Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

15" CONGRESS
First Regular Session

2980

HOUSE BILL No. **

Introduced by REP. SALVADOR H. ESCUDERO HL

EXPLANATORY NOTE

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

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

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

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

As dynamic developments are taking place in this very young sector, it is imperative
that conditions favorable to the establishment of the critical infrastructure and natural gas
market are put in place to optimize economic efficiency and returns from the downstream
natural gas industry.

The foregoing premises thus necessitate the immediate passage of the Natural Gas

he

SAL? OR H. ESCUDERO Tt

Bill.

* District, Sorsogon


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

15" CONGRESS
First Regular Session

HOUSE BILL No._ 2980

Introduced by REP. SALVADOR H. ESCUDERO III

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

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

CHAPTER I
TITLE AND DECLARATION OF POLICY

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

SEC. 2. Declaration of Policy. ~ \tis hereby declared the policy of the State:

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

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

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

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

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

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


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

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

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

(i) To encourage equity participation in gas transmi
utilities by the private sector.

jon utilities and gas distribution

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

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

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

(a) “Captive market”:

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

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

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

(b) “Congress” refers to the Congress of the Republic of the Philippines;
(c) “Contestable market” is a market that is not a captive market;

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

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

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


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

istribution utility

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

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

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

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

() “Franchise area” refers to a geographical area assigned or granted under a
franchise;

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

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

(0) “Gas distribution
distribution system;

refers to any person that has a franchise to operate a gas

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

(q) “Gas Transmission Code” refers to the code 10 be developed by the DOK
pursuant to Section 5(g) of this Act that sets the technical performance standards
for operating gas transmission systems and the minimum financial standards for
gas transmission utilities;

(F) “Gas ttansmission system” refers to the system to the system of high pressure
pipelines, storage and related facilities that are used to transport natural gas from
the interconnection with gathering facilities, liquefied natural gas (LNG)
regasification facilities or other gas transmission systems to gas distribution
systems, other gas transmission systems or end-users;

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

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


(u) “Infrastructure development perio
of this Act;

refers to the period prescribed in Chapter IV

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

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

(x) "LNG refers to liquefied natural gas’

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

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

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

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

(ce) "Philippine Energy Plan" or "PEP" refers to the overall energy program
formulated and updated yearly by the DOE and submitted to Congress pursuant
to Republic Act No. 7638, as amended;

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

(ee) "Supplier” refers to any person authorized by the DOE, initially, to engage in
the supply of natural gas;

(£) “Supply” refers to the domestic trading and/or sale of natural gas for wholesale or
retail

(gg) Transmission” refers to the transportation of natural gas through a gas
transmission system: and

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


CHAPTER IT
POWERS AND FUNCTIONS OF THE DOE AND THE ERC

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

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

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

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

(d) Before the end of April of each year, submit to the Office of the President and
Congress an annual report:

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

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

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

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

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

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


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

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

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

(h) By order, revoke, after due notice and hearing, the permit of any person that fails
to comply with the rules and regulations promulgated pursuant to this Act, the Gas
‘Transmission Code, the Gas Distribution Code, or any requirement of this Act.

‘The DOE shall allow such persons sufficient time to remedy the violation of or for
an orderly disgorgement, when applicable, but in no case shall such remediation
period exceed twelve (12) months from the date of issuance of the order;

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

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

(k) Exerci
nonprice regulation, fees, fines and penal
abovementioned powers and functions; and

original and exclusive jurisdiction over all cases contesting permits,
posed by it in the exercise of the

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

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

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

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

(ii) Provide er

to determine the relevant market structure; and


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

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

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

(d) Before the end of April of each year, submit to the Office of the President of the
Philippines and Congress, copy furnished the DOE, an annual report containing
such matters or cases which have been filed before or referred to it during the
preceding year, the actions and proceedings undertaken and its decision or
resolution in each case. The ERC shall make copies of such report available to any
interested party upon payment of a charge which reflects the printing costs;

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

(A) Exercise such other powers as may be necessary or incidental to attain the

objectives of this Act.

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

CHAPTER IIL
ORGANIZATION AND OPERATION OF THE DOWNSTREAM NATURAL GAS
INDUSTRY

SEC. 7. Organization. - For purposes of this Act, the Downstream Natural Gas
Industry shall be divided into three sectors, namely: transmission of natural gas, distribution
of natural gas and supply of natural gas.

SEC. 8.Regulation of Transmission, Distribution and Supply Sectors, ~ The
transmission, distribution and supply of natural gas are businesses affected with public
interest and the regulation of these businesses as provided for in this Act is hereby deemed
necessary in the public interest.

SEC. 9. Franchise Requirement. —

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

(b) Franchise. - Any person that seeks to operate for commercial purposes a gas

mn system or gas distribution system shall be required to obtain a



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

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

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

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

Operators of related facilities that are operated independently from the
pipeline.

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

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

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



SEC. 11. Third Party Access. ~

(a) Third Party Access Obligation. - Gas transmission systems and gas distribution
systems excluding those constructed and operated for own use or as part of gathering
facilities of service contractors shall be available for nondiscriminatory access by
third party users which may include parties to a service contract, suppliers and
customers, with due regard to the economic viability of the operation of such
facilities. Such operators shall negotiate in good faith with third party users the
provisions and terms of access in accordance with the guidelines to be promulgated
by the DOE;

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

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

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

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

award the same to the lowest bidder.

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

such deferment is necessary to enable the
nt planning of the infrastructure and aggregation of the initial
demand necessary to justify investments in the gas transmission systems
and gas distribution systems; or

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

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



(@) Approved Access Conditions for Gas Transmission Ut

Utilities. - Prior to the conduct of negotiations with third parties, a gas transmission
and a gas distribution utility shall request the DOE to approve its access
conditions in accordance with the third party access guidelines to be promulgated by
the DOE in consultation with the industry participants.

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

CHAPTER IV
NATURAL GAS TRANSMISSION SECTOR

SEC, 15. Permit. - No person or entity shall undertake the construction, operation and
maintenance of a natural gas transmission system unless it has secured a franchise: Provided,
however, That for a period not exceeding five years after the effectivity of this Act, the DOE
may issue a provisional permit with a maximum term of owo years, renewable twice for a
maximum cumulative term not exceeding six years for the continued operation of a gas
transmission system constructed prior to and in operation as of the date of effectivity of this
Act: Provided, further, That during the same period, the DOE may issue a permit for the
expansion, extension or modification of a natural gas transmission system,

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

SEC, 16.Terms and Conditions of Permits. - In issuing a permit, the DOE shall have
the power to impose such reasonable terms and conditions as the public interest may require.
Among such conditions shall be the requirement that the permit holder complies in full with
the Gas Transmission Code promulgated by the DOE pursuant to Section 5(g) of this Act.

SEC. 17. Fees. - The DOE shall have the authority to prescribe and collect fees and
charges relating to the issuance and/or review of permits, supervision and regulation of gas
transmission systems.

EC. 18, Abandonment of Gas Transmission Systems, - No holder of a permit for the
construction, installation, operation or maintenance of a gas transmission system shall
abandon or withdraw from service any portion of such gas transnfission system without
obtaining prior authorization from the DOE, which determination shall be made within one
hundred eighty (180) days from the filing of the application for abandonment. Such
abandonment shall be done in accordance with existing laws.

SEC. 19. Gas Transmission Code Compliance. - All gas transmission utilities shall
ensure the saféty,- reliability, adequacy, security, stability and integrity of their gas
transn n systems in accordance with the technical specifications and performance
standards set forth in the Gas Transmission Code to be promulgated by the DOE. Each gas
transmission utility shall submit to the DOE a statement of its compliance with such technical
specifications and performance standards prescribed in the Gas Transmission Code. Any gas



transmission utility that does not comply with any of the prescribed technical specifications
or performance standards shall include in such statement of compliance an undertaking to
comply with said technical specifications and performance standards within a reasonable time
as may be necessary to ensure safety and reliability, or prevent environmental harm. The
DOE shall, within sixty (60) days upon receipt of such plan, evaluate the same and notify the
gas transmission utility concerned of its decision thereon. Failure to submit a feasible and
credible plan and/or failure to implement the same shall serve as grounds for the imposition
of appropriate sanctions, fines or penalties pursuant to Section 39 of this Act.

SEC. 20. ERC Rate Regulation of Gas Transmission Utilities. ~ Gas Transmission
Rate. Except as otherwise provided during the infrastructure development period, the ERC
shall review and approve the rates, charges and other amounts proposed to be charged by the
gas transmission utilities as provided under Section 33 of this Act. Where such rates are
applicable to services provided to captive markets, the ratemaking methodology to be applied
by the ERC shall be based on the principle of full recovery of prudent and reasonable costs
incurred, including a reasonable return on rate base that is consistent with the encouragement
of private investment and goal of developing a Downstream Natural Gas Industry
infrastructure, or such other principles that will promote the determination of just and
reasonable rates» Where a rate applicant successfully demonstrates that its rates will be
applicable to contestable markets, the ERC shall have the authority to permit negotiated rates.

CHAPTER VI
DISTRIBUTION SECTOR

SEC. 21. Permit, - No person or entity shall undertake the construction, operation and
maintenance of a natural gas distribution system unless it has secured a franchise: Provided,
however, That for a period not exceeding five years after the effectivity of this Act, the DOE
may issue a provisional permit with a maximum term of two years, renewable twice for a
maximum cumulative term not exceeding six years for the continued operation of a gas
distribution system constructed prior to and in operation as of the date of effectivity of this
Act: Provided, further, That during the same period, the DOE may issue a permit for the
expansion, extension or modification of a natural gas distribution system.

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

SEC. 22. Terms and Conditions of Permits. - In issuing a permit, the DOE shall have
the power to impose such reasonable term and conditions to a permit as the public interest
may require. Among such conditions shall be the requirement that the permit holder comply
in full with the Gas Distribution Code promulgated by the DOE pursuant to Section 5(g) of
this Act.

SEC. 23. Fees, - The DOE shall have the authority to prescribe and collect fees and
charges relating to .the issuance and/or review of permits, supervision and regulation of gas
distribution systems.

SEC. 24. Abandonment of Gas Distribution Systems. - No holder of a permit for the
construction, installation, operation or maintenance of a gas distribution system shall abandon


or withdraw from service any portion of such gas distribution system without obtaining prior
authorization from the DOE, which determination shall be made within one hundred eighty
(180) days from the filing of the application for abandonment. Such abandonment shall be
done in accordance with existing laws.

SEC. 25. Gas Distribution Code Compliance. - All gas distribution utilities shall be
required to ensure and maintain the safety, reliability, adequacy, security, stability and
integrity of their gas distribution systems in accordance with the performance standards set
forth in the Gas Distribution Code to be promulgated by the DOE. Each gas distribution
utility shall submit to the DOE a statement of its compliance with the technical specifications
prescribed in the Gas Distribution Code and the performance standards prescribed in the
implementing rules and regulations promulgated by the DOE pursuant to Section 43 of this
Act. A gas distribution utility that fails 10 comply with any of the prescribed technical
specifications or performance standards shall include within such statement of compliance a
plan for achieving compliance with the said technical specifications and performance
standards within a reasonable time as may be necessary to ensure safety and reliability, or
prevent environmental harm. The DOE shall, within sixty (60) days from receipt of such
plan, evaluate the same and notify the gas distribution utility concerned of its decision
thereon, Failure to submit a feasible and credible plan and/or failure to implement the same
shall serve as grounds for the imposition of appropriate sanctions, fines or penalties pursuant
to Seotion 39 of this Act.

2C, 26. Gas Distribution Rate. - Except as provided for during the infrastructure
development period, the distribution rates charged by gas distribution utilities shall be subject
to regulation by the ERC based on the principle of full recovery of prudent and reasonable
economic costs incurred, including a reasonable return on rate base that is consistent with the
encouragement of private investment and goal of developing the Downstream Natural Gas
Industry infrastructure, or such other principles that will promote the determination of just
and reasonable rates by the ERC. Where a rate applicant successfully demonstrates that its
rates will be applicable to contestable markets, the ERC shall have the authority to permit
negotiated rates.

SEC. 27. Functions of Gas Distribution Utilities. - All gas distribution utilities shall

have the following functions:

(a) Obligation to provide distribution services and connections to its gas distribution
system for any end-user within the area covered by its permit consistent with the Gas
Distribution Code. Any gas distribution utility engaged therein shall provide
nondiscriminatory access 10 its gas distribution system to suppliers and/or end-users
entitled to retail access under Section 30 of Chapter VII of this Act. Any gas
distribution utility shall be entitled to impose and collect from such suppliers and/or
end-users distribution charges and connection fees as approved by the ERC after due
notice and hearing;

(b) Ensure the safety, reliability, adequa and integrity of their gas
distribution systems in accordance with the technical specifications and performance
standards set forth in the Gas Distribution Code to be promulgated by the DOE
pursuant to Section 5/g) of this Act. Each gas distrib yy shall submit to the
ERC a statement of its compliance with such technical specifications and performance
standards. Any gas distribution utility that fails to comply with any of the prescribed
technical specifications or performance standards shall include in such statement of,
compliance an undertaking to comply with said technical specifications and
performance standards within a reasonable time as may be necessary to ensure safety
and reliability, or prevent environmental harm. The ERC shall, within sixty (60) days



upon receipt of such plan, evaluate the same and notify the gas distribution utility
concemed of its decision thereon. Failure to submit a feasible and credible plan and/or
failure to implement the same shall serve as grounds for the imposition of appropriate
sanctions, lines or penalties pursuant to Section 39 of this Act;

(©) Provide universal service within the area covered by its permit except as provided
herein. Compliance with the universal service obligation shall be addressed as part of
the annual development and maintenance plan of a gas distribution utility. A gas
distribution utility shall be obliged to develop and maintain an efficient system for the

istribution of natural gas at the reasonable request of end-users within its franchise
area including:

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

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

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

(d) Submit annually 10 the ERC its plan for maintaining and developing its gas
distribution system in compliance with the obligations prescribed in this Act.

CHAPTER VIL
SUPPLY SECTOR

SEC. 28. Permit Requirement. - Any law to the contrary notwithstanding, no person
may engage in any supply activity unless it has obtained a permit from the DOE, initially:
Provided, however, That a gas transmission utility or gas distribution utility that has secured a
permit as such pursuant to Section 9(c) of this Act and that supplies natural gas to its own
customers shall not be required (0 secure a separate permit to engage in its supply activity,
For this purpost, the DOE shall promulgate rules and regulations prescribing the
qualifications of suppliers which shall include, among other requirements, a demonstration of
their technical capability, financial capability, creditworthiness and compliance with safety
standards. The DOF. shall have the authority to require suppliers to furnish a bond or other
evidence of their ability to withstand market disturbances or other events that may increase
the cost of providing service.



SEC. 29. Supplier Rate and Service Regulation. ~

(a) The rates and service of suppliers to captive markets shall be regulated by the ERC;
and

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

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

SEC. 30. Conditions for Retail Access to Gas Distribution Systems. - Following the
infrastructure development period, retail access to gas distribution systems shall be available
to large end-users meeting criteria set forth in the rules and regulations promulgated by the
ERC pursuant to this Act. The ERC shall determine when retail access may Be available to
other end-users or classes of end-users, giving consideration to relevant factors including
whether such end-users or class of end-users constitute a contestable market-end the financial
consequences of any assets potentially stranded by expanding retail access

SEC. 31. Taxes. - Gas transmission utilities, gas distribution utilities and suppliers of
natural gas shall be subject to the payment of all taxes, duties, fees or charges and other
impositions under the National Internal Revenue Code (NIRC) of 1997, as amended, and
other applicable laws: Provided, however, That, in recognition of the substantial investments
needed for the construction, operation and maintenance of gas transmission and gas
distribution systems, gas transmission utilities and gas distribution utilities shall, upon prior
endorsement by the DOE and approval by the Board of Investments, be entitled to income tax
holiday and such other incentives granted to pioneer enterprises under the Omnibus
Investment Code, as amended. The commodity price of gas shall be the only component of
the gas retail rate which shall be subj to ext taxes under Republic Act No. 8424,
otherwise known as the Comprehensive Tax Reform Law.

SEC. 32. Withdrawal of Exemptions. - Any law to the contrary notwithstanding, to
achieve the declared policies of this Act, particularly in relation to the promotion of fair and
nondiscriminatory treatment of public and private sector entities in the development of the
Downstream Natural Gas Industry infrastructure, all existing tax exemptions applicable 10
persons engaged in the transmission or the distribution of natural gas; insofar as. such
exemptions relate to revenues derived from the transmission or the distribution of natural gas,
shall be deemed revoked upon the effectivity of this Act.

CHAPTER IX
RATEMAKING REQUIREMENTS AND PROCEDURES.

SEC. 33. Ratemaking Requirements and Procedures of the ERC. - (a) Just and
reasonable rates and charges. - All rates and charges for transmission, distribution or supply
of natural gas to the captive market and all rules and regulations affecting or pertaining 10
such rates or charges shall be just and reasonable, Any such rate or charge that i not just and
reasonable is hereby declared to be unlawful;


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

(©) Filing of rate schedules. - Under such rules and regulations as the ERC may prescribe,
after due notice and public consultation, the ERC may require reports or documents
from gas transmission utilities, gas distribution utilities or suppliers to the captive
market showing all rates and charges for the transmission, distribution or supply of
natural gas to the captive market and the classifications, practice and regulations
affecting such rates, charges, and classifications and services: Provided, That the ERC
shall provide appropriate mechanisms to protect the confidential& of any information
that is commercially or competitively sensitive; and

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

CHAPTER X
PROMOTION OF COMEPTITION

SEC, 34. Anti-Competitive Behavior. - No gas transmission utility, gas distribution
utility or supplier, or affiliate thereof, may engage in any anti-competitive behavior or abuse
of market power including, but not limited to:

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

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

SEC. 35. Measures to Promote Competition. - Subject to the provisions of relevant
laws, the ERC shall adopt measures and/or corresponding remedies 40 promote competition
following an investigation of the relevant circumstances and a definitive finding of:

(a) Price and/or output fixing; or



(b) Other practices/conduct that are the subject of investigation restrict and/or prevent
and/or distort competition.

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

SEC. 36. Functional and Structural Unbundling. - When prevailing market conditions
so require, any Downstream Natural Gas Industry participant shall functionally and
structurally unbundle its business act and rates in accordance with the sectors as
identified in Section 7 hereof. The ERC shall ensure full compliance with this provision.

SEC. 37. Complaint Procedures. - The ERC shall, within one year from the
effectivity of this Act, promulgate rules and regulations providing for a complaint procedure
that, without limitation provides the party alleged to have engaged in anti-competitive or
abusive activities with notice and an opportunity to be heard.

SEC. 38.4filiated Suppliers. - In order to prevent anti-competitive conduct, service
contractors, gas transmission utilities and gas distribution utilities that own or control
affiliates that are suppliers shall conduct their business as follow:

(a) No preference will be given to the aff
contracting for available capacity, schedu
tari

ited supplier over other persons through
ing, balancing, curtailment priority or

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

©

Employees of the affiliated supplier shall, to the maximum extent possible, function
independently in making business decisions; and

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

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

SEC, 39. Administrative Fines and Penalties.

(a) The administrative fines and penalties that may be imposed by the ERC or the DOE,
as the case may be, for any violation of or noncompliance with this Act or its
implementing rules and regulations shall range from a minimum of Fifty thousand
pesos (P50,000.00) to a maximum: of Fifty million pesos (PS0,000,000.00):

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

(©) The members of the board of directors or any person that violates the provisions of
this Act may be fined by an amount not exceeding double the amount =f damages
caused by the offender at the discretion of the ERC or the DOE; as the case may be.


This rule shall apply to the members of the Board who, knowingly or by neglect,
allow the commission or omission under the law;

(d) Any party to an administrative proceeding may, at any time, make an offer to the ERC
or the DOE, as the case may be, conditionally or otherwise, for a consent decree,
voluntary compliance or desistance and other settlement of the case. The offer and

. any or all of the ultimate facts upon which the offer is based shall be considered for
settlement purposes only and shall not constitute an admission by the party making
the offer of any violation of the laws, rules, regulations, orders and resolutions of the
ERC or the DOE, as the case may be, nor as a waiver to file any warranted criminal
actions; and

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

CHAPTER XI

ANTI-PILFERAGE AND AN’ EFT PROVISION:

SEC. 40,Pilferage. - It is hereby declared unlawful for any person to:

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

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

(c) Damage or destroy any natural gas meter, equipment, pipeline or conduit or any part
of a gas transmission system or gas distribution system or allow any of them to be so
damaged or destroyed as 10 interfere with the prc accurate metering of natural
gas flows; and

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

SEC. 41. Theft of Equipment and Materials. - 1 is hereby declared unlawful for any
person to:

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

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

done for profit or gain: and



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

SEC. 42. Penalties.

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

(b) Violation of Section 41. - ‘The penalty of reclusion temporal or a fine ranging from
Fifty thousand pesos (P50,000.00) to One hundred thousand pesos (P100,000.00) or
both, at the discretion of the court, shall be imposed on any person found guilty of
violating Section 41 of this Act.

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

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

CHAPTER XIL
FINAL PROVISIONS

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

SEC. 44, Natural Gas Oversight Commission. - Upon the effectivity of this Act, a
congressional commission, hereinafter referred to as the "Natural Gas Oversight
Commission", is hereby constituted. The Natural Gas Oversight Commission shall be
composed of ten (10) members, with the chairmen of the Committee on Energy of the Senate
and the House of Representatives and four additional members from cach House, to be
designated by the Senate President and the Speaker of the House of Representatives,
respectively. The minority shall be entitled to pro rata representation but shall have at least
‘one representative in the Natural Gas Oversight Commission.

(a) The Natural Gas Oversight Commission shall, in aid of legislation, perf
following functions. among othe:



(b) Set the guidelines and overall framew
this Act;

k to monitor the proper implementation of

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

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

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

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

(g) Oversight Commis
ofall personnel;

ion and all disbursements therefrom, including compensation

(h) Submit periodic reports to the President of the Philippines and Congress; and

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

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

The Natural Gas Oversight Commissiomssha!l adopt its internal rules of procedure;

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

SEC, 45. ‘Separabitity Clause. - Uf, 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 fali free and eff

SEC, 46, Nonretroactivity, Applicability and Repeating Clause. - ‘The provisions of
Republic Act No, 387, otherwise known as the "Petroleum Act of 1949", as amended,
Presidential Decree No. 87, Republic Act No. 8997, and all other laws, decrees, executive
orders, rules and regulations, circulars and other issuances inconsistent with the provisions of
this Act are hereby repealed or modified accor

SEC. 47. Transitory Provision. - Gas transmission systems and gas distribution
systems that have been constructed and have commenced operation prior to the date of
effectivity of this Act shall continue to operate under their existing authorities: Provided, That
they have complied with existing laws, rules and regulations prior to the effectivity of this
Act and have secured a provisional permit from the DOE as provided in Sections 15 and 21
of this Act. Suppliers who have entered into gas sales and purchase contracts with customers
and have delivered indi “ts prior to the date

Spee nes ve BUERAa



of effectivity of this Act shall continue to sell natural gas under their existing authorities
provided they have complied with existing laws. rules and regulations prior to the effectivity
of this Act.

Nothing in this Act shall be deemed to revoke or otherwise'modily the powers and
functions of the Philippine National Oi! Company and its sul s under Presidential
Deeree No. 334, as amended, any existing concession granted under the Petroleum Act of
1949, as amended, certificate of public convenience or certificate of public convenience and
necessity granted pursuant to the Public Service Law, as amended, specific franchise for the
transmission, distribution or supply of natural gas or other administrative or regulatory permit
or contract, which concession, certificate, franchise, permit or contract shall be allowed to its
full term but may not be renewed except pursuant to the provisions of this Act.

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

SEC. 48. Effectivity Clause. - This Act shall take effect on the fifteenth (15th) day
following its publication in the Official Gazette and in at least two national newspapers of
general circulation.

Approved,