I 
Prepared jointly by the Coininittees on Energy, 
Gordon, Plavier, Madrigal, Arroyo and Hecto as au 
Services and ~ a y s  
and 
Magsaysay, Roxrs, 
Means with Senators J.@X&Dh, ~
~
~
~
~
AN ACT 
REVISING REI'UBLIC ACT NO. 9136 ENTITLED "AN ACT ORDAINING 
REFORMS IN TIE ELECTRIC POWER INDUSTRY, AMENDiNG FOR THE 
PURPOSE CERTAIN LAWS AND FOR OTHER PURPOSES" 
Be it enacted bv the Senate and House of Representatives of the Philimines in Conpress 
assem bled: 
Section 1. Republic Act No. 9136, otherwise known as the Electric Power Industry 
Refoim Act of 2001, is hereby revised to read as follows: 
"CI-IAPTER I 
"TITLE AND DECLARATION OF POLICY 
"SEC. 1. 
Short Title. - This Act, HEREINAFTER REPERRED 
TO AS THE ACT, shall be known as the "Electric Power Industry Reform Act 
of'2001". [It shall hereinalter be referred to as the Act.] 
"SEC. 2. 
Declaration qf Policy. - 
It is hereby declared the policy 
ofthe State: 
(a) 
To ensure and accelerate the [total electrification og PROVISION 
OF ELECTRIC SERVICE TO EVERY COMMUNITY IN tlie country; 
(b) 
To ensure the quality, reliability, security, and affordability of the 
supply or electric power; 
(c) 
To ensure transparent, JUST and reasonable prices of electricity in 
THE COUNTRY UNDER a regime of free and fair competition and full [public] 
accountability TO THE END-USERS OF ELECTRICITY AND, AT THE 
SAME TIME, to achieve greater operational [and economic] ECONOMY, 
efficiency, AND VIABILITY and TO enhance the competitiveness of Philippine 
products in the [global] WORLD market; 
(d) 
To ENCOURAGE, PROMOTE, AND enhance, the [inflow] 
PLOW of private capital TO, and broaden the ownership base of, the power 
generation, transmission, and distribution sectors[;] OF THE ELECTRIC 
POWER INDUSTRY; 
(e) 
To THE EXTENT IT IS LEGALLY ALLOWABLE AND 
JUSTIFIED, TO ensure A fair and non-discriminatory treatment of BOTH THE 
public and private [sector] entities ENGAGED IN TIIE ELECTRIC POWER 
INDUSTRY in CONNECTION WITH the process of restructuring the [electric 
power] SAID industry; 


(0 To protect the [public] interesl OF THE GENERAL PUBLIC 
AND THE INTEREST OF THE END-USERS OF ELECTRICITY, as [it is] 
THESE INTERJ3STS Am affected by the WHEELING CEIARGES, rates, 
and services of THE electric TRANSMISSION, SUB-TRANSMISSION, OR 
DISTRIBUTION utilities [and] OR BY THE PRICES OF THE olher 
providers of electric power[;] IJNDER THIS ACT; 
(9) 
To assure socially and environmentally compatible energy sources 
and ELECTRIC POWER infrastructure; 
(11) 
To SEARCH FOR AND promote the utilization of indigenous, 
[and] new, and renewable energy SOURCES AND resources in [power] THE 
generation OF ELECTRIC POWER in order to reduce THE dependence OF 
THE COUNTRY on imported energy[;] SOURCES AND RESOURCES; 
(i) 
To provide for [mj THE MOST ADVANTAGEOUS, 
BENEFICIAL, orderly, and transparent SALE, DISPOSITION, AND 
privatization of the GENERATION ASSETS, TRANSMISSION AND SUB- 
TRANSMISSION assets [and], REAL ESTATE ASSETS, OTHER 
DISPOSABLE ASSETS, IPP CONTRACTS, AND liabilities of the National 
Power Corporation (NPC); 
Q) 
To establish a TRULY IMPARTIAL, DEPENDABLE, strong, 
and [purely] independent regulatory [body] GOVERNMENT AGENCY and 
system [to ensure consumer protectionl, WIJICI-I SHALL PROTECT THE 
GENERAL PUBLIC AND THE END-USERS OF ELECTRICITY AND, AT 
THE SAME TIME, RECOGNIZE THE RIGHT OF THE ELECTRIC 
POWER INDUSTRY PARTICIPANTS TO A JUST AND REASONABLE 
RETURN ON THEIR INVESTMENTS, 
AND 
WHICH SHALL 
PROMOTE, FOSTER, aid enhance [the competitive] COMPETITION IN 
THE operation ofthe electricity marl&[; and] OF THE COUNTRY; AND 
(IC) 
To encourage [the efficient use of energy andl AND PROMOTE 
ECONOMY AND EFFICIENCY IN THE UTILIZATION OF ELECTRIC 
POWER IN THE COUNTRY BY THE END-USERS OF ELECTRICITY, 
AND IN THE other modalities of THE [djDemand [s]Side [m]Management. 
"SEC. 3. 
Scope. - This Act shall provide [a] THE framework for 
the GRADUAL restructwing of the electric power industry[, including the]; 
FOR THE BENElTICIAL SALE, DISPOSITION, AND privatization of the 
[assets of NPC, the] GENERATION ASSETS, TRANSMISSION AND SUB- 
TRANSMISSION 
ASSETS, 
REAL 
ESTATE 
ASSETS, 
OTHER 
DISPOSABLE ASSETS, IPP CONTRACTS, AND LIABILITIES OF NPC; 
FOR THE ORDERLY transition to the desired competitive MARKET 
structure[, and the definition] IN THE ELECTRIC POWER INDUSTRY; 
AND FOR THE CLEAR DEFINITION, DIVISION, AND ASSIGNMENT of 
the respoiisibilities of the various CONCERNED government agencies and 
private entities[.] THAT ARE INVOLVED IN THE ELECTRIC POWER 
INDUSTRY. 
"SEC. 4. 
(A) 
"AFFILIATE"/"ASSOCIATED 
ENTITY OR PERSON" 
REFERS TO ANY ENTITY OR PERSON WHICH, ALONE OR 
TOGETHER WITH ANY OTHER ENTITY OR PERSON, DIRECTLY 012 
INDIRECTLY, THROUGH ONE OR MORE INTERMEDIARIES, 
CONTROLS, IS CONTROLLED BY, OR IS UNDER COMMON 
CONTROL WITH ANOTHER ENTITY OR PERSON. 
Dejkition of Terms. - 


3 
[(all (B) 
"Aggregator" refers to a person or entity[, engaged] 
LICENSED BY THE COMMISSION TO ENGAGE in consolidating electric 
power demand of end-users OF ELECTRICITY in [the] A contestable market[,] 
WITHIN A FMNCHISE TERRITORY OF ANOTHER PARTY for the 
purpose of purchasing and reselling electricity TO SUCH END-USERS on a 
group basis; 
WI-TICII, WITI-TOUT A 
LEGISLATIVE FRANCIIISE, IS 
DULY 
[@)I (C) 
"Ancillary Services" refer to those services that are 
necessary to support the transmission of capacity and energy from SOURCES 
AND resources to loads while maintaining reliable operation of the transniission 
system in accordance with good utility [practice] PRACTICES and tlie Grid 
Code WHICH IS REQUIRED to be adopted in accordance with this Act; 
I(c)l (1% 
"Captive Market" refers to [electricity end-users who do 
not have tlie choice of a supplier of electricity, as may be determined by the 
Energy Regulatory Commission (ERC) in accordance with this Act;] TI-IAT 
MARKET, WHICH SHALL BE DETERMINED BY THE COMMISSION 
IN ACCOlZDANCE WITH THIS ACT, AFTER DUE NOTICE TO ALL 
INTERESTED PARTIES AND PUBLIC HEARING, CONSISTING OF 
END-USERS OF ELECTRICITY IN A FRANCHISE TERRITORY OF A 
DISTRIBUTION UTILITY THAT CANNOT CHOOSE THEIR SUPPLIER 
OF ELECTRICITY; 
[(dl (E) 
"Central Dispatch" refers to the [process of issuing] 
ISSUANCE OF direct instructions BY THE GRID OPERATOR to electric 
power industry participants [by the grid operator] IN ORDER to achieve the 
[economic] MOST ECONOMICAL operation, and THE maintenance of THE 
HIGHEST DEGREE OF quality, stability, reliability, and security, of the 
transmission system; 
(F) 
"CENTRAL 
SCHEDULING" 
REFERS 
TO 
THE 
PREPARATION BY THE MARKET OPERATOR OF A DISPATCH 
SCHEDULE TO DETERMINE THE DISPATCH OF GENERATING 
UNITS TO MEET DEMAND AT LEAST COST FOR EACH TRADING 
INTERVAL; 
[(e)] (G) 
"Co-Generation Facility" refers to a facility [which] THAT 
produces electrical and/or [AND OR] mecliauical energy and OTHER forms of 
useful thermal energy, such as heat or steam, which are used for 
RESIDENTIAL, industrial, OR commercial heating or cooling purposes through 
the sequential use of energy; 
[OI (19 
"Commission" reFers to the decision-making body of the 
[ERC] ENERGY REGULATORY COMMISSION @RC) composed of a 
Chairman and four (4) members as provided under Section [38 hereofj 37 OF 
THIS 
ACT[;]. 
FOR 
PURPOSES 
OF 
CONSTRUING 
AND 
INTERPRETING THE RELEVANT PROVISIONS OF THlS ACT, THE 
TERMS "COMMISSION", "ENERGY REGULATORY COMMISSION", 
AND "ERC" SHALL, UNLESS THE CONTEXT CLEARLY INDICATES 
OTHERWISE, SHALL REFER TO THE ONE AND THE SAME ENTITY; 
I(g)I 0) 
"Concession Contract" refers [to the award by the 
goveiiunent] TO A CONTRACT FROM THE NATIONAL GOVERNMENT 
OR FROM ANY OF ITS AUTHORIZED INSTRUMENTALITIES, 
WHICH GRANTS to a qualified private entity [of] the I'RIVILEGE OF AND 
THE responsibility for financing, operating, expanding, maintaining, and 


4 
managing specific [Government-ouiied assets;] NATIONAL GOVERNMENT 
DISPOSABLE ASSETS; 
[(11)1 (4 
"Contestable Market" refers to [the electricity end-users 
who have a choice of a supplier of electricity, as may he determined by the ERC 
in accordance with this Act;] THAT MARKET, WHICH SI-IALL BE 
DETERMINED BY THE COMMISSION IN ACCORDANCE WITH THIS 
ACT, AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND 
WITHIN A FRANCHISE TERRITORY OF A DISTRIBUTION UTILITY 
THAT CAN CHOOSE THEIR SUPPLIER OF ELECTRICITY; 
PUBLIC HEARING, CONSISTING OF END-USERS OF ELECTRICITY 
(IC) "CONTROL" REFERS TO THE POWER TO DIRECT OR 
CAUSE THE DIRECTION OF THE MANAGEMENT POLICIES OF AN 
ENTITY OR PERSON BY CONTRACT, AGENCY, OR OTHERWISE. 
IN1 (L) 
"Customer Service Charge" refers to [the] AN AMOUNT 
WHICH IS A component [in] OF the retail rate AND WHICH IS intended [for 
the cost recovery of customer-related services including,] TO RECOVER THE 
USER-RELATED SERVICES SUCH AS, but not limited to, meter reading, 
billing administration and collection; 
PRUDENT, JUST, AND REASONABLE COST OF ELECTRIC END- 
Iml (M) 
"Demand Side Management" refers to THE measures, 
DECISIONS, AND ACTIONS undertaken by distribution utilities to encourage 
end-users OF ELECTRICITY [in the proper management of their load to 
achieve] TO PROPERLY MANAGE THEIR LOADS IN ORDER TO 
ACHIEVE ECONOMY AND efficiency in the utilization of fixed 
infrastructures [in the system;] THAT ARE USED AND USEFUL IN THE 
ELECTRIC POWER SYSTEM; 
I(1C)l gv) 
"Department of Energy" or "DOE" refers to the 
NATIONAL goverivnent [agency] INSTRUMENTALITY created [pursuant to 
Republic Act No. 7638 whose expanded functions are provided herein;] UNDER 
REPUBLIC ACT NO. 7638; 
[(Ill (0) 
"Department of Finance" or "DOF" refers to the 
NATIONAL government [agency] INSTRUMENTALITY cleated [pursuant to] 
UNDER Executive Order No. 127[;], SERIES OF 1987; 
(P) 
"DISPATCH SCIIEDULE" REFERS TO THE TARGET 
LOADING LEVELS IN MEGAWATT FOR EACH SCHEDULED 
GENERATING UNlT OR SCIIEDULED LOAD AND FOR EACH 
RESERVE FACILITY FOR THE END OF THAT TRADING INTERVAL, 
DETERMINED BY TIIE MARIUCT OPERATOR. 
[(@I (Q) 
"Distribution Code" refers to a compilation of ides [and 
regulations governing electric utilities in the] INTENDED TO GOVERN AND 
GUIDE 
ELECTRIC 
DISTRIBUTION 
UTILITIES 
IN 
THE 
MANAGEMENT, operation, and maintenance o€ 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 of the parties connected thereto;]. 
IT SHALL 
INCLUDE, AMONG OTHERS, TIIE RULES AND STANDARDS TO BE 
OBSERVED BY DISTRIBUTION UTILITIES IN RENDERING THEIR 
MEASURING THE EFFICIENCY OF THEIR PERFORMANCE, AND 
THE RULES AND STANDARDS THAT SHALL GOVEIW THE 
RELATIONSHIP OF THEIR DISTRIBUTION SYSTEMS WITH THE 
SERVICES TO 'THEIR END-USERS OF ELECTRICITY AND IN 


5 
FACILITIES OR INSTALLATIONS OF OTIIER PARTIES CONNECTED 
TO SUCH DISTIURUTION SYSTEMS; 
I(11)l (N 
"Distribution of Electticity" relers to the conveyance AND/ 
OR RETAIL SALE of electric power by a distribution utility TO ITS END- 
USERS OF ELECTRICITY through its distribution system pursuant to the 
provisions of this Act; 
[(o)] (S) "Distribution System" refers to the system of wires and 
associated facilities belonging to [a fianchised distribution utility, extendingj A 
DISTRlBUTPON UTILITY IN ITS FRANCHISE TERRITORY, WHICII 
EXTENDS between the delivery points [on] OF the transmission or sub- 
transmission system [or generator connection and] OF THE TRANSCO OR OF 
A GENERATION COMPANY, AS THE CASE MAY BE, AND the point of 
connection OF SUCH WIRES AND ASSOCIATED FACILITIES lo the 
premises of the [end-user;] END-USERS OF ELECTRICITY; 
[(p)] (T) "Distribution Wlieeling Charge" relers to the [cost or charge 
regulated by the ERC] THE AMOUNT AUTIIOlUZED BY THE 
COMMISSION, APTER DUE NOTICE TO ALL INTERESTED PARTIES 
AND PUBLIC HEARING, TO BE CIIARGED for the use of (a] THE 
distribution system [and/or the availment of related services;] OF A 
DISTRIBUTION UTILITY AND/OR FOR THE USE OF OTHER 
RELATED SERVICES OF A DISTRIBUTION UTILITY: 
[(dl (U) 
"Distribution Utility" refers to any electric cooperative, TO 
ANY private corporation, TO ANY government-owned DISTRIBUTION utility, 
or TO ANY existing local governirrent unit, which has an exclusive fiancliise to 
operate a distribution system Iin accordance with this Act;] IN A SPEClFIC 
GEOGRAPHICAL. AREA UNDER THIS ACT; 
[(dl cv) 
"Electric Cooperative" refers to a distribution utility 
organized pnrsuant to Presidential Decree No. 269, as amended, or as otlterwise 
provided in this Act; 
[(s)j (W) 
"Electric Power Industry Participant" refers to any person 
or entity engaged OR WHO SHALL ENGAGE in the generation, tr~is~nission, 
distribution, or snpply of electricity; 
Wl (XI 
["End-user" refers to any person or entity requiring] 
"END-USERS OF ELECTRICITY" REFER TO PERSONS OR ENTITIES 
THAT RJLQUIRE OR HAVE ACTUAL ACCESS TO the supply and delivery 
of electricity for (its own use;j THEIR OWN USE. FOR PURPOSES OF 
CONSTRUING AND INTERPRETING THE RELEVANT PROVISIONS 
BE IDENTICAL IN MEANING TO THE TERM "CONSUMERS OF 
ELECTRICITY", 
AND 
THE 
PLURAL 
SHALL INCLUDE THE 
SINGULAR AND VICE VERSA, UNLESS THE CONTEXT CLEARLY 
INDICATES OTIIERWISE; 
OF THIS ACT, THE TERM "END-USERS OF ELECTRICITY" SHALL 
[@)I (Y) 
"Energy Regulatory Board" or "ERB" refers to the 
[independent,] NOW DEFUNCT quasi-judicial regulatory body created under 
Executive Order No. 172, as amended; 
I@)l (2) 
"Energy Regulatory Commission" or "ERC" refers to the 
regulatory agency cveated [herein;] UNDER SECTION 37 OF THIS ACT ANI) 
ALSO DEFINED IN PARAGRAPH (H) OF THIS SECTION; 


6 
[(w)] (AA) 
"Franchise [Area] TERRITORY" refers to a SPECIFlC 
geographical area [exclusively] assigned or granted EXCLUSIVELY UNDER A 
FRANCHlSE to a distribution utility for THE distribution of electricity; 
[(x)] (BE) 
"Generation Company" refers to any NATURAL OR 
JURIDICAL person or entity authorized by the [ERC to operate facilities wed in 
the generation of electricity;] COMMlSSION TO OPERATE AND/OR OWN 
ELECTRIC POWER PLANT OR PLANTS AND OTHER RELATED 
FACILITIES FOR THE GENERATION AND SALE OF ELECTRICITY; 
[(y)] (CC) 
"Generation of Electricity" refers to the production of 
[electricity] ELECTRIC POWER AND ENERGY by a generation company, or 
RY a co-generation facility, [pursuant to] IN ACCORANCE WITH the 
provisions or this Act; 
[(z)] (DU) 
"Grid" refers to the high voltage backbone system of 
interconnected transmission lines, substations, and OTHER related facilities; 
[(aa)] (EE) 
"Grid Code" refers to [the set] A COMPILATION of rules 
and regulations [governing] WHICH SHALL GOVERN the safe, EFFICIENT, 
and reliable operation, MANAGEMENT, maintenance, [aid] development, 
AND EXPANSION of the high voltage backbone transmission system and its 
OTHER related Eacilities; 
[(bb)] (FF) 
"Independent Power Producer" or "IPP" refers to an 
existing [power generating entity] GENERATION COMPANY, which is not 
owned by NPC[;] AND WITH WHOM NPC OR A DISTRIBUTION 
UTILITY HAS A VALID AND EXISTING PIJRCHASED POWER 
CONTRACT; 
[(cc)] (GG) 
"Inter-Class Cross Subsidy" refers to an amount charged by 
distribution utilities to RESIDENTIAL, industrial [and], commercial [end-users 
as well as to], AND other subsidizing [customer sectors] END-USERS OF 
ELECTRIClTY in order to [reduce electricity rates of other customer sectors] 
COMPENSATE FOR THE REDUCED ELECTRIC RATES CHARGE TO 
OTHER 
CLASS OF END-USERS OF ELECTRICITY, such as [the] 
CERTAIN 
residential end-users[,] OF ELECTRICITY, hospitals, and 
streetlights; 
[(dd)] ( I W )  "Inter-Regional Grid Cross Subsidy" refers to [an] THE 
amount embedded in the [electricity rates of NPC charged to its customers] 
ELECTRICITY located in a viable regional grid in order to [reduce the 
electricity] COMPENSATE FOR THE REDUCED ELECTRICITY rates in a 
less viable regional grid; 
[(ee)] (11) 
ELECTRlCITY RATES THAT NPC COLLECTS FROM END-USERS OF 
"Intra-Regional Grid Cross Subsidy" refers to [an] THE 
amount embedded in the [electricity rates of NPC charged to] ELECTRICITY 
RATES THAT NPC COLLECTS FROM distribution utilities [and non- 
utilities] with higher load factor and/or [AND OR] delivery voltage in order to 
[reduce the electricity rates charged to] COMPENSATE FOR THE RJ3DUCED 
ELECTRICITY RATES THAT NPC COLLECTS PROM distribution 
utilities with lower load factor and/or [AND OR] delivery vollage located in the 
same regional grid; 
[(ff)] (JJ) 
"IPP Administrator" refers to A qualified independent 
ENTITY OR entities [appointed by] THAT PSALM Corporation [who] shall 
APPOINT TO EFFICIENTLY administer, conserve, and manage the SALE 
OF THE contracted ELECTRIC energy output o€ WPC] NPC'S IPP contracts; 


I 
[(ggj] (ICK) 
"Isolated Distribution System" re€ers tb tlie backbone 
system of wires and associated facilities not directly connected to the national 
transmission system; 
[(lili)] (LL) 
"Lifeline Rate" refers to [tlie] A SPECIAL subsidized rate 
given to MARGINALIZED [low-income captive market] end-users OF 
TERRITORY, AND who camot afford to pay [at full cost;] THE FULL RATE 
ELECTRICITY IN THE SAME FRANCHISE TERRITORY; 
ELECTRICITY IN THE CAPTIVE MARKET OF A FRANCHISE 
AUTHORIZED 'ro BE COLLECTED FROM OTHER END-USERS OF 
(MM) "MARICET OPERATOR" REFERS TO THE ENTITY 
RESPONSIBLE FOR THE PREPARATION OP THE DISPATCII 
SCHEDULE FOR PURPOSES OF OPERATING THE SPOT MARKET. 
[(ii)] (NN) 
"National Eleciiification Administration" or "NEA" refers 
to the government agency created under Presidential Decree No. 269, as amended, 
[and] whose additional mandate is [further set forth herein;] SET FORTH IN 
THIS ACT; 
' [('jj)] (00) 
"National Power Corporation" or "NPC" refers to the 
government corporation created under Republic Act No. 6395, as amended; 
[(lk)] (PI') 
"National Transmission Coi+poration" or ["TRANSCO") 
"THE 
TRANSCO" 
refers 
to 
the 
GOVERNMENT-OWNED-AND- 
CONTROLLED corporation [organized pursuant to this Act to acquire all the 
transmission assets of tlie NPC;] CREATED UNDER SECTION 8 OF THIS 
TRANSMISSION FUNCTIONS OF NPC AND TO ACQUIRE ALL OF 
Nl'C'S 
TRANSMISSION AND SUB-TRANSMISSION ASSETS AND 
OTHER RELATED FACILITIES AND ASSETS, INCLUDING NPC'S 
NATIONWIDE FRANCHISE FOR THE OPERATION OF THE 
TRANSMISSION AND . SUB-TRANSMJSSION SYSTEMS AND TIlE 
GRID; 
ACT TO ASSUME THE ELEcrRIc TRANSMISSION AND SUB- 
[(ilj] (QQ) 
"Open Access" reEers to the [system of allowing] 
PRIVILEGE GRANTED TO any qualified person [the use 04 TO USE THE 
transmission[, and/or] AND SUB-TRANSMISSION FACILITIES AND 
ASSETS AND/OR THE distribution system and associated facilities OF ANY 
PUBLIC OR PRIVATE PERSON OR ENTITY, subject to the payment of 
JUST AND REASONABLE transmission and/or [AND OR] distribution [retail] 
wheeling [rates] CI-IARGES duly approved by the ERC, 
AFTER DUE 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING; 
[(mill) ] (RR) "Philippine Energy Plan" or "PEP" rerers to the overall 
energy program foriiiulated and updated yearly by ihe DOE and submitted to 
Congress pursuant to Republic Act No. 7638; 
[(nn)] (SS) 
"Power Development Program" or "PDP" refers to the 
indicative plan [for1 TO BE PREPARED AND FORMULATED AND 
UPDATED YEARLY BY THE DOE, IN COORDINATION WITH THE 
GENERATION 
COMPANIES, THE 
NATIONAL 
TRANSMISSION 
CORPORATION, AND THE DISTRIBUTION UTILITIES, FOR THE 
PURPOSE OF MEETING AND managing electricity demand through energy- 
efficient programs and for the PURPOSE OF upgrading, [expansion, 
rehabilitation, repair, and maintenance of power generation and transmission 
facilities, formulated and updated yearly by the DOE in coordination with the 
generation, transmission and distribution utility conipanies;] EXPANDING, 
REHABILITATING, 
REPAIRING, 
ANI) 
MAINTAINING 
THE 


8 
ELECTRIC POWER GENERATION FACILITIES AND ASSETS, AND 
FACILITIES; 
THE TRANSMISSION AND SUB-TRANSMISSION ASSETS AND 
((oo)] (TT) 
"Power Sector Assets and Liabilities Management 
Corporation" or "PSALM Corp." refers to the GOVERNMENT-OWNED-AND- 
CONTROLLED corporation created [pursuant to Section 49 liereoe] IN 
SECTION 46 OF THIS ACT; 
[(pp)] (uu) 
"Privatization" refers to tlie sale, disposition, [change,] and 
transfer of owiersliip and control of [assets and IPP contracts, from the 
Government or a government corporation LO a private person or entity;] THE 
GENERATION 
ASSETS 
AND 
RELATED 
FACILITIES, 
THE 
FACILITIES, REAL ESTATE ASSETS, OTHER DISPOSABLE ASSETS, 
IPP CONTRACTS, AND LIABILITIES OF NPC TO A PRIVATE PERSON 
OR PERSONS, OR TO A PRIVATE ENTITY OR ENTITIES; 
TRANSMISSION 
AND 
SUB-TRANSMISSION 
ASSETS 
AND 
(vv) ''PUBLIC HEARING" 
REFERS To A PROCEEDING 
CONDUCTED BY THE COMMISSION AFTER rrs MEMBERS ARE 
FORMALLY CONVENED TO HEAR, AFTER DUE NOTICE TO ALL 
INTERESTED PARTIES, TIlE TESTIMONY OF WITNESSES UNDER 
OATH, SUB.Jl3CT TO CROSS-EXAMINATION BY ADVERSE PARTIES, 
AND TO FORMALLY RECEIVE DOCUMENTARY EVIDENCE, IN 
ORDER TO DISPOSE ANY ISSUE BROUGHT TO THE ATTENTION OF 
THE COMMISSION THROUGH MOTIONS, 
COMPLAINTS 013 
PETITION PILED WITH THE COMMISSION. 
[(qq)] (WW) "Renewable Energy Resources" [refers] REFER to energy 
resources, [that do not have an upper limit on the] THAT ARE 
REPLENISBABLE, WITHOUT ANY LIMIT AS TO THEIR total quantity 
to he used[. Such resources are renewable on a regular basis and tlie renewable 
rate 
is 
rapid 
enough to 
consider], AND 
WHOSE RATES OF 
REPLENISHMENT ARE ALMOST CONSTANT AND RAPID ENOUGH 
TO ENSURE availability over an indefinite time[. These include, among others,], 
SUCH AS biomass, solar, wind, hydro, and ocean energy; 
[(rr)] (XX) 
"Restructuring" refers to the [process of reorganizing] 
REORGANIZATION OF the electric power industry in order to introduce 
[higher efficiency, greater innovation and end-user choice. It shall be understood 
as covering a range o f  alternatives enhancing exposure of tlie industry to 
competitive market forces;] AND PROMOTE A HIGHER DEGREE OP 
EFFICIENCY, GREATER AND USEFUL INNOVATIONS, END-USERS' 
CHOICE, AND A WIDER RANGE OF ALTERNATIVES THAT WILL 
ENSURE AN11 ENHANCE THE EXPOSURE OF THE INDUSTRY TO 
COlMPETITIVE MARKET FORCES; 
[(ss)] (VU) 
"Retail Rate" refers to tlie total [price paid by end-users 
consisting oq SUM OF THE AMOUNTS OF UNBUNDLED JUST AND 
REASONABLE CHARGES THAT END-USERS OF ELECTRIClTY PAY 
CONSUMED BY THEM AND SI-IALL INCLUDE the charges for generation, 
transmission and related ancillary services[,] AND POX distribution, supply, and 
other related charges for THE RENDITION OF electric service[;] TO THE 
END-USERS OF ELECTRICITY; 
FOR EACH KILOWATT-HOUR OF ELECTRICITY ACTUALLY 


9 
[(tt)] (ZZ) 
"Small Power Utilities G ~ o L I ~ "  
or SPUG" refers to the 
functional  init it of NPC] AND OPERATING UNIT OF NFC THAT HAS 
BEEN created to pursue AND IMPLEMENT THE missionary electrification 
f~inction[;] AND OPERATION OF NPC; 
[(uu)] (AAA) 
"Stranded contract costs of NPC or OF A distribution 
utility" refer to the excess of the contracted cost of electricity under [eligible 
contracls] THE ELIGIBLE INDEPENDENT POWER PRODUCER (IPP) 
CONTRACTS OF NPC OR OF A DISTRIBUTION UTILITY over the actual 
selling price of [the contracted energy output of such contracts in the marlset. 
Such contracts shall have been approved by the ERB as of December 3 1, 2000;] 
THAT CONTRACTED ELECTRICITY FROM SUCH 11%' CONTRACTS 
IN THE MARKET: PROVIDED, THAT IPP CONTRACTS, TO BE 
DEEMED ELIGIBLE, HAJI BEEN APPROVED BY THE ERB ON OR 
BEFORE DECEMBER 31,2000; 
[(vv)] (BBB) "Stranded Debts of NPC" refer to [any] ITS unpaid 
financial obligations [of NPC which have not been liquidated by the proceeds 
from the sales and privatization of NPC assets;], WHICH HAVE NOT BEEN 
LIQUIDATED OR OFFSET BY T I E  PROCEEDS FROM THE SALE, 
DISPOSITION, AND/OR PRIVATI7ATION OF NPC'S GENERATION, 
TRANSMISSXON 
AND 
SUB-TRANSMISSION 
ASSETS 
AND 
FACILITIES, REAL ESTATE ASSETS, OTHER DISPOSABLE ASSETS, 
AND 1P1' CONTRACTS; 
I(ww)l (CCC) 
"Sub-transmission Assets" refer to [tlie] ALL 
ASSETS AND facilities related to the power delivery service below the 
transmission voltages and, based on tlie hnctional assignment of assets 
[including], SI-IALL INCLUDE, but SHALL not BE limited to, step-down 
transforiners used solely by load customers, associated [switchyadsubstation] 
SWITCHYARD AND/OR SUBSTATION, control and protective equipment, 
reactive compensation equipment to improve customer power factor, overhead 
lilies, and the land where such [facilities/equipiiie~it are located. These include 
NPC assets linlsing the transmission system and the distribution system which are 
neither classified as generation nor transmission;] FACILITIES AND/OR 
EQUIPMENT ARE LOCATED, AS WELL AS ASSETS OF NPC LINKING 
THE TRANSMISSION SYSTEM AND THE DISTRIBUTION SYSTEM, 
WI3ICI-I ARE CLASSIFIED NEITHER AS GENERATION ASSETS NOR 
AS TRANSMISSION ASSETS; 
[(xx)] (DDD) ["Supplier" refers] "SUPPLIER OF ELECTRICITY" 
REFERS, 
UNLESS 
THE 
CONTEXT 
CLEARLY 
SUGGESTS 
OTHElZWXSE, l o  any person or eutity authorized by the [ERC] COMMISSION 
to sell, broker, market, or aggregate electricity to the end-users[;], AND DOES 
NOT INCLUDE A PERSON OR ENTITY ENGAGED IN 'ITIE 
DISTRIBUTION OF ELECTRICITY; 
GENERATION, 
TRANSMISSION, 
SUB-TRANSMISSION, 
AND 
[(yy)] (EEE) "Supplier's Charge" refers to the charge imposed by AN 
electricity [suppliers] 
SUPPLIER for ilie sale of electricity to end-users[, 
excluding] IN THE CONTESTABLE MARKET, EXCLUDING the chirrges 
for generation AND THE WHEELING CHARGES FOR transmission and 
distribution [wheeling]; 
[(zz)] (PFP) "Supply of Electricity" [means the sale of electricity by a 
pai-ty other than a generator or a distributor in the franchise area of a distribution 
utility, using the wires of the distribution utility concerned;] SHALL REFER, 
OF 
BUYING 
AND 
SELLING, 
BROKERING, 
MARKETING 
UNIZSS THE CONTEXT SUGGESTS OTHERWISE, TO THE BUSINESS 


10 
ELECTRICITY BY A PERSON OR ENTITY, OTHER THAN A 
GENERATION COMPANY OR A DISTRIBUTION UTILITY, TO END- 
USERS OF ELECTRICITY, OR OF AGGREGATING DEMANDS FOR 
TERRITORY OF A DISTRIl3UTION UTILITY, USING FOR .THE 
UTILITY CONCERNED; 
SUCH END-USERS OF ELECTRICITY, IN THE 
FRANCHISE 
P u w o s E  TIIE WIRES AND FACILITIES OF THE DISTRIBUTION 
(GGG)"SYSTEM OPERATOR" REFERS TO THE ENTITY 
RESPONSIBLE FOR THE IMPLEMENTATION OF THE DISPATCI-I 
SCHEDULE, THE PROVISION OF ANCILLARY SERVICES, AND 
OPERATION AND CONTROL TO ENSURE SAFETY, POWER 
QUALITY, STABILITY, RELIABILITY AND SECURITY OF THE GRID 
WHICH UPON THE PASSAGE OF THIS ACT REFERS TO TRANSCO. 
((aaa)] (I-IHH) "Transmission Charge" refers to the regulated cost or 
[charges] CHARGE AUTHORIZED BY THE COMMISSION for the use of a 
transmission system which may include the [availment] USE of 
ancillary 
services; 
[(bbb)] (111) "Transmission Development Plan" or "TDP" refers to the 
PART OF THE POWER DEVELOPMENT program PREPARED AND 
TO BE IMPLEMENTED BY THE LATTER IN ACCORDANCE WITH 
THIS ACT for managing the transmission system [through] AND FOR THE 
efficient planning [for the] OF ITS expansion, upgrading, rehabilitation, repair, 
and maintenance[, to be formulated by DOE and implemented by-the TMNSCO 
pursuant to this Act]; 
FORMULATED BY TIIE DOE tToiivrLY WITH THE TRANSCO AND 
[(ccc)] (JJJ) "Transmission of Electricity" refers to the conveyance of 
electricity through the high voltage backbone system; and 
' 
[(ddd)] (ItIUt) 
"Universal Charge" refers to the charge, if any, 
[imposed for the recovery of the stranded cost and other purposes puvsuant to 
Section 34 hereof.] TO BE DETERMINED, FIXED, AND APPROVED BY 
PARTIES AND I'UBLIC HEARING, IN ACCORDANCE WITH AND FOR 
THE PURPOSES MENTIONED IN SECTION 33 OF THIS ACT. 
m E  COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED 
"CHAPTER I1 
"ORGANIZATION AND OPERATION OF THE ELECTRIC 
POWER INDUSTRY 
"SEC. 5 .  Organization. - The electric power industry shall be divided 
into four (4) sectors, naniely: [g] Generation[;] SECTOR, [t]Transmission[;] 
SECTOR, [dlDistribution SECTOR, and [s]Supply SECTOR. 
"SEC. 6. 
Generation Sector. - THE [Glgeneration of electric 
power[,] IS a business affected with public interest[,] AND shall be competitive 
and open. 
Upon the effectivity of this Act, any new generation company OR 
ENTITY shall, before it operates, secure from the [Energy Regulatory 
Commission (ERC)] COMMISSION a certificate or ADHERENCE TO AND 
compliance [pursuant to] WITH the standards set forth in this Act, WITH THE 
WHOLESALE ELECTIUCITY SPOT MARKET RULES, as well as WITH 
GRID CODE, WITH THE DISPATCH SYSTEM, AND WITH THE 


I 1  
health, safety, and environmental [clearances from the] STANDARDS AND 
REQUIWMENTS OF appropriate goveriment agencies under existing laws. 
Any law to the contrary notwithstanding, IT IS HEREBY DECLARED 
THAT UPON THE EFFECTIVITY OF THIS ACT power generation shall not 
be [considered] DEEMED a public utility operation. [For this purpose, any] 
ANY person or entity WI3ICII IS NOW engaged or which shall engage in power 
generation and supply of electricity shall not be required to secure a national 
franchise. 
Upon THE implementation of retail competition and open access, the 
prices charged by a generation company for the supply of electricity shall not be 
subject lo ANY IUND OF regulation by the [ERC] COMMISSION, except as 
otherwise provided in this Act. 
[[pursuant to the objective of loweringj IN ORDER TO LOWER 
electricity rates to end-users, sales of [generated power] ELECTRICITY by 
generation coinpatlies shall be value-added tax zero-rated.] 
The [ERC shall, in determining] COMMISSION, IN ORDER TO 
DETERMINE the existence OF ABUSE of market power [abuse] or OTHER 
anti-competitive behavior, IS HEREBY AUTI-IORIZED TO require [from] 
generation companies [the submission OF] TO SUBRTIT their financial 
statenients[.] AT ANYTIME. 
"SEC. 7. 
Transmission Sector. - The transmission of electric 
power shall be a regulated coinrnon electricity carrier business, subject to the 
ratemalcing [powers of the ERC.] AUTHORITY OF THE COMMISSION. 
The [ERC] COMMISSION shall set the standards of the voltage 
transmission that shall [distinguish] SET APART tlie transmission ASSETS 
from the. sub-transmission assets. Pending the issuance of such [new1 standards, 
the distinction between the transniissiou ASSETS and sub-transmission assets 
shall be as follows: THE TRANSMISSION ASSETS SHALL RE 230 kilovolts 
aiid above in the Luzon Grid[,]; 69 kilovolts and above in tlie Visayas GRID and 
in tlie isolated distribution systems[,]; and 138 kilovolts and above in the 
Mindanao Grid: Provided, That for tlie Visayas and the isolated distribution 
[system, should] SYSTEMS, IF the 69 kilovolt line DOES not form pail of the 
main transmission grid and [be], IS directly connected to the substation of the 
distribution utility, it sliall form part of the sub-transmission system. 
"SEC. 8. 
Creation of the National Trrinsmission Company. - 
There 
is bereby created a National Transmission Corporation, hereinafter referred to as 
THE TRANSCO, which shall assume tlie electrical transmission functions of the 
National Power Corporation (NPC), and WI-IICII SHALL have the powers and 
OTIIER fiinctioiis hereinafter granted. The TRANSCO shall ALSO assume tlie 
authority aiid responsibility of NPC for tlie planning, construction aud centralized 
operation and maintenance of [its] NPC'S high voltage transmission facilities, 
iiicluding grid interconnections and ancillary services. 
Within six (6) months from the effectivity of this Act, the transmission 
and sub-transmission ASSETS AND facilities of NPC and all otlier assets related 
to transmission operations, including the nationwide franchise of NIT for the 
operation of the transmission sytem and the grid, shall be transferred IPSO 
FACTO AND IN TOTO to the TMNSCO. The TMNSCO shall be wholly 
owned by the Power Sector Assets and Liabilities Management Corporation 
(PSALM COYP.)[.] CREATED IN SECTION 46 OF m s  ACT. 


12 
The sub-transmission functions [and], assets, FACJLITIES, AND 
LIABILITIES, IF ANY, shall be segregated from the transmission functions, 
assets, FACILITIES, and 
liabilities for transparency and 
[disposal] 
DISPOSITION: Provided, That IN THE MEANTIME the sub-transmission 
FUNCTIONS, assets, AND FACILITIES shall be PERFORMED, operated, 
and maintained by THE TRANSCO until [their disposal] SUCII FUNCTIONS, 
ASSETS, AND FACILITIES ARE SOLD OR OTHERWISE DISPOSED 
AND TRANSFERRED to qualified distribution utilities wliich are [in a position] 
CAPABLE to take over tlie responsibility for PERFORMING, operating, 
maintaining, upgrading, aid expanding said assets[.] AND FACILITIES. All 
transmission and sub-transmission related liabilities of NPC shall be transfeired to 
and SHALL BE assumed by the PSALM Corp. 
THE TRANSCO shall negotiate with and thereafter, 
transfer such 
functions, assets, FACILITIES, and associated liabilities to the qualified 
distribution utility or utilities connected to such subtransmission ASSETS AND 
facilities not later than two (2) years from the effectivity of this Act or FROM tlie 
start of open access, whichever comes earlier: Provided, That in [the] case [ofj 
THE WINNING BIDDER OR BIDDERS ARE electric cooperatives, the 
TRANSCO shall grant THEM concessional financing over a period of twenty 
(20) years: 
Proilided, hoiimer, That the installment payments to THE 
TRANSCO for the [acquisition of] sub-transmission ASSETS AND facilities 
shall be given [first priority] by the WINNING electric cooperatives [out of] 
FIRST PREFERENCE TO the net income derived from such ASSETS AND 
facilities. 
The TRANSCO shall [determine the disposal value of the 
subhansmission assets based on the revenue potential of such assets.] HIRE AT 
LEAST TWO INDEPENDENT, COMPETENT, AND REPUTABLE 
APPRAISERS TO ESTABLISH AND DETERMINE, FOR THE PURPOSE 
OF DISPOSING SAID SUBTRANSMISSION ASSETS AND FACILITIES, 
THEIR TRUE AND FAIR MARIaT VALUE BASED ON THEIR 
REVENUE POTENTIAL. 
[In case of disagreement in] DISPUTES OR DISAGREEMENTS IN 
THE valuation, procedures, ownership participation, and other issues[, the ERC 
shall resolve such issues.] RELATED TO THE DISPOSITION OF THE 
SUBTRANSMISSION 
ASSETS 
AND 
FACILITIES 
SHALL 
BE 
RESOLVED EXPEDITIOUSLY BY THE COMMISSION, AFTER DUE 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING. 
The ACQUISITlON AND take over [by a distribution utility] of any 
subtransmission FUNCTION, asset [shall not cause], AND FACJLITY BY A 
DISTRIBUTION UTILITY OR BY DISTRIBUTION UTILITIES, AS THE 
CASE MAY BE, MUST NOT RESULT 1N a diminution of THE QUALITY 
AND RELIABILITY OF THE service land quality] BEING RENDERED to 
the end-users[. Where there are] OF ELECTRICITY. IN THE EVENT THAT 
two or more [connected] distribution utilities[, the] ARE CONNECTED TO 
or juridical entity shall be formed [by and] TO ACQUIRE AND TAX= OVER 
THE SUBTRANSMISSION FUNCTION, ASSET, AND FACILITY, AND 
THE CONSORTIUM OR JURIDICAL ENTITY SHALL BE composed of 
[BY] all of [them and] SUCH DISTRIBUTION UTILITIES. IN SUCH A 
CASE, 
THE 
SUBSCRIPTION 
RIGHTS 
OF 
EACH 
OF 
THE 
DISTRIBUTION TJTILITIES INVOLVED SHALL BE PROPORTIONATE 
TO THEIR RESPECTIVE LOAD REQUIREMENTS, UNLESS THEY 
AGREE OTRERWISE AMONG THEMSELVES. THE CONSORTIUM OR 
JURIDICAL ENTITY SHALL, thereafter [shall], be granted a fTanchise BY 
THE COMMISSION to PERFORM AND operate the subtransmissioii 
FUNCTION, asset, AND FACILITY [by the ERC]. 
T m  SAME SUBTRANSMISSION ASSET AND FACILITY, A consortium 


13 
[The subscription rights of each distribution utility involved shall be 
proportionate to their load requirements, unless otherwise agreed by the parties]. 
[Aside from tlie] EXCEPT FOR THE PSALM Corp., THE TRANSCO, 
and THE connected distribution utilities, no [third] OTHER party shall be 
allowed ANY SHARE IN THE ownership OF AND/or IN THE management 
[participation], in whole or in part, [in such sub-transmission] OF THE 
CONSORTIUM OR JURIDICAL entity[.] THAT SHALL ACOUIRE AND 
TAKE OVER THE SUB-TRANSMISSION FUNCTION, ASSET, AND 
FACILITY. 
The TRANSCO may exercise tlie power of eminent domain subject to the 
requirements of the Constitution and existing laws. 
Except as provided 
OTHERWISE [berein] IN THIS ACT, no person, company, or entity, other than 
the TRANSCO, shall own any transmission ASSETS AND facilities IN THE 
COUNTRY. 
[Prior to] BEFOKF: the transfer of the transmission functions by NPC to 
TRANSCOI,] and before the proinulgation of the =id 
Code, [ERC] THE 
COMMISSION shall [ensure] SEE TO IT that NPC shall provide to all electric 
power industry participants open and non-discriminatory access to [its] NPC'S 
transmission system. 
Any violation [thereofl IIEREOF [OF THE 
PIUCCEDING SENTENCE OF THIS PARAGRAPH] shall [be subject] 
RENDER THE PARTY RESPONSIBLE FOR SUCH VIOLATION 
LIABLE to the APPROPRIATE fines and penalties imposed [herein.] IN 
SECTION 44 OF THIS ACT. 
"SEC. 9. Functions and Responsibilities. - Upon the effectivity of this 
Act, the TRANSCO shall have the following fnnctions and responsibilities: 
(a) 
[Act] TO ACT as the [system] GRID operator of the nationwide 
eIectrica1 transmission and subtransmission system, THAT SHALL be 
transfemd to it by "2; 
(b) 
[Provide open and] TO PROVIDE POWER DELIVERY 
SERVICE THROUGH lion-discriminatory OPEN access to its transmission 
system to all [electricity] QUALIFIED AND AUTHORIZED 
users[;], 
SUBJECT TO THE PAYMENT OW TRANSMISSION WHEELING 
CHARGE APPROVED BY THE COMMISSION, AFTER DUE NOTICE 
TO ALL INTERESTED PARTIES AND PUBLIC HEARING. TRANSCO[,] 
SHALL NOT[,] IN ANY WAY BY VIRTUE OF THIS PROVISION, 
ENGAGE IN RETAILING OF ELECTRICITY, WIIICEI IS A FUNCTION 
OF DISTRIBUTION UTILITIES; 
(c) 
[Ensure] TO ENSURE and maintain the reliability, adequacy, 
security, stability, and integrity of the nationwide electrical TRANSMISSION 
grid in accordance with the performance standards Tor the operation and 
maintenance of the NATIONWIDE ELECTRICAL TIUNSMTSSION grid, as 
set forth in a Grid Code to be adopted and promulgated by the [ERC] 
COMMISSION within six (6) months from the effectivity of this Act; 
(d) 
[Improve] TO IMPROVE and expand its transniission ASSETS 
AND Tacilities, consistent with the Grid Code and the Transmission Development 
Plan (TDP) to be promulgated pursuant to this Act, IN ORDER to adequately 
serve generation companies, distribution utilities, and suppliers [requiring) THAT 
REQUIRE transmission service and/or [AND OR] ancillary services through the 
transmission system: Provided, That THE TRANSCO shall submit any plan for 
THE expansion or improvement of its ASSETS AND facilities for approval by 


14 
the [ERC;] COMMISSION, AFTER DUE NOTICE TO ALL INTJ3RESTED 
PARTIES AND PUBLIC HEARING; 
(e) 
Subject to SUCH technical constraints THAT MAY EXIST OR 
ARISE, IF ANY, AND TAIUNG INTO ACCOUNT ANY OUTSTANDING 
BILATERAL CONTMCTS, the [grid) SYSTEM operator of the TRANSCO 
shall provide central dispatch of all ELECTRIC generation PLANT facilities 
connected, directly or indirectly, to the transmission system in accordance with 
the dispatch schedule submitted by the market operator[, taking into account 
outstanding bilateral contracts]; PROVIDED HOWEVER, THAT SUCII 
TRANSCO'S SYSTEM OPERATION CHARGES AS THE OPERATING 
BUDGET WREN ITS SCHEDULE AND DISPATCH FUNCTIONS 
REQUIRE COMPLETE INDEPENDENCE FROM T l W S C O  AS TI-IE 
SYSTEM OPERATOR SHALL BE ALLOWEJ) TO SPIN-OFF USING 
GRID OWNER; and 
(0 
THE TRANSCO, JOINTLY WITH THE DOE, shall undertake 
the preparation AND FORMULATION of the TDP, WHICH SHALL BE 
APPROVED BY TI-IE DOE. 
In the preparation AND FORMULATION of the TDP, THE TRANSCO 
AND THE DOE shall consult the other [participants of the] electric power 
industry [such as] PARTICIPANTS, ESPECIALLY the generation companies, 
distribution utilities, and the [electricity] end-users[.] OF ELECTRICITY. The 
TDP shall be [submitted to the DOE for integration] INTEGRATED with the 
Power Development Program and the Philippine Energy Plan, BOTH OF 
WHICH ARE provided for in Republic Act No. 7638, otherwise known as "the 
Department of Energy Act of 1992". 
[A] SUBJECT TO THE PRIOR AUTfIORIZATION OF THE 
COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
AND PUBLIC I-IEAItING, A generation company may develop and own or 
operate dedicated AND LIMITED point-to-point [limited] transmission ASSETS 
AND facilities that are consistent with the TDP[: Provided, That], IF IT IS 
CLEAIUY SHOWN THAT such TRANSMISSION ASSETS AND facilities 
are required [only for the purpose of connecting] AND TO BE USED SOLELY 
BY THE GENERATION COMPANY TO CONNECT ITSELF to the 
transmission system[,and are used solely by the generating facility, subject to 
prior authorization by the ERC: 
Provided, further, That in] OF THE 
TMNSCO. IN the event that such IJMITED TRANSMISSION assets AND 
FACILITIES are required for competitive purposes, ownership of the same shall 
be transferred to the TRANSCO at a fair market price[: Provided, finally, That 
jn]. IN case of ANY DISPUTE OR disagreement on the €air market price OF 
SUCH TRANSMISSION ASSETS 
AND 
FACILITIES, 
the 
[ERCJ 
COMMISSION shall determine the fair market (value of the asset.] PRICE OF 
SAID LIMITED TRANSMISSION ASSETS AND FACILITIES, AFTER 
DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
ZIEARING. 
"SEC. 10. 
Corporate Powers of the TRANSCO. - [As a corporate 
entity,] THE TRANSCO shall have the following corporate powers: 
(a) 
To have continuous succession under its corporate name until 
otherwise provided by law; 
(b) 
To adopt and use a corporate seal and to change, alter or modify 
the same, if necessary; 
(c) 
To sue and be sued[;] IN ITS NAME; 


15 
(d) 
To enter into [a contract] ANY LAWFUL CONTRACT, and TO 
execute any AND ALL [instrument] INSTRUMENTS necessiry or convenient 
for the [purpose] PURPOSES for which it is created; 
(e) 
To borrow funds from any source, whether private or public, 
foreign or domestic, and issue OR FLOAT bonds and other evidence of 
indebtedness: 
Provided, That in the case of [the] bond issues OR 
FLOTATIONS, it shall be subject to the approval of the President of the 
Philippines, upon THE recoinmendation of the Secretary of Finance: Provided, 
,fiirther, That foreign loans shall be obtained in accordance with existing laws, 
AND WITH TI-IE d e s  and regulations of the Bangko Sentral ng Pilipinas; 
(9 
To maintain a provident fund which [consists of] SHALL 
CONSIST OF THE REGULAR MONTHLY contributions [made by both tlie] 
OF THE TRANSCO and OF its officials and employees, and [their] THE 
earnings OF SUCH REGULAR MONTHLY CONTRIBUTIONS. 
TIIE 
PROVIDENT FUND SHALL BE EARMARKED for the payment of benefits 
to such officials and employees or their heirs, under such terms and conditions as 
[it] THE BOARD OF DIRECTORS OF THE TRANSCO may prescribe; 
(g) 
To do any [act] AND ALL ACTS necessary or proper to carry out 
the [p~irpose] PURPOSES for which [it] TIJE TRANSCO is created, or which, 
fiom time to time, may be declared by the BOARD OF DIRECTORS OF TIIE 
TRANSCO [Board asJ TO BE necessary, PROPER, useful, incidental or 
auxiliary to accomplish [its] THE TRANSCO'S purposes and objectives; and 
(11) 
Generally, to USE AND exercise ANY, AND all OF the powers 
AND PREROGATIVES of a corporation under the corporation law OF THE 
PHILIPPINES, insofar as they are lint inconsistent with this Act. 
"SEC. 11. 
XIIE TRANSCO Board of Directors. - [All the] THE 
powers of the TRANSCO shall be vested in and SHALL BE exercised by a 
Board of Directors[. The Board], WHICH shall be composed o€ a Chairman and 
six (6) members. The Secretary of Uie Department of ENERGY (DOE) shall 
[be] SERVE AS the ex o@cio Chairman of the Board. THE TRANSCO 
PRESIDENT SHALL SERVE AS THE VICE-CHAIRMAN. The other 
members of the BOARD OF DIRECTORS OF THE TRANSCO [Board shall 
include] ARE the PSALM PRESIDENT, the Secretary of the Department of 
PUBLIC WORKS AND IIIGI-IWAYS, and three (3) [members to] PRIVATE 
INDIVIDUAL CITIZENS OF THE PHILIPPINES, WHO SHALL be 
appointed by the President[, each representing] AND WHO SHALL EACH, 
RESPECTIVBLY, BE DESIGNATED TO REPRESENT Luzon, THE 
Visayas, and Mindanao. 
The SAID THREE (3) PRIVATE INDIVIDUAL members of the Board 
[so] WHO ARE appointed by the President of the Philippines sha11 serve for a 
SINGLE, NON-EXTENDIBLE, AND NON-RENEWABLE term of six (6) 
years, except that any person appointed to fill-in a vacancy shaI1 serve only FOR 
the REMAINING unexpired term of [his/her] HIS OR HER predecessor in 
office. All TI-IE THREE (3) PRIVATE INDIVIDUAL members of the Board 
shall be professionals 
of 
GOOD REPUTE AND WELL-KNOWN 
INTEGRITY AND recognized competence and expertise in the fields of 
engineering, finance, economics, law, or business management. No member ol 
the Board or any of his relatives within tlie fourth civil degree olconsanguinity or 
affinity shall have any interest, either as investor, officer or director, in any 
generation coiiipany or distribution utility or other entity engaged in (transmitting, 


16 
generating and supplying electricity specified by ERC. ] THE TRANSMISSION, 
GENERATION, OR SUPPLY OF ELECTRICITY. 
“SEC. 12. 
Powers and Duties of the Board. - The following [are] 
SHALL BE the powers orthe Board: 
(a) 
To provide stmtegic direction for THE TIUNSCO, and TO 
forniulate medium and long-term PLANS AND strategies [purstlant to the vision, 
mission, and objectives of TlUNSCO;] IN ACCORDANCE WITH TI-IE 
MISSION, OBJECTIVES, PURPOSES, AND VXSION FOR WHICH THE 
TRANSCO WAS CREATED; 
(b) 
To FORMULATE, develop, and adopt policies and measures for 
the efficient and effective management and operation o f  THE TRANSCO; 
(c) 
To DETERMINE, organize, AND re-organize[, and determine] 
the organizational slrncture and staffing pattern of THE TRANSCO; TO 
CREATE, abolish, and/OR [create] IUZCREATE offices and positions; TO fix 
the number of its officers and employees; TO REMOVE FOR CAUSE OR TO 
transfer (and re-align] OR REASSIGN such officers and [personnel] 
EMPLOYEES; AND TO fix [tlieir coinpensation, allowance, and benefits;], 
WITHIN JUST AND REASONABLE LIMITS, THE COMPENSATION, 
ALLOWANCE, 
AND 
BENEFITS 
OF 
SAID 
OFFICERS 
AND 
EMPLOYEES; 
(d) 
To fix the coinpensation of the President of THE TRANSCO, and 
to appoint and fix the coinpensation of THE other corporate officers OF THE 
CORPORATION; 
(e) 
[For cause, toJ TO suspend or remove FOR CAUSE any 
coiiiorate officer appointed by the Board; AND 
(f) 
To adopt [and] SUCH set OF guidelines [for] AS MAY BE 
NEEDED TO GOVERN the einployment of personnel on the basis of merit, 
technical competence, and moral [character; and] RECTITUDE. 
[(g) 
write-off bad debts.] 
Any provisions of the law to the contray notwithstanding, to 
“SEC. 13. 
Board Meetings. - The Board shall meet [as often as 
may be] REGULARLY ONCE EVERY MONTH, WITIIOiJT ANY NEED 
OF CALL, ON A DAY FIXED IN A FtESOLUTION OF TEIE BOARD FOR 
THAT PURPOSE, AND IN A SPECIAL MEETING, WHEN IT IS necessary, 
upon the call of the Chairman of the Board or by a majority of the [Board] 
members[.] OF TEIE BOARD. THE MINUTES OF EVERY MEETING 0 1 7  
THE BOAID SIIALL INDICATE WHETHER THE MEETING IS A 
REGULAR OR A SPECIAL MEETING AND THE I’RINCIPAL 
MATTERS TAKEN DURING EVERY SUCH MEETING. 
“SEC. 14. 
Board Per Diems and Allowances. - The members of the 
Board shall receive A REASONABLE per diem for each regular or special 
meeting of the Board actually attended by them[, and, upon approval of the 
Secretary of the Department of Finance, such other allowances as the Board may 
prescribe.]. 
THE AMOUNT OF SUCH PER DIEM SHALL BE 
COMMENSURATE TO THE STATURE AND RESPONSiBILITY OF 
THE MEMBERS OF TIIE BOARD AND SHALL BE DETERMINED AND 
FIXED BY THE PRESIDENT OF THE PBILIPI’INES. THE MEMBERS 
OF THE BOARD MAY ALSO RKCEIVE SUCH OTI-IKR JUSTIFIED AND 


17 
REASONABLE ALLOWANCES AS THE PRESIDENT OF THE 
I'BILIPPINES MAY AUTROIUZE AND PRESCRIBE. 
"SEC. 15. 
Quorzmin. - The presence of at least four (4) members of 
' the Board shall constitute a quorum[, which shall be necessary] for the transaction 
of any business[. The], AND THE affirmative vote of a majority of ALL the 
members [present in a quonm] OF THE BOARD shall be [adequate] 
REQUIRED for the approval of any [resolution, decision or order, except when 
the Board shall otherwise agree that a greater vote is required.] DECISION, 
ORDER, RESOLUTION, CONTRACT, OR PROCUREMENT. 
"SEC. 16. 
Powers of the President of TRANSCO. - The President 
of THE TRANSCO shall be appointed by the President ofthe Philippines. In the 
absence of the EX OFFICIO Chairman [OF THE BOARD], the President OF 
THE TRANSCO , AS VICE-CklAIRMAN, shall preside over THE [Board] 
meetings[.] OF THE BOARD. 
The President o f  TLIE TRANSCO shall be tlie Chief Executive Officer o f  
[TRANSCO] THE CORPORATlON and shall have the rollowing powers and 
duties: 
(a) 
To execute and administer the DECISIONS, policies, and 
nieasures approved by the Board, and TO ASSUME AND take responsibility for 
the efficient AND HONEST discharge of THE management functions[;] IN 
THE TRANSCO; 
(b) 
To oversee the preparation of the budget of THE TRANSCO[;J 
AND TO PRESENT IT TO TI-IE BOAliD OF DIRECTORS AND OTHER 
HIGHER AUTHORlTlE§ AND/OR OFFICES FOR APPROVAL; 
(c) 
To direct and supervise the operation and internal administration of 
TFIE TKANSCO and, for this purpose, HE may delegate some or any of his 
administrative responsibilities and duties to other officers of THE TRANSCO; 
(d) 
Subject to [the] SUCH guidelines and policies (set up] AS MAY 
BE ADOPTED by the Board, [to] HE MAY appoint and fix the number and 
THE compensation, ALLOWANCE, AND BENEFITS of subordinate officials 
and employees of THE TRANSCO[;], 
and HE MAY, for cause, [to] remove, 
suspend, or otherwise discipline any SUCI-I subordinate [employee] OPPlClALS 
AND EMPLOYEES [of THE TRANSCO]; 
(e) 
To submit an annual report to the Board on tlie activities, 
PROBLEMS, PLANS, PROGRAMS, and achievements of THE TRANSCO at 
the close of each fiscal year, and upon approval thereof, IfE SHALL submit a 
copy OF THE SAME to the President of the Philippines and to such other 
agencies as may be required by law; 
(Q 
To represent THE TRANSCO in all ITS dealings and transactions 
with other offices, agencies, and instrumentalities o f  the Government and with all 
OTHER persons and [other] entitics, private or public, domestic or foreign; and 
(g) 
To exercise ALL such other powers and duties as may be vested in 
OR DELEGATED TO him by the Board from time to time. 
"SEC. 17. 
Exemptionj?oni the Salary Standardization Law. - (The 
salaries] EXCEl'T WHEN DELEGATED BY THE BOARD TO THE 
PRESIDENT OF TI-IE TRANSCO UNDER PARAGRAPH (D) OF [THE 
PRECEDING] SECTION 16 OF THIS ACT, THE COMPENSATION, 
ALLOWANCE, and benefits of ALL OTHER OFFICERS AND employees [in 


IS 
tlie TRANSCO] OF THE TRANSCO SHALL BE FIXED BY THE BOAlU) 
AND shall be [exempt] EXEMPTED from Republic Act No. 6758 [and shall be 
fixed by tlie TRANSCO Board.]. 
"SEC. 18. 
Pro$ts. - 
[The] UNTIL AND UNLESS THE PSALM 
COW. IS DIVESTED OF THE OWNERSHIP OF THE TRANSCO 
THROUGH AN ABSOLUTE SALE OF THE TRANSCO TO ANOTImR 
€'ARTY BY VIRTUE OF SECTION 21 OF TRIS ACT, TIIE net profit, if 
any, of THE TRANSCO shall be remitted to ihe PSALM Corp. not later than 
ninety (90) days COUNTED FROM THE DAY IMMEDIATELY after THE 
END OF the immediately preceding quarter. 
"SEC. 19. 
Trammissior? Charges. - The transmission charges of the 
TRANSCO shall be filed with and approved by the [ERC pursuant to] 
COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
AND PUBLJC HEARING, IN ACCORDANCE WITH THE APPLICABLE 
PROVISIONS OF Paragraph (f) of Section [43 liereoq 42 OF THIS ACT. 
IMPROVEMENTS OR EXPANSION 
PROJECTS OF THE 
TRANSCO THAT WILL RESULT IN ANY INCREASE IN THE PASS-ON 
CHARGES TO DISTRIBUTION UTILITIES SHALL BE PRESENTED TO 
THE NATIONAL ECONOMIC DEVELOPMENT AUTI-IORITY (NEDA) 
FOR THOROUGH ECONOMIC FEASIBILITY EVALUATION BEFORE 
SUCH 
XMPROVEMENTS 
OR 
EXPANSION 
PROJECTS 
ARE 
SUBMITTED TO TI-IE COMMISSION FOR APPROVAL. 
"SEC. 20. 
(THE] TRANSCO Relafed Businesses. - THE 
TRANSCO [may] IS HEREBY AUTHORIZED TO engage, DIRECTLY OR 
INDIRECTLY, in any BUSINESS related TO ITS MAIN business [which 
maximizes] IN ORDER TO MAXIMIZE THE utilization of its assets[:] AND 
RESOURCES: Provided, That WHERE ASSETS FORMING PART OF 
RELATED BUSINESS, a portion of the net income derived from such 
[uiidertaking utilizing assets which form part of the rate base] RELATED 
UUSINESS, WHICH PORTION SHALL NOT BE LESS THAN FIFTY 
PERCENT (50%) OF SUCH NET INCOME, shall be used lo reduce THE 
transinission RATE OR wlieeling [rates as determined by tlie ERC. Such portion 
of net income used to reduce the transmission wheeling rates shall not exceed 
fifty percent (50%) of the net income derived from such undertaking.] CHARGE 
THE RATE BASE OF THE TRANSCO ARE UTILIZED IN wci% 
PASSED-ON TO THE END-USERS OF ELECTRICITY; 
Separate accounts shall be maintained for each RELATED business 
[undertaking] to ensure that the transmission business shall neither subsidize in 
any way such RELATED business [undertaking1 nor encumber [its] THE 
TRANSCO'S 
transmission assets in any way to support such RELATED 
business. 
"SEC. 21. 
TRANSCO Privatization. - Within six (6) months from 
the effectivity of this Act, the PSALM Corp. shall submit a plan ON THE 
PRIVATIZATION OF THE TRANSCO for the endorsement by the Joint 
CONGRESSIONAL Power Commission TO, and FOR the approval of, the 
President of the PhiIippines. [The] THEREAFTER, THE President of the 
Philippines [thereafter] shall direct THE PSALM Corp. to [award, in] 
CONDUCT AN open competitive PUBLIC bidding, AND AWARD THE 
OWNERSHIP AND 
CONTROL OF TIIE TRANSCO THROUGH A 
CONTRACT OF SALE, OR AWARD T I E  ADMINISTRATION, 
MANAGEMENT, OPERATION, AND MAINTENANCE, AS WELL AS 
THE PRESERVATION, IMPROVEMENT, AND/OR EXPANSION OF the 
lransmission ASSETS AND facilities, including THE grid interconnections and 


19 
ancillary services TIIROUGII A CONCESSION CONTRACT to [a] THE 
qualified [party either through an outright sale or a concession contract.] 
WINNING 
BIDDER. 
The 
[buyerlconcessionaire] 
BUYER 
OR 
CONCESSIONAIRE, AS THE CASE MAY BE, shall be responsible for the 
EFFICIENT ADMINISTRATION, MANAGEMENT, OPERATION, AND 
MAINTENANCE, 
AS 
WELL 
AS 
FOR 
THE 
PRESERVATION, 
iniprovcment, AND/OR expansion[, operation, and/or maiiitenaiice of its] OF 
THE transmission assets and [lhe] FACILITIES, INCLUDING TIIE GRID 
ADMINISTRATION, MANAGEMENT, AND FOR THE operation of any 
related business[.] OR BUSINESSES. The award [shall result in maximum] TO 
THE QUALIFIED WINNING BIDDER MUST BE BASED ON THE MOST 
ADVANTAGEOUS, 
BENEFICIAL, AND OPTIMAL present value [of 
proceeds] to the national government. 111 case a concession contract is awarded, 
the concessionaire shall [jiave a] BE GIVEN AN INITIAL CONCESSION 
contract period of twenty-five (25) years, subject to review and renewal for a 
maximum period of another twenty-five (25) years. 
INTERCONNECTIONS 
AND ANCILLARY SERVICES AND THE 
IF ALL OR A CONTROLLING 1'ORTION OF THE SHARES OF STOCK 
OF TRANSCO ARE SOLD, THE BUYER OR BUYERS WILL NOT NEED A 
CONGRESSIONAL FWCIIISE SEPARATE FROM THAT OF TRANSCO TO 
OPERATE TIIX BUSINESS OF THE LATTER; PROWDED HOWEVER, THAT 
TfIE NATIONALITY REQUIREMENTS OF TIIE CONSTITUTION MUST BE 
COMPLIED WITII. 
IF THE AWARDEE OF TI-IE CONCESSION CONTRACT IS 
MERELY 
HIRED 
UNDER 
A 
COMPENSATION 
SCHEME TO 
ADMJNISTER, MANAGE, OPEIUTE, MAINTAIN, PRESERVE, AND TO 
FINANCE 
AND 
SUPERVISE 
THE 
IMPROVEMENTS 
AND/OR 
EXPANSIONS OF THE ELECTFUC TRANSMISSION ASSETS AND 
FACILITIES AND THE GRID INTERCONNECTIONS AND TIIE 
ANCILLARY SERVICES FOR THE TUNSCO, THE AWARDEE OF 
THE CONCESSION CONTRACT SHALL NOT BE REQUIRED TO 
OBTAIN A NATIONAL FRANCHISE, AND NEITHER SHALL HE OR IT 
BE 
REQUIRED 
TO 
QUALIFY 
UNDER 
TIlE 
NATIONALITY 
REQUIREMENTS OF THE CONSTITUTION FOR PUBLIC UTILITY 
OPERATORS. 
HOWEVER, IF TIIE WINNING BIDDER OR AWARDEE OF THE 
CONCESSION CONTRACT TAKES OVER TIE POSSESSION AND CONTROL 
OF THE ELECTRIC TRANSMISSION ASSETS AND FACILITIES AND TIIE 
GRID INTERCONNECTIONS AND ANCILLARY SERVICES, AS [A] BUYER 
OR 
LESSEE THEREOF, AND ADMINISTERS, MANAGES, MAINTAINS, 
OPERATES, IMPROVES, AND EXPANDS THEM AS FIIS OR I T S  OWN 
BUSJNESS, THEN I N  THAT CASE THE AWARDEE OB THE CONCESSION 
CONTRACT MUST OBTAIN A NATIONAL FRANCHLSE TEEREFOR, AND 
HE OR I'L' MUST QUALIFY UNDER THE NATIONALITY REQUIREMENTS 
OF TIBI CONSTITUTION FOR PUBLIC UTILITY OPERATORS. 
[In any case, the awardee shall] THE AWARDEE, WHETHER 
UNDER A CONTRACT OF SALE OR UNDER A CONCESSION 
CONTRACT, MUST comply with the Grid Code and the TDP [as approved]. 
The CONTRACT OF sale [agreement/concessionl OR TIIE CONCESSION 
contract, AS THE CASE MAY BE, shall [include, but not limited to, the 
provision for] PROVIDE, AMONG OTHERS, SUCH perfolnlance and 
financial guarantees or [any] other covenants [which] THAT the national 
government may require. [Failure to comply with such obligations shall result in 
the imposition of appropriate sanctions or penalties by the ERC.] THE 
FAILURE OF THE AWARDEE TO COMPLY WITH ANY OF SUCH 
GUARANTEES OR COVENANTS SHALL CONSTITUTE A DEFAULT 


20 
ON TEIE PART OF THE AWARDEE AND SHALL CAUSE TI-IE 
IMMEDIATE 
RESCISSION 
AND 
CANCELLATION 
OF 
THE 
CONTRACT OF SALE OR OF THE CONCESSION CONTRACT AND, IN 
ADDITION, THE IMPOSITION OF APPROPRIATE SANCTIONS, 
FINES, OR PENALTIES BY THE COMMISSION IN ACCORDANCE 
WITH SECTION 44 OF THIS ACT. 
The awardee [shall] MUST be financially and technically capable AND 
SOUND, with proven domestic and/or [AND OR] international experience and 
expertise as a leading transmission system operator. Such experience must be 
with a transmission system of comparable capacity a i d  coverage as THAT OF 
the Philippines. 
"SEC. 22. 
Distribution Sector. - The distribution o f  electricity to 
end-users [sliall bel IS a regulated common carrier business. [requiring] IT 
REQUlRES a natioiial franchise[.] AND [A] COMPLIANCE WITH THE 
NATIONALITY 
REQUIREMENTS 
OF 
THE 
CONSTITUTION. 
[Distribution] ,SUB.JECT TO THE, REGULATION OF THE COMMISSION, 
DISTRIBUTION of electric power to [all] end-users OF ELECTRICITY may 
be undertaken by QUALIFIED private distribution utilities, BY ELECTRIC 
cooperatives, BY local government units preseiitly undertalciiig this function 
[and], OR BY other duly authorized AND QUALIFIED entities[, subject to 
regulation by the EKC.]. 
"SEC. 23. 
Functions of Distribution Utilities. - [A] EVERY 
distribution utility [shall have] HAS the obligation AND RESPONSIBILITY 
UNDER THIS ACT to provide, WITHIN ITS FRANCHISE TERRITORY, 
ELECTRIC distribution services and connections to its system, IN 
ACCORDANCE WITH THE PROVISIONS OF THE DISTRIBUTION 
CODE, for [any] EVERY end-user OF ELECTRICITY [within its franchise 
area consistent with tlie distribution code. Any entity engaged therein] THAT 
APPLIES FOR SUCH SERVICES AND CONNECTIONS. 
THE 
PROVISIONS OF TI-IE DISTRIBUTION CODE SHALL BE CONSISTENT 
WITH 
THE 
PROVISIONS OF 
THIS 
ACT. 
EVERY 
SUCI-I 
DISTRIBUTION UTILITY shall provide open and non-discriminatory access to 
its distribution system to all QUALIlTIED users[.] WITHIN ITS FRANCIIISE 
TERRITORY. 
[Any] A distribution utility shall be entitled to impose and collect JUST 
AND REASONABLE distribution wheeling charges and connection fees from 
such lend-users as approved by the ERC.] QUALIFIED USERS, AS MAY BE 
INTERESTED PARTIES AND PUBLIC HEARING. 
APPROVED BY m E  COMMISSION, AFTER DUE NOTICE TO ALL 
A distribution utility [shall have the] HAS AN obligation AND 
RJ3SPONSIBILITY to supply electricity in the MOST ECONOMICAL AND 
least cost manner to its captive marltet, subject to the collection of JUST AND 
REASONABLE retail rate, duly approved [by the ERC.] BY THE 
COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
AND PUBLIC REARING. 
To achieve economies of scale in utility operations, distribution utilities 
may, after due iiotice TO ALL INTERESTED PARTIES and pnblic hearing, 
pursue structiiral and operational refoims such as, but not limited to, joint actions 
between or amoiig the distribution utilities, subject to [the] SUCH guidelines AS 
MAY BE issued by the [ERC. Such] COMMISSION, PROVIDED SUCH 
joint actions shall result in improved efficiencies, reliability of service, reduction 
of costs, and compliance [to] WITH the performance standards THAT SHALL 


21 
BE prescribed in the [IRR] IMPLEMENTING RULES AND IhGULATIONS 
QRR) ofthis Act. 
Distribution utilities shall submit to the [ERC] COMMISSION 
a 
statement of their compliance with the technical specifications prescribed in the 
Distribution Code and IN Ihe perfoiinance standards prescribed in the [IRR] 
IMPLEMENTING RULES AND REGULATIONS of this Act. Distribntion 
utilities which [do not] FAIL TO comply with any of the prescribed technical 
specifications [and] JN THE DISTJUBUTION CODE AND IN THE 
performance standards shall submit to the [ERC] COMMISSION a plan [to 
comply,] OF COMPLIANCE, within thee (3) years, with THE said prescribed 
technical specifications [and] IN TI-IE DISTJUBUTION CODE AND IN THE 
performance standards. The [ERC] COMMISSION shall, within sixty (60) days 
upon receipt of such plan, evaluate the same and notify the distribution utility 
coiicerned of [its] THE COMMISSION'S action. Failure ON THE PART OF 
ANY DISTRIBUTION UTILITY to submit a feasible and credible plan [and/or] 
OF COMPLIANCE AND/OR failure to implement the same shall serve as 
grounds for the iinposition of appropriate sanctions, fines, or penalties. 
Dislribulion utilities shall prepare and submit to the DOE their annual 
distribution development plans. [In the case of1 FOR electric cooperatives, such 
plans shall be submitted through the National Electrification Aclrninistration. 
[Distribution utilities] A PRIVATE OR GOVERNMENT-OWNED 
DISTRIBUTION UTILITY shall provide, WITHIN A REASONABLE TIME 
PROM THE REQUIREMENT THEREOF, universal service [within their 
fimchise, over a reasonable time horn the requirement thereof, including unviable 
areas, as part of their social obligations,] IN THE VIABLE AREAS OF ITS 
AS PART OF ITS SOCIAL OBLIGATIONS, in a manner that sliall sustain 
[the] ITS economic viability [of the utility], subject to the approval by the [ERC 
in the case of private or government-owned utilities. To this end, distribution 
utilities] COMMISSION AFTER DUE NOTICE TO ALL INTERESTED 
PARTIES AND PUBLIC HEARING. EVERY DISTRIBUTION UTILITY 
shall submit to the DOE [their plans] ITS PLAN for serving such areas as pail of 
[their] ITS distribution development [plans] PLAN. Areas [which a hanchised] 
IN THE FRANCHISE TERRITORY OF A distribution utility WHICH IT 
cannot SERVICE or does not find viable ENOUGH TO SERVICE inay be 
transferred to another distribution utility, if any is available, [who will] THAT 
CAN provide the service, subject to [THE] approval by [EKC.] THE 
COMMISSION AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
AND PUBLIC HEARING. In [cases where] THE EVENT THAT A franchise 
[holders fail and/or refuse] HOLDER PAILS AND/OR REFUSES to service 
[any] AN area within [their] ITS franchise territory and [allowed] another 
DISTRIBUTION ulilily IS AUTHORIZED AND ALLOWED BY TI-IE 
COMMISSION to service the same, [then) THE FRANCHISE HOLDER 
OVER THE SAID AREA CANNOT THEREAFTER CLAIM IT BACK 
AND THEREBY DlSTURB the status quo [shall be respected.] IN FAVOR OF 
THE DISTRIBUTION UTILITY THAT HAS BEEN AUTHORIZED AND 
ALLOWED BY THE COMMISSION TO SERVICE THE SAID AREA. 
FRANCHISE TERRITORY, AS WELL AS IN THE NON-VIABLE AREAS 
Distribution utilities [may exercise] ARF, HEREBY GRANTED the 
power of eminent domain, subject to [the] SUCH requirements [ofl AND 
LIMITATIONS[, IF ANY,] IMPOSED BY the Constitution and ANY existing 
[laws] LAW. 
"SEC. 24. 
Distribution Wheeling Charge. - The distribution 
wheeling charges of distribution utilities shall be filed with and approved [by the 
ERC pursuant to] BY THE COIVIIMISSION, AFTER DUE NOTICE TO ALL 


22 
INTERESTED PARTIES AND PUBLIC HEARING, IN ACCORDANCE 
WITH THE APPLICABLE PROVISIONS OF Paragraph (0 of Section [43 
hereof] 42 OF THIS ACT. 
“SEC. 25. 
Retail Rate. - The retail rates [charged by] THAT 
distribution utilities SHALL CHARGE Tor [the supply of electricity] 
PROVIDING DISTRIBUTION SERVICES AND CONNECTIONS TO 
END-USERS OF ELECTRICITY in [their] THE captive inarltei OF TIIEIR 
RESPECTIVE FRANCHISE TERRITORIES shall be [subject to regulation] 
FILED WITH AND APPROVED by the [ERC] COMMISSION, AFTER 
DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
HEARING. THE RETAIL RATES SHALL BE based on tlie principle of full 
recovery of prudent, JUST, and reasonable economic costs RESPECTIVELY 
incurred[, or such other principles that will promote elficiency as may be 
deterniined by tlie ERC.] BY THE DlSTRIBUTION UTILITIES. 
IN 
MAKING OR SETTING THE RETAIL RATES THAT DISTRIBUTION 
UTILITIES 
MAY 
CI-IARGE FOR 
PROVIDING 
DISTRIBUTION 
THEIR RESPECTIVE FRANCHISE TERRITORIES, THE COMMISSION 
MUST 
OBSERVE 
AND 
COMPLY 
WITH 
THE 
APPLICABLE 
PROVISIONS OF PARAGRAPH (F) OF SECTION 42 OF THIS ACT. 
SERVICES AND CONNECTIONS TO END-USERS OF ELECTRICITY IN 
Every distribution utility shall identify mid segregate in its bills to ITS 
end-users OF ELECTRICITY the components of [the] ITS retail rate, as 
[defined] REQUIlIED in this Act. 
“SEC. 26. 
Distribution Related Businesses. - [Distribution utilities] 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING, A 
SUBJECT TO VrI-IE APPROVAL OF THE COMMISSION, AFTER DUE 
DISTRIBUTION UTILITY may, directly or indirectly, engage in any 
BUSINESS related TO ITS MAIN business [undertaking which maximizes] IN 
ORDER TO MAXIMIZE the utilization of [their] ITS assets[:] AND 
RESOURCES: Provided, That WHERE ASSETS FORMING PART OF 
THE RATE BASE ARE UTILIZED IN SUCH RELATED BUSINESS, a 
portion of the net income derived lrom such [undertalcing utilizing assets which 
form part of the rate base] RELATED BUSINESS, WHICI-I PORTION 
SHALL NOT BE LESS THAN FIFTY PERCENT (50%) OF SUCH NET 
INCOME, shall be used to reduce its distribution wheeling [charges] CHARGE 
AND RETAIL RATE [as determined] APPROVED by the [ERC: Provided, 
firrther, That such portion of net income 
used to reduce their distribution 
wheeling charges shall not exceed fifty percent (50%) of the net income derived 
fi.om such undertaking: Provided, finally, That separate accounls are maintained 
for each business undertaking to ensure that the distribution busiiiess shall neither 
subsidize in any way such business undertaking nor encumber its distribution 
assets in any way to support such business.] COMMISSION. 
SEPARATE ACCOUNTS SHALL BE MAINTAINED FOR EACH 
RELATED BUSINESS TO ENSURE THAT THE DISTRIBUTION 
BUSINESS SHALL NEITHER SUBSIDIZE, IN ANY WAY, SUCH 
RELATED BUSINESS NOR ENCUMBER, IN ANY WAY, 
ITS 
DISTRIBUTION ASSETS TO SUPPORT SUCH RELATED BUSINESS. 
“SEC. 27. 
Franchising Power in the Electric Power Sector. - 
[The] 
UPON THE EFFECTIVITY OF TI-IIS ACT, TIIE power to grant franchises to 
persons engaged in the traiismission and distribution of electricity shall be vested 
exclusively in the Congress of the Philippines. [and all] ALL laws inconsistent 
with [this Act] THE PRECEDING SENTENCE OF TI-US SECTION 
particularly, but not limited to, Section 43 of I’D 269, otherwise known as the 
“National Electrification Decree,“ are hereby [deemed] repealed or modified 


23 
accordingly: Provided, That all existing franchises shall be allowed to RUN their 
full term: Provided ,firrther., That in the case of electric cooperatives, renewals 
aiid cancellations shall remaiii with the National Electrification Commission 
under the National Electrification Administration for five (5) more years [after] 
FROM the enactment of this Act. 
["SEC. 28. 
De-Monopolization and Shareholding Dispersal. - In 
compliance with the constitutional mandate for dispersal of ownership and de- 
monopolization of public utilities, the holdings of persons, natural or juridical, 
including directors, officers, stoclcliolders and related interests, in a distribution 
utility and their respective holding companies shall not exceed twenty-five (25%) 
percent of the voting shares of stock unless the utility or the company holding the 
shares or its controlling stocldiolders are already listed in the Philippine Stock 
Exchange (PSE): Provided, That controlling stockholders of small distribution 
utilities are hereby required to list in the PSE within five (5) years from the 
enactment of this Act if they already own the stocks. New controlling 
stockholders shall uiidertalte such listing within five (5) years from the time they 
acquire ownership and control. A small distribution company is one whose peak 
demand is equal to or less than Ten megawatts (1 OMW).] 
[The ERC shall, within sixty (60) days from tlie effectivity of this Act, 
promulgate the rules and regulations to implement and effect this provision.] 
[This Section shall not apply to electric cooperatives.] 
"SEC. /29] 28.Supply Secfor: - The supply sector is a business affected 
with public interest. Except for distribution utilities and electric cooperatives with 
respect to their RESPECTIVE existing franchise [areas] TERRITORIES, all 
suppliers of electricity to the contestable market [shall require] MUST [HAVE] 
SECURE a license fiom the [ERC.I COMMISSION. 
For this purpose, the [ERC] COMMISSION shall promulgate THE 
NECESSARY rules and regulations [prescribing], NOT INCONSISTENT 
WITH THE PROVISIONS OF THIS ACT, THAT SHALL PRESCRIBE the 
qualifications of [electricity] suppliers [which] OF ELECTRICITY. SUCH 
QUALIFICATIONS shall include, among other requirements, a demonstration 
of their technical [capability,] AND fiiiancial [capability,] CAI'ABILITIES and 
creditworthiness: Provided, That the [ERC] COMMISSION shall have THE 
authority to require [electricity] suppliers OF ELECTRICITY to furnish [a] 
SURETY bond OR BONDS, or ANY other [evidence of the ability of a supplier] 
ANALOGOUS GUARANTEE INSTRUMENTS SATISFACTORY TO THE 
COMMISSION, TO DEMONSTRATE AND ENSURE THEIR ABILITY 
AND CAPACITY, AS SUPPLIERS OF ELECTRICITY, to withstand market 
disturbances [or other] AND OTHER RISKS AND events that may increase [the 
cost of providing service.] THEIR COSTS IN FULFILLING THEJR 
COMMITMENTS, AS SUPPLIERS OF ELECTRICITY, TO PROVIDE 
THE QUALITY AND LEVEL OF SERVICES THEY OFFER TO THEIR 
CUSTOMERS. 
Any law to the contrary notwithstanding, supply of electricity to the 
contestable market sliall not be [considered] DEEMED a public utility operation. 
[For this purpose, any] ANY person or entity [which shall] THAT APPLIES TO 
THE COMMlSSION FOR A LICENSE TO engage in the [supply of 
electricity] BUSINESS AS SUPPLIER OF ELECTRICITY to the contestable 
market shall not be required TO HAVE OR to secure a national franchise. 


24 
The prices [to be charged by suppliers] THAT SUPPLIERS OF 
ELECTRICITY SIIALL CHARGE for [he s~pply o f  electricity to the 
contestable market shall not be subject to regulation by the [ERC.] 
COMMISSION. 
[Electricity suppliers] SUPPLIERS OF ELECTRICTY shall be subject 
to [the] rules and regulations [concerning] THAT MAY BE PROMULGATED 
BY 
THE 
COMMISSION GOVERNING 
abuse of 
lnarlcet power, 
CONSPIRACIES IN RESTRAINT OF TRADE, cartelization, and other anti- 
competitive or discriminatory behavior [to be promulgated by the ERC.] TI-IAT 
ARE INIMICAL TO TIIE INTEREST OF THE GENEML PUBLIC AND 
THE END-USERS OF ELECTRICITY. 
[In its billings to end-users, every supplier] EVERY SUPPLIER OF 
ELECTNCITY shal1,identify and segregate IN 131s OR ITS BILLINGS TO 
HIS OR ITS END-USERS OF ELECTRlCITY the components of HIS OR its 
[supplier's) cliaxge, as defined [herein] IN THIS ACT. 
"SEC. [30]29. W'holesal'e Electricily Spot Market. - Within one (1) year 
from the effectivity of this Act, tlie DOE shall establish 4 [w]Wliolesale 
[ejElectricity [s]Spot [in]Marliet, HEREIN AFTER REFERRED TO AS THE 
WESM, composed of lhe [wliolesale eleceicity spot marlcet] WESM participants. 
The [marltet] WESM shall provide the mechanism for identifying and setting the 
price of actual variations from the quantities transacted under contracts between 
TI-IE sellers and THE purchasers of'electricity[.] IN THE WESM. 
Jointly with ALL the electric power industry participants, the DOE shall 
formulate the detailed rules for the [wholesale electricity spot market.] WESM. 
Said rules shall provide tlie [niechanism for] SYSTEM AND MANNER OR 
determining the price of electricily not covered by bilateral contracts between 
THE sellers and THE purchasers of electricity users. [The price determination 
melhodology contained in said rules] TIIE METHOD CONTAINED IN THE 
SAXD RULES FOR DETERMINING THE PRICE OF ELECTRICITY IN 
TIIE WESM shall be subject to the approval of [ERC.] THE COMMISSION, 
AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
HEARING. Said rules shall also EMBODY AND reflect accepted econoniic 
principles {and] THAT SHALL provide a level playing field to all electric power 
industry participants. The rules shall FURTHERMORE provide, aniong others, 
procedures for: 
(a) 
Establishing the merit order dispatch inswuctions for each time 
period; 
PROVIDED HOWEVER, 
THAT IN EVERY CASE, AS A 
DISPATCHED AHEAD OF THE HIGHER PRICED XLECTRICITY. 
GENERAL RULE, THE CHEAPER ELECTRICITY SHALL BE 
(b) 
(c) 
Determining the market-clearing price for each time period; 
Administering the marlcet, including criteria for admission to [and 
ferminafionf 012 DISMISSAL from tlie market [which includes], AS WELL AS 
ANY REQUIlU3D security or performance [bond requirements] BOND, voting 
rights of the participants, surveillance, [and] assurance of compliance [ofJ BY tlie 
participants with the rules, and the formation of the [wliolesale electricity spot 
marltet governing body] GOVERNING BODY OF THE WESM; 
(d) 
Prescribing guidelines for the marltet operation in system 
emergencies; and 
(e) 
Amending tlie SAID rules. 


25 
The [wholesale electricity spot marlcet] WESM shall be implemented by a 
market operator in accordance with the [wholesale electricity spot marlcets] 
WESM rules. The market operator shall be an autononion~ group[,] to be 
constituted by DOE[,] with equitable representation from electric power industry 
participauts[,] AND initially under the administrative supervision of the 
T W S C O .  The market operator shall undertake tlie preparatory work and THE 
initial operation of the [wholesale electricity spot marltct] WESM. Not later than 
one (1) year after the implementation of the [wholesale electricity spot market] 
WESM, an independent entity sliall be formed and the functions, assets and 
liabilities of the market operator shall be transferred to such INDEPENDENT 
entity with the joint endorsement of die DOE and the electric power industry 
participants. Thereafter, the administrative supervision of the TRANSCO over 
[such entity shall cease.] TIIE WESM AND THE INDEPENDENT MARICET 
OPERATOR SHALL CEASE AND TERMINATE. 
Subject to the compliance with the membership criteria, all [generating] 
GENERATION companies, distribution utilities, suppliers OF ELECTRICITY, 
bulk [consumersiend-users] [CONSUMERS AND/OR] END-USERS OF 
ELECTRICITY and other similar entities authorized by the [ERC shall be] 
COMMMISSION ARE eligible to become members of the [wholesale 
electricity spot marlcet] WESM. 
The [ERC] COMMISSION may aulliorize other similar entities to 
become eligible as members, either directly or indirectly, of the [wholesale 
electricity spot market] WESM. All [generating] GENERATION companies, 
distributioii utilities, suppliers OF ELECTRICITY, bulk ~consumers/end-users] 
END-USERS OF ELECTRICITY and other similar entities authorized by the 
[ERC] COMMISSION, whether direct or indirect members of the '[wholesale 
electricity spot mavltet] WESM, shall be bound by the [wholesale electricity spot 
market] WESM rules with respect to transactions in [that market] THE WESM. 
NEA may, in exchaiige for adequate security and a guarantee fee, act as a 
guarantor for THE purchases of electricity in the [wholesale electricity spot 
market] WESM by any electric cooperative or small distribution utility to support 
[their] THE credit standing OF THE LATTER, consistent with the provisions 
hereof. For this purpose, the authorized capital stock o f  NEA is INCREASED, 
AS IT IS hereby increased, to Fifteen billion pesos (Pl5,000,000,000.00). 
All electric cooperatives [which have] WITH outstanding uncollected 
billings to any local government unit shall report such billings to NEA [which] 
AND NEA shall, in tum, report the same to tlie Department of Budget and 
Management (DBM) for collection pursuant to Executive Order 190, issued on 
December 21, 1999. 
The cost of administering and operating the [wholesale electricity spol 
market] WESM shall be recovered by the market operator through a charge 
imposed to all market members: Provided, That such charge shall be filed with 
and approved by the [ERC.] COMMISSION, AFTER DUE NOTICE TO ALL 
INTERESTED PARTIES AND PUBLIC HEARING. 
In cases of national and international security emergencies or natural 
calamities, the [ERC] COMMISSION is hereby empowered to suspend the 
operation of the [whoIesale electricity spot market] WESM or declare a 
temporary [wholesale electricity spot marlcet] WESM failure. 
TO ENCOURAGE AND PROMOTE THE DEVELOPMENT OF 
THE WESM, DISTRIBUTION UTILITIES WITEI DEMAND LEVELS OF 
NOT LESS THAN 100 MEGAWATTS ARE REQUIRED, FOR THE FIRST 
THREE 
(3) 
YEARS 
IMMEDIATELY 
FOLLOWING 
THE 


26 
JZSTABLISHMENT OF THE WESM, TO SOURCE FROM THE WESM 
AT LEAST 
TEN 
PERCENT 
(100/) 
OF THEIR 
SUPPLY OF 
ELECTRICITY FOR RETAIL TO END-USERS. THE COMMISSION 
MAY, FROM TIME TO TIME, REVIEW THE APPROPRIATE LEVEL 
OF DEMAND TO BE SOURCED FROM THE WESM AND, IN 
MERITORIOUS INSTANCES, WAIVE IMPLEMENTATION OF SUCH 
REQUIREMENT, SUBJECT TO A PUBLIC BEARING. 
GRADUALLY BE INCREASED AT THE RATE OF TWO PERCENT (2%) 
ESTABLISHMENT OF THE WESM IN ORDER TO liEACH A LEVEL 
OF TWENTY PERCENT (20%) ON THE SAID EIGHTH (8”) YEAR 
WHERE IT SHALL REMAIN UNTIL ADJUSTED FURTHER UPWARD 
BY CONGIUSS. 1 
[THEREAFTER, THE SAID TEN PERCENT (ioo/o) SHALL 
EVERY YEAR u p  TO THE EIGIITI-I (nTil) YEAR FROM THE 
“SEC. (31130. Xefnil Conzpefition and Open Access. - Any law to the 
contrary notwithstanding, retail competition and open access on distribution wires 
OF DISTRIBUTION UTILITIES shall be implemented not later than three (3) 
years [upon the) FROM THE DATE OF THE effectivity of this Act, subject to 
the following conditions: 
(a) 
[Establislment] THE ESTABLISHMENT of the [w] Wholesale 
[e]Ele@icitp [s]Spol [m]Mwket (WESM); 
(b) [Approval] THE APPROVAL of THE unbundled transmission and 
distribution wheeling charges[;] BY THE COMMISSION; 
(c) [Initial] THE 
INITIAL implementation of the cross subsidy 
removal scheme; 
(d) [Privatization] THE 
PRIVATIZATION of at least [seventy 
(70%) percent] FIFTY PERCENT (50%) of the total capacity of [generating] 
THE GENERATION assets of NPC in Luzoii and THE Visayas; [and) 
(e) [Transfer] THE TRANSFER of the management and control of at 
least [seventy percent (70%)] FIFTY PERCENT (50%) of the total energy 
output of ALL power plants under contract with NPC to the IPP 
Administrators[.]; AND 
[(P) 
IN THE FRANCIIISE TERRITORIES OF ELECTRIC 
COOPERATIVES, THE TRANSFER OF TI3Z SUB-TRANSMISSlON 
ASSETS 
AND 
FACILITIES 
IN 
ACCORDANCE 
WITH 
THE 
ELECTRIC COOPERATIVES. ] 
APPLICABLE PROVISIONS OF TIIIS ACT To THE CONNECTED 
Upon the 
initial implementation of open access, the 
[ERC] 
COMMISSION shall [allow] CONSTITUTE IN A FORMAL ORDER TO 
BE ISSUED AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
AND PUBLIC IIEAWNC all [electricity) end-users OF ELECTRICITY with 
a monthly average peak demand of [at least] NOT LESS THAN one megawatt 
(IMW) for the IMMEDIATELY preceding twelve (12) BILLING months to be 
the contestable marl<et. 
[Two] APTER TWO (2) years [thereafter,] 
IMMEDIATELY FOLLOWING THE iNITIAL IMPLEMENTATION OF 
OPEN ACCESS, the threshold level for tlie contestable market shall be reduced 
to seven hundred fifty kilowatts (750kW). At [tliis] THAT level, aggregators 
shall be allowed to supply electricity to end-risers whose aggregate demand within 


21 
a contiguous wea is at least seven hundred fifty lcilowatts (7501cW). [Subsequeiitly 
and every1 EVERY year thereafter, the [ERC] COMMISSION shall REVIE’I’V 
AND evaluate the performance of the CONTESTABLE marl&[. On] AND, ON 
the basis of such YEARLY REVIEW AND evaluation, [it] THE 
COMMISSION shall gradually reduce the threshold level until [it reaches] TI3E 
CONTESTABLE MARICET SI-IALL FINALLY COVER the household 
[demand level.] END-USERS OF ELECTRICITY. In the case of electric 
cooperatives, retail competition and open access shall be implelnented not earlier 
than five (5) years [upon] FROM the effectivity of this Act. 
“SEC. 132131. [NPC Stranded Debt and Contract Cost Recovery.) NPC’S 
STMNDED DEBTS AND STRclNDED CONTRACT COSTS RECOVERY. 
- [Stranded debt] THE STRANDED DEBTS of NPC [slialll refer to [any] ITS 
unpaid financial obligations [of NPC.], WIIICI-I ARE NOT LIQUIDATED OR 
OFIWET BY THE PROCEEDS FROM THE SALE, DISPOSITION, 
AND/OR 
PRIVATIZATION 
OF 
NPC’S 
GENERATION 
ASSETS, 
TRANSMISSION AND SUBrRANSMISSION ASSETS AND FACILITIES, 
REAL ESTATE ASSETS, OTHER DISPOSABLE ASSETS, AND IPP 
CONTRACTS. 
[Stranded] THE STRANDED contract costs of NPC [shall] refer to the 
excess of the contracted cost of elecbicity under THE eligible {IPP] 
INDEPENDENT POWER PRODUCER (ET) contracts o f  NPC WITH ITS 
IPPs over Ihe actual selling price of [the] THAT contracted [energy output of 
such contracts] ELECTRICITY PROM SUCH IPP CONTRACTS in the 
market. [Such contracts shall] INDEPENDENT POWER PRODUCER 
CONTRACTS OF NPC SHALL BE DEEMED ELIGIBLE CONTRACTS 
TO APPLY FOR S T W D E D  CONTRACT COSTS RECOVERY ONLY 
IF SUCH CONTRACTS have been approved by the ERJ3 [as ofl ON OR 
BEFORL? December 31,2000. 
The national government shall directly assunie a portion of the financial 
obligations of NPC in an amount not [to exceed] LESS TI-IAN Two hundred 
billion pesos (P200, 000,000,000.00). 
The [ERC] COMMISSION shall verify the reasonable [amounts and 
determine the manlier and duration for the full recovery of stranded debt and 
stranded contract costs as defined herein:], ACTUAL, AND AGGREGATE 
AMOUNTS OF TIIE STRANDED DEBTS AS WELL AS TIlE JUST AND 
REASONABLE, ACTUAL, AND AGGREGATIC AMOUNTS OF THE 
STRANDED 
CONTRACT COSTS OF NPC 
THAT 
MUST 
BE 
MANNER AND DURATION FOR THE FULL lU3COVERY OF BOTH, 
AFTER DUE NOTICE TO ALIA INTERESTED PARTIES AND PUBLIC 
HEARING: Provided, That the duration for such FULL recovery shall not be 
[shorter] LESS than fifteen (15) years nor [longer] MORE than twenty-five (25) 
years. The [ERC] COMMISSION shall, at the end of the first year [ofl FROM 
the implementation of [stranded cost recovery] THE STRANDED DEBTS AND 
STRANDED CONTRACT COSTS RECOVERY, and every year thereafter, 
conduct a review OF ALL RELEVANT FACTS to determine whether there [is] 
HAS BEEN AN under-recovery or over-recovery [and adjust (true-up) the level 
of stranded cost, recovery charge accordingly.] FROM THE STRANDED 
I~COVERED, rp ANY, AND SHALL APPROVE AND DETERMINE THE 
DEBTS AND THE STRANDED CONTRACT cosrs RECOVERY 
CHARGE. 
IN THE EVENT OF UNDER-RECOVERY OR OVER- 
RECOVERY, TIIE COMMISSION SHALL, AFTER DUE NOTICE TO 
ALL INTERESTED PARTIES AND PUBLIC HEARING, ADJUST THE 
RATE OF THE SAID STRANDED DEBTS AND STRANDED CONTRACT 
COSTS RECOVERY CHARGE ACCORDINGLY. Any amount [to be 
included o r  stranded cost recovery] REPRESENTING TKE STMNDED 


28 
DEBTS AND STRANDED CONTRACT COSTS RECOVERY CHARGE 
shall be reflected as a separate item in the [consumer billing statement.] 
ELECTRlC END-USER'S MONTHLY BILLING STATEMENTS. 
IN CASE OF OVER-RECOVERY, THE AMOUNT OVER- 
RECOVERED SHALL BE REFUNDED TO THE END-USERS OF 
ELECTRICITY IN THE AREAS WHERE THE OVER-RECOVERY 
OCCURRED, WITH INTEREST E Q U U  TO THE NATIONAL 
GOVERNMENT'S NINETY-DAY TREASURY BILL BORROWING 
RATE, COMPUTED ON THE BASIS OF THE AMOUNT OF EACI-I 
MONTHLY BILLING STATEMENT UNTIL TIIE TOTAL OVER- 
IWCOVERED AMOUNT IS FULLY ItEPUNDED. THE COMMISSION IS 
HEREBY AUTHORIZED TO ADOPT SUCH FAIR AND REASONABLE 
FORMULA AND PROCEDURE TO EFFECT TIIE SAID REFUND. 
"SEC. 133132. Distribz.ition /Utilities/ UTILITY'S Stranded Contract 
Costs Recovery. - [Stranded] THE STRANDED contract costs o f  A 
distribution [utilities shall] UTILITY refer to the excess o f  the contracted cost of 
electricity under THE eligible INDEPENDENT POWER PRODUCER (IPP) 
contracts of [such utilities] THE DISTRIBUTION UTILITY WITH ITS IPPs 
over the actual selling price of [such contracts] TJUT CONTRACTED 
RLECTlUCITY PROM SUCH IPP CONTRACTS in the market. [Such 
contracts shall] INDEPENDENT POWER PRODUCER CONTRACTS OF 
THE DISTRIBUTION UTILITY SHALL BE DEEMED ELIGIBLE 
CONTRACTS TO ,APPLY POR STRANDED CONTRACT COSTS 
RECOVERY ONLY IF SUCH CONTRACTS have been approved by the ERB 
[as ofj ON OR BEFORE December 31,2000. 
A distribution utility [shall] WITH ELIGIBLE IPP CONTRACTS 
MAY BE ALLOWED TO recover ITS stranded contract costs[: Provided 
however,That] ONLY IF such STRANDED CONTRACT costs [of the IPPs of 
distribution utilities are subject to] ARE FOUND, AFTER A TI-IOROUGH 
review by [ERC in order to determine fairness and reasonableness] 
THE 
COMMISSION, TO BE FAIR AND REASONABLE in relatioil to OR IN 
COMPAIUSON WITH the average price of SIMILAR OR COMPARABLE 
land-based [IPP projects] IPP CONTRACTS entered into by NPC, at the time 
[Uiey were contracted. The ERCJ OR AS NEAR A TIME AS THE SAID IPP 
CONTRACTS OF THE DISTRIBUTION UTILITY WERE CONCLUDET). 
1N REVIEWING AND COMPARING THE SAID AVERAGE PRICE OP 
ELIGIBLE IPP CONTRACTS OF THE DISTRIBUTION UTILITY, THE 
COMMISSION shall talce into consideration all RELEVANT factors that affect 
the total cost of WPC] NPC'S IPP generation projects, including direct or indirect 
subsidies or incentives provided by the Government. 
Within one (1) year from the start of open access, any distribution utility 
that [seeks] INTENDS TO SEEK THE recovery of stranded contract cosls shall 
file with the [ERC] COMMISSION A notice of such intent [together with], 
STATING WITH SUFFICIENT PARTICULARITY ai estimate of THE 
AGGREGATE AMOUNT OF such [obligations, including the] STRANDED 
CONTRACT COSTS AND ITS present value [thereof] and SUBMITTING AT 
THE SAME TIME such [oilier] supporting EVIDENCE AND/OR data as may 
be required by the [ERC.] COMMISSION TO ASSESS AND DETERMINE 
THE MERIT AND VALIDITY OF THE ALLEGED STRANDED 
CONTRACT COSTS. 
Any distribution utility that does not file SUCH 
NOTICE OF INTENT, WITH THE NECESSARY SUPPORTING 
EVIDENTIAL REQUIREMENTS, within the [date] specified PERIOD OF 
TIME shall not be [eligible for such recovery.] ENTITLED TO 1aCOVER 
ANY STRANDED CONTRACT cosrs. 


29 
Any distribution utility [which seeks] THAT INTENDS to recover 
stranded [cost] CONTRACT COSTS shall have a duty to mitigate 
BEFOREHAND its potential stranded contract costs by malting [reasonable best] 
JlEAL efforts [to]: 
(a) 
TO reduce the costs of its existing contracts with [IPPs] ITS 
INDEPENDENT POWER PRODUCERS (IPPS) to [a level not exceeding] 
[THE] AN EXTENT [OF] AT LEAST EQUAL TO the average buying price 
[of] PROM other COMPARABLE land-based electric power [generators;] 
GENERATION COMPANIES; and 
(b) 
TO submit to ai1 annual [earnings] FINANCIAL review AND 
AUDIT by the [ERC and use] COMMISSION UNTIL THE END OF THE 
STRANDED CONTRACT COSTS RECOVERY PERIOD SO THAT its 
earnings above its authorized rate of return, IF ANY, SHALL BE USED to 
reduce the book value o€ [contracts until the end of the stranded cost recovery 
period.] ITS 11’1’ CONTRACTS. 
BILATERAL CONTRACTS C0NCLUDE.D BY A DISTRIBUTION 
UTILITY WITHOUT OPEN COMPETITIVE PUBLIC BIDDING, 
SPECIALLY 
WJTI-I 
SISTER 
OR 
AFFILIATED 
GENERATION 
MITIGATION EXAMINATION TO ELIMINATE ABOVE MARI‘XT 
PRICES, 
INDICES, 
COST 
FACTORS, 
OTI-JER 
PREFERRED 
PROVISIONS 
AND 
ARRANGEMENTS 
THAT 
[SHALL] 
WILL 
INCREASE THE 
PASS-ON 
COSTS TO THE END-USERS 
OF 
ELECTRICITY. 
COMPANY OR COMPANIES, MUST BE SUBJECTED ‘To STRINGENT 
THE STRANDED CONTRACT COSTS RECOVERIES ALLOWED 
AFTER TEIE ABOVE-MENTIONED MITIGATJON EXAMINATION 
SHALL BE COLLECTED ONLY PROM CUSTOMERS 
OF THE 
DISTRIBUTION 
UTILITY CONCERNED IN rrs OWN FRANCHISE 
TERRITORY, AFTER THE ELIMINATION OF THE INTER-GRID 
SUBSIDIES. 
[Other] IN CONDUCTING THE REVIEW OF TEIE STRANDED 
CONTRACT 
COSTS 
OF 
A 
DISTRIBUTION 
UTILITY, 
THE 
COMMISSION MAV UTILIZE FOR TIIAT PURPOSE OTHER mitigating 
measures which are reasonably kuown and generally accepted witliin the electric 
power industry [sliall be utilized]. The [ E X ]  COMMISSION shall not require 
tlie distribution utility to take a loss to reduce ITS stranded contract costs or TO 
divest ITSELF OF assets, unless tlie divestiture is imposed as a penalty [as 
provided herein.] 
IN ACCORDANCE 
WlTH 
THE APPLICABLE 
PROVISIONS OF THIS ACT. 
The [relevant] distribution utility CONCERNED shall submit to the 
[ERC] COMMISSION quarterly reports showing the amount of THE stranded 
CONTRACT costs ALREADY recovered and the REMAINING balance 
[remaining], IF ANY, YET to be recovered. 
Within three (3) nionlhs [from] IMMEDIATELY FOLLOWING the 
submission of the application for THE stranded [cost] CONTRACT COSTS 
recovery by tlie [relevant] distribution [utilities,] UTILITY CONCERNED, tlie 
[ERC] COMMISSION shall verify the JUST AND reasonable [amounts] 
AMOUNT TO BE RECOVERED, IF ANY, and SHALL APPROVE THE 
SAME AND determine the manner and duration for the full recovery of THE 
stranded contract costs [as defined herein:], AFTER DUE NOTICE TO ALL 
INTERESTED PARTIES AND PUBLIC HEARING: 
Provided, That the 
duratioii for such recovery shall not be [shorter] LESS than fifteen (15) years nor 


30 
[longer] M O W  than twenty-five (25) years. Any amount [to be included for 
stranded cost recovery] RJ?,PRESENTING THE STRANDED CONTRACT 
COSTS RECOVERY CL-IARGE shall be reflected as a separate item in the 
[consumer billing 
statement.] ELECTRIC END-USER’S MONTHLY 
BILLING STATEMENTS. 
The [ERC] COMMISSION shall, at the end of the first year [of] FROM 
the implcnientation of TIIE stranded [cost] CONTRACT COSTS recovery, and 
every year thereafter, conduct [a] AN 
ANALYSIS AND ieview OF ALL 
RELEVANT FACTS to determine whether there [is] IIAS BEEN AN urrder- 
recoveiy or over-recovery FROM THE STRANDED CONTRACT COSTS 
IZECOVERY CHARGE and adjust [(trimup) the level 04 THE RATE OF 
THE SAID stranded [cost] CONTRACT COSTS recovery charge accordingly. 
In case of an over-recovery, the [ERC] COMMISSION shall ensure that any 
excess ainount shall be iemitted to the Special Trust Fund cleated under Section 
[34 hereof.] 33 OF THIS ACT. A separatc TRUST account shall be created for 
these amounts, which shall be held in trust for any future claims of distribution 
utilities for stranded [cost] CONTRACT COSTS recovery. At the end of the 
stranded [cost] CONTRACT COSTS recovery period, any remaining amount in 
[this] TIIE SAID TRUST account shall be used to reduce the electricity rates 
CHARGED to the end-users[.] OF ELECTRICITY. 
“SEC. 134133. Universal Clzarge. - Within one (1) year from tlie 
effectivity of this Act, a universal charge to be deteimined, fixed, and approved 
by tlie 
[ERC,] COMMISSION, AFTER DUE NOTICE TO ALL 
INTERESTED PARTIES AND PUBLIC IIEAIUNG, shall be imposed on all 
[electricity] end-users OF ELECTRICITY, ON THE BASIS OF 
THE 
CONSUMED BY THEM, for tlie following purposes: 
NUMBER OF IULOWATT HOURS OF ELECTRICITY RESPECTIVELY 
(a) 
[Payment for] FOR the PAYMENT OF THE AMOUNT OF 
stranded debts OF NPC in excess of the amount TO BE assumed by the National 
Government [and] AS PROVIDED UNDER SECTION 31 OF THIS ACT, 
FOR THE PAYMENT OF JUST AND REASONABLE AMOUNT OF 
stranded contract costs of NPC [and as well as qualified] FROM ITS 
INDEPENDENT POWER PRODUCER CONTRACTS, AND FOR THE 
PAYMENT OF JUST AND REASONABLE AMOUNT OF stranded contract 
costs of distribution utilities [resulting fiom] THAT MAY ARISE FROM 
THEIR RESPECTIVE ELIGIBLE IPP CONTRACIS RECAUSE OF the 
restructuring of the ELECTRIC POWER industiy; 
ib) 
[Missionaiy electrification] FOR TIIE PAYMENT OF 
PRUDENT, JUST AND REASONABLE COSTS OF MISSIONARY 
ELECTRIFICATION PROJECTS: 
(c) 
[The] FOR THE PAYMENT OF THE AMOUNT FOR THE 
equalization of the taxes and royalties applied to indigenous or renewable sources 
or energy vis-&vis imported energy fuels; 
(d) 
[An] FOR THE PAYMENT 0 1 7  THE AMOUNT OF AN 
environmental charge equivalent to one-fourth of one centavo per kilowatt-hour 
(PO.O025/lcWh), which shall accrue to an environmental fund [to], AND WIIICH 
SIIALL be used solely for [watershed] THE rehabilitation and management[. 
Said Eund shall be managed by NPC under existing arrangements;] OF THE 
RE 
UNDER 
THE 
RESPONSIBILIT’I’, 
ADMINISTRATION, AND 
MANAGEMENT OF THE NPC; and 
WATERSHED AREAS. TIIE SAID ENVIRONMENTAL FUND SHALL 


31 
(e) 
(A charge to account for all forins ofl FOR THE PAYMENT OF 
TIIE 
CHARGE 
REPRESENTING 
THE 
RECOVERY 
OF TIIE 
AGGRJ3GATE AMOUNT OF ALL cross-subsidies AUTHORIZED UNDER 
TIIIS ACT, WIKICII CROSS-SUBSIDIES SHALL EXIST ONLY for a 
period not (exceeding] TO EXCEED three (3) years(.] FROM THE DATE OF 
THE IMPOSITION OF THE UNIVERSAL CIIARGE PROVIDEI) IN TIIIS 
SECTION. 
The universal charge [shall be a] UNDER THIS SECTION IS non- 
bypassable [charge wbich] AND 
shall be passed on and collected PER 
BILLING MONTH BY THE DISTRIBUTION UTILITIES from all THEIR 
RESPECTIVE end-users OF ELECTRICITY on [a inontlily] THE basis [by 
the distribution utilities.] OF THE NUMBER OF KILOWATT HOURS OF 
USERS OF ELECTRICITY PER BILLING MONTH. Collections by the 
distribution utilities and the TRANSCO in any given BILLING month shall be 
remitted to the PSALM Corp. on or before the fifteenth (15th) DAY or tlie 
succeeding month, net of any amount due to tlie distribution utility. [Any end-user 
or self-generating entity not connected to a distribution utility shall remit its 
corresponding universal charge directly to the TRANSCO.] 
ELECTRICITY ACTUALLY CONSUMED BI7 EACH OF SUCH END- 
THE SELF-GENERATED ELECTRICITY OF AN END-USER WHO 
OR WHICII IS NOT DIRECTLY CONNECTED TO THE DISTRIBUTION 
SYSTEM OF A DISTRIBUTION UTILITY OR TO THE TRANSMISSION 
GRID AND ITS SUBTRANSMISSION FACILITIES SHALL NOT BE 
SUBJECT TO OR LIABLE FOR THE UNIVERSAL CZIARGE IMPOSED 
IN THIS SECTION, 
EXCEPT FOR THE PAYMENT OF THE 
OBLIGATIONS SPECIFIED IN (b) AND (d) IF THE SELF GENERATED 
AND EXPLOITATION OF THE NATURAL RESOURCES OF THE 
COUNTRY. 
ELECTIUCITY OF ‘rm END USER COMES FROM THE UTILIZATION 
HOWEVER, EVEN IF THE END USER WHO OR WHICH 
GENERATES ELECTRICITY FOR ITS OWN USE FROM ITS OWN 
GENERATION FACILITY IS CONNECTED TO THE DISTRIRUTION 
SYSTEM OF A DISTRIBUTION UTILITY OR TO THE TRANSMISSION 
SYSTEM OF TRANSCO, THE SAME SHALL NOT BE SUBJJZCT TO 
THE 
UNIVERSAL 
CHARGE 
IF 
THE 
SELF 
GENERATED 
ELECTRICITY DOES NOT PASS THROUGII TIIE DISTRIBUTION 
SYSTEM OF A DISTRIBUTION UTILITY OR OF TIIE TRANSMISSION 
SYSTEM OF TRANSCO, 
EXCEPT FOR THE PAYMENT OF THE 
OBLIGATIONS SPECIFIED IN (b) AND (4 IF THE SELF GENERATED 
ELECTRICITY OF THE END USER COMES FROM THE UTILIZATION 
AND EXPLOITATION OF THE NATURAL RESOURCES OF THE 
COUNTRY. 
The PSALM Corp., [as] BEING THE CUSTODIAN AND administrator 
of the [fund,] UNIVERSAL CHARGE I-IElZFJN PROVIDED, shall create a 
Special Trust Fund ACCOUNT, which shall be USED, AND FROM WHICH 
SIIALL BE disbursed only SUCII AMOUNTS AS MAY BE NEEDED 
STRICTLY, for the purposes specified [herein] IN THIS SECTION in an open 
and transparent manner. PSALM SHALL APPOINT A CONSUMER [OR A] 
REPRESENTATIVE [FROM A CONSUMER GROUP] ACTIVE IN THE 
ELECTRICITY 
INDUSTRY 
WIIO 
SHALL 
MONITOR 
THE 
DISBURSEMENT OF FUNDS. All amounts collected for the universal charge 
shall be ALLOCATED AND distributed EXPEDITIOUSLY FOR THE 
PAYMENT OF THE OBLIGATIONS SPECIFIED IN (A), (B), (C), (D), 
AND (E) ABOVE AND to [the] THEIR rcspective beneficiaries, within [a] 


32 
SUCH reasonable period [to be provided by the ERC.] OF TIME AS SHALL 
I3E DETERMINED BY THE COMMISSION. 
"SEC. 135134. Royalties, Returns and Tax Rates for Indigenous Energy 
Resources. - The provisions of Section 79 of Commonweald1 Act No. 137 
(C.A. No. 137) and any law to the contrary notwithstanding, the President of the 
Philippines shall [IS HEREBY DIRECTED TO] reduce the SHARE, royalties, 
returns, and taxes [collected] OF THE NATIONAL GOVERNMENT for the 
exploitation of all indigenous sources of energy, including but not limited to, 
natural gas and geothermal steam, so as to effect parity of [tax] treatment [with 
the existing rates for] FOR TAX PURPOSES BETWEEN imported coal, crude 
oil, bunker fiiel, [and] other imported fuels[.] AND INDIGENOUS SOURCES 
OF ENERGY, ESPECIALLY NATURAL GAS AND GEOTHERMAL 
STEAM. 
To eiisnre [lower rates] CHEAPER ELECTRICITY for end-users, the 
[ERC shall] COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED 
PARTIES ANI) PUBLIC HEARING, [IS HEREBY DIRECTED TO] 
SHALL FIND WAYS AND MEANS AND [TO] EXERT EVERY EFFORT 
TO forthwith reduce the PMCES AND/OR rates of ELECTRKC power fiom 
all 
indigenous sources of energy AND 
IMPROVE TIIE GRID'S 
GENERATION MIX OR PORTFOLIO OP PLANTS. 
"SEC. [36]35. Unbundling of Rates and Functions. - Within THE six 
(6) months [from] IMMEDIATELY FOLLOWING the effectivity of this Act, 
NPC shall file [with the ERC its revised rates.] A PETITION FOR THE 
APPROVAL OF ITS REVISED RATES BY THE COMMISSION, AFTER 
DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
HEARING. The EXISTING rates of NPC shall be unbundled between ITS 
transmission SECTOR and generation [rates] SECTOR, and the rates shall 
reflect the respective costs of providing each IUND OF service[. Inter-grid] 
BEING RENDERED. THE INTER-GRID and intra-grid cross subsidies [for 
both the transmission and the generation rates] IN THE EXISTING NPC 
RATES, IF ANY, BOT13 IN THE TRANSMISSION SECTOR AND IN 
THE GENERATION SECTOR, shall be removed in accordance with THE 
APPLICABLE PROVISIONS OF this Act. 
Within THE six (6) months [from] IMMEDIATELY FOLLOWING the 
effectivity of this Act, each distribution utility shall [file its revised rates for the 
approval by the ERC.] [ALSO] LIICEWJSE PILE A PETITION FOR THE 
APPROVAL OF ITS REVISED RATES BY TIIE COMMISSION, AFTER 
DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
IIEARKNG. 
The distribution wheeling charge OF A DISTRIBUTION 
UTILITY TO SUPPLIERS OF ELECTRICITY shall be unbundled from the 
DISTRIBUTION UTILITY'S retail rate [and the rates] TO ITS END-USERS 
OF ELECTRICITY. BOTH THE WIJEELING CI3ARGE AND THE 
RETAIL RATE OF A DISTRIBUTION UTILITY shall reflect the respective 
costs of providing each AND EVERY IUND OF service[. 
For both the 
distribution retail wheeling and supplier's charges,] BEING RENDERED, AND 
BOTH SHALL BE REFLECTED SEPAIUTELY IN THE DISTRIBUTION 
OF ELECTRICITY. 
THE inter-class subsidies shall be removed [in 
accordance with this Act.] UOTH FROM THE DISTRIBUTION UTILITY'S 
WHEELING CHARGE TO SUPPLIERS OF ELECTRTCITY AND FROM 
TIIE DISTRIBUTION UTILITY'S RETAIL RATE TO ITS END-USERS 
OF ELECTRICITY, IN ACCORDANCE WITH THE APPLICABLE 
PROVISIONS OF THIS ACT, 
UTILITY'S MONTHLY BILLING STATEMENTS TO ITS END-USERS 


33 
Witliin THE six (6) months [from] IMMEDIATELY FOLLOWING the 
date of [submission oCrevised rates by NPC and each distribution utility, the ERC 
shall notify the eiititics of their approval.] THE FILING BY NPC OR BY A 
DISTRIBUTION UTILITY, AS THE CASE MAY UE, OF ITS PETITION 
SIIALL I;"ORTIIWITH ACT ON THE PETITION, AND THEREAFTER 
[THE 
COMMISSION 
SHALL] 
ACCORDINGLY 
NOTIFY 
THE 
INTERESTED PARTIES OF ITS DECISION THEREON. 
FOR THE APPROVAL OF ITS RJWISED RATES, m-IE COMMISSION 
Any electric power industry participant shall fiinctionally and structurally 
unbundle its business activities and/OR ITS rates in accordance with the [sectors 
as identified in] SECTOR TO WHICH IT BELONGS ACCORDING TO 
Section 5 [hereof.] OF TIUS ACT. The [ERC] COMMISSION shall ensure 
AND ENFORCE fiill compliance with this provision. 
"CHAPTER I11 
"ROLE OF THE DEPARTMENT OF ENERGY 
"SEC. [37]36. Powers and Functions of the DOE. - In addition to its 
existing powers and fimctions, the DOE is hereby [mandated] [ASSIGNED] 
DESIGNATED AND DIRECTED to supervise the restructuring of the 
[electricity] ELECTRIC POWER industry. In pursuance thereof, Section 5 of 
M 7638 otherwise lcnown as "The Department of Energy Act of 1992" is hereby 
amended to read as follows: 
"(a) 
Formulate policies for the planning and implementation of a 
coniprehensive program for the efficient supply and economical use of energy 
WlIICH [WILL] SHALL BE consistent with the approved national economic 
plan, [illid] with the policies on environmental protection, [and] conservation, and 
maintenance or ecological balance, and WHICH SHALL provide a mechanism 
for the integration, rationalization, and coordination of the various energy 
programs of the Goveiiiment; 
(b) 
Develop and update annually the existing Philippine Energy Plan, 
hereinafter referred to as 'The [Plan] PEP', which shall provide for an integrated 
and comprehensive exploration, development, utilization, distribution, and 
conservation of energy resources, with [preferential bias for] PREFERENCE IN 
FAVOR OF eiivironment-friendly, indigenous, and low-cost sources of energy. 
The plan shall include [a policy direction towards the privatization of government 
agencies related to energy, deregulation of the power aid energy industry, and] 
WAYS AND MEANS TOWARO THE reduction of dependency OF THE 
COUNTRY on oil-fired plants. Said Plan shall be submitted to Congress not later 
than the fifteenth day of September and every year thereafter; 
(c) 
Prepare and update annually a Power Development Program (PDP) 
and integrate the same into the [Philippine Energy Plan.] PEP. The PDF shall 
consider and integrate the individual or joint development plans FOR the 
transmission, generation, and distribution sectors of the electric power industry, 
which are submitted to the Department: Provided however, That the [ERCJ 
COMMISSION shall have exclusive authority [covering] TO ISSUE AND 
IMPLEMENT the Grid Code, THE DISTRIBUTION CODE, and [the] SUCH 
OTHER pertinent rules and regulations [it] THAT THE COMMISSION may 
issue; 
(d) 
Ensme tlic AVAILABILIlY, ADEQUACY, reliability, quality, 
and security of THE supply of electric power; 


(e) 
Following the restivctnring of the [electricity sector] ELECTRIC 
POWER INDUSTRY, the DOE: shall, among others: 
(i) 
Encourage INVESTMENrS FROM THE private sector 
[investments] in the 
[electricity sector] ELECTRIC POWER 
INDUSTRY and promote THE development o f  indigenous and 
renewable SOURCES OF energy [sources]; 
(ii) 
Facilitate aid encourage reforms in the structure and 
operations of distribution utilities [for] IN ORDER TO ATTAIN greater 
efficiency and lower costs[;] OF ELECTRICITY; 
(iii) 
In consultation with other government agencies, promote a 
system of incentives to encourage [industry participants, including new 
generating companies and end-users to provide adequate and reliable 
electric supply;] [AND ENLARGE] NEW PARTICIPANTS IN TIIE 
ELECTRIC 
POWER 
INDUSTRY, 
[ESPECIALLY 
TO 
ENCOUIUGE] 
THE 
ENTRY 
OF 
NEW 
GENERATION 
COMPANIKS AND TO [ENLARGE] BROADEN THE NUMBER 
PROVIDE THE COUNTRY WITH AN ADEQUATE, RELIABLE, 
AND CHEAPER SUPPLY OF ELECTRICITY, and 
OF END-USERS OF ELECTRICITY, WIIICI-I WILL IN TURN 
(iv) 
Undertake, 
in 
coordination 
with 
the 
[ERC] 
COMMISSION, NPC, PSALM, NEA and the Philippine Information 
Agency (PIA), [SUCH] information campaignS [THAT MAY BE 
NEEDED] to educate the public on the restructuring of the [electricity 
sector] ELECTRIC POWER INDUSTRY and ON THE privatization of 
THE NPC assets; 
(f) 
Jointly with the electric power industry participants, establish the 
[wholesale electricity spot marlcet] WESM and formulate the detailed rules 
[governing the operations IhereofJ TO GOVERN ITS OPERATIONS; 
(g) 
Establish 
and administer programs 
for 
the 
exploration, 
transportation, marketing, distribution, utilization, conservation, stockpiling, and 
storage of energy resources or all forms, whether conventional OP non- 
conventional; 
(11) 
Exercise supervision and control over all government activities 
[relative to] [THAT HAVE TO DO WITH] INVOLVING energy projects in 
order to attain A WELL COORDINATED EFFORT TO ACCOMPLISH the 
goals embodied in Section 2 of 11A 7638; 
(i) 
Devclop policies and procedures and, as appropriate, [promote] a 
system of energy development incentives to enable and encourage electric power 
industry participants to provide adequate SUPPLY capacity to meet 
INCREASED demand including, among others, reserve requirements[;] OF 
THE COUNTRY; 
(j) 
Monitor THE ACTIVITIES OF THE private sector (activities 
relative to energy projects in order to attain the goals of the restructuring, 
privatization, and modernization or the electric power sector as provided for under 
existing laws:] REGARDING ENERGY PROJECTS IN ORDER TO 
ACCOMPLlSIK 
THE 
GOALS 
AND 
OBJECTIVES 
OF 
THE 
RESTRUCTURING, 
PRIVATIZING, AND 
MODERNIZING THE 
ELECTRIC POWER INDUSTRY IN ACCORDANCE WITII THE 


35 
MANDATE OF EXISTlNG LAWS; Provided, That tlie Deparlment shall 
endeavor to provide [for] an environment TIIAT IS conducive to A free and 
active private sector INVOLVEMENT, participation, and investment in all 
energy activities[;] OF THE COUNTRY; 
(I) 
Assess the requirements of, determine priorities €or, provide 
direction to, and disseminate information resulting from energy research and 
development progranis for the optimal development o f  various forms of energy 
production and utilization technologies; 
(1) 
Forniulaie and implement [programs, including] A PROGRAM 
OF PENALTIES FOR THE INJUDICIOUS OR INEFFICIENT USE OF 
ENERGY IN ALL ENERGY-CONSUMING SECTORS OF TIIE 
ECONOMY, AS WELL AS a system of [providing] incentives [and penalties,] 
for the judicious aid efficient use of energy, SUCH AS CO-GENERATION 
SYSTEMS, 
DISTRIBUTED 
GENEMTION, 
DEMAND-SIDE 
MANAGEMENT SYSTEM, AND RENEWABLE ENERGY [in all energy- 
coiisuming sectors of the economy]; 
(m) 
Formulate and implement a program for the accelerated 
development of non-conventional energy [systems] SOURCES and the 
promotion and commnercidizatio~~ 
of its applications; 
(n) 
Devise ways and means of [giving] EXTENDING direct benefit 
to the INHABITANTS OF A REGION, province, city, [or] AND municipality[, 
especially the community, and people affected, and equitable preferential benefit 
to the region] that hosts the energy resource [and/or the energy-generating] 
AND/OR THE ENERGY-GENERATION facility[:] OR FACILITIES: 
Provided, however, That the INHABITANTS OF THE other REGIONS, 
provinces, cities, AND municipalities[, or regions] shall not be deprived of their 
energy requirements; 
(0) 
Encourage private enterprises engaged in energy projects, 
including corporations, cooperatives, and similar collective organizations, to 
broaden the base of their ownership and thereby encourage the widest public 
ownership of energy-orientcd [corporations;] ENTERPRISES; 
0,) 
Formulate such rules and regulations [as], NOT INCONSISTENT 
WITH THE PROVISIONS OF THIS ACT, WHICH may be necessary to 
implement the objectives of this Act; and 
(9) 
Exercise such other powers as may be necessary or incidental to 
attain the objectives oftbis Act." 
"CHAPTER IV 
"REGULATION OF THE ELECTRIC POWER INDUSTRY 
"SEC. (38137. Creation ojthe Energy Regulatory Commission. - 
[There 
is hereby created an IMPARTIAL, ITRULY] independent, AND quasi-judicial 
regulatory body to be [nanied the Energy Regulatory Commission (ERC). For 
this purpose,] KNOWN AS "THE COMMISSION". EXECUTIVE ORDER 
NO. 172, SERIES OF 1987, AS AMENDED, IS HEREBY REPEALED IN 
TOTO, AND tlie [existing] Energy Regulatory Board (ERR) created [under 
Executive Order No. 172, as amended,] THEREUNDER is hereby abolished[.] 
AND 
ALL 
I T S  POWERS ARE 
FORMALLY 
ANI) 
TOTALLY 
AnOLlSHED AND TERMINATED.] TI-IE ENERGY REGULATORY 


36 
BOARD (ERJ3) CREATED UNDER EXECUTIVE ORDER NO. 172, AS 
AMENDED, IS HEREBY ABOLISHED. IN LIEU THEREOF, TFIERE IS 
JUDICIAL FtKGULATORY BODY TO BE NAMED THE ENERGY 
THIS ACT IS RICFERRED 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 MAY BE 
EXERCISED BY THE COMMISSION. 
HEREBY C.REATED AN IMPARTIAL, INDEPENDENT, AND QUASI- 
REGULATORY COMMISSION (ERC), wmca FOR PURPOSES OF 
THE COMMISSION SHALL ENJOY FISCAL AUTONOMY 
PROVIDED THAT A SUPPLEMENTAL BUDGET THROUGH THE 
DEPARTMENT OF BUDGET AND MANAGEMENT 
SHALL BE 
SUBMITTED TO CONGRESS, WITHOUT PREJUDICE TO THE 
POWERS OF THE COMMISSION ON AUDIT OVER THE FINANCIAL 
ACTIVITIES OF THE COMMISSION. 
“SEC. 38. 
QUALIFICATIONS O F  THE MEMBERS OF THE 
COMMISSION. - The Commission shall be composed of a Chairman and four 
(4) ASSOCIATE members to be appointed by the President of the Philippines. 
The Chairman and the ASSOCIATE members of the Commission shall be 
natural-born citizens OF THE PHILIPPINES and PERMANENT residents [of 
the 
Philippines,] 
THEREOF 
FOR 
THE 
LAST 
FIVE 
YEARS 
IMMEDIATELY PRECEDING THEIR APPOINTMENTS. THEY SIXALL 
BE REPUTABLE INDIVIDUALS [persons] of good moral character, at least 
thirty-five (35) years of age, and [of] POSSESSING KNOWN AND recognized 
PROFESSIONAL competence in any of the following fields: [OF EITHER] 
energy, law, economics, finance, commerce, [OR] ACCOUNTANCY, or 
engineering[, with]. EXCEPT FOR THE MEMBERS FROM THE LAW 
MEMBERS MUST HAVE at least [three (3)] FIVE (5) yeas OF actual, 
ACTIVE, and distinguished I’ROI%SSIONAL experience in their respective 
fields [of expertise: Pyovjded, That out oq. OF the [four (4)] FIVE (5) ineinbers 
of the Commission, at least one (1) OF THEM shall be a REPUTABLE AND 
RESPECTED member of the Philippine Bar with at least ten (10) years OF 
DISTINGUISHED experience in the active practice of THE law, and 
ANOTHER m e  (I) shall be a REPUTABLE AND RESPECTED cerlified 
public accountant, ALSO with at least ten (10) years OF DISTINGUISHED 
experience in THE active practice[.] OF THE PROFESSION OF 
ACCOUNTANCY. 
AND 
ACCOUNTANCY 
PROFESSIONS, n m  THREE 
OTHER 
Within tliree (3) months from the creation o f  the IERC] COMMISSION, 
the Chairman shall submit [for the approval by] TO the President of the 
Philippines FOR HIS APPROVAL [the] A new organizational structure and A 
LIST ORplorztillo OF positions necessary to carry out the powers and functions 
of the [ERC.] COMMISSION. 
The Chairman of the Commission, who shall be a RESPECTED, 
REPUTABLE, AND DISTINGUISI-IED ineinber of the Philippine Bar, shall 
act as the Chief Executive Officer of the Commission. 
All members of the Commission shall have a FIXED, NON- 
RENEWABLE, AND NON-EXTENDIBLE term of seven (7) years[: Provided, 
That for]. FOR the first appointees, the Chairman shall hold office for seven (7) 
years[,]; two (2) ASSOCIATE members shall hold office for five (5) years; and 
the [other] LAST two (2) ASSOCIATE members shall hold office for three (3) 
years: Provided[, firvlher], That appointment to any future vacancy shall only be 
for the unexpired term of the predecessor[: Provided, finally, That there shall be 


37 
no reappointmeut and in no case shall any member serve for more than seven (7) 
years in the Commissionj. 
The Chairman and TIIE ASSOCIATE members ofthe Commission sliall 
assume office at the beginning of their RESPECTIVE terms: Provided, That, if 
upon the effectivity of this Act, the Commission has not been constituted, and the 
new staffing pattern [artd] OR ylantilln OF positions [have] HAS not been 
approved and/OR filled-up, the [current Board and existing personnel of ERB] 
MEMBERS 
AND 
PERSONNEL 
OF THE 
DEFUNCT ENERGY 
REGULATORY BOARD shall continne to hold office[.] UNTIL THEY A m  
CORRESPONDINGLY REPLACED. 
[The existing] ANY OF THE personnel of the DEFUNCT ERU, if HE 
OR SHE IS qualified AND HAS NOT BEEN THE SUBJECT OF ANY 
ADMINISTRATIVE OR CRIMINAL CASE OF DERELICTION OF DUTY 
OR OF MALFEASANCE OR MISFEASANCE 1N OFFICE, shall be given 
preference in [thej filling [up ofl THE NEW STAFFING PATTERN OR 
plnntilla OF positions created in [the ERC,] AND FOR THE COMMISSION, 
subject to SUCH REQUIREMENTS OF existing civil service rules and 
regulations. 
[Members] ALL THE MEMBERS of the Commission shall enjoy 
security of tenure, and THEY shall not be suspended or removed from office 
[except] ON ANY GROUND OTHER TI-IAN for A just cause as PROVIDED 
AND specified by law. 
“SEC. 39. PROHIBITIONS - The Chairnlan and the ASSOCIATE 
members of the Commission [or any ofl AND their relatives within the fourth 
civil degree of consanguinity or affinity, WHETHER SUCH PERSONAL 
RELATIONS ARE legitimate, [or] common law, [shall bej OR OTHERWISE, 
ARE prohibited fiom holding any interest whatsoever, either as investor, 
stockholder, officer, or director, in any company or entity engaged in the business 
of transmitting, generating, supplying, AGGREGATING, or distributing [any 
form of energy and must, therefore, divest ihrough sale or legal disposition of any 
and all interests in the energy sector upon assumption of office.] 
ELECTRICITY. 
UPON THE ASSUMPTION BY THE CHAIRMAN AND THE 
ASSOCIATE 
MEMBERS 
OF TI~KI? COMMISSION OF 
THEIR 
RESPECTIVE POSITIONS, THE CHAIRMAN AND THE ASSOCIATE 
MEMBERS OF THE COMMISSION AND THEIR RESPECTIVE 
RELATIVES WITHIN THE PROSCRIBED DEGREE OF PERSONAL 
RELATIONS 
MUST 
DIVEST THEMSELVES OF ALL 
THEIR 
PROHIBITED 
INTEREST, 
THROUGH 
REAL 
ARMS 
LENGTH 
TRANSACTIONS OR OTHER VALID FORMS OF DISPOSITION, WITH 
CORRESPONDING PAYMENT OF ALL TAXES DUE, IF ANY, ON 
SUCH TRANSACTION OR OTHER FORMS OF DISPOSITION AND 
WITHOUT ANY PROVISION GRANTING A RIGHT TO THE 
TRANSFEROR OF SUCH PROHIBITED INTEREST TO REPURCHASE 
SUCH TRANSFERRED OR DISPOSED PROHIBITED INTEREST, AND 
[OR] MUST RESIGN FROM ALL THEIR PROSCRIBED POSITIONS IN 
THE ELECTRIC POWER INDUSTRY. 
“SEC. 40. QUORUM - The presence of at least three (3) members of the 
Commission shall constitute a quorum lalid the majority] IN EVERY 
OFFICIAL AND FORMAL MEETING AND/OR HEARING OF THE 
COMMISSION. THE vote of [two (2) members in a meeting where a quorum 
is present] A MAJORITY OF THE QUORUM shall be necessary for the 
adoption of [any] A VALID rule, ruling, order, resolution, decision or other 


3s 
OFFICIAL AND FORMAL act of the Commission in the exercise of its quasi- 
judicial functions: 
Provided, ’lhat in fixing THE TRANSMISSION, 
SUBTMNSMISSION, AND DISTRIBUTION WIIEELING CHARGES 
AND THE TRANSMISSION, SUBTRANSMISSION, AND DISTRIBUTION 
rates and tariffs[,] AS WELL AS IN RENDERING ANY ORDER OR 
DECISION ON ANY ISSUE OR MATTER THAT SHALL RESULT IN AN 
ELECTRICITY, an affirmative vote of AT LEAST three (3) members OF 
THE COMMISSION sliall be required. 
INCREASE IN THE FINANCIAL BURDEN TO THE END-USERS OF 
“SEC.[ 39141. Conpensation and Other Eniolumeizts for [ERC] THE 
COMMISSION Petxonnel. 
-The 
compensation and [other emoluments] 
ALLOWANCES for the Cliairman and THE ASSOCIATE members of tlie 
Commission [and the ERC personnel] AS WELL AS THE SALARIES AND 
ALLOWANCES OF THE COMMISSION PERSONNEL sliall be exempted 
from [lhe coverage oq Republic Act No. 6758, otherwise known as the “Salary 
Standardization Act”. For this purpose, the schedule of [compensation of the ERC 
personnel,] SALARIES AND ALLOWANCES OF THE 
COMMXSSlON 
l’ERSONNEL, except for the initial [salaries and] compensation AND 
ALLOWANCES of the Chairman and THE ASSOCIATE members of the 
Coinmission, shall be submitted for approval by the President of the Philippines. 
The new schedule of compensation OR SALARIES AND ALLOWANCES 
sliall be implemented within six (6) months from the effectivity of this Act, and 
SAID COMPENSATION OR SALARIES AND ALLOWANCES may be 
upgraded by the President of tlie Philippines as the need arises: Provided, That in 
no case shall the rate OF SUCH COMPENSATION OR SALARIES AND 
ALLOWANCES be upgraded more than once a year. 
The Chairman and THE ASSOCIATE members ofthe Commission shall 
initially be entitled to tlie same [salaries] COMPENSATION, allowances, and 
benefits as those of the Presiding Justice and Associate Justices of the Supreme 
Court, respectively. The Chairman and the ASSOCIATE members of tlie 
Commission shall, upon coinpletioii of their term 0 1 7  OFFICE or upon becoming 
eligible for retirement under existing laws, be entitled to the same retirement 
benefits and privileges provided for the Presiding Justice and Associate Justices 
of the Supreme Court, respectively 
“SEC. 140142. Enlinncenient of Technical Competence. - The [ERC] 
COMMISSXON shall establish rigorous training programs for its staff [for tlie 
purpose of enhancing llie] AND PERSONNEL TO ENHANCE THEIR 
technical competence AND 
THAT of the [ERC in the following areas: 
evaluation of technical performance and monitoring ofJ COMMISSION IN 
ORDER TO STRENGTHEN ITS KNOWLEDGE AND CAPACITY TO 
MONITOR AND EVALUATE THE TECHNICAL CAPABILITIES AND 
OVERALL PERFORMANCE OF THE ELECTRIC POWER INDUSTRY 
PARTICIPANTS, INCLUDING THEIR compliance with THE service [and], 
performance, [standards, performance-based rate-setting reform, environmental 
standards, and such other areas as will] AND ENVIRONMENTAL 
ACT, AND ABOVE ALL TO enable the [ERC] COMMISSION to adequately 
perform its duties aud EFFICIENTLY ACCOMPLISH ITS functions. 
STANDARDS, AS WELL AS wm THE REFORMS PROVIDED IN THIS 
“SEC. [4 1143. PROTECTION AND Promotion of Consiiiner RIGHTS 
AND Interests. - THE COMMISSION SHALL ENSURE THE 
ADEQUATE PROTECTION AND PROMOTION OF THE INTERESTS 
RIGHTS AS FOLLOWS: 
OF THE ELECTRICITY CONSUMERS AND UPHOLD THEIR BASIC 


39 
TO HAVE QUALITY, RELIABLE, AFFORDABLE, SAFE, 
AND RJ3GULAR SUPPLY OF ELECTRIC POWER; 
TO BE ACCORDED COURTEOUS, PROMPT, AND NON- 
DISCRIMINATORY 
SERVICE BY 
THE 
ELECTRIC 
SERVICE PROVIDER; 
TO 
BE 
GIVEN 
A 
TRANSPARENT, 
NON- 
DISCIUWIINATORY AND REASONABLE 
PIUCE OF 
ELECTRICITY CONSISTENT WITH THE PROVISIONS 
OF THIS ACT. 
TO BE AN INFORMED ELECTRIC CONSUMER AND 
GIVEN 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 
TO 
ORGANIZE THEMSELVES AS 
A 
CONSUMER 
ORGANIZATION IN THE FRANCHISE AREA WHERE 
THEY BELONG AND WHERE THEY ARE SERVED BY 
THE DISTRIBIJTION UTILITY OR AS A NETWORIC OF 
ORGANIZATION. 
The [ERC] COMMISSION shall [handle] ATTEND AND RESPOND 
EXPEDITIOUSLY TO THE [consumer] complaints OF END-USERS OF 
ELECTRICITY, and IT SHALL ensure AND SAPEGIJARD the adequate, 
EFFECTIVE, AND SUSTAINED promotion [of consumer interests.] AND 
PROTECTION 
OF 
THE 
INTERESTS 
OF 
END-USERS 
OF 
ELECTRICITY. 
THE COMMISSION SHALL ENSURE THAT DISTRIBUTION 
UTILITIES SHALL SUPPLY THE LEAST COST ELECTRICITY FOR 
TIIEIR CAPTIVE END-USERS; 
“SEC. [42]44. Budget ofthe [ERC.] COMMESION. - The amount of 
One Hundred city million pesos (P150,000,000.00) is hereby allocated from the 
existing budget of the DEFUNCT ERB for the initial operation of the [ERC.] 
COMMISSION. Any balance shall initially be sourced from the Office of the 
President o f  the Philippines. Thereafter, the annual budget of the [ERC] 
COMMISSION shall be included in the [regular] GENERAL or special 
appropriations[.] OF THE NATIONAL GOVERNMENT. 
“SEC. 143145. Functions ofthe fERC.1 COMMISSION. - 
The [ERC] 
COMMISSION shall, AMONG OTHERS, [(l)] promote competition[,]; 
[(2)] encourage niarlcet development[,]; [(3)] PROTECT END-USERS OF 
ELECTRICITY 
FROM 
DISCRIMINATOR\’, 
UNFAIR, 
OR 
CONFISCATORY 
RATES; 
[(4)] 
ensure 
[customer], 
UPON 
THE 
choice; and [(5)] CONTROL, PREVENT, AND penalize abuse of market power 
in the restructured [electricity] ELECTRIC POWER industry. 
ESTAULISTIMENT OF THE CONTESTABLE MARKET, END-USER’S 


40 
[In appropriate cases, the ERC] THE COMMISSION is authorized to 
issue A cease and desist order, WHENEVER IT IS NEEDED TO SERVE THE 
INTEREST OF THE PUBLIC OR THE INTEREST OF JUSTICE, after due 
notice TO ALL INTERFSTED PARTIES and I’UULlC hearing. 
THE COMMISSION, ACTING AS A QUASI-JUDICIAL BODY, 
SHALL CONDUCT PXJBLIC HEARJNGS ON ALL APPLICATIONS FOR 
RATE INCREASE AND ON ANY ISSUE, THE RESOLUTION OF 
WIIICIS, 
WILL 
AFFECT 
PRIVATE 
RIGHTS 
OR 
IMPOSE 
OBLIGATIONS OR WILL RESULT IN ANY INCREASE IN THE PRICE 
OF ELECTRICITY TO TISE CONSUMERS. 
HENCEFORTH, NO 
PROVISIONAL AUTHORITY FOR ELECTRICITY RATE INCREASE 
MAY BE ISSUED. 
[Towards this end, it shall] IN ADDITION, THE COMMISSION 
SHALL PERFORM AND EXERCISE AND be responsible for the ibllowing 
[key] POWERS AND functions [in the restructured industryj: 
(a) 
Enforce the implementing rules and regulations of this Act[;], 
WIlICII ARE NOT INCONSISTENT WITH ANY OF ITS PROVISIONS; 
(b) 
Within six (6) montlis [from] IMMEDIATELY FOLLOWING 
the effectivity of this Act, promulgate and enforce, in accordance with [law,] 
TI-IE APPLICABLE PROVISIONS OF THIS ACT, 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 establislunent of 
the SAID performance standards, the nature and function of the entities 
shall CAREFULLY be considered; [and] 
(ii) 
Financial capability standards for the 
[generating] 
GENERATION companies, the TRANSCO, THE distribution utilities, 
and THE suppliers: Provided, That in the formulation of the SAID 
financial capability standards, the nature and function of the [entity] 
ENTITIES shall CAREFULLY be considered: Provided, further, That 
[such] SAID standards are set to ensure that the electric power industry 
pa1ticipants 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 
(111) DETERMINE, PIX, AND APPROVE, AFTER DUE 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
HEARING, TI-IE ITEMIZED AMOUNTS OF THE UNIVERSAL 
CHARGE TO BE IMPOSED ON ALL 
END-USERS OF 
ELECTRICITY PURSUANT TO SECTION 33 OF THIS ACT. 
(c) 
Enforce the rules and regulations governing the operations of the 
[electricity spot marlcet] WESM and the activities of the spot market operator and 
other participants in the spot market, for the purpose of ensuring a greater AND 
RELIABLE supply and rational pricing o€electricity; 
(d) 
Determine the [level] AMOUNT AND EXTENT of cross 
subsidies in the existing retail rate until the same is FINALLY removed pursuant 
to Section [74 hereof;] 71 OF THIS ACT; 


41 
(e) 
Amend, REVISE, or revoke, after due notice TO ALL 
INTERESTED PARTIES and PUBLIC hearing, the authority to operate [ofl 
GRANTED TO any person or entity which fails to comply with the 
PERTINENT provisions [hereof, the IRR, or any] OF' THIS ACT, OR WITH 
ANY OF TIlE IMPLEMENTING RULES AND REGULATIONS OF TIlIS 
ACT, OR WITH ANY DECISION, order, or resolution of the [ERC.] 
COMMISSION. In the event a divestment, CESSATION, OR DESISTANCE 
is required, the [ERCJ COMMISSION shall, THROUGH A PORMAL 
ORDER FOR TEIAT PURPOSE, allow the affected party [sufficient time] A 
REASONABLE TIME to remedy the infraction, or [for] TO UNDERTAKE an 
orderly disposal OF THE MATTER, ACTIVITY, OR BUSINESS 
INVOLVED, AS THE CASE MAY BE, but [shall] in no case SHALL THE 
SAID REASONABLE TIME exceed twelve (12) months from the issuance of 
the SAID FORMAL order[;] OF THE COMMISSION; 
(f) 
[In the public interest establish] ESTABLISI-I and enforce [a 
methodology for setting] IN THE INTEREST OF THE GENERAL PUBLIC 
AFTER 
TAIUNG 
INTO 
ACCOUNT 
ALL 
RELEVANT 
CONSIDERATIONS, 
INCLUDING 
THE 
EFFICIENCY 
OR 
INEFFICIENCY OF THE REGULATED ENTITIES, AND AFTER DUE 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING, 
JUST 
AND 
REASONABLE 
transmission 
and 
distxibulion 
NON- 
DISCIUMINATORY wheeling [rates and] CHARGES, AS WELL AS JUST 
AND REASONABLE NON-DISCRIMINATORY retail rates €or the captive 
market of [a] distribution [utility, taking into account all relevant considerations, 
including the efficiency or inefficiency of the regulated entities. The rates must be 
such as to] UTILITIES, WIXICH SHALL allow the recovery of ALL just and 
reasonable costs[,] and [a] GIVE A JUST AND reasonable return on THE rate 
base (RORB) OF THE REGULATED ENTITIES to enable [the entity] THEM 
to operate viably[. The ERC may adopt alternative forms of internationally- 
accepted rate-setting methodology as it may deem appropriate. The rate-setting 
methodology so adopted and applied must ensure a reasonable price of electricity. 
The rates prescribed shall be non-discriminatory. To achieve this objective and to 
ensure the complete removal of cross subsidies, the cap on the recoverable rate of 
system losses prescribed in Section 10 of Republic Act No. 7832, is hereby 
amended and shall be replaced by caps which shall be determined by the ERC 
based on load density, sales mix, cost of service, delivery voltage aud other 
technical considerations it may promulgate. The ERC shall determine such €orin 
of rate-setting methodology, which shall promote efficiency. In case the rate 
setting methodology used is RORB, it shall be subject to the following 
guidelines:], AND WHICH SHALL ENSURE A JUST AND REASONABLE 
PRICE OF ELECTRICITY. 
AND IN THE INTEREST OF THE END-USERS OF ELECTRICITY, 
IN DETERMINING A JUST AND REASONABLE RETURN ON 
[THE] RATE BASE OF THE TRANSCO OR OF A DISTRIBUTION 
G IJIUELINES : 
UTILITY, THE COMMISSION MUST OBSERVE T m  FOLLOWING 
(I) THE RATE BASE SIIALL CONSIST OF TIIE AVERAGE 
VALUE OF ALL ASSETS, FACILITIES, PROPERTY, AND 
PERMANENT IMPROVEMENTS OF THE TRANSCO OR OF THE 
DISTRIBUTION UTILITY, AT TIIE BEGINNING AND AT THE 
END OF ITS FISCAL YEAR, AS SHOWN IN THE PROPERTY 
ACCOUNTS OF TIIE TRANSCO OR OF THE DISTRIBUTION 
UTILITY, AS THE CASE MAY BE, WHICH ARE DIRECTLY 
USED AND TJSEPUL IN PROVIDING THE SERVICE TO THE 
ALLOWANCE FOR DEPRECIATION TAKEN FOR THE YEAR 
END-USERS 
OF 
ELECTRICITY, 
LESS 
THE 
ACCRTJED 


42 
ON THE REGULATED ENTITY’S DEPRECIABLE ASSETS, 
FACILITIES, 
I’HOPERTY, 
AND 
PERMANENT 
IMPROVEMENTS, 
PLUS 
TWO 
MONTHS 
PRUDENT 
OPERATING CAPITAL. 
(11) THE VALUE OF THE FRANCHISE OF THE TRANSCO 
OR OF THE DISTRlBUTlON UTILITY 
SHALL NOT BE 
INCLUDED IN TIIE RATE BASE FOR PURPOSES OF 
RATEMAI<ING. 
(111) 
THE 
VALUE 
OF 
ANY 
ASSET, 
FACILlTY, 
PROPERTY, 
AND 
PERMANENT 
IMPROVEMENTS 
NOT 
ACTUALLY USED AND USEFUL FOR THE PURPOSE OF 
RENDERING THE SERVICE OF THE TRANSCO OR OF THE 
DISTRIBUTION UTILITY SHALL NOT BE lNCLUDED IN THE 
RATE BASE, HOWEVER USEFUL THE ASSET, FACJLITY, 
PROPERTY, AND PERMANENT IMPROVEMENTS MAY HAVE 
BEEN IN THE PAST 011 MAY YET BE IN THE FUTUW. 
(IV) TI-TE VALUE OF REAL OR PERSONAL PROPERTY 
DISTRIBUTION UTILITY FOR TIIE NEEDS OF POSSIBLE 
FUTURE GROWTH SHALL NOT [LIICEWISE] BE INCLUDED IN 
THE RATE BASE. 
PURCHASED AND HELD BY ‘rm TRANSCO OR BY THE 
(V) 
THE 
COST 
OF 
OVJCR-ADEQUATE 
ASSETS, 
FACILITIES, PROPERTY, AND PERMANENT IMPROVEMENTS 
SHALL NOT [SlMlLARLYJ BE ALLOWED TO BE INCLUDED IN 
THE RATE 
BASE 
OF THE 
TRANSCO 
OR 
OF TWE 
DISTRIBUTION UTILITY. 
(VI) 
TIIE 
TOTAL AMOUNT OF ALL 
DEPOSITS 
OF ELECTRICITY AS A CONDITION OF RENDITION AND 
CONTINUATION OF SERVICE, INCLUDING TIIE TOTAL 
NOT 
BE 
INCLUDED 
IN TIIE 
RATE 
BASE 
OF TIIE 
DISTRIBUTION UTILITY. 
REQUIRED BY A DISTRIBUTION UTILITY FROM END-USERS 
AMOUNT OF ACCUMULATED INTERESTS THEREON, SHALL 
(VII) THE VALUE OF NEWLY CONSTRUCTED OR 
INSTALLED 
ASSETS, 
FACILITIES, 
PROPERTY, 
AND 
PERMANENT 
IMPROVJZMENTS 
\VIIICH 
ARE 
TO 
BE 
INCLUDED IN THE RATE BASE SHALL BE TIIE PRUDENT 
ORIGINAL COSTS OP SUCH NEWLY CONSTRUCTED OR 
INSTALLED 
ASSETS, 
FACILITIES, 
PROPERTY, 
AND 
PERMANENT IMPROVEMENTS. 
(VIlI) FOR ASSETS, FACILITIES, PROPERTY, AND 
CONSTRUCTED OR 
INSTALLED, 
THEIR VALUE, 
FOR 
PURPOSES OF DETERMINING THE RATE BASE, SIIALL BE 
THEIR 
CUIURENT 
TOI’AL 
REVALUATION 
VALUE, 
IN 
ACCORDANCE WITII TIIE IWVALUATION AUTIIORIZED 
UNDER THIS ACT, AS SHOWN IN THE PROPERTY ACCOUNTS 
THE 
TOTAL 
ACCUMULATED 
ALLOWANCES 
FOR 
DEPRECIATlON TAKEN BY THE REGULATED ENTITIES 
EVERY FISCAL YEAR ON THEIR DEPRECIABLE ASSETS, 
PERMANENT IMPROVEMENTS Wmcrx ARE NOT NEWLY 
OF THE TRANSCO OR OF n r E  DISTRIBUTION UTILITY, LESS 


43 
PACILITIES, 
PROPERTY, 
AND 
PERMAMENT 
IMPROVEMENTS. 
(1X) 
A 
REASONABLE 
ALLOWANCE 
FOR 
IN 
ACCORDANCE 
WIT11 
WIDELY 
ACCEPTED 
AND 
RECOGNIZED ACCOUNTING RULES SHALL BE TAKEN 
EVERY FISCAL YEAR ON EACH OF TIIE DEPRECIABLE 
ASSETS, 
FACILITIES, 
PROPERTY, 
AND 
PERMANENT 
IMPROVEMENTS OF THE TRANSCO OR OF A DISTRIBUTION 
UTILITY. SUCH YEARLY ALLOWANCE FOR DEPRECIATION 
ON EACII OF THE DEPRECIABLE ASSETS, FACILITIES, 
PROPERTY, AND PERMANENT IMPROVEMENTS SHALL BE 
DETERMINED, FIXED, AND ImPT IN A PROPER AND 
ADEQUATE DEPRECIATION ACCOUNTS WHICH SHALL BE 
CARRIED AND RECORDED IN TIIE BOOKS OF THE TRANSCO 
OR OF TIIE DISTRIBUTION UTILITY, IN ACCORDANCE WITH 
ACCOUNTS AS THE COMMISSION MAY PRESCRIBE FOR TIIE 
PROTECTION OF TIIE STOCICHOLDERS, BONDHOLDERS, 
CREDITORS, AND THE GENERAL PUBLIC, ESPECIALLY THE 
DEPRECIATION BASED ON A RATE CONSISTENTLY APPLIED 
SUCH RULES, REGULATIONS, AND riv SUCH FORMS OF TIIE 
END-USERS OF ELECTRICITY. 
(X) THE TRANSCO OR TIIE DISTRIBUTION UTILITY 
SHALL CONSISTENTLY CONFORM TO ITS DEPRECIATION 
RATE OR RATES SO DETERMINED AND FIXED, AND SHALL 
SET ASIDE THE MONEYS SO ALLOTTED FOR SUCH 
DEPRECIATION ALLOWANCES OUT OF ITS EARNINGS IN A 
DEPRECIATION FUND, AND IT SHALL CARRY THE SAME IN 
A DEPICECIATION FUND ACCOUNT. THE INCOME FROM 
INVESTMENTS OF THE MONEYS IN SUCH DEPRECIATION 
FUND ACCOUNT SIIALL BE INCLUDED AND RECORDED IN 
SUCH DEPRECIATION FUND ACCOUNT AND SIIALL FORM A 
PART OF THE DEPRECIATION FUND. 
(XI) THE DEPRECIATION FUND SHALL NOT BE 
EXPENDED 
OTIIER[WISE] 
TIIAN 
FOR 
NEW 
REPLACEMENTS, EXTENSIONS, OR ENHANCEMENT OF THE 
ASSETS, 
FACILITIES, 
PROPERTY, 
AND 
PERMANENT 
IMPROVEMENTS 
OF 
THE 
TRANSCO 
OR 
OF 
THE 
DISTRIBUTION UTILITY TIIAT SHALL RAISE AND IMPROVE 
TIIE DEGREE OF EFFICIENCY AND QUALITY OF THE 
SERVICE TO BE RENDERED BY THE TRANSCO OR BY THE 
DISTRIBUTION UTILITY. 
CONSTRUCTIONS, 
OR 
Fort 
THE 
IMPROVEMENTS, 
(xrr) 
ANY 
AMOUNT 
DRAWN 
FROM 
THE 
DEPRECIATION FUND AND USED FOR THE IMPROVEMENT, 
REPLACEMENT, EXTENSION, OR ENHANCEMENT OF THE 
ASSETS, FACILITIES, 
I’IZOPERTY, AND PERMANENT 
IMPROVEMENTS 
OF 
THE 
TRANSCO 
OR 
OF 
THE 
DISTRIBUTION UTILITY, OR FOR THE CONSTRUCTION OF 
ANY NEW ASSET, FACILITY, PROPERTY, AND PERMANENT 
IMPROVEMENT 
OF 
THE 
TRANSCO 
OR 
OF 
THE 
DISTRIBUTION UTILITY, SHALL BECOME PART OF THE 
RATE BASE. 
[(i)] (XIII) 
[For purposes of determining the rate base, the] 
THE TRANSCO or [any] A distribution utility [may be allowed] IS 


44 
AUTHORIZED to revdue its {eligible] assets {not more than], 
CONSTITUTING ITS RATE BASE once every three (3) years [by an] 
ESTABLISHED, 
REPUTABLE, 
AND 
independent 
appraisal 
CONSISTENTLY MAINTAINED METHOD OF VALUATION: 
Provided, however, That [ERC] THE COMMISSION may [give an 
exemption in case or unusual] TEMPORARILY SUSPEND THE 
AFORESAID THIUEE 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, firther, That 
the [ERC] COMMISSION, IN THAT EVENT, shall exert [efforts to] 
EVERY EFFORT TO PREVENT AND/OR iiiiuiniize THE STEEP 
AND 
RAPID 
ESCALATION OF THE price 
[shoclcs] OF 
ELECTRICITY in order to protect the [consumers;] END-USERS OF 
ELECTRICITY. 
F A C r L r r m ,  PROPERTY, AND PERMANENT IMPROVEMENTS 
THROUGH THE SERVICES OF AN EXPERIENCED, WELL- 
company[:], 
IN 
ACCORDANCE 
WITH 
SOUND 
AND 
(XIV) A .JUST AND REASONABLE RATE OF RETURN ON 
THE RATE BASE OF THE TRANSCO OR OF A DISTRIBUTION 
UTILITY SI-IALL NOT EXCEED TWELVE PERCENTUM (12%) 
PER ANNUM OF SUCH RATE BASE. 
(xv) THE CAP ON m E  RECOVERABLE RATE OF A 
JUST AND REASONABLE SYSTEMS LOSS PRESCRIBED IN 
SECTION 10 OF REPUBLIC ACT NO. 7832 SHALL BE 
MAINTAINED IN T I E  DENSELY POPULATED CITIES, URBAN 
CENTERS, AND 
MUNICIPALITIES OF THE COUNTRY: 
PROVIDED, THAT IT SHALL BE ACCORDINGLY AMENDED 
AND REPLACED IN AREAS OTHER 1IIAN THE DENSELY 
POPULATED 
CITIES, 
URBAN 
CENTERS, 
AND 
MUNICIPALITIES OF THE COUNTRY BY CAPS WHICH SIIALL 
BE DETERMINED AND FIXED BY THE COMMISSION, AFTER 
DUE NOTICE TO ALL INTERESTED PARTIES AND PUBLIC 
IIEARING, BASED ON LOAD DENSITY, SALES MIX, COST OF 
SERVICE, DELIVERY VOLTAGE, AND OTIIER TECHNICAL 
CONSIDERATIONS 
THAT 
THE 
COMMISSION 
MAY 
PROMULGATE: PROVIDED FURTHEX, THAT ANY NEW CAP 
FOR RECOVERABLE SYSTEMS LOSS IN AREAS OTHER THAN 
THE DENSELY POPULATED CITIES, URBAN CENTERS, AND 
MUNIClPALr~IES OF THE COUNTRY SIIALL ALSO TAKE 
INTO CONSIDEIZATION AND PROVIDE FOR A JUST AND 
REASONABLE SYSTEMS LOSS FOR THE INEFFICIENCIES OF 
TIIE 
SYSTEMS 
OF 
ELECTRIC 
COOPERATIVES 
IN 
PERFORMING 
TIIEIR 
MISSIONARY 
ELECTRIFICATION 
FUNCTIONS. 
(XVI) CORPORATE INCOME TAX LEVIED ON TIIE NET 
TAXARLE 
INCOME 
OF 
THE 
TRANSCO 
OR 
OF 
A 
DISTRIBUTION 
UTILITY 
SHALL NOT, 
DIRECTLY 
OR 
INDIRECTLY, BE PASSED ON TO THE 
END-USERS OF 
ELECTlUCITY. 
[(ii)] (XVII) Interest expenses [are not allowable] OF THE 
TRANSCO OR OF A DISTRIBUTION UTILITY SHALL NOT BE 
ALLOWED AS deductions [from permissible] FOR PURPOSES OF 
DETERMINING A JUST AND REASONABLE return on rate base[;]. 


45 
(XVIlI) 
NEGLIGENT 
OR 
WASTEFUL 
LOSSES, 
INCLUDING LOSSES DUE TO UNNECESSARY ERRORS IN 
CONSTRUCTION OR IN EQUIPMENT PROCUREMENT, AS 
WELL AS LOSSES DUE TO LACK OF ORDINARY ECONOMY, 
PRUDENCE, 
FORESIGIIT, 
AND 
EFFICIENCY 
IN 
MANAGEMENT, INCURRED BY THE TRANSCO OR BY A 
DISTRIBUTION UTILITY SHALL NOT BE PERMITTED AS 
OPERATING CHARGES AND, THEREFORE, SHALL NOT BE 
ALLOWED 
AS 
DEDUCTIONS 
FOR 
PURPOSES 
OF 
I~TEMAIUNG. 
(XIX) THE AMOUNT OF PENALTIES AND/OR COSTS OF 
REMEDIES ARISING FROM ANY VIOLATION OF CONTRACT 
BY THE TRANSCO OR BY A DISTRIBUTION UTILITY SHALL 
NOT BE PASSED ON TO TIIE END-USERS OF ELECTRICITY. 
[(iii)] (XX) 
[In] FOR PURPOSES OF determining [eligible] 
THE JUST AND REASONABLE cost o f  services that will be passed on 
to 
the 
end-users[,] 
OF 
ELECTRICITY, 
the 
[ERC] 
THE 
COMMISSION shall establish minimum efficiency performance 
standards for the TRANSCO and THE distribution utilities, including 
systeins losses, interiuptioii frequency rates, and collection efficiency[;] 
OF THE REGULATED ENTITIES. 
[(iv)] ( H I )  [Further, in] IN determining THE rate base[,] OF 
THE TRANSCO OR OF ANY DISTRIBUTION UTILITY, THE 
COMMISSION SHALL NOT ALLOW the TRANSCO or any 
distribution utility [shall not be allowed] to include THE COSTS OF 
management inefficiencies [like cost], SUCH AS, BUT NOT LIMITED 
TO, THE COSTS o f  project delays not [excused] EXCUSABLE by 
force majeure[,] OR THE penalties and related interest CHARGES 
ARISING during construction [applicable to these unexcused delays; and] 
PERIOD BECAUSE OF SAID INEXCUSABLE DELAYS. 
[(v)] (XXII) Any 
significant operating costs or 
project 
investments of the TRANSCO and OF A distribution [utilities] 
UTILITY, which shall become part of the rate base, shall be subject to 
[verification by the ERC] THE APPROVAL OF THE COMMISSION, 
AFTER DUE NOTICE TO ALL INTERESTED PARTIES AND 
PUBLIC HEARING, IN OlZDER to ensure that the [contracting and] 
procurement of the equipment, assets, and 
OR services [have been 
subjected lo] AS WELL AS THE TERMS AND CONDITIONS OF 
THE 
CONTRACT 
OR 
CONTRACTS 
COVERING 
SUCII 
PROCUREMENT SHALL BE DONE IN ACCORDANCE WITH 
OPEN COMPETITIVE PUBLIC BIDDING AND IN COMPLIANCE 
PROCUREMENT LAWS, AS WELL AS IN ACCOROANCE WITH 
transparent and accepted industry procurement and purchasing practices 
[to protect the public interest.], SO THAT THE INTEREST OP THE 
ELECTRICITY SIIALL BE PROTECTED. 
wrm THE REQUIREMENTS OF EXISTING APPLICABLE 
GENERAL PUBLIC AND THAT OF THE 
END-USERS OF 
(XXIII) 
IN 
ASCERTAINING, 
FOR 
RATEMAKING 
PURPOSES, THE COST OF OR INVESTMENT IN 
ASSETS, 
FACILITIES, PROPERTY, AND PERMANENT IMPROVEMENTS 
WHICH SHALL BE USED AND USEFUL IN PROVIDING THE 
ELECTRIC SERVICE TO END-USERS OF ELECTRICITY, SUCH 
COST OR INVESTMENT SHALL NOT INCLUDE OUTLAYS OR 
ALLOWANCES 
FOR 
RECKLESS, 
EXTRAVAGANT, 


46 
UNNECESSARY, OR INOPPORTUNE EXPENDITURES OR 
COSTS OF CONSTRUCTION. 
THE COMMISSION, TO PROMOTE EFFICIENCY AND 
FAIRNESS IN THE ELECTRIC POWER INDUSTRY AND WHEN 
JUSTIFIED AND DEMANDED BY THE NATIONAL INTEREST, 
MAY ADOPT, AFTER DUE NOTICE TO ALL INTERESTED 
PARTIES AND PUBLIC HEARING, ANY OTHER ALTERNATIVE 
RATEMAICING TEAT SHALL BEST SERVE THE MUTUAL 
li”0RM OF INTERNATIONALLY-ACCEPTED METHOD OF 
INTEREST OF THE GENERAL PUBLIC, TIJE END-USERS OP 
ELEcTiucrrY, 
AND 
THE 
ELECTRJC 
INDUSTRY 
PARTICIPANTS. 
IN EVERY CASE, THE RATEMAKING METHOD SO 
ADOPTED 
AND 
APPLIED 
MUST 
BE 
NEITHER 
EXTORTIONARY TO ‘rm END-USERS OF ELECTRTCITY NOR 
CONFISCATORY 
TO 
THE 
TRANSCO 
OR pro 
THE 
DISTRIlXJTION UTILITIES, AND MUST FURTHERMORE 
ENSURE TIIAT THE PRICE OF ELECTRICITY IS JUST AND 
REASONABLE. 
THE RATEMAKING POWER HEREIN GRANTED TO 
THE COMMISSION MUST BE EXERCISED IN SUCH A 
MANNER THAT EVERY DOUBT MUST BE RESOLVED IN 
FAVOR OF THE PROTECTION OF THE RIGHTS OF THE 
GENERAL PUBLIC. 
THE COMMISSION IS HEREBY AUTHORIZED TO 
DIVIDE 
THE 
FRANCIIISE 
AImA 
OR 
AREAS 
OP 
A 
SUCH DIVISION OR DIVISIONS WILL PROMOTE GREATER 
USERS, 
TRANSPARENCY, 
AND 
MORE 
JWFECTIVE 
REGULATION OF THE REGULATED ENTITIES IN THE 
ELECTRIC POWER INDUSTRY. 
DISTRIBUTION UTILITY INTO SUB-AREA OR SUB-AREAS, IF 
EFFICIENCY, LOWER PRICE OF ELECTRICITY TO END- 
IN ALL CASES OF RATE-MAKING, TIIE SOLICITOR 
GENERAL MUST BE NOTIFIED OF AND SHALL APPEAR IN 
TIIE 
PROCEEDINGS 
BEFORE 
TIIE 
COMMISSION 
TO 
REl’lmSENT TIIE GOVERNMENT TIIERJZIN SO THAT TI3E 
INl?EIWST OF THE GENERAL PUBLIC ANI) THE INTEREST 
OF THE END-USERS OF ELECTRICITY WILL BE PROTECTED. 
SIMILARLY, THE COMMISSION ON AUDIT (COA) IS 
IIEIWBY REQUIRED TO ASSIST THE COMMISSION, WHEN 
NEEDED BY TI-ZE LATTER, TO VERIFY AND VALIDATE TIIE 
FACTS AND FIGURES INVOLVED IN ANY RATEMAKING 
PROCEEDINGS BEFORE THE COMMISSION. 
(g) 
Three (3) years after the imposition OC the universal charge, ensure 
that the charges of the TRANSCO or OF any distribution utility shall [bear] 
INCLUDE no cross subsidies between THE grids, within [grids,] A GRID, or 
between classes of [customers] END-USERS OF ELECTRICITY, except as 
provided [lierein;] IN THIS ACT; 
(h) 
Review and approve any changes [on] IN the terms and conditions 
of service oflhe T W S C O  or OF any distribution utility; 


47 
(i) 
Allow the TRANSCO to charge user fees for ancillary services to 
all electric power industry parlicipants or self-generating entities connected to the 
grid. Such fees shall be fixed by the [ERC] COMMISSION after due notice TO 
ALL INTEXWSTED PARTIES and public hearing; 
(i) 
Set 
a 
lifeline 
rate 
for 
[the 
marginalized 
end-users;] 
[DESERVING] LOW-INCOME END-USERS OF ELECTRICITY; 
(I) 
Monitor and take SUCH APPROPRIATE measures in 
accordance with this Act to penalize ANY abuse of marlcet power, ANY 
cartelization, andOR ANY anti-competitive or discriminatory behavior by any 
electric power industry participant; 
(I) 
Impose fines AND/or penalties for any non-cotnpliance with or 
breach of ANY PROVISION OF this Act, [the IRR] OR OF ANY 
PROVISION OF THE IMPLEMENTING RULES AND REGULATIONS of 
this Act, [and the] OR OF ANY DECISION, ORDERS, RESOLUTIONS, 
rules, and regulations which [it] THE COMMISSION promulgates or 
administers; 
(ni) 
Take any other action THAT HAS BEEN delegated to it [pursuant 
to] UNDER this Act; 
(n) 
[Before the end ofl ON OR BEFORE THE THIRTIETH (30TF1) 
OW April [THIRTY (3O)] of each year, submit to the Office o f  the President of 
the Philippines and TO THE Congress[,] OF THE PHILIPPINES, WITH A 
copy furnished TO the DOE, an annual report containing ALL such matters or 
cases which have been filed before or referred to it during the preceding year, the 
actions and proceedings undertalcen BY IT IN CONNECTION THEREWITH, 
and its decision or resolution in each AND EVERY case. Tlie [ERCJ 
COMMISSION shall tnalce SUFFICIENT copies of such reports AND MAIUZ 
THEM available to any interested party upon payment of a REASONABLE 
charge which [reflects] SHALL BE SUFFICIENT TO COVER, AT LEAST, 
the printing costs. The [ERCl COMMISSION shall publish all its decisions 
involving rates and THOSE INVOLVING anti-competitive cases in at least one 
(1) newspaper of general circulation, and/or [AND OR] post THE SAME 
electronically, and circulate to all interested electric power industry participants 
copies of its DECISIONS OR resolutions to MAICE KNOWN AND ensure A 
fair and imnpai-tial treatment[;] OF EVERYONE AFFECTED; 
(0) 
Monitor ALL the activities in the generation and sutpply SIDE of 
the electric power industry [with the end in view ofpromoting] IN ORDER TO 
PROMOTE free market competition TI-IERJXIN and [ensuring] IN ORDER TO 
ENSURE that the allocation or pass through o f  bulk purchase cost by 
[distributors] DISTRIBUTION UTILITIES is transparent[,] AND non- 
discriminatory and that any existing subsidies, IF SUCH WERE THE CASE, 
shall be divided pro-rata among all retail suppliers; 
(p) 
Act on applications for or modifications of certificates of public 
convenience [and/or] [AND OR] necessity, licenses, or permits of franchised 
[electric] DISTRIBUTION utilities in accordance with law; and revoke, review, 
and modify such certificates, licenses or permits in appropriate cases, such as 
FOR INSTANCE in cases of violations of the Grid Code, THE Distribution 
Code, and [other] THE rules and regulations issued by the [ERC] 
COMMISSION in accordance with [law;] THE PROVISIONS OF THIS 
ACT; 


4x 
(q) 
Act on THE applications for [cost recovery and] JUST AND 
REASONAULE 
COSTS 
RECOVEIRIES 
AND 
FOR 
JUST 
AND 
REASONABLE return on THE dernand side management projects; 
(r) 
In the exercise of its investigative and quasi-judicial powers, act 
against any ELECTRIC POWER INDUSTRY 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 OTHER similar or related acts by any ELECTRIC 
POWER INDUSTRY 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] THAT MAY BE RELEVANT to any investigation or hearing BEING 
conducted BY THE COMMISSION pursuant to this Act; 
(s) 
 inspect,] IN THE EXJ!,RCISE OF ITS QUASI-JUDICIAL 
POWER, INSPECT AT ANY TIME, on its own DIRECTLY or Ihrough [duly 
authorized] representatives[,] DULY AUTHORIZED BY IT, 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 [AND OR] market power abuse [and] OR any 
violation of d e s  and regulations issued by the [ERC;] COMMISSION; 
(t) 
Perform such other regulatory functions as [are] MAY BE 
appropriate and necessary [in order] to ensure the successful restructuring and 
niodernizatioii of Ihe electric power industry, [such as,] INCLUDING, but not 
limited to, the ADOPTION AND ENFORCEMENT OF rules and guidelines, 
NOT INCONSISTENT WITH THE PROVISIONS OF THIS ACT, under 
which generation companies, THE TRANSCO, AND THE distribution utilities 
[which], WHOSE SHARES OF STOCK are not YET publicly listed IN THE 
PEIILIPPINE STOCK EXCHANGE (PSE), shall offer and sell to the 
GENERAL public [a portion], WITH PRIORITY AND PREFERENCE 
GIVEN TO END-USERS OF ELECTRICITY, not less than fifieen percent 
(1 5%) of their IWSPECTIVE common shares of stoclcs: Provideeil, howeiler, 
That generation companies[,] AND distribution utilities [or their respective 
lidding companies] that me already listed in the PSE TO THE EXTENT OF AT 
LEAST FIFTEEN PERCENT OF THEIR RESPECTIVE COMMON 
SHARES OF STOCK are deemed [in compliaice. For existing companies, 
such] 
TO 
HAVE 
COMPLIED 
WITH 
THIS 
REQUIREMENT. 
GENERATION COMPANIES, THE TRANSCO, AND DISTRIBUTION 
UTILITIES W-IICH ARE NOT YET LISTED IN THE I’SE, OR 
GENERATION COMPANIES AND DISTRIBUTION UTILITIES WHICH, 
THOUGH ALREADY LISTED IN THE PSE, HAVE NOT YET Rl3ACIIED 
THE MINIMUM FIFTEEN PERCENT (15%) LISTING REQUIREMENT, 
SHALL COMPLY OR COMPLETE WITH THE REQUIRED LISTING 
AND public offering [shall be implemented] not later than five (5) years fiom the 
effectivity of this Act. New GENERATION companies AND DISTRIBUTION 
UTILITIES shall implement their respective LISTING AND public offerings 
not later than five (5) years fiom the issuance of their certificate of compliance[;] 
OR CONGRESSIONAL FlWCEIISE, AS THE CASE MAY BE; and 
(11) 
The [ERC] COMMISSION shall have [the] original and exclusive 
jurisdiction over all cases contesting rates, fees, fines, and penalties [imposed by 
the ERC in] ARISING PROM OR IMPOSED UNDER THE PROVISIONS 
OF THIS ACT, AS WELL AS OVER ALL CASES ARISING FROM the 
exercise of the above-mentioned powers, functions and responsibilities, and [over 
all cases] OR involving disputes between and among ELECTRIC POWER 
INDUSTRY pai-ticipants or players [in the energy sector]. 


49 
All notices of hearings to be conductecl by the [ERC] COMMISSION for 
the puyose of fixing rates or fees sliall be published at least twice for two 
successive weeks in two (2) newspapers of nationwide circulation. 
["SEC. 44. 
Transfer of Powers and Functions. - The powers and 
functions of the Energy Regulatory Board not inconsistent with the provisions of 
this Act are hereby transferred to the [ERC] COMMISSION. The foregoing 
iransfer of powers and functions shall include all applicable funds and 
appropriations, records, equipment, property and personnel as may be necessary.] 
"SEC. 145146. Cross Ownership, Market Power Abuse and Anti- 
Competitive Behavior. - No participant in the [electricity] ELECTRIC 
POWER industry [or any other person may] SHALL engage in any IUND OF 
anti-competitive behavior, including, but not limited to, cross-subsidization, price 
or marlcet manipulation, or ANY other unfair trade practices THAT ARF, 
detrimental to the DEVELOPMENT, encouragement, and protection of THE 
contestable markets. 
No 
generation 
conipany, 
distribution 
utility, 
A 
COMPANY 
SUPPLYING ELECTRICITY, or ANY OF its [respective subsidiary or 
affiliate or stockholder or official of a generation company or distribution utility, 
or other entity engaged in generating and supplying electricity specified by ERC] 
SUBSIDIARIES, AFFILIATES, STOCKHOLDERS, OFFICIALS, OR 
DIRECTORS, OR THE OFFICIALS, DIRECTORS, OR OTHER 
STOCIU3OLDERS OF SUCH SUBSIDIARIES OR AFFILIATES, OR ANY 
RELATIVES 
OF 
SUCH 
STOCIGIOLDERS, 
OFFICIALS, 
OR 
DIRECTORS wilhin the fonrth civil degree of consanguinity or affinity, shall be 
allowed to HAVE AND liold, DIRECTLY OR INDIRECTLY, any interest[, 
directly or indirectly,] in THE TRANSCO or [its] IN THE TRANSCO'S 
concessionaire. Likewise, the TIUNSCO, or its concessionaire, or any of [its] 
THE stocltholders, [or] officials, OR DIRECTORS OF THE TRANSCO OR 
ITS CONCESSIONAIRE, or any 
[of their] 
relatives 
OF SUCH 
OR ITS CONCESSIONAIRE within the fourth civil degree of consanguinity or 
affinity, shall not BE ALLOWED TO HAVE AND hold, DIRECTLY OR 
INDIRECTLY, any interest[, whether directly or indirectly,] in any generation 
company, [or] distribution utility[.], OR A COMPANY SUPPLYING 
ELECTRICITY. Except for ex ofjcio government-appointed representatives, no 
[person who is an] officer or director, OR STOCIU-IOLDER of the TRANSCO 
or 
[its] OFFICER, DIRECTOR, OR STOCIU-IOLDER OF 
THE 
TRANSCO'S concessionaire shall be an officer or director of any generation 
company, distribution utility, or [supplier.] A COMPANY SUPPLYING 
ELECTRICITY. 
STOCKHOLDERS, OFFICIALS OR DIRECTORS OF THE TRANSCO 
A 
DISTRIBUTION UTILITY, WHICH IS EXISTING AT THE 
TIME OF THE EFFECTIVITY OF THIS ACT AND WHICH HOLDS 
SHARES OF STOCK IN A GENERATION COMPANY AND/OR 
ANOTHER 
DISTRIBUTION 
UTILITY 
ON 
OR 
BEFORE 
THE 
EFFECTIVITY OF THIS ACT, MAY CONTINUE TO HOLD SUCH 
SEIARES OF STOCK BUT SHALL NOT BE AUTHORIZED TO 
INCREASE THE NUMBER OF SUCH SHARES OF STOCK EXCEPT 
WHEN SUCH INCREASE IS THE RESULT OF A DECLARATION OF 
CORPORATE S r o c I c  DIVIDENDS. 
AFTER THE ElWECTIVITY OF THIS ACT, NO 
NEW 
DISTRIBUTION 
UTILITY 
OR 
ANY 
OF 
ITS 
SUBSIDIARIES, 
AFFILIATES, STOCIGIOLDERS, OFFICIALS, OR DIRECTORS, OR 
THE OFFICIALS, DIRECTORS, OR O T m R  STOCICHOLDERS OF 
SUCH SUBSIDIANES OR AFFILIATES, INCLUDING THE RELATIVES 


50 
OF SUCH STOCIU[-IOLDERS, OFFICIALS) OR DIRECTORS WITHIN 
THE FOURTH CIVIL DEGREE OF CONSANGUINITY 012 AFFINITY 
SHALL BE ALLOWED TO HAVE AND HOLD, DIRECTLY OR 
INDIRECTLY, ANY INTERJCST IN ANY NEW OR EXISTING 
GENERATION COMPANY. 
NEITHER MAY A [ANY] NEW GENERATION COMPANY OR 
ANY 
OF ITS 
SUBSIDIARIES, AFFlLIATES, STOCIUIOLDERS, 
OFFICIALS, OR DIWCTORS, OR THE OFFICIALS, DIRECTORS, OR 
OTHER STOCKHOLDERS OP SUCH SUBSIDIARIES OR AFFILIATES, 
INCLUDING 
THE 
RELATIVES 
OF 
SUCH 
STOCKHOLDERS, 
OFFICIALS, OR DIlmCTORS WITHIN THE FOURTH CIVIL DEGREE 
OF CONSANGUINITY OR AFFINITY BE ALLOWED TO HAVE AND 
HOLD, DIRECTLY OR INDIRECTLY, ANY INTEREST IN ANOTHER 
GENERATION COMPANY, [ANY] OR IN A NEW OR EXISTING 
DISTRIBUTION UTILITY. 
[PROVIDED, THAT ANY DISTRIBUTION 
UTILITY OR GENERATION COMPANY, AS THE CASE MAY BE, 
HOLDING ANY SUCH PROSCRIBED INTEREST IN A GENERATION 
COMPANY OR DISTRIBUTION UTILITY, AT THE TIME OF THE 
ENACTMENT OF THIS ACT, SHALL DIVEST ITS PROSCRIBED 
INTEREST IN SUCH GENERATION COMPANY OR DISTRIBUTION 
UTILITY NOT LATER THAN THE END OF THE YEAR TWO 
THOUSAND EIGHT (ZOOS).] 
AFTER THE EFFECTIVITY OF THIS ACT AND EXCEPT AS 
OTHERWISE AUTHORIZED AND PROVIDED HEREIN, NO HOLDING 
COMPANY OR OTHER ENTITY, WI-IETRER IN THE FORM OF A 
CORPORATION OR NOT, SHALL BE ALLOWED TO RAVE AND 
SOLD VOTlNG SHARES OF STOCK SIMULTANEOUSLY IN A 
GENERATION COMPANY AND IN A DISTRIBUTION UTILITY IN 
SUCH NUMBERS AS TO ENABLE THE HOLDING COMPANY OR 
OTHER ENTITY TO ELECT 
A 
DIRECTOR IN BOTH THE 
GENERATION COMPANY AND THE DISTRIBUTION UTILITY. 
To promote true market competition and prevent harmful monopoly and 
market power abuse, the [ERC] COMMISSION shall enforce the following 
safeguards: 
(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 and/or [AND OR] twenty-five (25%) of the [national] installed 
NATIONAL generating capacity. "Related group" includes a person's business 
intexests, including its subsidiaries, affiliates, directors or officers or any of tlieir 
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 subject to review AND APPROVAL by the [ERC:] 
COMMISSION, AFTER DUE NOTICE TO ALL INTERESTED PARTIES 
AND PUBLIC HEARING: Provided, That [SLICII 
review shall only be required 
for distribution utilities whose marlcets have not reached household demand level. 
For the purpose of preventing market power abuse between associated firms 
engaged in generation and distribution, no distribution utility sliall be allowed to 
source from bilateral power supply coiltracts more than fifty percent (50%) of its 
total demand from an associated firm engaged in generation but such limitation, 
however, shall not prejudice coiltracts entered into prior to the effectivity of this 
Act. An associated firm with respect to another entity refers to any person which, 
alone or together with any other person, directly or indirectly, through one or 


51 
iiiol'e intermediaries, controls, is conlrolled by, or is under common control with, 
such entity; and] FOR THE PROTECTION OF CAPTIVE MARImTS AND 
IN ORDER TO ENSURE HEALTHY COMPETITION IN THE 
GENERATION SECTOR OF THE ELECTRIC POWER INDUSTRY, 
BILATERAL POWER SUPPLY CONTRACT OR CONTRACTS OF 
SIXTY MEGAWATTS (60 MW) OR MORE SHALL BE SUBJECT TO 
OPEN COMPETITIVE PUBLIC BIDDING CONDUCTED BY A BJD 
COMMITTEE UNDER THE SUPERVISION OF THE COMMISSlON 
AND 
COMPOSED OF REPRESENTATIVE EACH 
FROM THE 
NATIONAL ECONOMIC DEVELOPMENT AUTHORITY (NEDA), THE 
DEPAIZTMENT OF ENERGY (DOE), THE DISTRIBUTION UTILITY 
CONCERNED, 
AND 
AN 
EXPERIENCED 
AND 
REPUTABLE 
SELECTED BY THE COMMISSION. 
REPRJEZNTATIVE 
OF THE E L E c r m  END-USERS GROUPS 
IN ORDER TO PREVENT ABUSE OF MARKET POWER AND 
SHALL BE ALLOWED TO SOURCE FROM A BILATERAL ELECTRIC 
POWER SUPPLY CONTRACT OR CONTRACTS MORE TITAN THIRTY 
THREE PERCENT (33%) OF ITS TOTAL ELECTRIC POWER SUPPLY 
REQUIREMENTS FROM ANY GENERATION COMPANY OR GROUP 
OF GENERATING COMPANIES WHOLLY OWNED OR CONTROLLED 
BY THE SAME INTERESTS. ANY DISTRIBUTION UTILITY THAT 
HAS, ON THE EFFECTIVITY OF THIS ACT, SUCH CONTRACT OR 
CONTRACTS WI-ITCH EXCEED THE ALLOWABLE THIRTY THREE 
PERCENT (33%) LIMIT SET FORTH HEREIN SHALL DESIST FROM 
FURTHER AWARDING ADDITIONAL ELECTRIC POWER SUPPLY 
CONTRACT OR CONTRACTS WITH ANY GENERATION COMPANY 
OR GROUP OF GENERATING COMPANIES WHOLLY OWNED OR 
CONTROLLED BY THE SAME INTERESTS, UNTIL ITS PRESENT 
ELECTRIC POWER SUPPLY WQUIREMENTS, WHEN ADDED TO 
THE 
PROPOSED 
ADDITIONAL 
ELECTRIC 
POWER 
SUPPLY 
CONTRACT OR CONTRACTS WITH ANY GENERATION COMPANY 
OR GROUP OF GENERATING COMPANIES WHOLLY OWNED OR 
ANTI-COMPETITIVE BEHAVIOR, NO DISTRIBUTION UTILITY 
CONTROLLED BY THE SAME INTERESTS SHALL COMPLY WITH 
THE THIRTY THREE PERCENT (33%) LIMIT SET FORTH HEREIN 
PROVIDED, THAT ANY EXTENSION OR EXPANSION OF EXISTING 
ELECTRIC POWER SUPPLY CONTRACT OR CONTRACTS SHALL 
BE DEEMED AS NEW CONTRACT OR CONTRACTS FOR PURPOSES 
OF THE LIMITATION SET FORTH HEREIN. 
(c) 
For the first five (5) years from the establishment of the Iwholesale 
electricity spot market] WESM, no distribution utility shall source more than 
ninety percent (90%) of its total demand from bilateral ELECTRIC power 
supply contracts. THE COMMISSION MAY, FROM TIME TO TIME, 
REVIEW THE APPROPRIATE LEVEL OF DEMAND TO BE SOURCED 
FROM TI-IE WESM AND, IN MERITORIOUS INSTANCES, WAIVE 
IMPLEMENTATION OF SUCH REQUIREMENT, SUBJECT TO A 
PUBLIC HEARING. 
For purposes of this Section, the grid basis shall consist of Lliree (3) 
separate grids, namely: THE L ~ o n  
GRID, THE Visayas GRID, and THE 
Mindanao GRID. [The EKC shall have the authority] THE COMMISSION IS 
HEREBY AUTHORIZED to modify or amend this definition of a grid when 
two or [more] ALL of the three separate grids become sufficiently interconnected 
to constitute a single grid, or [as] WHEN conditions may otherwise [permit.] 
REQUIRE SUCH MODIFICATION OR AMENDMENT. 


52 
Exceptions from [these] TIIE ABOVE limitations shall be allowed for 
isolated grids that are not coimected to the high voltage transmission system. 
[Except as otherwise provided for in this Section, any restrictioii oii owiierships 
and/or control between or within sectors of the electricity industry may be 
imposed by ERC only insofar as tlie enforcement of the provisions of this Section 
is concerned]. 
The [ERC] COMMISSION shall, within one (1) year from the efrectivity 
of this Act, promulgate rules and regulations, CONSISTENT WITH THE 
PROVISIONS OF THIS ACT, to ensure and promote competition, encourage 
market development, [and] customer choice, and [discourage/penalize] DETER 
AND/OR PENALIZE ANY abuse of marlcet power, cartelization, [and] OR any 
anti-competitive or discriminatory behavior, in order to further the intent of this 
Act and IN ORDER TO protect the [public] interest[.] OF THE GENERAL 
PUBLIC AND THE END-USERS OF ELECTRICITY. Such rules and 
regulations shall COVER AND define the following: 
(a) 
the relevant mxlcets for purposes 
o f  establishing TIIE 
PRESENCE OR ABSENCE OF MONOPOLIZATION, CARTELIZATION, 
ANTI-COMPETITIVE 
AND/OR 
DISCRIMINATORY 
ACT 
OR 
IBEI$AVIOR, AND/OR abuse or misuse [of monopoly or] OF market [position;] 
POWER; 
(b) 
(c) 
areas of isolated grids; and 
the periodic reportorial requirements [ofl FROM THE electric 
power industry participants [as] THAT may be necessary to enforce the 
provisions of this Section. 
The [ERC] COMMISSION shall, nzotzi proprio, monitor and, WHEN 
WARRANTED BY THE ATTENDANT FACTS, penalize any SUCH 
MONOPOLIZATION, CARTELIZATION, ABUSE OP market power 
[abuse] or anti-competitive AND/or discriminatory act or behavior by any 
[participant in the] electric power industry[.] PARTICIPANT. Upon finding that 
[a market] AN ELECTRIC POWER INDUSTRY participant has engaged in 
sucli MONOPOLIZATION, CARTELIZATION, ABUSE OF MARKET 
POWER, OR ANTI-COMPETITIVE AND/OR DISCRIMINATORY act or 
behavior, the [ERC] COMMISSION shall FORTHWITH ISSUE A CEASE 
AND DESIST ORDER TO THE ERRING ELECTRIC POWER 
INDUSTRY PARTICIPANT, AND THEREAFTER PERMANENTLY stop 
and redress the same. Such [remedies shall, without limitation, include] 
REDRESS SHALL INCLUDE, AMONG OTHER REMEDIES THAT MAY 
BE APPROPRIATE UNDER THE CIRCUMSTANCES, the imposition of 
price [controls,] CONTROL, TI-IE issuance of [injunctions, requirement ofl 
INJUNCTIVE RELIEF, AND THE divestment or disgorgement of excess 
profits, and TI-IE imposition of fines and penalties pursuant lo THE 
APPLICABLE PROVISIONS OF this Act. 
The [ERC] COMMISSION shall, within one (1) year from tlie effectivity 
of this Act, promulgate SUCH rules [and regulations providing for a complaint 
procedure that, without limitation, provicles] AS MAY BE NECESSARY, NOT 
INCONSISTENT WITH THE PROVISIONS OF THIS ACT, THAT WILL 
ESTABLISH A PROCEDURE WHEREBY tlie accused party, with DUE 
notice [aid] 
TO ALL INTEIWSTED PARTIES AND PUBLIC HEARING, 
SHALL BE GIVEN BY THE COMMISSION an opportunity to be heard. 
"SEC. 146147. Fines and Penalties. - The fines and/OR penalties that 
shall be imposed by the [ERC] COMMISSION for any violation of or non- 
compliance with ANY PROVISIONS OF this Act or [the IRR] ANY RULES 


53 
AND REGULATIONS IMPLEMENTING THIS ACT shall, DEPENDING 
UPON TI-IE GRAVITY OF THE OFFENSE, range from a minimum of Fifty 
thousand pesos (P50,OOO.OO) to a maximuni of Fifty inillion pesos 
(P50,000,000.00). 
Any person who is found guilty of any of the prohibited acts pursuant to 
Section [45] 43 hereof shall suffer the penalty of prision mayor [and] OR a fine 
ranging from Ten thousand pesos (Pl0,OOO.OO) to Ten million pesos 
(PlO,OOO.OOO.OO), 
or both [PENALTY AND PINE], at the discretion of the 
APPROPRIATE TRIAL conrt. 
The STOCKHOLDERS, OFFICERS, members of the Board of 
Directors of [the juridical companies participating in or covered in the] A 
generation [companies] COMPANY, [the] distribution [utilities] UTILITY 
COMPANY, the TRANSCO [or its], THE LATTER’S concessionaire 
COMPANY, or A COMPANY THAT ACTS AS A supplier OF 
ELECTRICITY AND THE RELATIVES OF SUCH STOCKHOLDERS, 
OFFICERS, OR MXMBERS OF THE BOARD OF DIRECTORS WITHIN 
THE FOURTH CIVIL DEGREE OF CONSANGUINITY OR AFFINITY, 
who [violate] IS FOUND GUILTY FOR ANY VIOLATION OF ANY OF tlie 
provisions of this Act may be fined by an amount not exceeding double tlie 
amount of damages caused by the [offender] OFFENDING COMPANY or by 
imprisonnient of one (1) pear [or] TO two (2) years or bot11 SUCH FINE AND 
IMPRISONMENT, at the discretion of the APPROPRIATE TRIAL court. 
[This iule shall apply to the members of the Board who luiowingly or by neglect 
allows the commission or omission under the law.] 
If tlie offender is a government olficial or employee, he shall, in addition 
TO TI-IE PENALTY IMPOSED ON FIIM OR HER BY THE TRIAL 
COURT, be dismissed from the [government] service [with prejudice to 
reinstatement and] with perpetual [or temporary] disqualification [f‘rom holding] 
TO HOLD any elective or appointive GOVERNMENT office. 
If the offender is an alien, lie [may] SHALL, in addition to the penalties 
prescribed, be deported SUMMARILY without further proceedings after THE 
PAYMENT OF HIS OR HER FINE OR THE service of HIS OR HER 
sentence. [HIS OR HER IMPRISONMENT.] 
[Any case] CASES which [involves] INVOLVE question of fact shall be 
THOSE which involve 
appealable to the Court of Appeals [and those]. 
PURELY questions of law shall be directly appealable to the Supreme Court. 
[The] ANY administrative sanction that [may be imposed by the ERC] 
TSE COMMISSION MAY HAVE IMPOSED shall [be without prejudice to] 
NOT PREVENT OR IMPEDE the filing of [a] ANY criminal action, if 
warranted. 
To ensure compliance with this Act, the penalty ofprision correccional or 
a fine ranging fioin Five thousand pesos (P5,OOO.OO) to Five million pesos 
(PS,000,000.00), or both, at the discretion of the court, shall be imposed on any 
person, including but not limited to the president, member of the Board, Chief 
Executive Officer or Chief Operating Officer of tlie corporation, partnership, or 
any other entity involved, found guilty of violating or refusing to comply with any 
provision of this Act or its IRR, otlier than those provided Irerein. 
Any party [to] CHARGED IN an administrative proceeding UNDER 
THE PROVISIONS OF THIS ACT may, at any time, malie an offer to the 
[ERC,] COMMISSION, EITHER coiiditionally or otherwise, for a [consented] 
CONSENT decree, OR voluntary compliance, or VOLUNTARY desistance 


54 
[and], OR ANY other settlement of the case. The offer [and], INCLUDING any 
or all of the ultiinate facts upon which the offer is based, shall be [considered] 
DEEMED TO HAVE BEEN MADE for settlement purposes only and sliall not 
be used, FOR ANY PURPOSE, as evidence against THE OFFEKlNG PARTY 
OR AGAINST any OTHER party for [any other purpose] THAT MATTER, 
and shall not constitute an admission [by the party malting the offer] of any 
violation of the laws, rules, regulatioiis, orders [and], OR resolutions of the [ERC, 
nor] COMMISSION BY THE PARTY MAKING THE OFFER. NEITHER 
SHALL TJJE ACT OF THE COMMISSION, THE GOVERNMENT, OR 
ANY INTERESTED OR AGGIUEVED PARTY IN ENTERTAINING AND 
DISCUSSING THE OFFER BE DEEMED AS AN ESTOPPEL NOR as a 
waiver ON TI-IE PART OF THE COMMISSION, TI-IE GOVERNMENT, 
OR ANY INTERESTED OR AGGRIEVED PARTY to file any [warranted] 
criminal (actions.1 ACTION, IF WARRANTED BY THE FACTS. 
In addition, Congress may, upon recommendation of the DOE [and/or 
EItC,] AND/OR THE COMMISSION, revoke such franchise or privilege 
granted to the [party who] ELECTRJC POWER INDUSTRY PARTICIPANT 
THAT violated the provisions of this Act. 
"CHAPTER V 
"PRIVATIZATION OF THE ASSETS OF THE NATIONAL 
POWER CORPORATION 
"SEC. 147148. NPC Privafizution. - Except €or the assets of SPUG, the 
generation assets, real estate, and other disposable assets [as well as] OF NPC, 
INCLUDING ITS TPP contracts [of NPC], shall be privatized in accordance with 
TIJE PROVISIONS OF this Act. 
Within six (6) months [from] 
IMMEDIATELY FOLLOWING the efkctivity of this Act, the PSALM Corp. 
shall submit (a plan for the endorsement by] TO the Joint Congressional Power 
Commission FOR ITS ENDORSEMENT TO and [the] approval [of] BY the 
President of the Philippines, A PLAN on the total privatization of the generation 
assets, real estate, AND other disposable assets [as well as existing] OF NPC, 
INCLUDING ITS IPP contracts [of NPC] and, thereafter, THE PSALM COW. 
S€IAJdJJ iniplement the same, in accordance with the following guidelines, except 
as provided for in Paragraph (0 
herein: 
(a) 
The privatization value to the National Government of the WPC] 
generation assets, real estate, AND other disposable assets [as well as] OF NPC, 
INCLUDING ITS IPP contracts, shall be [optimized;] TJ3E MOST 
ADVANTAGEOUS AND BENEFICIAL TO THE NATIONAL INTEREST; 
(b) 
The participation by Filipino citizens and BY corporations 
WIJOLLY OWNED OR CONTROLLED BY THEM in the purchase AND 
ACQUISITION of THE NPC GENERATION assets, REAL ESTATE, 
OTHER DISPOSABLE ASSETS, AND ITS IPP CONTRACTS shall be 
encouraged; 
In [the] case [ofl THE PURCHASE AND ACQUISJTION IS DONE 
BY foreign investors, [at least] THEY SJiALL COMPLY WIT13 THE 
NATIONALITY REQUIREMENTS OF THE CONSTITUTION, WHEN 
APPLICABLE, AND NOT LESS THAN seventy-five percent (75%) of the 
funds used to acquire [NPC-generation assets] THE GENERATION ASSETS 
OF NPC and ITS TPP contracts shall be SOURCED OUTSIDE THE 
PHILIPPINES AND inwardly remitted and registered with the Bangko Sentral 
ng Pilipinas. 


55 
(c) 
[The NPC plants and/or] THE GENERATION ASSETS OF 
NPC AND/OR its IPP contracts assigned to IPP Administrators, [its] 
INCLUDING THEIR related assets and assigned liabilities, if any, shall be 
grouped in SUCH a rnauner [which] THAT shall promote NOT ONLY the 
viability of the resulting generation companies [(gencos)] (GENCOS), BUT 
ALSO ensure THEIR economic AND OPERATIONAL efficiency, encourage 
competition, PROMOTE AND foster A JUST AND reasonable PRICE OF 
electricity [rates], and create market appeal to [optimize] BRING ABOUT TI-IE 
MOST ADVANTAGEOUS AND BENEFICIAL returns to the government 
from the sale and disposition o f  [such] TI-IE GENERATION assets, REAL 
ESTATE, AND OTHER DISPOSABLE ASSETS OF NPC, INCLUDING 
ITS IPP CONTRACTS, in a manner consistent with the objectives of this Act. 
In [the] grouping [ofl the generation assets and IPP contracts of NPC, the 
following criteria shall be considered: 
(I) 
A sufficient scale of operations arid balance sheet strength to 
promote the financial viability of the restructured units; 
(2) 
Broad geographical groupings to ensure efficiency of operations 
[but] without the formation of regional companies or consolidation of market 
power; 
(3) 
Portfolio of GENERATION plants and IPP contracts to achieve 
management and operational synergy without doiniiiating any part o f  the market 
or of the load curve; and 
(4) 
Such other factors as may be deemed ADVANTAGEOUS AND 
beneficial to the [best] NATIONAL interest [of the National Government while] 
AND AT TI-IE SAME TIME ensuring attractiveness to potential investors. 
(d) 
All GENERATION AND OTHER assets of NPC shall be sold in 
[an] A TRANSPARENT AND open [and transparent manner through], 
COMPETITIVE public bidding[, and the]. THE same MANNER AND 
STANDARD OF DISPOSITION shall [apply to] BE EMPLOYED IN the 
disposition of THE IPP contracts[;] OF NPC; 
(e) 
In cases of transfer of possession, control, operation, or 
privatization of multi-purpose hydro facilities, safeguards shall be prescribed to 
ensure THAT TEIE APPLICABLE CONSTITUTIONAL PROSCRIPTION 
ON THE ALIENATION AND DISPOSITION OF NATURAL RESOURCES 
OWNED BY THE STATE SHALL BE STRICTLY OBSERVED AND that 
the national government may direct water usage in cases o f  shortage to protect 
potable water, irrigation, and all other requirements imbued with public interest; 
(0 
The Agus and the Pulangui complexes in Mindanao shall be 
excluded from [among] the generation [companies] ASSETS OF NPC that will 
be initially privatized. Their ownership shall be transferred to the PSALM Cop. 
[aid], BUT both COMPLEXES shall continue to be operated by the NPC. Said 
complexes may be privatized not earlier than ten (IO) years from the effectivity of 
this Act, and, except for Agus 111, shall not be subject to THE Build-Operate- 
Transfer (B-0-T), Build-Rehabilitale-Operate-Transfer (B-R-0-T) and SUCH 
other variations thereof lpursuant to] AS SET FORTI1 IN Republic Act No. 
6957, as amended by Republic Act No. 7718. The privatization of THE Agus and 
THE Pulangui complexes, AFTER THE LAPSE OF THE SAID TEN (10) 
YEARS PROM TEIE EFFECTIVITY OF THIS ACT, shall be left to the 
discretion of PSALM Corp. in consultation with Congress; 


56 
(g) 
The steamfield assets and generating plants of each geothermal 
complex [shall not be sold separately. They shall] MAY be combined and [each 
geothernial complex] [BE COMBINED AND HELD TOGETHER AS A 
SINGLE UNIT AND shall be] sold as one package [through] IN A 
TRANSPARENT 
AND OPEN, COMPETITIVE public bidding. THE 
CORRESPONDING 
STEAM SALES AGREEMENTS 
OF THESE 
GENERATING PLANTS SHALL BE CARRIED WITH THE SALE AND 
SHALL CONTINUE TO BE IN EFFECT, WITH TI-IE RIGHTS AND 
OBLIGATIONS 
UNDER 
SUCH 
STEAM 
SALES 
AGREEMENT 
TRANSFERRED FROM NPC TO TI-IE BUYER OF THE GENERATING 
PLANTS. PSALM MAY ALSO APPLY ALTERNATIVE SCHEMES FOR 
THE 
SALE, 
PRIVATIZATION 
OR 
DISPOSITION 
OF 
NPC 
GENERATING PLANTS IN THE GEOTHERMAL COMPLEXES, 
PROVIDED SUCH ALTERNATIVE SCI-IEMES SHALL OPTIMIZE THE 
VALUE AND SALE PRICES OR SAID GENERATING ASSETS. TI-IE 
SECRETARY OF THE DEPARTMENT OF FINANCE (DOF), IN 
CONSULTATION WITH THE PRIVATIZATION COUNCIL, SHALL 
DETERMINE THE OPTIMUM VALUE OF SUCH ASSETS. The 
geothermal complexes covered by this [requirement] PARAGRAPH (G) OF 
THIS SECTION SHALL include, bul are not limited to, Tiwi-Maltban, BAC- 
MAN, Tongonan AND Palinpinon; 
(11) 
The ownership of the Caliraya-Botokan-Kalayaan (CBK) pump 
storage complex shall be transferred FROM NPC to the PSALM Corporation; 
(i) 
Not later than thee (3) years from the effectivity of this Act, [and] 
BUT in no case later than the initial inipleinentation of open access, at least 
[seventy percent (70%)] FIFTY PERCENT (50%) OF THE AGGREGATE 
SUM of BOTH Uie total capacity of THE generating assets [of] OWNED 
DIRECTLY BY NPC and [ofl the total capacity of the power plants under 
contract with NPC [located] in Luzon and Visayas shall have been privatized: 
Provided, That any unsold capacity FROM SUCH AGGREGATE SUM shall 
be privatized not later than eight (8) years from the effectivity of this Act; and 
6) 
NPC may generate and sell electricity only from the undisposed 
[generating] GENERATION assets and FROM THE UNDISPOSED IPP 
contracts of PSALM Corp. and shall not incur any new obligations to purchase 
ELECTRIC power through bilateral CONTRACT OR contracts with OTHER 
generation companies or [other] WITH ELECTRIC POWER suppliers. 
[“SEC. 48. 
Nafional Power Board of Directors. - Upon the passage 
of this Act, Section 6 of RA 6395, as aniended, and Section 13 of RA 7638, as 
amended, referring to the composition of the National Power Board of Directors, 
are hereby repealed and a new Board shall be immediately organized. The new 
Boaxd shall be coinposed of the Secretary of Finance as Chairman, with the 
following as members: the Secretary of Energy, the Secretary of Budget and 
Management, the Secretary of Agriculture, the Director-General of the National 
Economic and Development Authority, the Secretary of Environment and Natural 
Resources, the Secretary of the Interior and Local Government, the Secretary o l  
the Department of Trade and Industry, and the President of the National Power 
Corporation.] 


57 
"CHAPTER VI 
"POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT 
"SEC. 49. 
Creation 
of Power 
Sector 
Assets 
and Liabilities 
Management Corporafion. - There is hereby created a government-owned and 
-controlled corporation to be luiown as the "Power Sector Assets and Liabilities 
Management Corporation", hereinafter referred to as the "PSALM Coip.", which 
shall take OVER THE ownership AND CONTROL of all existing [NPC] 
generation assets, liabilities, IPP contracts, real estate, and all other disposable 
assets[.], EXCEPT THE SPUG ASSETS AND THE TRANSMISSION AND 
SUBTMNSMISSION ASSETS AND FACILITIES, OF NPC. All outstanding 
obligations of the NPC arising from loans[, issuances] TO IT AND FROM 
PLOTATION BY IT of bonds, securities, and other instruments of iiidebtedness 
shall be transferred to and assumed by the PSALM Corp. within one hundred 
eighty (1 80) days from the [approval] EFFECTIVITY of this Act. 
"SEC. 50. 
Purpose and Objective, Domicile and Term of Existence. 
- The principal purpose of the PSALM Corp. is to ADMINISTER AND 
manage the orderly sale, disposition, and privatization of WPC] THE generation 
assets, real estate, [and] other disposable assets, and IPP contracts OF NPC with 
the [objective] END IN VIEW of liquidating AND SETTLING all OF Ir\rPC] 
NPC'S financial obligations and stranded contract costs in (an optiinal manner.] 
THE MOST ADVANTAGEOUS AND BENEFICIAL MANNER TO THE 
GOVERNMENT AND TO TITE END-USERS OF ELECTRICITY. 
The PSALM Corp. shall have its principal office and place of business 
[within] IN VIetro Manila. 
The PSALM C o p .  shall exist for a period of twenty five (25) years from 
the effectivity of this Act, unless otherwise provided by [law,] THE CONGRESS 
OF THE PHILIPPINES, and all assets [held by it, allj, moneys, [and] 
properties, CONTRACTS, AND RECORDS HELD BY AND beloiigiiig to it, 
and all its liabilities outstanding upon the expiration of its term of existence shall 
[revert] IPSO FACTO BE TRANSFERRED to and be assumed by the National 
Government. 
"SEC.51. 
Powers. - The PSALM Corp. 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 DISPOSITION, 
sale, and privatization of the [NPC] GENERATION assets, REAL ESTATE, 
OTHER DISPOSABLE ASSETS, and IPP contracts OF NPC and the 
liquidation of PPC] ITS debts and stranded contract costs, such liqtiidation to be 
completed AS SOON AS POSSIBLE within the term of existence of the PSALM 
Corp.; 
(b) 
To take title to and possession of, AND administer and conserve 
WITH Tl-Ili: DILIGENCE OF A GOOD FATHER OF A FAMILY, the assets 
THAT SHALL BE transferred AND ENTRUSTED to it; to sell or dispose [of] 
the same at such [price] JUST AND REASONABLE PRTCES and under such 
terms and conditions as [it] may [deem] RE DEEMED necessary [orj, proper, 
AND MOST ADVANTAGEOUS AND BENEFICIAL TO THE NATIONAL 
USERS OF ELECTRICITY, subject to SUCH applicable laws, rules and 
regulations; 
INTEREST, TIIE NATIONAL GOVERNMENT, AND TO THE END- 


58 
(c) 
To take title to and possession of the [NPC] IPP cohtracts OF NPC 
and to appoint, after A TRANSPARENT AND OPEN COMPETITIVE public 
bidding [in transparent and open manner] FOR THAT PURPOSE, A 
IWPUTABLE, TECHNICALLY qualified, AND FINANCIALLY SOUND 
independent ENFXTY OR entities [who] THAT shall [act] SERVE as the IPP 
ADMINISTRATOR OR Administrators in accordance with 
THE 
PROVISIONS OF this Act; 
(d) 
To calculate [the] WITH REASONABLE CERTAINTY AND 
ESTABLISH THE PRUDENT 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;] OF THE COMMISSION IN DETERMINING THE 
JUST AND REASONABLE AMOUNT OF UMVERSAL CHARGE FOR 
STRANDED DEBTS AND STRANDED CONTRACT COSTS; 
(e) 
To liquidate the NPC stranded contract costs, [utilizing] USING 
FOR THAT PURPOSE the proceeds from [sales and] THE DISPOSITION, 
SALE, AND PRIVATIZATION OF THE GENERATION ASSETS, REAL 
ESTATE, OTHER DISPOSAL ASSETS, AND IPP CONTRACTS OF NPC, 
AS WkLL AS THE VALUE OF SUCH other property THAT MAY HAVE 
BEEN contributed to it[,] (PSALM CORP.), including the proceeds from the 
universal 
charge[;] 
IMPOSED 
TO RECOVER 
THE 
STRANDED 
CONTRACT COSTS OF NPC; 
(f) 
To adopt rules and regulations, NOT INCONSISTENT WITH 
THE PROVISIONS OF THIS ACT, as may be necessary or proper for the 
orderly conduct of its business or operations; 
(6) 
(11) 
To sue and be sued in its OWN 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], AS far as practicable AND TO 
SAVE ON COST, PSALM CORP. shall avail itself of the services of personnel 
detailed TO IT froni other government agencies: 
(i) 
To own, hold, acquire, or lease real and personal properties as may 
be necessary or required in tlie discharge of its fbnctions; 
0 )  
To borrow money and TO incur such liabilities[, including] 
THROUGH the [issuance] FLOTATION of bonds, securities, or other 
evidences of indebtedness, utilizing FOR THAT PURPOSE its assets as 
collateral [and/or through the guarantees) AND/OR THE GUAIZANTEE of the 
National Government: Provided, however, That all such debts or borrowings OF 
PSALM CORP. shall [have been] BE LIQUIDATED AND paid off before the 
end of its corporate life; 
(IC) 
(1) 
To restructure THE existing loans of the NPC; 
To collect, administer, and apply PROPERLY NPC's Lportion] 
SI-IARE of the universal charge; and 
(m) 
To structure the DISPOSITION, sale, AND privatization [or 
disposition ofNPC] OF THE GENERATION assets and IPP contracts [and/or] 
OF NPC AND/OR their ELECTRIC energy output, based on such ternis and 
conditions which shall [optimize tlie value] PRODUCE THE MOST 
ADVANTAGEOUS AND BENEFICIAL RESULTS, VALUES, and [sale] 
prices [of] FOR said GENERATION assets[.] AND IPP CONTRACTS AND 
THEIR ELECTRIC ENERGY 
OUTPUT FOR THE NATIONAL 


59 
INTEREST, FOR THE NATIONAL GOVERNMENT, AND FOR TIIE 
END-USERS OF ELECTRICITY. 
“SEC. 52. 
Power 
Sector Assets 
and 
Liabilities 
Management 
Corporation, Meetings, Quorum and Voting. - The Corporation shall be 
administered[,] and its powers and fuiictions SHALL BE exercised[,] by a Board 
of Directors which shall be composed of the Secretary of Finance as the 
Chairman, the Secretary of Budget and Management, the Secretary of the 
Department of Energy, the Director-General of the National Economic and 
Development Authority, the Secretary of the Departinent of Justice, the Secretary 
of the Department of Trade and Industry, and the President of the PSALM Corp., 
ALL OF WHOM SHALL SERVE as ex oficio members thereof. 
The Board of Directors OF THE PSALM COW. shall [meet regularly 
and] HOLD A REGULAR MEETING ONCE EVERY MONTH WITHOUT 
NEED OF CALL ON A DAY TO RE DESIGNATED BY THE MEMBERS 
OF THE BOARD OF DIRECTORS IN A FORMAL IWSOLUTION FOR 
TI-IAT PURPOSE. THE BOARD OF DIRECTORS OF THE PSALM 
COIU’. MAY ALSO HOLD SPECIAL MEETINGS, WHEN DEMANDED 
BY THE NEEDS OF THE CORPORATION AND as frequently as may be 
necessary [to enable it] to discharge [its] THE functions and responsibilities[.) 
OF THE MEMBERS OF THE BOARD, UPON WRITTEN NOTICE FROM 
PURPOSE OF TI-IE SPECIAL MEETING BEING CALLED. The presence 
[at a meeting] of AT LEAST four (4) members OF THE BOARD IN ANY 
MEETING shall constitute a quorum[,] TO DO BUSINESS, and the decision of 
[the majority of three (3)) AT LEAST POUR (4) members present at [a] THE 
meeting [where there is a quoruin] shall [be the] CONSTITUTE A decision of 
the Board of Directors. 
THE CHAIRMAN, WHICH SHALL STATE, IN EVERY CASE, THE 
“SEC. 53. 
Powers qf the President of 
PSALM Corp. - The 
President of the PSALM Corp. shall be appointed by the President of the 
Philippines. In the absence of the Chairman, the President OF THE PSALM 
COW. shall preside over THE [Board] meetings[.] OF THE BOARD. 
The President o f  the PSALM Corp. shall be the Chief Executive Officer of 
the PSALM Corp., and HE shall have the following powers and duties: 
(a) 
[To] HE SHALL execute and administer the policies and 
measures approved by the Board, and HE SHALL [take responsibility] BE 
RESPONSIBLE for the efficient discharge of ALL management furtctions; 
(b) 
[To] IIE SIIALL DIRECTLY oversee the preparation of the 
budget of the PSALM Corp.; 
(c) 
[To] HE SHALL direct and supervise the operation and internal 
administration of the PSALM Coip. and, for this purpose, HE may delegale 
[some or] any OR SOME of his administrative respoiisibilities and duties to other 
o€ficers of the PSALM Corp.; 
(d) 
Subject to the guidelines and policies set [up1 by the Board, [to] 
111s SHALL appoint and fix the number and compensation of subordinate 
officials atid employees of the PSALM Corp.; and, for cause, [to] HE SHALL 
remove, suspend, or otherwise discipline any subordinate employee of the 
PSALM Corp.; 
(e) 
[To] HE SHALL submit an annual report to the Board on the 
activities, [aid] achievements, AND ACTUAL CONDITION or the PSALM 
Corp. at the close of each fiscal year and, upon approval thereofl,] BY THE 


60 
OOARD, HE SHALL submit a copy OF THE ANNUAL REPORT to the 
President of the Philippines, TO THE CONGRESS OF THE PHILIPPINES, 
and to such other agencies as may be required by law; 
(9 
[To] HE SHALL represent the PSALM Corp. in all dealings and 
transactions with other offices, agencies, aid instrumentalities of the Government 
atid with all persons and other entities, private or public, domestic or foreign; and 
(g) 
[To] HE SHALL exercise such other powers and PERFORM 
SUCH OTHER duties as may be vested in him by the Board from time to time. 
"SEC. 54. 
Exenzptionfrom the Salary Stundurdizution Law. - The 
salaries and benefits o f  employees [in] OF the PSALM Corp. shall be [exempt] 
FIXJ3D BY ITS BOARD OF DIRECTORS AND SHALL BE EXEMPTED 
from THE PROVISIONS OF Republic Act No. 6758 [and shall be fixed by the 
PSALM Corp. Board]. 
"SEC. 55. 
Property of the PSALM Corp. - The following funds, 
assets, contributions, and other property shall constitute the CAPITAL, ASSETS, 
AND property of the PSALM Corp.: 
(a) 
The generation assets, real estate, [IPP contracts,] other disposable 
assets [of NPC], AND XPP CONTRACTS TRANSFERRED TO IT FROM 
NPC BY VIRTUE OF THE PROVlSIONS OF THIS ACT AND THE 
proceeds &om the sale or disposition oE [such] ANY OR ALL OF SAID assets 
[and the], REAL ESTATE, AND CONTRACTS AS WELL AS ANY residual 
assets HELD BY IT from B-0-T, R-0-T, and other variations thereof; 
(b) 
[Transfers] ANY AND ALL TRANSFERS from the National 
Government; 
(c) 
[Proceeds] THE PROCEEDS from loans incurred to restructure 
AND/or refinance [NPC's transferred) T I E  liabilities[:] OF NPC THAT WERE 
TRANSFEIUUCD TO IT BY VIRTUE OF THE PROVISIONS OF THIS 
ACT: Provided, however, That ANY AND all SUCH LOANS OR borrowings 
shall be fully paid [for by] AND LIQUIDATED NOT LATER THAN the end 
of the life of the PSALM Corp.; 
(d) 
[Proceeds] THE PROCEEDS from the universal charge allocated 
for TI-IE LIQUIDATION OF THE stranded contract costs and the stranded 
debts of NPC: 
(e) 
(f) 
(g) 
v e l )  THE ANNUAL profit oENPC; 
[Net] TI-IE ANNUAL profit of TIIE TRANSCO; 
[Official] ANY AND ALL IUNDS OF OFFICIAL assistance, 
grants, and/OR donations fiom external sources; and 
(h) 
[Other sources of funds as may be determined] ANY AND ALL 
FUNDS DERIVED by THE PSALM Corp. [necessary for the above-mentioned 
purposes.] FROM OTHER SOURCES. 
"SEC. 56. 
CIuims Against the PSALM Corp. - The following shall 
constitute the claims against the PSALM C o p :  
(a) 
[NPC] VALID liabilities OF NPC THAT WERE transferred to 
the PSALM Gorp.[;] IN ACCORDANCE WITH THE PROVISIONS OF 
THIS ACT: 


61 
(b) 
(c) 
New Loans[;] INCURRED BY TIIE PSALM CORP. IN 
Transfers from the National Government; 
ACCORDANCE WITH TIIE PROVISIONS OF THIS ACT: and 
(d) 
[NPC] NPC'S stranded contract costs[.] ARISING FROM ITS 
VALIDLY CONCLUDED IPP CONTRACTS. 
"CHAPTER VI1 
"PROMOTION OF RURAL ELECTIUFICATION 
"SEC. 57. Conversion of Electric Cooperatives. - Electric 
cooperatives are hereby given the option to convert into either stoclc 
cooperative under the Cooperatives Development Act or stoclc coiporation 
under the Corporation Code. Nothing contained in this Act shall deprive 
electric cooperatives of any privilege or right granted to theni under 
Presidential Decree No. 269, as aiiiended, 'and other existing laws. 
"SEC. 58. 
Addiiional Mandate 
of 
the National Electr$cation 
Administration (AEA). - NEA shall develop and implement programs: 
(a) 
To prepare electric cooperatives in operating and competing under 
the deregulated electricity market IN AN OPEN ACCESS AND RETAJL 
WHEELING ENVIRONMENT, AND COMPLETE THAT PREPARATION 
within five (5) yeas fiom tlie effectivity of this Act[, specifically in an 
environment of open access and retail wheeling]; 
(b) 
To strengthen the lechnical capability and financial viability of 
rural electric cooperatives; and 
(c) 
To review and upgrade THE APPLICABLE regulatory policies 
with a view to enhancing the viability of THE rural electric cooperatives as 
electric DISTKLBUTION utilities. 
NEA shall continue to be under the supervision o€ the DOE and shall 
exercise its fiinctioiis under Presidential Decree No. 269, as amended by 
Presidential Decree No. 1645, insofar as they are consistent with tliis Act. 
"SEC. 59. 
Alternative Electric Service for Isolated Villages. - The 
provision AND RENDITION of electric service in ANY remote, SPARSELY 
POPULATED, and unviable (villages that the franchised] AREA WI-XICFK IS 
COVERED BY THE FRANCHISE OF A DISTRIBUTION utility WHICH 
is unable to PROVIDE AND RENDER service TO THE SAID AREA for any 
reason shall be opened to ANY other qualified third parties, PREFERABLY TO 
SAME AREA. 
ANY INTERESTED ADJACENT DISTRIBUTION urILrrY IN THE 
"SEC. 60. 
Debts ofEleciric Cooperatives. - Upon the efkctivity of 
this Act, all outstanding financial obligations of electric cooperatives to NEA and 
other government agencies, incurred for tlie purpose of financing the roral 
electrification program, shall be assumed by the PSALM Corporation in 
accordance with [tlie] A program TO BE approved by the President of the 
Philippines within one (1) year from the effectivity of this Act, which SAID 
PROGRAM shall be implemented and completed within three (3) years from the 
effectivity of this Act. The [ERC] COMMISSION shall ensure a reduction in the 


62 
rates of electric cooperatives commensurate with [the] THEIR resulting savings 
[due to] ARISING FROM the removal of tlie amorlization payinents [oi-] ON 
their loans[. Within] ASSUMED BY THE PSALM CORP. 
IF WITHIN 
THE FIRST five (5) years froin the condonation of [debt,] THE AFORESAID 
FINANCIAL OBLIGATIONS any electric cooperative [which shall] SHOULD 
transfer AND DIVEST ITSELF COMPLETELY AND ABSOLUTELY OF 
THE ownership [or] AND control of its assets, franchise [or], AND operations, 
SUCH ELECTRIC COOPERATIVE shall [repay] PAY BACK TO THE 
PSALM Corp. AN AMOUNT EQUAL TO THE SHARE OF THE SAID 
ELECTRIC COOPERATIVE OF the total CONDONED debts, including 
accrued interests thereon. 
"CHAPTER VIII 
"GENERAL PROVISIONS 
"SEC. 61. 
Reportorial Requirenients. - The DOE [shall] MUST 
talce [the] ANY AND ALL necessary measures to ensure that the provisions of 
this Act are properly implemented, and shall PERIODICALLY submit to the 
JOINT CONGRESSIONAL Power Commission, BEING CREATED IN 
SECTION 59 OF THIS ACT, a semi-annual report on the PROPER AND 
ACTUAL implementation of this Act on or before the last week of April and 
October of each year. 
"SEC. 62. 
Joint Congressional Power Conmission. - Upon the 
effectivity of this Act, a JOINT congressional POWER commission, [hereinafter 
referred to as] the "Power Commission", is hereby constituted. The Power 
Commission shall be composed of fourteen (14) members with the chairmen of 
the Committee on Energy of the Senate and the House of Representatives and six 
(6) additional members from each I-rouse, to be designated by tlie Senate 
President and the Speaker of the House of Representatives, respectively. The 
ininority IN EACH HOUSE OF CONGRESS shall be entitled to A pro rata 
representation [but sl~all have at] IN THE POWER COMMISSION, OR AT 
THE VERY least one (1) representative [in the Powek Commission.] THEREIN. 
The POWER Commission shall, in aid of legislation, perform the 
following functions, among others: 
(a) 
Set the guidelines and overall framework to OVERSEE, monitor, 
and eiisure the proper, FAITHFUL, AND STIUCT implementation ofthis Act; 
(b) 
Endorse TO AND FOR TIIE APPROVAL OF THE 
PRESIDENT OF THE PHILIPPINES the initial privatization plan OF THE 
NPC within one (1) month from THE submission of such plan to [the Power 
Commission by PSALM Corp. for approval by the President of the Philippines;] 
IT BY THE PSALM CORP. AS REQUIRED UNDER SECTION 45 OF 
THIS ACT; 
(c) 
To 
ensure 
transparency, 
FAITHFUL, 
AND 
STRICT 
ADHERXNCE TO TIIE PROVISIONS OF THIS ACT REGARDING THE 
PRIVATIZATION OF NPC, require the submission of SUCH PERTINENT 
DOCUMENTS OR reports from government agencies concerned on the conduct 
of public bidding procedures [regarding] IN CONNECTION WITH THE 
privatization of [NIT] THE generation [and] ASSETS, transin~ssion assets[;], 
REAL ESTATE, OTHER DISPOSABLE ASSETS, AND IPP CONTRACTS 
OF NPC: 


63 
(d) 
Review and evaluate the performance of the industry participants 
in relation to the objectives [and], timelines, AND TIME-SEQUENCES set forth 
in this Act; 
(e) 
Approve the budget for the programs of the Power Commission 
and all disbursements therefrom, including compensation of all personnel; 
(9 
Congress; 
Submit periodic reports to the President of the Philippines and TO 
(8) 
Determine inherent wealcnesses in the law and recominend 
necessary remedial legislation or executive measures; and 
(h) 
Perform snch other duties and functions as may be necessary to 
attain its objectives. 
In furtherance OF THE DUTIES AND FUNCTIONS OF THE 
POWER COMMISSION AS SET FORTH hereof, the Power Commission is 
hereby empowered to require the DOE, [ERC] THE COMMISSION, NEA, 
TMNSCO, generation companies, distribution utilities, suppliers, and other 
electric power industry participants to submit reports and all pertinent data and 
information 
relating 
to 
TIIEIR 
IUCSPECTIVE 
ACTIVITIES 
AND 
BUSINESSES AS WELL AS RELATING TO the performance of their 
respective functions in the industry. Any person who willfully and deliberately 
refuses without ANY just cause to extend the support and assistance required by 
the Power Commission IN ORDER to effectively attain its objectives shall, upon 
conviction, be punished by imprisonment of not less than one (1) year but not 
more than six (6) years or a fine of not less than Fifty thousand pesos 
(PS0,000.00) but not more than Five hundred thousand pesos (P500,000.00) or 
both at the discretion of the court. 
The Power Commission shall adopt its OWN internal rules of 
procedures[;] AND SHALL coiiduct SUCH hearings, and receive SUCH 
testimonies, reports, and technical advice[;] AS ARE NEEDED BY IT IN THE 
PERFORMANCE OF ITS FUNCTIONS. THE POWER COMMISSION IS 
HEREBY AUTI-IORIZED TO invite or summon by subpoena ad test$candiim 
any public official, private citizen, or any other person to testify before it, or 
require any person by subpoena duces tecum to produce before it such records, 
reports, documents, or other materials as it may require[; and]. AND generally 
[require], THE POWER COMMISSION IS IIEIZEBY GRANTED all the 
powers necessary to attain the purposes for which it is created. The Power 
Commission shall be assisted by a secretariat to be composed o f  personnel who 
may be seconded from the Senate and the House of Representatives [and]. THE 
POWER COMMISSION, WITEN IT BECOMES NECESSARY IN 
PEREORMING ITS FUNCTIONS, may retain consultants. The secretariat shall 
be headed by an executive director who has sufficient KNOWLEDGE, 
EXPERIENCE, background, and competence on THE ELECTRIC POWER 
INDUSTRY AND ON the policies and issues relating to electricity industry 
reforms as provided in this Act. To carry out its powers and fnnctions, the initial 
sun1 of 
Twenty-five 
million 
pesos 
(P25,000,000.00) IS 
HEREBY 
APPROPRIATED FOR THE POWER COMMISSION AND shall be charged 
against the current appropriations of the Senate. Thereafter, [such] ANY amount 
necessary for [its] THE continned operation OF THE POWER COMMISSION 
shall be included in the annual General Appropriations Act. 
The Power Commission shall exist for period of ten (10) years from the 
effectivity of this Act, aid ITS EXISTENCE may be extended by a joint 
concurrent resolution[.] OF BOTH HOUSES OF CONGRESS. 


64 
"SEC. 63. 
Separation Benejcs of OfJicials and Emplojiees of Ajfected 
Agencies. - National Government employees displaced or separated from the 
service as a result of the restrnctnring of the electricity industry and privatization 
of NPC assets pursuant to this Act, shall be entitled [to] either TO a separation 
pay and other benefits in accordance with existing laws, rules or regulations or [be 
eiititlecl] to avail of the privileges provided under a separation plan which shall 
[be] GRANT TO THE AVAILING EMPLOYEE one and one-half month 
salary for every year of service in the government: Provided, however, That tliose 
who [avail] HAVE AVAILED of [such] THE privileges OF THE SAID 
SEPARATION PLAN shall start their government service anew if THEY ARE 
absorbed TNEREAFTER by any government-owned successor company[.] OR 
BY THE NATIONAL GOVERNMENT ITLSEF. In no case shall there be any 
diminution of benefits under the separation plan until the full implementation of 
the restructuring and privatization[.] OF NPC. 
Displaced or separated persoimel OF NPC as a result of [the] ITS 
privatization[, if qualified,] shall, IF QUALIFIED, be given preference in the 
hiring of the manpower requirements of the pxivatized companies[.] OR 
EMERGING CORPORATE ENTITIES OF THE PRIVATIZED ASSETS. 
The salaries of employees of NPC shall continue to be [exempt] 
EXEMI'TED from the coverage of Republic Act No. 6758, otherwise Ifflown as 
"The Salary Standardization Act". 
With respect to employees who, are not retained by NPC, the Government, 
through the Department of Labor and Employment, shall endeavor to implement 
re-training, job counseling, and job placement progranis[.] FOR THEM. 
"SEC. 64. 
Fiscal Prudence. -' 
To promote the prudent management 
of government resonrces, the creation of new positions and the levels of or 
increases in salaries and all other emoluments and benefits of THE TRANSCO 
and THE PSALM Corp. personuel shall be subject to the approval of the 
President of the Philippines. The compensation and all other emoluments and 
benefits of the oElicials and THE members of the Board of DIRECTORS OF 
THE TRANSCO and OF THE OFFICIALS AND THE MEMBERS OF T€E 
BOARD OF DIRECTORS OF THE PSALM Corp. shall be subject to the 
approval of the President of the Philippines. 
"SEC. 65. 
Environmental Protection. - Participants in the 
generation, distribution, and transmission [sub-sectors] SECTORS or the 
ELECTRIC POWER industry shall comply with all environmental laws, rules, 
regulations, and standards promulgated by the Departnient of Environment and 
Natural Resources including, in appropriate cases, the establishment of an 
environmental guarantee fund. 
"SEC. 66. 
BeneJits lo Host Communities. - The obligations of 
generation companies and energy SOURCE AND/OR resource developers to 
THE communities [hosting] THAT HOST energy generating facilities and/or 
[AND OR] energy SOURCE AND/OR resource developers, as defined under 
Chapter 11, Sections 289 to 294 of the Local Government Code and Section 5(i) of 
Republic Act No. 7638 and their implementing rules and regulations and 
applicable orders and circulars WHICH MUST BE consistent with this Act, shall 
continue: Provided, That the obligations [mandated] IMPOSED under Chapter 
11, Section 291 of Republic Act No. 7160, shall apply to privately-owned 
corporations or entities utilizing the national wealth of the locality. 
To ensure the effective implementation of the reduction in THE cost of 
electricity in the communities where the source of energy is located, the 
mechanics and procedures prescribed in the Department o€ the Interior and Local 


65 
Government (D1LG)-DOE Circulars No. 95-01 and 98-01, dated October 31, 
1995 aiid September 30, 1998, respectively, and THE other issuances related 
thereto shall be pursued. 
Towards this end, the finid generated from the eighty percent (80%) of the 
national wealth tax shall, in no case, be used by any local government unit for any 
purpose other than those for wliich it was intended. 
In case of any violation or noncompliance by any local government 
official of any provision thereof, the DILG shall, upon prior notice and hearing, 
order the project operator, through the DOE, to withhold the remittance of the 
royalty payment to the host community concerned pending completion of the 
investigation. The unremitted funds shall be deposited in a government bank 
under a trust fund[.] ACCOUNT IN THE NAME OF THE BENEFICIARY 
LOCAL HOST COMMUNITY. 
"SEC. 67. 
NPC Offer of Transition Supply Contrcicts. - Within six 
(6) months from the effectivity of this Act, NPC shall file with the [ERC] 
COMMISSION for [its] THE LATTER'S approval [a], AFTER DUE 
NOTICE TO ALL INTERESTED PARTIES AND PUBLIC HEARING, 
THE transition supply contract OR CONTRACTS duly negotiated with [the] 
distribution utilities containing the terms and conditions of TIIE supply OF 
ELECTRICITY TO SUCII DISTRIBUTION UTILITIES and [a] THE 
corresponding schedule of rates, consistent with the provisions [hereof,] OF 
THIS ACT, iiicluding adjustments andor [AND OR] indexation fotmulas [which 
shall apply to] APPLICABLE DURING the term of such CONTRACT OR 
contracts. The teim of the transition supply CONTRACT OR contracts shall not 
extend beyond one (1) year from the introduction of open access. Such 
CONTRACT OR contracts shall be based on tlie projected demand of such 
DISTIUBUTION utilities less any of their currently committed quantities under 
eligible IPP contracts [as defined] DESCRJBED in Section [33 hereof:] 32 OF 
THIS ACT: 
PTovided, That the total generation capacity of such signed 
transition supply CONTRACT OR contracts shall not exceed the level of Ir\rPC] 
NPC'S owned, controlled, or committed capacity as of the effectivity of this Act. 
Such transition supply CONTRACT OR contracts shall be assignable to AND 
BE MADE BINDING ON Itlie NPC] NPC'S successor [generating] 
GENERATION companies. 
Within six (6) months from the date of TIIE submission of the transition 
supply contract OR CONTRACTS by NPC FOR THE APPROVAL OF TIIE 
COMMISSION, the [ERC] COMMISSION shall notify NPC of [their] ITS 
approval of the SCIIEDULE OF rates contained [therein.] IN SAID SUPPLY 
CONTRACT OR CONTRACTS. 
The [ERC] COMMISSION shall maintain a record of the [contract] terms 
aiid CONDITIONS OF THE CONTRACT OR CONTRACTS AND THE 
SCHEDULE OF THE rates offered by NPC. 
Likewise, the [ERC] 
COMMISSION shall update mouthly[,] the SAID rates, WHEN THERE IS A 
NECESSITY TO DO SO, using [the] SiJCH appropriate, JUST AND 
REASONABLE adjustment and/or [AND OR] indexation formula[.] THAT 
WILL PROMOTE AND PROTECT THE INTEREST OF THE GENERAL 
PUBLIC AND TIIE INTEREST OF THE END-USERS OF ELECTRICITY. 
Notwithstanding the provisions of Section 25 [hereof] OF THIS ACT, the 
rates charged by a distribution utility for the gemration component of tlie supply 
of electricity in their retail rate shall, for the term of the transition s~ipply 
CONTRACT OR contracts, riot exceed the SCHEDULE OF IUTES 
CONTAINED IN THE SAID transition supply contract [rates,] OR 
CONTRACTS, AS APPROVED BY THE COMMISSION AND as updated 


66 
nioiithly. The recovery of costs incurred by a distribution utility for any 
generation component in excess of the SAID transition  upp ply contract OR 
CONTRACTS rates shall be disallowed by the [ERC] COMMISSION, except 
for eligible contracts as delitied funder] AND DESCRIBED IN Section [33 
hereof] 32 OF THIS ACT: Provided, That such limitation on the recovery of 
generation component costs by a distribution utility shall apply only to the 
equivalent quality and quantity of electricity still available to the distribution 
utility from NPC[.], TAKING INTO ACCOUNT THE TOTAL COST OF 
DELIVERING THE ELECTRIC POWER TO THE DISTlUBUTION 
UTILITY’S FRANCHISE TERRITORY. 
“SEC. 68. 
Review of IPP Contracts. - An [iJInter-agency 
IcICommittee WHICH SHALL BE chaired by the Secretary of Finance, with the 
Secretary of the Department of Justice and the Director General of the National 
Economic and Development Authority as members thereof, is hereby created IN, 
AND upon tlie effectivity of, this Act. The INTER-AGENCY Committee shall 
immediately undertake a thorough review of all IPP contracts[.] AND SHALL 
TAKE 
EVERY 
NECESSARY 
EFFORT 
AND 
ACTION 
TO 
RENEGOTIATE SUCH IPP CONTRACTS [AND] TO ERADICATE 
AND/OR [MINIMIZE EVERY ONEROUS PROVISIONS CONTAINED IN 
THEM] MITIGATE THEIR ONEROUS EFFECTS. In cases where such 
contracts are found to have provisions which are grossly disadvantageous, or 
onerous to tlie Government, the INTER-AGENCY Committee shall [cause] 
REQUIRE the appropriate government agency [to file an action], IF IT 
BECOMES NECESSARY, EITHER TO AVAIL, WITHOUT ANY 
UNNECESSARY DELAY, OF TIIE LEGAL REMEDIES under the 
arbitration clanses provided in THE said contracts or TO initiate PROMPTLY 
any SUCH appropriate LEGAL action BEFORE A COMPETENT COURT 
under [Philippinej THE laws[.] OF THE PHILIPPINES. The PSALM 
Corporation shall diligently seek to reduce stranded CONTRACT costs, if any. 
ANY REDUCTION IN THE COSTS OF THE SAID IPP 
CONTRACTS ARISING PROM THEIR RENEGOTIATION, OR FROM 
ANY REMEDIES TAKEN UNDER THE RELEVANT ARBITRATION 
CLAUSES IN SUCH CONTRACTS, OR FROM ANY LEGAL ACTION 
BEFORE A COMPETENT COURT UNDER THE LAWS OF THE 
PHILIPPINES SHALL BE USED TO REDUCE THE UNIVERSAL 
CHARGE IMPOSED UNDER SECTlON 33 OF THIS ACT. 
ANY UNJUSTIFIED FAILURE TO PERFORM TfIE OFFICIAL 
DUTY IMPOSED UNDER THIS SECTION 65 AND THE SUCCEEDING 
SECTION 66 OF THIS ACT SHALL BE A GROUND FOR THE FILING 
OF [ANY] THE APPROPRIATE LEGAL ACTION AGAINST, AND THE 
PUNISHMENT OF, TIIE RESPONSIBLE PARTY OR PARTIES UNDER 
THE APPROPRIATE PROVISION OF REPUBLIC ACT NO. 3019, 
OTHERWISE ICNOWN AS THE ANTI-GRAFT AND 
CORRUPT 
PRACTICES ACT OF THE PHILIPPINES. 
“SEC. 69. 
Renegotiation of Power Purchase and Energy Conversion 
Agreements between Governmenls Entities. - Within three (3) months fioin the 
effectivity of this Act, ill1 power purchase and energy conversion agreements 
between the PNOC-Energy Development Corporation (PNOC-EDC) and NPC, 
including but not limited to the BAC-MAN, Palinpinon, Tongonan, LEYTE A 
AND B and Mt. Apo Geothermal complexes, shall be reviewed by the (ERC] 
COMMISSION, and the ONEROUS terms AND CONDITIONS thereof, IF 
ANY, MUST BE REVISED AND amended to remove any hidden costs or 
extraordinary mark-ups in the cost of power or steam above their [true] JUST 
AND REASONABLE costs. A11 Amended contracts shall be submitted to the 
Joint 
Congressional 
Power 
Commission 
for 
approval. 
The 
[ERC] 


67 
COMMISSION shall ensure that all savings realized from the reduction of [said] 
ANY SUCH HIDDEN COSTS OR EXTRAORDINARY mark-ups shall be 
passed on to all end-users OF ELECTRICJTY. 
“SEC. 70. 
Missionary 
Elecfrzj2ation. 
-Notwithstanding 
the 
NATIONAL POWER CORPORATION’S divestment and/or [AND OR] 
privatization of WPC assets,] ITS GENERATION ASSETS, TRANSMISSION 
contracts [and spun-off corporations, NPC], THE NPC shall [remain as a 
National Government] CONTINUE TO EXIST AS A GOVERNMENT-owned 
and-controlled corporation to perforni [the] A niissioriary electrification ftmction 
through the Small Power Utilities Group (SPUG) [and] AS DEFINED IN THIS 
ACT. 
FOR 
THAT 
PURPOSE, 
THE 
NATIONAL 
POWER 
CORPORATION IS HEREBY AUTHORIZED TO EXERCISE ALL ITS 
CORI’OIZATE POWERS AND ENJOY ALL ITS PREROGATIVES 
UNDER ITS EXISTING LEGISLATlVE CHARTER, EXCEPT TO THE 
EXTENT 
THAT SUCH POWERS AND 
PREROGATIVES ARE 
MODIFIED BY AND ARE INCONSISTENT WITH ANY OF THE 
PROVISIONS 
OF 
THIS 
ACT. 
THE 
NATIONAL 
POWER 
CORPORATION shall be responsible for providing power generation [and its] 
OR GENERATIONS, INCLUDING ALL NECESSARY AND associated 
power delivery systems, in areas that are not connected to the NATIONAL 
transmission system. The missionary electrification hnction OF THE 
NATIONAL POWER CORPORATION shall be fiinded: 
(A) from the 
revenues from sales in missionary areas; and (B) from the universal charge [to] 
THAT SHALL be collected from all [electricity] end-users [as] OF 
ELECTRICITY, WHICH UNIVERSAL CHARGE SHALL BE delermined 
by the [ERC.] COMMISSION, AFTER DUE NOTICE TO ALL 
INTERESTED PARTIES AND PUBLIC HEARING. 
AND SUB-TRANSMISSTON 
ASSETS AND FACILITIES, AND IPP 
“SEC. 71. 
Electric Power Crisis Provision. - [Upon the 
determination by] IN CASE OF ANY IMMINENT SHORTAGE OF SUPPLY 
OF ELECTRICITY, AS DETERMINED AND PROCLAIMED BY the 
President of the Philippines [of an imminent shortage of tlie supply of electricity], 
Congress may authorize, through a joint resolution, the establishment of 
additional [generating capacity] GENERATION CAPACITIES TO SOLVE 
SUCH SHORTAGE ADEQUATELY, under such terms and conditions as [it] 
CONGRESS may approve. 
“SEC. 72. 
[A4andatedJ MANDATORY Rate Reducfion. - Upon the 
effectivity of this Act, residential end-users OF ELECTRICITY shall be ganted 
a [rate] MANDATORY reduction from NPC rates IN AN AMOUNT of NOT 
LESS THAN thirty centavos per kilowatt-hour (P0.30kWh). Such reduction shall 
be reflected as a separate item in tlie [consumer] MONTHLY billing statement 
OF RESIDENTIAL END-USERS OF ELECTRICITY. 
”SEC. 73. 
Lififeline Rate. - A socialized pricing meclianisni, called a 
lifeline 
rate, 
for 
[tlie] marginalized RESIDENTIAL end-users 
OF 
ELECTRICITY shall be set by the [ERC, which] COMMISSION. THIS 
LIFELINE RATE shall be exempted from the cross subsidy phase-out under this 
Act AND SHALL REMAIN for a period of ten (10) years[,] PROM AND 
AFTER THE DATE OF ITS ESTABLISHMENT, unless extended by [law.] 
BY CONGltESS. The [level of] consumption LEVEL OF THOSE WI-LICI-1 
USERS OF ELECTRICITY and the LEVEL OF WHAT SHALL BE 
DEEMED TO BE A JUST AND WASONABLE LIFELINE rate shall be 
determined by the [ERC] COMMISSION, after due notice TO ALL 
INTERESTED PARTIES and I’UULIC hearing. 
SHALL BE CONSIDERED MARGINALIZED RESIDENTIAL END- 


68 
"SEC. 74. 
Cross Subsiclies. - Cross subsidies within a grid, between 
grids and/or, [AND OR] BETWEEN classes of [customers] END-USERS OF 
ELECTlUClTY shall be phased out [in] WITHIN a period not exceeding three 
(3) years from the establishment by the [ERC] COMMISSION of [a] THE 
universal [charge] CHARGE AUTHORIZED UNDER SECTION 33 OF 
THIS ACT, which shall be collected from all [electricity] end-users[. Such level 
ofl OF ELECTRICITY, EXCEPT AS OTHERWISE PROVIDED IN THIS 
ACT. THE AMOUNT PER IULOWATT HOUR POI< EACH KIND OF 
SAID cross subsidies shall be made transparent [and] TO THE PUBLIC AND 
SI-IALL BE identified separately in the billing statenients [provided to end-users 
by the suppliers.] THAT A DISTRIBUTION UTILJTY OR SUPPLIER OF 
USERS OF ELECTRICITY. 
ELECTRICITY [SENDS] ISSUES MONTHLY TO [EACH OF ITS] END- 
The [ E X ]  COMMISSION may extend, AFTER DUE NOTICE TO 
ALL INTERESTED PARTIES AND PUBLIC HEARING, the period for the 
removal of SAID cross subsidies for a inaxiinuni period of one (1) year [upon 
finding], IF IT FINDS that THE cessation of [such mechanism] SAID CROSS 
SUBSIDIES would have a material adverse effect [upon the public] ON THE 
interest[,] OF THE GENERAL PUBLIC, particularly the INTEREST OF THE 
residential end-user[;] OF ELECTRICJTY; or would have an immediate, 
irreparable, and adverse financial effect 011 distribution [utility.] UTILITIES OR 
ON SUPPLIERS OF ELECTRICITY. 
"CHAPTER IX 
"FINAL PROVISIONS 
"SEC. 75. 
Statutory Construction/s]. - This Act shall, unless the 
context indicates otherwise, be construed in favor of the establishment, 
promotion, AND preservation of competition [and people] AS WELL AS IN 
FAVOR OF THE empowerment [so that the widest participation of the people] 
OF THE PEOPLE TO PARTICIPATE, AS WIDELY AS IS LEGALLY 
ALLOWED, whether directly or indirectly, [is ensured.] ON ANY MATERIAL 
AND SUBSTANTIAL MATTER OR DECISION AFFECTING THE 
ELECTRTC POWER INDUSTRY SO THAT THE PEOPLE CAN ENSURE 
TEIE PROTECTION OF THEIR JUGHTS AND INTERESTS. With respect 
to NPC's debts and IPP [and related] contracIs, nothing CONTAJNED in this 
Act, UNLESS THE CONTEXT CLEARLY SAYS OTHERWISE, shall be 
construed as: (1) an EXPRESSED OR implied waiver of any right, action, or 
claim[,] OF NPC OR OF THE PHILIPPINE GOVERNMENT, ARISING 
FROM OR RELATING TO ANY SUCH CONTRACTS, against any person 
or entity[, of NPC or the Philippine Government arising from or relating to any 
such conlracts); or (2) a [conferment] GRANT of new OR ADDITIONAL or 
better OR SUPERIOR rights to creditors and IPP contractors [in addition to] 
DISTINCT FROM THE ALREADY subsisting rights granted by the NPC or 
BY the Philippine Government under existing contracts[.] OR AGREEMENTS. 
"SEC. 76. 
Education and Protection of End Users. - [End users] 
THE END-USERS OF ELECTRICITY shall be [educated about the] 
INFORMED ABOUT AND MADE FAMILIAR WKTH THE CONCEPT 
AND implementation of retail OPEN access and its impact on end-users OF 
ELECTRICITY, and [on] WJTH the proper [use], COST-EFFECTIVE, AND 
ECONOMICAL UTILILIZATION of electric power. Such [education] 
INFORMATION AND FAMILIARIZATION shall include, but not limited to, 
the existence of competitive GENERATION COMPANIES, COMPETITIVE 
electricity suppliers, choice of competitive electricity services, regulated 


69 
transmission and distribution services, RATE BASE, RETURN ON RATE 
BASE (RORB), systems PERFORMANCE STANDARDS AND reliability, 
aggregation, [market] WHOLESALE ELECTRICITY SPOT MARKET 
(WESM), CAPTIVE AND CONTESTABLE MARICETS, itemized billing 
STATEMENT, stranded [cost] DEBT OF NPC, STRANDED CONTRACT 
COSTS OF NPC AND OF DISTRIBUTION UTILITIES, uniform disclosure 
requirements 
FROM 
ALL 
ELECTRIC 
POWER 
INDUSTRY 
PARTICIPANTS, low-income bill [payment) PAYMENTS, AND energy 
conservation and safety measures. 
The DOE, in coordination with tlie NPC, NEA, [ERC) THE 
COMMISSION, and the Office of the Press Secretary-Philippine hiforination 
Agency (OPS-PIA), shall BE. RESPONSIBLE FOR AND undertake an 
information campaign to [educate] INFORM AND FAMILIARIZE the public 
on ALL FACETS OF the restructuring of the electric power industry and TI-XE 
privatization of NPC. 
"SEC. 77. 
Implementing Rules and Regulations. - The DOE [shall], 
in consultation with relevant government agencies, the electric power industry 
participants, CONCERNED non-government organizations, and WITH end- 
users[,] OF ELECTRICTY GROUPS, SHALL promulgate, WITHIN SIX (6) 
MONTHS F.ROM THE EFFECTIVITY OF THIS ACT, the NECESSARY 
Implementing Rules and Regulations (IRR) [of this Act, within six (6) months 
from the effectivity of this Act, subject to the approval of the Power 
Commission,], 
WI-IICI-T MUST 
BE 
CONSISTENT 
WITH 
THE 
PROVISIONS 
OF 
THIS 
ACT 
AND 
APPROVED 
BY 
JOINT 
CONGJIESSIONAL POWER COMMISSION. 
"SEC. 78. 
Injzinction 
arid 
Restraining 
Order. 
- 
The 
implementation of the provisions o f  this Act, WITH RESPECT TO THE 
FSSTRUCTURING OF THE ELECTRIC POWER INDUSTRY AND THE 
PRIVATIZATION OF THE NPC, shall not be restrained or enjoined except by 
an order issued by the Supreme Court of the Philippines. 
"SEC. 79. 
Separability Claim. - If for any reason, any provision of 
this Act is declared unconstitutional or invalid, the other parts or provisions 
[liereofj which are not affected thereby shall continue to be in full force and 
effect. 
"SEC. SO. 
Applicability and Repealzng Clause. - The [applicability] 
APPLICABLE provisions of Commonwealth Act No. 146, as amended, 
otherwise known as the "Public Services Act"; Republic Act 6395, as amended, 
revising the charter of NPC; Presidential Deciee 269, as amended, referred to as 
the National Electrification Decree; Republic Act 7638, otherwise known as the 
["]Department of Energy Act of 1992["]; [Executive Order 172, as amended, 
creating the EM;) Republic Act 7832 otherwise known as tlie ["]Anti-EIectricity 
and Electric Transmission LinedMaterials Pilferage Act of 1994["], shall 
continue to have full force and effect, except insofar as [they] SUCH ACTS AND 
DECREE, AND ONLY TO THAT EXTENT, are iiiconsistcnt with ANY OF 
TIIE PROVISlONS OF this Act. 
The provisions with respect to electric power of Section [l l(c)] 12(C) of 
Republic Act 7916, as amended, and Section 5(f) of Republic Act 7227, are 
hereby repealed or modified accordingly[.], IT REING THE CLEAR INTENT 
OF 
CONGRJ3SS 
TlIAT 
HENCEFORTIT 
THE 
GENERATION, 
TRANSMISSION, SUBTRANSMISSION, DISTRIBUTION, AND/OR 
SUPPLY OF ELECTRIC POWER SHALL BE GOVERNED ENTIRELY 
BY TIIE PROVISIONS OF THIS ACT, AND THAT NO AGENCY OF TIE 
NATIONAL GOVERNMENT, OTIIER THAN THE COMMISSION, 


70 
SIIALL BE ALLOWED TO RJCGULATE THE TRANSMISSION, 
SUBTMNSMISSION, AND DISTRIBUTION, OR AUTHORIZE TI3E 
ESTABLISHMENT OF GENERATION COMPANIES OR SUPPLIERS 
OP ELECTIZICITY. 
Presidential Decree No. 40 and all laws, decrees, rules and regulations, or 
portions thereof, inconsistent with this Act axe hereby repealed or modified 
accordingly. 
EXECUTIVE ORDER NO. 172, SERIES OF 1987, AS AMENDED, 
CREATING THE ENERGY REGULATORY BOARD, IS HEREBY 
REPEALED EXCEPT AS OTHERWISE PROVIDED IN THIS ACT. 
"SEC. 81. 
Effectivity Claim. - This Act shall take effect on the 
fifteenth day following its publication in at least two (2) national [papers] 
NEWSPAPERS of general circulation. 
Approved,