FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
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SENATE 
S.B.No. 
2 
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OFFICE OF Tr .;·'CRETAR'I' 
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Introduced by Senator Jnan Ponce Enrile 
EXPLANATORY NOTE 
Our country is endowed with energy resources that are relatively abundant. Our 
Constitution promises that the development of these energy resources shall inure to the benefit of 
the Filipino people. Unfortunately, the promise remained as such - a promise - until substantial 
reforms began recently when this Congress enacted Republic Act No. 9513 otherwise known as 
the Renewable Energy Act of2008. 
However, much is left to be desired with respect to other indigenous sources of energy. 
Government impositions associated with making available such resources for electricity 
generation are more burdensome than those applied on imported fuels such that rates of 
electricity generated using indigenous energy resources are rendered artificially high. 
For instance, as of May 2007, government royalties (or government share) on indigenous 
natural gas was around P1.46/kWh, which was 5 to 8 times more than the taxes imposed on 
imported fuels such as coal (PO.l7/kWh), oil (PO.20/kWh) and liquefied natural gas 
(P0.29/kWh). If taxes and royalties were to be removed on both indigenous and imported fuels, 
the rates of electricity generated using indigenous energy resources would be substantially lower. 
Moreover, between indigenous petroleum which is intensively used for generating electricity and 
other local extractive industries such as mining, the former is being subjected to royalties of 
about 60% while the latter enjoys a much lower tax rate of3%. 
Thus, instead of enjoying lower electricity rates, the Filipino is effectively being 
penalized for utilizing its own energy resources. In addition, because of the disparities, the 
country's energy self-sufficiency is being held on a tight leash of its own making - a regrettable 
stance in the face of volatile energy prices in the international markets. 
These policy anomalies are not present in our Asian neighbors similarly endowed with 
natural resources such as Thailand, Indonesia, Malaysia and Vietnam. While royalties/taxes on 
oil and gas in these countries are comparable with those in our country, domestic use of these 
indigenous natural resources are afforded substantially lower prices unlike in our case. 
It's about time that the Filipino people should fully benefit from its energy resources by 
removing the disparities in the tax/royalty treatment of indigenous resources not covered by the 
Renewable Energy Act of 2008. This will directly result in reducing the commodity prices of 
these energy resources as they are utilized for electricity generation, which reduction will 
translate into lower electricity rates to the Filipino consumers. In the Meralco franchise arear 
alone, a reduction of government royalties will mean a reduction of electricity rates to as much 
as PO.SO/kWh for all customers. 
In a study conducted in early 2008 by University of the Philippines Professor Dante B. 
Canlas, former Director General at the National Economic Development Authority, it is shown 


that a reduction of the natural gas royalties to lower the cost of electricity to industrial loads 
would induce economic output growth on account of greater competitiveness and productivity of 
the Philippine industries. Incidentally, the study also concludes that the reduction of the royalties 
provide government additional tax and non-tax revenues that would be more than sufficient to 
offset the foregone royalties collection in less than 2 years from implementation. 
There is more need for competitiveness and greater productivity now when Philippine 
industries, including the millions of Filipinos whose livelihood depend on them, are being 
threatened or already reeling from the effects of the global financial crisis and the recessions in 
the largest economies of the world. Recent newspaper reports reveal that associations of 
industrial establishments such as the Semiconductor and Electronics Industries in the Philippines 
Inc., an organization of semiconductor and electronics companies which account for about 70% 
of Philippine exports, is already making a call for lower royalties and lower electricity rates to 
help the Philippine export industry brace for the effects of the global crisis. 
Needless to say, the ordinary Filipino, especially the marginal end-user of electricity, has 
long been in need of respite from high electricity rates. 
In consideration of the foregoing, this bill seeks to lower the government share in the 
exploration, development and production of indigenous energy resources other than those 
already covered by the Renewable Energy Act of 2008; set such government share at the level 
that maintains the relative preference to indigenous renewable energy resources and still provide 
for a substantial revenue for the government; and remove the disparities in tax/royalty treatment 
between indigenous energy resources and imported fuels. These are sought to ultimately lower 
electricity rates to the Filipino consumers in a significant and sustainable manner. 
The immediate passage of this bill is earnestly requested. 


FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S.B.No. 
2 
Introduced by Senator Juan Ponce Enrile 
AN ACT 
DIRECTING THE REDUCTION OF ELECTRICITY RATES THROUGH THE 
UTILIZATION 
OF 
THE 
GOVERNMENT 
SHARE 
IN 
THE 
DISCOVERY, 
EXPLORATION, DEVELOPMENT AND/OR PRODUCTION OF INDIGENOUS 
SOURCES OF ENERGY FOR THE PURPOSE OF LOWERING THE COST OF 
ELECTRICITY 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
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SECTION 1. This Act shall be known as the "Electricity Rate Reduction Act of20l0". 
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SEC. 2. Declaration of Policy - It is hereby declared the policy of the State that, to the 
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end-users of electricity: (i) the government impositions relating to indigenous sources of energy 
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shall be effectively at par with or more favorable than analogous impositions on imported fuels 
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in keeping with the Constitutional precept of preserving the benefits of the national patrimony to 
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the Filipino people; (ii) the competitiveness of indigenous sources of energy vis-it-vis imported 
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fuels shall be ensured thereby increasing the country's energy self-sufficiency; and (iii) the true 
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and lower cost of electricity generated from indigenous sources of energy shall be reflected in 
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view of the economic goal under the Constitution of increasing the amount of goods and services 
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produced by the nation for the benefit of the people. 
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SEC. 3. Definition of Terms - As used in this Act: 
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(a) 
"Department of Energy" or "DOE" refers to the government agency created 
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pursuant to Republic Act No. 7638. 
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(b) 
"Energy Regulatory Commission" or "Commission" refers to the independent 
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quasi-judicial regulatory agency created pursuant to Republic Act No. 9136. 
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(c) 
"Government Share" refers to the amount due the national government and local 
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government units from the discovery, exploration, development and/or production of indigenous 
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energy resources under new and existing service contracts pursuant to relevant laws. 


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(d) 
"Indigenous sources of energy" refers to energy sources that are native to the 
Philippines except those that are subject of or covered by Republic Act No. 9513 or the 
Renewable Energy Act of2008; 
(e) 
"Net proceeds from the sale of the energy resource" refers to the difference 
between the gross proceeds from the sale of such energy resource and the sum of expenses 
allowed to be recovered under the relevant service contract. 
SEC. 4. Government Share - Notwithstanding any law to the contrary, the Government 
Share shall henceforth be utilized and applied to reduce the commodity price of the indigenous 
energy resources sold by a service contractor for generation of electricity such that the 
Government Share is effectively reduced, as it is hereby reduced, to three percent (3%) of the net 
proceeds from the sale of the energy resource over the life of the relevant service contract. 
The commodity price reduction under the preceding section shall be fully reflected as a 
reduction in the price of electricity produced by generation companies utilizing the indigenous 
energy resource. The commodity price reduction shall be subject to annual adjustment or 
reconciliation to ensure that such reduction shall be revenue-neutral to the service contractor. 
SEC. 5. UtiliZation of the Reduction in the Electricity Price -
In order that end-users 
will fully benefit from the reduction in the electricity price of any generation company utilizing 
the indigenous energy resource: 
(a) 
Any distribution utility obtaining supply from said generation company shall pass 
on the full reduction in electricity price to its end-user customers, thereby lowering the retail 
rates of electricity; and 
(b) 
Any end-user which said generation company may serve during the 
implementation of retail competition and open access as provided for under Section 31 of 
Republic Act No. 9136 shall also be included among those to which the reduction in electricity 
price shall be passed on. 
The Commission shall determine the reduction in electricity rates to end-users across end-
user classifications, giving priority to efficient end-users such as industrial loads for maximum 
multiplier effect on the national economy and marginalized end-users for more meaningful 
benefits. 
SEC. 6. Implementing Rules and Regulations -
Within three (3) months from the 
effectivity of this Act, the DOE, in consultation with the Commission, shall issue the rules and 
regulations implementing the same: Provided, That the provisions on the utilization of the 
Government Share for the reduction of the commodity price of the indigenous energy shall take 
effect immediately. 
For ease of implementation, the Department of Energy shall pursue amendments to the 
relevant existing service contracts to provide for the reduced Government Share under Section 4 
above: Provided, That the rights of the concerned service contractors shall not be impaired 
thereby; and Provided, further, That the DOE shall ensure that reduction of Government Share 


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shall be fully reflected in the reduction of electricity rates to end-users in accordance with 
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Sections 4, 5 and 6 herein. In any event, the implementation of this Act shall not be dependent 
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upon such amendments being adopted by the parties. 
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SEC. 7. Separability Clause - If for any reason, any provision of this Act or any part 
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thereof shall be held unconstitutional or invalid, the other parts or provisions of this Act, which 
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are not affected thereby, shall remain in force and effect. 
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SEC. 8. Repealing Clause -
All laws, decrees, orders, rules and regulations including 
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Presidential Decree No. 87, or parts thereof, which are inconsistent with any of the provisions of 
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this Act are hereby repealed, amended or modified accordingly. 
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SEC. 9. 
Effectivity Clause - This Act shall take effect fifteen (15) days after its 
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complete publication in at least two newspapers of general circulation. 
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Approved, 
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