FIFTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
) 
. First Regular Session 
) 
SENATE 
S.B.No. 2343 
Introduced by Senator JUAN PONCE ENRILE 
EXPLANATORY NOTE 
The Electric Power Industry Reform Act, also known as the EPIRA law, was enacted into 
law in 200 I to ensure the quality and reliability of the supply of electric power that would 
translate to lower consumption costs. 
However, the passage of the law was accompanied by increases in electric bills, 
confusion in the implementation and enforcement of the provisions of the law and inevitably 
caused a haphazard market behavior in the electric power industry. 
The EPIRA law became evidently anti-poor, anti-people, benefiting only a selected 
number of power generators and distributors. 
It resulted in electricity cost that is more 
burdensome ,on the part of the consumers. At the same time, the issues the law originally 
intended to resolve were not properly addressed. 
It is therefore in our national interest to pass an amendatory bill that will clarify vague 
and conflicting provisions of the law, afford protection to end-users of electricity and to level the 
playing field for all the industry players. We need a pragmatic and substantial solution to make 
the cost of electricity affordable to the consumers while recognizing the right of the electric 
power industry players to a just and reasonable return on their investments. 
This bill seeks to lessen the hardship on electricity consumers by preventing certain 
industry players to pass on the costs of their inefficiencies, mistakes and .questionable onerous 
contracts or dealings. 
In view of the foregoing, approval of this bill is earnestly sought. 


FIFTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
SENATE 
S.B. No. ·2:343 
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Introduced by Senator JUAN PONCE ENRILE 
AN ACT 
AMENDING SECTIONS 4, 9, 20, 21, 23, 25, 26, 30, 31, 32, 33, 34, 35, 38, 41, 43, 45, 
48, 51, 70 OF REPUBLIC ACT NO. 9136 ENTITLED "AN ACT ORDAINING 
REFORMS IN THE 
ELECTRIC POWER INDUSTRY AND FOR OTHER 
PURPOSES" 
Be it enacted by the Senate and House of Representatives the Philippines in Congress 
assembled: 
1 
SECTION 1. Section 4, Chapter 1, of Republic Act No. 9136, otherwise known as the 
2 
Electric Power Industry Reform Act of 2001, hereinafter referred to as "the Act", is 
3 
hereby amended to read as follows: 
4 
"SEC. 4. Definition of Terms. -
5 
(A) "AFFILIATE"/"ASSOCIATED ENTITY OR PERSON" REFERS 
6 
TO ANY ENTITY OR PERSON WHICH, ALONE OR TOGETHER WITH 
7 
ANY OTHER ENTITY OR PERSON, DIRECTLY OR INDIRECTLY, 
8 
THROUGH 
ONE 
OR 
MORE 
INTERMEDIARIES, 
CONTROLS, 
IS 
9 
CONTROLLED BY, OR IS UNDER COMMON CONTROL WITH ANOTHER 
10 
ENTITY OR PERSON. FOR PURPOSES OF THIS ACT, A HOLDING 
11 
COMPANY SHALL BE DEEMED AN "AFFILIATE" OF THE GENERATION 
12 
AND/OR DISTRIBUTION COMPANY IN WHICH IT HOLDS INTERESTS; 
13 
[(a)] (B) "Aggregator" refers to a person or entity[, engaged] WHICH, 
14 
WITHOUT A LEGISLATIVE FRANCHISE, IS DULY LICENSED BY THE 
15 
COMMISSION TO ENGAGE in consolidating electric power demand of end-
16 
users OF ELECTRICITY in [the] A contestable market[,] WITHIN A 


1 
[(b)] (C) "Ancillary Services" refer to those services that are necessary to 
2 
support the transmission of capacity and energy from resources to loads while 
3 
maintaining reliable operation of the transmission system in accordance with good 
4 
utility practice and the Grid Code to be adopted in accordance with this Act; 
5 
[(c)] (D) "Captive Market" refers to [electricity end-users who do not have 
6 
the choice of a supplier of electricity, as may be determined by the Energy 
7 
Regulatory Commission (ERC) in accordance with this Act;] THAT MARKET 
8 
WITH 
RESPECT 
TO 
A 
DISTRIBUTION 
UTILITY 
WHICH, 
AS 
9 
DETERMINED BY THE COMMISSION IN ACCORDANCE WITH THIS 
10 
ACT, AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
11 
HEARING, CONSISTS OF END-USERS OF ELECTRICITY WITH LOAD 
12 
. REQUIREMENTS 
THAT DO 
NOT MEET 
THE 
THRESHOLD 
OF 
13 
CONTEST ABILITY AND MUST THEN BE SUPPLIED WITH ELECTRICITY 
14 
EXCLUSIVELY BY THE DISTRIBUTION UTILITY HOLDING FRANCHISE 
15 
OVER SUCH AREA; 
16 
[(d)] (E) "Central Dispatch" refers to the process of issuing direct 
17 
instructions to electric power industry participants by the grid operator to achieve 
18 
the economic operation, and maintenance of quality, stability, reliability, and 
19 
security, of the transmission system; 
20 
[(e)] (F) "Co-Generation Facility" refers to a facility which produces 
21 
electrical and/or mechanical energy and forms of useful thermal energy, such as 
22 
heat or steam, which are used for industrial, 
commercial heating or cooling 
23 
purposes through the sequential use of energy; 
24 
[(f)] (G) "Commission" refers to the decision-making body of the [ERC] 
25 
ENERGY REGULATORY COMMISSION (ERC) composed of a Chairman and 
26 
four (4) members as provided under Section 38 [hereof] OF THIS ACT[;]. FOR 
27 
PURPOSES OF CONSTRUING AND INTERPRETING THE RELEVANT 
28 
PROVISIONS OF THIS ACT, THE TERMS "COMMISSION", "ENERGY 
29 
REGULATORY COMMISSION", AND "ERC" SHALL, UNLESS THE 
2 


I 
·CONTEXT CLEARLY INDICATES OTHERWISE, SHALL REFER TO THE 
2 
ONE AND THE SAME ENTITY; 
3 
[(g) J (H) "Concession Contract" refers to the award by the government to 
4 
a qualified private entity of the responsibility for financing, operating, expanding, 
5 
maintaining, and managing specific Government-owned assets; 
6 
[(h)] (I) "Contestable Market" refers to [the electricity end-users who have 
7 
a choice of a supplier of electricity, as may be determined by the ERC in 
8 
accordance with this Act;] 
THAT MARKET, 
WHICH 
SHALL BE 
9 
DETERMINED BY THE COMMISSION IN ACCORDANCE WITH THIS 
10 
ACT, AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
II 
HEARING, CONSISTING OF END-USERS OF ELECTRICITY WITHIN A 
12 
FRANCHISE TERRITORY OF A DISTRIBUTION UTILITY THAT CAN 
13 
CHOOSE THEIR SUPPLIER OF ELECTRICITY; 
14 
(1) "CONTROL" REFERS TO THE POWER TO DIRECT OR CAUSE 
IS 
THE DIRECTION OF THE MANAGEMENT POLICIES OF AN ENTITY OR 
16 
PERSON BY CONTRACT, AGENCY, OR SIMILAR ARRANGEMENTS; 
17 
[(i)] (K) "Customer Service Charge" refers to the component in the retail 
18 
rate intended for the cost recovery of customer-related services including, but not 
19 
li,mited to, meter reading, billing administration and collection; 
20 
[G)] (L) "Demand Side Management" refers to measures, undertaken by 
21 
distribution utilities to encourage end-users in the proper management of their 
22 
load to achieve efficiency in the utilization of fixed infrastructures in the system; 
23 
[(k)] (M) "Department of Energy" or "DOE" refers to the government 
24 
agency created pursuant to Republic Act-No. 7638 whose expanded functions are 
25 
provided herein; 
26 
[(l)] (N) "Department of Finance" or "DOF" refers to the government 
27 
agency created pursuant to Executive Order No. 127; 
28 
(0) "DEREGULATION" REFERS TO THE REMOVAL OF PRICE 
29 
CONTROLS IN THE SUPPLY OF ELECTRICITY; 
3 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
[em)] (P) "Distribution Code" refers to a compilation of rules and 
regulations governing electric utilities in the, operation, and maintenance of their 
distribution systems, which includes, among others, the standards for service and 
performance, and defines and establishes the relationship of the distribution 
systems with the facilities or installations ofthe parties connected thereto; 
[en)] (Q) "Distribution of Electricity" refers to the conveyance of electric 
power by a distribution utility through its distribution system pursuant to the 
provisions of this Act; 
[(0)] (R) "Distribution System" refers to the system of Wlfes and 
associated facilities belonging to a franchised distribution utility, extending 
between the delivery points on the transmission or sub-transmission system or 
generator connection and the point of connection to the premises of the end-user; 
rep)] (S) "Distribution Wheeling' Charge" refers to the cost or charge 
regulated by the ERC for the use of a distribution system and/or the availment of 
related services; 
[(q)] (T) "Distribution Utility" refers to any electric cooperative, private 
corporation, government-owned utility, or existing local government unit, which 
has an exclusive franchise to operate a distribution system in accordance with this 
Act; 
[(r)] (U) "Electric Cooperative" refers to a distribution utility organized 
pursuant to Presidential Decree No. 269, as amended, or as otherwise provided in 
this Act; 
[(s)] (V) "Electric Power Industry Participant" refers to any person or 
entity engaged in the generation, transmission, distribution, or supply of 
electricity; 
ret)] (W) "End-user" refers to any person or entity requiring the supply and 
delivery of electricity for its own use; 
4 


, 
1 
[(u)] 
(X) "Energy Regulatory Board" or "ERB" refers to the 
2 
[independent,] NOW DEFUNCT quasi-judicial regulatory body created under 
3 
Executive Order No. 172, as amended; 
4 
[(v)] (Y) "Energy Regulatory Commission" or "ERC" refers to the 
5 
regulatory agency created herein; 
6 
[(w)] (Z) "Franchise Area" 
refers to a geographical area exclusively 
7 
assigned or granted to a distribution utility for distribution of electricity; 
8 
[(x)] (AA) "Generation Company" refers to any person or entity 
9 
authorized by the ERC to operate facilities used in the generation of electricity; 
10 
[(y)] (BB) "Generation of Electricity" refers to the production of 
11 
electricity by a generation company, or a co-generation facility, pursuant to the 
12 
provisions of this Act; 
!3 
[(z)] (CC) "Grid" refers to the high voltage backbone system of 
14 
interconnected transmission lines, substations, and related facilities; 
IS 
[(aa)] (DD) "Grid Code" refers to the set of rules and regulations 
16 
governing the safe, and reliable operation, maintenance, and development, of the 
, 
17 
high voltage backbone transmission system and its related facilities; 
18 
[ebb)] (EE) "Independent Power Producer" or "IPP" refers to an existing 
19 
[power generating entity] GENERATION COMPANY, which is not owned by 
20 
NPC[;] AND WITH WHOM NPC OR A DISTRIBUTION UTILITY HAS A 
21 
VALID AND EXISTING PURCHASED POWER CONTRACT; 
22 
[(cc)] (FF) "Inter-Class Cross Subsidy" refers to an amount charged by 
23 
distribution utilities to industrial and commercial end-users as well as to other 
24 
subsidizing customer sectors in order to reduce electricity rates of other customer 
25 
sectors ,such as the residential end-users, hospitals, and streetlights; 
26 
[(dd)] (GG) "Inter-Regional Grid Cross Subsidy" refers to an amount 
27 
embedded in the electricity rates of NPC charged to its customers located in a 
28 
viable regional grid in order to reduce the electricity rates in a less viable regional 
29 
grid; 
5 


1 
[(ee)] (HH) "Intra-Regional Grid Cross Subsidy" refers to an amount 
2 
embedded in the electricity rates of NPC charged to distribution utilities and non-
3 
utilities with higher load factor andlor delivery voltage in order to reduce the 
4 
electricity rates charged to distribution utilities with lower load factor andlor 
5 
delivery voltage located in the same regional grid; 
6 
[(ff)] (II) "IPP Administrator" refers to qualified independent entities 
7 
appointed by PSALM Corporation who shall administer, conserve, and manage 
8 
the contracted energy output ofNPC IPP contracts; 
9 
[egg)] (JJ) "Isolated Distribution System" refers to the backbone system of 
10 
wires and associated facilities not directly connected to the national transmission 
II 
system; 
12 
[(hh)] (KK) "Lifeline Rate" refers to the subsidized rate given to low-
13 
income captive market end-users who cannot afford to pay at full cost; 
14 
[(ii)] (LL) "National Electrification Administration" or "NEA" refers to 
15 
the government agency created under Presidential Decree No. 269, as amended, 
16 
and whose additional mandate is further set forth herein; 
17 
[Uj)] (MM) "National Power Corporation" or "NPC" refers to the 
18 
government corporation created under Republic Act No. 6395, as amended; 
19 
[(kk)] (NN) "National Transmission Corporation" or "TRANSCO" refers 
20 
to the corporation organized pursuant to this Act to acquire all the transmission 
21 
assets of the NPC; 
22 
[(II)] (00) "Open Access" refers to the [system of allowing] PRIVILEGE 
23 
GRANTED TO any qualified person [the use of! TO USE THE transmission[, 
24 
and/or] AND SUB-TRANSMISSION FACILITIES AND ASSETS ANDIOR 
25 
THE distribution system and associated facilities OF ANY PUBLIC OR 
26 
PRIV A TE PERSON OR ENTITY, subject to the payment of JUST AND 
27 
REASONABLE transmission andlor distribution [retail] wheeling [rates] 
28 
CHARGES 
duly approved by the ERC, 
AFTER DUE NOTICE TO ALL 
29 
INTERESTED PARTIES AND PUBLIC HEARING; 
6 


1 
[(mm) ] (PP) "Philippine Energy Plan" or "PEP" refers to the overall 
2 
energy program formulated and updated yearly by the DOE and submitted to 
3 
Congress pursuant to Republic Act No. 7638; 
4 
[(nn)] (QQ) 
"Power Development Program" or "PDP" refers to the 
5 
indicative plan for managing electricity demand through energy-efficient 
6 
programs and for the 
upgrading, expansion, rehabilitation, repair, and 
7 
maintenance of power generation and transmission facilities, formulated and 
8 
updated yearly by the DOE in coordination with the generation, transmission and 
9 
distribution utility companies; 
10 
[(00)] (RR) 
"Power Sector Assets 
and 
Liabilities 
Management 
11 
Corporation" or "PSALM Corp." refers to the corporation created pursuant to 
12 
Section 49 hereof; 
13 
[(pp)] (SS) "Privatization" refers to the sale, disposition, change, and 
14 
transfer of ownership and control of assets and IPP contracts, from the 
15 
Government or a government corporation to a private person or entity; 
16 
(TT) 
"PUBLIC 
I-lEARING" 
REFERS 
TO 
A 
PROCEEDING 
17 
CONDUCTED BY THE COMMISSION AFTER ITS MEMBERS ARE 
18 
FORMALLY CONVENED TO HEAR, AFTER DUE NOTICE TO ALL 
19 
INTERESTED PARTIES, THE TESTIMONY OF WITNESSES UNDER 
20 
OATH, SUBJECT TO CROSS-EXAMINATION BY ADVERSE PARTIES, 
21 
AND TO FORMALLY RECEIVE DOCUMENTARY EVIDENCE, IN ORDER 
22 
TO DISPOSE ANY ISSUE BROUGHT TO THE ATTENTION OF THE 
23 
COMMISSION THROUGH MOTIONS, COMPLAINTS OR PETITION FILED 
24 
WITH THE COMMISSION; 
25 
[(qq)] (UU) "Renewable Energy Resources" refers to energy resources, 
26 
that do not have an upper limit on the total quantity to be used. Such resources 
27 
are renewable on a regular basis and the renewable rate is rapid enough to 
28 
consider, availability over an indefinite time. These include, among others, 
29 
biomass, solar, wind, hydro, and ocean energy; 
7 


I 
[err)] (VV) 
"Restructuring" refers to the process of reorganizing the 
2 
electric power industry in order to introduce higher efficiency, greater innovation 
3 
and end-user choice. It shall be understood as covering a range of alternatives 
4 
enhancing exposure of the industry to competitive market forces; 
5 
less)] (WW) "Retail Rate" refers to the total price paid by end-users 
6 
consisting of the charges for generation, transmission and related ancillary 
7 
services, distribution, supply, and other related charges for electric service; 
8 
[(tt)] (XX) "Small Power Utilities Group" or "SPUG" refers to the 
9 
functional unit ofNPC created to pursue miSSionary electrification function; 
10 
[ (uu) "Stranded contract costs ofNPC or distribution utility" refer to the 
II 
excess of the contracted cost of electricity under eligible contracts over the actual 
12 
selling price of the contracted energy output of such contracts in the market. Such 
13 
contracts shall have been approved by the ERB as of December 31, 2000; 
14 
(vv) 
"Stranded Debts of NPC" refer to any unpaid financia:l obligations 
IS 
of NPC which have not been liquidated by the proceeds from the sales and 
16 
privatization ofNPC assets;] 
17 
[(ww)] (YY) "Sub-transmission Assets" refer to the facilities related to 
18 
the power delivery service below the transmission voltages and, based on the 
19 
fi.mctional assignment of assets including, but not 
limited to, step-down 
20 
transformers used solely by load customers, associated switchyard/substation, 
21 
control and protective equipment, reactive compensation equipment to improve 
22 
customer 
power 
factor, 
overhead 
lines, 
and 
the 
land 
where 
such 
23 
facilities/equipment are located. 
These include NPC assets linking the 
24 
transmission system and the distribution system which are neither classified as 
25 
generation nor transmission. REGARDLESS OF VOLTAGE, ANY FACILITY 
26 
DIRECTLY SERVING AN END-USER SHALL BE CLASSIFIED AS A 
27 
DISTRIBUTION ASSET; 
28 
[(xx)] (ZZ) 
"Supplier" refers to any person or entity, OTHER THAN A 
29 
GENERATION COMPANY OR A DISTRIBUTION UTILITY, LICENSED BY 
8 


1 
THE ERC TO ENGAGE IN THE BUSINESS OF BUYING AND SELLING, 
2 
BROKERING, AND MARKETING, TO END-USERS OF ELECTRICITY, IN 
3 
THE FRANCHISE TERRITORY OF A DISTRIBUTION UTILITY, USING 
4 
FOR 
THE 
PURPOSE 
THE 
WIRES 
AND 
FACILITIES 
OF 
THE 
5 
DISTRIBUTION UTILITY CONCERNED [authorized by the ERC 
to sell, 
6 
broker, market, or aggregate electricity to the end-users]; 
7 
[(yy)] (AAA) "Supplier's Charge" refers to the charge imposed by 
8 
electricity suppliers for the sale of electricity to end-users, excluding the charges 
9 
for generation transmission and distribution wheeling; 
10 
[(zz)] (BBB) "Supply of Electricity" [means the sale of electricity by a 
11 
p~rty other than a generator or a distributor in the franchise area of a distribution 
12 
. utility, using the wires of the distribution utility concerned;] SHALL REFER, 
13 
UNLESS THE CONTEXT SUGGESTS OTHERWISE, TO THE BUSINESS OF 
14 
BUYING AND SELLING, BROKERING, MARKETING ELECTRICITY BY A 
15 
PERSON OR ENTITY, OTHER THAN A GENERATION COMPANY OR A 
16 
DISTRIBUTION UTILITY, TO END-USERS OF ELECTRICITY, OR OF 
17 
AGGREGATING DEMANDS FOR SUCH END-USERS OF ELECTRICITY, 
18 
IN THE FRANCHISE TERRITORY OF A DISTRIBUTION UTILITY, USING 
19 
FOR 
THE 
PURPOSE 
THE 
WIRES 
AND 
FACILITIES 
OF 
THE 
20 
DISTRIBUTION UTILITY CONCERNED; 
21 
(CCC) "SYSTEM OPERATOR" REFERS TO THE ENTITY WHICH 
22 
SHALL BE AN INDEPENDENT BODY THAT IS RESPONSIBLE FOR 
23 
CENTRAL DISPATCH OF ALL ELECTRIC GENERATION PLANT 
24 
FACILITIES 
CONNECTED DIRECTLY 
OR INDIRECTLY TO 
THE 
25 
TRANSMISSION SYSTEM IN ACCORDANCE WITH THE DISPATCH 
26 
SCHEDULE SUBMITTED BY THE MARKET OPERATOR; 
27 
[(aaa)] (DDD) "Transmission Charge" refers to the regulated cost or 
28 
charges for the use of a transmission system which may include the availment of 
29 
ancillary services; 
9 


1 
[(bbb)] (EEE) "Transmission Development Plan" or "TDP" refers to the 
2 
program for managing the transmission system through efficient planning for the 
3 
expansion, upgrading, rehabilitation, repair, and maintenance, to be formulated by 
4 
DOE and implemented by the TRANSCO pursuant to this Act; 
5 
[(ccc)] (FFF) "Transmission of Electricity" refers to the conveyance of 
6 
electricity through the high voltage backbone system; and 
7 
[(ddd)] (GGG) 
"Universal Charge" refers to the charge, if any, 
8 
[imposed for the recovery of the stranded cost and other purposes pursuant to 
9 
Section 34 hereof.] TO BE DETERMINED, FIXED, AND APPROVED BY THE 
10 
COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
11 
AND PUBLIC HEARING, IN ACCORDANCE WITH AND FOR THE 
12 
PURPOSES MENTIONED IN SECTION 34 OF THIS ACT. 
13 
SEC. 2. Section 9, Chapter 11 of the Act is hereby amended to read as follows: 
14 
"SEC. 9. Functions and Responsibilities. - Upon the effectivity of this Act, 
15 
the TRANSCO shall have the following functions and responsibilities: 
16 
(a) 
[Act] TO ACT as the [system] GRID operator of the nationwide 
17 
electrical transmission and subtransmission system, THAT SHALL be transferred 
18 
to it by NPC; 
19 
(b) 
[Provide open and] TO PROVIDE POWER DELIVERY 
20 
SERVICE THROUGH non-discriminatory OPEN access to its transmission 
21 
system to all [electricity] QUALIFIED AND AUTHORIZED usersL], SUBJECT 
22 
TO 
THE 
PA YMENT 
OF 
TRANSMISSION 
WHEELING 
CHARGE 
23 
APPROVED BY THE COMMISSION, AFTER DUE NOTICE TO ALL 
24 
INTERESTED PARTIES AND PUBLIC HEARING. TRANSCO SHALL NOT 
25 
IN ANY WAY ENGAGE IN THE DISTRIBUTING AND RET AILING OF 
26 
ELECTRICITY, WHICH IS A FUNCTION OF DISTRIBUTION UTILITIES; 
27 
(c) 
[Ensure] TO ENSURE and maintain the reliability, adequacy, 
28 
security, stability, and integrity of the nationwide electrical TRANSMISSION 
29 
grid in accordance with the performance standards for the operation and 
10 


1 
maintenance of the NATIONWIDE ELECTRICAL TRANSMISSION grid, as set 
2 
forth in a Grid Code to be adopted and promulgated by the [ERC] COMMISSION 
3 
within six (6) months from the effectivity of this Act; 
4 
(d) 
[Improve] TO IMPROVE and expand its transmission ASSETS 
5 
AND facilities, consistent with the Grid Code and the Transmission Development 
6 
Plan [TDP] to be promulgated pursuant to this Act, IN ORDER to adequately 
7 
serve generation companies, distribution utilities, and suppliers [requiring] THAT 
8 
REQUIRE transmission service andlor [AND OR] ancillary services through the 
9 
. transmission system: Provided, That THE TRANSCO shall submit any plan for 
10 
THE expansion or improvement of its ASSETS AND facilities for approval by 
II 
the [ERC;] COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED 
12 
PARTIES AND PUBLIC HEARING; 
13 
(e) 
Subject to SUCH technical constraints THAT MAY EXIST OR 
14 
ARISE, IF ANY, AND TAKING INTO ACCOUNT ANY OUTSTANDING 
15 
BILATERAL CONTRACTS, the [grid] SYSTEM operator of the TRANSCO 
16 
shall provide central dispatch of all ELECTRIC generation PLANT facilities 
17 
connected, directly or indirectly, to the transmission system in accordance with 
18 
the dispatch schedule submitted by the market operator[, taking into account 
19 
outstanding bilateral contracts]; PROVIDED, 
HOWEVER, 
THAT SUCH 
20 
SYSTEM OPERATOR SHALL BE ALLOWED TO SPIN-OFF USING 
21 
TRANSCO'S SYSTEM OPERATION CHARGES AS THE OPERATING 
22 
BUDGET WHEN ITS SCHEDULE AND DISPATCH FUNCTIONS REQUIRE 
23 
COMPLETE INDEPENDENCE FROM TRANSCO AS THE GRID OWNER; 
24 
and 
25 
(f) 
THE TRANSCO, JOINTLY WITH THE DOE, shall undertake the 
26 
preparation AND FORMULATION of the TDP, WHICH SHALL BE 
27 
APPROVED BY THE DOE. 
, 
28 
In the preparation AND FORMULATION of the TDP, THE TRANSCO 
29 
AND THE DOE shall consult the other [participants of the] electric power 
11 


1 
industry [such as] PARTICIPANTS, ESPECIALLY the generation companies, 
2 
THE MARKET OPERATOR, THE SYSTEM OPERATOR, distribution utilities, 
3 
and the [electricity] end-users[.] OF ELECTRICITY. The TDP shall be 
4 
[submitted to the DOE for integration] INTEGRATED with the Power 
5 
Development Program and the Philippine Energy Plan, BOTH OF WHICH ARE 
6 
provided for in Republic Act No. 7683, otherwise known as "the Department of 
7 
Energy Act of 1992". 
8 
SUBJECT 
TO 
THE 
PRIOR 
AUTHORIZATION 
OF 
THE 
9 
COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
10 
AND PUBLIC HEARING, A generation company may develop and own or 
11 
operate dedicated AND LIMITED point-to-point [limited] transmission ASSETS 
12 
AND facilities that are consistent with the TDP[: Provided, That], IF IT IS 
13 
CLEARLY SHOWN THAT such TRANSMISSION ASSETS AND facilities are 
14 
required [only for the purpose of connecting] AND TO BE USED SOLELY BY 
15 
THE GENERATION COMPANY TO CONNECT ITSELF to the transmission 
16 
s~stem[,and are used solely by the generating facility, subject to prior 
17 
authorization by the ERC: Provide, further, That in [ OF THE TRANS CO. IN 
18 
the event that such LIMITED TRANSMISSION assets AND FACILITIES are 
19 
required for competitive purposes, ownership of the same shall be transferred to 
20 
the TRANSCO at a fair market pricer: Provided, finally, That in]. IN case of 
21 
ANY DISPUTE OR disagreement on the fair market price OF SUCH 
22 
TRANSMISSION ASSETS AND FACILITES, the [ERC] COMMISSION shall 
23 
determine the fair market [value of the asset.] PRICE OF SAID LIMITED 
24 
TRANSMISSION ASSETS AND FACILITES, AFTER DUE NOTICE TO ALL 
25 
INTERESTED PARTIES AND PUBLIC HEARING." 
26 
SEC 3. Section 20, Chapter II of the Act is hereby amended to read as follows: 
27 
"SEC. 20. TRANSCO Related Businesses. -
THE TRANSCO [may] IS 
28 
HEREBY AUTHORIZED TO engage, DIRECTLY OR INDIRECTLY, in any 
29 
BUSINESS related TO ITS MAIN business [which maximizes] IN ORDER TO 
12 


1 
MAXIMIZE THE utilization of its assets[:] AND RESOURCES: Provided, That 
2 
WHERE ASSETS FORMING PART OF THE RATE BASE OF THE 
3 
TRANSCO ARE UTILIZED IN SUCH RELATED BUSINESS, a portion of the 
4 
net income derived from such [undertaking utilizing assets which form part of the 
5 
raie base] RELATED BUSINESS, WHICH PORTION SHALL NOT BE MORE 
6 
THAN FIFTY PERCENT (50%) OF SUCH NET INCOME, shall be used to 
7 
reduce THE transmission RATE OR wheeling [rates as determined by the ERC. 
8 
Such portion of net income used to reduce the transmission wheeling rates shall 
9 
not exceed fifty percent (50%) of the net income derived from such undertaking.] 
10 
CHARGE PASSED-ON TO THE END-USERS OF ELECTRICITY. 
11 
Separate accounts shall be maintained for each RELATED business 
12 
[undertaking] to ensure that the transmission business shall neither subsidize in 
13 
any way such RELATED business [undertaking] nor encumber [its] THE 
14 
TRANSCO'S transmission assets in any way to support such RELATED 
15 
business." 
16 
SEC. 4. Section 21 of the Act is hereby amended to read as follows: 
17 
"SEC. 21. 
TRANSCO Privatization. -
Within six (6) months from 
18 
the effectivity of this Act, the PSALM Corp. shall submit a plan ON THE 
19 
PRIVATIZATION OF THE TRANS CO for the endorsement by the Joint 
20 
CONGRESSIONAL Power Commission TO, and FOR the approval of, the 
21 
President of the Philippines. [The] THEREAFTER, THE 
President of the 
22 
Philippines [thereafter] shall direct THE PSALM Corp. to [award, in] CONDUCT 
23 
AN open competitive PUBLIC bidding, AND AWARD THE OWNERSHIP 
24 
AND CONTROL OF THE TRANSCO THROUGH A CONTRACT OF SALE, 
25 
OR AWARD THE ADMINISTRATION, MANAGEMENT, OPERATION, 
26 
AND 
MAINTENANCE, 
AS 
WELL 
AS 
THE 
PRESERVATION, 
27 
IMPROVEMENT, AND/OR EXPANSION OF the transmission ASSETS AND 
28 
facilities, including THE grid interconnections and ancillary services THROUGH 
29 
A CONCESSION CONTRACT to [a] THE qualified [party either through an 
13 


1 
outright 
sale 
or 
a 
concessIOn 
contract.] 
WINNING 
BIDDER. 
The 
2 
buyer/concessionaire, AS THE CASE MAY BE, shall be responsible for the 
3 
EFFICIENT ADMINISTRATION, MANAGEMENT, OPERATION, AND 
4 
MAINTENANCE, AS WELL AS FOR THE PRESERVATION, improvement, 
5 
AND/OR expansion[, operation, and/or maintenance of its] OF THE transmission 
6 
assets and [the] FACILITIES, INCLUDING THE GRID INTERCONNECTIONS 
7 
AND 
ANCILLARY 
SERVICES 
AND 
THE 
ADMINISTRATION, 
8 
MANAGEMENT, AND FOR THE operation of any related business[.] OR 
9 
BUSINESSES. The award [shall result in maximum] TO THE QUALIFIED 
10 
WINNING BIDDER MUST BE BASED ON THE MOST ADVANTAGEOUS, 
11 
BENEFICIAL, AND OPTIMAL present value [of proceeds] to the national 
12 
government. In case a concession contract is awarded, the concessionaire shall 
13 
[have a] BE GIVEN AN INITIAL CONCESSION contract period of twenty-five 
14 
(25) years, subj ect to review and renewal for a maximum period of another 
15 
twenty-five (25) years. 
16 
IF THE AWARDEE OF THE CONCESSION CONTRACT IS MERELY 
17 
HIRED 
UNDER 
A COMPENSATION 
SCHEME TO 
ADMINISTER, 
18 
MANAGE, OPERATE, MAINTAIN, PRESERVE, AND TO FINANCE AND 
19 
SUPERVISE THE IMPROVEMENTS AND/OR EXPANSIONS OF THE 
20 
ELECTRIC TRANSMISSION ASSETS AND FACILITIES AND THE GRID 
21 
INTERCONNECTIONS AND THE ANCILLARY SERVICES FOR THE 
22 
TRANSCO, THE AWARDEE OF THE CONCESSION CONTRACT SHALL 
23 
NOT BE REQUIRED TO OBTAIN A NATIONAL FRANCHISE, AND 
24 
NEITHER SHALL HE OR IT BE REQUIRED TO QUALIFY UNDER THE 
25 
NATIONALITY REQUIREMENTS OF THE CONSTITUTION FOR PUBLIC 
26 
UTILITY OPERATORS. 
27 
HOWEVER, IF THE WINNING BIDDER OR AWARDEE OF THE 
28 
CONCESSION CONTRACT TAKES OVER THE POSSESSION AND 
29 
CONTROL OF THE ELECTRIC TRANSMISSION ASSETS AND FACILITIES 
14 


I 
AND THE GRID INTERCONNECTIONS AND ANCILLARY SERVICES, AS 
2 
BUYER OR 
LESSEE THEREOF, AND ADMINISTERS, MANAGES, 
3 
MAINTAINS, OPERATES, IMPROVES, AND EXPANDS THEM AS HIS OR 
4 
ITS OWN BUSINESS, THEN IN THAT CASE THE AWARDEE OF THE 
5 
CONCESSION CONTRACT MUST OBTAIN A NATIONAL FRANCHISE 
6 
THEREFOR, AND HE OR IT MUST QUALIFY UNDER THE NATIONALITY 
7 
REQUIREMENTS OF THE CONSTITUTION FOR PUBLIC UTILITY 
8 
OPERATORS. 
9 
[In any case, the awardee shall] THE AWARDEE, WHETHER UNDER 
10 
A CONTRACT OF SALE OR UNDER A CONCESSION CONTRACT, MUST 
II 
comply with the Grid Code and the TDP [as approved]. The CONTRACT OF 
12 
sale [agreement/concession] OR THE CONCESSION contract, AS THE CASE 
13 
MAY BE, shall [include, but not limited to, the provision for] PROVIDE, 
14 
AMONG OTHERS, SUCH performance and financial guarantees or [any] other 
IS 
covenants [which] THAT the national government may require. [Failure to 
16 
comply with such obligations shall result in the imposition of appropriate 
17 
sanctions or penalties by the ERC.] THE FAILURE OF THE AWARDEE TO 
18 
COMPLY WITH ANY OF SUCH GUARANTEES OR COVENANTS SHALL 
19 
CONSTITUTE A DEFAULT ON THE PART OF THE AWARDEE AND 
20 
SHALL CAUSE THE IMMEDIATE RESCISSION AND CANCELLATION OF 
21 
THE CONTRACT OF SALE OR OF THE CONCESSION CONTRACT AND, 
22 
LN ADDITION, THE IMPOSITION OF APPROPRIATE SANCTIONS, FINES, 
23 
OR PENALTIES BY THE COMMISSION IN ACCORDANCE WITH 
24 
SECTION 44 OF THIS ACT. 
25 
The awardee [shall] MUST be financially and technically capable AND 
26 
SOUND, with proven domestic and/or international experience and expertise as a 
27 
leading transmission GRID AND system operator. Such experience must be with 
28 
a transmission system of comparable capacity and coverage as THAT OF the 
29 
Philippines. THE SALE AGREEMENT OR CONCESSION CONTRACT 
15 


I 
SHALL INCLUDE, BUT SHALL NOT BE LIMITED TO, COMMITMENTS 
2 
ON A NEW OR REPLACEMENT INVESTMENTS CONSISTENT WITH THE 
3 
TDP; UNDERTAKINGS ON TARIFF LEVELS; 
PERFORMANCE AND 
4 
FINANCIAL GUARANTEES OR ANY OTHER COVENANTS WHICH THE 
5 
NATIONAL GOVERNMENT MAY REQUIRE." 
6 
SEC. 5. Section 23 of the Act is hereby amended to read as follows: 
7 
"SEC. 23. Functions of Distribution Utilities. - A distribution utility shall 
8 
have the obligation to provide distribution services and connections to its system 
9 
for any end-user within its franchise area consistent with the distribution code. 
10 
Any entity engaged therein shall provide open and non-discriminatory access to 
, 
II 
its distribution system to all users. 
12 
Any distribution utility shall be entitled to impose and collect distribution 
13 
wheeling charges and connection fees from such end-users as approved by the 
14 
ERC. 
15 
A distribution utility shall have the obligation to supply electricity in the 
16 
least cost manner to its captive market[,].[subject to the collection of retail rate 
17 
duly approved by the ERC.] 
18 
FOR THIS PURPOSE, "LEAST COST" SHALL MEAN THE 
19 
EFFICIENT EFFECTIVE RATE THAT WOULD BE INCURRED TO MEET 
20 
THE 
REQUIREMENT 
OF 
THE 
CAPTIVE 
MARKET 
OF 
EACH 
21 
DISTRIBUTION UTILITY. 
22 
FOR 
THE 
PURPOSE 
OF 
ENCOURAGING 
GREATER 
23 
COMPETITION, 
THE 
DOE, 
WITHIN 
SIX 
MONTHS 
FROM 
THE 
24 
EFFECTIVITY OF THIS AMENDATORY ACT, SHALL ESTABLISH THE 
25 
MANNER AND MECHANISM OF DETERMINING "LEAST COST" . 
. 26 
To achieve OPERATING EFFIENCY [economies of scale in utility 
27 
operations], distribution utilities may, after due notice and public hearing, pursue 
28 
structural and operational reforms such as but not limited to, joint actions between 
29 
or among the distribution utilities, subject to the guidelines issued by the ERe. 
16 


I 
'Such joint actions shall result in improved efficiencies, reliability of service, 
2 
reduction of costs and compliance to the performance standards prescribed in the 
3 
IRR of this Act. 
4 
Distribution utilities shall submit to the ERC a statement of their 
5 
compliance with the technical specifications prescribed in the Distribution Code 
6 
and the performance standards prescribed in the IRR of this Act. Distribution 
7 
utilities which do not comply with any of the prescribed technical specifications 
8 
and performance standards shall submit to the ERC a plan to comply, within three 
9 
(3) years, with said prescribed technical specifications and performance standards. 
10 
The ERC shall, within sixty (60) days upon receipt of such plan, evaluate the 
II 
same and notify the distribution utility concerned of its action. Failure to submit a 
12 
feasible and credible plan and/or failure to implement the same shall serve as 
13 
grounds for the imposition of appropriate sanctions, fines or penalties. 
14 
Distribution utilities shall prepare and submit to the DOE their annual 
IS 
distributions development plans. In the case of electric cooperatives, such plans 
16 
shall be submitted through the National Electrification Administration. 
17 
Distribution utilities shall provide universal service within their franchise, 
18 
over a reasonable time from the requirement thereof, including unviable areas, as 
19 
part of their social obligations, in a manner that shall sustain the economic 
20 
. ~iability of the utility, subject to the approval by the ERC in the case of private or 
21 
government-owned utilities. To this end, distribution utilities shall submit to the 
22 
DOE their plans for serving such areas as part of their distribution development 
23 
plans. Areas which a franchised distribution utility cannot or does not find viable 
24 
may be transferred to another distribution utility, if any is available, who will 
25 
provide the service, subject to approval by ERC. In cases where franchise holders 
26 
fail and/or refuse to service any area within this franchise territory and allowed 
27 
another utility to service the same, then the status quo shall be respected. 
28 
Distribution utilities may exercise the power of eminent domain subject to 
29 
the requirements of the Constitution and existing laws." 
17 


I 
SEC. 6 Section 25 of the Act is hereby amended to read as follows: 
2 
"SEC. 25. Retail Rate - The retail rates charged by distribution utilities for 
3 
the supply of electricity in their captive market shall be subject to regulation by 
4 
the [ERClCOMMISSION based on the principle of [full recovery of prudent and 
5 
reasonable economic costs incurred,] LEAST COST SUPPLY or such other 
6 
principles that will promote ECONOMIC efficiency as may be determined by the 
7 
[ERClCOMMISSION. 
8 
Every distribution utility shall identify and segregate in its bills to end-
9 
. users the components of the retail rate, as defined in this Act." 
10 
SEC. 7. Section 26 of the Act is hereby amended to read as follows: 
11 
"SEC. 26. 
Distribution Related Businesses. -
[Distribution utilities] 
12 
SUBJECT TO THE APPROVAL OF THE COMMISSION, AFTER DUE 
13 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING, A 
14 
DISTRIBUTION UTILITY may, directly or indirectly, engage in any BUSINESS 
15 
related TO ITS MAIN business [undertaking which maximizes] IN ORDER TO 
16 
MAXIMIZE the utilization of [their] ITS assets[:] AND RESOURCES: 
17 
Provided, That WHERE ASSETS FORMING PART OF THE RATE BASE ARE 
18 
UTILIZED IN SUCH RELATED BUSINESS, a portion of the net income 
19 
derived from such [undertaking utilizing assets which form part of the rate base] 
20 
RELATED BUSINESS, WHICH PORTION SHALL NOT BE MORE THAN 
21 
FIFTY PERCENT (50%) OF SUCH NET INCOME, shall be used to reduce its 
22 
distribution wheeling [charges] CHARGE AND RETAIL RATE [as determined] 
23 
APPROVED by the [ERC: Provided, further, That such portion of net income 
24 
used to reduce their distribution wheeling charges shall not exceed fifty percent 
25 
(50%) of the net income derived from such undertaking: Provided, finally, That 
26 
separate accounts are maintained for each business undertaking to ensure that the 
27 
distribution business shall neither subsidize in any way such business undertaking 
, 
28 
nor encumber its distribution assets in any way to support such business.] 
29 
COMMISSION. IN THE CASE OF THE ELECTRIC COOPERATIVES, A 
18 


1 
REASONABLE TRANSITION PERIOD SHALL BE PROVIDED UNTIL 
2 
SUCH TIME THAT A NEW RATE METHODOLOGY IS ADOPTED BY THE 
3 
COMMISSION. 
4 
SEPARATE ACCOUNTS SHALL BE MAINTAINED FOR EACH 
5 
RELATED BUSINESS TO ENSURE THAT THE DISTRIBUTION BUSINESS 
6 
SHALL NEITHER SUBSIDIZE, IN ANY WAY, SUCH RELATED BUSINESS 
7 
NOR ENCUMBER, IN ANY WAY, ITS DISTRIBUTION ASSETS TO 
8 
SUPPORT SUCH RELATED BUSINESS." 
9 
SEC. 8. Section 30 of the Act is hereby amended to read as follows: 
10 
"SEC. 30. Wholesale Electricity Spot Market. -
Within one (1) year 
11 
from the effectivity of this Act, the DOE shall establish a wholesale electricity 
12 
spot market, HEREINAFTER REFERRED TO AS THE WESM, composed of 
13 
the [wholesale electricity spot market] WESM participants. The market shall 
14 
provide the mechanism for identifying and setting the price of actual variations 
15 
from the quantities transacted under contracts between sellers and purchasers of 
16 
el,ectricity. 
17 
Jointly with 
the electric power industry participants, the DOE shall 
18 
fOlmulate the detailed rules for the wholesale electricity spot market.. Said rules 
19 
shall provide the mechanism for determining the price of electricity not covered 
20 
by bilateral contracts between sellers and purchasers of electricity users. [The 
21 
price determination methodology contained in said rules]. THE METHOD 
22 
CONTAINED IN THE SAID RULES FOR DETERMINING THE PRICE OF 
23 
ELECTRICITY IN THE WESM shall be subject to the approval of [ERC.] THE 
24 
COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
25 
AND PUBLIC HEARING. Said rules shall also reflect accepted economic 
26 
principles and provide a level playing field to all electric power industry 
27 
participants. The rules shall provide, among others, procedures for: 
28 
(a) 
Establishing the merit order dispatch instructions for each time 
29 
period; PROVIDED, HOWEVER, THAT IN EVERY CASE, AS A GENERAL 
19 


• 
RULE, THE CHEAPER ELECTRICITY SHALL BE DISPATCHED AHEAD 
2 
OF THE HIGHER PRICED ELECTRICITY. 
3 
4 
(b) 
(c) 
Determining the market-clearing price for each time period; 
Administering the market, including criteria for admission to [and 
5 
ter,mination] OR DISMISSAL from the market [which includes], AS WELL AS 
6 
ANY REQUIRED security or performance [bond requirements] BOND, voting 
7 
rights of the participants, surveillance, [and] assurance of compliance [of] BY the 
8 
participants with the rules, and the formation of the [wholesale electricity spot 
9 
market governing body] GOVERNING BODY OF THE WESM; 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
(d) 
Prescribing guidelines for the market operation 
III system 
emergencies; and 
(e) 
Amending the rules. 
The wholesale electricity spot market shall be implemented by a market 
operator in accordance with the wholesale electricity spot markets rules. The 
market operator shall be an autonomous group, to be constituted by DOE, with 
equitable representation from electric power industry participants, initially under 
the administrative supervision of the TRANSCO. The market operator shall 
undertake the preparatory work and initial operation of the wholesale electricity 
spot market. Not later than one (I) 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 TRANS CO over [such entity 
shall cease.] THE WESM AND THE INDEPENDENT MARKET OPERATOR 
SHALL CEASE AND TERMINATE. 
Subj ect to the compliance with the membership criteria, all generating 
companies, distribution utilities, suppliers, bulk consumers/end-users and other 
similar entities authorized by the ERC shall be eligible to become members of the 
wholesale electricity spot market. 
20 


.. 
The ERC may authorize other similar entities to become eligible as 
2 
members, either directly or indirectly, of the wholesale electricity spot market. All 
3 
generating companies, distribution utilities, suppliers, bulk consumers/end-users 
4 
and other similar entities authorized' by the ERC, whether direct or indirect 
5 
members of the 
wholesale electricity spot market, shall be bound by the 
6 
wholesale electricity spot market rules with respect to transactions in that market. 
7 
NEA may, in exchange for adequate security and a guarantee fee, act as a 
8 
guarantor for purchases of electricity in the wholesale electricity spot market by 
9 
any electric cooperative or small distribution utility to support their credit 
10 
standing consistent with the provisions hereof For this purpose, the authorized 
11 
12 
capital stock of NEA is 
(P 15,000,000,000,00), 
hereby increased, to Fifteen billion pesos 
13 
All electric cooperatives which have outstanding uncollected billings to 
14 
any local government unit shall report such billings to NEA which shall, in turn, 
15 
report the same to the Department of Budget and Management (DBM) for 
16 
collection pursuant to Executive Order 190, issued on December 21, 1999. 
17 
The cost of administering and operating the wholesale electricity spot 
18 
market shall be recovered by the market pperator through a charge imposed to all 
19 
market members: Provided, That such charge shall be filed with and approved by 
20 
the [ERC,] COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED 
21 
PARTIES AND PUBLIC HEARING, 
22 
In cases of national and international security emergencIes or natural 
23 
calamities, the ERC is hereby empowered to suspend the operation of the 
24 
wholesale electricity spot market or declare a temporary wholesale electricity spot 
25 
market failure, 
26 
TO ENCOURAGE AND PROMOTE THE DEVELOPMENT OF THE 
27 
WESM, THE COMMISSION MAY, FROM TIME TO TIME, EITHER MOTU 
28 
PROPIO, OR UPON THE PETITION OF ANY DISTRIBUTION UTILITY, 
21 


• 
REVIEW THE APPROPRIATE LEVEL OF DEMAND TO BE SOURCED 
2 
FROM THE WESM , SUBJECT TO A PUBLIC HEARING." 
3 
SEC. 9. Section 31 of the Act is hereby amended to read as follows: 
4 
"SEC. 31. 
Retail Competition and Open Access. -
Any law to the 
5 
contrary notwithstanding, retail competition and open access on distribution wires 
6 
shall be implemented not later than three (3) years upon the effectivity of this Act, 
7 
subject to the following conditions: 
8 
(a) Establishment ofthe wholesale electricity spot market; 
9 
(b) 
Approval of unbundled transmission and distribution wheeling 
10 
charges; 
11 
(c) Initial implementation of the cross subsidy removal scheme; 
12 
(d) Privatization of at least [seventy (70%) percent] FIFTY PERCENT 
13 
(50%) of the total capacity of [generating] THE GENERATION assets ofNPC in 
14 
Luzon and Visayas; and 
15 
(e) Transfer of the management and control of at least [seventy percent 
16 
(70%)] FIFTY PERCENT (50%) of the total energy output of power plants under 
17 
contract with NPC to the IPP Administrators. 
18 
PROVIDED, THAT, WITH RESPECT TO THE CONDITIONS UNDER 
19 
SUBSECTIONS (D) AND (E) ABOVE, (i) THE COMMISSION SHALL 
20 
ENSURE THAT NECESSARY SAFEGUARDS ARE ESTABLISHED TO 
21 
AVOID ABUSE OIl MARKET POWER BY NPC AND PSALM AND IN 
22 
FURTHERANCE THEREOF, PSALM AND NPC SHALL SUBMIT TO THE 
23 
JOINT CONGRESSIONAL POWER COMMISSION A COMMITTED AND 
24 
DETAILED 
SCHEDULE 
OF 
THE 
PRIVATIZATION 
OF 
NPC'S 
25 
GENERATION ASSETS IN LUZON AND VISA Y AS TO THE LEVEL OF 
26 
SEVENTY PERCENT (70%); AND (ii) FULL OPEN ACCESS TO THE 
27 
HOUSEHOLD 
LEVEL 
SHALL 
BE 
IMPLEMENTED 
SUBJECT 
TO 
28 
COMPLIANCE WITH 
THE GRID 
AND NATIONAL LIMITS 
FOR 
22 


• 
1 
MAXIMUM 
INSTALLED 
GENERATING 
CAPACITY AS 
MAY 
BE 
2 
PROMULGATED BY THE COMMISSION. 
3 
THE ERC MAY DECLARE OPEN ACCESS PRIOR TO THE 
4 
FULFILLMENT OF THE CONDITIONS UNDER SUBSECTIONS (D) AND 
5 
(E) ABOVE, ON THE CONDITION THAT GENERATION PARTICIPANTS 
6 
IN THE OPEN ACCESS ELECTRICITY MARKET SHALL BE LIMITED TO 
7 
THOSE GENERATION COMPANIES THAT COMPLY WITH THE LIMITS 
8 
SET FORTH IN SEC. 45 (A) OF THIS ACT. FOR PURPOSES HEREOF, ALL 
9 
GOVERNMENT ENTITIES SUCH AS THE NPC, PSALM OR ANY OTHER 
10 
GOVERNMENT 
AGENCY 
AND 
GOVERNMENT 
OWNED 
OR 
11 
CONTROLLED CORPORATIONS SHALL BE DEEMED AS ONE RELATED 
12 
. GROUP. 
13 
IN ORDER TO ENSURE A LEVEL PLAYING FIELD UPON THE 
14 
COMMENCEMENT OF THE OPEN ACCESS, ALL THE BENEFITS 
15 
ACCRUING TO NAPOCOR UNDER COMMONWEALTH ACT NO. 120 AND 
16 
REPUBLIC ACT NO. 
6395 
SUCH AS, BUT NOT LIMITED TO, 
17 
SOVEREIGN GUARANTY ON DEBTS, EXEMPTION FROM ALL KINDS 
18 
OF TAXES AND GOVERNMENT IMPOSITIONS, AND MANDATORY 
19 
PROCUREMENT OF ELECTRICITY OF ALL GOVERNMENT OFFICES 
20 
AND INSTRUMENTALITIES FROM NAPOCOR ARE HEREBY DEEMED 
21 
WITHDRAWN UPON THE EFFECTIVITY OF THIS ACT. 
22 
PEZA SHALL, IN THE EXERCISE OF ITS AUTHORITY TO 
23 
REGULATE ELECTRIC POWER WITHIN ITS ECONOMIC ZONES, 
24 
INCLUDING THE OPERATION OF DISTRIBUTION UTILITIES THEREIN, 
25 
ADHERE TO THE POLICIES AND STANDARDS SET FORTH IN THIS ACT 
26 
AND SHALL ADOPT RULES AND GUIDELINES IN COMPLIANCE WITH 
27 
AND CONSISTENT HERETO. 
WITH RESPECT TO NEW ECONOMIC 
28 
ZONES TO BE ESTABLISHED UNDER REPUBLIC ACT NO. 7916, PEZA 
29 
SHALL GIVE PRIORITY TO THE INCUMBENT DISTRIBUTION UTILITY 
23 


• 
I 
2 
3 
4 
5 
6 
7 
S 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
'SERVING THE FRANCHISE AREA OF SUCH ECONOMIC ZONES, 
PROVIDED THAT SUCH INCUMBENT DISTRIBUTION UTILITY IS 
QUALIFIED AND IS ADEQUATELY SERVING SUCH FRANCHISE AREA. 
Upon 
the 
initial 
implementation 
of open 
access, 
the 
[ERe] 
COMMISSION shall [allow] CONSTITUTE IN A FORMAL ORDER TO BE 
ISSUED AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND 
PUBLIC HEARING all [electricity] end-users OF ELECTRICITY with a 
monthly average peak demand of [at least] NOT LESS THAN one megawatt 
(1MW) for the IMMEDIATELY preceding twelve (12) BILLING months to be 
the contestable market. 
[Two] AFTER TWO (2) years [thereafter,] 
IMMEDIATELY FOLLOWING THE INITIAL IMPLEMENTATION OF OPEN 
ACCESS, the threshold level for the contestable market shall be reduced to seven 
hundred fifty kilowatts (750kW). At [this] THAT level, aggregators shall be 
allowed to supply electricity to end-users whose aggregate demand within a 
contiguous area is at least seven hundred fifty kilowatts (750kW). [Subsequently 
and every] EVERY year thereafter, the [ERC] COMMISSION shall REVIEW 
AND evaluate the performance of the CONTESTABLE market[. On] AND, ON 
the basis of such YEARLY REVIEW AND evaluation, [it] THE COMMISSION 
shall gradually reduce the threshold level until [it reaches] THE CONTESTABLE 
MARKET SHALL FINALLY COVER the household [demand level.] END-
USERS OF ELECTRICITY. 
In the case of electric cooperatives, retail 
competition and open access shall be implemented not earlier than five (5) years 
upon the effectivity of this Act." 
SEC. 10. Section 32 of the Act is hereby deleted 
["SEC. 32. 
NPC Stranded Debt and Contract Cost Recovery. 
Stranded debt ofNPC shall refer to any unpaid financial obligations ofNPC. 
Stranded contract costs of NPC shall refer to the excess of the contracted 
cost of electricity under eligible IPP contracts ofNPC over the actual selling price 
24 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
of the contracted energy output of such contracts in the market. Such contracts 
shall have been approved by the ERB as of December 31, 2000. 
The national government shall directly assume a portion of the financial 
obligations of NPC in an amolmt not to exceed Two hundred billion pesos (P200, 
000,000,000.00). 
The ERC shall verify the reasonable amounts and determine the manner 
and duration for the full recovery of stranded debt and stranded contract costs as 
defined herein: Provided, That the duration for such recovery shall not be shorter 
. than fifteen (15) years nor longer than twenty-five (25) years. The ERC shall, at 
the end of the first year of the implementation of stranded cost recovery, and 
every year thereafter, conduct a review to determine whether there is under-
recovery or over-recovery and adjust (true-up) the level of stranded cost recovery 
charge accordingly. Any amount to be included for stranded cost recovery shall 
be reflected as a separate item in the consumer billing statement.] 
SEC. 11. Section 33 of the Act is hereby deleted: 
["SEC. 33. 
Distribution Utilities Stranded Contract Costs Recovery. 
Stranded contract costs of distribution utilities shall refer to the excess of the 
contracted cost of electricity under eligible contracts of such utilities over the 
actual selling price of such contracts in the market. Such contracts shall have 
been approved by the ERB as of December 31, 2000. 
A distribution utility shall recover stranded contract costs: 
Provided, 
however That such costs of the IPPs of distribution utilities are subject to review 
by ERC in order to determine fairness and reasonableness in relation to the 
average price of land-based IPP projects entered into by NPC, at the time they 
were contracted. The ERC shall take into consideration all factors that affect the 
total cost of NPC IPP generation projects, including direct or indirect subsidies or 
ipcentives provided by the Government. 
Within one (1) year from the start of open access, any distribution utility 
that seeks recovery of stranded contract costs shall file with the ERC notice of 
25 


I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
II 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
such intent together with, an estimate of such obligations, including the present 
value thereof and such other supporting data as may be required by the ERe. Any 
distribution utility that does not file within the date specified shall not be eligible 
for such recovery. 
Any distribution utility which seeks to recover stranded cost shall have a 
dnty to mitigate its potential stranded contract costs by making reasonable best 
efforts to: 
(a) Reduce the costs of its existing contracts with IPPs to a level not 
exceeding the average buying price of other land-based electric power generators; 
and 
(b) Submit to an annual earnings review by the ERe and use its earnings 
above its authorized rate of return, to reduce the book value of contracts until the 
end of the stranded cost recovery period. 
Other mitigating measures which are reasonably known and generally 
accepted within the electric power industry shall be utilized. The ERe shall not 
r~quire the distribution utility to take a loss to reduce stranded contract costs or 
divest assets, unless the divestiture is imposed as a penalty as provided herein. 
The relevant distribution utility shall submit to the ERe quarterly reports 
showing the amount of stranded costs recovered and the balance remaining to be 
recovered. 
Within three (3) months from the submission of the application for 
stranded cost recovery by the relevant distribution utilities, , the ERe shall verifY 
the reasonable amounts, and determine the manner and duration for the full 
recovery of stranded contract costs as defined herein: 
Provided, That the 
duration for such recovery shall not be shorter than fifteen (15) years nor longer 
than twenty-five (25) years. Any amount to be included for stranded cost recovery 
shall be reflected as a separate item in the consumer billing statement. 
The ERe shall, at the end of the first year of the implementation of 
stranded cost recovery, and every year thereafter, conduct a review to determine 
26 


1 
whether there is under-recovery or over-recovery and adjust (true-up) the level of 
2 
stranded cost recovery charge accordingly. In case of an over-recovery, the ERC 
3 
shall ensure that any excess amount shall be remitted to the Special Trust Fund 
4 
created under Section 34 hereof. A separate account shall be created for these 
5 
amounts, which shall be held in trust for any future claims of distribution utilities 
6 
for stranded cost recovery. At the end of the stranded cost recovery period, any 
7 
remaining amount in this account shall be used to reduce the electricity rates to 
8 
the end-users.] 
9 
SEC. 12. A new Section is added to read as follows: 
10 
"SEC. 32. NON-RECOVERY OF OUTSTANDING· 
DEBTS AND 
11 
CONTRACT COSTS OF ALL INDUSTRY PARTICIPANTS. -
12 
IN ORDER TO REFLECT THE TRUE COST OF POWER AND TO 
13 
AVOID ADDITIONAL BURDEN TO THE CONSUMERS, THERE SHALL 
14 
HENCEFORTH BE NO RECOVERY OF STRANDED DEBTS AND 
15 
CONTRACT COSTS FOR THE NATIONAL POWER CORPORATION, 
16 
PSALM, GENERATION COMPANIES, AND DISTRIBUTION UTILITIES." 
17 
SEC. 13. Section 34 of the Act is hereby amended to read as follows: 
18 
"SEC. 34. 
Universal Charge. 
-
Within one (1) year from the 
19 
effectivity of this Act, a universal charge to be determined, fixed, and approved 
20 
by the [ERC,] COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED 
21 
PARTIES AND PUBLIC HEARING, shall be imposed on all [electricity] end-
22 
users OF ELECTRICITY, ON THE BASIS OF 
THE NUMBER OF 
23 
KILOWATT HOURS OF ELECTRICITY RESPECTIVELY CONSUMED BY 
24 
THEM, for the following purposes: 
25 
[(a) 
Payment for the stranded debts in excess of the amount assumed 
26 
by the National Government and stranded contract costs of NPC and as well as 
27 
qualified stranded contract costs of distribution utilities resulting from the 
28 
restructuring of the industry;] 
27 


1 
[(b)](A) 
Missionary electrification. - FIFTY PERCENT (50%) OF THE 
2 
ALLOCATION 
FOR MISSIONARY 
ELECTRIFICATION 
SHALL BE 
3 
UTILIZED TO SUBSIDIZE RENEWABLE ENERGY DEVELOPMENT 
4 
WHICH 
SHALL 
INCLUDE BUT NOT 
LIMITED 
TO 
RESEARCH, 
5 
EXPLORATION, PROMOTION AND UTILIZATION OF RENEWABLE 
6 
ENERGY SYSTEMS AND TECHNOLOGIES. 
7 
[(c) The equalization of the taxes and royalties applied to indigenous or 
8 
renewable sources of energy vis-a-vis imported energy fuels;] 
9 
[(d)](B) An environmental charge equivalent to one-fourth of one centavo 
10 
per kilowatt-hour (PO.0025/kWh), which shall accrue to an environmental fund to 
11 
be used solely for watershed rehabilitation and management. Said fund shall be 
12 
managed by NPC under existing arrangements, AND IN APPROPRIATE CASES 
13 
BY THE LOCAL GOVERNMENT UNIT WHERE THE WATERSHED IS 
14 
LOCATED; and 
15 
[(e)](C) A charge to account for all forms of cross-subsidies for a period 
16 
not exceeding three (3) years. 
17 
The universal charge [shall be a non-bypassable charge which] shall be 
18 
passed on and collected PER BILLING MONTH BY THE DISTRIBUTION 
19 
UTILITIES AND TRANSCO from all THEIR RESPECTIVE end-users OF 
20 
ELECTRICITY on [a monthly] THE basis [by the distribution utilities.] OF THE 
21 
NUMBER OF KILOWATT HOURS 
OF ELECTRICITY ACTUALLY 
22 
CONSUMED BY EACH OF SUCH END-USERS OF ELECTRICITY PER 
23 
BILLING MONTH. Collections by the distribution utilities and the TRANSCO 
24 
in any given BILLING month shall be remitted to the PSALM Corp. on or before 
25 
the fifteenth (15th) DAY of the succeeding month, net of any amount due to the 
26 
distribution utility. [Any end-user or self-generating entity not connected to a 
27 
distribution utility shall remit its corresponding universal charge directly to the 
28 
TRANSCO.] 
28 


, 
1 
THE SELF-GENERATED ELECTRICITY OF AN END-USER WHO OR 
2 
WHICH IS NOT DIRECTLY CONNECTED TO THE DISTRIBUTION 
, 
3 
SYSTEM OF A DISTRIBUTION UTILITY OR TO THE TRANSMISSION 
4 
GRID AND ITS SUB TRANSMISSION FACILITIES SHALL NOT BE 
5 
SUBJECT TO OR LIABLE FOR THE UNIVERSAL CHARGE IMPOSED IN 
6 
THIS SECTION, EXCEPT FOR THE PAYMENT OF THE OBLIGATION 
7 
SPECIFIED IN SUBSECTION (d)OF TI-US ACT, IF THE SELF GENERATED 
8 
ELECTRICITY OF THE END USER COMES FROM THE UTILIZATION 
9 
AND EXPLOITATION OF THE NATURAL RESOURCES 
OF THE 
10 
COUNTRY. 
11 
EVEN IF THE END USER WHO OR WHICH GENERATES 
12 
ELECTRICITY FOR ITS OWN USE FROM ITS OWN GENERATION 
13 
FACILITY IS CONNECTED TO THE DISTRIBUTION SYSTEM OF A 
14 
DISTRIBUTION UTILITY OR TO THE TRANSMISSION SYSTEM OF 
15 
TRANSCO, THE SAME SHALL NOT BE SUBJECT TO THE UNIVERSAL 
16 
CHARGE IF THE SELF GENERATED ELECTRICITY DOES NOT PASS 
17 
THROUGH THE DISTRIBUTION SYSTEM OF A DISTRIBUTION UTILITY 
18 
OR OF THE TRANSMISSION SYSTEM OF TRANSCO, EXCEPT FOR THE 
19 
PAYMENT OF THE OBLIGATION SPECIFIED IN SUBSECTION (d) OF 
20 
THIS SECTION, IF THE SELF GENERATED ELECTRICITY OF THE END 
21 
USER COMES FROM THE UTILIZATION AND EXPLOITATION OF THE 
, 
22 
NATURAL RESOURCES OF THE COUNTRY. 
23 
The PSALM Corp., [as] BEING THE CUSTODIAN AND administrator 
24 
of the [fund,] UNIVERSAL CHARGE HEREIN PROVIDED, shall create a 
25 
Special Trust Fund ACCOUNT, which shall be USED, AND FROM WHICH 
26 
SHALL BE disbursed only SUCH AMOUNTS AS MAY BE NEEDED 
27 
STRICTLY, for the purposes specified [herein] IN THIS SECTION in an open 
28 
and transparent manner. THE RECORDS OF DISBURSEMENTS FROM SUCH 
29 
SPECIAL TRUST FUND ACCOUNT SHALL BE OPEN FOR MONITORING 
29 


1 
AND INSPECTION UPON WRITTEN REQUEST OF 
CONSUMERS, 
2 
CONSUMER REPRESENTATIVES OR ORGANIZATIONS. All amounts 
3 
collected for the universal charge 
shall be ALLOCATED AND distributed 
4 
EXPEDITIOUSLY 
FOR THE 
PAYMENT 
OF 
THE 
OBLIGATIONS 
5 
SPECIFIED IN (A), (B), AND (C) ABOVE AND to [the] THEIR respective 
6 
beneficiaries, within fa] SUCH reasonable period [to be provided by the ERC.] 
7 
OF TIME AS SHALL BE DETERMINED BY THE COMMISSION." 
8 
SEC. 14. Section 35 of this Act is hereby amended to read as follows: 
9 
"SEC. 35. 
Royalties, Returns and Tax Rates for Indigenous Energy 
10 
Resources. - The provisions of Section 79 of Commonwealth Act No. 136 (C.A. 
, 
11 
No. 137) and any law to the contrary notwithstanding AND FOR THE 
12 
PURPOSE OF LOWERING RATES OF ELECTRICITY TO END USERS, the 
13 
President of the Philippines shall 
reduce the royalties, returns, and taxes 
14 
[collected] OF THE NATIONAL GOVERNMENT for the exploitation of all 
15 
indigenous sources of energy, including but not limited to, natural gas and 
16 
geothermal steam, [so as to effect parity of tax treatment with the existing rates 
17 
for, and other imported fuels.] WHENEVER THE INTEREST OF THE 
18 
GENERAL PUBLIC SO REQUIRES. 
19 
To ensure [lower rates] CHEAPER ELECTRICITY for end-users, the 
20 
[ERC shall] COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED 
21 
PARTIES AND PUBLIC HEARING, SHALL 
forthwith reduce the PRICES 
22 
AND/OR rates of ELECTRIC power from all indigenous sources of energy 
23 
CORRESPONDING TO THE REDUCTION OF THE GOVERNMENT'S 
24 
SHARE IN THE ROYALTIES RETURNS AND TAXES AND IMPROVE 
25 
THE GRID'S GENERATION MIX OR PORTFOLIO OF PLANTS. 
26 
FRANCHISE TAXES IMPOSED BY LOCAL GOVERNMENT UNITS 
27 
SHALL BE LIMITED ONLY TO THE DISTRIBUTION AND WHEELING 
28 
CHARGES OF THE DISTRIBUTION UTILITIES WHICH ARE PASSED ON 
29 
TO THE END-USERS." 
30 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
SEC. 15. Section 38, Chapter IV, of the Act is hereby amended to read as follows: 
"SEC. 38. 
Creation of the Energy Regulatory Commission. -
[There 
is hereby created an independent, quasi-judicial regulatory body to be named the 
Energy Regulatory Commission (ERC). For this purpose, the existing Energy 
Regulatory Board (ERB) created under Executive Order No. 172, as amended, is 
hereby abolished.] THE ENERGY REGULATORY BOARD (ERB) CREATED 
UNDER EXECUTIVE ORDER NO. 172, AS AMENDED, IS HEREBY 
ABOLISHED. 
IN LIEU THEREOF, THERE IS HEREBY CREATED AN 
IMPARTIAL, INDEPENDENT, AND QUASI-JUDICIAL REGULATORY 
BODY TO BE NAMED THE ENERGY REGULATORY COMMISSION 
(ERC), WHICH FOR PURPOSES OF THIS ACT IS REFERRED TO AS THE 
"COMMISSION". 
ALL THE POWERS FORMERLY VESTED IN THE 
ENERGY REGULATORY BOARD UNDER EXECUTIVE ORDER NO. 172, 
AS AMENDED, THAT ARE CONSISTENT WITH THE PROVISIONS OF 
THIS ACT MAYBE EXERCISED BY THE COMMISSION. 
The Commission shall be composed of a Chairman and four (4) members 
to be appointed by the President of the Philippines. The Chairman and the 
members of the Commission shall be natural-born citizens and residents of the 
Philippines, persons of good moral character, at least thirty-five (35) years of age, 
. and of recognized competence in any of the following fields: 
energy, law, 
economics, finance, commerce, 
or engineering, with at least three (3) years 
actual, 
and distinguished 
experience in their respective fields of expertise: 
Provided, That [out of the four (4) members of the Commission, at least] one (I) 
MEMBER shall be a member of the Philippine Bar with at least ten (10) years 
experience in the active practice of law, [and] one (1) MEMBER shall be a 
certified public accountant, with at- least ten (10) years experience in active 
practice[.] IN FINANCIAL MANAGEMENT, ONE (1) MEMBER SHALL BE 
AN ENGINEER WITH AT LEAST TEN (10) YEARS EXPERIENCE IN 
POWER SYSTEM ENGINEERING AND ONE (1) MEMBER SHALL BE A 
31 


1 
REGULATORY ECONOMIST WITH TEN (10) YEARS EXPERIENCE IN 
2 
UTILITY ECONOMICS. 
3 
Within three (3) months from the creation of the ERC, the Chairman shall 
4 
submit for the approval by the President of the Philippines the new organizational 
5 
structure and plantilla positions necessary to carry out the powers and functions 
6 
of the ERC. 
7 
The Chairman of the Commission, [who shall be a member of the 
8 
PhUippine Bar,] shall act as the Chief Executive Officer of the Commission. 
9 
All members of the Commission shall have a term of seven (7) years: 
10 
Provided, That for the first appointees, the Chairman shall hold office for seven 
11 
(7) years, two (2) members shall hold office for five (5) years; and the other two 
12 
(2) members shall hold office for three (3) years: Provided, further, That 
13 
appointment to any future vacancy shall only be for the unexpired term of the 
14 
predecessor: Provided, finally, That there shall be no reappointment and in no 
15 
case shall any member serve for more than seven (7) years in the Commission. 
16 
The Chairman and members of the Commission shall assume office at the 
17 
beginning of their terms: Provided, That, if upon the effectivity of this Act, the 
18 
Commission has not been constituted, and the new staffing pattern and plantilla 
19 
positions have not been approved and filled-up, the current Board and existing 
20 
personnel of ERB shall continue to hold office. 
21 
The existing personnel of the ERB, if qualified, shall be given preference 
22 
in the filling up of plantilla positions created in the ERC, subject to existing 
23 
civil service rules and regulations. 
24 
Members of the Commission shall enjoy security of tenure, and shall not 
25 
be suspended or removed from office except for just cause as specified by law. 
26 
The Chairman and the members of the Commission [or any of] AND their 
27 
r\!latives within the fourth civil degree of consanguinity or affinity, WHETHER 
28 
SUCH PERSONAL RELATIONS ARE legitimate, [or] common law, [shall be] 
29 
OR OTHERWISE, ARE prohibited from holding any interest whatsoever, either 
32 


1 
as investor, stockholder, officer, or director, in any company or entity engaged in 
2 
the business of transmitting, generating, supplying, AGGREGATING, or 
3 
distributing [any form of energy and must, therefore, divest through sale or legal 
4 
disposition of any and all interests in the energy sector upon assumption of 
5 
office.] ELECTRICITY. 
6 
UPON THE ASSUMPTION BY THE CHAIRMAN AND THE 
7 
ASSOCIATE MEMBERS OF THE COMMISSION OF THEIR RESPECTIVE 
8 
POSITIONS, THE CHAIRMAN AND THE ASSOCIATE MEMBERS OF THE 
9 
COMMISSION AND THEIR RESPECTIVE RELATIVES WITHIN THE 
10 
PROSCRIBED DEGREE OF PERSONAL RELATIONS MUST DIVEST 
11 
THEMSELVES OF ALL THEIR PROHIBITED INTEREST, THROUGH REAL 
12 
ARMS LENGTH TRANSACTIONS OR OTHER VALID FORMS OF 
13 
DISPOSITION, WITH CORRESPONDING PAYMENT OF ALL TAXES DUE, 
14 
IF ANY, ON SUCH TRANSACTION OR OTHER FORMS OF DISPOSITION 
15 
AND WITHOUT ANY PROVISION GRANTING A RIGHT TO THE 
16 
TRANSFEROR OF SUCH PROHIBITED INTEREST TO REPURCHASE 
17 
SUCH TRANSFERRED OR DISPOSED PROHIBITED INTEREST, AND 
18 
MUST RESIGN FROM ALL THEIR PROSCRIBED POSITIONS IN THE 
19 
ELECTRIC POWER INDUSTRY. 
20 
The presence of at least three (3) members of the Commission shall 
21 
constitute a quorum and the majority vbte of two (2) members in a meeting 
22 
where a quorum is present shall be necessary for the adoption of any rUle, ruling, 
23 
order, resolution, decision or other act of the Commission in the exercise of its 
24 
quasi-judicial functions: Provided, That in fixing rates and tariffs, an affirmative 
25 
vote of three (3) members shall be required." 
26 
SEC. 16. Section 41 of the Act is hereby amended as follows: 
27 
"SEC. 41. PROTECTION AND Promotion of Consumer RIGHTS AND 
28 
Interests. 
-
[The ERC shall handle consumer complaints and ensure the 
29 
adequate promotion of consumer interests.]THE COMMISSION SHALL 
33 


I 
ENSURE THE ADEQUATE PROTECTION AND PROMOTION OF THE 
2 
INTERESTS OF THE ELECTRICITY CONSUMERS AND UPHOLD THEIR 
3 
BASIC RIGHTS AS FOLLOWS: 
4 
A) 
TO HAVE QUALITY, RELIABLE, AFFORDABLE, SAFE, 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
B) 
C) 
AND REGULAR SUPPLY OF ELECTRIC POWER; 
TO BE ACCORDED COURTEOUS, PROMPT, AND NON-
DISCRIMINATORY SERVICE BY THE ELECTRIC SERVICE 
PROVIDER; 
TO BE GIVEN A TRANSPARENT, NON-DISCRIMINATORY 
AND REASONABLE PRICE OF ELECTRICITY CONSISTENT 
WITH THE PROVISIONS OF THIS ACT; 
D) 
TO BE AN INFORMED ELECTRIC CONSUMER AND GIVEN 
E) 
F) 
ADEQUATE ACCESS TO INFORMATION ON MATTERS 
AFFECTING THE ELECTRIC SERVICE OF THE CONSUMER 
CONCERNED; 
TO BE ACCORDED PROMPT AND SPEEDY RESOLUTION 
OF COMPLAINTS BY BOTH THE DISTRIBUTION UTILITY 
AND/OR THE COMMISSION; 
TO KNOW AND CHOOSE THE ELECTRIC SERVICE 
RETAILER UPON THE IMPLEMENTATION OF RETAIL 
COMPETITION; AND 
G) 
TO 
ORGANIZE 
THEMSELVES 
AS 
A 
CONSUMER 
23 
ORGANIZATION IN THE FRANCHISE AREA WHERE THEY 
24 
BELONG AND WHERE THEY ARE SERVED BY THE 
25 
DISTRIBUTION 
UTILITY 
OR 
AS 
A 
NETWORK 
OF 
26 
ORGANIZATION. 
27 
The [ERC] COMMISSION shall [handle] ATTEND AND RESPOND 
28 
EXPEDITIOUSLY TO THE [consumer] complaints OF END-USERS OF 
29 
ELECTRICITY, and IT SHALL ensure AND SAFEGUARD the adequate, 
34 


1 
EFFECTIVE, AND SUSTAINED promotion [of consumer interests.] 
AND 
2 
PROTECTION OF THE INTERESTS OF END-USERS OF ELECTRICITY. 
3 
THE COMMISSION SHALL ALSO DETERMINE THE MANNER 
4 
AND MECHANISM BY WHICH DISTRIBUTION UTILITIES SHALL 
5 
SUPPLY THE LEAST COST ELECTRICITY FOR THEIR CAPTIVE END-
6 
USERS." 
7 
Sec. 17. Section 43 of the Act is hereby amended as follows: 
8 
"SEC. 43. 
Functions of the [ERCJ COMMISSION. -
The [ERC] 
9 
COMMISSION shall, AMONG OTHERS, promote competition[,];encourage 
10 
market development[,];PROTECT END-USERS OF ELECTRICITY FROM 
11 
DISCRIMINATORY, UNFAIR, OR OPPRESSIVE RATES; ensure [customer], 
12 
UPON THE ESTABLISHMENT OF THE CONTESTABLE MARKET, END-
13 
U~ER'S choice; and CONTROL, PREVENT, AND penalize abuse of market 
14 
power in the restructured [electricity] ELECTRIC POWER industry. 
15 
[In appropriate cases, the ERC] THE COMMISSION is authorized to 
16 
issue A cease and desist order, WHENEVER IT IS NEEDED TO SERVE THE 
17 
INTEREST OF THE PUBLIC OR THE INTEREST OF JUSTICE, after due 
18 
notice TO ALL INTERESTED PARTIES· and PUBLIC hearing. 
19 
THE COMMISSION, ACTING AS A QUASI-JUDICIAL BODY, 
20 
SHALL CONDUCT PUBLIC HEARINGS ON ALL APPLICATIONS FOR 
21 
RATE INCREASE AND ON ANY ISSUE, THE RESOLUTION OF WI-IICH, 
22 
WILL AFFECT PRIVATE RIGHTS OR IMPOSE OBLIGATIONS OR WILL 
23 
RESULT IN ANY INCREASE IN THE PRICE OF ELECTRICITY TO THE 
24 
CONSUMERS. 
HENCEFORTH, NO PROVISIONAL AUTHORITY SHALL 
25 
BE ISSUED FOR APPLICATIONS FOR RATE ADJUSTMENTS THAT 
26 
PERTAIN TO BASIC RATE COMPONENTS ATTRIBUTABLE TO THE 
27 
REGULATED ENTITY SUCH AS, BUT NOT LIMITED TO THE BASIC 
28 
GENERATION RATE OF NPC, TRANSMISSION WHEELING RATES FOR 
29 
TRANSCO, 
TRANSCO 
CONCESSIONAIRE, 
AND 
DISTRIBUTION 
35 


• 
1 
RELATED 
CHARGES 
FOR 
DISTRIBUTION 
COMP ANIES. 
SUCH 
2 
HEARINGS SHALL BE COMPLETED WITHIN A REASONABLE PERIOD 
, 
3 
OF TIME WITH REGARD TO FULL DISCUSSION OF ISSUES AS WELL AS 
4 
ENSURING 
A 
TIMELY 
RESOLUTION 
OF 
ISSUES 
FOR 
THE 
5 
DISTRIBUTION COMPANIES: PROVIDED, THAT A FINAL DECISION IN 
(; 
FULL SHALL BE RENDERED BY THE COMMISSION NO LATER THAN 
7 
ONE (1) YEAR FROM THE FILING OF THE RATE .APPLICATION: 
8 
PROVIDED, FURTHER, THAT THE RATE APPLICATION SHALL BE 
9 
AUTOMATICALLY 
DEEMED 
APPROVED 
BY 
THE 
COMMISSION 
10 
IMMEDIATEL Y UPON THE LAPSE OF THE ONE (1) 
YEAR PERIOD 
11 
WITHOUT THE FINAL DECISION RENDERED IN FULL. 
12 
THE COMMISSION MAY GRANT PROVISIONAL AUTHORITY 
13 
FOR OPERATIONAL APPLICATIONS OR PASS-THROUGH CHARGES 
14 
PROVIDED THAT IN OPERATIONAL APPLICATIONS, THE COMMISSION 
15 
SHALL IMMEDIATELY SUBJECT SUCH APPLICATIONS TO PUBLIC 
16 
HEARINGS AND RENDER A FINAL DETERMINATION AND DECISION 
17 
THEREON NOT LATER THAN ONE HUNDRED TWENTY (120) DAYS 
18 
FROM THE ISSUANCE OF THE PROVISIONAL AUTHORITY: PROVIDED, 
19 
FURTHER, 
THAT 
WITH 
RESPECT 
TO 
APPLICATIONS 
FOR 
20 
IMPLEMENTATION 
OF 
PASS 
THROUGH 
CHARGES 
ALREADY 
21 
APPROVED BY THE COMMISSION, THE PROVISIONAL AUTHORITY 
22 
GRANTED SHALL ONLY BE SUBJECT TO VERIFICATION BY THE 
23 
COMMISSION. 
24 
[Towards this end, it shall] IN ADDITION, THE COMMISSION SHALL 
25 
PERFORM AND EXERCISE AND be responsible for the following [key] 
26 
POWERS AND functions [in the restructured industry]: 
27 
(a) 
Enforce the implementing rules and regulations of this Act; 
36 


• 
• 
I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
(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 0 & M Concessionaire, 
distribution utilities, and suppliers: Provided, That in the establishment of 
the performance standards, the nature and function of the entities shall be 
considered; [and] 
(ii) 
Financial 
capability 
standards 
for 
the 
generating 
companies, the TRANSCO, distribution utilities, and suppliers: Provided, 
That in the formulation ofthe financial capability standards, the nature and 
function 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 standards to protect the public interest[. 
Determine fix, and approve, after due notice and public hearings the 
universal charge, to be imposed on all electricity end-users pursuant to 
Section 34 hereof]; AND 
(Ill) 
DETERMINE, FIX, AND APPROVE, AFTER DUE 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING, 
THE ITEMIZED AMOUNTS OF THE UNIVERSAL CHARGE TO BE 
IMPOSED ON ALL END-USERS OF ELECTRICITY PURSUANT TO 
SECTION 34 OF THIS ACT. 
(c) 
Enforce the rules and regulations governing the operations of the 
electricity spot market and the activities of the spot market operator and other 
participants in the spot market, for the purpose of ensuring a greater supply and 
rational pricing of electricity; 
(d) 
Determine the level of cross subsidies in the existing retail rate 
until the same is removed pursuant to Section 74 hereof; 
(e) 
Amend, REVISE, or revoke, after due notice TO ALL 
INTERESTED PARTIES and PUBLIC hearing, the authority to operate [of] 
37 


1 
GRANTED TO any person or entity which fails to comply with the PERTINENT 
2 
provisions [hereof, the IRR, or any] OF THIS ACT, OR WITH ANY OF THE 
3 
IMPLEMENTING RULES AND REGULATIONS OF nIls ACT, OR WITH 
4 
ANY DECISION, order, or resolution of the [ERC.] COMMISSION. 
In the 
5 
event a divestment, CESSATION, OR DESISTANCE is required, the [ERCJ 
6 
COMMISSION shall, THROUGH A FORMAL ORDER FOR THAT PURPOSE, 
7 
allow the affected party [sufficient time] A REASONABLE TIME to remedy the 
8 
infraction, or [for] TO UNDERTAKE an orderly disposal OF THE MATTER, 
9 
ACTIVITY, OR BUSINESS INVOLVED, AS THE CASE MAY BE, but [shall] 
10 
in no case SHALL THE SAID REASONABLE TIME exceed twelve (12) months 
11 
from the issuance ofthe SAID FORMAL order[;] OF THE COMMISSION; 
12 
(f) 
[In the public interest establish] ESTABLISH and enforce [a 
13 
methodology for setting] IN THE INTEREST OF THE GENERAL PUBLIC 
14 
AND IN THE INTEREST OF THE END-USERS OF ELECTRICITY, AFTER 
15 
TAKING 
INTO 
ACCOUNT 
ALL 
RELEVANT 
CONSIDERATIONS, 
16 
INCLUDING THE EFFICIENCY OR INEFFICIENCY OF THE REGULATED 
17 
ENTITIES, AND AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
18 
AND PUBLIC HEARING, JUST AND REASONABLE transmission and 
19 
distribution NON-DISCRIMINATORY wheeling [rates and] CHARGES, AS 
20 
. WELL AS JUST AND REASONABLE NON-DISCRIMINATORY retail rates 
21 
for the captive market of [a] distribution [utility, taking into account all relevant 
22 
considerations, including the efficiency or inefficiency of the regulated entities. 
23 
The rates must be such as to] UTILITIES, WHICH SHALL allow the recovery of 
24 
ALL just and reasonable costs[,] and [a] GIVE A JUST AND reasonable return 
25 
on THE rate base (RORB) OF THE REGULATED ENTITIES INCLUDING 
26 
THE TRANSCO CONCESSIONAIRE to enable [the entity] THEM to operate 
27 
viably[. The ERC may adopt alternative forms of internationally-accepted rate-
28 
setting methodology as it may deem appropriate. The rate-setting methodology so 
29 
adopted and applied must ensure a reasonable price of electricity. The rates 
38 


1 
prescribed shall be non-discriminatory. To achieve this objective and to ensure 
2 
the complete removal of cross subsidies, the cap on the recoverable rate of system 
3 
losses prescribed in Section 10 of Republic Act No. 7832, is hereby amended and 
4 
shall be replaced by caps which shall be determined by the ERC based on load 
5 
density, sales mix, cost of service, delivery voltage and other technical 
6 
considerations it may promulgate. The ERC shall determine such form of rate-
7 
setting methodology, which shall promote efficiency. In case the rate setting 
8 
methodology used is RORB, it shall be subject to the following guidelines:], AND 
9 
. WHICH SHALL ENSURE A JUST AND REASONABLE PRICE OF 
10 
ELECTRICITY. 
II 
THE COMMISSION, TO PROMOTE EFFICIENCY AND FAIRNESS 
12 
IN THE ELECTRIC POWER INDUSTRY AND WHEN JUSTIFIED AND 
13 
DEMANDED BY THE NATIONAL INTEREST, MAY ADOPT, AFTER DUE 
14 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING, ANY 
15 
OTHER ALTERNATIVE FORM OF INTERNATIONALLY-ACCEPTED 
16 
METHOD OF RATEMAKING THAT SHALL BEST SERVE THE MUTUAL 
17 
INTEREST 
OF 
THE 
GENERAL 
PUBLIC, 
THE 
END-USERS 
OF 
18 
ELECTRICITY, AND THE ELECTRIC INDUSTRY PARTICIPANTS. 
19 
THE COMMISSION MAY ADOPT COMMON OR UNIFORM 
20 
DISTRIBUTION RATES FOR GEOGRAPHICALLY ADJACENT ELECTRIC 
21 
COOPERATIVES WITHIN A REGION. SUCH UNIFORM RATES MUST BE 
22 
IMPLEMENTED 
WITH 
A MECHANISM TO 
ACHIEVE A COST-
23 
REFLECTIVE TARIFF. 
24 
IN EVERY CASE, THE RATEMAKING METHOD SO ADOPTED 
25 
AND APPLIED MUST BE NEITHER EXTORTIONARY TO THE END-
26 
USERS OF ELECTRICITY NOR CONFISCATORY TO THE TRANSCO, TO 
27 
1'HE TRANSCO CONCESSIONAIRE OR TO THE DISTRIBUTION 
28 
UTILITIES, AND MUST FURTHERMORE ENSURE THAT THE PRICE OF 
29 
ELECTRICITY IS JUST AND REASONABLE. TOWARDS THIS END, THE 
39 


1 
COMMISSION SHALL PUBLISH THE REGULATORY GUIDELINES ON 
2 
THE 
RATEMAKING 
METHODOLOGY 
ADOPTED 
AND 
ALL 
3 
DOCUMENTS RELATED TO ANY DECISIONS SHALL BE CONSIDERED 
4 
PUBLIC DOCUMENTS FOR PURPOSES OF TRANSPARENCY. 
5 
THE RA TEMAKING POWER HEREIN GRANTED TO THE 
6 
COMMISSION MUST BE EXERCISED IN SUCH A MANNER THAT 
7 
EVERY DOUBT MUST BE RESOLVED IN FAVOR OF THE PROTECTION 
8 
OF THE RIGHTS OF THE GENERAL PUBLIC. 
9 
IN ALL CASES OF RATE-MAKING, THE SOLICITOR GENERAL 
10 
OR HIS REPRESENTATIVE MUST BE NOTIFIED OF AND SHALL 
11 
APPEAR IN THE PROCEEDINGS 
SO THAT THE INTEREST OF THE 
12 
GENERAL PUBLIC AND 
THE INTEREST OF THE END-USERS OF 
13 
ELECTRICITY WILL BE PROTECTED. 
14 
IN DETERMINING A JUST AND REASONABLE RETURN ON RATE 
15 
BASE OF THE TRANSCO, TRANSCO CONCESSIONAIRE OR OF A 
16 
DISTRIBUTION UTILITY, THE COMMISSION MUST OBSERVE THE 
17 
FOLLOWING GUIDELINES: 
18 
(I) THE RATE BASE SHALL CONSIST OF THE AVERAGE VALUE 
19 
OF 
ALL 
ASSETS, 
FACILITIES, 
PROPERTY, 
AND 
PERMANENT 
20 
IMPROVEMENTS OF THE TRANSCO, THE TRANSCO CONCESSIONAIRE 
21 
OR OF THE DISTRIBUTION UTILITY; AT THE BEGINNING AND AT THE 
22 
END OF ITS FISCAL YEAR, AS SHOWN IN THE PROPERTY ACCOUNTS 
23 
OF THE TRANSCO OR OF THE DISTRIBUTION UTILITY, AS THE CASE 
24 
MAY BE, WHICH ARE DIRECTLY USED AND USEFUL IN PROVIDING 
25 
THE SERVICE TO THE END-USERS OF ELECTRICITY, LESS THE 
26 
ACCRUED ALLOWANCE FOR DEPRECIATION TAKEN FOR THE YEAR 
27 
ON THE REGULATED ENTITY'S DEPRECIABLE ASSETS, FACILITIES, 
28 
PROPERTY, AND PERMANENT IMPROVEMENTS, PLUS TWO MONTHS 
29 
PRUDENT OPERATING CAPITAL. 
40 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
(II) THE VALUE OF THE FRANCHISE OF THE TRANSCO, THE 
CONCESSION OR OF THE DISTRIBUTION UTILITY SHALL NOT BE 
INCLUDED IN THE RATE BASE FOR PURPOSES OF RA TEMAKING. 
[( i)] (III) 
[For purposes of determining the rate base, the] THE 
TRANSCO, TRANSCO CONCESSIONAIRE or [any] A distribution utility 
[may be allowed] IS AUTHORIZED to revalue its [eligible] assets [not more 
than], FACILITIES, PROPERTY, AND PERMANENT IMPROVEMENTS 
CONSTITUTING ITS RATE BASE once every three (3) years [by an] 
THROUGH 
THE 
SERVICES 
OF 
AN 
EXPERIENCED, 
WELL-
ESTABLISHED, REPUTABLE, AND independent appraisal company[:], IN 
ACCORDANCE WITH SOUND AND CONSISTENTLY MAINTAINED 
METHOD 
OF 
VALUATION: 
Provided, 
however, 
That 
[ERC] 
THE 
COMMISSION may [give an exemption in case of unusual] TEMPORARILY 
SUSPEND THE AFORESAID THREE YEAR LIMITATION IN THE EVENT 
OF EXTRAORDINARY INFLATION OR devaluation[:] OF THE PESO AND 
ONLY FOR THE PERIOD THAT SUCH EXTRAORDINARY INFLATION 
OR DEVALUATION 
LASTS: 
Provided, 
further, 
That the 
[ERC] 
COMMISSION, 
IN THAT EVENT, shall exert [efforts to] EVERY EFFORT 
TO PREVENT AND/OR minimize THE STEEP AND RAPID ESCALATION 
OF THE price [shocks] OF ELECTRICITY in order to protect the [consumers;] 
END-USERS OF ELECTRICITY. 
(IV) THE ONE PERCENT (1%) ADMINISTRATIVE USE OF 
ELECTRICITY BY DISTRIBUTION UTILITIES SHALL BE REMOVED AS 
PART OF THE SYSTEM LOSS CHARGE THAT MAY BE PASSED ON TO 
THE END-USERS. THE ERC SHALL ENSURE THAT ALL DISTRIBUTION 
UTILITIES SHALL BILL ELECTRICITY FOR THEIR RESPECTIVE OWN 
COMPANY USE AT EFFICIENT LEVELS AND WHICH SHALL BE 
TREATED AS PART OF NECESSARY OPERATING EXPENSES. THE ERC 
IS LIKEWISE MANDATED TO TAKE MEASURES FOR THE PROPER 
41 


1 
ALLOCATION AND REDUCTION OF SYSTEM LOSS BY REVIEWING 
2 
THE ALLOWABLE SYSTEMS LOSS CAPS PRESCRIBED IN SECTION 10 
3 
OF REPUBLIC ACT NO. 7832, OR THE ANTI-ELECTRICITY PILFERAGE 
4 
ACT OF 1994, AND TO GRANT INCENTIVES TO DISTRIBUTION 
5 
UTILITIES FOR REDUCING SYSTEM LOSSES BELOW THE MANDATED 
6 
CAPS, SUCH THAT CONSUMERS AND DISTRIBUTION UTILITIES 
7 
SHARE EQUITABLY IN THE EFFICIENCY GAINS. 
8 
(V) CORPORATE INCOME TAX LEVIED ON THE NET TAXABLE 
9 
INCOME OF THE TRANSCO, TRANSCO CONCESSIONAIRE OR OF A 
10 
DISTRIBUTION UTILITY SHALL NOT BE PASSED ON TO THE END-
11 
USERS OF ELECTRICITY WHILE STILL PROVIDING AN ALLOWABLE 
12 
AFTER TAX RETURN TO THE TRANSCO AND THE DISTRIBUTION 
13 
UTILITY COMPARABLE TO OTHER INDUSTRIES WITH SIMILAR 
, 
14 
INVESTMENT RISK PROFILE. 
15 
[(ii)] (VI) 
Interest expenses [are not allowable] OF THE TRANSCO, 
16 
TRANSCO CONCESSIONAIRE OR OF A DISTRIBUTION UTILITY SHALL 
17 
NOT BE ALLOWED AS deductions [from permissible] FOR PURPOSES OF 
18 
DETERMINING A JUST AND REASONABLE return on ratebase[;]. 
19 
[(iii)] (VII) 
[In] FOR PURPOSES OF determining [eligible] THE 
20 
JUST AND REASONABLE cost of services that will be passed on to the end-
21 
users[,] OF ELECTRICITY, the [ERC] THE COMMISSION shall establish 
22 
minimum efficiency performance standards for the TRANS CO and THE 
23 
distribution utilities, including systems losses, interruption frequency rates, and 
24 
collection efficiency[;] OF THE REGULATED ENTITIES[.] INCLUDING 
25 
THE 
TRANSCO 
CONCESSIONAIRE. 
THE 
COMMISSION 
SHALL 
26 
DETERMINE 
AND 
FIX, 
FOLLOWING 
DUE 
NOTICE 
TO 
ALL 
27 
INTERESTED PARTIES AND PUBLIC HEARING, A CAP ON THE 
28 
MAXIMUM TRANSMISSION SYSTEM LOSSES THAT TRANSCO SHALL 
29 
MAINTAIN FOR THE EFFICIENT OPERATION OF THE LUZON, 
42 


1 
VISAYAS 
AND 
MINDANAO 
GRIDS, 
INCLUDING 
A 
2 
PENALTY/INCENTIVE SYSTEM. 
, 
3 
[(iv)] (VIII) [Further, in] IN determining THE rate baseL] OF THE 
4 
TRANSCO OR OF ANY DISTRIBUTION UTILITY, THE COMMISSION 
5 
SHALL NOT ALLOW the TRANSCO or any distribution utility [shall not be 
6 
allowed] to include THE COSTS OF management inefficiencies [like cost], 
7 
SUCH AS, BUT NOT LIMITED TO,. THE COSTS of project delays not 
8 
[excused] EXCUSABLE by force majeureL] OR THE penalties and related 
9 
interest CHARGES ARISING during construction [applicable to these 
10 
unexcused delays; and] PERIOD BECAUSE OF SAID INEXCUSABLE 
11 
DELAYS. 
12 
[(v)] (IX) 
Any ~ignificant operating costs or proj ect investments of 
13 
the TRANSCO, THE TRANSCO CONCESSIONAIRE and OF A distribution 
14 
[utilities] UTILITY, which shall become part of the rate base, shall be subject to 
15 
[verification by the ERC] THE APPROVAL OF THE COMMISSION, AFTER 
16 
DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING, 
17 
IN ORDER to ensure that the [contracting and] procurement of the equipment, 
18 
assets, and OR services [have been subjected to] AS WELL AS THE TERMS 
19 
AND CONDITIONS OF THE CONTRACT OR CONTRACTS COVERING 
20 
SUCH PROCUREMENT SHALL BE DONE IN ACCORDANCE WITH OPEN 
21 
COMPETITIVE PUBLIC BIDDING AND IN COMPLIANCE WITH THE 
22 
REQUIREMENTS OF EXISTING APPLICABLE PROCUREMENT LAWS, 
23 
AS WELL AS IN ACCORDANCE WITH transparent and accepted industry 
24 
procurement and purchasing practices to protect the public interest; 
25 
(g) 
Three (3) years after the imposition of the universal charge, ensure 
26 
that the charges of the TRANSCO, THE TRANSCO CONCESSIONAIRE or any 
27 
distribution utility shall bear no cross subsidies between grids, within grids, or 
28 
between classes of customers, except as provided herein; 
43 


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2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
(h) 
Review and approve any changes on the terms and conditions of 
service of the TRANSCO, THE TRANSCO CONCESSIONAIRE or any 
distribution utility; 
(i) 
Allow the TRANSCO OR TRANSCO CONCESSIONAIRE to 
charge user fees for ancillary services to all electric power industry participants or 
self-generating entities connected to the grid. Such fees shall be fixed by the ERC 
after due notice and public hearing; 
(j) 
Set a lifeline rate for the marginalized end-users; 
(k) 
Monitor and take measures in accordance with this Act to penalize 
abuse of market power, cartelization, and anti-competitive or discriminatory 
behavior by any electric power industry participant; 
(1) 
Impose fines or penalties for any non-compliance with or breach of 
this Act, the IRR of this Act, and the rules and regulations which it promulgates 
or administers; 
(m) 
(n) 
Take any other action delegated to it pursuant to this Act; 
Before the end of April of each year, submit to the Office of the 
President of the Philippines and Congress, copy furnished the DOE, an annual 
report containing such matters or cases which have been filed before or referred 
to it during the preceding year, the actions and proceedings undertaken, and its 
decision or resolution in each case. The ERC shall make copies of such reports 
available to any interested party upon payment of a charge which reflects the 
printing costs. The ERC shall publish all its decisions involving rates and anti-
competitive cases in at least one (I) newspaper of general circulation, and/or post 
electronically, and circulate to all interested electric power industry participants 
copies of its resolutions to ensure fair and impartial treatment; 
(0) 
Monitor the activities in the generation and supply of the electric 
power industry with the end in view of promoting free market competition and 
ensuring that the allocation or pass through of bulk purchase cost by distributors 
44 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
is transparent, non-discriminatory and that any existing subsidies, shall be divided 
pro-rata among all retail suppliers; 
(p) 
Act on applications for or modifications of certificates of public 
convenience and/or necessity, licenses, or permits of franchised electric utilities in 
accordance with law; and revoke, review, and modify such certificates, licenses or 
permits in appropriate cases, such as in cases of violations of the Grid Code, 
Distribution Code, and other rules and regulations issued by the ERC in 
accordance with law; 
(q) 
Act on applications for cost recovery and return on demand side 
management projects; 
(r) 
In the exercise of its investigative and quasi -judicial powers, act 
against any participant or player in the energy sector for violations of any law, 
rule, and regulation governing the same, including the rules on cross-ownership, 
anti-competitive practices, abuse of market positions, and similar or related acts 
by any participant in the energy sector or by any person, as may be provided by 
law, and require any person or entity to submit any report or data relative to any 
investigation or hearing conducted pursuant to this Act; 
(s) 
Inspect, on its own or through duly authorized representatives, the 
premises, books of accounts, and records of any person or entity at any time, in 
the exercise of its quasi-judicial power for purposes of determining the existence 
of any anti-competitive behavior and/or market power abuse and any violation of 
rules and regulations issued by the ERC; 
(t) 
Perform such other regulatory functions as are appropriate and 
necessary in order to ensure the successful restructuring and modernization of the 
electric power industry, such as, but not limited to, the rules and guidelines, under 
which generation companies, distribution utilities which are not publicly listed 
shall offer and sell to the public a portion, not less than fifteen percent (15%) of 
their common shares of stocks: Provided, however, That generation companies, 
distribution utilities or their respective holding companies that are already listed 
45 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
in the PSE are deemed in compliance. 
For existing companies, such public 
offering shall be implemented not later than five (5) years from the effectivity of 
this Act. New companies shall implement their respective public offerings not 
later than five (5) years from the issuance of their certificate of compliance; and 
(u) 
The ERC shall have the original and exclusive jurisdiction over all 
cases contesting rates, fees, fines, and penalties imposed by the ERC in the 
exercise of the above-mentioned powers, functions and responsibilities, and over 
aU cases involving disputes between and among participants or players in the 
. energy sector. 
All notices of hearings to be conducted by the ERC for the pw-pose of 
fixing rates or fees shall be published at least twice for two successive weeks in 
two (2) newspapers of nationwide circulation." 
SEC. 18. Section 45 of the Act is hereby amended to read as follows: 
"SEC. 45. 
Cross Ownership, 
Market Power Abuse and Anti-
15 
Competitive Behavior. -
No participant in the electricity industry or any other 
16 
person [may] SHALL engage in any KIND OF anti-competitive behavior, 
17 
including, but not limited to, cross-subsidization, price or market manipulation, or 
18 
ANY 
other 
unfair 
trade 
practices 
THAT 
ARE 
detrimental 
to 
the 
19 
DEVELOPMENT, encouragement, and protection of THE contestable markets. 
20 
No generation company, distribution utility, A COMPANY SUPPLYING 
21 
ELECTRICITY, or ANY OF its [respective subsidiary or affiliate or stockholder 
22 
or official of a generation company or distribution ntility, or other entity engaged 
23 
in generating and supplying electricity specified by ERC] SUBSIDIARIES, 
24 
AFFILIATES, STOCKHOLDERS, OFFICIALS, OR DIRECTORS, OR THE 
25 
OFFICIALS, DIRECTORS, OR OTHER STOCKHOLDERS OF SUCH 
26 
SUBSIDIARIES OR AFFILIATES, OR ANY RELATIVES OF SUCH 
27 
STOCKHOLDERS, OFFICIALS, OR DIRECTORS 
within the fourth civil 
28 
degree of consangninity or affinity, shall be allowed to HAVE AND hold, 
29 
DIRECTLY OR INDIRECTLY, any interest[, directly or indirectly,] in THE 
46 


I 
TRANSCO or [its] IN THE TRANSCO'S concessionaire. Likewise, the 
2 
TRANSCO, or its concessionaire, or any of [its] THE stockholders, [or] officials, 
3 
OR DIRECTORS OF THE TRANSCO OR ITS CONCESSIONAIRE, or any [of 
4 
their] relatives OF SUCH STOCKHOLDERS, OFFICIALS OR DIRECTORS OF 
5 
THE TRANSCO OR ITS CONCESSIONAIRE within the fourth civil degree of 
6 
consanguinity or affinity, shall not BE ALLOWED TO HAVE AND hold, 
7 
DIRECTLY OR INDIRECTLY, any interest[, whether directly or indirectly,] in 
8 
any generation company, [or] distribution utility[.], OR A COMPANY 
9 
SUPPLYING ELECTRICITY. Except for ex officio government-appointed 
10 
representatives, no [person who is an] officer or director, OR STOCKHOLDER 
11 
of the TRANSCO or [its] OFFICER, DIRECTOR, OR STOCKHOLDER OF 
12 
THE TRANSCO'S concessionaire shall be an officer or director of any generation 
13 
company, distribution utility, or [supplier.] A COMPANY SUPPLYING 
14 
ELECTRICITY. 
15 
To promote true market competition and prevent harmful monopoly and 
16 
market power abuse, the [ERC] COMMISSION shall enforce the following 
17 
. safeguards: 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
(a) 
No company or related group [can] SHALL BE ALLOWED TO 
own, operate or control more than thirty percent (30%) of the installed generating 
capacity of a grid andlor twenty-five (25%) of the [national] installed 
NATIONAL generating capacity. "Related group" includes a 'person's business 
interests, including its subsidiaries, affiliates, directors or officers or any of their 
relatives by consanguinity or affinity, legitimate or common law, within the 
fourth civil degree; 
(b) 
Distribution utilities may enter into bilateral power supply 
CONTRACT OR contracts FOR THEIR CAPTIVE CUSTOMERS subject to 
review AND APPROVAL by the [ERC:] COMMISSION, AFTER DUE 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING FOR 
PURPOSES OF DETERMINING AND APPROVING THE ALLOWABLE 
47 


1 
PASS-THROUGH GENERATION RATES[:]. [Provided, That such review shall 
2 
only be required for distribution utilities whose markets have not reached 
3 
household demand level. For the purpose of preventing market power abuse 
4 
between associated firms engaged in generation and distribution, no distribution 
5 
utility shall be allowed to source from bilateral power supply contracts more than 
6 
.fifty percent (50%) of its total demand from an associated firm engaged in 
7 
generation but such limitation, however, shall not prejudice contracts entered into 
8 
prior to the effectivity of this Act. An associated firm with respect to another 
9 
entity refers to any person which, alone or together with any other person, directly 
10 
or indirectly, through one or more intermediaries, controls, is controlled by, or is 
11 
under common control with, such entity; and] 
12 
IN ORDER TO PREVENT ABUSE OF MARKET POWER AND ANTI-
13 
COMPETITIVE BEHAVIOR, NO DISTRIBUTION UTILITY SHALL BE 
14 
ALLOWED TO SOURCE FROM A BILATERAL ELECTRIC POWER 
15 
SUPPLY CONTRACT OR CONTRACTS MORE THAN FIFTY PERCENT 
16 
(50%) OF ITS TOTAL ELECTRIC POWER SUPPLY REQUIREMENTS 
17 
FROM ANY GENERATION COMPANY OR GROUP OF GENERATING 
18 
COMPANIES WHOLLY OWNED OR CONTROLLED BY THE SAME 
19 
INTERESTS: 
PROVIDED, 
FURTHER, 
THAT 
SUCH 
BILATERAL 
20 
CONTRACTED CAPACITY SHALL NOT EXCEED TWENTY PERCENT 
21 
(20%) OF THE INSTALLED CAPACITY OF THE GRID AS MAY BE 
22 
DETERMINED BY THE ERC. ANY DISTRIBUTION UTILITY THAT HAS, 
23 
ON 
THE EFFECTIVITY OF 
THIS 
ACT, 
SUCH CONTRACT 
OR 
24 
CONTRACTS WHICH EXCEED THE ALLOWABLE FIFTY PERCENT (50%) 
, 
25 
LIMIT 
SET 
FORTH 
HEREIN 
SHALL 
DESIST 
FROM 
FURTHER 
26 
AWARDING ADDITIONAL ELECTRIC POWER SUPPLY CONTRACT OR 
27 
CONTRACTS WITH 
ANY 
GENERATION COMPANY OR GROUP OF 
28 
GENERATING COMPANIES WHOLLY OWNED OR CONTROLLED BY 
29 
THE SAME INTERESTS, UNTIL ITS PRESENT ELECTRIC POWER 
48 


1 
SUPPLY 
REQUIREMENTS, 
WHEN 
ADDED 
TO 
THE 
PROPOSED 
2 
ADDITIONAL ELECTRIC POWER SUPPLY CONTRACT OR CONTRACTS 
3 
WITH ANY GENERATION COMPANY OR GROUP OF GENERATING 
4 
COMPANIES WHOLLY OWNED OR CONTROLLED BY THE SAME 
5 
INTERESTS SHALL COMPLY WITH THE FIFTY PERCENT (50%) LIMIT 
6 
AND TWENTY PERCENT (20%) GRID CAPACITY LIMIT SET FORTH 
7 
HEREIN: PROVIDED, THAT ANY EXTENSION OR EXPANSION OF 
8 
EXISTING ELECTRIC POWER SUPPLY CONTRACT OR CONTRACTS 
9 
SHALL BE DEEMED AS NEW CONTRACT OR CONTRACTS FOR 
10 
PURPOSES OF THE LIMITATION SET FORTH HEREIN. 
11 
(c) 
For the first five (5) years from the establishment of the wholesale 
12 
electricity spot market, [no distribution utility shall source more than ninety 
13 
percent (90%) of its total demand from bilateral power supply contracts 1 THE 
, 
14 
DISTRIBUTION UTILITIES SHALL SUBMIT OR FILE WITH THE 
15 
COMMISSION ITS SUPPLY MANAGEMENT PROGRAM TO ENSURE 
16 
COMPLIANCE WITH ITS OBLIGATION TO SUPPLY ELECTRICITY IN 
17 
THE LEAST COST MANNER TO ITS CAPTIVE MARKET. 
THIS 
18 
SUBMISSION 
SHALL 
BE 
CONSIDERED 
CONFIDENTIAL 
AND 
19 
PROPRIETARY: PROVIDED, THAT THE COMMISSION, MAY, MOTU 
20 
PROPRIO, COMMENCE INVESTIGATION AND PROCEEDINGS AGAINST 
21 
THE DISTRIBUTION UTILITY FOR FAILURE TO COMPLY WITH THE 
22 
OBLIGATION TO SUPPLY ELECTRICITY IN THE LEAST COST MANNER: 
23 
PROVIDED, 
THAT 
IF 
THE 
COMMISSION 
FINDS, 
AFTER 
AN 
24 
INVESTIGATION CONDUCTED, FOR THAT PURPOSE, THAT THE COST 
25 
OF THE PROCURING ELECTRIC POWER IN BILATERAL CONTRACTS IS 
26 
MORE EXPENSIVE THAN THE PRICE OF ELECTRIC POWER IN THE 
27 
WHOLESALE ELECTRICITY SPOT MARKET, THE DISTRIBUTION 
28 
UTILITIES SHALL BE PENALIZED IN ACCORDANCE WITH THE SCALE 
29 
OF PENALTIES HEREUNDER PROVIDED: (A) FIRST OFFENSE, FINE 
49 


I 
RANGING FROM PhpIOO,OOO.OO TO Php500,000.00; (B) SECOND OFFENSE, 
2 
FI~E RANGING FROM Php500,000.00 TO I MILLION PESOS: PROVIDED, 
3 
THAT THE SECOND OFFENSE SHALL BE PRIMA FACIE EVIDENCE OF 
4 
COLLUSSION AND THE GENERATION COMPANIES SHALL SUFFER 
5 
THE SAME PENALTY AS THAT IMPOSED TO THE DISTRIBUTION 
6 
UTILITY. THE COMMISSION IS HEREBY MANDATED TO REVIEW THE 
7 
ELECTRICITY SUPPLY COST OF THE· DISTRIBUTION UTILITIES EVERY 
8 
THREE (3) MONTHS. 
9 
For purposes of this Section, the grid basis shall consist of three (3) 
10 
separate grids, namely: Luzon, Visayas, and Mindanao. The ERC shall have the 
II 
authority to modify or amend this definition of a grid when two or more of the 
12 
three separate grids become sufficiently interconnected to constitute a single grid, 
13 
or as conditions may otherwise permit. 
14 
Exceptions from these limitations shall be allowed for isolated grids that 
15 
are not connected to the high voltage transmission system. [Except as otherwise 
16 
provided for in this Section, any restriction on ownerships and/or control between 
17 
or within sectors of the electricity industry may be imposed by ERC only insofar 
18 
as the enforcement of the provisions ofthis Section is concerned]. 
19 
The [ERC] COMMISSION shall, within one (1) year from the effectivity 
20 
of this Act, promulgate rules and regulations, CONSISTENT WITH THE 
21 
PROVISIONS OF THIS ACT, to ensure and promote competition, encourage 
22 
market development, [and] customer choice, and [discourage/penalize] DETER 
23 
AND/OR PENALIZE ANY abuse of market power, cartelization, [and] OR any 
24 
anti-competitive or discriminatOlY behavior, in order to further the intent of this 
25 
Act and IN ORDER TO protect the [public] interest[.] OF THE GENERAL 
26 
PUBLIC AND THE END-USERS OF ELECTRICITY. Such rules and 
27 
regulations shall COVER AND define the following: 
28 
(a) 
the relevant markets for purposes of establishing abuse or misuse 
29 
of monopoly or market position; 
50 


I 
2 
(b) 
(c) 
areas of isolated grids; and 
the periodic reportorial requirements of electric power industry 
3 
participants as may be necessary to enforce the provisions of this Section. 
4 
The [ERC] COMMISSION shall, motu proprio, monitor and, WHEN 
5 
WARRANTED BY THE ATTENDANT FACTS, penalize any SUCH 
6 
MONOPOLIZATION, CARTELIZATION, ABUSE OF market power [abuse] or 
7 
anti-competitive AND/or discriminatory act or behavior by any [participant in 
8 
the] electric power industry[.] PARTICIPANT. Upon finding that [a market] AN 
9 
ELECTRIC 
POWER 
INDUSTRY 
participant 
has 
engaged 
in 
such 
10 
MONOPOLIZATION, CARTELIZATION, ABUSE OF MARKET POWER, OR 
II 
ANTI-COMPETITIVE AND/OR DISCRIMINATORY act or behavior, the 
12 
[ERC] COMMISSION shall FORTHWITH ISSUE A CEASE AND DESIST 
13 
ORDER TO THE ERRING ELECTRIC POWER INDUSTRY PARTICIPANT, 
14 
AND THEREAFTER PERMANENTLY stop and redress the same. Such 
15 
[remedies shall, without limitation, include] REDRESS SHALL INCLUDE 
16 
AMONG OTHER REMEDIES THAT MAY BE APPROPRIATE UNDER THE 
17 
CIRCUMSTANCES, the imposition of price [controls,] CONTROL, THE 
18 
issuance of [injunctions, requirement of] INJUNCTIVE RELIEF, AND THE 
19 
divestment or disgorgement of excess profits, and THE imposition of fines and 
20 
penalties pursuant to THE APPLICABLE PROVISIONS OF this Act: 
21 
PROVIDED, HOWEVER, 
THAT ANY PERSON OR ENTITY FOUND 
22 
GUILTY OF THE ABOVESTATED PROHIBITED ACTS IN THIS SECTION 
23 
SHALL SUFFER THE FOLLOWING PENALTIES: (A) FIRST OFFENSE, 
24 
ARESTO 
MAYOR 
OR 
FINE 
RANGING 
FROM 
PhpIOO,OOO.OO 
TO 
25 
Php500,000.00, OR BOTH AT THE DISCRETION OF THE COURT; (B) 
26 
SECOND OFFENSE, PRISION CORRECCIONAL OR FINE RANGING FROM 
27 
I MILLION PESOS TO 5 MILLION PESOS, OR BOTH AT THE 
28 
DISCRETION OF THE COURT; AND (C) THIRD OFFENSE, PRISlON 
29 
MAYOR OR FINE RANGING FROM 6 MILLION PESOS TO 10 MILLION 
51 


1 
PESOS, OR BOTH AT THE DISCRETION OF THE COURT: PROVIDED, 
2 
THAT, THE THIRD OFFENSE WILL ALSO MERIT A SUSPENSION OF THE 
3 
FRANCHISE OR LICENSE OF THE ERRING UTILITY. 
4 
IF THE OFFENDER IS A CORPORATE ENTITY, THE PENALTY OF 
5 
IMPRISONMENT SHALL BE IMPOSED UPON THE OFFICERS, AND 
6 
DIRECTORS WHO KNOWINGLY, OR BY NEGLECT ALLOWED THE 
7 
COMMISSION OF THE PROHIBITED ACT. 
8 
The [ERC] COMMISSION shall, within one (1) year from the effectivity 
9 
of this Act, promulgate SUCH rules [and regulations providing for a complaint 
10 
procedure that, without limitation, provides] AS MAYBE NECESSARY, NOT 
11 
INCONSISTENT WITH THE PROVISIONS OF THIS ACT, THAT WILL 
12 
ESTABLISH A PROCEDURE WHEREBY the accused party, with DUE notice 
13 
[and] TO ALL INTERESTED PARTIES AND PUBLIC HEARING, SHALL BE 
14 
GIVEN BY THE COMMISSION an opportunity to be heard." 
15. 
SEC. 19. Section 48 of the Act is hereby amended to read as follows: 
16 
"SEC. 48. National Power Board of Directors. - Upon the passage of this 
17 
Act, Section 6 of R.A. 6395, as amended, and Section 13 of RA 7683, as 
18 
amended, referring to the composition of the National Power Board of Directors, 
19 
are hereby repealed and a new Board shall be immediately organized. The new 
20 
. Board shall be composed of the Secretary of Finance as Chairman, with the 
21 
following as members: the Secretary of Energy, the Secretary of Budget and 
22 
management, the Secretary of Agriculture, the Director General of the National 
23 
Economic and Development Authority, the Secretary of Environment and Natural 
24 
Resources, the Secretary of Interior and Local Government, the Secretary of 
25 
Trade and Industry, [and] the President of the National Power Corporation AND 
26 
THE PRESIDENT OF THE POWER SECTOR ASSETS AND LIABILITIES 
27 
MANAGEMENT CORPORATION." 
28 
SEC. 20. Section 51 of the Act is hereby amended to read as following: 
52 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
"SEC. 51 Powers. - The Corporation shall, in the performance of its 
functions and for the attainment of its objective, have the following powers: 
(a.) 
To formulate and implement a program for the sale and 
privatization of the NPC assets and IPP contracts and the liquidation of 
NPC debts and stranded contract costs, such liquidation to be completed 
within the term of existence of the PSALM Corp.; 
(b.) 
To take title to and possession of, administer and conserve 
the assets transferred to it; to sell or dispose of the same at such price and 
under such terms and conditions as it may deem necessary or proper, 
subject to applicable laws, rules and regulations. 
(c.) 
To take title to and possession of the NPC IPP contracts 
and to appoint, after public bidding in transparent and open manner, 
qualified independent entities who shall act as the IPP Administrators in 
accordance with this Act; 
(d.) 
To calculate the amount of the stranded debts and stranded 
contract costs of NPC [which shall form the basis for ERC in the 
determination of the universal charge]; 
(e.) 
To liquidate the NPC stranded contract costs utilizing 
proceeds from sales and other property contributed to it, including the 
proceeds from the universal charge; 
(f) 
To adopt rules and regulations as may be necessary or 
proper for the orderly conduct of its business or operations; 
(g.) 
(h.) 
To sue and be sued in its name; 
To appoint or hire, transfer, remove and fix the 
compensation of its personnel: Provided, however, That the Corporation 
shall hire its own personnel only if absolutely necessary, and as far as 
practicable, shall avail itself of the services of personnel detailed from 
other government agencies; 
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(i.) 
To own, hold, acquire, or lease real and personal properties 
as may be necessary or required in the discharge of its functions; 
G.) 
To borrow money and incur such liabilities, including the 
issuance of bonds, securities or other evidences of indebtedness utilizing 
its assets as collateral and/or through the guarantees of the National 
Government: Provided, however, That all such debts or borrowings shall 
have been paid off before the end of its corporate life; 
(Ie.) 
(\.) 
To restructure existing loans ofNPC; 
To collect, administer, and apply NPC's portion of the 
universal charge; and 
(m.) 
To restructure the sale, privatization or disposition of NPC 
assets and IPP contacts which shall optimize the value and sale prices of 
said assets. 
(n.) 
TO HAVE ACCESS AT ALL TIMES AND EXAMINE, 
15 
INSPECT, AUDIT, TAKE COPIES OF BOOKS OF ACCOUNTS, 
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FINANCIAL STATEMENTS, DOCUMENTS, PAPERS, CONTRACTS 
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ENTERED INTO, PERTAINING TO THE REMITTANCES AND 
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UTILIZATION OF THE UNIVERSAL CHARGE; 
19 
(0.) 
TO 
BRING OR DEFEND ACTIONS 
FOR THE 
20 
PROTECTION, PRESERVATION, RECOVERY OF THE SPECIAL 
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TRUST FUND TO THE BENEFICIARIES OF THE UNIVERSAL 
22 
CHARGE; AND 
23 
(p.) 
TO EXERCISE THE POWER OF EMINENT DOMAIN 
24 
SUBJECT TO THE REQUIREMENTS OF THE CONSTITUTION AND 
25 
EXISTING LAWS. 
26 
SEC. 21. Section 70 of the Act is hereby amended as follows: 
27 
"SEC. 70. Missionary Electrification. - Notwithstanding the divestment 
28 
and/or privatization of NPC assets, IPP contracts and spun-off corporations, NPC 
29 
shall remain as a National Government-owned and -<;ontrolled corporation to 
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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 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. 
IN 
ADDITION 
TO 
THE 
NPCs 
SPUG, 
THE 
ELECTRIC 
COOPERATIVE SHALL ALSO HAVE ACCESS TO THE MISSIONARY 
ELECTRIFICATION FUND COLLECTED THROUGH THE UNIVERSAL 
CHARGES. " 
SEC. 22. 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. 23. Applicability and Repealing Clause. -
The applicable provisions of 
Commonwealth Act No. 146, as amended, otherwise known as the "Public Services Act"; 
Republic Act 6395, as amended, revising the charter ofNPC; Presidential Decree 269, as 
amended, referred to as the National Electrification Decree; Republic Act 7638, 
otherwise known as the Department of Energy Act of 1992; Republic Act 7832 otherwise 
known as the Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 
1994, shall continue to have full force and effect, except insofar as such acts and decree, 
and only to that extent, are inconsistent with any of the provisions of this Act. 
Presidential Decree No. 40 and all laws, decrees, rules and regulations, or portions 
thereof, inconsistent with this Act are hereby repealed or modified accordingly. 
S~c. 24. Effectivity Clause. -
This Act shall take effect on the fifteenth day 
following its publication in at least two (2) national papers of general circulation. 
Approved, 
55