FIFTEENTH CONGRESS OF THE REPUBLIC)

OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVE
HB.No._ 3081

Authored by HON. PETER “Sr. Pedro” UNABIA,

EXPLANATORY NOTE,

“AN ACTAMENDING SECTIONS 47, 57, 58, AND 70 OF REPUBLIC ACT NO. 9136
ENTITLED “ELECTRIC POWER INDUSTRY REFORM ACT.”

This bill represents the views of the Mindanao Electric Cooperatives as far as
amending the Electric Power Industry Reform Act or EPIRA. The contents of this
measure were based on the letter of the Association of Mindanao Rural Electric
Cooperatives, Inc (AMRECO) which tackled several provisions in the EPIRA that the
association deems amended. Based on our dialogues with some leaders of the ECs
in Misamis Oriental, the following proposed amendments appear to be the more
important items, wit:

1, Ultimately Exempting the Agus & Pulangui Complexes from Privatization.
While there are pronouncements of the executive branch that privatization
of the Agus & Pulangui Complexes in Mindanao will no longer proceed as a
prerogative, we want it declared in permanence. There are studies made
which strongly supports the theory that privatizing the said hydro-electric
plants will definitely increase the already high power rates in Mindanao.
Accordingly, the latest act of privatizing some assets like those power
barges aggravated the power crises in Mindanao since there already was a
shortage of supply. In fact, some sectors are further pushing the idea that a
portion of the generated capacity of these same plants shall be devoted for
the marginalized consumers.

2. Clarifying the Provision On the Registration of Electric Cooperatives Either
with CDA, SEC or NEA as an Option by the Membership. Legislations
mandating the registration of ECs under the Cooperative Development
Authority are being resisted by the ECs in Mindanao as unnecessary and
divisive. Accordingly, this issue dates back when the cooperative code was
introduced in congress. According to some experts in the power industry,
placing the supervision of ECs under the CDA will only defeat the missionary
electrification function of these entities as the said agency lacks the
technical capacity on a very speciatized industry such as the power sector.
Moreover, ECs will only be burdensome to CDA which is presently tasked to
‘oversee thousands of other cooperatives. Clarifying the provision will be a



compromise to revisit the issue and to give the sense for membership self-
determination.

3. The Privatization of Assets & Functions Under the Small Power Utilities
Group _(SPUG). Finally the circumstances of the operation of the SPUG
which in actuality is a major concern and task of the island-based electric
cooperatives in off-grid areas, can be examined. For the government to
save costs, the National Power Corporation (NPC) which is currently
operating these facilities should come up with a program of gradually
transferring ownership of the assets associated to the SPUG operations,
under the theme on privatization, to qualified electric cooperatives. ECs
are private in nature and are already capable of running these facilities. If
only to ensure the effective operation of the same, the NEA can supervise
since as a matter of existing arrangement, NEA has also supervisory powers
over the ECs. It is also our understanding that originally, the SPUG used to
be an operation managed by the NEA until the decision to consolidate all
generating facilities under one corporation.

Definitely a lot more provisions of the EPIRA will also be presented for
amendment in the course of deliberating this bill. This has been manifested
during the floor deliberations the subject of the same in fact dominated the
discussions in the first week of congressional sessions.

Suffice it to say that the primary intention of this bill is to provide those that
the ECs see as immediate steps for them to hasten the delivery of services in
behalf of the government.

It is for these reasons that passage of this measure is earnestly squght.



FIFTEENTH CONGRESS OF THE REPUBLIC)
OF THE PHILIPPINES )
First Regular Session ! )

HOUSE OF REPRESENTATIVE
HB.No._ 3081

AN ACT
AMENDING SECTIONS 47, 57, 58, AND 70 OF REPUBLIC ACT NO. 9136 ENTITLED.
“ELECTRIC POWER INDUSTRY REFORM ACT.”

Be it enacted by the senate and house of representative of the Philippines in congress assembled:

SECTION 1, The provision on privat

“SEC. 47. NPC Privatization. — Except for [the assets of SPUG] THE AGUS &
PULANGUI COMPLEXES, the generation assets, real estate, and other disposable assets as
well as IPP contracts of NPC shall be privatized in accordance with this Act{.] AND [Within
six (6) months from the effectivity of this Act, the PSALM Corp shall submit a plan for the
endorsement by the Joint Congressional Power Commission and the approval of the President
of the Philippines, on the total privatization of the generation assets, real estate, other
disposable assets as well as existing IPP contracts of NPC and thereafter, implement the
same, in accordance with] the following guidelines, except as provided for in Paragraph (f)
herein:
a.

b. Xxx
c. Xxx
4
a

shall be amended to read as folows:

|. Xxx
Xxx

“(f) The Agus and the Pulangui complexes in Mindanao shall be excluded from among the
generation companies that will be {initially) privatized. Their ownership shall be transferred
to the PSALM Corp. and both shall continue to be operated by the NPC. Said complexes
SHALL BE RETAINED TO GENERATE POWER WHICH WILL SERVE AS
BUFFER SUPPLY TO AVERT POWER CRISES. ELECTRIC COOPERATIVES
SHALL BE PRIORITIZED IN CONTRACTING THESE COMPLEXES’ CAPACITY
TO SERVE THE NEED OF THE RESIDENTIAL CONSUMERS. [may be privatized
not earlier than ten (10) years from the effectivity of this Act, and except for Agus III, shall
not be subject to Build-Operate-Transfer (B-O-T), Build-Rehabilitate-Operate- Transfer (B-
R-O-T) and other variations thereof pursuant to Republic Act No. 6957, as amended by
Republic Act No. 7718. The privatization of Agus and Pulangui complexes shall be left to the
discretion of PSALM Corp. in consultation with Congress;]

“@) Xxx.


“(h) Xxx.

“(@ Not later than three (3) years from the effectivity of this AMENDATORY Act, and in no
case later than the initial implementation of open access, at least seventy percent (70%) of the
total capacity of generating assets of NPC and of the total capacity of the power plants under
contract with NPC located in Luzon and Visayas, WITH THE EXCEPTION OF THOSE
WHICH ARE EXCLUDED FROM PRIVATIZATION AND SALE BY THIS
AMENDATORY ACT, shall have been privatized : Provided, That any unsold [capacity
shall be privatized not later than eight (8) years from the effectivity of this Act; and
JAT THE TIME OF THE APPROVAL OF THIS AMENDMENT SHALL BE
RETAINED AS ASSETS OF NPC, AND ADMINISTERED BY PSALM THAT WILL
SERVE AS ANCILLARY SERVICE PROVIDER OF THE LUZON AND VISAYAS
GRID. AND;

j. NPC shall generate and sell electricity from the undisposed generating assets [and IPP
contracts of PSALM Corp. and shail not incur any new obligations to purchase power
through bilateral contracts with generation companies or other suppliers.] AND SHALL
CONSTRUCT AND MAINTAIN ADDITIONAL CAPACITY EQUIVALENT TO THE
CAPACITY OF THE BIGGEST POWER PLANT IN EVERY GRID, FOR
ANCILLARY PURPOSES AND TO STABILIZE THE GRID IN ANY GIVEN TIME
THAT A BASE PLANT EXPERIENCE OUTAGE.

SECTION 2. Section 57 of the EPIRA is hereby amended to read as follows:

“ Sec. $7.-OPTIONS {Conversion} of Electric Cooperatives.- Electric Cooperatives are hereby
given the option to convert to either stock cooperatives under Cooperatives Development Authority,
or Stock Corporation under the Corporation Code, OR TO REMAIN AS NON-STOCK, NON-
PROFIT COOPERATIVES UNDER PD 269.

IF THE ELECTRIC COOPERATIVES OPT TO BECOME A STOCK COOPERATIVE
OR STOCK CORPORATION, THE SAID COOPERATIVES SHALL CONDUCT A
REFERENDUM PURSUANT TO THE EXISTING REFERENDUM GUIDELINES DULY
ISSUED BY THE NEA.

IF THE COOPERATIVES OPT TO REMAIN AS NON-STOCK, NON-PROFIT, THE
SAID COOPERATIVES SHALL MANIFEST THEIR INTENT THRU A BOARD
RESOLUTION. THE SAID COOPERATIVES SHALL CONTINUE TO BE REGISTERED
UNDER NEA AND SHALL BE EXEMPT FROM ALL LOCAL AND NATIONAL TAXES
AND FEES. FOR THIS PURPOSE, SECTION 193 OF R.A. 7160 OTHERWISE KNOWN AS
THE LOCAL GOVERNMENT CODE OF 1991, AND OTHER LAWS INCONSISTENT
HEREWITH, ARE HEREBY DEEMED AMENDED OR REPEALED.

Nothing contained in this act shall deprive the electric cooperatives of OTHER [any] privelege or
right granted to them under Presidential Decree 269, as amended, and other existing laws.

SECTION 3. Section 58 Of EPIRA is hereby amended to read as follows:

“Sec. 8. Additional Mandate of the National Electrification Administration (NEA). - NEA
shall develop and implement programs:

(a) To prepare electric cooperatives in operating and competing under the deregulated
electricity market AND IN AN OPEN ACCESS AND RETAIL COMPETITION
ENVIRONMENT, INCLUDING SETTING UP MANAGEMENT SYSTEM, PROMOTING


JOINT ACTIONS IN POWER PURCHASE POOLING, OPERATION OF SUB-
TRANSMISSION LINES, SHARING OF COMMON SERVICE FACILITIES AND
REGULATION-RELATED TRAINING AND TECHNICAL INTERVENTIONS, within five
(6) years from the effectivity of this Act [, specifically in an environment of open access
and retail wheeling];

(b) To CONTINUE STRENGTHENING [strengthen] the technical capability and financial
viability of rural electric cooperative AND FOR THAT PURPOSE, WITHIN ONE (1)
YEAR FROM THE EFFECTIVITY OF THIS ACT, DEVELOP, SUBMIT AND
IMPLEMENT PROGRAMS TO ENABLE THE ELECTRIC COOPERATIVES TO BE
FINANCIALLY VIABLE AND INDEPENDENT

(c) To [review and upgrade] CREATE AN APPROPRIATE TECHNICAL STAFF TO
ASSIST ELECTRIC COOPERATIVES IN CONDUCTING PERIODIC REVIEW OF
RATES AND OTHER RELATED ACTIVITIES [regulatory policies with a view to
enhancing the viability of rural electric cooperatives as electric utilities) AND

(d) TO ACT AS PLANNING AND IMPLEMENTING AGENCY INVOLVING
MISSIONARY ELECTRIFICATION AND INTEGRATING GRID AND OFF-GRID
EXPANSION PROGRAMS AND TO SUBMIT THE SAME TO DOE FOR REVIEW,
APPROVAL AND PROPER IMPLEMENTATION.

NEA shall continue to be under the supervision of the DOE and shall exercise its functions
under Presidential Decree No. 269, as amended by Presidential Decree No. 1645, insofar as
they are consistent with this Act.

SECTION 4. To continue the mandate of the government of serving the rural poor, section
70 of EPIRA shall be amended to read as follows:

“Sec, 70. Missionary Electrification. —[Notwithstanding the divestment and/or privatization
of NPC assets, IPP contracts and spun-off corporations, NPC shall remain as a National
Government-owned and -controlled corporation to perform the missionary electrification
function through the Small Power Utilities Group (SPUG) and } .

THE MISSIONARY ELECTRIFICATION FUNCTIONS OF NPC-SPUG SHALL BE
PERFORMED BY THE ELECTRIC COOPERATIVES UNDER THE SUPERVISION
OF THE NATIONAL ELECTRIFICATION ADMINISTRATION. THIS SAME
FUNCTION SHALL BE IN ACCORDANCE TO THE ADDITIONAL MANDATE OF
NEA AS PROVIDED FOR BY SECTION 58 OF EPIRA AS AMENDED BY THIS ACT.
NEA THROUGH THE ELECTRIC COOPERATIVES SHALL be responsible in providing
power generation and its associated power delivery systems in areas that-are not connected to
the transmission system. The missionary electrification function shall be funded from the
revenues from sales in missionary areas and from the universal charge to be collected from
all electricity end-users as determined by the ERC.

SECTION 5. Separability 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.

SECTION Effectivity Clause. This Act shall take effect on the fifteenth (15th) day
following its publication in at least two (2) newspapaers of general circulation.

Approved