Republic of the Philippines 
1 
Fivst Regulav Session 
1 
FOURTEENTH CONGRESS 
} 
S E N A T E  
Bill No. 924 0 
Introduced by Senator FRANCIS G. ESCUDERO 
EXPLANATORY NOTE 
Natural gas is considered by many modern economies as the fuel of 
choice because of its abundance, clean-burning properties and versatility as a 
fuel source. Wkh the successful launching of the Malampaya Deep Water 
Gas-to-Power Project on October 16, 2001 marked the birth of the country's 
natural gas industry. The Malampaya gas field discovery signaled a 
significant leap towards energy self-reliance as it now fuels about one-third of 
the country's total power generation. A total of 2700 MW of installed capacity 
of gas-fired power plants make use of the natural gas produced from 
Malampaya. 
Aside from the use of natural gas for power generation, alternative 
applications in the transport sector is also being pursued. The launching by 
President Gloria Macapagal-Arroyo of the Natural Gas Vehicle Program for 
Public Transport (NGVPPT) on October 16,2002 served as a banner program 
for the use of natural gas in the transport sector. 
Following the inauguration of the Malampaya Deep Water Gas-to- 
Power Project, government advocacy has been initiated to create an impetus 
to the development of the country's downstream natural gas industry. These 
are the (i) signing on January 18,2002 by President Gloria Macapagal-Arroyo 
of Executive Order No. 66 designating the Department of Energy (DOE) as 
the lead agency for the development of the country's natural gas industry; 
and (ii) issuance on August 27, 2002 by the DOE of the interim rules and 
regulations governing the transmission, distribution and supply sub-sectors 
of the natural gas industry. 
However, both issuances are not sufficient to impart a clear, 
comprehensive and integrated regulatory framework that will provide 
direction and to accelerate the development of the country's nascent 
downstream natural gas sector. 
As dynamic developments are taking place in this very young sector, it 
is imperative that conditions favorable to the establishment of the critical 
infrastructure and natural gas market are put in place to optimize economic 
efficiency and returns from the downstream natural gas industry. 


The foregoing premises thus necessitate the immediate passage of the 
Natural Gas Bill 
FRANCIS G. ESCUDERO 
2 


Republic of the Philippines 
1 
FOURTEENTH CONGRESS 
1 
First Regular Session 
1 
S E N A T E  
~~ 
~ 
~ 
Introduced by Senator FRANCIS G. ESCUDERO 
AN ACT 
ORDAINING THE DEVELOPMENT OF THE DOWNSTREAM NATURAL GAS 
INDUSTRY, CONSOLIDATING FOR THE PURPOSE ALL LAWS RELATING TO 
THE TRANSMISSION, DISTRIBUTION AND SUPPLY OF NATURAL GAS AND 
FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
CHAPTER I 
TITLE AND DECLARATION OF POLICY 
SECTION 1. Short Title. - This Act shall be known as the "Downstream Natural 
Gas lndusty Development Act". 
SEC. 2. DecZaration of PoZiq. - It is hereby declared the policy of the State: 
(a) 
To promote the role of natural gas as a socially-acceptable, 
environment-friendly and economically efficient source of energy by creating favorable 
conditions for establishing a Downstream Natural Gas Industry for the benefit of all 
segments of the nation's population and all sectors of its economy; 
(b) 
To ensure the safety, quality, reliability and security of the 
transmission, distribution and supply of natural gas; 
(c) 
To ensure transparent and reasonable rates and prices of natural 
gas transmission, distribution and supply in a regime of open and fair competition and 
full public accountability that will promote greater operational and economic efficiency 
and the enhanced competitiveness of Philippine products in the global market; 
(d) 
To encourage the inflow of private capital in providing the 
infrastructure and services necessary to support an expanded role of natural gas in the 
nation's energy supply; 


(e) 
To protect the public interest as it is affected by the quality of, and 
rates charged for, the transmission, distribution and supply of natural gas and related 
services; 
(f) 
To assure the development of a Downstream Natural Gas 
Industry infrastructure that is socially-acceptable and compliant with existing 
environmental laws; 
(8) 
To ensure that the Downstream Natural Gas Industry shall be 
regulated in a manner that will ensure the quality, reliability, security and 
reasonableness of charges for the transmission, distribution and supply of natural gas, 
encourage private investment in the Downstream Natural Gas Industry and promote 
the efficient and competitive operation thereof; 
(h) 
To develop the necessaly trades, technical expertise and skills to 
support the Downstream Natural Gas Industry; 
(i) To facilitate the development of end-uses of natural gas that 
promotes fuel diversity and compliance with existing environmental laws including, 
but not limited to, the use of natural gas as a motor vehicle fuel; and 
0) 
' 
To encourage equity participation in gas transmission utilities and 
gas distribution utilities by the private sector. 
SEC. 3. Scope. - This Act shall provide a framework for the development of a 
Downstream Natural Gas Industry and its transition from an emerging to a mature 
industry status and competitive natural gas market, and define the responsibilities of 
various government agencies and private entities in furtherance of this national goal. 
All activities of the Department of Energy (DOE) and the Energy 
Regulatory Comniission (ERC) relevant to the development and regulation of the 
Downstream Natural Gas Industry shall be in accordance with this Act. 
SEC. 4. Dejnition ofTerms. - As used in this Act, the following terms shall have the 
following meanings: 
(a) "Captive market": 
with respect to the transmission of natural gas, refers to natural gas end-users 
who do not have a choice of a gas transmission utility; 
with respect to the distribution of natural gas, refers to natural gas end-users 
who do not have a choice of a gas distribution utility; 
2 


with respect to the supply of natural gas, refers to natural gas end-users who do 
not have a choice of supplier of natural gas or other economically competitive energy 
substitute; 
(b) "Congress" refers to the Congress of the Republic of the Philippines; 
(c) "Contestable market" is a market that is not a captive market; 
(d) "Delivery" refers to the transmission or distribution of natural gas and the 
supply of natural gas, at wholesale or retail; 
(e) "Department of Energy" or "DOE" refers to the government agency created 
pursuant to Republic Act No. 7638, as amended; 
(f) "Department of Environment and Natural Resources" or "DENR" refers to the 
government agency created pursuant to Executive Order Nos. 192 and 292, as amended; 
(9) "Distribution" refers to the conveyance of natural gas by a gas distribution 
utility through its gas distribution system; 
(h) "Downstream Natural Gas Industry" refers to the transmission, distribution 
and supply of natural gas and related activities, such as, but not limited to, processing, 
storing, regasification, interconnection, measurement and/or metering; 
(i) "End-user" refers to any person that will receive delivery of natural gas for its 
own use; 
(j) "Energy Regulatory Commission" or "ERC" refers to the independent quasi- 
judicial regulatory agency created pursuant to Republic Act No. 9136, otherwise known 
as the "Electric Power Industry Reform Act of 2001", whose expanded functions are 
provided in this Act; 
(k) "Franchi&" refers to the right, privilege and authority issued by Congress 
authorizing a person to engage in the transmission of natural gas and/or distribution of 
natural gas within a specific geographical area; 
(1) "Franchise area" refers to a geographical area assigned or granted under a 
franchise: 
3 


(m)”Gas Distribution Code” refers to the code to be formulated by the DOE 
pursuant to Section 5(g) of this Act that sets the technical performance standards for 
operating gas diskibution utilities and the minimum financial standards for gas 
distribution systems; 
(n) “Gas distribution system” refers to the system of pipelines and related facilities 
extending from the delivery points where the gas distribution system receives the 
natural gas to the point of connection to the premises of the end-user; 
(0) ”Gas distiibution utility” refers to any person that has a franchise to operate a 
gas distribution system; 
(p) ”Gas supply contract” refers to a contract between a supplier and a purchaser 
for the supply of natural gas; 
(4 ”Gas Transmission Code” refers to the code to be developed by the DOE 
pursuant to Section 5(g) of this Act that sets the technical performance standards for 
operating gas transmission systems and the minimum financial standards for gas 
transmission utilities; 
(r) “Gas transmission system” refers to the system of high pressure pipelines, 
storage and related facilities that are used to transport natural gas from the 
interconnection with gathering facilities, liquefied natural gas (LNG) regasification 
facilities or other ,gas transmission systems to gas distribution systems, other gas 
transmission systems or end-users; 
(s) ”Gas transmission utility” refers to any person that has a franchise to operate 
or intending to operate a gas transmission system except own-use pipelines; 
(t) ”Gathering facilities” refers to natural gas pipelines and related facilities used 
to gather gas in the field and bring it to a location for processing or for delivery at an 
interconnection with the gas transmission system. The terms ”gather” and ”gathering” 
shall be construed accordingly; 
(u) ”Infrastructure development period” refers to the period prescribed in Chapter 
IV of this Act; 
4 


(v) "Joule" refers to the unit of energy or work done when the point of application 
of a force of one Newton is displaced a distance of one meter in the direction of the 
force. It is also equal to one watt-second; 
(w)"Large end-user" refers to an end-user whose aggregate annual natural gas 
consumption is one thousand (1,000) gigajoules (gross heating value) or greater, as may 
be determined by the ERC; 
(x) "LNG' refers to liquefied natural gas"; 
(y) "Natural gas" refers to hydrocarbons, obtained initially from sub-surface 
reservoirs, primarily methane, which, at atmospheric temperature and pressure, is in a 
gaseous phase. The term "natural gas" shall include LNG; 
(z) "Permit? refers to an authorization issued by the DOE, initially, for the 
construction, operation, expansion and modification of gas transmission systems, gas 
distribution systems and for the supply of natural gas; 
(aa) "Person" refers to a natural or juridical person, as the case may be, including 
the national and lqcal government of the Republic of the Philippines, its agencies and 
instrumentalities, and government-owned and 
-controlled corporations; 
(bb) "Petroleum operations" refers to searching for and obtaining petroleum 
within the Philippines through drilling and pressure or suction or the like, and all other 
operations incidental thereto. It includes the transportation, storage, handling and sale 
(whether for export or for domestic consumption) of petroleum so obtained but does 
not include any: (1) transportation of petroleum outside the Philippines; (2) processing 
or refining at a refinery; or (3) any transaction in the products so refined; 
(cc) "Philippine Energy Plan" or "PEP" refers to the overall energy program 
formulated and updated yearly by the DOE and submitted to Congress pursuant to 
Republic Act No. 7638, as amended; 
(dd) "Service contract" refers to the award granted by the Philippine government 
to a qualified person to engage in the exploration, development and utilization of 
natural resources *rough joint venture, co-production, production-sharing or other 
similar arrangement with the State pursuant to Article XII, Section 2 of the Constitution, 
including service contracts under Presidential Decree No. 87, as amended; 
5 


(ee) ”Supplier” refers to any person authorized by the DOE, initially, to engage in 
the supply of natural gas; 
(ff) ”Supply” refers to the domestic trading and/or sale of natural gas for 
wholesale or retail; 
(gg) “Transmission” refers to the transportation of natural gas through a gas 
transmission system; and 
(hh) ”Unbundled service” refers to the pricing of the energy value of natural gas 
separately from the rates charged for natural gas transmission or distribution. 
CHAFTER I1 
POWERS AND FUNCTIONS OF THE DOE AND THE ERC 
SEC. 5.Pou~ers and Functions of the DOE. - In addition to its existing powers and 
functions, the DOE shall have the overall responsibility of supervising and monitoring 
the development of the Downstream Natural Gas Industry and regulation of the 
construction and operation of natural gas pipelines and related facilities for the 
transmission, distribution and supply of natural gas. Towards this end, the DOE shall 
have the following-powers and functions: 
(4 
Prepare and periodically update a Downstream Natural Gas 
Industry Development Plan (DNGIDP) and integrate the same into the PEP. The 
DNGIDP shall consider and integrate the individual or joint development plans of the 
Downstream Natural Gas Industry participants pursuant to this Act, which are 
submitted to the DOE. Appropriate mechanisms shall be provided to protect the 
confidentiality of any information that is commercially or competitively sensitive. The 
DOE shall publish an initial draft of the plan and undertake public consultations 
thereon prior to its adoption; 
(b) 
, 
Issue permits for the construction, operation and maintenance of 
pipelines and related facilities for the transmission, distribution and/or supply of 
natural gas; 
(c) 
.. 
Establish standards setting forth the characteristics for classifying 
pipeline and pipeline-related facilities either as gas transmission systems or gas 
distribution systems. These characteristics may include both the physical characteristics 
related to the diameter, size and pressure of pipeline facilities, and the functional 
characteristics of such facilities; 
6 


(4 
Before the end of April of each year, submit to the Office of the 
President and Congress an annual report; 
(4 
Ensure the safety, reliability, quality and security of supply of 
natural gas. Consistent with the development of the Downstream Natural Gas Industry, 
the DOE shall, among others: 
(i) 
Encourage private sector investments in the Downstream 
Natural Gas Industry and promote the development of domestic markets for natural 
gas; 
(ii) 
In consultation with the Downstream Natural Gas 
Industry participants and other government agencies, promote a system of incentives to 
encourage industry participants, including new producers and end-users, to provide 
adequate and reliable supply of natural gas; and 
(iii) 
Undertake, in coordination with other governmental 
agencies, as appropriate, an information campaign to educate the public on the benefits 
of developing the Downstream Natural Gas Industry and the potential for utilizing 
natural gas as a source of energy. 
(0 
Within six months from the effectivity of this Act, develop plans 
and programs to encourage market development and customer choice; 
(9) 
Within twelve (12) months from the effectivity of this Act, the 
DOE shall, preparatory to the holding of public consultations with the Downstream 
Natural Gas Industry participants, draft the Gas Transmission and Distribution Codes 
which shall contain, among others, the following: 
(i) 
Technical performance standards for gas transmission and 
distribution utilities: Provided, That in the establishment of the performance standards, 
the nature and function of the entities shall be considered; and 
(ii) 
Minimum financial capability 
standards 
for 
gas 
transmission and distribution utilities: Puovided, That such standards are set to ensure 
that the Downstream Natural Gas Industry participants meet the minimum financial 
standards to protect the public interest. 
Within eighteen (18) months from the effectivity of this 
Act, the DOE shall, in consultation with the Downstream Natural Gas Industry 
participants, issue the final Gas Transmission and Distribution Codes. 
-ih) 
By order, revoke, after due notice and hearing, the permit of any 
person that fails to comply with the rules and regulations promulgated pursuant to this 
Act, the Gas Transmission Code, the Gas Distribution Code, or any requirement of this 
Act. The DOE shall allow such persons sufficient time to remedy the violation of or for 
an orderly disgorgbment, when applicable, but in no case shall such remediation period 
exceed twelve (12) months from the date of issuance of the order; 


(i) 
Encourage private enterprises in the Downstream Natural 
Gas Industry to broaden their ownership base and promote widest public ownership 
thereof; 
0) 
Formulate, in consultation with the Downstream Natural Gas 
Industry participants, the rules and regulations as may be necessary to implement the 
objectives of this Act; 
(k) 
Exercise original and exclusive jurisdiction over all cases 
contesting permits, nonprice regulation, fees, fines and penalties imposed by it in the 
exercise of the abovementioned powers and functions; and 
(I) . Exercise such other powers and functions as may be necessary or 
incidental to attain the objectives of this Act. 
Subject to existing rules and regulations, the DOE is hereby authorized to create 
offices and appoint personnel thereto as may be necessary to efficiently and effectively 
perform its functions as stipulated in this Act. 
SEC. 6.Pozvers and Functions of the ERC. - In addition to its existing powers and 
functions, the ERC shall have the sole regulatory responsibility for establishing the rates 
and related terms and conditions of service for the transmission, distribution and 
supply of natural gas to the extent that such activities are regulated pursuant to the 
requirements set forth in this Act. It shall: 
(a) 
Within one year from the effectivity of this Act, promulgate, upon 
due notice and public consultation, rules and regulations to promote competition and 
prohibit/penalize abuse of market power, cartelization and any anti-competitive or 
discriminatory behavior, in order to further the intent of this Act and protect the public 
interest. Such rules and regulations shall: 
(i) 
Define the relevant product and geographic markets for 
purposes of establishing anti-competitive conduct; 
(ii) 
Provide criteria to determine the relevant market 
structure; and 
(iii) 
Establish the periodic reportorial requirements of the 
Downstream Natural Gas Industry participants as may be necessary to enforce the 
provisions of this section. 
(b) 
In the public interest, establish and enforce a methodology for 
setting transmission, distribution and supply rates, taking into account all relevant 
Considerations, including the efficiency or inefficiency of the regulated entities. The 
rates must be such.as to allow the recovery of just and reasonable costs and a reasonable 
return to enable the entity to operate viably. The ERC may, upon due notice and public 
consultation, adopt internationally accepted rate setting methodology. The rate setting 
8 


methodology so adopted and applied shall promote efficiency and ensure a reasonable 
price or tariff. The rates prescribed shall be nondiscriminatory; 
(4 
Apply 
administrative procedures that will ensure the 
constitutional right to due process; 
(4 
Before the end of April of each year, submit to the Office of the 
President of the Philippines and Congress, copy furnished the DOE, an annual report 
containing such matters or cases which have been filed before or referred to it during 
the preceding year, the actions and proceedings undertaken and its decision or 
resolution in each case. The ERC shall make copies of such report available to any 
interested party upon payment of a charge which reflects the printing costs; 
(4 
Publish in newspapers of general circulation all its decisions 
invoIving rates and anticompetitive cases; and . 
0 
Exercise such other powers as may be necessary or incidental to 
attain the objectives of this Act. 
Subject to existing rules and regulations, the ERC is hereby authorized to create 
offices and appoint personnel thereto as may be necessary to efficiently and effectively 
perform its functions as stipulated in this Act. 
CHAPTER I11 
ORGANIZATION AND OPERATION OF THE DOWNSTREAM 
NATURAL GAS INDUSTRY 
SEC. 7. Organization. - For purposes of this Act, the Downstream Natural Gas 
transmission of natural gas, 
Industry shall be divided into three sectors, namely: 
distribution of natural gas and supply of natural gas. 
SEC. 8.Regulation of 
Transmission, Distribution and Supply Sectors. - The 
transmission, distribution and supply of natural gas are businesses affected with public 
interest and the regulation of these businesses as provided for in this Act is hereby 
deemed necessary in the public interest. 
SEC. 9. Franchise Requirement. - 
(a) 
Transmission and distribution of natural gas declared public 
utility operations. - The transmission and distribution of natural gas as provided for in 
this Act are hereby declared to be public utility operations, requiring a franchise; 
(b) 
Franchise. - Any person that seeks to operate for commercial 
purposes a gas transmission system or gas distribution system shall be required to 
obtain a franchise, any law to the contrary notwithstanding. The franchise requirement 
shall apply with respect to all gas transmission systems and gas distribution systems, 
9 


regardless of the size or pressure of the pipeline. The foregoing, notwithstanding, this 
franchise requirement shall not apply to: 
(i) 
Holders of 
service contracts which authorizes the 
construction and operation of facilities for the transmission of natural gas only to the 
extent that such facilities are: (1) for own use; (2) used to transport natural gas from the 
point of extraction or production to the processing or gathering facility; and (3) used to 
provide service to existing customers or such person under a gas supply contract 
entered into prior to the effectivity of this Act, which gas supply contract shall not be 
affected by &e enactment of this Act. 
However, the operation of any pipeline facility used to 
serve or deliver nahral gas to third persons, whether or not such facility was, prior to 
such operation, previously utilized only as a gathering facility, shall require a franchise. 
(ii) 
Operators of pipeline facilities to transport natural gas for 
their own use: Provided, hozuever, That such operators shall secure a permit from the 
DOE as provided herein; and 
(iii) 
Operators of 
related facilities that are operated 
independently from the pipeline. 
The franchise so granted shall include a provision that shall honor and protect the 
forty percent (40%) share of local government units (LGUs) from the proceeds of the 
gross collection derived by the national government from its share in any co- 
production, joint venture or production-sharing agreement in the utilization and 
development of the national wealth within their territorial jurisdiction, pursuant to 
Article X, Section 7 of the Constitution and Section 290 of Republic Act No. 7160, 
otherwise known qs the Local Government Code of 1991, as amended. The share of the 
LGU concerned shall be included automatically in the General Appropriations Act 
following the year the revenue was generated. 
(c) 
Prior regulatory approvals. - The grantee of such franchise shall 
also be required to secure from the DOE a permit as provided herein, and to secure 
from the appropriate government agencies all other regulatory approvals, licenses, 
permits and authorizations applicable to such grantee under existing laws. The DOE 
shall not unreasonably withhold or delay the grant of any permit, and may not reopen 
any legislative determination in the review and grant of any franchise. 
SEC. 10.PhiZippine Ownership Requirement. - As required under Article XII, Section 
11 of the Constitution of the Republic of the Philippines, no franchise, certificate, or any 
other form of authorization of a public utility shall be granted except to citizens of the 
Philippines or to- corporations or associations organized under the laws of the 
Philippines at leastsixty percent (60%) of whose capital is owned by such citizens. 
10 


SEC. 11.Third Pavty Access. - 
(a) 
Third Party Access Obligation. - Gas transmission systems and 
gas distribution systems excluding those constructed and operated for own use or as 
part of gathering facilities of service contractors shall be available for nondiscriminatory 
access by third party users which may include parties to a service contract, suppliers 
and customers, with due regard to the economic viability of the operation of such 
facilities. Such operators shall negotiate in good faith with third party users the 
provisions and terms of access in accordance with the guidelines to be promulgated by 
the DOE; 
(b) . Available Capacity. - Third party access obligations shall apply 
only to the available capacity of the gas transmission systems and gas distribution 
systems as determined by subtracting from the design capacity of the gas transmission 
systems and gas distribution systems the volume of capacity that is: 
(i) 
Used by the owner or operator to serve his own customer; 
and/ or 
(ii) 
Allocated to third parties under transportation contracts. 
Nondiscriminatory third party access shall be available to users by contract with 
the gas transmission or gas distribution utility. 
If the gas transmission or gas 
distribution utility with available capacity refuses service to a user or offers 
discriminatory service, the affected party may request for the intervention of the ERC. 
The gas transmission or gas distribution utility shall be required to file proof that 
capacity was not available when service was denied. 
Gas transmission utilities shall not be obligated to 
undertake, nor may the DOE require, the expansion of an existing gas transmission 
system to serve additional customers or the sizing of a gas transmission system for the 
purpose of increasing capacity to serve load in excess of the load proposed to be served 
by the gas transmission utility. However, in situations where no entity is interested to 
build additional transmission capacity in any franchise area, the DOE may conduct a 
public bidding and award the same to the lowest bidder. 
(c) 
Deferment of Third Party Access Obligation. - As may be 
provided in the permit, the implementation of third party access to gas transmission 
systems and gas distribution systems may be deferred where, upon the determination 
by the DOE:. 
(i) 
It can be demonstrated that such deferment is necessary to 
enable the efficient planning of the infrastructure and aggregation of the initial demand 
11 


necessary to justify investments in the gas transmission systems and gas distribution 
systems; or 
(ii) 
It is in the interest of the customers served by the gas 
transmission system and gas distribution system to ensure stability of supply. 
In either case, the DOE may not defer implementation of 
third party access for a period longer than three years after completion of construction 
in the case of gas transmission systems and five years after completion of construction 
in the case of gas distribution systems: Provided, however, That the deferment period 
may be extended on reasonable grounds. 
(d) 
Approved Access Conditions for Gas Transmission Utilities and 
Gas Distribution Utilities. - Prior to the conduct of negotiations with third parties, a gas 
transmission utility and a gas distribution utility shall request the DOE to approve its 
access conditions in accordance with the third party access guidelines to be 
promulgated by the DOE in consultation with the industry participants. 
SEC. 12.Environmental Protection. - Gas transmission utilities, gas distribution 
utilities and suppliers shall comply with all environmental laws, rules, regulations and 
standards promulgated by the Department of Environment and Natural Resources 
(DENR) and other appropriate governmental agencies. 
CHAPTER I%’ 
DELIVERY INFRASTRUCTURE DEVELOPMENT PERIOD 
SEC. 13.lnfrastrucfure Development Period. - To encourage initial capital investment 
in new infrastructure that is critical for developing a viable Downstream Natural Gas 
Industry, gas transmission utilities and gas distribution utilities shall, during the 
infrastructure development period as set forth herein, be exempted from the ERC 
regulation of rates for the transmission and distribution of natural gas to large end-users 
that have the ability to use alternative fuels in lieu of natural gas in accordance with the 
criteria to be set by the ERC, including the following: 
(a) 
The investment is necessary to develop new sources of gas supply 
or new gas markets; and 
(b) 
The exemption is not detrimental to competition or the effective 
functioning of the relevant geographic or product market, or the efficient functioning of 
the regulated system to which the new infrastructure is connected as determined by the 
DOE. 
Such provision shall also apply to significant increases of capacity 
in existing infrastructure and to any modification of such infrastructure to enable the 
12 


development of new sources of gas supply and new gas markets. The exemption may 
cover aIf or parts of the new infrastructure, the existing infrastructure with sigmficantly 
increased capacity or the modification of the existing infrastructure. 
SEC. 14.Term of Inj?ashzrcture Development Period. - The infrastructure period shall 
be for a 15-year period beginning in a particular franchise area, on the date of 
commencement of operation of the pioneer gas transmission system or gas distribution 
system constructed after the effectivity of this Act: Provided, hozuever, That the expiration 
of the infrastructure development period shall not affect any contract for the 
transmission or distribution of natural gas entered during such period. 
CHAPTER V 
NATURAL GAS TRANSMISSION SECTOR 
SEC. 15.Permit. - No person or entity shall undertake the construction, operation 
and maintenance of a natural gas transmission system unless it has secured a franchise: 
Provided, hoiuever, That for a period not exceeding five years after the effectivity of this 
Act, the DOE may issue a provisional permit with a maximum term of two years, 
renewable twice for a maximum cumulative term not exceeding six years for the 
continued operation of a gas transmission system constructed prior to and in operation 
as of the date of effectivity of this Act: Provided, further, That during the same period, 
the DOE may issue a permit for the expansion, extension or modification of a natural 
gas transmission system. 
The DOE shall issue a public notice of all permit applications and 
afford interested parties reasonable opportunity to comment upon such applications. 
The DOE shall issue a permit upon its determination that the construction, ownership, 
control, installation, operation and maintenance of the gas transmission system would 
be consistent with ;the policy declarations contained in this Act: Provided, hozuever, That 
if a permit is sought for new service that would be provided within the franchise area of 
a gas distribution utility, the DOE shall consider the economic effects of granting such a 
permit upon the gas distribution utility and its customers. 
SEC. 16.Terms and Conditions ofPermits. - In issuing a permit, the DOE shall have 
the power to impose such reasonable terms and conditions as the public interest may 
require. Among such conditions shall be the requirement that the permit holder 
complies in full with the Gas Transmission Code promulgated by the DOE pursuant to 
Section 5(g) of this Act. 
13 


SEC. 17.Fees. - The DOE shall have the authority to prescribe and collect fees and 
charges relating to the issuance and/or review of permits, supervision and regulation of 
gas transmission systems. 
SEC. 18.Abandonment ofGus Transmission Systems. - No holder of a permit for the 
construction, installation, operation or maintenance of a gas transmission system shall 
abandon or withdraw from service any portion of such gas transmission system without 
obtaining prior authorization from the DOE, which determination shall be made within 
one hundred eighty (180) days from the filing of the application for abandonment. Such 
abandonment shall be done in accordance with existing laws. 
SEC. 19.Gas Transmission Code Compliance. - All gas transmission utilities shall 
ensure the safety,- reliability, adequacy, security, stability and integrity of their gas 
transmission systems in accordance with the technical specifications and performance 
standards set forth in the Gas Transmission Code to be promulgated by the DOE. Each 
gas transmission utility shall submit to the DOE a statement of its compliance with such 
technical specifications and performance standards prescribed in the Gas Transmission 
Code. Any gas transmission utility that does not comply with any of the prescribed 
technical specifications or performance standards shall include in such statement of 
compliance an undertaking to comply with said technical specifications and 
performance standards within a reasonable time as may be necessary to ensure safety 
and reliability, or prevent environmental harm. The DOE shall, within sixty (60) days 
upon receipt of such plan, evaluate the same and notify the gas transmission utility 
concerned of its decision thereon. Failure to submit a feasible and credible plan and/or 
failure to implement the same shall serve as grounds for the imposition of appropriate 
sanctions, fines or penalties pursuant to Section 39 of this Act. 
SEC. 2O.ERC Rate Regulation of Gas Transmission Utilities. - Gas Transmission Rate. 
Except as otherwise provided during the infrastructure development period, the ERC 
shall review and approve the rates, charges and other amounts proposed to be charged 
by the gas transmission utilities as provided under Section 33 of this Act. Where such 
rates are applicable to services provided to captive markets, the ratemaking 
methodology to be applied by the ERC shall be based on the principle of full recovery of 
prudent and reasonable costs incurred, including a reasonable return on rate base that is 
consistent with the encouragement of private investment and goal of developing a 
Downstream Natural Gas Industry infrastructure, or such other principles that will 
promote the determination of just and reasonable rates. Where a rate applicant 
14 


successfully demonstrates that its rates will be applicable to contestable markets, the 
ERC shall have the authority to permit negotiated rates. 
CHAPTER VI 
DISTRIBUTION SECTOR 
SEC. 21.Permit. - No person or entity shall undertake the construction, operation 
and maintenance of a natural gas distribution system unless it has secured a franchise: 
Provided, however, That for a period not exceeding five years after the effectivity of this 
Act, the DOE may issue a provisional permit with a maximum term of two years, 
renewable @ice for a maximum cumulative term not exceeding six years for the 
continued operation of a gas distribution system constructed prior to and in operation 
as of the date of effectivity of this Act: Provided, further, That during the same period, 
the DOE may issue a permit for the expansion, extension or modification of a natural 
gas distribution system. 
The DOE shall issue a public notice of all permit applications and 
afford interested parties an opportunity to comment on such applications. The DOE 
shall issue a permit upon its determination that the construction, ownership, control, 
installation, operation and maintenance of the gas distribution systems would be 
consistent with the policy declarations contained in this Act: Provided, however, That if a 
permit is sought for new service that would be provided within the franchise area of 
another gas distribution utility, the DOE shall consider the economic effects of granting 
such a permit upon the gas distribution utility and its customers. 
SEC. 22.Terms and Conditions of Permits. - In issuing a permit, the DOE shall have 
the power to impose such reasonable term and conditions to a permit as the public 
interest may requife. Among such conditions shall be the requirement that the permit 
holder comply in full with the Gas Distribution Code promulgated by the DOE 
pursuant to Section 5(g) of this Act. 
SEC. 23.Fees. - The DOE shall have the authority to prescribe and collect fees and 
charges relating to .the issuance and/or review of permits, supervision and regulation of 
gas distribution systems. 
SEC. 24.Abandonment of Gas Distribution Systems. - No holder of a permit for the 
construction, installation, operation or maintenance of a gas distribution system shall 
abandon or withdraw from service any portion of such gas distribution system without 
obtaining prior authorization from the DOE, which determination shall be made within 
15 


one hundred eighty (180) days from the filing of the application for abandonment. Such 
abandonment shall be done in accordance with existing laws. 
SEC. 25.Gas Distribution Code Compliunce. - All gas distribution utilities shaII be 
required to ensure and maintain the safety, reliability, adequacy, security, stability and 
integrity of their gas distribution systems in accordance with the performance standards 
set forth in the Gas Distribution Code to be promulgated by the DOE. Each gas 
distribution utility shall submit to the DOE a statement of its compliance with the 
technical specifications prescribed in the Gas Distribution Code and the performance 
standards prescribed in the implementing rules and regulations promulgated by the 
DOE pursuant to Section 43 of this Act. A gas distribution utility that fails to comply 
with any of the prescribed technical specifications or performance standards shall 
include within such statement of compliance a plan for achieving compliance with the 
said technical specifications and performance standards within a reasonable time as 
may be necessary to ensure safety and reliability, or prevent environmental harm. The 
DOE shall, within sixty (60) days from receipt of such plan, evaluate the same and notify 
the gas distribution utility concerned of its decision thereon. Failure to submit a feasible 
and credible plan and/or failure to implement the same shall serve as grounds for the 
imposition of appropriate sanctions, fines or penalties pursuant to Section 39 of this Act. 
SEC. 26.Gas Distribution Rate. - Except as provided for during the infrastructure 
development period, the distribution rates charged by gas distribution utilities shall be 
subject to regulation by the ERC based on the principle of full recovery of prudent and 
reasonable economic costs incurred, including a reasonable return on rate base that is 
consistent with the encouragement of private investment and goal of developing the 
Downstream Natural Gas Industry infrastructure, or such other principles that will 
promote the deter&ination of just and reasonable rates by the ERC. Where a rate 
applicant successfully demonstrates that its rates will be applicable to contestable 
markets, the ERC shall have the authority to permit negotiated rates. 
SEC. 27.Fzincfions of Gas Distvibution Utilities. - All gas distribution utilities shall 
have the following functions: 
(a) 
Obligation to provide distribution services and connections to its 
gas distribution system for any end-user within the area covered by its permit 
consistent with the Gas Distribution Code. Any gas distribution utility engaged therein 
shall provide nondiscriminatory access to its gas distribution system to suppliers 
and/or end-users entitled to retail access under Section 30 of Chapter VI1 of this Act. 
16 


Any gas distribution utility shall be entitled to impose and collect from such suppliers 
and/or end-users distribution charges and connection fees as approved by the ERC 
after due notice and hearing; 
(b) 
Ensure the safety, reliability, adequacy, security, stability and 
integrity of their gas distribution systems in accordance with the technical specifications 
and performance standards set forth in the Gas Distribution Code to be promulgated by 
the DOE pursuant to Section 5(g) of this Act. Each gas distribution utiIity shall submit to 
the ERC a statement of its compliance with such technical specifications and 
performance standards. Any gas distribution utility that fails to comply with any of the 
prescribed technical specifications or performance standards shall include in such 
statement of, compliance an undertaking to comply with said technical specifications 
and performance standards within a reasonable time as may be necessary to ensure 
safety and reliability, or prevent environmental harm. The ERC shall, within sixty (60) 
days upon receipt bf such plan, evaluate the same and notify the gas distribution utility 
concerned of its decision thereon. Failure to submit a feasible and credible plan and/or 
failure to implement the same shall serve as grounds for the imposition of appropriate 
sanctions, fines or penalties pursuant to Section 39 of this Act; 
(c) 
Provide universal service within the area covered by its permit 
except as provided herein. Compliance with the universal service obligation shall be 
addressed as part of the annual development and maintenance plan of a gas distribution 
utility. A gas distiibution utility shall be obliged to develop and maintain an efficient 
system for the distribution of natural gas at the reasonable request of end-users within 
its franchise area including: 
(i) 
The installation of pipes where the connection to the end- 
user is within twenty-five (25) meters of the gas distribution system; or 
(ii) 
Increasing the capacity of existing gas distribution 
systems: Provided,htuever, That no new service shall be required if such service would 
not be economically viable. A determination by a gas distribution utility that it cannot 
viably serve a portion of its franchise area shall be subject to review by the ERC upon 
filing of a complaint by the requesting end-user. 
The obligation of the gas distribution utility to provide 
universal access involves both an obligation to connect end-users within twenty-five 
(25) meters from the main pipeline and an obligation to supply such end-users, to the 
extent the distribution utility is the sole gas supplier. Upon implementation of third 
party access, the utility shall be relieved of its obligation to supply end-users eligible for 
retail access as defined in the guidelines to be promulgated by the DOE, but not its 
obligation to provide connection to its distribution system to such end-users. Whether 
or not the gas distribution utility is the sole gas supplier in the area, prices charged by 
17 


the said utility for -che supply of gas shall be negotiated for the contestable market and 
regulated by the ERC for the captive market; and 
(d) 
Submit annually to the ERC its plan for maintaining and 
developing its gas distribution system in compliance with the obligations prescribed in 
this Act. 
CHAPTER VI1 
SUPPLY SECTOR 
SEC. 28.Pevmif Requirement. - Any law to the contrary notwithstanding, no person 
may engage in any supply activity unless it has obtained a permit from the DOE, 
initially: Provided, however, That a gas transmission utility or gas distribution utility that 
has secured a permit as such pursuant to Section 9(c) of this Act and that supplies 
natural gas to its own customers shall not be required to secure a separate permit to 
engage in its supply activity. For this purpose, the DOE shall promulgate rules and 
regulations prescribing the qualifications of suppliers which shall include, among other 
requirements, a demonstration of their technical capability, financial capability, 
creditworthiness and compliance with safety standards. The DOE shall have the 
authority to require suppliers to furnish a bond or other evidence of their ability to 
withstand market disturbances or other events that may increase the cost of providing 
service. 
SEC. 29.Supplier Rate and Seroice Regulation. - 
(a) 
The rates and service of suppliers to captive markets shall be 
regulated by'the ERC; and 
(b) 
, 
The rates and service of suppliers to contestable markets shall not 
be subject to regulation by the ERC Provided, however, That suppliers shall be subject to 
the rules and regulations concerning abuse of market power, cartelization and other 
anti-competitive or discriminatory behavior promulgated by the ERC. 
The supply of natural gas for electric generation and large end- 
users is hereby deemed to be a contestable market. In all other cases, suppliers shall 
bear the burden of 'demonstrating that a market is contestable. 
SEC. 30. Conditions for Retail Access to Gas Distribution Systems. - Following the 
infrastructure development period, retail access to gas distribution systems shall be 
available to large end-users meeting criteria set forth in the rules and regulations 
promulgated by the ERC pursuant to this Act. The ERC shall determine when retail 
access may Be available to other end-users or classes of end-users, giving consideration 
to relevant factors including whether such end-users or class of end-users constitute a 
18 


contestable marketmd the financial consequences of any assets potentially stranded by 
expanding retail access. 
CHAPTER VI11 
TAXATION 
SEC. 31.Taxes. - Gas transmission utilities, gas distribution utilities and suppliers 
of natural gas shall be subject to the payment of all taxes, duties, fees or charges and 
other impositions under the National Internal Revenue Code (NIRC) of 1997, as 
amended, and other applicable laws: Provided, however, That, in recognition of the 
substantial investments needed for the construction, operation and maintenance of gas 
transmission and gas distribution systems, gas transmission utilities and gas 
distribution utilities shall, upon prior endorsement by the DOE and approval by the 
Board of Investments, be entitled to income tax holiday and such other incentives 
granted to pioneer enterprises under the Omnibus Investment Code, as amended. 
The commodity price of gas shall be the only component of the 
gas retail rate which shall be subject to excise taxes under Republic Act No. 8424, 
otherwise known as the Comprehensive Tax Reform Law. 
SEC. 32. Withdrawal of Exemptions. - Any law to the contrary notwithstanding, to 
achieve the declared policies of this Act, particularly in relation to the promotion of fair 
and nondiscriminatory treatment of public and private sector entities in the 
development of the Downstream Natural Gas Industry infrastructure, all existing tax 
exemptions applicable to persons engaged in the transmission or the distribution of 
natural gas; insofar as such exemptions relate to revenues derived from the 
transmission or the distribution of natural gas, shalI be deemed revoked upon the 
effectivity of this Act. 
CHAPTER IX 
RATEMAKING REQUIREMENTS AND PROCEDURES 
SEC. 33.Ratemaking Requirements and Procedures of the ERC. - (a) Just and 
reasonable rates and charges. - All rates and charges for transmission, distribution or 
supply of natural gas to the captive market and all rules and regulations affecting or 
pertaining to such rates or charges shall be just and reasonable. Any such rate or charge 
that is not just and reasonable is hereby declared to he unlawful; 
(b) 
Undue preferences and unreasonable rates and charges are 
prohibited. - No gas transmission utility, gas distribution utility or supplier shall, with 
19 


respect to the tranedssion, distribution or supply of natural gas to the captive market: 
(1) make or grant any undue preference or advantage, or (2) maintain any unreasonable 
difference in rates, charges, service, facilities, or in any other respect, between locations 
or between classes of service; 
(c) 
Filing of rate schedules. - Under such rules and regulations as the 
ERC may prescribe, after due notice and public consultation, the ERC may require 
reports or documents from gas transmission utilities, gas distribution utilities or 
suppliers to the captive market showing all rates and charges for the transmission, 
distribution or supply of natural gas to the captive market and the classifications, 
practice and regulations affecting such rates, charges, and classifications and services: 
Provided, That the ERC shall provide appropriate mechanisms to protect the 
confidential& of any information that is commercially or competitively sensitive; and 
(d) 
Changes in rate and charges. - Within thirty (30) days upon filing 
for an adjustment ig rates, the ERC shall issue an order accepting, rejecting or setting for 
hearing such adjustment. The ERC may, upon the filiig of an application therefor or at 
any stage thereafter, with or without prior hearing, on the basis of supporting papers 
duly verified or authenticated, and with such notice to the affected parties and 
opportunity for such parties to make such submissions as the ERC determines to be 
appropriate in the circumstances, grant provisional relief fixing interim rates for the 
transmission of natural gas or distribution of natural gas or supply of natural gas to the 
captive market applicable during the pendency of the hearing on the application, on 
motion of a party in the case or on its own initiative, without prejudice to a final 
decision after hearing, should the ERC find that the pleadings, together with such 
affidavits, documents and other evidences which may be submitted in support of the 
motion, substantially support the provisional order. 
The final order fixing the 
applicable rates shall provide for over- or under-recovery of costs occasioned by the 
application of ERC-approved interim rates. At any hearing involving rates adjustment, 
the burden of proof to show that the increased rates are just and reasonable shall be 
upon the gas transmission utility, gas distribution utility or supplier to the captive 
market. 
CHAPTER X 
PROMOTION OF COMPETITION 
SEC. 34.Antihrzpetitive Behavior. - No gas transmission utility, gas distribution 
utility or supplier, or affiliate thereof, may engage in any anti-competitive behavior or 
abuse of market power including, but not limited to: 
20 


(a) 
Agreements, decisions and concerted practices of persons or 
associations of persons to fix prices and/or fix output; and 
@) 
Other practices and/or conduct by a person or groups of persons 
that restrict, prevent or distort competition such as, but not limited to, predatory pricing 
and practices, excessive pricing, bundling and other vertical restraints, denial of access 
to essential facilities on fair terms, discriminatory conditions on transactions that 
restrict, prevent or distort competition. 
SEC. 35.Measures to Promote Competition. - Subject to the provisions of relevant 
laws, the ERC shall adopt measures and/or corresponding remedies to promote 
competition following an investigation of the relevant circumstances and a definitive 
finding of 
(a) 
(b) 
Price and/or output fixing; or 
Other practices/conduct that are the subject of investigation 
restrict and/or prevent and/or distort competition. 
Such remedies shall, without limitation, include the imposition of 
price controls, issuance of injunctions or disgorgement of excess profits and imposition 
of administrative fines and penalties pursuant to this Act. 
SEC. 36.FunctionaI and Structural Unbundling. - When prevailing market conditions 
so require, any Downstream Natural Gas Industry participant shall functionally and 
structurally unbundle its business activities and rates in accordance with the sectors as 
idenfified in Section 7 hereof. The ERC shall ensure full compliance with this provision. 
SEC. 37.Cumplaint Procedures. - The ERC shall, within one year from the effectivity 
of this Act, promulgate rules and regulations providing for a complaint procedure that, 
without limitationi provides the party alleged to have engaged in anti-competitive or 
abusive activities with notice and an opportunity to be heard. 
SEC. 38.Afiliafed SuppZiers. - In order to prevent anti-competitive conduct, service 
contractors, gas transmission utilities and gas distribution utilities that own or control 
affiliates that are suppliers shall conduct their business as follows: 
(a) 
No preference will be given to the affiliated supplier over other 
persons through contracting for available capacity, scheduling, balancing, curtailment 
priority or tariffs; 
21 


(b) 
Marketing information provided to the affiliated supplier will be 
provided to any nonaffiliated supplier that is a competitor or potential competitor; 
(c) 
Employees of the affiliated supplier shall, to the maximum extent 
possible, function independently in making business decisions; and 
(d) 
Books of accounts and records of the affiliated supplier shall be 
maintained separately. 
As used herein, “affiliate” refers to any person or entity which, 
alone or together with any other person or entity, directly or indirectly, through one or 
more intermediaries, controls, or is controlled by another person or entity. As used 
herein, ”control” shall mean the power to direct or cause the direction of the 
management policies of a person by contract, agency or otherwise. 
SEC. 39.Adrn!’r.istratiue Fines and Penalties. - 
(a) 
The administrative fines and penalties that may be imposed by 
the ERC or the DOE, as the case may be, for any violation of or noncompliance with this 
Act or its implementing rules and regulations shall range from a minimum of Fifty 
thousand pesos (P50,000.00) to a maximum of Fifty million pesos (f50,000,000.00); 
(b) 
Any person who is found to have engaged in any of the 
prohibited acts pursuant to sfction 34 of this Act shall suffer the administrative penalty 
or fine ranging from Ten thousand pesos (Pl0,OOO.OO) to Ten million pesos 
(PlO,OOO,OOO.OO), at the discretion of the ERC or the DOE, as the case may be; 
(c) 
The members of the board of directors or any person that violates 
the provisions of this Act may be fined by an amount not exceeding double the amount 
of damages caused by the offender at the discretion of the ERC or the DOE, as the case 
may be. This rule shall apply to the members of the Board who, knowingly or by 
neglect, allow the commission or omission under the law; 
(d) 
Any party to an administrative proceeding may, at any time, 
make an offer to the ERC or the DOE, as the case may be, conditionally or otherwise, for 
a consent decree, voluntary compliance or desistance and other settlement of the case. 
The offer and any or all of the ultimate facts upon which the offer is based shall be 
considered for settlement purposes only and shall not constitute an admission by the 
party making the offer of any violation of the laws, rules, regulations, orders and 
resolutions of the ERC or the DOE, as the case may be, nor as a waiver to file any 
warranted criminal actions; and 
(e) 
Congress may, upon recommendation of the ERC or the DOE, as 
the case may be, revoke such franchise or privilege granted to the party found in 
violation of the provisions of this Act. 
22 


CHAPTER XI 
ANTI-PILFERAGE AND ANTI-THEFT PROVISIONS 
SEC. 40.Pilferugc. - It is hereby declared unlawful for any person to: 
(a) 
Tap, make or cause to be made any connection with any gas 
transmission system or gas distribution system without previous authority or consent of 
the gas transmission utility or gas distribution utility concerned; 
(b) 
Tamper, install or use tampered meters or any other device which 
interferes with proper or accurate registry or metering of natural gas flows or otherwise 
results in its diversion in a manner whereby natural gas is stolen or wasted; 
(c) 
Damage or destroy any natural gas meter, equipment, pipeline or 
conduit or any part of a gas transmission system or gas distribution system or allow any 
of them to be so damaged or destroyed as to interfere with the proper or accurate 
metering of natural gas flows; and 
(d) 
Knowingly use or receive the direct benefit of natural gas delivery 
service obtained through any of the acts mentioned in paragraphs (a), (b) and (c) above. 
SEC. 41.Theff of Equipment and Muteviuls. - It is hereby declared unlawful for any 
person to: 
(a) 
Cut, saw, slice, separate, split, severe, smelt or remove any 
portion of a gas transmission system or gas distribution system, including pipeline 
materials and meters, from any installation or place of installation or any other place or 
site where it may be rightfully or lawfully stored, deposited, kept, stocked, inventoried, 
situated or located, without the consent of the gas transmission utility or gas 
distribution utility concerned, whether or not the act is done for profit or gain; 
(b) . Take, carry away or remove or transfer, with or without the use of 
a motor vehicle or other means of conveyance, load, carry, ship or move from one place 
to another, whether by land, air or sea, any portion of a gas transmission system or gas 
distribution system, including pipeline materials or meters, from any installation or 
place of installation, or any place or site where it may be rightfully or lawfully stored, 
deposited, kept, stocked, inventoried, situated or located without the consent of the gas 
transmission utility or gas distribution utility concerned, whether or not the act is done 
for profit or gain; and 
. (c) 
Store, possess or otherwise keep in his premises, custody or 
conbol, without lawful purpose, any portion of a gas transmission system or gas 
distribution system, including pipeline materials or meters, without the consent of the 


gas transmission utility or gas distribution utility concerned, whether or not the act is 
done for profit or gain. 
SEC. 42.Penalties. - 
(a) 
Violation of Section 40. - The penalty of prision mnyor or a fine 
ranging from Ten thousand pesos (Pl0,OOO.OO) to Twenty thousand pesos (P20,OOO.OO) or 
both, at the discretion of the court, shall be imposed on any person found guilty of 
violating Section 40 of this Act. 
(b) 
Violation of Section 41. - The penalty of reclusion temporal or a fine 
ranging from Fifty thousand pesos (P50,OOO.OO) to One hundred thousand pesos 
(Pl00,000.00) or both, at the discretion of the court, shall be imposed on any person 
found guilty of violating Section 41 of this Act. 
(c) 
Provision common to violations of Sections 40 and 41 hereof. - If 
the violation of Section 40 or Section 41 of this Act is committed by, or in connivance 
with, an officer or employee of the gas transmission utility or gas distribution utility 
concerned, such officer or employee shall, upon conviction, be punished with a penalty 
one degree higher than the penalty provided herein, and forthwith be dismissed and 
perpetually disqualified from employment in any public or private utility or service 
company and from holding any public office. 
If the violation of Section 40 or Section 41 of this Act is committed 
by a partnership, firm, corporation, association or any other legal entity, including a 
government-owned or -controlled corporation, the penalty shall be imposed on the 
president, manager and each of the officers thereof who shall have knowingly 
permitted, failed to prevent or was otherwise responsible for the commission of the 
offense. 
CHAPTER XI1 
FINAL PROVISIONS 
SEC. 43.lmplementing Rules and Regulations. - The DOE shall, in consultation with 
the ERC, appropriate government agencies, the Downstream Natural Gas Industry 
participants, nongovernmental organizations and end-users, promulgate implementing 
rules and regulations (IRR) within six months from the effectivity of this Act. 
SEC. 44.Natural Gas Oversight Commission. - Upon the effectivity of this Act, a 
congression31 commission, hereinafter referred to as the "Natural Gas Oversight 
Commission", is hereby constituted. The Natural Gas Oversight Commission shall be 
composed of ten (10) members, with the chairmen of the Committee on Energy of the 
24 


Senate and the House of Representatives and four additional members from each 
House, to be designated by the Senate President and the Speaker of the House of 
Representatives, respectively. The minority shall be entitled to pro rata representation 
but shall have at least one representative in the Natural Gas Oversight Commission. 
The Natural Gas Oversight Commission shall, in aid of legislation, 
perform the following functions, among others: 
(a) 
Set the guidelines and overall framework to monitor the proper 
implementation of this Act; 
(b) 
Look into the appropriateness of creating a single independent 
regulatory body when the conditions prevailing so require; 
(c) 
Conduct a periodic review of this Act at least once every three 
years; 
(d) 
Determine inherent weaknesses in the law and recommend 
necessary remedial legislation or executive measures; 
(e) 
Approve the budget for the programs of the Natural Gas 
Oversight Commission and all disbursements therefrom, including compensation of all 
personnel; 
(f) 
Submit periodic reports to the President of the Philippines and 
Congress; and 
(g) 
Perform such other powers and functions as may be necessary to 
attain its objectives. 
To carry out its powers and functions, the initial sum of Fifteen million 
pesos (Pl5,000,000.00) shall be charged against the current appropriations of the Senate. 
Thereafter, such amount necessary for its continued operation shall be included in the 
annual General Appropriations Act. 
The Natural Gas Oversight Commission shaU adopt its internal rules of 
procedure; conduct hearings and receive testimonies, reports and technical advice; 
invite or s u m o n  by subpoena ad festijicandum any public official, private individual 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 generally require all the powers necessary to attain the purposes for which it is 
created. The Natural Gas Oversight Commission shall be assisted by a secretariat to be 
composed of personnel who may be seconded from the Senate and the House of 
Representatives and may retain consultants. The secretariat shall be headed by an 
executive director who has sufficient background and competence on the policies and 
issues relating to the Downstream Natural Gas Industry refornis as provided in this Act. 
25 


The Natural Gas Oversight Commission shall exist for a period of ten (10) 
years from the effectivity of this Act and may be extended by a joint resolution. 
SEC. 45.Separubility Clause. - If, for any reason, any provision of this Act is 
declared unconstitutional or invalid, the other parts or provisions hereof which are not 
affected thereby shall continue to be in full force and effect. 
SEC. 46.Nonretroactivity, Applicability and Repealing Clause. - The provisions of 
Republic Act No. 387, otherwise known as the "Petroleum Act of 1949", as amended, 
Presidential Decree No. 87, Republic Act No. 8997, and all other laws, decrees, executive 
orders, rules and regulations, circulars and other issuances inconsistent with the 
provisions of this Act are hereby repealed or modified accordingly. 
SEC. 47.Transitory Provision. - Gas transmission systems and gas distribution 
systems that have been constructed and have commenced operation prior to the date of 
effectivity of this Act shall continue to operate under their existing authorities: Pyovided, 
That they have complied with existing laws, rules and regulations prior to the effectivity 
of this Act and have secured a provisional permit from the DOE as provided in Sections 
15 and 21 of this Act. Suppliers who have entered into gas sales and purchase contracts 
with customers and have delivered indigenous or imported natural gas under said 
contracts prior to the date of effectivity of this Act shall continue to sell natural gas 
under their existing authorities provided they have complied with existing laws, rules 
and regulations prior to the effectivity of this Act. 
Nothing in this Act shall be deemed to revoke or otherwise modify the 
powers and functions of the Philippine National Oil Company and its subsidiaries 
under Presidential Decree No. 334, as amended, any existing concession granted under 
the Petroleum Act of 1949, as amended, certificate of public convenience or certificate of 
public convenience and necessity granted pursuant to the Public Service Law, as 
amended, specific franchise for the transmission, distribution or supply of natural gas or 
other administrative or regulatory permit or contract, which concession, certificate, 
franchise, permit or contract shall be allowed to its full term but may not be renewed 
except pursuant to the provisions of this Act. 
For a period not exceeding five years after the effectivity of this Act, the 
DOE may issue provisional permits, with a maximum term of two years, renewable 
twice for a maximum cumulative term not exceeding six years, for the construction, 
operation and maintenance of pipelines and related facilities for the transmission, 
distribution and supply of natural gas. 
26 


SEC. 48. 
Efectivity Clause. - This Act shall take effect on the fifteenth (15th) 
day following its publication in the Oficial Gazette and in at least two national 
newspapers of general circulation. 
Approved, 
21