Republic of the Philippines

House of Representatines f ‘

Quezon City, Metro Manila

SIXTEENTH CONGRESS
First Regular Session

House Bill Number 3958

Introduced by Representative EDGARDO ‘ERM’ RAMA MASONGSONG

EXPLANATORY NOTE

“AN ACT AMENDING REPUBLIC ACT NO. 9136, OTHERWISE KNOWN AS THE "ELECTRIC
POWER INDUSTRY REFORM ACT OF 2001 OR EPIRA”, AND FOR OTHER PURPOSES"

This legislative measure is a collation of various proposals from the stakeholders in the
power industry. It is admitted that putting all those into one final piece of a proposed bill is not a walk
in the park. The proposals collected vary to an extent in terms of ways in pursuing reforms. Take for
‘example the Mindanao sentiment for the provisions on privatization of National Power Corporation
(NPC) Plants; we realize that the word "privatization" has taken some various forms of definition. For
the greater number of consumers, the word has assumed notoriety because it would mean selling
the Agus and Pulangui Hydro Complexes to a few people and easily drive rates to skyrocketing
heights. Privatization to the same people in Mindanao, would also mean letting go of these assets in
the same fashion and outcome as the disposal of the power barges 117 and 118, previously owned
by the NPC.

The recent submission of the Mindanao Coalition of Power Consumers (MCPC), in the
Electric Power Industry Reform Act (EPIRA) review by the Department of Energy (DOE), enlightens
us that what the people in Mindanao objects to is simply selling the Agus and Pulangui Hydro
Complexes resulting to increase in rates. This means privatization could still be done for as long as
it does not necessarily drive the rates high, and for as long as it does not result to a monopoly or
oligopoly set up. This makes the proposal from the Association of Mindanao Rural Electric
Cooperatives, Inc, (AMRECO) palatable since it promoted the principle EPIRA espouses of
widening the ownership base by maintaining ownership of the same resources with the people,
linking the process to the creation of a Government-Owned and Controlled Corporation (GOCC).
While the creation of the Mindanao Power Corporation is taken up by House Bills 676 and 2621, this
instant bill provides a transition of the Mindanao Hydro Complexes being owned and controlled by
the PSALM Corporation to being separated as a distinct corporate firm. For the preceding
explanations, this immediate bill takes priority cognizance on the subject of privatization.

Another point noteworthy mentioning, this author admits, is on the ambivalence of the
necessity of filing this measure without sacrificing the intent of not confining myself to the duties of
being a legislator, but rather of being part of the bigger picture of the reform agenda. As an ordinary
participant in various consumer-based forums, | am overwhelmed by the clamor to overhaul the
EPIRA. Expressions of common experiences pointing an accusing finger to EPIRA being the culprit
have been exchange. These provide the urge to act soon on the matter as they command
immediate action seemingly at all costs. However, learning of the business sector's perception into
the review of this law, has provided the insight that a balance should be struck at. Accordingly,

1


tinkering EPIRA will freeze current investment initiatives in the generation sector. | believe that,
notwithstanding my outrage being a consumer myself, utmost care must be done to avoid sending
the wrong message and instead imbibe sacrifice by all.

Undeniably, the outpour of citizens’ action will re-direct the energies of the members in
literally dismantling the law which may negate the milestones, however few, EPIRA has achieved. It
is therefore a requirement that the leadership of Congress must, once it decides to hear the various
proposals, identify specific provisions which should not put instability to the current investments on
additional power supply, if the problem indeed is simply on supply unavailability. It is therefore
indispensable to contemplate on congress's collective action to pin down on the solutions "without
burning the house".

{n particular, this bill features what the consumers’ alliance want amended, as follows:

* Retain state ownership of Agus-Pulangui Hydroelectric plants complexes to
‘ensure stability of power supply and thereby avert power crises in Mindanao grid;

* Create the Mindanao Power Corporation to manage and operate the Agus and
Pulangui Hydro Electric Power Plants;

'* Optimize the powers and functions of the DOE to protect the electric consumers
against market abuse;

* Rationalize application of the wholesale Electricity Spot Market to achieve the
objective of stabilizing power supply and the maximum utilization thereof, at least
cost manner;

* Authorize the government, through the National Power Corporation, to engage in
power generation and contracting capacity undertaking as supplementary to
stabilize market prices during emergency shutdown of base load plants;

* Transfer of Small Power Utilities Group (SPUG) operation to the National
Electrification Administration (NEA);

+ Ensure true market competition by enhancing safeguards on ownership limitations
and restrictions;

« Simplify the distribution of the shares of national wealth tax, the communities
hosting any source of energy are entitled for eighty percent (80%), with the
provision that the generation facilities deduct the same amount from the
generation charges imposed to electric consumers;

« Enhance the selection process for the heads of agencies in the power sector; and

« Expand the use of Universal Charge through funding the rehabilitation of lines
previously constructed using subsidy funds from NEA and/or Priority Development
Assistance Fund (PDAF) to electrify far-flung areas.

I, therefore, urge my dear colleagues for the immediate passage of this bill.

EDGARDO ‘ERM’ RAMA MASONGSONG


Republic of the Philippines

House of Representatives

Quezon City, Metro Manila

SIXTEENTH CONGRESS
First Regular Session

House Bill Number 8958

Introduced by Representative EDGARDO ‘ERM’ RAMA MASONGSONG

AN ACT
AMENDING REPUBLIC ACT NO. 9136, OTHERWISE KNOWN AS THE
“ELECTRIC POWER INDUSTRY REFORM ACT OF 2001 OR EPIRA”, AND
FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

CHAPTER I - POLICY AND DEFINITIONS

SECTION 1. Title. - This act shall be known as the “Revised Electric Power Industry Reform Act or
REPIRA’. It shall hereinafter be referred to as the Act

SEC. 2. Declaration of Policy. — It is hereby declared the policy of the State to ensure that the
right policy direction is provided in the power industry in order to provide the right support for sectors that
deliver direct benefits to consumers such as the rural electrification program, Towards this end, the State
shall strengthen the support mechanism to enable electric cooperatives do their mandate in delivering
electricity to the countryside even in the economically marginalized areas,

CHAPTER Il - AMENDATORY PROVISIONS
SEC. 3. Section 2 of EPIRA is hereby amended to read as follows:

“Section 2. Declaration of Policy. - It is hereby declared the policy of the State:

(a) xxx
(B) xxx
(C) 100


“(d) To enhance the inflow of private capital and broaden the ownership base of the power
generation, transmission and distribution sectors IN ORDER TO MINIMIZE THE
FINANCIAL RISK EXPOSURE OF THE NATIONAL GOVERNMENT AND THEREBY
RATIONALIZE OWNERSHIP TO PREVENT MONOPOLY AND OLIGOPOLY IN ANY OF
THE SECTORS OF THE INDUSTRY;

(0) xxx

(f) 200%

(9) xx

“(h) To promote the utilization of indigenous and new and renewable energy resources in
power generation in order to reduce dependence on imported energy AND COME UP
WITH POLICIES THAT WOULD ENCOURAGE RATHER THAN RESTRICT INVESTORS
IN THIS AREA;

*(i) To provide for an orderly and transparent privatization of the assets and liabilitias of the
National Power Corporation (NPC), WITH THE ASSURANCE OF PROVIDING A WELL
UNDERSTOOD PROCESS GIVING EQUAL OPPORTUNITY OF PARTICIPATION;

“) To establish a strong and purely independent regulatory body, MANNED BY
INDEPENDENT OFFICERS WITH EXTENSIVE BACKGROUND OF INDUSTRY
PRACTICE, and system to ensure consumer protection and enhance the competitive
operation of the electricity market; and

{k) 1000

SEC. 4. Section 4 of EPIRA shall be amended to read as follows:

“Section 4. Definition of Terms. —

(a) "Aggregator" refers to a person or entity, engaged in consolidating electric power
demand of end-users in the contestable market, for the purpose of purchasing [and],
reselling, MANAGING FOR THE OPTIMUM UTILIZATION OF THE AGGREGATED
DEMAND, OR SIMPLY POOLING FOR THE TENDERING PROCESS IN LOOKING FOR
SUPPLY, OF electricity on a group basis;

20K

(pp) "Privatization' refers to the sale, disposition, change and transfer of ownership and
control of assets and IPP contracts from the Goverment or a government corporation to
ANOTHER CORPORATION OR FIRM OR A private person or entity;

root

SEC. 5. Section 23 of the EPIRA shall be amended to read as follows:

“Section 23. Functions of Distribution Utilities. - 200

XXX


“To achieve economies of scale in utility operations, distribution utilities may, after due
notice and public hearing, pursue structural and operational reforms such as but not limited
to, joint actions between or among the distribution utilities, subject to the guidelines issued
by the ERC. IN PURSUING JOINT ACTIONS PARTICULARLY IN AGGREGATING
DEMAND TO ATTRACT INVESTMENTS THAT WOULD RESULT TO THE REDUCTION
OF THE PER KILOWATT HOUR OF ELECTRICITY, THE DISTRIBUTION UTILITIES
MAY CREATE A SUBSIDIARY COMPANY, THE OWNERSHIP OF WHICH SHALL BE
SUBJECT TO THE LIMITATIONS IMPOSED UNDER THE CROSS-OWNERSHIP
PROVISION. Such joint actions shall result in improved efficiencies, reliability of service,
reduction of costs and compliance to the performance standards prescribed in the IRR of
this Act.

Xxx"

SEC. 6. Section 30 of the EPIRA is hereby repealed 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 composed of the
wholesale electricity spot market 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 shall be subject to the approval of ERC. Said rules shall also reflect accepted
economic principles SUCH AS THE REQUIREMENT OF ESTABLISHING AVAILABILITY
OF SUPPLY PRIOR TO THE INTRODUCTION OF THE WESM and provide a level
playing field to all electric power industry participants. The rules shall provide, among
others, procedures for:

(2) xxx;
(b) 006,
(€) 2x,

*(d) Prescribing guidelines for the market operation in system emergencies, WHICH
INCLUDE THE REQUIREMENT OF ESTABLISHING THE AVAILABILITY OF SUPPLY
IN A CERTAIN GRID PRIOR TO THE IMPLEMENTATION OF THIS SAME; and

"(e) Amending the rules.


SEC. 7.

“The wholesale electricity spot market shall be implemented by @ market operator in
accordance with the wholesale electricity spot market 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. NOTWITHSTANDING THE FAILURE OF ESTABLISHING WESM IN
MINDANAO GRID, TRANSCO SHALL ACT AS THE MARKET OPERATOR OF THE
GRID, IN CONTRA-DISTINCTION TO THE ROLE OF THE NGCP WHICH IS THE DE
FACTO SYSTEMS OPERATOR OF THE GRID.

“Subject to the compliance with the membership criteria, WHICH SHALL BE PREMISED
ON PROVISIONS THAT WILL DETERMINE VOLUNTARINESS ON THE NATURE OF
MEMBERSHIP, 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.

YK

“In cases of national and international security emergencies or natural calamities,
INCLUDING DURING A DECLARATION OF SUPPLY SHORTAGE IN A PARTICULAR
GRID SUCH AS BUT NOT LIMITED TO THE ONE IN MINDANAO, the ERC is hereby
‘empowered to suspend the operation of the wholesale electricity spot market or declare a
temporary wholesale electricity spot market failure, OR IS HEREBY EMPOWERED TO
PREVENT THE IMPLEMENTATION OF THE WESM OR A SIMILAR STRUCTURE OF
MARKET OPERATIONS WHEN SUCH WILL CLEARLY RESULT TO INCREASE OF
RETAIL ELECTRICITY PRICES DUE TO THE DEMAND INCREASE WITHOUT THE
CORRESPONDING INCREASE OR THE CORRESPONDING ADDITIONAL SUPPLY IN
THE SAID GRID.”

Section 34 of the EPIRA shall be 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, shall be imposed on
all electricity end-users for the following purposes:

(a) 0%

(b) 200


(0) 109%

*(d) An environmental charge equivalent to one-fourth of one centavo per kilowatt-hour
(P0.0025/kWh), which shall accrue to an environmental fund to be used 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[.J; AND

“(F) TO FUND THE REHABILITATION OF LINES PREVIOUSLY CONSTRUCTED
USING NEA-SUBSIDY FUNDS AND/OR PRIORITY DEVELOPMENT ASSISTANCE
FUND (PDAF) TO ELECTRIFY FAR-FLUNG UNVIABLE AREAS.

“The universal charge shall be non-by passable charge which shall be passed on and
collected from all end-users on a monthly basis by the distribution utilities. Collections by
the distribution utilities and the TRANSCO in any given month shall be remitted to the
PSALM Corp. on or before the fifteenth (15th) of the succeeding month, net of any amount
due to the distribution utility. Any end-user or self-generating entity not connected to a

distribution utility shall remit its corresponding universal charge directly to the TRANSCO,

“The PSALM Corp., as administrator of the fund, shall create a Special Trust Fund which
shall be disbursed only for the purposes specified herein in an open and transparent
manner. All amounts collected for the universal charge shall be distributed to the
respective beneficiaries within a reasonable period to be provided by the ERC.”

SEC. 8. Section 35 of the EPIRA, is hereby amended to read as follows:

“SEC.35. Royalties, Returns and Tax Rate- The provisions of Section 79 of
Commonwealth Act No. 137 (C.A. No, 137) and any law to the contrary notwithstanding,
the President of the Philippines shall reduce the royalties, returns and taxes collected for
the FOLLOWING:

“4. INDIGENOUS ENERGY RESOURCES - Fifjor the exploitation of all indigenous
sources of energy, including but not limited, natural gas and geothermal steam, so as
to effect parity of tax treatment with the existing rates for imported coal, crude oil,
bunker fuel and other imported fuels.

“2, TAX FOR ELECTRIC COOPERATIVES”

“To ensure lower rates for end-users, the ERC shall forthwith reduce rates of power from
all indigenous sources of eneray.”


SEC. 9. Section 37 of the EPIRA shall be amended to read as follows:

“SEC. 37. Powers and Functions of the DOE. - In addition to its existing powers and
functions, the DOE is hereby mandated to supervise the restructuring of the electricity
industry. In pursuance thereof, Section 5 of R. A. 7638 otherwise known as "The
Department of Energy Act of 1992" is hereby amended to read as follows:

(a) xx
(b) 0%;
(c) 200%,

“(d) Ensure the reliability, quality and security of supply of electric power, PRIMED ON
THE INTEREST OF PROTECTING THE CONSUMERS FROM UNREASONABLE
INCREASE OF PRICES;

(@) xxx;
(i) xx;
(ii) x00,
{iil) 3006, and,
(iv) 2006

“(f) Jointly with the electric power industry participants, establish the wholesale electricity
spot market WHEN IT IS WARRANTED BY UNCONDITIONAL DECLARATION, WHICH
MUST BE CONCURRED IN BY THE ERC, OF STABILITY IN POWER SUPPLY, and
formulate the detailed rules governing the operations thereof,

(g) xxx,

(h) 200%,

(i) Develop policies and procedures and, as appropriate, promote a system of energy
development incentives to enable and encourage electric power industry participants to
provide adequate capacity to meet demand, ESPECIALLY A SUDDEN SURGE OF
DEMAND THAT MAY ARISE ON EMERGENCY SITUATION BROUGHT UPON BY A
SIMULTANEOUS OUTAGE BY SEVERAL GENERATORS, OR A SINGLE ONE,

REPRESENTING A HUGE BULK OF SUPPLY ON PER GRID BASIS, including, among
others, reserve requirements;

(i) xx
(k) x00

(1) xxx.


“(p) EXERCISE SUPERVISION OVER GOVERNMENT AGENCIES IN THE POWER
SECTOR, FOR THEIR COMPLIANCE TO THIS ACT IN ORDER TO MONITOR AND
TAKE REMEDIAL MEASURES IN PENALIZING ABUSE OF MARKET POWER,
CARTELIZATION, AND ANTI-COMPETITIVE OR DISCRIMINATORY BEHAVIOUR. TO
THIS END, DOE IS EMPOWERED MOTU PROPIO TO INVESTIGATE AND FILE
CORRESPONDING CHARGES, IN THE APPROPRIATE COURT OR TO THE ARC,
AGAINST VIOLATORS PARTICULARLY ON CARTELIZATION, ABUSE OF MARKET
POWER, ANTI-COMPETITIVE OR DISCRIMINATORY BEHAVIOR OF INDUSTRY
PARTICIPANTS [Formulate such rules and regulations as may be necessary to implement
the objectives of this Act]; [and]

(q) FORMULATE SUCH RULES AND REGULATIONS AS MAY BE NECESSARY TO
IMPLEMENT THE OBJECTIVES OF THIS ACT; AND

() EXERCISE SUCH OTHER POWERS AS MAY BE NECESSARY OR INCIDENTAL TO
ATTAIN THE OBJECTIVES OF THIS ACT.”

SEC. 10, Section 38 of EPIRA is herein amended to read as follows:
"SEC. 38. Creation of the Energy Regulatory Commission. — xxx

“The Commission shall be composed of a Chairman and four (4) members to be
SELECTED AND appointed by the President of the Philippines FROM THE ROSTER OF
NOMINEES TO BE SUBMITTED BY THE JCPC OR A SUBSTITUTE BODY CREATED
WHEN JCPC'S TERM EXPIRES, WHICH SHALL BE CALLED MULTI-STAKEHOLDER
POWER ADVISORY COUNCIL FORMED, PURSUANT TO THEIR ADDITIONAL
MANDATE DEFINED IN SEC. 62 OF THIS AMENDATORY ACT. 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) years of age, GRADUATE OF AT
LEAST FOUR-YEAR COURSE IN ANY OF THE FOLLOWING FIELDS: ENERGY,
ECONOMICS, FINANCE, COMMERCE, ENGINEERING OR ANY RELATED FIELDS and
WITH AT LEAST TEN (10) YEARS OF PROFESSIONAL AND RELEVANT
EXPERIENCE LINKED TO THE PROVISION OF HIGH LEVEL POLICY ADVICE OR
POLICY MAKING IN THE ELECTRIC POWER INDUSTRY [of recognized competence in
any of the following fields: energy, law, economics, finance, commerce, or engineering,
with at least three (8) 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 of experience in the
active practice of law, ONE (1) REPRESENTATIVE FROM THE ELECTRIC CONSUMER
GROUPS, and one (1) shall be a certified public accountant with at least ten (10) years of
experience in active practice

SEC. 11. Section 43 of EPIRA is further amended to read as follows:


“SEC. 43. Functions of the ERC. 10x

*(a) Enforce the implementing rules and regulations of this Act RELATIVE TO INDUSTRY
COMPETITION AND MARKET ABUSE TOGETHER WITH OTHER AGENCIES
AUTHORIZED TO MONITOR THE STANDARDS IN ACCORDANCE WITH THE
EXISTING RULES AND REGULATIONS SET.

*(b) 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:

“(i) Performance standards for TRANSCO O & M Concessionaire, 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 utlities and suppliers: Provided, That in the formulation of the entity
shall be considered: Provided, further, That such standards are set to ensure that
the electric power industry participants meet the minimum financial AND
TECHNICAL standards to protect the public interest. PROVIDED,
FURTHERMORE, THAT MONITORING, SUPERVISION AND ENFORCEMENT
OF FINANCIAL AND TECHNICAL STANDARDS OF THE ELECTRIC
COOPERATIVES WILL BE IMPLEMENTED BY THE NATIONAL
ELECTRIFICATION ADMINISTRATION, INCLUDING EXISTING GUIDELINES
PROMULGATED BY THE ENERGY REGULATORY COMMISSION, PRIOR TO
THIS AMENDMENT. 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 hereof,

(c) xxx
(A) xx

SEC. 12. Section 45 of the EPIRA shall be amended to read as follows:

“SEC. 45. Cross Ownership, Market Power Abuse and Anti-Competitive Behavior. — xxx

“No generation company or distribution utility, or its respective subsidiary or affiliate or
stockholder or official of a generation company or distribution utility, AND ANY OF THEIR
RELATIVES WITHIN THE SIXTH CIVIL DEGREE OF CONSANGUINITY OR AFFINITY,
or other entity engaged in generating and supplying electricity specified by ERC [within the
fourth civil degree of consanguinity or affinity], EXCEPT WITH THE OFFICIALS OF A

NON-STOCK AND NON-PROFIT ELECTRIC COOPERATIVES, shall be allowed to hold
8


any interest, direct or indirect, in TRANSCO or its concessionaire. Likewise, the
TTRANSCO, or its concessionaire or any of its stockholders or officials or any of their
relatives within the [fourth] SIXTH civil degree of consanguinity or affinity, shall not hold
any interest, whether direct or indirect, in any generation company or distribution utility.
Except for government-appointed representatives, no person who is an officer or director
‘of TRANSCO or its concessionaire shall be an officer or director of any generation
‘company, distribution utility or supplier.

“An “affiliate” means 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 another person. As used herein, *contro!” shall mean the power to
direct or cause the direction of the management policies of a person by contract, agency or
otherwise.

“To promote true market competition and prevent harmful monopoly and market power
abuse, the ERC shall enforce the following safeguards:

*(a) No company or related group can own, operate or control more than fifteen
percent (15%) [thirty percent (30%)] of the installed generating capacity of a grid
[and/or twenty-five percent (25%) of the national installed generating capacity] AS
IN LUZON, VISAYAS AND MINDANAO GRID, THE SAME LEVEL OF
OWNERSHIP SHALL BE MAINTAINED ON A PER ISLAND GRID BASIS EVEN
AFTER THE INTERCONNECTION OF THE THREE MAIN GRIDS. ‘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] SIXTH civil degree[;]

THE SECURITIES AND EXCHANGE COMMISSION (SEC) IS HEREBY TASKED
TO CONSIDER IN THEIR TEMPLATE OF APPLICATION FOR REGISTRATION
OF ALL POWER INDUSTRY PLAYERS INFORMATION RELATIVE TO ABOVE
AND WILL BE HELD RESPONSIBLE IN CASE OF VIOLATION OF THE
PROVISION FOR ANY POWER INDUSTRY PLAYER THAT CAN REGISTER
EVEN IF NOT QUALIFIED PURSUANT TO THE ABOVE PROHIBITION.

*(b) [Distribution utilities may enter into bilateral power supply contracts subject to
review by the ERC: Provided, That such review shall only be required for
distribution utilities whose markets have 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
9


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 PURPOSE OF PREVENTING MARKET POWER ABUSE
BETWEEN ASSOCIATED FIRMS ENGAGED IN GENERATION AND
DISTRIBUTION, DISTRIBUTION UTILITY IS ONLY ALLOWED TO SOURCE
FROM BILATERAL POWER SUPPLY CONTRACT OF ITS TOTAL DEMAND
FROM ITS ASSOCIATED FIRMS ENGAGED IN GENERATION AS FOLLOWS:

DU’S TOTAL DEMAND | ALLOWED BILATERAL CONTRACT

| 50 MW AND BELOW 60% |

| 51-100 MW 50% |
101-250 MW 40% -

| 251-500 MW = 30%

25%

501 AND ABOVE

(©) [For the first five (5) years from the establishment of the wholesale electricity
spot market, no distribution utility shall source more than ninety percent (90%) of
its total demand from bilateral power supply contracts.| UPON OPERATION OF
THE VARIOUS WHOLESALE ELECTRICITY SPOT MARKET, NO
DISTRIBUTION UTILITY SHALL SOURCE MORE THAN 90% OF ITS TOTAL
DEMAND FROM A BILATERAL CONTRACT IF THE SAME IS MORE THAN 15
MW AND THAT THERE IS NO AVAILABLE RENEWABLE ENERGY SOURCES
THAN CAN BE DEVELOPED IN ITS FRANCHISE AREA. TO THE CONTRARY,
A DISTRIBUTION UTILITY WITH A TOTAL DEMAND OF 15 MW AND BELOW
MAY OPT TO SECURE ITS POWER REQUIREMENT THROUGH BILATERAL
CONTRACT OR DEVELOP ITS OWN GENERATING PLANT, ESPECIALLY IF
RENEWABLE ENERGY IS EMEBEDDED IN ITS FRANCHISE AREA.

Xxx"

SEC. 13. Section 47 of the EPIRA is hereby amended to read as follows:

“SEC. 47. NPC Privatization. — {Except for the assets of SPUG, the generating assets, real
estate, and other disposable assets as well as generation contracts of NPC shall be
privatized in accordance with this Act. Within six (6) months from the effectivity of this Act,
the PSALM Corp. shall submit a plan for the endorsement by the Joint Congressional Power
‘Commission and the approval of the President of the Philippines, on the total privatization of
the generation assets, real estate, other disposable assets as well as existing generation
contracts of NPC and thereafter, implement the same, in accordance with the following
guidelines, except as provided for in paragraph (f) herein:] EXCEPT FOR THE AGUS AND
PULANGUI HYDRO ELECTRIC PLANTS COMPLEXES, THE GENERATION ASSETS,
10


REAL ESTATE, AND OTHER DISPOSABLE ASSETS AS WELL AS IPP CONTRACTS OF
NPC SHALL BE PRIVATIZED IN ACCORDANCE WITH THIS ACT AND THE
FOLLOWING GUIDELINES, EXCEPT AS PROVIDED FOR IN PARAGRAPH (F) HEREIN:

(a) 0x
(b) 20x
(c) 100%
(a) 109%
(e) 0%

“(f) The Agus and the Pulangui complexes in Mindanao shall be excluded from among the
generation companies that will be [initially] privatized. Their ‘ownership shall be transferred
to the PSALM Corp. and both shall continue to be operated by the NPC. Said complexes
[may be privatized not earlier than ten (10) years from the effectivity of this Act, and except
for Agus Ili, shall not be subject to Build-Operate-Transfer (B-O-T), Build-Rehabilitate-
Operate-Transfer (B-R-O-T) and other variations thereof pursuant to Republic Act No.
6957, as amended by Republic Act. No. 7718. The privatization of Agus and Pulangui
complexes shall be left to the discretion of PSALM Corp. in consultation with Congress)
SHALL BE RETAINED TO GENERATE POWER WHICH WILL SERVE AS BUFFER
SUPPLY TO AVERT POWER CRISES. THE GOVERNMENT THROUGH THE NPC
SHALL ENSURE ITS IMMEDIATE REHABILITATION TO MAXIMIZE ITS CAPACITY
OUTPUT THROUGH LOANS WHICH SHALL BE RECOVERED IN A GENERATION
RATE TO BE FILED WITH THE ERC WHOSE REVENUE SHALL BE USED FOR THE
REPAYMENT OF ITS REHABILITATION AND OPERATION EXPENSES. PROVIDED,
THAT ELECTRIC COOPERATIVES SHALL BE PRIORITIZED IN CONTRACTING
THESE COMPLEXES’ CAPACITY TO SERVE THE NEED OF THE RESIDENTIAL
CONSUMERS.

“FOR THE PURPOSE OF ENSURING THE VIABILITY OF OPERATION OF THE AGUS
AND PULANGI HYDRO ELECTRIC PLANTS COMPLEXES. A MINDANAO POWER
CORPORATION SHALL BE CREATED THAT WILL MANAGE, OPERATE AND
MAINTAIN THE PLANTS. FOR THIS PURPOSE, THE ASSETS AND LIABILITIES OR
OBLIGATIONS AND DEBTS OF NAPOCOR / PSALM RELATED TO THE OPERATION
OF THE MINDANAO GENERATION (MINGEN) SHALL BE SEPARATED FROM THE
BOOK OF ACCOUNTS OF NAPOCOR AND TRANSFERRED TO THE NEW ENTITY,
‘THE MINDANAO POWER CORPORATION.

“THE MINDANAO POWER CORPORATION SHALL BE A GOVERNMENT OWNED AND
CONTROLLED CORPORATION BUT SHALL BE MANAGED AND OPERATED IN A
PRIVATELY OWNED TYPE OF MANAGEMENT, WHOSE COMPOSITION IN ITS
BOARD OF DIRECTORS SHALL INCLUDE ONLY THE SECRETARY OF THE
MINDANAO DEVELOPMENT AUTHORITY AS CHAIRMAN. OTHER BOARD MEMBERS

1


COMPOSED OF A MAXIMUM OF FIVE EXCLUDING THE CHAIRMAN SHALL BE A
REPRESENTATIVE OF ELECTRIC COOPERATIVES IN MINDANAO, PRIVATELY
OWNED DU’S IN MINDANAO, CONSUMER ORGANIZATION, BUSINESS SECTOR
REPRESENTATIVE, AND FROM LAKE LANAO WATERSHED PROTECTION AND
DEVELOPMENT COUNCIL,

(9) xxx
(h) xxx

(i) Not later than three (3) years from the effectivity of this AMENDATORY Act, and in no
case later than the initial implementation of open access, at least seventy percent (70%) of
the total capacity of generating assets of NPC and of the total capacity of the power plants
under contract with NPC located in Luzon and Visayas, WITH THE EXCEPTION OF
THOSE WHICH ARE EXCLUDED FROM PRIVATIZATION AND SALE BY THIS
AMENDATORY ACT, shall have been privatized: Provided, That any unsold capacity
[shall be privatized not later than eight (8) years from the effectivity of this Act] AT THE
TIME OF THE APPROVAL OF THIS AMENDMENT, WITH THE EXCEPTION OF THOSE
TO BE FORMED UNDER THE MINDANAO POWER CORPORATION, SHALL BE
RETAINED AS ASSETS OF NPC TO SERVE AS ANCILLARY SERVICE PROVIDER OF
THE LUZON AND VISAYAS GRID; and

“() NPC SHALL [may] generate and sell electricity {only] from the undisposed generating
assets [and IPP contracts of PSALM Corp. and shall not incur any new obligations to
purchase power through bilateral contracts with generation companies or other suppliers.]
EXCLUSIVE OF THE AGUS AND PULANGUI HYDRO COMPLEXES IN MINDANAO
WHICH SHALL BE OPERATED BY A SEPARATE ENTITY AND IPP CONTRACTS,
INCLUDING NEW POWER SUPPLY PORFOLIO WHICH SHOULD NOT BE LESS THAN
THE REQUIRED ANCILLARY CAPACITY OF EACH GRID IN LUZON, VISAYAS AND
MINDANAO AS DETERMINED BY THE GRID MANAGEMENT COMMITTEE AND TO
BE UPRATED ON THE BASE LOAD REQUIREMENT OF THE GRID PLUS TEN
PERCENT (10%).

“THE CAPACITY FEE OF ALL NPC POWER PLANTS AND POWER SUPPLY
CONTRACTS THAT WILL SERVE AS ANCILLARY SHALL BE RECOVERED IN A
FORM OF ANCILLARY SERVICE CHARGE TO BE COLLECTED FROM ALL
ELECTRICITY END USERS BY THE GRID OPERATOR AND REMITTED DIRECTLY TO
THE NPC.

“ANCILLARY CHARGES SHALL INCLUDE FIXED COST AND A CERTAIN MARGIN
WHICH SHOULD BE APPLIED BY NPC TO THE ERC FOR COST DETERMINATION
AND APPROVAL.

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“IN CASE OF EMERGENCY AND IN ORDER TO STABILIZE THE PRICE IN THE
WESM, NPC POWER PLANTS SHALL OPERATE AS BASE LOAD PLANTS WITH
GENERATION COST TO BE DETERMINED BY ERC BASED ON THE TECHNOLOGY
USED.”

SEC. 14, Section 48 of EPIRA is hereby amended as follows

"SEC. 40. [National Power Board of Directors] NATIONAL POWER CORPORATION.-
Upon the passage of this Act, Section 6 of RA. 6395, as amended, and Section 13 of RA
7638, as amended, referring to the composition of the National Power Board of Directors,
are hereby repealed and a new Board shall be immediately organized. The new Board
shall be composed of the Secretary of Finance as Chairman, with the following as
members: the Secretary of Energy, the Secretary of Budget and Management, the
Secretary of Agriculture, the Director General of the National Economic and Development
‘Authority, the Secretary of Environment and Natural Resources, the Secretary of Interior
and Local Government, the Secretary of the Department of Trade and Industry, and the
President of the National Power Corporation.

“THE NATIONAL POWER CORPORATION SHALL REMAIN AS A GOVERNMENT
OWNED AND CONTROLLED CORPORATION (GOCC), HOWEVER, ITS
OPERATIONAL GOVERNANCE AND CONDUCT OF BUSINESS SHOULD BE
BASICALLY SIMILAR TO THAT OF A PRIVATE UTILITY THAT ENSURES BUSINESS
VIABILITY AND THEREFORE THE QUALIFICATIONS AND HIRING OF PERSONNEL
AS WELL AS ITS ORGANIZATION STRUCTURE SHOULD BE ALIGNED TO THAT OF
A PRIVATELY OWNED COMPANY OR CORPORATION.

“FOR THIS PURPOSE, THE DEPARTMENT OF TRADE AND INSUDTRY (DTI) SHALL
ESTABLISH THE BUSINESS STRUCTURE OF NPC, INCLUDING PLANTILLA
POSITION AND SALARY SCALE AS WELL AS JOB DESCRIPTIONS, WITHIN SIX (6)
MONTHS FROM THE EFFECTIVITY OF THIS AMENDATORY ACT.

“THE COMPOSITION OF THE CORPORATE BOARD OF NPC SHALL BE PART OF
THE PLANTILLA THAT SHALL BE DETERMINED BY THE DTI, EXCLUDING
POLITICAL APPOINTEES.”

SEC. 15. Section 62 of the EPIRA of the EPIRA is hereby amended to read as follows:
“SEC, 62. Joint Congressional Power Commission. — xx
“The Commission shall, in aid of legislation, perform the following functions, among others:

(a) xxx

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(0) x.

(0) x.

(d) 10x

(©) xxx

() 10K

"(g) Determine inherent weaknesses in the law THAT BREEDS REGULATORY
FLAWS and recommend necessary remedial legislation or executive measures;
[and]

“(h) [Perform such other duties and functions as may be necessary to attain its
objectives.] ENHANCE THE QUALITY OF THE SEARCH, SCREENING, AND
SELECTION PROCESS FOR THE FOLLOWING POSITIONS: SECRETARY OF
THE DEPARTMENT OF ENERGY, CHAIRMAN OF THE ERC, PRESIDENT OF
NPC, PRESIDENT OF PEMC, PRESIDENT AND CEO OF TRANSCO,
PRESIDENT AND CEO OF PSALM, AND OTHER HEADS OF AGENCIES
COVERED BY EPIRA];

“() SUBMIT A LIST OF FIVE (5) NOMINEES FOR EACH POSITION
ENUMERATED IN SECTION 62 (H) TO THE PRESIDENT OF THE
PHILIPPINES FOR FINAL APPOINTMENT AT LEAST ONE (1) YEAR BEFORE
‘THE INCUMBENT’S TERM EXPIRES; AND

“j) PERFORM SUCH OTHER DUTIES AND FUNCTIONS AS MAY BE
NECESSARY TO ATTAIN ITS OBJECTIVES.

"0
SEC. 16. Section 66 of the EPIRA is hereby amended to read as follows:

“SEC. 66. Benefits to Host Communities.-The obligations of generation companies and
energy resource developers to communities hosting energy generating facilities and/or
energy resource developers as defined under Chapter Il, Sections 289 to 294 of the Local
Government Code and Section 5) of Republic Act No. 7638 and their implementing rules
and regulations and applicable orders and circulars [consistent with this Act shall continue:
Provided, That the obligations mandated under Chapter Il, Section 291 of Republic Act No.
7160, shall apply to privately-owned corporations or entities utilizing the national wealth of
the locality] INCONSISTENT WITH THIS ACT ARE HEREBY AMENDED TO SIMPLIFY
‘THE DISTRIBUTION OF THE SHARES IN NATIONAL WEALTH TAX.

“THE COMMUNITIES HOSTING ANY SOURCE OF ENERGY SHALL BE ENTITLED TO
THE EIGHTY PERCENT (80%) OF THE NATIONAL WEALTH TAX; PROVIDED, THAT
‘THE GENERATION FACILITIES AND/OR ENERGY RESOURCE DEVELOPERS SHALL
DEDUCT THIS AMOUNT FROM THE POWER BILLS OF THE ELECTRIC
COOPERATIVES/DISTRIBUTION UTILITIES; PROVIDED FURTHER, THAT THIS

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SHALL HAVE RETROACTIVE EFFECT FROM THE TIME THE GENERATION
FACILITIES AND/OR ENERGY RESOURCE DEVELOPERS STARTED TO OPERATE.
IN THE HOST COMMUNITIES.

73x.
Xx"
SEC. 17. Section 70 of EPIRA is hereby amended to read as follows:

“SEC. 70. Missionary Electrification,- [Notwithstanding the divestment andlor privatization
of NPC assets, IPP contracts and spun-off corporations, NPC shall remain as a National
Government-owned and —controlled corporation to perform the missionary electrification
function through the Small Power Utilities Group (SPUG) and shall be responsible for
providing power generation and its associated power delivery systems in areas that are not
connected to the transmission system.) THE MISSIONARY ELECTRIFICATION
FUNCTIONS OF NPC-SPUG SHALL BE PERFORMED BY THE NATIONAL
ELECTRIFICATION ADMINISTRATION AS AN ADDITIONAL MANDATE IN
ACCORDANCE UNDER SECTION 58 OF THIS ACT WHICH IS TO ASSIST THE
ELECTRIC COOPERATIVES IN COMPLYING WITH THIS ACT. THE NEA SHALL BE
RESPONSIBLE IN PROVIDING POWER GENERATION AND ITS ASSOCIATED
POWER DELIVERY SYSTEMS IN AREAS THAT ARE NOT CONNECTED TO THE
TRANSMISSION SYSTEM. The missionary electrification function shall be funded from
the revenues from sales in missionary areas and from the universal charge to be collected
from all electricity end-users as determined by the ERC AND TO BE REMITTED AND
ADMINISTERED BY THE NEA. THE NEA MAY OPT TO TRANSFER OR RELINQUISH
THE OPERATION OF THE OFF-GRID POWER PLANTS TO THE ELECTRIC
COOPERATIVE AFTER A SOUND EVALUATION OF THE SAID EC, IF EC IS
TECHNICALLY AND FINANCIALLY CAPABLE OF MAINTAINING THE PLANT AND IF
SO DOING THE ASSETS OF NPC-SPUG BE TRANSFERRED TO NEA.”

SEC. 18, Section 71 of EPIRA is hereby amended to read as follows:

"SEC, 71, Electric Power Crisis Provision.-Upon the determination by the President of the
Philippines of an imminent shortage of the supply of electricity, [Congress may authorize,
through a joint resolution, the establishment of additional generating capacity under such
terms and conditions as it may approve] THE PRESIDENT SHALL AUTHORIZE THE
ESTABLISHMENT OF ADDITIONAL GENERATING CAPACITY.”

CHAPTER IV - GENERAL PROVISIONS

15


SEC. 19. Implementing Rules and Regulations. The Secretary of the Department of Energy, in
coordination with the other agencies involved in power, shall create a technical writing group that will be
tasked to draft the Implementing Rules and Regulations,

SEC. 20. Separability Clause. If any part or section of this Act is declared unconstitutional, such
declaration shall not affect in any manner other parts or sections of this Act.

SEC. 21. Repealing Clause. — All laws, decrees, proclamations, issuances, or ordinances that are
contrary to or inconsistent with the provisions of this Act are hereby amended, repealed or modified
accordingly.

SEC. 22. Effect on Other Acts. All acts or parts of Acts inconsistent herewith are repealed or
modified accordingly.

SEC. 23, Effectivity Clause, This Act shall take effect fifteen (15) days after its publication in
at least two (2) newspapers of general circulation.

Approved,

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