FOURTEENTH CONGRESS OF THE 
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REPUBLIC OF THE PHILIPPINES 
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Second Regular Session 
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S E N A T E  
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S.B.No. 3282 
(In Substitution of S. B. No. 3148) n"'"-:\"Fn 
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Introduced by Senators Juan Pome Enrile and Gregorio B. Honasan I1 
AN ACT 
DIRECTING THE REDUCTION OF THE GOVERNMENT SHARE FROM INDIGENOUS 
ENERGY RESOURCES IN ORDER TO ACHIEVE PARITY OF TAX TREATMENT, LOWER 
COMMODITY PRICE, REDUCE THE COST OF ELECTRICITY, AND FOR OTHER 
PURPOSES 
Be it enacted by the Senate and House of Representatives of the PhiIippines in Congress 
assem bled: 
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of 2009". 
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SECTION 1. Title. - This Act shall be known as the "Electricity Rate Reduction Act 
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State that, to 
the end-users of electricity: (i) the government impositions relating to indigenous sources of 
energy shall be effectively at par with or more favorable than analogous impositions on 
imported fuels in keeping with the Constitutional precept of preserving the benefits of the 
national patrimony to the Filipino people; (ii) the competitiveness of indigenous sources of 
energy vis-&-vis imported fuels shall be ensured thereby increasing the country's energy self- 
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sufficiency; and (iii) the true and lower cost of electricity generated from indigenous sources 
of energy shall be reflected in view of the economic goal under the Constitution of 
increasing the amount of goods and services produced by the nation for the benefit of the 
people and consistent with the elimination of all inter-class cross subsidies as mandated by 
Republic Act No. 9136. 
SEC. 3. Definition of Terms. -As used in this Act: 
(a) 
"Department of Energy" or "DOE" refers to the government agency created 
pursuant to Republic Act No. 7638; 


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(b) 
“Energy Regulatory Commission” or “Commission” refers to the independent 
quasi-judicial regulatory agency created pursuant to Republic Act No. 9136; 
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(c) 
“Government Share” refers to the amount due the national government and 
local government units in the form of royalty payments by service contractors from the 
discovery, exploration, development and/or production of indigenous energy resources 
under new and existing service contracts pursuant to relevant laws; 
(d) 
“Indigenous energy sources” refers to energy sources including, but not limited 
to, natural gas, that are drawn, mined or extracted from and within Philippines territory, 
except those that are subject of or covered by Republic Act No. 9513 or the Renewable 
Energy Act of 2008; 
(e) 
“Marginalized End-users” refers to the low-income, captive, household 
electricity consumers who cannot afford to pay at full cost and have levels of electricity 
consumption below a threshold level determined by the Commission in accordance with 
Republic Act No. 9136; and 
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“Net proceeds” refers to the difference between the gross proceeds derived by 
service contractors from the sale of the energy resource and the sum of expenses explicitly 
allowed to be recovered under the respective service contracts. 
SEC. 4. Reduction of Government Share. - With a view to achieving parity of tax 
treatment, the ‘Government Share from the net proceeds from the sale of the indigenous 
energy resource is hereby reduced from sixty percent (60%) to three percent (3%) over the 
remaining life of the respective service contracts. The foregoing shall be remitted by the 
service contractor to the national government through the Bureau of Treasury, in accordance 
with the time and manner stipulated in their respective service contracts. 
The 3% 
Government Share shall be maintained at the current 60/40 sharing scheme between the 
national government and the local government units concerned. 
Notwithstanding any law to the contrary, the service contractor shall earmark the 
fifty seven percent (57%) reduction for commodity price reduction in accordance with the 
manner provided in this Act: Provided, That the amount to be earmarked shall be net of the 
corporate income tax deduction allowed under its service contract. 
In the specific case of indigenous energy sources that are used for electrical power 
generation, the commodity price reduction under the preceding section shall be reflected 
and passed on to eligible consumers as a reduction in power generation charges. The 
commodity price reduction shall be subject to periodic review by the Commission in order to 
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ensure that such reduction shall be revenue-neutral to the service contractor, the power 
generation company and the distribution utility. 
SEC. 5. Reduction in Commodity Price. - The amount contemplated in the second 
paragraph of the preceding section shall automatically be applied by the service contractor as 
a reduction of its commodity price. 
In the specific case of indigenous energy resource sold for electrical power generation, 
the service contractor shall, upon the effectivity of this Act, reduce its commodity price by 
thirty two percent (32%), which amount shall be subject to quarterly review, setting and 
reconciliation by the Commission. At any point in time where the amount available for 
commodity price reduction exceeds the total funding requirement, such excess amount shall 
be remitted to and held by the Department of Energy in a separate account and shall be 
earmarked and used by it solely and exclusively for the purpose of lowering power 
generation cost. 
To ensure a faithful implementation of this Act, the DOE shall make a quarterly 
review of the production levels and proceeds of sales and recovery costs of the service 
contractor in order to see to it that the amount available for commodity price reduction shall 
not be impaired. 
The DOE shall, likewise, submit quarterly reports to the Joint 
Congressional Power Commission of the results of its periodic review as herein required. 
SEC. 6. Reduction in the Price of Electricity. - In the exercise of its regulatory 
mandate, the Commission shall ensure that consumers benefit from the lower power 
generation cost arising from the foregoing commodity price reduction, by verifying that such 
lower costs are automatically passed on to the full extent to eligible customers of Distribution 
Utilities and also in the case of power generation companies, once the regime of retail 
competition and open access is declared and implemented pursuant to Section 31 of Republic 
Act No. 9136. 
For this purpose “Eligible customers” shall compxise of: (a) Marginalized End-users, 
actually classified as such by the affected Distribution Utilities, and subject to periodic 
review and confirmation by the Commission; and, (b) all other electric consumers with an 
average load factor of seventy percent (70%) for each particular month. 
SEC. 7. Implementing Rules and Regulations. - Not later than forty-five (45) days from 
the effectvity of this Act, the Commission shall formulate and adopt rules and regulations 
consistent with the provisions of this Act to carry out its intent and objective: Provided, That the 
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provisions on the utilization of the Government Share for the reduction of the commodity 
price of the indigenous energy shall take effect immediately. 
SEC. 8. Separability Clause. -In the event that any provision of this Act is rendered or 
declared by a competent court as void or invalid, the other parts of this Act, which are not 
affected thereby, shall remain in full force and effect. 
SEC. 9. Repealing Clause. - All laws, decrees, orders, rules and regulations including 
Presidential Decree No. 87, or parts thereof, which are inconsistent with any of the 
provisions of this Act are hereby repealed, amended or modified accordingly. 
SEC. 10. Effectivity Clause - This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette. 
Approved