Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
FIFTEENTH CONGRESS

Second Regular Session

Howse BiiNo, _5381

Introduced by Reps. GIORGIDI B. AGGABAO, ARTURO B. ROBES ang
MARCELINO “Marcy* R. TEODORO

EXPLANATORY NOTE

In tine with the government's thrust of improving the power industry, the
country’s sole transmission system operated by the National Transmission
Corporation (TRANSCO) was bid out by the Power Sector Assets and Liabilities
Management Corporation (PSALM) in 2007. The consortium of Monte Oro Grid
Resources Corporation, Calaca High Power Corp., and State Grid of China
emerged as the highest bidder for a 25-year concession of the TRANSCO.

As part of the requirements of the PSALM, the winning bidder needs to
secure a legislative franchise from Congress before it can operate the
transmission business of the government. Thus, Monte Oro Grid Resources.
Corp., Calaca High Power Corp., and State Grid of China incorporated as the
National Grid Corporation of the Philippines ( NGCP) for the purpose of securing
the franchise. The NGCP got their 25-year franchise through Republic Act No.
9511 on December 1, 2008. R.A 9511 however, upon review, was granted
certain privileges, quite favorable to the Grantee, to wit:

* Section 1 of RA 9511 gave authority to NGCP to engage in
ancillary or related businesses that would maximize the utilization
of its assets, such as but not limited to telecommunications,
pursuant to Section 20 of Republic Act No. 9136.

* Section 6 on sale, lease, transfer, usufruct does not require
anymore the prior approval of Congress as stipulated on the
sub-provisions.

* Section 9 of the said franchise law on Tax Provision, expressly
imposes three percent (3%) franchise tax in lieu of all taxas, duties,


fees and charges of any kind, nature or description, levied,
established or collected by any authority whatsoever, local or
national, on its franchise, rights, privileges, receipts, revenues and
profits, and on properties used in connection with its franchise.

‘This bill therefore seeks to amend the franchise of NGCP by limiting the
nature and scope of its franchise to the core business it applied for its franchise
which is the operation of the national transmission system in the power industry
and related businesses to power transmission, and removing
telecommunications on the scope. Congress requires corporations to have
separate franchise for each kind of public utility service, in this case, NGCP
should have its franchise only in transmission and should have separate
franchise in telecommunications if it would like ta engage in this business in the
future.

Further, Sections 6 and 9 are also being amended to allow different
government agencies to collect all taxes and fees due to the goverment thereby
providing a level-playing field to all corporations engaged in the power industry.
With the significance NGCP plays in the Philippine economy, any change in the
composition of the corporate owners should, at the very least, be concurred by
Congress.

in view of the foregoing, approval of this proposed measure is eamestly
requested.

REP. cone acoasno REP. ARJURO B. ROBES

4" District-Isabela Lone District- San Jose del Monte City

fiehe Tn Sane
REP. MARCELINO “Marcy” R. TEODORO
4 *Dstrict, Marikina City


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
Second Regular Session

gi
House Bill No 53

Introduced by Reps. GIORGIDI B. AGGABAO, ARTURO B. ROBES ana
MARCELINO “Marcy” R. TEODORO.

AN ACT
AMENDING REPUBLIC ACT NO, 9511 ENTITLED, “AN ACT GRANTING THE
NATIONAL GRID CORPORATION OF THE PHILIPPINES A FRANCHISE TO
ENGAGE IN THE BUSINESS OF CONVEYING OR TRANSMITTING
ELECTRICITY THROUGH HIGH VOLTAGE BACK-BONE SYSTEM OF
INTERCONNECTED TRANSMISSION LINES, SUBSTATIONS AND RELATED
FACILITIES AND FOR OTHER PURPOSES”

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

SECTION 1. Section 1 of Republic Act No. 9511 is hereby amended to
read as follows.

“SECTION 1. Nature and Scope of Franchise. — Subject to the
provisions of the Constitution and applicable laws, rules and regulations
and subject to the terms and conditions of the concession agreement and
other documents executed with the National Transmission Corporation
(TRANSCO)} and the Power Sector assets and Liabilites Management
Corporation ( PSALM) pursuant to Section 21 of Republic Act No. $136.
which are not inconsistent herewith, there is hereby granted to the

National Grid Corporation of the Philippines, hereunder referrec to as the


Grantee. its successors or assigns, a franchise to operate, manage and
maintain, and in connection therewith, to engage in the business of
conveying or transmitting electricity through high voltage back-oone
system of interconnected transmission lines, substations and related
facilities, systems operations, and other activities that are necessary to
support the safe and reliable operation of a transmission system and to
construct, install, finance, manage, improve, expand, operate. maintain,
‘rehabilitate, repair and refurbish the present nationwide transmission
system of the Republic of the Philippines. The Grantee shali continue to
operate and maintain the subtransmission systems which have not peen
disposed by TRANSCO. Likewise, the Grantee is authorized to engage in
ancillary businesses and any related business which maximizes utilization
of its assets [ such as, but not limited to telecommunication system.)
pursuant to Section 20 of Republic Act no. 9136. The scope of tne
franchise shalt be nationwide in accordance with the Transmission
Development Plan, subject to amendments or modifications of the said
Plan, as may be approved by the Department of Energy of the Republic of

the Philippines.”

SEC. 2 Section 6 of Republic Act No. 9511 is hereby amended tc
fead as follows:
“SEC, 6. Sale, Lease, Transfer, Usutruct, Etc. - The Grantee shall
not lease, transfer, grant the usufruct of, or seil this franchise or the rights

and privileges acquired hereunder to any person, firm, company or other


commercial or legal entity [ , nor merge with any other company, nor shall
the controlling interest of the Grantee be transferred whether in whole ar in.
part, and whether simultaneously or contemporaneously, to any person,
firm, company or entity } without the prior approval of the Congress of the
Philippines: Provided, That the foregoing limitation shall not apply to any
transfer or issuance of shares of stock in the implementation of the
requirement for the Grantee's dispersal of ownership pursuant to Section
8 of this Act; or to any issuance of shares to any foreign or local investors
pursuant to of in connection with any increase in the Grantee's autnorized
capital stock which results in the dilution of the stockholdings of the
Grantee's then existing stockholders, PROVIDED HOWEVER, THAT
NO MERGER WITH ANY OTHER COMPANY OR ENTITY. OR
TRANSFER OR ALIENATION OF THE CONTROLLING INTEREST OF
THE GRANTEE, WHETHER IN WHOLE OR IN PART, AND WHETHER.
TO ANY PERSON, FIRM, COMPANY OR ENTITY, SHALL TAKE
EFFECT WITHOUT THE PRIOR APPROVAL OF THE CONGRESS OF
THE PHILIPPINES: ; Provided, moreover, That the [ foregoing ] timitation
PROVIDED iN THE FIRST SENTENCE OF THIS SECTION shall not
apply to any transfer, sale or issuance of shares of stock at the level of
corporate stockholders of the Grantee: Provided, furthermore; That the
foregoing limitations shall not apply in case of assignment or transfer of
the operation of any of its related business [ such as but not limited to

telecommunications business } to another entity. Provided, however, That


any such transfer, sale or issuance at the level of the corporate
stockholders of the Grantee is in accordance with applicable constitutional
limitations; Provided, finally, that’ any person or entity to which such
shares is sold, transferred or assigned, under this Act shalt be subject to

the same conditions and limitations of this Act.”

SEC. 3. Section 9 of Republic Act No. 9511 is hereby amended to
read as follows:

“SEC. 9. Tax Provision. — In consideration of the franchise and
rights hereby granted, the grantee, its successors or assigns, shall [ pay a
franchise tax equivalent to three percent (3%) of all gross receipts derived
by the Grantee from its operation under this franchise. Said tax shall in
lieu of income tax and any and all taxes, duties, fees and charges of any
kind, nature or description levied, established or collected by any authority
whatsoever, loca! or national, on its franchise, rights. privileges. receipts,
revenues and profits, and on properties used in connection with its
franchise, from which taxes. duties and charges, the Grantee is hereby
expressly exempted: Provided. That the Grantee, its successors or
assigns, shall be liable to pay the same taxes on their real estate,
buildings and personal property. exclusive of this franchise. as other
corporations are now or hereby may be required by law to pay: Provided.
further, That_ payment by Grantee of the concession fees due to PSALM
under the concession agreement shall not be subject to income tax and

value-added tax (VAT). ] BE SUBJECT TO THE PAYMENT OF ALL


TAXES . DUTIES, FEES OR CHARGES AND OTHER IMPOSI!TIONS
UNDER THE NATIONAL INTERNAL REVENUE CODE (NIRC) OF 1597
AS AMENDED, AND OTHER APPLICABLE LAWS: PROVIDED = THAT
NOTHING HEREIN SHALL BE CONSTRUED AS REPEALING ANY
SPECIFIC TAX EXEMPTIONS, INCENTIVES OR PRIVILEGES
GRANTED UNDER ANY RELEVANT LAWS: PROVIDED, FURTHER.
THAT ALL RIGHTS, BENEFITS AND EXEMPTIONS ACCORDED TO
EXISTING AND FUTURE PRIVATE ELECTRIC UTILITIES BY THEIR
RESPECTIVE FRANCHISES SHALL LIKEWISE BE GRANTED TO THE

GRANTEE.”
SEC. 4. Ail laws, decrees, orders. regulations, instructions and rules and
regulations or parts thereof, which are inconsistent with this Act. are hereby

deemed repealed or modified

SEC. 5. This Act shail take effect fifteen (15) days from the date of 1s

publication in at least two (2) newspapers of general circulation in the Phisippines

Approved.