribution Code, which 
shall include, but not limited to, the following: 


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(i) Performance standards for TRANSCO 0 & M Concessionaire, 
distribution utilities, and suppliers: Provided, That in the establishment of the 
performance standards, the nature and function of the entities shall be considered; 
and 
(ii) 
Financial capability standards for the generating companies, the 
TRANSCO, distribution utilities, and suppliers: Provided, That in the formulation 
of the financial capability standards, the nature and function of the entity shall he 
considered: Provided further, That such standards are set to ensure that the 
electric power industry participants meet the minimum financial standards to 
protect the public interest[. Determine fix, and approve, after due notice and 
public hearings the universal charge, to be imposed on all electricity end-users 
pursuant to Section 34 hereofl; AND 
(111) DETERMINE, FIX, AND APPROVE, AFTER DUE NOTICE 
TO ALL INTERESTED PARTIES AND PUBLIC HEARING, THE 
ITEMIZED AMOUNTS OF THE UNIVERSAL CHARGE TO BE 
SECTION 34 OF THIS ACT. 
(c) 
Enforce the rules and regulations governing the operations of the 
electricity spot market and the activities of the spot marlcet operator and other participants 
in the spot market, for the purpose of ensuring a greater supply and rational pricing of 
electricity; 
(d) 
IMPOSED ON ALL END-USERS OF ELECTRICITY PURSUANT TO 
Determine the level of cross subsidies in the existing retail rate until the 
same is removed pursuant to Section 74 hereof; 
(e) 
Amend, REVISE, or revoke, after due notice TO ALL INTERESTED 
PARTIES and PUBLIC hearing, the authority to operate [of] GRANTED TO any 
person or entity which fails to comply with the PERTINENT provisions [hereof, the 
IRR, or any] OF THIS ACT, OR WITH ANY OF THE IMPLEMENTING RULES 
AND REGULATIONS OF THIS ACT, OR WITH ANY DECISION, order, or 
resolution of the [ERC.] COMMISSION. In the event a divestment, CESSATION, OR 
DESISTANCE is required, the [ERC] COMMISSION shall, THROUGH A 
FORMAL ORDER FOR THAT PURPOSE, allow the affected party [sufficient time] 
A REASONABLE TIME to remedy the infraction, or [for] TO UNDERTAKE an 
orderly disposal OF THE MATTER, ACTIVITY, OR BUSINESS INVOLVED, AS 
THE CASE MAY BE, but [shall] in no case SHALL THE SAID REASONABLE 
TIME exceed twelve (12) months from the issuance of the SAID FORMAL order[;] OF 
THE COMMISSION: 
(Q 
[In the public interest establish] ESTABLISH and enforce [a 
methodology for setting1 IN THE INTEREST OF THE GENERAL PUBLIC AND IN 
INTO ACCOUNT ALL RELEVANT CONSIDERATIONS, INCLUDING THE 
EFFICIENCY OR INEFFICIENCY OF THE REGULATED ENTITIES, AND 
AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
HEARING, JUST AND REASONABLE transmission and distribution NON- 
DISCRIMINATORY wheeling [rates and] CHARGES, AS WELL AS JUST AND 
REASONABLE NON-DISCRIMINATORY retail rates for the captive marlcet o f  [a] 
distribution [utility, taking into account all relevant considerations, including the 
efficiency or inefficiency of the regulated entities. The rates must he such as to] 
UTILITIES, WHICH SHALL allow the recovery of ALL just and reasonable costs[,] 
and [a] GIVE A JUST AND reasonable return on THE rate base (RORB) OF THE 
REGULATED ENTITIES to enable [the entity1 THEM to operate viably[. The ERC 
may adopt alternative forms of internationally-accepted rate-setting methodology as it 
may deem appropriate. The rate-setting methodology so adopted and applied must ensure 
THE INTEREST OF THE END-USERS OF ELECTRICITY, AFTER TAKING 


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a reasonable price of electricity. The rates prescribed shall be non-discriminatory. To 
achieve this objective and to ensure the complete removal of cross subsidies, the cap on 
the recoverable rate of system losses prescribed in Section 10 of Republic Act No. 7832, 
is hereby amended and shall be replaced by caps which shall be determined by the ERC 
based on load density, sales mix, cost of service, delivery voltage and other technical 
considerations it may promulgate. The ERC shall determine such form of rate-setting 
methodology, which shall promote efficiency. In case the rate setting methodology used 
is RORB, it shall be subject to the following guidelines:], AND WHICH SHALL 
ENSURE A JUST AND REASONABLE PRICE OF ELECTRICITY. 
THE 
COMMISSION, TO 
PROMOTE 
EFFICIENCY 
AND 
FAIRNESS IN THE ELECTRIC POWER INDUSTRY AND WHEN 
JUSTIFIED AND DEMANDED BY THE NATIONAL INTEREST, MAY 
ADOPT, AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND 
PUBLIC HEARING, ANY 
OTHER 
ALTERNATIVE FORM 
OF 
SHALL BEST SERVE THE MUTUAL INTEREST OF THE GENERAL 
INDUSTRY PARTICIPANTS. 
INTERNATIONALLY-ACCEPTED METHOD OF RATEMAIUNG THAT 
PUBLIC, THE END-USERS OF ELECTRICITY, AND THE ELECTRIC 
IN EVERY CASE, THE RATEMAKING METHOD SO ADOPTED 
USERS OF ELECTRICITY NOR CONFISCATORY TO THE TRANSCO 
OR TO THE DISTRIBUTION UTILITIES, AND MUST FURTHERMORE 
ENSURE THAT THE PRICE OF ELECTRICITY IS 
JUST AND 
REASONABLE. 
AND APPLIED MUST BE NEITHER EXTORTIONARY TO THE END- 
THE RATEMAKING POWER HEREIN GRANTED TO THE 
COMMISSION MUST BE FXERCISED IN SUCH A MANNER THAT 
EVERY 
DOUBT MUST BE RESOLVED IN FAVOR OF THE 
PROTECTION OF THE RIGHTS OF THE GENERAL PUBLIC. 
IN ALL CASES OF RATE-MAKING, THE SOLICITOR GENERAL 
MUST BE NOTIFIED OF AND SHALL APPEAR IN THE PROCEEDINGS 
BEFORE THE COMMISSION TO REPRESENT THE GOVERNMENT 
THEREIN SO THAT THE INTEREST OF THE GENERAL PUBLIC AND 
PROTECTED. 
IN DETERMINING A JUST AND REASONABLE RETURN ON RATE 
BASE OF THE TRANSCO OR OF A DISTRIBUTION UTILITY, THE 
COMMISSION MUST OBSERVE THE FOLLOWING GUIDELINES: 
THE INTEREST OF THE END-USERS OF ELECTRICITY WILL BE 
(I) THE RATE BASE SHALL CONSIST OF THE AVERAGE 
VALUE 
OF 
ALL 
ASSETS, 
FACILITIES, 
PROPERTY, 
AND 
PERMANENT IMPROVEMENTS OF THE TRANSCO OR OF THE 
DISTRIBUTION UTILITY, AT THE BEGINNING AND AT THE END OF 
ITS FISCAL YEAR, AS SHOWN IN THE PROPERTY ACCOUNTS OF 
THE TRANSCO OR OF THE DISTRIBUTION UTILITY, AS THE CASE 
MAY BE, WHICH ARE DIRECTLY USED AND 
USEFUL IN 
LESS THE ACCRUED ALLOWANCE FOR DEPRECIATION TAKEN 
FOR THE YEAR ON THE REGULATED ENTITY'S DEPRECIABLE 
ASSETS, 
FACILITIES, 
PROPERTY, 
AND 
PERMANENT 
IMPROVEMENTS, PLUS TWO MONTHS PRUDENT OPERATING 
CAPITAL. 
PROVIDING THE SERVICE TO THE END-USERS OF ELECTRICITY, 


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(11) THE VALUE OF THE FRANCHISE OF THE TRANSCO OR 
OF THE DISTRIBUTION UTILITY SHALL NOT BE INCLUDED IN 
THE RATE BASE FOR PURPOSES OF RATEMAIUNG. 
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[(i)] (111) 
[For purposes of determining the rate base, the] THE 
TRANSCO or [any] A distribution utility [may be allowed] IS AUTHORIZED 
to revalue its [eligible] assets [not more than], FACILITIES, PROPERTY, 
AND PERMANENT IMPROVEMENTS CONSTITUTING ITS RATE 
BASE once every three (3) years [by an] THROUGH THE SERVICES OF AN 
EXPERIENCED, WELL-ESTABLISHED, REPUTABLE, AND independent 
appraisal 
company[:], 
IN 
ACCORDANCE 
WITH 
SOUND 
AND 
CONSISTENTLY MAINTAINED METHOD OF VALUATION: Provided, 
however, That [ERC] THE COMMISSION may [give an exemption in case of 
unusual] TEMPORARILY SUSPEND THE AFORESAID THREE YEAR 
LIMITATION IN THE EVENT OF EXTRAORDINARY INFLATION OR 
devaluation[:] OF THE PESO AND ONLY FOR THE PERIOD THAT 
SUCH EXTRAORDINARY INFLATION OR DEVALUATION LASTS: 
Provided, further, That the [ERC] COMMISSION, IN THAT EVENT, shall 
exert [efforts to] EVERY EFFORT TO PREWENT AND/OR minimize THE 
STEEP AND RAPID ESCALATION OF THE price [shocks] OF 
ELECTRICITY in order to protect the [consumers;] END-USERS OF 
ELECTRICITY. 
(IV) THE CAP ON THE RECOVERABLE RATE OF A JUST AND 
REASONABLE SYSTEMS LOSS PRESCRIBED IN SECTION 10 OF 
REPUBLIC ACT NO. 7832 SHALL BE MAINTAINED IN THE DENSELY 
POPULATED CITIES, URBAN CENTERS, AND MUNICIPALITIES OF 
THE COUNTRY: PROVIDED, THAT IT SHALL BE ACCORDINGLY 
AMENDED AND REPLACED IN AREAS OTHER THAN THE DENSELY 
POPULATED CITIES, URBAN CENTERS, AND MUNICIPALITIES OF 
THE COUNTRY BY CAPS WHICH SHALL BE DETERMINED AND 
FIXED BY THE COMMISSION, AFTER DUE NOTICE TO ALL 
INTERESTED PARTIES AND PUBLIC HEARING, BASED ON LOAD 
DENSITY, SALES MIX, COST OF SERVICE, DELIVERY VOLTAGE, 
AND 
OTHER 
TECHNICAL 
CONSiDERATIONS 
THAT 
THE 
COMMISSION MAY PROMULGATE: PROVIDED FURTHER, THAT 
ANY NEW CAP FOR RECOVERABLE SYSTEMS LOSS IN AREAS 
OTHER THAN THE DENSELY POPULATED CITIES, 
URBAN 
CENTERS, AND MUNICIPALITIES OF THE COUNTRY SHALL ALSO 
TAKE INTO CONSIDERATION AND PROVIDE FOR A JUST AND 
REASONABLE SYSTEMS LOSS FOR THE INEFFICIENCIES OF THE 
SYSTEMS OF ELECTRIC COOPERATIVES IN PERFORMING THEIR 
MISSIONARY ELECTRIFICATION FUNCTIONS. 
(V) CORPORATE INCOME TAX LEVIED ON THE NET 
TAXABLE INCOME OF THE TRANSCO OR OF A DISTRIBUTION 
UTILITY SHALL NOT, DIRECTLY OR INDIRECTLY, BE PASSED ON 
TO THE END-USERS OF ELECTRICITY. 
[(ii)] (VI) 
Interest expenses [are not allowable] 
OF THE 
TRANSCO OR OF A DISTRIBUTION UTILITY SHALL NOT BE 
ALLOWED AS deductions [from permissible] FOR PURPOSES OF 
DETERMINING A JUST AND REASONABLE return on rate base[;]. 
[(iii)] (VII) 
[In] FOR PURPOSES OF determining [eligible] THE 
JUST AND REASONABLE cost of services that will be passed on to the end- 


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users[,] OF ELECTRICITY, the [ERC] THE COMMISSION shall esiablish 
minimum efficiency performance standards for the TRANSCO and THE 
distribution utilities, including systems losses, interruption frequency rates, and 
collection efficiency[;] OF THE REGULATED ENTITIES. 
[(iv)] (VIII) 
[Further, in] IN determining THE rate base[,] OF THE 
TRANSCO OR OF ANY DISTRIBUTION UTILITY, THE COMMISSION 
SHALL NOT ALLOW the TRANSCO or any distribution utility [shall not be 
allowed] to include THE COSTS OF management inefficiencies [like cost], 
SUCH AS, BUT NOT LIMITED TO, THE COSTS of project delays not 
[excused] EXCUSABLE by force majeure[,] OR THE penalties and related 
interest CHARGES ARISING during construction [applicable to these 
unexcused delays; and] PERIOD BECAUSE OF SAID INEXCUSABLE 
DELAYS. 
[(v)] (IX) 
Any significant operating costs or project investments of 
the TRANSCO and OF A distribution [utilities] UTILITY, which shall become 
part of the rate base, shall be subject to [verification by the ERC] THE 
APPROVAL OF THE COMMISSION, AFTER DUE NOTICE TO ALL 
INTERESTED PARTIES AND PUBLIC HEARING, IN ORDER to ensure 
that the [contracting and] procurement of the equipment, assets, and OR 
services [have been subjected to] AS WELL AS THE TERMS AND 
CONDITIONS OF THE CONTRACT OR CONTRACTS COVERING 
SUCH PROCUREMENT SHALL BE DONE IN ACCORDANCE WITH 
OPEN COMPETITIVE PUBLIC BIDDING AND IN COMPLIANCE WITH 
THE REQUIREMENTS OF EXISTING APPLICABLE PROCUREMENT 
LAWS, AS WELL AS IN ACCORDANCE WITH transparent and accepted 
industry procurement and purchasing practices to protect the public interest. 
(g) 
Three (3) years after the imposition of the universal charge, ensure that the 
charges of the TRANSCO or any distribution utility shall bear no cross subsidies between 
grids, within grids, or between classes of customers, except as provided herein; 
(h) 
Review and approve any changes on the terms and conditions of service of 
the TRANSCO or any distribution utility; 
(i) 
Allow the TRANSCO to charge user fees for ancillary services to all 
electric power industry participants or self-generating entities connected to the grid. Such 
fees shall be fixed by the ERC after due notice and public hearing; 
(j) 
(k) 
Set a lifeline rate for the marginalized end-users; 
Monitor and take measures in accordance with this Act to penalize abuse 
of market power, cartelization, and anti-competitive or discriminatory behavior by any 
electric power industry participant; 
(I) 
Impose fines or penalties for any non-compliance with or breach of this 
rules and regulations which it promulgates or 
Act, the IRR of this Act, and the 
administers; 
(m) 
(n) 
Take any other action delegated to it pursuant to this Act; 
Before the end of April of each year, submit to the Office of the President 
of the Philippines and Congress, copy furnished the DOE, an annual report containing 
such matters or cases which have been filed before or referred to it during the preceding 
year, the actions and proceedings undertaken , and its decision or resolution in each case. 
The ERC shall make copies of such reports available to any interested party upon 
payment of a charge which reflects the printing costs. The ERC shall publish all its 
decisions involving rates and anti-competitive cases in at least one (1) newspaper of 


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general circulation, and/or post electronically, and circulate to all interested electric 
power industry participants copies of its 
resolutions to ensure fair and impartial 
treatment; 
(0) 
Monitor the activities in the generation and supply of the electric power 
industry with the end in view of promoting free market competition and ensuring that the 
allocation or pass through of bulk purchase cost by distributors is transparent, non- 
discriminatory and that any existing subsidies, shall be divided pro-rata among all retail 
suppliers; 
(p) 
Act on applications for or modifications of certificates of public 
convenience and/or necessity, licenses, or permits of franchised electric utilities in 
accordance with law; and revoke, review, and modify such certificates, licenses or 
permits in appropriate cases, such as in cases of violations of the Grid Code, Distribution 
Code, and other rules and regulations issued by the ERC in accordance with law; 
(q) 
Act on 
management projects; 
applications for cost recovery and return on demand side 
(r) 
In the exercise of its investigative and quasi-judicial powers, act against 
any participant or player in the energy sector for violations of any law, rule, and 
regulation governing the same, including the rules on cross-ownership, anti-competitive 
practices, abuse of market positions, and similar or related acts by any participant in the 
energy sector or by any person, as may be provided by law, and require any person or 
entity to submit any report or data relative to any investigation or hearing conducted 
pursuant to this Act; 
(s) 
Inspect, on its own or through duly authorized representatives, the 
premises, books of accounts, and records of any person or entity at any time, in the 
exercise of its quasi-judicial power for purposes of determining the existence of any anti- 
competitive behavior and/or market power abuse and any violation of rules and 
regulations issued by the ERC; 
(t) 
Perform such other regulatory functions as are appropriate and necessary 
in order to ensure the successful restructuring and modernization of the electric power 
industry, such as, but not limited to, the rules and guidelines, under which generation 
companies, distribution utilities which are not publicly listed shall offer and sell to the 
public a portion, not less than fifteen percent (15%) of their common shares of stocks: 
Provided, however, That generation companies, distribution utilities or their respective 
holding companies that are already listed in the PSE are deemed in compliance. For 
existing companies, such public offering shall be implemented not later than five (5) 
years from the effectivity of this Act. New companies shall implement their respective 
public offerings not later than five (5) years from the issuance of their certificate of 
compliance; and 
(u) 
The ERC shall have the original and exclusive jurisdiction over all cases 
contesting rates, fees, fines, and penalties imposed by the ERC in the exercise of the 
above-mentioned powers, functions and responsibilities, and over all cases involving 
disputes between and among participants or players in the energy sector. 
All notices of hearings to be conducted by the ERC for the purpose of fixing rates 
or fees shall be published at least twice for two successive weeks in two (2) newspapers 
of nationwide circulation. 


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Sec. 13. Section 46 of the Act is hereby amended to read as follows: 
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"SEC. 46. 
Cross Ownership, Market Power Abuse and Anti-Competitive 
Behavior. - No participant in the electricity industry or any other person [may] 
SHALL engage in any KIND OF anti-competitive behavior, including, but not limited 
to, cross-subsidization, price or market manipulation, or ANY other unfair trade practices 
THAT ARE detrimental to the DEVELOPMENT, encouragement, and protection of 
THE contestable markets. 
No generation company, distribution utility, A COMPANY SUPPLYING 
ELECTRICITY, or ANY OF its [respective subsidiary or affiliate or stockholder or 
official of a generation company or distribution utility, or other entity engaged in 
generating and 
supplying electricity specified 
by 
ERC] SUBSIDIARIES, 
AFFILIATES, STOCKHOLDERS, OFFICIALS, OR DIRECTORS, OR THE 
OFFICIALS, DIRECTORS, 
OR 
OTHER STOCKHOLDERS 
OF SUCH 
SUBSIDIARIES OR AFFILIATES, OR ANY 
RELATIVES OF SUCH 
STOCKHOLDERS, OFFICIALS, OR DIRECTORS within the fourth civil degree of 
consanguinity or affinity, shall be allowed to HAVE AND hold, DIRECTLY OR 
INDIRECTLY, any interest[, directly or indirectly,] in THE TRANSCO or [its] IN 
THE TRANSCO'S concessionaire. Likewise, the TRANSCO, or its concessionaire, or 
any of [its] THE stockholders, [or] officials, OR DIRECTORS OF THE TRANSCO 
OR 
ITS 
CONCESSIONAIRE, or 
any 
[of 
their] 
relatives 
OF 
SUCH 
STOCKHOLDERS, OFFICIALS OR DIRECTORS OF THE TRANSCO OR ITS 
CONCESSIONAIRE within the fourth civil degree of consanguinity or affinity, shall 
not BE ALLOWED TO HAVE AND hold, DIRECTLY OR INDIRECTLY, any 
interest[, whether directly or indirectly,] in any generation company, [or] distribution 
utility[.], OR A COMPANY SUPPLYING ELECTRICITY. Except for ex oflcio 
government-appointed representatives, no [person who is an] officer or director, OR 
STOCKHOLDER of the TRANSCO or [its] OFFICER, DIRECTOR, OR 
STOCKHOLDER OF THE TRANSCO'S concessionaire shall be an officer or director 
of any generation company, distribution utility, or [supplier.] A COMPANY 
SUPPLYING ELECTRICITY. 
A DISTRIBUTION UTILITY, WHICH IS EXISTING AT THE TIME OF 
THE EFFECTIVITY OF THIS ACT AND WHICH HOLDS SHARES OF STOCK 
IN A GENERATION COMPANY AND/OR ANOTHER DISTRIBUTION 
UTILITY ON OR BEFORE THE EFFECTIVITY OF THIS ACT, MAY 
CONTINUE TO HOLD SUCH SHARES OF STOCK BUT SHALL NOT BE 
AUTHORIZED TO INCREASE THE NUMBER OF SUCH SHARES OF STOCK 
EXCEPT WHEN SUCH INCREASE IS THE RESULT OF A DECLARATION OF 
CORPORATE STOCK DIVIDENDS. 
AFTER THE EFFECTIVITY OF THIS ACT, NO NEW DISTRIBUTION 
UTILITY OR ANY OF ITS SUBSIDIARIES, AFFILIATES, STOCKHOLDERS, 
OFFICIALS, OR DIRECTORS, OR THE OFFICIALS, DIRECTORS, OR 
OTHER STOCKHOLDERS OF SUCH SUBSIDIARIES OR AFFILIATES, 
INCLUDING THE RELATIVES OF SUCH STOCKHOLDERS, OFFICIALS, OR 
DIRECTORS WITHIN THE FOURTH CIVIL DEGREE OF CONSANGUINITY 
OR AFFINITY SHALL BE ALLOWED TO HAVE AND HOLD, DIRECTLY OR 
INDIRECTLY, ANY INTEREST IN ANY NEW OR EXISTING GENERATION 
COMPANY. 
NEITHER MAY A NEW GENERATION COMPANY OR ANY OF ITS 
SUBSIDIARIES, 
AFFILIATES, 
STOCKHOLDERS, 
OFFICIALS, 
OR 
DIRECTORS, 
OR 
THE 
OFFICIALS, 
DIRECTORS, 
OR 
OTHER 
STOCKHOLDERS OF SUCH SUBSIDIARIES OR AFFILIATES, INCLUDING 


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THE RELATIVES OF SUCH STOCKHOLDERS, OFFICIALS, OR DIRECTORS 
WITHIN THE FOURTH CIVIL DEGREE OF CONSANGUINITY OR AFFINITY 
BE ALLOWED TO HAVE AND HOLD, DIRECTLY OR INDIRECTLY, ANY 
INTEREST IN ANOTHER GENERATION COMPANY, OR IN A NEW OR 
EXISTING DISTRIBUTION UTILITY. 
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AFTER THE EFFECTIVITY OF THIS ACT AND EXCEPT AS 
OTHERWISE AUTHORIZED AND PROVIDED HEREIN, NO HOLDING 
COMPANY OR OTHER ENTITY, WHETHER IN THE FORM OF A 
CORPORATION OR NOT, SHALL BE ALLOWED TO HAVE AND HOLD 
VOTING SHARES OF STOCK SIMULTANEOUSLY IN A GENERATION 
COMPANY AND IN A DISTRIBUTION UTILITY IN SUCH NUMBERS AS TO 
ENABLE THE HOLDING COMPANY OR OTHER ENTITY TO ELECT A 
DIRECTOR 
IN BOTH 
THE 
GENERATION 
COMPANY 
AND 
THE 
DISTRIBUTION UTILITY. 
To promote true market competition and prevent harmful monopoly and market 
power abuse, the [ERC] COMMISSION shall enforce the following safeguards: 
(a) 
No company or related group [can] SHALL BE ALLOWED TO own, 
operate or control more than thirty percent (30%) of the installed generating capacity of a 
grid and/or twenty-five (25%) of the [national] installed NATIONAL generating 
capacity. "Related group" includes a person's business interests, including its subsidiaries, 
affiliates, directors or officers or any of their relatives by consanguinity or affinity, 
legitimate or common law, within the fourth civil degree; 
(b) 
Distribution utilities may enter into bilateral power supply CONTRACT 
OR contracts subject to review AND APPROVAL by the [ERC:] COMMISSION, 
AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
HEARING: Provided, That [such review shall only be required for distribution utilities 
whose markets have not reached household demand level. For the purpose of preventing 
market power abuse between associated firms engaged in generation and distribution, no 
distribution utility shall be allowed to source from bilateral power supply contracts more 
than fifty percent (50%) of its total demand from an associated firm engaged in 
generation but such limitation, however, shall not prejudice contracts entered into prior to 
the effectivity of this Act. An associated firm with respect to another entity refers to any 
person which, alone or together with any other person, directly or indirectly, through one 
or more intermediaries, controls, is controlled by, or is under common control with, such 
entity; and] FOR THE PROTECTION OF CAPTIVE MARKETS AND IN ORDER 
TO ENSURE HEALTHY COMPETITION IN THE GENERATION SECTOR OF 
THE ELECTRIC POWER INDUSTRY, BILATERAL POWER SUPPLY 
CONTRACT OR CONTRACTS OF SIXTY MEGAWATTS (60 MW) OR MORE 
SHALL BE 
SUBJECT TO OPEN COMPETITIVE PUBLIC BIDDING 
CONDUCTED BY A BID COMMITTEE UNDER THE SUPERVISION OF THE 
COMMISSION AND COMPOSED OF REPRESENTATIVE EACH FROM THE 
NATIONAL ECONOMIC DEVELOPMENT AUTHORITY (NEDA), THE 
DEPARTMENT OF ENERGY (DOE), 
THE DISTRIBUTION UTILITY 
CONCERNED, 
AND 
AN 
EXPERIENCED 
AND 
REPUTABLE 
BY THE COMMISSION. 
REPRESENTATIVE OF THE ELECTRIC END-USERS GROUPS SELECTED 
IN ORDER TO PREVENT ABUSE OF MARKET POWER AND ANTI- 
COMPETITIVE BEHAVIOR, NO DISTRIBUTION UTILITY SHALL BE 
ALLOWED TO SOURCE FROM A BILATERAL ELECTRIC POWER SUPPLY 
CONTRACT OR CONTRACTS MORE THAN THIRTY THREE PERCENT 
(33%) OF ITS TOTAL ELECTRIC POWER SUPPLY REQUIREMENTS FROM 
ANY GENERATION COMPANY OR GROUP OF GENERATING COMPANIES 
WHOLLY OWNED OR CONTROLLED BY THE SAME INTERESTS. ANY 
DISTRIBUTION UTILITY THAT HAS, ON THE EFFECTIVITY OF THIS ACT, 


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SUCH CONTRACT OR CONTRACTS WHICH EXCEED THE ALLOWABLE 
THIRTY THREE PERCENT (33%) LIMIT SET FORTH HEREIN SHALL 
DESIST FROM FURTHER AWARDING ADDITIONAL ELECTRIC POWER 
SUPPLY CONTRACT OR CONTRACTS WITH 
ANY 
GENERATION 
COMPANY OR GROUP OF GENERATING COMPANIES WHOLLY OWNED 
OR CONTROLLED BY THE SAME INTERESTS, UNTIL ITS PRESENT 
ELECTRIC POWER SUPPLY REQUIREMENTS, WHEN ADDED TO THE 
PROPOSED ADDITIONAL ELECTRIC POWER SUPPLY CONTRACT OR 
CONTRACTS WITH ANY GENERATION COMPANY OR GROUP OF 
GENERATING COMPANIES WHOLLY OWNED OR CONTROLLED BY THE 
SAME INTERESTS SHALL COMPLY WITH THE THIRTY THREE PERCENT 
(33%) LIMIT SET FORTH HEREIN: PROVIDED, THAT ANY EXTENSION OR 
EXPANSION OF EXISTING ELECTRIC POWER SUPPLY CONTRACT OR 
CONTRACTS SHALL BE DEEMED AS NEW CONTRACT OR CONTRACTS 
FOR PURPOSES OF THE LIMITATION SET FORTH HEREIN. 
(c) 
For the first five (5) years from the establishment of the [wholesale 
electricity spot market] WESM, no distribution utility shall source more than ninety 
percent (90%) of its total demand from bilateral ELECTRIC power supply contracts. 
THE COMMISSION MAY, FROM TIME TO TIME, REVIEW THE 
APPROPRIATE LEVEL OF DEMAND TO BE SOURCED FROM THE WESM 
AND, IN MERITORIOUS INSTANCES, WAIVE IMPLEMENTATION OF SUCH 
REQUIREMENT, SUBJECT TO A PUBLIC HEARING. 
For purposes of this Section, the grid basis shall consist of three (3) separate grids, 
namely: Luzon , Visayas , and Mindanao . The ERC shall have the authority to modify or 
amend this definition of a grid when two or more of the three separate grids become 
sufficiently interconnected to constitute a single grid, or as conditions may otherwise 
permit. 
Exceptions from these limitations shall be allowed for isolated grids that are not 
connected to the high voltage transmission system. [Except as otherwise provided for in 
this Section, any restriction on ownerships and/or control between or within sectors of the 
electricity industry may be imposed by ERC only insofar as the enforcement of the 
provisions of this Section is concerned]. 
The [ERC] COMMISSION shall, within one (1) year from the effectivity of this 
Act, promulgate rules and regulations, CONSISTENT WITH THE PROVISIONS OF 
THIS ACT, to ensure and promote competition, encourage market development, [and] 
customer choice, and [discourage/penalizeJ DETER AND/OR PENALIZE ANY abuse 
of market power, cartelization, [and] OR any anti-competitive or discriminatory 
behavior, in order to further the intent of this Act and IN ORDER TO protect the 
[public] interest[.] OF THE GENERAL PUBLIC AND THE END-USERS OF 
ELECTRICITY. Such rules and regulations shall COVER AND define the following: 
(a) 
the relevant markets for purposes of establishing abuse or misuse of 
monopoly or market position; 
(b) 
(c) 
the periodic reportorial requirements of electric power industry 
areas of isolated grids; and 
participants as may be necessary to enforce the provisions of this Section. 
The [ERC] COMMISSION shall, motu proprio, monitor and, WHEN 
WARRANTED 
BY 
THE 
ATTENDANT 
FACTS, 
penalize 
any 
SUCH 
MONOPOLIZATION, CARTELIZATION, ABUSE OF market power [abuse] or 
anti-competitive AND/or discriminatory act or behavior by any [participant in the] 
electric power industry[.] PARTICIPANT. Upon finding that [a market] AN 
ELECTRIC 
POWER 
INDUSTRY 
participant 
has 
engaged 
in 
such 


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MONOPOLIZATION, CARTELIZATION, ABUSE OF MARKET POWER, OR 
ANTI-COMPETITIVE AND/OR DISCRIMINATORY act or behavior, the [ERC] 
COMMISSION shall FORTHWITH ISSUE A CEASE AND DESIST ORDER TO 
THE ERRING 
ELECTRIC POWER INDUSTRY PARTICIPANT, AND 
THEREAFTER PERMANENTLY stop and redress the same. Such [remedies shall, 
without limitation, include] REDRESS SHALL INCLUDE, AMONG OTHER 
REMEDIES THAT MAY BE APPROPRIATE UNDER THE CIRCUMSTANCES, 
the imposition of price [controls,] CONTROL, THE issuance of [injunctions, 
requirement ofl INJUNCTIVE RELIEF, AND THE divestment or disgorgement of 
excess profits, and THE imposition of fines and penalties pursuant to THE 
APPLICABLE PROVISIONS OF this Act. 
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The [ERC] COMMISSION shall, within one (1) year from the effectivity of this 
Act, promulgate SUCH rules [and regulations providing for a complaint procedure that, 
without limitation, provides] AS MAY BE NECESSARY, NOT INCONSISTENT 
WITH THE PROVISIONS OF THIS ACT, THAT WILL ESTABLISH A 
PROCEDURE WHEREBY the accused party, with DUE notice [and] TO ALL 
INTERESTED PARTIES AND PUBLIC HEARING, SHALL BE GIVEN BY THE 
COMMISSION an opportunity to be heard. 
SEC. 14. 
Separability Clause. - If for any reason, any provision of this 
Act is declared unconstitutional or invalid, the other parts or provisions hereof which are 
not affected thereby shall continue to be in full force and effect. 
SEC. 15. 
Applicability and Repealing Clause. - The applicable provisions 
of Commonwealth Act No. 146, as amended, otherwise known as the "Public Services 
Act"; Republic Act 6395, as amended, revising the charter of NPC; Presidential Decree 
269, as amended, referred to as the National Electrification Decree; Republic Act 7638, 
otherwise known as the Department of Energy Act of 1992; Republic Act 7832 otherwise 
known as the Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 
1994, shall continue to have full force and effect, except insofar as such acts and decree, 
and only to that extent, are inconsistent with any of the provisions of this Act. 
The provisions with respect to electric power of Section 12(C) of Republic Act 
7916, as amended, and Section 5(Q of Republic Act 7227, are hereby repealed or 
modified accordingly, it being the clear intent of Congress that henceforth the generation, 
transmission, subtransmission, distribution, and/or supply of electric power shall be 
governed entirely by the provisions of this Act, and that no agency of the national 
government, other than the commission, shall be allowed to regulate the transmission, 
subtransmission, and distribution, or authorize the establishment of generation companies 
or suppliers of electricity. 
Presidential Decree No. 40 and all laws, decrees, rules and regulations, or portions 
thereof, inconsistent with this Act are hereby repealed or modified accordingly. 
Executive order no. 172, series of 1987, as amended, creating the Energy 
Regulatory Board, is hereby repealed except as otherwise provided in this act. 
SEC. 16. 
Effectivity Clause. - This Act shall take effect on the fifteenth 
day following its publication in at least two (2) national papers of general circulation. 
Approved,