“
Republic of the Philippines .
HOUSE OF REPRESENTATIVES WS RECEWED
Quezon City I OT NOY 2016
DATE:
time: 22

SEVENTEENTH CONGRESS
First Regular Session

BitL No, 4269

HOU

Introduced by EVELINA G,

SCUDERO

EXPLANATORY NOTE

Natural gas is considered by many modern economies as the fuel of choice because of its
abundance, clean-burning properties and versatility as a fuel source. With the successfull launching
of the Malampaya Deep Water Gas-to-Power Project on October 16, 2001 marked the birth of the
country's natural gas industry, The Malampaya gas field discovery signaled a significant leap
towards energy self-reliance as it now fuels about one-third of the country's total power generation.
A votal of 2700 MW of installed capacity of gas-fired power plants make use of the natural gas
produced from Malampaya.

Aside ftom the use of natural gas for power generation, alternative applications in the
transport sector is also being pursued. The launching of the Natural Gas Vehicle Program for Public
Transport (NGVPPT) on October 16, 2002 served as a banner program for the use of natural gas in
the transport sector.

Following the inauguration of the Malampaya Deep Water Gas-to- Power Project,
government advocacy has been initiated to create an impetus to the development of the country's
clownstream natural gas industry, These are the (i) signing on January 18, 2002 by President Gloria
Macapagal-Arroyo of Executive Order No. 66 designating the Department of Energy (DOE) as the
lead agency for the development of the country's natural gas industry; and (ii) issuance on August
27, 2002 by the DOE of the interim rules and regulations governing the transmission, distribution
and supply sub-sectors of the natural gas industry.

However, both issuances are not sufficient to impart a clear, comprehensive and integrated
regulatory framework that will provide direction and to accelerate the development of the country's
nascent downstream natural gas sector.

As dynamic developments are taking place in this very young sector, it is imperative that

conditions favorable to the establishment of the critical infrastructure and natural gas market are put
in place to optimize economic efficiency and returns from the downstream natural gas industry.

The foregoing premises thus necessitate the immediate passage of the Natural Gas Bill,
which proposal has remained pending for a considerable time to date

_ eeedid

EVELINA G. ESCUDERO



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

NTEENTH CONGRESS
First Regular Session

HOUSE BILL No, 42698

Introduced by EVELINA G

SUDERO

AN AC
ORDAINING THE DEVELOPMENT OF THE DOWNSTREAM NATURAL GAS
INDUSTRY, CONSOLIDATING FOR THE PURPOSE ALL LAWS RELATING TO THE.
TRANSMISSION, DISTRIBUTION AND SUPPLY OF NATURAL GAS AND FOR OTHER
PURPOS!

Be it enacted by the Senate and the House of Representativ.
Philippines in Congress assembled.

of the Republic of the

CHAPTERI
TITLE AND DECLARATION OF POLICY

SECTION 1. Short Title. — This Act shall be known as the “Downstream Natural Gas
Industry Development Act”.

SEC, 2. Declaration of Policy. — It is hereby declared the policy of the State:

(a) To promote the role of natural gas as a socially-acceptable, environment-friendly and
economically efficient source of energy by creating favorable conditions for establishing
a Downstream Natural Gas Industry for the benefit of all segments of the nation’s
population and all sectors of its economy;

(b) To ensure the safety, quality, reliability and security of the transmission, distribution
and supply of natural gas;

(c) To ensure transparent and reasonable rates and prices of natural gas transmission,
tribution and supply in a regime of open and fair competition and full public
accountability that will promote greater operational and economic efficiency and the
enhanced competitiveness of the Philippine products in the global market;

(d) To encourage the inflow of private capital in providing the infrastructure and services
necessary to support an expanded role of natural gas in the nation’s energy supply;

(e) To protect the public interest as itis affected by the quality of, and rates charged for, the
transmission, distribution and supply of natural gas and related services;

(1) To assure the development of a Downstream Natural Gas Industry infrastructure that is
socially-aeceptable and compliant with existing environmental laws;



(g) To ensure that the Downstream Natural Gas Industry shall be regulated in a manner that
will ensure the quality, reliability, security and reasonableness of charges for the
transmission, distribution and supply of natural gas, encourage private investment in the
Downstream Natural Gas Industry and promote the efficient and competitive operation
thereof

(h) To develop the necessary trades, technical expertise and skills to support the
Downstream Natural Gas Industry:

(i) To facilitate the development of end-uses of natural gas that promotes fuel diversity and
compliance with existing environmental laws including, but not limited to, the use of
natural gas as a motor vehicle fuel; and

(j) To encourage equity partic
utilities by the private sector,

ation in gas transmission utilities and gas distribution

SEC. 3. Scope. ~ This Act shall provide a framework for the development of a Downstream
Natural Gas Industry and its transition from an emerging to a mature industry status and
competitive natural gas market, and define the responsibilities of various government agencies and
private entities in furtherance of this national goal

All activities of the Department of Energy (DOE) and the Energy Regulatory Commission
(ERC) relevant to the development and regulation of the Downstream Natural Gas Industry shall be
in accordance with this Act.

SEC. 4. Definition of Terms, ~ As used in this Act, the following terms shall have the
following meanings

(a) “Captive market”:
© with respect to the transmission of natural gas, refers to natural gas end-users who
do not have a choice of a gas transmission utility:

«with respect to the distribution of natural gas, refers to natural gas end-users who do
not have a choice of a gas distribution utility;

with respect to the supply of natural gas, refers to natural gas end-users who do not
have a choice of supplier of natural gas or other economically competitive energy
substitute;

(b) “Congress” refers to the Congress of the Republic of the Philippines;

(c) “Contestable market” is a market that is not a captive market;

(d) “Delivery” refers to the transmission or distribution of natural gas and the supply of
natural gas, at wholesale or retail;

(c) “Department of Energy” or “DOB” refers to the government agency created pursuant to
Republic Act No. 7638, as amended

(1) “Department of Environment and Natural Resources” or “DENR” refers to the
government agency created pursuant to Executive Order Nos. 192 and 292, as amended:


(g) “Distribution” refers to the conveyance of natural gas by a gas distribution utility
through its gas distribution system;

(h) “Downstream Natural Gas Industry” refers to the transmission, distribution and supply
of natural gas and related activities, such as, but not limited to, processing, storing,
regasification, interconnection, measurement and/or metering;

(i) “End-user” refers to any person that will receive delivery of natural gas for its own use;

(j) “Energy Regulatory Commission” or “ERC” refers to the independent quasi-judicial
regulatory agency created pursuant to Republic Act No. 9136, otherwise known as the
“Electric Power Industry Reform Act of 2001”, whose expanded functions are provided
in this Act;

(k) “Pranchise” refers to the right, privilege and authority issued by Congress authorizing a
person to engage in the transmission of natural gas and/or distribution of natural gas
within a specific geographical area;

anchi:

we area” refers to a geographical area assigned or granted under a franchise:

Distribution Code” refers to the code to be formulated by the DOE pursuant to
Section 5(g) of this Act that sets the technical performance standards for operating gas
distribution utilities and the minimum financial standards for gas distribution systems;

(n) “Gas distribution system” refers to the system of pipelines and related facilities
extending from the delivery points where the gas distribution system receives the
natural gas to the point of connection to the premises of the end-user;

(0) “Gas distribution utility” refers to any person that has a franchise to operate a gas
distribution system;

(p) “Gas supply contract” refers to a contract between a supplier and a purchaser for the
supply of natural gas;

(q) “Gas Transmission Code” refers to the code to be developed by the DOE pursuant to
ction 5(g) of this Act that sets the technical performance standards for operating gas
transmission systems and the minimum financial standards for gas transmission
utilitie

(1) “Gas transmission system” refers to the system to the system of high pressure
pipelines, storage and related facilities that are used to transport natural gas from the
interconnection with gathering facilities, liquefied natural gas (LNG) regasification

facilities or other gas transmission systems to gas distribution systems, other gas

transmission systems or end-users;

(s) "Gas transmission utility” refers to any person that has a franchise to operate or
intending to operate a gas transmission system except own-use pipelines:

(t) "Gathering facilities” refers to natural gas pipelines and related facilities used to gather
gas in the field and bring it to a location for processing or for delivery at an
interconnection with the gas transmission system. ‘The terms “gather” and “gathering”
shall be construed accordingly;



(u) “Infrastructure development period” refers to the period prescribed in Chapter IV of this,
Act,

(v) "Joule" refers to the unit of energy or work done when the point of application of a force
of one Newton is displaced a distance of one meter in the direction of the force. It is also
equal to one watt-second;

(w) “Large end-user" refers to an end-user whose aggregate annual natural gi
consumption is one thousand (1,000) gigajoules (gross heating value) or greater, as
may be determined by the ERC;

(x) "LNG refers to liquefied natural gas";

(y) "Natural gas" refers to hydrocarbons, obtained initially from sub-surface reservoirs,
primarily methane, which, at atmospheric temperature and pressure, is in a gaseous
phase. The term "natural gas" shall include LNG:

(2) "Permit” refers to an authorization issued by the DOE, initially, for the construction,
operation, expansion and modification of gas transmission systems, gas distribution
systems and for the supply of natural gas

(aa) "Person" refers to a natural or juridical person, as the case may be, including the
national and local government of the Republic of the Philippines, its agencies and
instrumentalities, and government-owned and -controlled corporations:

(bb) "Petroleum operations" refers to searching for and obtaining petroleum within the
Philippines through drilling and pressure or suction or the like, and all other operations
incidental thereto, It includes the transportation, storage, handling and sale (whether for
export or for domestic consumption) of petroleum so obtained but does not include
any: (1) transportation of petroleum outside the Philippines; (2) processing or refining
at a refinery; or (3) any transaction in the products so refined;

(cc) "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, as amended:

(dd) "Service contract” refers to the award granted by the Philippine government to a
qualified person to engage in the exploration, development and utilization of natural
resources rough joint venture, co-production, production-sharing or other similar
arrangement with the State pursuant to Article XII, Section 2 of the Constitution,
including service contracts under Presidential Decree No. 87, as amended;

(ce) “Supplier” refers to any person authorized by the DOR, initially, to engage in the
supply of natural gas;

(10) "Supply” refers to the domestic trading and/or sale of natural gas for wholesale or retail;

(gg)

ransmission” refers to the transportation of natural gas through a gas transm
system; and

(hh) “Unbundled service” refers to the pricing of the energy value of natural gas separately
from the rates charged for natural gas transmission or distribution


CHAPTER II
POWERS AND FUNCTIONS OF THE DOE AND THE ERC

SEC. 5. Powers and Functions of the DOE. - In addition to its existing powers and
functions, the DOE shall have the overall responsibility of supervising and monitoring the
development of the Downstream Natural Gas Industry and regulation of the construction and
operation of natural gas pipelines and related facilities for the transmission, distribution and supply
of natural gas. Towards this end, the DOE shall have the following-powers and functions:

(a) Prepare and periodically update a Downstream Natural Gas Industry Development Plan
(DNGIDP) and integrate the same into the PEP. The DNGIDP shall consider and
integrate the individual or joint development plans of the Downstream Natural Gas
Industry participants pursuant to this Act, which are submitted to the DOE. Appropriate
mechanisms shall be provided to protect the confidentiality of any information that is
commercially or competitively sensitive. The DOE shall publish an initial draft of the
plan and undertake public consultations thereon prior to its adoption;

(b) Issue permits for the construction, operation and maintenance of pipelines and related
facilities for the transmission, distribution and/or supply of natural gas;

(c) Establish standards setting forth the characteristics for classifying pipeline and pipeline-
related facilities either as gas transmission systems or gas distribution systems. These
characteristics may include both the physical characteristics related to the diameter, size
and pressure of pipeline facilities. and the functional characteristics of such facilities;

(d) Before the end of April of each year,
an annual report:

submit to the Office of the President and Congress

(c) Ensure the safety, reliability, quality and security of supply of natural gas. Consistent
with the development of the Downstream Natural Gas Industry, the DOE shall, among
others:

(i) Encourage private sector investments in the Downstream Natural Gas Industry
and promote the development of domestic markets for natural gas;

(ii) In consultation with the Downstream Natural Gas Industry participants and other
government agencies, promote a system of incentives to encourage industry
participants, including new producers and end-users, to provide adequate and
reliable supply of natural gas; and

(iii) Undertake, in coordination with other governmental agencies, as appropriate, an
information campaign to educate the public on the benefits of developing the
Downstream Natural Gas Industry and the potential for utilizing natural gas as a
source of energy.

(2) Within six months from the effectivity of this Act, develop plans and programs to
encourage market development and customer choice:

(g) Within twelve (12) months from the effectivity of this Act, the DOE shall, preparatory
to the holding of public consultations with the Downstream Natural Gas Industry
participants, draft she Gas Transmission and Distribution Codes which shall contain,
among others. the following


(i) Technical performance standards for gas transmission and distribution utilities:
Provided, That in the establishment of the performance standards, the nature and
function of the entities shall be considered; and

i) Minimum financial capability standards for gas transmission and distribution
utilities: Provided, That such standards are set to ensure that the Downstream
Natural Gas Industry participants meet the minimum. financial standards to
protect the public interes

Within eighteen (18) months from the effectivity of this Act, the DOE shall,
in consultation with the Downstream Natural Gas Industry participants, issue the
final Gas Transmission and Distribution Codes,

(h) By order, revoke, after due notice and hearing, the permit of any person that fails to
comply with the rules and regulations promulgated pursuant to this Act, the Gas
Transmission Code, rhe Gas Distribution Code, or any requirement of this Act. The
DOE shall allow such persons sufficient time to remedy the violation of or for an
orderly disgorgement, when applicable, but in no case shall such remediation period
exceed twelve (12) months from the date of issuance of the order;

(i) Encourage private enterprises in the Downstream Natural Gas Industry to broaden their
ownership base and promote widest public ownership thereof:

(j) Formulate. in consultation with the Downstream Natural Gas Industry participants, the
rules and regulations as may be necessary to implement the objectives of this Act:

(k) Exereise original and exclusive jurisdiction over all cases contesting permits, nonprice
regulation, fees, fines and penalties imposed by it in the exercise of the abovementioned
powers and functions; and

(1) Exercise such other powers and functions as may be necessary or incidental to attain the
objectives of this Act. Subject to existing rules and regulations, the DOE is hereby
authorized to create offices and appoint personnel thereto as may be necessary to
efficiently and effectively perform its functions as stipulated in this Act

. 6. Powers and Functions of the ERC, ~ In addition to its existing powers and
functions, the ERC shall have the sole regulatory responsibility for establishing the rates and
related terms and conditions of service for the transmission, distribution and supply of natural gas
to the extent that such activities are regulated pursuant to the requirements set forth in this Act. It
shall

(a) Within one year from the effectivity of this Act, promulgate, upon due notice and public
consultation, rules and regulations to promote competition and prohibit/penalize abuse
of market power, cartelization and any anti-competitive or discriminatory behavior, in
order to further the intent of this Act and protect the public interest. Such rules and
regulations shall:

(i) Define the relevant product and geographic markets for purposes of establishing
anti-competitive conduct;

(ii) Provide criteria to determine the relevant market structure; and


(ii) Establish the periodic reportorial requirements of the Downstream Natural Gas
Industry participants as may be necessary to enforce the provisions of this
section.

(b) In the public interest, establish and enforce a methodology for setting transmission,
distribution and supply rates, taking into account all relevant Considerations, including
the efficiency or inefficiency of the regulated entities, The rates must be such as to allow
the recovery of just and reasonable costs and a reasonable return to enable the entity to
operate viably, The ERC may, upon due notice and public consultation, adopt
internationally accepted rate setting methodology. The rate setting methodology so.
adopted and applied shall promote efficiency and ensure a reasonable price or tariff The
rates prescribed shall be nondiscriminatory;

(S

Apply administrative procedures that will ensure the constitutional right to due process;

(d) 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 report available to any interested party upon payment of
a charge which reflects the printing costs:

(c) Publish in newspapers of general circulation all its decisions involving rates and
anticompetitive cases; and

(B) Exercise such other powers as may be necessary or incidental to attain the objectives of
this Act.

Subject to existing rules and regulations, the ERC is hereby authorized to create
offices and appoint personnel thereto as may be necessary to efficiently and effectively
perform its functions as stipulated in this A

CHAPTER IIL
ORGANIZATION AND OPERATION OF THE DOWNSTREAM NATURAL GAS
INDUSTRY

SEC. 7. Organization, - For purposes of this Act, the Downstream Natural Gas Industry

shall be divided into three sectors, namely: transmission of natural gas, distribution of natural gas
and supply of natural gas.

dlistribution and supply of natural gas are businesses afl

SEC. 8.Regulation of Transmission, Distribution and Supply Secto) The transmission,

cted with public interest and the regulation

of these businesses as provided for in this Act is hereby deemed necessary in the public interest.

SEC. 9. Franchise Requirement.

(a) Transmission and distribution of natural gas declared public utility operations. - The
transmission and distribution of natural gas as provided for in this Act are hereby
declared to be public utility operations, requiring a franchise;

(b) Franchise. - Any person that seeks to operate for commercial purposes a gas
transmission system or gas distribution system shall be required to obtain a franchise,


any law to the contrary notwithstanding. The franchise requirement shall apply with
respect to all gas transmission systems and gas distribution systems, regardless of the
size or pressure of the pipeline. The foregoing, notwithstanding, this franchise
requirement shall not apply to

(i) Holders of service contracts which authorizes the construction and operation of
ities for the transmission of natural gas only to the extent that such facilities
are: (1) for own use; (2) used to transport’ natural gas from the point of
extraction or production to the processing or gathering facility; and (3) used to
provide service to existing customers or such person under a gas supply
contract entered into prior to the effectivity of this Act, which gas supply
contract shall not be affected by &e enactment of this Act

However, the operation of any pipeline facility used to serve or deliver
natural gas to third persons, whether or not such facility was, prior to such
operation, previously utilized only as a gathering facility, shall require a
franchise.

(ii) Operators of pipeline facilities to transport natural gas for their own us
Provided, however, That such operators shall secure a permit from the DOE as
provided herein; and

(iii) Operators of related facilities that are operated independently from the pipeline

The franchise so granted shall include a provision that shall honor and
protect the forty percent (40%) share of local government units (LGUs) from
the proceeds of the gross collection derived by the national government from its
share in any coproduction, joint venture or production-sharing agreement in the
utilization and development of the national wealth within their territorial
jurisdiction, pursuant to Article X, Section 7 of the Constitution and Section
290 of Republic Act No. 7160, otherwise known as the Local Government
Code of 1991, as amended. The share of the LGU concerned shall be included
automatically in the General Appropriations Act following the year the revenue
was generated,

(c) Prior regulatory approvals, - The grantee of such franchise shall also be required to secure
from the DOE’a permit as provided herein, and to secure from the appropriate government
wencies all other regulatory approvals, licenses, permits and authorizations applicable to
such grantee under existing laws. The DOE shall not unreasonably withhold or delay the
grant of any permit, and may not reopen any legislative determination in the review and
grant of any franchise.

EC. 10. Philippine Ownership Requirement. - As required under Article XII, Section 11 of
the Constitution of the Republic of the Philippines, no franchise, certificate, or any other form of
authorization of a publi utility shall be granted exeept to citizens of the Philippines ot to-
corporations or associations organized under the laws of the Philippines at least sixty percent (60%)
of whose capital is owned by such citizens

SEC. 11. Third Party Access,

(a) Third Party Access Obligation. - Gas transmission systems and gas distribution
excluding those constructed and operated for own use or as part of gathering facilities of



service contractors shall be available for nondiscriminatory access by third party users
which may include parties to a service contract, suppliers and customers, with due regard to
the economic viability of the operation of such facilities. Such operators shall negotiate in
good faith with third party users the provisions and terms of access in accordance with the
guidelines to be promulgated by the DOR:

(b) Available Capacity. - Third party access obligations shall apply only to the available
capacity of the gas transmission systems and gas distribution systems as determined by
subtracting from the design capacity of the gas transmission systems and gas distribution

tems the volume of capacity that is:

(i) Used by the owner or operator to serve his own customer; and/ or

(ii) Allocated to third parties under transportation contracts. Nondiseriminatory
third party access shall be available to users by contract with the gas
transmission or gas distribution utility. If the gas transmission or ga
distribution utility with available capacity refuses service to a user or offers
discriminatory service, the affected party may request for the intervention of the
ERC. The gas transmission or gas distribution utility shall be required to file
proof that capacity was not available when service was denied.

Gas transmission utilities shall not be obligated to undertake, nor may the
DOE require, the expansion of an existing gas transmission system to serve
additional customers or the sizing of a gas transmission system for the purpose
of increasing capacity to serve load in excess of the load proposed to be served
by the gas transmission utility, However, in situations where no entity is
interested to build additional transmission capacity in any franchise area, the
DOE may conduct a public bidding and award the same to the lowest bidder.

(c) Deferment of Third Party Access Obligation. - As may be provided in the permit, the
implementation of third party access to gas transmission systems and gas distribution
systems may be deferred where, upon the determination by the DOE

(i) It can be demonstrated that such deferment is necessary to enable the efficient
planning of the infrastructure and aggregation of the initial demand necessary to
justify investments in the gas transmission systems and gas. distribution
systems; or

(ii) It is in the interest of the customers served by the gas transmission system and
gas distribution system to ensure stability of supp!

In either case, the DOE may not defer implementation of third party
access for a period longer than three years after completion of construction in
the case of gas transmission systems and five years after completion of
construction in the case of gas distribution systems: Provided, however, ‘That
the deferment period may be extended on reasonable grounds

(d) Approved Access Conditions for Gas Transmission Utilities and Gas Distribution Utilities. -
Prior to the conduct of negotiations with third parties, a gas transmission utility and a gas
distribution utility shall request the DOE to approve its access conditions in accordance
with the third party access guidelines to be promulgated by the DOE in consultation with
the industry participants.

10


SEC. 12.Environmental Protection. ~ Gas transmission utilities, gas distribution utilities and
suppliers shall comply with all environmental laws, rules, regulations and standards promulgated
by the Department of Environment and Natural Resources (DENR) and other appropriate
governmental agencies.

CHAPTER IV
NATURAL GAS TRANSMISSION SECTOR:

SEC. 13. Permit, - No person or entity shall undertake the construction, operation and
maintenance of a natural gas transmission system unless it has secured a franchise: Provided,
however, That for a period not exceeding five years after the effectivity of this Act, the DOE may
issue a provisional permit with a maximum term of two years, renewable twice for a maximum
cumulative term not exceeding six years for the continued operation of a gas transmission system
constructed prior to and in operation as of the date of effectivity of this Act: Provided, further, That
during the same period, the DOE may issue a permit for the expansion, extension or modification
of a natural gas transmission system.

The DOE shall issue a public notice of all permit applications and afford interested parties
reasonable opportunity to comment upon such applications. The DOE shall issue a permit upon its
determination that the construction, ownership, control, installation, operation and maintenance of
the gas transmission system would be consistent with ;the policy declarations contained in this Act
Provided. however, That if a permit is sought for new service that would be provided within the
franchise area of a gas distribution utility, the DOE shall consider the economic effects of granting
such a permit upon the gas distribution utility and its customers.

SEC. 14.Terms and Conditions of Permits. - In issuing a permit, the DOE shall have the
power to impose such reasonable terms and conditions as the public interest may require. Among
such conditions shall be the requirement that the permit holder complies in full with the Gas
Transmission Code promulgated by the DOE pursuant to Section 5(g) of this Act.

SEC. 15. Fees. - The DOE shall have the authority to prescribe and collect fees and charges
relating to the issuance and/or review of permits, supervision and regulation of gas transmission
systems.

SEC. 16, Abandonment of Gas Transmission Systems. - No holder of a permit for the
construction, installation, operation or maintenance of a gas transmission system shall abandon or
withdraw from service any portion of such gas transmission system without obtaining prior
authorization from the DOE, which determination shall be made within one hundred eighty (180)
days from the filing of the application for abandonment. Such abandonment shall be done in
accordance with existing laws.

SEC. 17. Gas Transmission Code Compliance. - All gas transmission utilities shall ensure
the safety,- reliability, adequacy, security, stability and integrity of their gas transmission systems
in accordance with the technical specifications and performance standards set forth in the Gas
Transmission Code to be promulgated by the DOE. Each gas transmission utility shall submit to the
DOE a statement of its compliance with such technical specifications and performance standards
preseribed in the Gas Transmission Code. Any gas transmission utility that does not comply with
any of the prescribed technical specifications or performance standards shall include in such
statement of compliance an undertaking to comply with said technical specifications and
performance standards within a reasonable time as may be necessary to ensure safety and
reliability, or prevent environmental harm. The DOE shall, within sixty (60) days upon receipt of
such plan, evaluate the same and notify the gas transmission utility concerned of its deci

W


thereon, Failure to submit a feasible and credible plan and/or failure to implement the same shall
serve as grounds for the imposition of appropriate sanctions, fines or penalties pursuant to Section
39 of this Act.

SEC. 18. ERC Rate Regulation of Gas Transmission Utilities. - Gas Transmission Rate.
Except as otherwise provided during the infrastructure development period, the ERC shall review
and approve the rates, charges and other amounts proposed to be charged by the gas transmission
utilities as provided under Section 33 of this Act. Where such rates are applicable to services
provided to captive markets, the ratemaking methodology to be applied by the ERC shall be based
on the principle of full recovery of prudent and reasonable costs incurred, including a reasonable
return on rate base that is consistent with the encouragement of private investment and goal of
developing a Downstream Natural Gas Industry infrastructure, or such other principles that will
promote the determination of just and reasonable rates, Where a rate applicant successfully
demonstrates that its rates will be applicable to contestable markets, the ERC shall have the
authority to permit negotiated rates.

CHAPTER V

DISTRIBUTION SECTOR

SEC. 19. Permit. - No person or entity shall undertake the construction, operation and
maintenance of a natural gas distribution system unless it has secured a franchise: Provided,
however. That for a period not exceeding five years after the effectivity of this Act, the DOE may
issue a provisional permit with a maximum term of two years, renewable twice for a maximum
cumulative term not exceeding six years for the continued operation of a gas distribution system
constructed prior to and in operation as of the date of effectivity of this Act: Provided, further, That
during the same period, the DOE may issue a permit for the expansion, extension or modification
of a natural gas distribution system

‘The DOE shall issue a public notice of all permit applications and afford interested parties
an opportunity to comment on such applications. The DOE shall issue a permit upon its
determination that the construction, ownership, control, installation, operation and maintenance of
the gas distribution systems would be consistent with the policy declarations contained in this Act:
Provided, however, That if a permit is sought for new service that would be provided within the
franchise area of another gas distribution utility, the DOE shall consider the economic effects of
granting such a permit upon the gas distribution utility and its customers.

SEC. 20. Terms and Conditions of Permits. ~ In issuing a permit, the DOE shall have the
power to impose such reasonable term and conditions to a permit as the public interest may require.
Among such conditions shall be the requirement that the permit holder comply in full with the Gas
Distribution Code promulgated by the DOE pursuant to Section 5(g) of this Act.

SEC. 21. Fees. - The DOE shall have the authority to prescribe and collect fees and charges
relating to .the issuance and/or review of permits, supervision and regulation of gas distribution
systems.

SEC. 22, Abandonment of Gas Distribution Systems. - No holder of a permit for the
construction, installation, operation or maintenance of a gas distribution system shall abandon ot
withdraw from service any portion of such gas distribution system without obtaining prior
authorization from the DOE, which determination shall be made within one hundred eighty (180)
days from the filing of the application for abandonment, Such abandonment shall be done in
accordance with existing laws.



SEC. 23. Gas Distribution Code Compliance. - All gas distribution utilities shall be required
to ensure and maintain the safety, reliability, adequacy, security, stability and integrity of their gas
distribution systems in accordance with the performance standards set forth in the Gas Distribution
Code to be promulgated by the DOE. Each gas distribution utility shall submit to the DOE a
statement of its compliance with the technical specifications prescribed in the Gas Distribution
Code and the performance standards prescribed in the implementing rules and regulations
promulgated by the DOE pursuant to Section 43 of this Act, A gas distribution utility that fails to
comply with any of the prescribed technical specifications or performance standards shall include
within such statement of compliance a plan for achieving compliance with the said technical
specifications and performance standards within a reasonable time as may be necessary to ensure
safety and reliability, or prevent environmental harm. The DOE shall, within sixty (60) days from
receipt of such pi, evaluate the same and notify the gas distribution utility concerned of its
decision thereon, Failure to submit a feasible and credible plan and/or failure to implement the
same shall serve as grounds for the imposition of appropriate sanctions, fines or penalties pursuant
to Section 39 of this Act.

SEC. 24. Gay Distribution Rate, - Except as provided for during the infrastructure
development petiod, the distribution rates charged by gas distribution utilities shall be subject to
regulation by the ERC based on the principle of full recovery of prudent and reasonable economic
costs incurred, including a reasonable return on rate base that is consistent with the encouragement
of private investment and goal of developing the Downstream Natural Gas Industry infrastructure,
or such other principles that will promote the determination of just and reasonable rates by the
ERC. Whete a rate applicant successfully demonstrates that its rates will be applicable to
contestable markets, the ERC shall have the authority to permit negotiated rates.

SEC. 25. Functions of Gas Distribution Utilities. - All gas distribution utilities shall have
the following functions:

(a) Obligation to provide distribution services and connections to its gas distribution system for
any end-user within the atea covered by its permit consistent with the Gas Distribution
Code. Any gas distribution utility engaged therein shall provide nondiscriminatory access to
its gas distribution system to suppliers and/or end-users entitled to retail access under
Section 30 of Chapter VII of this Act. Any gas distribution utility shall be entitled to impose
and collect from such suppliers and/or end-users distribution charges and connection fees as
approved by the ERC after due notice and hearing:

(b) Ensure the safety, reliability, adequacy, security, stability and integrity of their gas
distvibution systems in accordance with the technical specifications and performance
standards set forth in the Gas Distribution Code to be promulgated by the DOE pursuant to
Section 5(g) of this Act, Each gas distribution utility shall submit to the ERC a statement of
its compliance with such technical specifications and performance standards. Any gas
distribution utility that fails to comply with any of the prescribed technical specifications or
performance standards shall include in such statement of, compliance an undertaking to
comply with said technical specifications and performance standards within a reasonable
time as may be necessary to ensure safety and reliability, or prevent environmental harm.
The ERC shall, within sixty (60) days upon receipt of such plan, evaluate the same and
notify the gas distribution utility concerned of its decision thereon. Failure to submit a
feasible and credible plan and/or failure to implement the same shall serve as grounds for
the imposition of appropriate sanctions, fines or penalties pursuant to Section 39 of this Act:

(c) Provide universal service within the area covered by its permit except as provided herein
Compliance with the universal service obligation shall be addressed as part of the annual


development and maintenance plan of a gas distribution utility. A gas distribution utility
shall be obliged to develop and maintain an efficient system for the distribution of natural
gas at the reasonable request of end-users within its franchise area including:

(i) ‘The installation of pipes where the connection to the end-user is within twenty-
five (25) meters of the gas distribution system; or

(ii) Increasing the capacity of existing gas distribution systems: Provided, however,
That no new service shall be required if such service would not be economically
viable, A determination by a gas distribution utility that it cannot viably serve a
portion of its franchise area shall be subject to review by the ERC upon filing of
a complaint by the requesting end-user.

The obligation of the gas distribution utility to provide universal access
involves both an obligation to connect end-users within twenty-five (25) meters
from the main pipeline and an obligation to supply such end-users, to the extent
the distribution utility is the sole gas supplier. Upon implementation of third
party access, the utility shall be relieved of its obligation to supply end-users
eligible for retail access as defined in the guidelines to be promulgated by the
DOE, but not its obligation to provide connection to its distribution system to
such end-users. Whether or not the gas distribution utility is the sole gas
supplier in the area, prices charged by the said utility for the supply of gas shall
be negotiated for the contestable market and regulated by the ERC for the
captive market; and

(d) Submit annually to the ERC its plan for maintaining and developing its gas distribution
system in compliance with the obligations prescribed in this Act.

CHAPTER VI
SUPPLY SECTOR

SEC. 26. Permit Requirement. - Any law to the contrary notwithstanding, no person may
engage in any supply activity unless it has obtained a permit from the DOE, initially: Provided,
however, That a gas transmission utility or gas distribution utility that has secured a permit as such
pursuant to Section 9(c) of this Act and that supplies natural gas to its own customers shall not be
required to secure a separate permit to engage in its supply activity. For this purpose, the DOE shall
promulgate rules and regulations prescribing the qualifications of suppliers which shall include,
among other requirements, a demonstration of their technical capability, financial capability,
creditworthiness and compliance with safety standards, The DOE shall have the authority to require
suppliers to furnish a bond or other evidence of their ability to withstand market disturbances or
other events that may increase the cost of providing service.

SEC. 27. Supplier Rate and Service Regulation.
(a) The rates and service of suppliers to captive markets shall be regulated by the ERC; and

(b) ‘The rates and service of suppliers to contestable markets shall not be subject to regulation
by the ERC Provided, however, That suppliers shall be subject to the rules and regulations
concerning abuse of market power, cartelization and other anti-competitive or
discriminatory behavior promulgated by the ERC.



(c) The supply of natural gas for electric generation and large end-users is hereby deemed to be
a contestable market. In all other cases, suppliers shall bear the burden of ‘demonstrating
that a market is contestable.

SEC. 28. Conditions for Retail Access to Gas Distribution Systems, - Following the
infrastructure development period, retail access to gas distribution systems shall be available to
large end-users meeting criteria set forth in the rules and regulations promulgated by the ERC
pursuant to this Act. The ERC shall determine when retail access may Be available to other end-
users or classes of end-users, giving consideration to relevant factors including whether such end-
users or class of end-users constitute a contestable market-end the financial consequences of any
assets potentially stranded by expanding retail ace

CHAPTER VII
TAXATION

>, 29. Taxes, - Gas transmission utilities, gas distribution utilities and suppliers of natural
gas shall be subject to the payment of all taxes, duties, fees or charges and other impositions under
the National Internal Revenue Code (NIRC) of 1997, as amended, and other applicable laws:
Provided, however, That, in recognition of the substantial investments needed for the construction,
operation and maintenance of gas transmission and gas distribution systems, gas transmission
utilities and gas distribution utilities shall, upon prior endorsement by the DOE and approval by the
Board of Investments, be entitled to income tax holiday and such other incentives granted to
pioneer enterprises under the Omnibus Investment Code, as amended. The commodity price of gas

shall be the only component of the gas retail rate which shall be subject to excise taxes under
Republi Act No, 8424, otherwise known as the Comprehensive Tax Reform Law.

SEC. 30. Withdrawal of Exemptions. - Any law to the contrary notwithstanding, to achieve
the declared policies of this Act, particularly in relation to the promotion of fair and
nondiseriminatory treatment of public and private sector entities in the development of the
Downstream Natural Gas Industry infrastructure, all existing tax exemptions applicable to persons
engaged in the transmission or the distribution of natural gas; insofar as such exemptions relate to
revenues derived from the transmission or the distribution of natural gas, shall be deemed revoked
upon the effectivity of this Act.

CHAPTER VIL
RATEMAKING REQUIREMENTS AND PROCEDURES

SEC. 31. Ratemaking Requirements and Procedures of the ERC. - (a) Just and reasonable
rates and charges. - All rates and charges for transmission, distribution or supply of natural gas to
the captive market and all rules and regulations affecting or pertaining to such rates or charges shall
be just and reasonable. Any such rate or charge that is not just and reasonable is hereby declared to
be unlawful;

(b) Undue preferences and unreasonable rates and charges are prohibited. - No gas transmission
utility, gas distribution utility or supplier shall, with respect to the transmission, distribution
or supply of natural gas to the captive market: (1) make or grant any undue preference or
advantage, or (2) maintain any unreasonable difference in rates, charges, service, facilities,
or in any other respect, between locations or between classes of service:

(c) Piling of rate schedules. - Under such rules and regulations as the ERC may prescribe, after
due notice and public consultation, the ERC may require reports or documents from gas
transmission utilities, gas distribution utilities or suppliers to the captive market showing all
rates and charges for the transmission, distribution or supply of natural gas to the captive


market and the classifications, practice and regulations affecting such rates, charges, and
classifications and services: Provided, That the ERC shall provide appropriate mechanisms
to protect the confidential& of any information that is commercially or competitively
sensitive; and

(d) Changes in rate and charges. - Within thirty (30) days upon filing for an adjustment in rates,
the ERC shall issue an order accepting, rejecting or setting for hearing such adjustment. The
ERC may, upon the filing of an application therefor or at any stage thereafter, with or
Without prior hearing, on the basis of supporting papers duly verified or authenticated, and
With such notice to the affected parties and opportunity for such parties to make such
submissions as the ERC determines to be appropriate in the circumstances, grant
provisional relief fixing interim rates for the transmission of natural gas or distribution of
natural gas or supply of natural gas to the captive market applicable during the pendency of
the hearing on the application, on motion of a party in the case or on its own initiative,
without prejudice to a final decision after hearing, should the ERC find that the pleadings,
together with such affidavits, documents and other evidences which may be submitted in
support of the motion, substantially support the provisional order. The final order fixing the
applicable rates shall provide for over- or under-recovery of costs occasioned by the
application of ERC-approved interim rates. At any hearing involving rates adjustment, the
burden of proof to show that the increased rates are just and reasonable shall be upon the
gas transmission utility, gas distribution utility or supplier to the captive market

CHAPTER IX
PROMOTION OF COMEPTITION

SEC. 32. Anti-Competitive Behavior. ~ No gas transmission utility, gas distribution utility ot
supplier, or affiliate thereof, may engage in any anti-competitive behavior or abuse of market

power including. but not limited to: .

(a) Agreements, decisions and concerted practices of persons or associations of persons to fix
prices and/or fix output: and

(b) Other practices and/or conduct by a person or groups of persons that restrict, prevent or
distort competition such as, but not limited to, predatory pricing and practices, excessive
pricing, bundling and other vertical restraints, denial of access to essential facilities on fair
terms. discriminatory conditions on transactions that restrict, prevent or distort competition.

SEC. 33. Measures to Promote Competition. - Subject to the provisions of relevant laws, the
ERC shall adopt measures and/or corresponding remedies fo promote competition following an
nvestigation of the relevant circumstances and a definitive finding of

(a) Price and/or output fixing; or
(b) Other practices/conduct that are the subject of investigation restrict and/or prevent and/or
distort competition

Such remedies shall, without limitation, include the imposition of price controls, issuance of
injunctions or disgorgement of excess profits and imposition of administrative fines and penalties
pursuant to this Act.

SEC. 34. Functional and Structural Unbundling. - When prevailing market conditions so
require, any Downstream Natural Gas Industry participant shall functionally and structurally

16


unbundle its business activities and rates in accordance with the sectors as identified in Section 7
hereof. The ERC shall ensure full compliance with this provision.

SEC. 35. Complaint Procedures. - The ERC shall, within one year from the effectivity of
this Act, promulgate rules and regulations providing for a complaint procedure that, without
limitation provides the party alleged to have engaged in anti-competitive or abusive activities with
notice and an opportunity to be heard.

SEC. 36. Affiliated Suppliers. - In order to prevent anti-competitive conduct, service
contractors, gas transmission utilities and gas distribution utilities that own or control affiliates that
are suppliers shall conduct their business as follows:

(a) No preference will be given to the affiliated supplier over other persons through contracting
for available capacity, scheduling, balancing, curtailment priority or tariffs:

(b) Marketing information provided to the affiliated supplier will be provided to any
nonaffiliated supplier that is a competitor or potential competitor;

(c) Employees of the affiliated supplier shall, to the maximum extent possible, function
independently in making business decisions: and

(d) Books of accounts and records of the affiliated supplier shall be maintained separately

‘As used herein, “affiliate” refers to any person or entity which, alone or together
with any other person or entity, directly or indirectly, through one or more intermediaries,
controls, or is controlled by another person or entity. As used herein,”control” shall mean
the power to direct or cause the direction of the management policies of a person by
contract, agency or otherwise. S

SEC. 37. Administrative Fines and Penalties, —

(a) The administrative fines and penalties that may be imposed by the ERC or the DOE, as the
case may be, for any violation of or noncompliance with this Act or its implementing rules
and regulations shall range from a minimum of Fifty thousand pesos (P50,000.00) to a
maximum of Fifty million pesos (P50,000,000.00);

(b) Any person who is found to have engaged in any of the prohibited acts pursuant to Section
34 of this Act shall suffer the administrative penalty or fine ranging from Ten thousand
pesos (P10,000.00) to Ten million pesos (P10,000,000,00), at the discretion of the ERC or
the DOE, as the ease may be:

(c) ‘The members of the board of directors or any person that violates the provisions of this Act
may be fined by an amount not exceeding double the amount of damages caused by the
offender at the discretion of the ERC or the DOE, as the case may be. This rule shall apply
to the members of the Board who, knowingly or by neglect, allow the commission of
omission under the law:

(d) Any party to an administrative proceeding may, at any time, make an offer to the ERC or
the DOE, as the case may be, conditionally or otherwise, for a consent decree, voluntary
compliance or desistance and other settlement of the case. The offer and any or all of the
ultimate facts upon which the offer is based shall be considered for settlement purposes only
and shall not constitute an admission by the party making the offer of any violation of the



to:

laws, rules, regulations, orders and resolutions of the ERC or the DOE, as the case may be,
nor as a waiver to file any warranted criminal actions; and

(c) Congress may, upon recommendation of the ERC or the DOE, as the case may be, revoke
such franchise or privilege granted to the party found in violation of the provisions of this
Act

CHAPTER X

AND ANTI-THEFT PROVISION:

ANTI-PILFERAG!

SEC, 38, Pilferage. - It is hereby declared unlawful for any person to:

(a) Tap, make or cause to be made any connection with any gas transmission system or gas
distribution system without previous authority or consent of the gas transmission utility or
gas distribution utility concerned;

(b) Tamper, install or use tampered meters or any other device which interferes with proper or
accurate registry or metering of natural gas flows or otherwise results in its diversion in a
manner whereby natural gas is stolen or wasted:

(c) Damage or destroy any natural gas meter, equipment, pipeline or conduit or any part of a
gas transmission system or gas distribution system or allow any of them to be so damaged
or destroyed as to interfere with the proper or accurate metering of natural gas flows; and

(d) Knowingly use or receive the direct benefit of natural gas delivery service obtained through
any of the acts mentioned in paragraphs (a), (b) and (c) above.

SEC. 39. Theft of Equipment and Materials. - It is hereby declared unlawful for any person

(a) Cut, saw, slice, separate, split, severe, smelt or remove any portion of a gas transmission
system or gas distribution system, including pipeline materials and meters, from any
installation or place of installation or any other place or site where it may be rightfully or
lawfully stored, deposited, kept, stocked, inventoried, situated or located, without the
consent of the gas transmission utility or gas distribution utility concerned, whether or not
the act is done for profit or gain;

b) Take, carry away or remove or transfer, with or without the use of a motor vehicle or other
means of conveyance, load, carry. ship or move from one place to another, whether by land,
air or sea, any portion of a gas transmission system or gas distribution system, including
pipeline materials or meters, from any installation or place of installation, or any place or
site where it may be rightfully or lawfully stored, deposited, kept, stocked, inventoried,
situated or located without the consent of the gas transmission utility or gas distribution
utility concerned, whether or not the aet is done for profit or gain; and

(c) Store, possess or otherwise keep in his premises, custody or control, without lawful
purpose, any portion of @ gas transmission system or gas distribution system, including
pipeline materials or meters, without the consent of the gas transmission utility or
distribution utility concerned, whether or not the act is done for profit or gain,



C. 40, Penalties. ~

(a) Violation of Section 40, - The penalty of prision mayor or a fine ranging from Ten thousand
pesos (P10,000,00) to Twenty thousand pesos (P20,000.00) or both, at the discretion of the
court, shall be imposed on any person found guilty of violating Section 40 of this Act.

(b) Violation of Section 41. - The penalty of reclusion temporal or a fine ranging from Fifty
thousand pesos (50,000.00) to One hundred thousand pesos (P100,000.00) or both, at the
discretion of the court, shall be imposed on any person found guilty of violating Section 41
of this Act.

Provision common to violations of Sections 40 and 41 hereof, ~ If the violation of Section
40 or Section 41 of this Act is committed by, or in connivance with, an officer or employee
of the gas transmission utility or gas distribution utility concerned, such officer or employee
shall, upon conviction, be punished with a penalty one degree higher than the penalty
provided herein, and forthwith be dismissed and perpetually disqualified from employment
in any publie or private utility or service company and from holding any publie office.

If the violation of Section 40 or Section 41 of this Act is committed by a partnership,
firm, corporation, association or any other legal entity, including a government-owned ot -
controlled corporation, the penalty shall be imposed on the president, manager and cach of
the officers thereof who shall have knowingly permitted, failed to prevent or was otherwise
responsible for the commission of the offense.

CHAPTER XI
FINAL PROVISIONS

SEC. 41. Implementing Rules and Regulations. - The DOE shall, in consultation with the
ERC. appropriate government agencies, the Downstream Natural Gas Industry participants.
nongovernmental organizations and end-users, promulgate implementing rules and regulations
(IRR) within six months from the effectivity of this Act.

SEC. 42. Natural Gas Oversight Commission. - Upon the effectivity of this Act, a
congressional commission, hereinafter referred to as the "Natural Gas Oversight Commission’, is
hereby constituted. The Natural Gas Oversight Commission shall be composed of ten (10)
members, with the chairmen of the Committee on Energy of the Senate and the House of
Representatives and four additional members from each House, to be designated by the Senate
President and the Speaker of the House of Representatives, respectively. The minority shall be
emtitled to pro rata representation but shall have at least one representative in the Natural Gas
Oversight Commission

(a) ‘The Natural Gas Oversight Commission shall. in aid of legislation, perform the following
functions, among others

(b) Set the guidelines and overall framework to monitor the proper implementation of this Act;

(c) Look into the appropriateness of creating a single independent regulatory body when the
conditions prevailing so require:

() Conduct a periodic review of this Act at least once every three years;

19


(e) Determine inherent weaknesses in the law and recommend necessary remedial legislation or
executive measures;

(1) Approve the budget for the programs of the Natural Gas

(g) Oversight Commission and all disbursements therefrom, including compensation of all
personnel;

(h) Submit periodic reports to the President of the Philippine

(i) Perform such other powers and functions as may be necessary to attain its objectives.

To carry out its powers and functions, the initial sum of Fifteen million pesos (P15,000,000.00)
shall be charged against the current appropriations of the Senate. Thereafter, such amount necessary
for its continued operation shall be included in the annual General Appropriations Act.

The Natural Gas Oversight Commission shall adopt its internal rules of procedure; conduct
hearings and receive testimonies, reports and technical advice: invite or summon by subpoena ad
‘estificandum any public official, private individual or any other person to testify before it, or
require any person by subpoena duces fecum to produce before it such records, reports, documents
or other materials as it may require: and generally require all the powers necessary to attain the
purposes for which it is created. The Natural Gas Oversight Commission shall be assisted by a
secretariat to be composed of personnel who may be seconded from the Senate and the House of
Representatives and may retain consultants, The secretariat shall be headed by an executive director
who has sufficient background and competence on the policies and issues relating to the
Downstream Natural Gas Industry reforms as provided in this Act.

SEC. 43. 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. 44, Nonretroactivity, Applicability and Repealing Clause, - The provisions of
Republic Act No. 387, otherwise known as the "Petroleum Act of 1949", as amended, Presidential
Decree No, 87, Republic Act No. 8997, and all other laws, decrees, executive orders, rules and
regulations, circulars and other issuances inconsistent with the provisions of this Act are hereby
repealed or modified accordingly.

SEC. 45. Transitory Provision, - Gas transmission systems and gas distribution systems that
have been constructed and have commenced operation prior to the date of effectivity of this Act
shall continue to operate under their existing authorities: Provided, ‘That they have complied with
existing laws. rules and regulations prior to the effectivity of this Act and have secured a
provisional permit from the DOE as provided in Sections 15 and 21 of this Act. Suppliers who have
entered into gas sales and purchase contracts with customers and have delivered indigenous or
imported natural gas under said contracts prior to the date of effectivity of this Act shall continue to
sell natural gas under their existing authorities provided they have complied with existing laws,
rules and regulations prior to the effectivity of this Act.

Nothing in this Act shall be deemed to revoke or otherwise modify the powers and
funetions of the Philippine National Oil Company and its subsidiaries under Presidential Decree
No. 334, as amended, any existing concession granted under the Petroleum Act of 1949, as
amended, certificate of public convenience or certificate of public convenience and necessity
granted pursuant to the Public Service Law, as amended, specific franchise for the transmission,

20


tribution or supply of natural gas or other administrative or regulatory permit or contract, which
ssion, certificate, franchise, permit or contract shall be allowed to its full term but may not be
renewed except pursuant to the provisions of this Act.

For a period not exceeding five years after the effectivity of this Act, the DOE may issue
provisional permits, with a maximum term of two years, renewable twice for a maximum
cumulative term not exceeding six years, for the construction, operation and maintenance of
pipelines and related facilities for the transmission, distribution and supply of natural gas

SEC. 46, Effectivity Clause. - This Act shall take effect on the fifteenth (15th) day following
its publication in the Official Gazette and in at least two national newspapers of general circulation.

Approved,