ZeEP RES

Republic of the Philippines fey” E- Filed
House of Representatives '~ RECEIVED
Quezon City 9°

Z__ DATE September 25, 2023

~
a
* TIME 3:10pm *

INETEENTH CONGRESS
Second Regular Session

HOUSE BILL NO. _ 9310

Introduced by:
HON. JOSEPH STEPHEN S. PADUANO, HON. JULIET MARIE DE LEON FERRER and
HON. FRANCISCO B. BENITEZ

EXPLANATORY NOTE

This bill seeks to grant NEGROS ELECTRIC AND POWER CORP. (NEPC) a franchise
to acquire, establish, operate, and maintain, for commercial purposes and in the public
interest, a distribution system for the conveyance of electric power to end users in the
Cities of Bacolod, Silay, Talisay, and Bago and in the Municipalities of Murcia and
Don Salvador Benedicto, all in the province of Negros Occidental.

The electrical distribution in these cities and municipalities is presently handled by
Central Negros Electric Cooperative Inc. (CENECO). CENECO has enjoyed this
privilege for more than forty-seven (47) years, since 1976 when it started operating in
Silay City.

The quality of the service that CENECO has been providing has been wanting. Among
the complaints against CENECO are: power outages, voltage fluctuations, poorly-
maintained lines, inadequate investment in distribution facilities, inordinate delay in
the restoration of power services, overbilling/overcharging, and poor customer
relations, among others.

Bacolod and its adjacent cites and municipalities is oné of the most progressive regions
in the Philippines and its growth is being hindered by the poor service of CENECO.
Understandably, CENECO is subject to certain limitations being an electric
cooperative. It is reliant on funding from limited resources from the government. It
lacks access to modern technology and does not have the entrepreneurial drive to
address managerial, operational and service problems. Unless the steadily increasing
power demand is fully addressed by a reliable, reasonable and efficient power
distributor, the economic growth in the region will be delayed and hindered.

Accepting its own limitations CENECO has agreed to the offer of the Prime Strategic
Group for a joint venture to acquire, rehabilitate, expand and operate the distribution
system in the franchise area. A joint venture agreement (JVA) was agreed and NEPC


NEPC is the sister company of MORE Electric and Power Corporation (MORE Power)
which is the distribution utility in Iloilo City. NEPC was established to engage in the
distribution of electric power to consumers, businesses, institutions, and other users in
the community within its franchise area. NEPC will also be managed and led by the same
management group and technical team behind MORE Power. It is backed up by the
financial resources of the same Group that owns or controls several publicly listed
companies: Bloomberry Resorts Corporation (BLOOM), Manila Water Company, Inc.
(MWC), and Apex Mining Company Inc. (APX). This Group has demonstrated the
amazing capability to turn around the decrepit and neglected distribution system in Iloilo
City and was able to quickly stabilize, rehabilitate, upgrade and expand the operating
capacity and service. Systems loss has been reduced, more than 20,000 new customers
have been added to the consumer base, and the power cost has been brought down in
that area within only two (2) years from its takeover of the decrepit and neglected
distribution facilities. The local government officials in Iloilo City and adjacent city and
municipalities have attested to and endorsed the good deeds and accomplishments of
this Group.

Considering that Negros Electric and Power Corp. possesses the required capability, it is
apt for the Congress to grant Negros Electric and Power Corp. the franchise to acquire,
establish, operate, and maintain, for commercial purposes and in the public interest, a
distribution system for the conveyance of electric power to end users in the Cities of
Bacolod, Silay, Talisay, and Bago and in the Municipalities of Murcia and Don Salvador
Benedicto, all in the province of Negros Occidental.

The Support of the Members of Congress for the prompt and timely passage of this
measure is earnestly sought.

HO] F¥ STEPHEN S. HON. IE DE LEON

FERRER


Republic of the Philippines
House of Representatives
Quezon City

NINETEENTH CONGRESS
Second Regular Session

HOUSE BILLNO.___ 9310

Introduced by:
HON. JOSEPH STEPHEN S. PADUANO, HON. JULIET MARIE DE LEON FERRER
and HON. FRANCISCO B. BENITEZ

AN ACT GRANTING NEGROS ELECTRIC AND POWER CORP. A FRANCHISE TO
ESTABLISH, OPERATE, AND MAINTAIN, FOR COMMERCIAL PURPOSES AND IN
THE PUBLIC INTEREST, A DISTRIBUTION SYSTEM FOR THE CONVEYANCE OF
ELECTRIC POWER TO THE END USERS IN THE CITIES OF BACOLOD, SILAY,
TALISAY, AND BAGO AND THE MUNICIPALITIES OF MURCIA AND DON
SALVADOR BENEDICTO, ALL IN THE PROVINCE OF NEGROS OCCIDENTAL,
AND ENSURING CONTINUOUS AND UNINTERRUPTED SUPPLY OF
ELECTRICITY IN THE FRANCHISE AREA

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

SEC. 1. Nature and Scope of Franchise. - Subject to the provisions of the Constitution and
applicable laws, rules and regulations, there is hereby granted to Negros Electric and
Power Corp., hereunder referred to as the Grantee, its successors or assignees, a franchise
to establish, operate, and maintain, for commercial purposes and in the public interest, a
distribution system for the conveyance of electric power to end users in the Cities of
Bacolod, Silay, Talisay, and Bago and in the Municipalities of Murcia and Don Salvador
Benedicto, all in the province of Negros Occidental.

As used in this Act, distribution system refers to the system of wires and associated
facilities including subtransmission lines belonging to or used by a franchised distribution
utility extending between the delivery point on the national transmission system or
generating facility and the metering point or facility of the end-user.

SEC. 2. Manner of Operation of Facilities. — All electric distribution facilities, lines and
systems for electric services owned, maintained, operated, or managed by the Grantee
shall be operated and maintained at all times in the best manner. It shall be the duty of the
Grantee, its successors or assignees, to continuously improve its facilities and employ the
latest technology and innovations that promote efficiency, and which is beneficial to
consumers. It shall comply with the standards set by the Energy Regulatory Commission
(ERC) such as those found in the Philippine Distribution Code , its resolutions, and other
issuances. The Grantee shall also implement measures required by the ERC, the
Department of Energy (DOE), or their legal successors, or any other government agency
concerned, to modify, improve, upgrade and change such facilities, systems or the
management and maintenance thereof .


30
31
32

34
35
36
37
38
39
40
41
2
4B
44
45
46
47
48
49
50
31
52
33
54
55
56
37
58
59
60
61
62
68
64
65
66
67
68
9
70
7
n
B
4
15
16
7
B
9
80
81
82
83
84
85
86

Whenever practicable and for purposes of maintaining order, safety, and aesthetics along
highways, roads, streets, alleys, or easements, the Grantee may allow the use of its poles,
facilities, or easements by interested parties upon the payment of reasonable compensation
to the Grantee, considering costs incurred to accommodate and administer the use of the
Grantee's facilities by such parties. The ERC shall resolve cases of disputes or
disagreements between and among the parties concerned.

SEC. 3. Authority of the Energy Regulatory Commission. - The Grantee shall secure from the
ERC or any other government agency which has jurisdiction over the operation of the
herein Grantee, the necessary certificate of public convenience and necessity (CPCN) and
other appropriate permits and licenses for the construction and operation of its electric
distribution system.

SEC. 4. Excavation and Restoration Works. — For the purpose of erecting, maintaining poles
and other supports for wires or other conductors for the laying and maintaining of
underground wires, cable, pipes or other conductors , the Grantee, its successors or
assignees, is authorized to make excavations or lay conduits in any of the public places,
roads, highways, streets, lanes, alleys, avenues, sidewalks, or bridges of said province,
cities and/or municipalities, subject to prior approval of the Department of Public Works
and Highways (DPWH) or the relevant local government unit (LGU) concerned, Provided,
however, That any public place, road, highway, street, lane, alley, avenue, sidewalk, or
bridge disturbed, altered, or changed by reason of the erection of poles or other supports
or the underground laying of wires, other conductors or conduits, shall be repaired or
replaced in a workmanlike manner at the expense of the Grantee, its successors or
assignees, in accordance with the standards set by the DPWH or the relevant LGU
concerned. Should the Grantee, its successors or assignees, after the ten- (10) day notice
from the said authority, fail, refuse or neglect to repair or replace any part of a public place,
road, highway, street, lane, alley, avenue, sidewalk, or bridge that has been disturbed,
altered, or changed by the said Grantee, its successors or assignees, then the DPWH or the
relevant LGU concerned shall have the right to have the same repaired or replaced in good
order and condition and charge the Grantee, its successors or assignees, at double the
amount of the costs and expenses incurred for such repair or replacement.

SEC. 5. Responsibility to the Public. — The Grantee shall supply electricity to its captive
market in the urban and rural portions of its franchise area in the least costly manner. In
the interest of the public good and as far as feasible and whenever required by the ERC,
the Grantee shall modify, improve, or change its facilities, poles, lines, systems, and
equipment for the purpose of providing efficient and reliable service and reduced
electricity costs. The Grantee shall charge reasonable and just power rates for its services
to all types of consumers within its franchise area.

The Grantee is required to source and procure its power requirements in accordance with
the applicable rules and resolutions of the ERC: Provided, That, the Grantee, immediately
after the enactment of this Act, may be allowed to avail of the negotiated procurement of
emergency power supply under the applicable circulars, rules, or regulations issued by the
DOE or the ERC, or their legal successors, allowing emergency procurement: Provided
further, That, such emergency contracts, shall only be for a period of one (1) year and the
rates must not be higher than the latest ERC-approved generation tariff for the same or
similar technologies in the area.

The Grantee shall have the obligation to provide open and non-discriminatory access to its
distribution system and services to any end user within its franchise area consistent with
Republic Act No. 9136, otherwise known as the “Electric Power Industry Reform Act of
2001.” The Grantee shall not engage in any activity that will constitute an abuse of market
power such as unfair trade practices, monopolistic schemes, and any other activities that
will hinder competitiveness of businesses and industries.


87
88
89

91

92

93

94

95

96

97

98

99
100
101
102
103
104
105
106
107
108
109
110
Mt
112
113
114
115
116
117
118
119
120
121

123
124
125
126

143

SEC. 6. Rates for Service. — The retail rates and charges for the distribution of electric power
by the Grantee to its end users shall be regulated by and subject to the approval of the ERC
or its legal successor.

The Grantee shall identify and itemize the components of its retail rate, pursuant to RA No
9136, in the statements of account it issues to its end users. Such rates charged by the
Grantee shall be made public and transparent. The Grantee shall implement a lifeline rate
to marginalized end users, as mandated by RA No. 9136.

The Grantee shall strictly comply with the systems loss cap prescribed by the ERC, subject
to the transition provisions under Section 17 of this Franchise.

SEC. 7. Protection of Consumer Interests. ~ The Grantee shall establish a customer desk that
will handle consumer complaints and ensure adequate protection of consumer interests.
The Grantee shall act with dispatch on all such complaints brought before it.

The Grantee shall reduce the duration and frequency of interruptions in its network and
in that regard shall observe the System Average Interruption Frequency Index (SAIFI) and
System Average Interruption Duration Index (SAIDI) imposed by the ERC.

SEC. 8. Election of Independent Directors. - The Board of the Grantee shall have independent
directors constituting at least twenty percent (20%) of its total membership. These directors
must be elected by a majority of the outstanding shares entitled to vote.

An independent director is a person who, apart from shareholdings and fees received from
the corporation, is independent of management and free from any business or other
relationship which could or could reasonably be perceived to materially interfere with the
exercise of independent judgment in carrying out the responsibilities as a director.

SEC. 9. Right of the Government. — A special right is hereby reserved to the President of the
Philippines, in times of war, rebellion, public peril, calamity, emergency, disaster or
disturbance of peace and order, to temporarily take over and operate the distribution
system of the Grantee, to temporarily suspend the operation of any station or facility in the
interest of public safety, security and public welfare, or to authorize the temporary use and
operation thereof by any agency of the government, upon the payment of due
compensation to the Grantee for the use of said distribution system during the period
when it shall be so operated.

SEC. 10. Right of Eminent Domain. — Subject to the limitations and procedures prescribed
by law, the Grantee is authorized to exercise the power of eminent domain insofar as it
may be reasonably necessary for the efficient establishment, improvement, upgrading,
rehabilitation, maintenance and operation of its services. The Grantee is authorized to
install and maintain its poles, wires, and other facilities over, under and across public
property, including streets, highways, parks, and other similar properties of the
Government of the Philippines, its branches, or any of its instrumentalities. The Grantee
may acquire such private property as is actually necessary for the realization of the
purposes for which this franchise is granted, including but not limited to poles, wires,
cables, transformers, switching equipment and stations, buildings, infrastructure,
machineries and equipment previously, currently or actually used, or intended to be used,
or have been abandoned, unused or underutilized, or which obstruct its facilities, for the
operation of a distribution system for the conveyance of electric power to end users in its
franchise area; Provided, That proper expropriation proceedings shall have been instituted
and just compensation paid.

Provided, Further, That upon the filing of the petition for expropriation, or at any time
thereafter, and after due notice to the owner of the property to be expropriated and the
deposit with the relevant court that has jurisdiction over the franchise area of the full


144
145
146
147
148
149

151
152
153
154
155
156
157
158
159
160
161
162
163

165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200

amount of the assessed value of the property or properties, the Grantee shall be entitled to
immediate possession, operation, control, use and disposition of the properties sought to
be expropriated, including the power of demolition if necessary, notwithstanding, the
pendency of other issues before the court, including the final determination of the amount
of just compensation to be paid. The court may consider the tax declarations, current
audited financial statements and rate-setting applications of the owner or owners of the
property or properties being expropriated in order to determine their assessed value.

SEC. 11. Term of the Franchise. — This franchise shall be for a term of twenty-five (25) years
from the effectivity of this Act, unless sooner canceled or revoked. This franchise shall be
deemed ipso facto revoked in the event that the Grantee fails to operate continuously for
two (2) years from approval of the CPCN.

SEC. 12. Renewal, Extension or Revocation of Franchise. - The Grantee shall apply for the
renewal or extension of its franchise five (5) years before its expiration date which shall be
reckoned fifteen (15) days after the publication of the franchise in the Official Gazette or in
a newspaper of general circulation, whichever comes earlier.

This franchise may be revoked by Congress when the public interest so requires or when
the Grantee fails to reasonably comply with regulatory standards.

SEC. 13. Warranty in Favor of the National and Local Governments. - The Grantee shall hold
the national, provincial, city, and municipal governments of the Philippines free from all
claims, liabilities, demands, or actions arising out of accidents that cause injury to persons
and damage to properties, during the construction, installation, operation, and
maintenance of the distribution system of the Grantee.

SEC. 14. Liability for Damages. - The Grantee shall be liable for any injury to persons and
damage to property arising from or caused by any accident arising from any defective
construction of any infrastructure built pursuant to the operation of its business under this
franchise, or by any neglect or failure to keep its poles and wires in safe condition.

SEC. 15. Sale, Lease, Transfer, Grant of Usufruct, or Assignment of the Franchise. —The Grantee
shall not sell, lease, transfer, grant the usufruct of, nor assign this franchise or the rights
and privileges acquired thereunder to any person, firm, company, corporation or other
commercial or legal entity, nor merge with any other corporation or entity, nor shall
transfer the controlling interest of the Grantee, whether as a whole or in part, and whether
simultaneously or contemporaneously, to any person, firm, company, corporation, or
entity without the prior approval of the Congress of the Philippines and in compliance
with legal requirements stipulated in other statutes; Provided, That, during the period
before the dispersal of its ownership under Section 16, the Grantee shall notify Congress
in writing of any sale, or transfer of its shares that is less than the controlling interest;
Provided, Further, That the failure to report to Congress such change of ownership shall be
a ground for revocation of this franchise; Provided, Furthermore, That the limitations set
forth in this section shall not apply to: (a) any transfer or issuance of shares of stock in the
implementation of the requirement for the dispersal of ownership in the Grantee pursuant
to Section 16 of this Act; and (b) any sale, transfer, or assignment of shares of the Grantee
in favor of an affiliate whose controlling interest is owned by the same parent corporation
of the Grantee: Provided, Finally, That any such transfer, sale, or issuance is in accordance
with any applicable constitutional limitations.

Any person or entity to which this franchise is sold, transferred or assigned to shall be
subject to the same conditions, terms, restrictions, and limitations of this Act.

SEC. 16. Dispersal of Ownership. - In accordance with the constitutional provision to
encourage public participation in public utilities, the grantee shall offer to the public,
specifically Filipino citizens, at least twenty percent (20%) or a higher percentage that may



201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248

250
251
252
253
254
255
256
257

hereafter be provided by law of its outstanding capital stock in any securities exchange in
the Philippines within five (5) years from the grant of its CPCN by the ERC; Provided, That
in cases where a public offer of shares is not applicable, 209 other methods of encouraging
public participation by citizens and corporations operating public utilities must be
implemented; Provided that ownership by Central Negros Electric Cooperative, Inc.
(‘CENECO") or its successor cooperative or corporation of at least twenty percent (20%)
of the outstanding capital stock of the Grantee shall be deemed a compliance with the
dispersal of ownership requirement.

In the event the required dispersal of ownership is not implemented within five (5) years
from the grant of its CPCN, the holdings of persons, natural or juridical, including
directors, officers, stockholders, and related interests in the Grantee and its respective
holding company, if any, shall not exceed twenty-five percent (25%) of the voting shares
of stock, unless the utility or the company holding the shares or its controlling stockholders
are already listed in the Philippine stock exchange, Provided, that, the ERC may, upon
application of the Grantee, and after notice and hearing, allow such reasonable extension
of the five- (5-) year period within which the Grantee should offer its shares of stock to the
public, if the market conditions are not suitable for such listing or in the event that the
Grantee cannot comply with the requirements of the Securities and Exchange Commission
(GEC) or the Philippine Stock Exchange (PSE) for a public offering, such as, but not limited
to, meeting the three- (3-) year profitability requirement.

Non-compliance therewith shall render the franchise ipso facto revoked.

SEC. 17. Transition of Operations. ~ In the public interest and to ensure uninterrupted supply
of electricity, the current operator, CENECO, shall continue to operate the existing
distribution system within the franchise area as well as implement its existing power
supply agreements with generation companies that have been provisionally or finally
approved by the ERC until the acquisition by the Grantee of ownership of its own
distribution system and its complete transition towards full operations as determined by
the ERC which period shall in no case exceed two (2) years from the grant of this franchise.

The Grantee shall source its initial power requirements from the existing power supply
contracts of CENECO at the rates duly approved by the ERC for such power supply
contracts, subject to applicable rules and regulations of the ERC and the DOE. The Grantee
shall renegotiate such power supply contracts to reduce the generation costs.

To reduce the length of the transition period, ERC and all agencies issuing the requisite
licenses shall prioritize all applications relevant to the transfer and operation of the
distribution system under this franchise.

The Grantee shall, as far as practicable and subject to required qualifications, accord
preference to hiring qualified former employees of CENECO upon the commencement of
business operations.

‘An information dissemination campaign in the franchise areas regarding public services
and operations of the Grantee shall be made to all end-users in the franchise area.

The Grantee and CENECO shall jointly ensure that all employees terminated by CENECO
shall receive all separation and/or retirement benefits they are entitled to in accordance
with applicable laws and any valid collective bargaining agreement between CENECO
and its employees.

The DOE shall, during the transition, ensure that there will be an uninterrupted supply of
electricity in the existing 261 franchise area.


258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296
297
298
299
300
301
302
303
304
305
306
307
308
309

310
311

312
313
314
315

The applicable systems loss cap that will apply to the Grantee during the first year from
the grant of its CPCN shall be the same systems loss cap prescribed by the ERC for
CENECO, Provided, that on each succeeding anniversary date of the grant of the CPCN
until the fourth (4th) anniversary date, the systems loss cap shall be reduced by one-half
of one percent (0.5%) per year, Provided, Further, that on the fifth (6th) anniversary date,
the systems loss cap shall be that which is prescribed by the ERC for private distribution
utilities.

SEC. 18. Commitment to Provide and Promote the Creation of Employment Opportunities. - The
Grantee shall create employment opportunities and shall allow on-the-job trainings in
their franchise operations: Provided, That priority shall be accorded to the residents of the
franchise area: Provided, Further, That the Grantee shall follow the applicable labor
standards and allowance entitlement under existing labor laws, rules and regulations and
similar issuances: Provided, Finally, That the employment opportunities or jobs created
shall be reflected in the General Information Sheet (GIS) to be submitted to the SEC
annually.

SEC. 19. Reportorial Requirement. - The Grantee shall submit an annual report to the
Congress of the Philippines, through the Committee on Legislative Franchises of the
House of Representatives and the Committee of Public Services of the Senate, on its
compliance with the terms and conditions of the franchise and on its operations on or
before April 30 of the succeeding year.

The annual report shall include an update on the rollout, development, operation and/or
expansion of the business; audited financial statements; latest GIS officially submitted to
the SEC (if available or applicable), certification from the ERC on the status of its permits
and operations; and an update on the dispersal of ownership undertaking, if applicable.

A reportorial compliance certificate issued by Congress shall be required before any
application for permit or certificate is accepted by the ERC.

The ERC shall, one (1) year from the grant of this franchise and every five (5) years
thereafter, conduct a comprehensive assessment on the Grantee's operations and
compliance with the conditions imposed hereunder and shall submit a report thereof to
Congress. The Grantee shall submit to the ERC all information and documents necessary
to complete such assessment.

SEC. 20. Fine. - Failure of the Grantee to submit the requisite annual report to Congress
shall be penalized by a fine of Five Hundred Pesos (Php500.00) per working day of
noncompliance. The fine shall be collected by the ERC from the Grantee separate from the
reportorial penalties imposed by the ERC and the same shall be remitted to the National
Treasury.

SEC. 21. Equality Clause. - Any advantage, favor, privilege, exemption, or immunity
granted under existing franchises, or which may hereafter be granted to power distribution
franchises, upon prior review and approval of Congress, shall become part of this franchise
and shall be accorded immediately and unconditionally to the herein Grantee: Provided,
That the foregoing shall neither apply to nor affect provisions concerning territorial
coverage, the term, or the type of service authorized by the franchise.

SEC 22. Applicability of Existing Laws. - The Grantee shall comply with and be subject to the
relevant provisions of Commonwealth Act No. 146, or the “313 Public Service Act” as
amended, and Republic Act No. 9136.

SEC. 23. Repealability and Non-Exclusivity Clause. ~ This franchise shall be subject to
amendment, alteration, or repeal by the Congress of the Philippines when the public
interest so requires and shall not be interpreted as an exclusive grant of the privileges
herein provided for.


316
317
318
319
320
321
322
323
324
325
326
327

SEC. 24. Separability Clause. - If any of the sections or provisions of this Act is held invalid,
all other provisions not affected thereby shall remain valid.

SEC. 25. Repealing Clause - All laws, decrees, orders, resolutions, instructions and rules
and regulations or parts thereof, which are inconsistent with this Act, are hereby deemed
repealed or modified accordingly.

SEC. 26. Effectivity. - This Act shall take effect fifteen (15) days after its publication in the
Official Gazette or in a newspaper of general circulation.

Approved