FOURTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
1 
Second Regular Session 
1 
B@X!VE!3 MY ' -,. 
Introduced by Senator Juan PoncCEnrile 
S E N A T E  
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EXPLANATORY NOTE 
Congress enacted the Electric Power Industry Reform Act (EPIRA) in 2001 with the end 
goal of establishing a more competitive and responsible electricity industry which shall hopefully, 
in turn, provide better services to the public at affordable and competitive prices. To achieve this 
goal, the law provided for the restructuring and deregulation of the power industry. 
However, five years after the passage of EPIRA, it became evident that some provisions of 
the law could not be properly enforced which, contrary to the objectives of the law, led to a constant 
rise in the cost of electricity that is more burdensome on the part of the consumers. 
In addition, taxes paid by industry players in the power sector became unreasonable that it 
encouraged an unabated transfer of the burden of what are properly costs of doing business to the 
consumers. Prior to the enactment of Republic Act 9337, which further amended the National 
Internal Revenue Code (NIRC), electric, gas and water utilities were subject to a franchise tax at the 
rate of two percent (2%) on gross receipts under Section 119 of the NIRC, as amended. The 
amendments embodied in RA 9337 removed electric utilities from the franchise tax regime and 
subjected the same to the twelve percent (12%) value added tax. 
Under present system, however, where the power industry players are required to pay 
ordinary income tax as well as the 12%-VAT, consumers are placed at a disadvantage as the energy 
companies simply passed on the cost of paying these taxes onto the end-users. 
This bill therefore seeks to revert to the previous system where franchise tax i s  being 
required of distribution utilities not only to allow the industry players to enjoy a more equitable tax 
regime. More importantly, the imposition of a franchise tax which is directly absorbed by the 
franchisee will free the consumers from shouldering additional pass on charges. 
In view of the foregoing, the immediate passage of the bill is earnestly sought. 


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FOURTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
1 
Second Regular Session 
1 
S E N A T E  
S. B. No. 394 
AN ACT 
IMPOSING A UNIFORM FRANCHISE TAX ON DISTRIBUTION UTILITIES 
ENJOYING LEGISLATIVE FRANCHISE IN LIEU OF ANY AND ALL TAXES 
COLLECTED BY THE GOVERNMENT WITH THE END IN VIEW OF REDUCING 
THE COST OF ELECTRICITY BORNE BY CONSUMERS 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Declaration of Policy. - It is hereby declared the policy of the State 
to promote the public interest by ensuring the affordability and steady supply of electricity 
to the end-users, 
SEC. 2. Franchise Tax On Distribution Utility Grantee. - Distribution utilities shall 
pay a franchise tax equivalent to three percent (3%) of a distribution utility's Gross 
Distribution Income derived from the distribution business granted under the Distribution 
Utility's legislative franchise. Said tax shall be in lieu of all taxes, such as income tax, 
value added tax, business taxes, licenses, and any and all taxes, duties, fees, and charges of 
any kind, nature or description 
levied, established or collected by any government 
authority whatsoever, whether local or national, on its franchise, rights, privileges, receipts 
wheeling charges, revenues and profits and upon its machineries, equipment, supplies, 
meters, poles, wires, transformers, insulators, capacitors, 
transportation 
equipment, 
substations, facilities, and all other real and personal property actually used or intended for 
use by the Distribution Utility to provide electric power distribution services to the 
consumers: Provided, That the Distribution Utility Grantee, its successor or assigns, shall 
be liable to pay the same taxes on its real estate, buildings and other real property not 
actually used nor intended to provide distribution services under its franchise to distribute 
electric power, as other persons or corporations are now or hereafter may be required by law 
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to pay. 


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SEC. 3. Gross Distribution Income. - Gross Distribution Income shall mean gross 
income derived by a Distribution Utility from all its income less all transmission and 
generation charges on the distributed electricity which are passed on to the consumers and 
excluding all universal charges imposed under Republic Act No. 9136 as well as charges 
determined by Energy Regulatory Commission to be passed on to the consumers. 
SEC. 4. Repealing Clause. All laws, acts, decrees, executive orders, including the 
relevant provisions of the National Internal Revenue Code, as amended, the Local 
Government Code, as amended or parts thereof which are contrary to and inconsistent with 
this Act are hereby repealed, amended or modified accordingly. 
SEC. 5. Implementing Rules and Regulations. - The Secretary of Finance, in 
consultation with the Secretary of Energy, shall promulgate and publish the necessary rules 
and regulations within thirty (30) days for the effective enforcement of the provisions of 
this Act. 
SEC. 6. Effectivity. - This Act shall take effect within fifteen (15) days after its 
publication in at least two (2) newspapers of general circulation. 
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Approved,