1 Epira Irr Consolidated Proposals v1

RELATED EPIRA-IRR PROPOSED
EPIRA-IRR PROVISION IMPLEMENTATION STATUS RATIONALE/ COMMENTS

EPIRA PROVISION AMENDMENTS
RULES AND REGULATIONS TO
IMPLEMENT REPUBLIC ACT NO.
9136, ENTITLED "ELECTRIC
POWER INDUSTRY REFORM ACT
OF 2001"
Pursuant to Sections 37 and 77 of Section 37. Powers and
Republic Act No. 9136, an Act Functions of the DOE.
Ordaining Reforms in the
Philippine Electric Power Industry, (p) Formulate such rules and
otherwise known as the “Electric regulations as may be necessary
Power Industry Reform Act of to implement the objectives of
2001” (Act), the Department of this Act; and
Energy (DOE), in consultation with
the appropriate government Section 77. Implementing
agencies such as the Energy Rules and Regulations.
Regulatory Commission (ERC),
Department of Finance (DOF), The DOE shall, in consultation
National Electrification with the electric power industry
Administration (NEA), National participants and end-users,
Power Corporation (NPC), promulgate the Implementing
Department of Trade and Industry Rules and Regulations (IRR) of
(DTI), Department of Justice this Act within six (6) months
(DOJ), Department of Budget and from the effectivity of this Act,
Management (DBM), Power Sector subject to the approval by the
Assets and Liabilities Management Power Commission.
Corporation (PSALM), the Electric
Power Industry Participants, and
with the approval of the Joint
Congressional Power Commission
(Power Commission), hereby
issues, adopts and promulgates
the following rules and regulations
to implement the provisions of the
Act.
PART I - GENERAL PROVISIONS
The succeeding rules and
regulations shall include the general
provisions to be followed in
implementing the major structural
reforms for the electric power
industry and the Privatization of the
state-owned NPC.
RULE 1. TITLE AND SCOPE
Section 1. Title.
These rules and regulations shall be
referred to as the "Implementing
Rules and Regulations of Republic
Act No. 9136” (Rules) otherwise
known as the “Electric Power
Industry Reform Act of 2001” (Act).
Section 2. Scope. Section 77. Implementing
Rules and Regulations.
These Rules are promulgated under The DOE shall, in consultation
the authority of the DOE to with the electric power industry
formulate, in consultation with participants and end-users,
relevant government agencies, promulgate the Implementing
Electric Power Industry Participants, Rules and Regulations (IRR) of
non-government organizations, this Act within six (6) months
End-users and consumers, such from the effectivity of this Act,
rules and regulations as may be subject to the approval by the
necessary to implement the Power Commission.
objectives of the Act and pursuant
to the exercise of such other
powers as may be necessary or
incidental to attain the objectives of
the Act. These Rules shall govern
the relation and responsibilities of
Electric Power Industry
Participants and governmental
authorities, including but not limited
to: the DOE, NPC, NEA, ERC, and
PSALM.
RULE 2. DECLARATION OF Section 2. Declaration of Policy
POLICY
It is hereby declared the policy of the It is hereby declared the policy of
State: the State:
(a) To ensure and accelerate (a) To ensure and accelerate the
the total electrification of the total electrification of the country;
country;
(b) To ensure the quality, (b) To ensure the quality,
reliability, security and reliability, security and
affordability of the supply of affordability of the supply of
electric power; electric power;
(c) To ensure transparent (c) To ensure transparent and
and reasonable prices of reasonable prices of electricity in
electricity in a regime of free a regime of free and fair
and fair competition and full competition and full public
public accountability to accountability to achieve greater
achieve greater operational operational and economic
and economic efficiency, efficiency and enhance the
promote consumer choice competitiveness of Philippine
and enhance the products in the global market;
competitiveness of
Philippine products in the
global market;
(d) To enhance the inflow of (d) To enhance the inflow of
private capital, participation private capital and broaden the
in the attendant risks, and ownership base of the power
broaden the ownership base generation, transmission and
of the power generation, distribution sectors in order to
transmission and distribution minimize the financial risk
sectors; exposure of the national
government;
(e) To ensure fair and non- (e) To ensure fair and non-
discriminatory treatment of discriminatory treatment of
public and private sector public and private sector entities
entities in the process of in the process of restructuring
Restructuring the electric the electric power industry;
power industry;
(f) To protect the public (f) To protect the public interest
interest as it is affected by the as it is affected by the rates and
rates and services of electric services of electric utilities and
utilities and other providers of other providers of electric power;
electric power;
(g) To assure socially and (g) To assure socially and
environmentally compatible environmentally compatible
energy sources and energy sources and
infrastructure; infrastructure;
(h) To promote the utilization (h) To promote the utilization of
of indigenous and new and indigenous and new and
renewable energy resources renewable energy resources in
in power generation in order power generation in order to
to reduce dependence on reduce dependence on imported
imported energy; energy;
(i) To provide for an orderly (i) To provide for an orderly and
and transparent Privatization transparent privatization of the
of the assets and liabilities of assets and liabilities of the
the NPC; National Power Corporation
(NPC).
(j) To establish a strong and (j) To establish a strong and
purely independent regulatory purely independent regulatory
body and system to ensure body and system to ensure
consumer protection and consumer protection and
enhance the competitive enhance the competitive
operation of the electricity operation of the electricity
market; and market; and
(k) To encourage the k) To encourage the efficient use
efficient use of energy and of energy and other modalities of
other modalities of Demand demand side management.
Side Management (DSM).
RULE 3. RESPONSIBILITIES OF
THE DOE, ERC, NPC, NEA AND
PSALM
Section 1. Responsibilities of the Section 37. Powers and
DOE. Functions of the DOE.
In addition to its existing powers and In addition to its existing powers
functions, the DOE shall supervise and functions, the DOE is
the Restructuring of the electricity hereby mandated to supervise
industry and perform the following the restructuring of the electricity
functions: industry. In pursuance thereof,
Section 5 of R. A. 7638
otherwise known as "The
Department of Energy Act of
1992" is hereby amended to
read as follows:
(a) Formulate policies for "(a) Formulate policies for the
the planning and planning and implementation of
implementation of a a comprehensive program for
comprehensive program for the efficient supply and
the efficient supply and economical use of energy
economical use of energy consistent with the approved
consistent with the approved national economic plan and with
national economic plan and the policies on environmental
with the policies on protection and conservation and
environmental protection and maintenance of ecological
conservation and balance, and provide a
maintenance of ecological mechanism for the integration,
balance, and provide a rationalization, and coordination
mechanism for the of the various energy programs
integration, rationalization, of the Government
and coordination of the
various energy programs of
the Government;
(b) Develop and update (b) Develop and update annually
annually the existing the existing Philippine Energy
Philippine Energy Plan, Plan, hereinafter referred to as
hereinafter referred to as 'The Plan', which shall provide
PEP, which shall provide for for an integrated and
an integrated and comprehensive exploration,
comprehensive exploration, development, utilization,
development, utilization, distribution, and conservation of
distribution, and energy resources, with
conservation of energy preferential bias for
resources, with preferential environment-friendly,
bias for environment- indigenous, and low-cost
friendly, indigenous, and sources of energy.
low-cost sources of energy.
The PEP shall include a The plan shall include a policy
policy direction towards the direction towards the
Privatization of government privatization of government
agencies related to energy, agencies related to energy,
deregulation of the power deregulation of the power and
and energy industry, and energy industry, and reduction of
reduction of dependency dependency on oil-fired plants.
on oil-fired plants. Said Said Plan shall be submitted to
PEP shall be submitted to Congress not later than the
Congress not later than the fifteenth day of September every
fifteenth (15th) day of year thereafter;
September and every year
thereafter;
(c) Prepare and update (c) Prepare and update annually [PEMC] [PEMC]
annually a Power a Power Development Program (c) Prepare and update annually a The IRR should be made
Development Program (PDP) and integrate the same Power Development Program (PDP) consistent with the provision of
(PDP) and integrate the into the Philippine Energy Plan. and integrate the same into the the EPIRA wherein the DOE shall
same into the PEP. The The PDP shall consider and PEP. The PDP shall consider and formulate the TDP.
PDP shall consider and integrate the individual or joint integrate the individual or joint Furthermore, the development
integrate the individual or development plans of the development plans of the plan for the transmission facilities
joint development plans of transmission, generation, and transmission, generation, and should be simultaneously
the transmission, distribution sectors of the power distribution sectors of the electric formulated and updated yearly by
generation, and distribution industry, which are submitted to power industry which are submitted the DOE with the Power
sectors of the electric power the Department: Provided, to the DOE: Provided, however, That Development Program or “PDP”
industry which are submitted however, That the ERC shall the ERC shall have exclusive (contains proposed generating
to the DOE: Provided, have exclusive authority authority covering the Grid Code and capacity development and
however, That the ERC covering the Grid Code and the the Distribution Code; and the expansion plans), as practiced in
shall have exclusive pertinent rules and regulations it pertinent rules and regulations it may other jurisdictions.
authority covering the Grid may issue; issue. The DOE, following its Commercial simulation tools are
Code and the Distribution approval of shall formulate the already available in the market to
Code; and the pertinent Transmission Development Plan perform the simultaneous
rules and regulations it may (TDP) incorporating the proposal formulation and updating of the
issue. The DOE, following prepared by the National generation expansion and
its approval of the Transmission Corporation transmission development plans.
Transmission Development (TRANSCO) or its Buyer or
Plan (TDP) prepared by the Concessionaire on the improvement
National Transmission and expansion of its transmission
Corporation (TRANSCO) or facilities, and shall integrate the TDP
its Buyer or Concessionaire, with the annual development plans
shall integrate the TDP with of Distribution Utilities and NPC, and
the annual development other relevant data as are available to
plans of Distribution Utilities DOE, which shall be incorporated in
and NPC, and other relevant the PEP;
data as are available to DOE,
which shall be incorporated in
the PEP;
(d) Ensure the reliability, (d) Ensure the reliability, quality
quality and security of supply and security of supply of electric
of electric power; power;
(e) Following the (e) Following the restructuring of
Restructuring of the the electricity sector, the DOE
electricity sector, the DOE shall, among others:
shall, among others:
(i) Encourage private sector (i) Encourage private
investments in the sector investments in the
electricity sector and electricity sector and
promote development of promote development of
indigenous and indigenous and
Renewable Energy renewable energy
Sources including small- sources;
scale renewable energy
generating sources;
(ii) Facilitate and ii) Facilitate and
encourage reforms in encourage reforms in the
the structure and structure and operations
operations of Distribution of distribution utilities for
Utilities for greater greater efficiency and
efficiency and lower lower costs;
costs;
(iii) In consultation with other (iii) In consultation with
government agencies, other government
promote a system of agencies, promote a
incentives to encourage system of incentives to
Electric Power Industry encourage industry
Participants, including participants, including
new Generation new generating
Companies and End- companies and end-
users, to provide users to provide
adequate and reliable adequate and reliable
electric supply; and electric supply; and
(iv) Undertake, in (iv) Undertake, in
coordination with the coordination with the
ERC, NPC, NEA and ERC, NPC, NEA and the
the Philippine Philippine Information
Information Agency Agency (PIA), information
(PIA), information campaign to educate the
campaigns to educate public on the
the public on the restructuring of the
Restructuring of the electricity sector and
electricity sector and privatization of NPC
Privatization of NPC assets;
assets;
(f) Jointly with the Electric (f) Jointly with the electric power
Power Industry Participants, industry participants, establish
establish the Wholesale the wholesale electricity spot
Electricity Spot Market market and formulate the
(WESM) and formulate the detailed rules governing the
detailed rules governing the operations thereof;
operations thereof;
(g) Establish and (g) Establish and administer
administer programs for programs for the exploration,
the exploration, transportation, marketing,
transportation, marketing, distribution, utilization,
distribution, utilization, conservation, stockpiling, and
conservation, stockpiling, storage of energy resources of
and storage of energy all forms, whether conventional
resources of all forms, or non-conventional;
whether conventional or non-
conventional;
(h) Exercise supervision and (h) Exercise supervision and
control over all government control over all government
activities relative to energy activities relative to energy
projects in order to attain the projects in order to attain the
goals embodied in Section 2 goals embodied in Section 2 of
of Republic Act No. 7638; RA 7638;
(i) Develop policies and (i) Develop policies and [BENECO]
procedures and, as procedures and, as appropriate,
appropriate, promote a promote a system of energy Relative to this, the DOE shall
system of energy development incentives to recognize the electric
development incentives to enable and encourage electric cooperatives as a key player in
enable and encourage power industry participants to power generation. The ECs shall
Electric Power Industry provide adequate capacity to be allowed to put up their
Participants to provide meet demand including, among generation facility provided the
adequate capacity to meet others, reserve requirements; source of power will be
demand including, among renewable energy.
others, reserve requirements;
The DOE must give the ECs the
opportunity to secure hydro
service contracts based on terms
and conditions reflective of the
nature of the operations of ECs.
In cases where the HSC has

already been awarded to an
independent private entity, the
Terms of Reference (TOR) of the
HSC should include a provision
mandating the entity to reveal the
benefits it could give to the host
communities. An interested EC
must then be given the right to
match the benefits to be given by
the private entity and should the
offer of the ECs be better, the
ECs must be allowed to be the
party to develop the resources of
the area covered by the HSC.
The issuance of a HSC to a

private party should not prevent
the residents from choosing their
power developer especially if the
areas concerned fall within the
ancestral domains of Indigenous
Peoples (IPs) and Indigenous
Cultural Communities (ICCs).
The Indigenous Peoples Rights
Act (IPRA) or RA 8371 is a
paramount law that enshrined the
rights of IPs to decide the use
and development of their natural
resources. The HSC given to a
private entity should not
supersede such right. The
IPs/ICCs must be given the right
to decide which company or party
they would enter into a MOA for
the development of their
renewable energy resources.
(j) Monitor private sector (j) Monitor private sector
activities relative to energy activities relative to energy
projects in order to attain the projects in order to attain the
goals of the Restructuring, goals of the restructuring,
Privatization, and privatization, and modernization
modernization of the electric of the power sector as provided
power sector as provided for for under existing laws:
under existing laws: Provided, That the Department
Provided, That the DOE shall endeavor to provide for an
shall endeavor to provide for environment conducive to free
an environment conducive to and active private sector
free and active private participation and investment in
sector participation and all energy activities;
investment in all energy
activities;
(k) Assess the requirements (k) Assess the requirements of,
of, determine priorities for, determine priorities for, provide
provide direction to, and direction to, and disseminate
disseminate information information resulting from energy
resulting from energy research and development
research and development programs for the optimal
programs for the optimal development of various forms of
development of various energy production and utilization
forms of energy production technologies;
and utilization technologies;
(l) Formulate and implement (l) Formulate and implement
programs, including a programs, including a system of
system of providing providing incentives and
incentives and penalties, for penalties, for the judicious and
the judicious and efficient efficient use of energy in all
use of energy in all energy- energy-consuming sectors of the
consuming sectors of the economy;
economy;
(m) Formulate and (m) Formulate and implement a
implement a program for the program for the accelerated
accelerated development of development of non-
non-conventional energy conventional energy systems
systems and the promotion and the promotion and
and commercialization of its commercialization of its
applications; applications;
(n) Devise ways and means (n) Devise ways and means of
of giving direct benefit to the giving direct benefit to the
province, city, or province, city, or municipality,
municipality, especially the especially the community and
community and people people affected, and equitable
affected, and equitable preferential benefit to the region
preferential benefit to the that hosts the energy resource
region that hosts the energy and/or the energy-generating
resource and/or the energy- facility: Provided, however, That
generating facility: Provided, the other provinces, cities,
however, That the other municipalities, or regions shall
provinces, cities, not be deprived of their energy
municipalities, or regions requirements;
shall not be deprived of their
energy requirements;
(o) Encourage private (o) Encourage private
enterprises engaged in enterprises engaged in energy
energy projects, including projects, including corporations,
corporations, cooperatives, cooperatives, and similar
and similar collective collective organizations, to
organizations, to broaden broaden the base of their
the base of their ownership ownership and thereby
and thereby encourage the encourage the widest public
widest ownership of energy-oriented
public ownership of energy- corporations;
oriented corporations;
(p) Formulate such rules and (p) Formulate such rules and
regulations as may be regulations as may be necessary
necessary to implement the to implement the objectives of
objectives of the Act; this Act; and
(q) As part of the reportorial Section 61. Reportorial
requirements of the Act, the Requirements.
DOE shall prepare and
submit to the Power The DOE shall take the
Commission a semi-annual necessary measures to ensure
report on the status of the that the provisions of this Act are
implementation of the Act on properly implemented, and shall
or before the last week of submit to the Power Commission
April and October of each a semi-annual report on the
year. Towards this end, the implementation of this Act, which
DOE shall be on or before the last
may require reports or week of April and October of
documents from the Electric each year.
Power Industry
Participants as necessary to
facilitate compliance with this
mandate and subject to
appropriate measures to
preserve the confidentiality of
proprietary or commercially
sensitive information; and
(r) Exercise such other Section 37. Powers and
powers as may be Functions of the DOE.
necessary or incidental to (q) Exercise such other powers
attain the objectives of the as may be necessary or
Act. incidental to attain the objectives
of this Act."
Section 2. Responsibilities of the
NPC.
(a) Pursuant to Section 70 of the Section 70. Missionary
Act, notwithstanding the Electrification.
divestment and/or
Privatization of NPC assets, Notwithstanding the divestment
IPP contracts and spun-off and/or privatization of NPC
corporations, NPC shall assets, IPP contracts and spun-
remain as a National off corporations, NPC shall
Government-owned and remain as a National
-controlled corporation to Government-owned and
perform the missionary -controlled corporation to
electrification function perform the missionary
through the Small Power electrification function through
Utilities Group (SPUG) and the Small Power Utilities Group
shall be responsible for (SPUG) and shall be responsible
providing power generation for providing power generation
and its associated power and its associated power
delivery systems in areas delivery systems in areas that
that are not connected to the are not connected to the
transmission system. The transmission system. The
missionary electrification missionary electrification
function shall be funded from function shall be funded from the
the revenues from sales in revenues from sales in
missionary areas and from missionary areas and from the
the Universal Charge to be universal charge to be collected
collected from all electricity from all electricity end-users as
End-users as determined by determined by the ERC.
the ERC.
(b) Consistent with Section 34(d) Section 34. Universal Charge.
of the Act, the NPC shall
manage under existing Within one (1) year from the
arrangements, an effectivity of this Act, a universal
environmental charge charge to be determined, fixed
equivalent to P0.0025 per and approved by the ERC, shall
kilowatt-hour (kWh) sales, be imposed on all electricity end-
intended solely for the users for the following purposes:
rehabilitation and
management of watersheds (d) An environmental charge
nationwide. equivalent to one-fourth of one
centavo per kilowatt-hour
(P0.0025/kWh), which shall
accrue to an environmental fund
to be used solely for watershed
rehabilitation and management.
Said fund shall be managed by
NPC under existing
arrangements; and
(c) Pursuant to Section 47(f) of Section 47. NPC Privatization.
the Act, NPC shall continue
to operate Agus and (f) The Agus and the Pulangui
Pulangui complexes, which complexes in Mindanao shall be
shall be owned by PSALM. 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 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;
(d) Pursuant to Section 47(j) of j) NPC may generate and sell
the Act, NPC/PSALM may electricity only from the
continue to generate and undisposed generating assets
sell electricity only from the and IPP contracts of PSALM
undisposed generating Corp. and shall not incur any
assets and IPP contracts of new obligations to purchase
PSALM. NPC/PSALM shall power through bilateral contracts
not incur any new with generation companies or
obligations to purchase other suppliers.
power through bilateral
contracts with Generation
Companies or other
Suppliers.
NEA.
(a) NEA shall continue to be Section 58. Additional
under the supervision of the Mandate of the National
DOE and shall Electrification Administration
exercise its functions under (NEA).
Presidential Decree No. 269,
as amended by Presidential NEA shall continue to be under
Decree No. 1645 insofar as the supervision of the DOE and
they are consistent with the shall exercise its functions under
Act. To this end, NEA shall Presidential Decree No. 269, as
develop and implement amended by Presidential Decree
programs: No. 1645 insofar as they are
consistent with this Act.
(i) To prepare Electric NEA shall develop and
Cooperatives (ECs) in implement programs:
operating and competing
under the deregulated (a) To prepare electric
electricity market within five cooperatives in operating and
(5) years from the effectivity competing under the
of the Act, specifically in an deregulated electric market
environment of Open within five (5) years from the
Access and retail wheeling effectivity of this Act, specifically
and Retail Competition; in an environment of open
access and retail wheeling
(ii) To strengthen the (b) To strengthen the technical

technical capability and capability and financial viability
financial viability of ECs, of rural electric cooperatives;
through the following and
activities:
(1) NEA may offer services
to the ECs other than
those related to its lending
functions, for a fee duly
approved by the NEA Board
of Administrators; and
(2) NEA may consider hiring
qualified external industry
management experts and
shall provide their services
to the ECs: Provided, That
such services will not
increase Retail Rates.
(iii) To review and upgrade
regulatory policies with a
view to enhancing the
viability of the ECs as electric
utilities.
(b) NEA may, in exchange Section 30. Wholesale
for adequate security and a Electricity Spot Market.
guarantee fee, act as a
guarantor for purchases of NEA may, in exchange for
electricity in the WESM by adequate security and a
any EC or small Distribution guarantee fee, act as a
Utility to support their credit guarantor for purchases of
standing consistent with the electricity in the wholesale
provisions of the Act. For electricity spot market by any
this purpose, the electric cooperative or small
authorized capital stock of distribution utility to support their
NEA is hereby increased to credit standing consistent with
Fifteen Billion Pesos the provisions hereof. For this
(P15,000,000,000.00). purpose, the authorized capital
stock of NEA is hereby
increased to Fifteen billion pesos
(P15,000,000,000.00)
(c) NEA shall submit the All electric cooperatives which
report of ECs on their have outstanding uncollected
outstanding uncollected billings to any local government
billings due from any local unit shall report such billings to
government unit (LGU) to NEA which shall, in turn, report
the Department of Budget the same to the Department of
and Management (DBM) Budget and Management (DBM)
pursuant to Executive Order for collection pursuant to
(E.O.) No. 190 issued on 21 Executive Order 190 issued on
December 1999. The DBM December 21, 1999.
shall effect withholding from
the Internal Revenue
Allotment (IRA) of the
concerned LGU: Provided,
That there is a Memorandum
of Agreement (MOA)
executed between the LGU
and NEA: Provided, further,
That the uncollected billings
are supported by a
certification issued by the
Municipality/City or Provincial
Treasurer.
ERC.
(a) Pursuant to Section 43 of the Section 43. Functions of the
Act, the ERC shall have the ERC.
responsibility of promoting
competition, encouraging The ERC shall promote
market development, ensuring competition, encourage market
customer choice, and penalizing development, ensure customer
abuse of market power in the choice and penalize abuse of
electric power industry. market power in the restructured
electricity industry. In
appropriate cases, the ERC is
authorized to issue cease and
desist order after due notice and
hearing. Towards this end, it
shall be responsible for the
following key functions in the
restructured industry:
(b) Pursuant to Sections 43 and 45 Section 43. Functions of the
of the Act, the ERC shall ERC.
promulgate such rules and
regulations as authorized The ERC shall promote
thereby, including but not limited competition, encourage market
to Competition Rules and development, ensure customer
limitations on recovery of choice and penalize abuse of
system losses, and shall market power in the restructured
impose fines or penalties for electricity industry. In
any non-compliance with or appropriate cases, the ERC is
breach of the Act, these Rules authorized to issue cease and
and the rules and regulations desist order after due notice and
which it promulgates or hearing. Towards this end, it
administers. shall be responsible for the
(a) Enforce the

implementing rules and
regulations of this Act;
(b) Within six (6) months

from the effectivity of this
Act, promulgate and
enforce, in accordance
with law, a National Grid
Code and a Distribution
Code which shall
include, but not limited
to, the following: xxx
(c) Enforce the rules and

regulations governing
the operations of the
electricity spot market
and the activities of the
spot market operator
and other participants in
the spot market, for the
purpose of ensuring a
greater supply and
rational pricing of
electricity;
(e) Amend or revoke, after

due notice and hearing,
the authority to operate
of any person or entity
which fails to comply
with the provisions
hereof, the IRR or any
order or resolution of the
ERC. In the event a
divestment is required,
the ERC shall allow the
affected party sufficient
time to remedy the
infraction or for an
orderly disposal, but in
no case exceed twelve
(12) months from the
issuance of the order;
(f) In the public interest,

establish and enforce a
methodology for setting
transmission and
distribution wheeling
rates and retail rates for
the captive market of a
distribution utility, 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
on rate base (RORB) to
enable the entity to
operate viably. The ERC
may adopt alternative
forms of internationally-
accepted rate-setting
methodology as it may
deem appropriate. The
rate-setting methodology
so adopted and applied
must ensure a
reasonable price of
electricity. The rates
prescribed shall be non-
discriminatory. To
achieve this objective
and to ensure the
complete removal of
cross subsidies, the cap
on the recoverable rate
of system losses
prescribed in Section 10
of Republic Act No.
7832, is hereby
amended and shall be
replaced by caps which
shall be determined by
the ERC based on load
density, sales mix, cost
of service, delivery
voltage and other
technical considerations
it may promulgate. The
ERC shall determine
such form or rate-setting
methodology, which
shall promote efficiency.
In case the rate setting
methodology used is
RORB, it shall be subject
to the following
guidelines:
Impose fines or penalties for any

non-compliance with or breach
of this Act, the IRR of this Act
and the rules and regulations
which it promulgates or
administers;
(c) The ERC shall review and Section 9. Functions and
approve any plan for the Responsibilities of TransCo.
expansion or improvement of
transmission facilities submitted (d) Improve and expand its
by TRANSCO or its Buyer or transmission facilities, consistent
Concessionaire with due regard with the Grid Code and the
to the TDP. Transmission Development Plan
(TDP) to be promulgated
pursuant to this Act, to
adequately serve Generation
companies, distribution utilities
and suppliers requiring
transmission service and/or
Ancillary services through the
transmission system: Provided,
That TRANSCO shall submit any
plan for expansion or
improvement of its facilities for
approval by the ERC;
Section 4. Definition of Terms

(bbb) “Transmission Development
Plan” or “TDP” refers to the
program for managing the
transmission system through
efficient planning for the
expansion, upgrading,
rehabilitation, repair and
maintenance, to be formulated by
DOE and implemented by the
TRANSCO pursuant to this Act;
(d) To promote efficiency and non- Section 43. Functions of the
discrimination, the ERC, after ERC.
the conduct of public hearings,
shall determine, fix and (g) In the public interest,
approve Transmission and establish and enforce a
Distribution Wheeling Charges, methodology for setting
and Retail Rates through an transmission and distribution
ERC established and enforced wheeling rates and retail rates
methodologies setting the for the captive market of a
same. It shall fix and regulate the distribution utility, taking into
rates and charges to be imposed account all relevant
by Distribution Utilities on their considerations, including the
Captive Market as well as the efficiency or inefficiency of the
Universal Charge to be regulated entities. The rates
imposed on all electricity End- must be such as to allow the
users including self-generating recovery of just and reasonable
entities. costs and a reasonable return on
rate base (RORB) to enable the
entity to operate viably. The rate-
setting methodology so adopted
and applied must ensure a
reasonable price of electricity.
The rates prescribed shall be
non-discriminatory. To achieve
this objective and to ensure the
complete removal of cross
subsidies, the cap on the
recoverable rate of system
losses prescribed in Section 10
of Republic Act No. 7832, is
hereby amended and shall be
replaced by caps which shall be
determined by the ERC based
on load density, sales mix, cost
of service, delivery voltage and
other technical considerations it
may promulgate. The ERC shall
determine such form of rate-
setting methodology, which shall
promote efficiency. In case the
rate setting methodology used is
RORB, it shall be subject to the
following guidelines: xxx
Section 34. Universal Charge.

Within one (1) year from the
effectivity of this Act, a universal
charge to be determined, fixed
and approved by the ERC., shall
be imposed on all electricity end-
users for the following purposes:
xxx
(e) Any application or petition for
rate adjustment or for any relief
affecting the consumers must be
verified, and accompanied with
an acknowledgement of receipt
of a copy thereof by the LGU
Legislative Body of the locality
where the applicant or petitioner
principally operates together
with the certification of the
notice of publication thereof in a
newspaper of general circulation
in the same locality.
The ERC may grant provisionally
or deny the relief prayed for not
later than seventy-five (75)
calendar days from the filing of
the application or petition, based
on the same and the supporting
documents attached thereto and
such comments or pleadings the
consumers or the LGU
concerned may have filed within
thirty (30) calendar days from
receipt of a copy of the
application or petition or from the
publication thereof as the case
may be. Thereafter, the ERC
shall conduct a formal hearing on
the application or petition, giving
proper notices to all parties
concerned, with at least one
public hearing in the affected
locality, and shall decide the
matter on the merits not later
than twelve (12) months from the
issuance of the aforementioned
provisional order.
This Section 4(e) shall not
apply to those applications or
petitions already filed as of 26
December 2001 in compliance
with Section 36 of the Act.
Section 4 (e) shall not apply to
Generation Rate Adjustment
Mechanism (GRAM),
Incremental Currency
Exchange Recovery
Adjustment (ICERA),
Transmission Rate Adjustment
Mechanism, Transmission true-
up Mechanism, System Loss
Rate Adjustment Mechanism,
Lifeline Rate Recovery
Mechanism, Cross-Subsidy
Mechanism, Local Franchise
Tax Recovery Mechanism,
Business Tax Recovery
Mechanism, Automatic
Generation Rate Adjustment
Mechanism, VAT Recovery
Mechanism, Incremental
Generation Cost Adjustment
Mechanism, and Recovery of
Deferred Accounting
Adjustment for Fuel Cost and
Power Produced by NPC and
NPC-SPUG, Provided that,
such adjustments shall be
subject to subsequent
verification by the ERC to avoid
over/under recovery of
charges.
(f) Amend or revoke, after due
notice and hearing, the
authority to operate of any
Person or entity which fails to
comply with the provisions of
the Act, these Rules or any
order or resolution of the
ERC. In the event a divestment
is required, the ERC shall allow
the affected party sufficient time
to remedy the infraction or for an
orderly disposal, but shall in no
case exceed twelve (12)
months from the issuance of the
order.
(g) In order to facilitate the Section 43. Functions of the
provision of an efficient, reliable ERC.
and quality service to End-
users, the ERC shall (b) Within six (6) months from
promulgate a Grid Code and a the effectivity of this Act,
Distribution Code that shall promulgate and enforce, in
include performance standards accordance with law, a National
and the minimum financial Grid Code and a Distribution
capability standards and other Code which shall include, but not
terms and conditions for access limited to, the following:
to and use of the transmission
and distribution facilities within (i) Performance standards for
six (6) months from the effectivity TRANSCO O & M
of the Act. Concessionaire, distribution
utilities and suppliers: Provided,
That in the establishment of the
performance standards, the
nature and function of the
entities shall be considered; and
(ii) Financial capability standards
for the generating companies,
the TRANSCO, distribution
utilities and suppliers: Provided,
further, That such standards are
set to ensure that the electric
power industry participants meet
the minimum financial standards
to protect the public interest.
Determine, fix, and approve,
after due notice and public
hearings the universal charge, to
be imposed on all electricity end-
users pursuant to Section 34
hereof.
(h) Act on applications for cost (q) Act on applications for cost
recovery and return on DSM. recovery and return on demand
side management projects;
(i) The ERC shall set the criteria Section 43. Functions of the
for eligibility and authorize ERC.
eligible Generation Companies,
Distribution Utilities, Suppliers, (c) Enforce the rules and
IPP Administrators, End-users regulations governing the
and other entities authorized by operations of the electricity spot
ERC in accordance with the market and the activities of the
Act for membership in the spot market operator and other
WESM. For the purpose of participants in the spot market,
ensuring a greater supply and for the purpose of ensuring a
rational pricing of electricity, the greater supply and rational
ERC shall enforce the rules and pricing of electricity;
regulations governing the
operations of WESM and the Section 30. Wholesale
activities of the WESM Electricity Spot Market.
Operator and other WESM
Participants. In cases of Subject to the compliance with
national and international the membership criteria, all
security emergencies or natural generating companies,
calamities, it can suspend spot distribution utilities, suppliers,
market operations within the bulk consumers/end-users and
WESM. other similar entities authorized
by the ERC shall be eligible to
become members of the
wholesale electricity spot
market.
The ERC may authorize other

similar entities to become
eligible as members, either
directly or indirectly, of the
market. All generating
companies, distribution utilities,
suppliers, bulk consumers/end-
users and other similar entities
authorized by the ERC, whether
direct or indirect members of the
market, shall be bound by the
wholesale electricity spot market
rules with respect to transactions
in that market.
(j) The ERC shall ensure that Section 36. Unbundling of
Electric Power Industry Rates and Functions.
Participants and
NPC functionally and structurally Within six (6) months from the
unbundle their respective effectivity of this Act, NPC shall
business activities and rates and file with the ERC its revised
determine the levels of cross rates. The rates of NPC shall be
subsidies in the existing Retail unbundled between transmission
Rates until the same is removed and generation rates and the
in accordance with the sectors as rates shall reflect the respective
identified in and as required by costs of providing each service.
Sections 5, 36 and 74 of the Act. Inter-grid and intra-grid cross
ERC shall set a Lifeline Rate for subsidies for both the
the Marginalized End-users. In transmission and the generation
particular, the distribution rates rates shall be removed in
should unbundle at least the accordance with this Act.
following business activities or
assets: supply, distribution, and Within six (6) months from the
such other services as the ERC effectivity of this Act, each
may determine. distribution utility shall file its
revised rates for the approval by
the ERC. The distribution
wheeling charge shall be
unbundled from the retail rate
and the rates shall reflect the
respective costs of providing
each service. For both the
distribution retail wheeling and
supplier’s charges, inter-class
subsidies shall be removed in
accordance with this Act.
Within six (6) months from the

date of submission of revised
rates by NPC and each
distribution utility, the ERC shall
notify the entities of their
approval.
Any electric power industry

participant shall functionally and
structurally unbundle its
business activities and rates in
accordance with the sectors as
identified in Section 5 hereof.
The ERC shall ensure full
compliance with this provision.
Section 43. Functions of the

ERC.
(d) Determine the level of cross

subsidies in the existing retail
rate until the same is removed
pursuant to Section 74 hereof;
(j) Set a lifeline rate for the

marginalized end-users;
Section 74. Cross Subsidies
Cross subsidies within a grid

between grids and / or classes of
customers shall be phased out in
a period not exceeding three (3)
years from the establishment by
the ERC of a universal charge
which shall be collected form all
electricity end-users. Such level
of cross subsidies shall be made
transparent and identified
separately in the billing
statements provided to end-
users by the suppliers.
The ERC may extend the period

for the removal of cross
subsidies for a maximum period
of one (1) year upon finding that
cessation of such mechanism
would have a material adverse
effect upon the public interest,
particularly the residential end-
user; or would have an
immediate, irreparable, and
adverse financial effect on
distribution utility.
(k) The ERC shall promulgate rules Section 29. Supply Sector.
and regulations prescribing the
qualifications of Suppliers, which The supply sector is a business
shall include among others their affected with public interest.
technical and financial capability Except for distribution utilities
and credit worthiness. and electric cooperatives with
respect to their existing franchise
areas, all suppliers of electricity
to the contestable market shall
require a license from the ERC.
For this purpose, the ERC shall

promulgate rules and regulations
prescribing the qualifications of
electricity suppliers which shall
include, among other
requirements, a demonstration
of their technical capability,
financial capability, and
creditworthiness: Provided, That
the ERC shall have authority to
require electricity suppliers to
furnish a bond or other evidence
of the ability of a supplier to
withstand market disturbances
or other events that may
increase the cost of providing
service.
(l) The ERC shall determine the Section 31. Retail Competition
electricity End-users comprising and Open Access.
the Contestable and Captive
Markets. The ERC shall also Upon the initial implementation
seek to foster competition in of open access, the ERC shall
credit, collection and metering allow all electricity end-users
services in Contestable Markets. with a monthly average peak
It shall likewise license Suppliers demand of at least one
to Contestable Markets. megawatt (1MW) for the
preceding twelve (12) months to
be the contestable market. Two
(2) years thereafter, the
threshold level for the
contestable market shall be
reduced to seven hundred fifty
kilowatts (750kW). At this level,
aggregators shall be allowed to
supply electricity to end-users
whose aggregate demand within
a contiguous area is at least
seven hundred fifty kilowatts
(750kW). Subsequently and
every year thereafter, the ERC
shall evaluate the performance
of the market. On the basis of
such evaluation, it shall
gradually reduce threshold level
until it reaches the household
demand level. In the case of
electric cooperatives, retail
competition and open access
shall be implemented not earlier
than five (5) years upon the
effectivity of this Act.
(m) The ERC shall perform such Section 43. Functions of ERC. [PEPOA] [PEPOA]
other regulatory functions as are The ERC shall perform such other The primary objective of small DUs
appropriate and necessary in (t) Perform such other regulatory regulatory functions as are in offering their shares to the
order to ensure the successful functions as are appropriate and appropriate and necessary in order to public is to raise funds for their
Restructuring and modernization necessary in order to ensure the ensure the successful Restructuring CAPEX projects.
of the electric power industry, successful restructuring and and modernization of the electric
such as, but not limited to, the modernization of the electric power industry, such as, but not Listing at the PSE may not be
rules and guidelines under power industry, such as, but not limited to, the rules and guidelines practical for small Distribution
which Generation Companies, limited to, the rules and under which Generation Companies, Utilities (DUs) as the cost of doing
Distribution Utilities, which are guidelines under which Distribution Utilities, which are not an Initial Public Offering (IPO) and
not publicly listed, shall offer and generation companies, publicly listed, shall offer and sell to PSE listing could be quite
sell to the public a portion not distribution utilities which are not the public a portion not less than prohibitive for them. This would
less than fifteen percent (15%) publicly listed shall offer and sell fifteen percent (15%) of their defeat the purpose of small DUs in
of their common shares of to the public a portion not less common shares of stocks: Provided, going public as it might not leave
stocks: Provided, however, That than fifteen percent (15%) of however, That Generation sufficient funds to fund their
Generation Companies, their common shares of stocks: Companies, Distribution Utilities or CAPEX projects.
Distribution Utilities or their Provided, however, That their respective holding companies
respective holding companies generation companies, that are already listed in the If listing at the PSE would not be
that are already listed in the distribution utilities or their Philippine Stock Exchange (PSE) are practical, small DUs should be
Philippine Stock Exchange respective holding companies deemed in compliance; Provided, allowed to explore other innovative
(PSE) are deemed in that are already listed in the PSE Further, That public offering ways to raise funds from the
compliance. For existing are deemed in compliance. For pursuant to the Revised Securities public.
companies, such public offering existing companies, such public Act (R.A. No. 8799) shall be
shall be implemented not later offering shall be implemented deemed compliant hereof. For
than five (5) years from the not later than five (5) years from existing companies, such public
effectivity of the Act. New the effectivity of this Act. New offering shall be implemented not
companies shall implement their companies shall implement their later than five (5) years from the
respective public offerings not respective public offerings not effectivity of the Act. New companies
later than five (5) years from the later than five (5) years from the shall implement their respective
issuance of their Certificate of issuance of their certificate of public offerings not later than five (5)
Compliance (COC); compliance; and years from the issuance of their
Certificate of Compliance (COC);
(n) The ERC shall have the original (u) The ERC shall have the
and exclusive jurisdiction over original and exclusive jurisdiction
all cases contesting rates, fees, over all cases contesting rates,
fines and penalties imposed in fees, fines and penalties
the exercise of its powers, imposed by the ERC in the
functions and responsibilities and exercise of the above mentioned
over all cases involving disputes powers, functions and
between and among participants responsibilities and over all
or players in the energy sector cases involving disputes
relating to the foregoing powers, between and among participants
functions and responsibilities. or players in the energy sector.
(o) It shall also be empowered to
issue such other rules that are
essential in the discharge of its
functions as an independent
quasi-judicial body.
(p) All actions taken by the ERC
pursuant to the Act are subject
to judicial review and the
requirements of due process
and the cardinal rights and
principles applicable to quasi-
judicial bodies.
(q) The ERC may require reports or
documents from the Electric
Power Industry Participants as
necessary to facilitate
compliance with the
Act, subject to appropriate
measures to preserve the
confidentiality of proprietary or
commercially sensitive
information.
(r) All notices of hearings to be
conducted by the ERC for the
purpose of fixing rates or fees
shall be published at least twice
for two (2) successive weeks in
two (2) newspapers of nationwide
circulation.
(s) The ERC shall conduct rate
application hearings in the
locality where the applicant is
conducting its operations:
Provided, That this requirement
shall not apply to applications
filed pursuant to Section 36 of
the Act.
PSALM.
(a) Consistent with Section 49 of the Section 49. Creation of Power
Act, PSALM shall take Sector Assets and Liabilities
ownership of all existing NPC Management Corporation.
generation assets, liabilities, IPP
contracts, real estate and all There is hereby created a
other disposable assets. All government-owned and
outstanding obligations of NPC -controlled corporation to be
arising from loans, issuances known as the “Power Sector
of bonds, securities and other Assets and Liabilities
instruments of indebtedness Management Corporation”,
shall be transferred to and hereinafter referred to as the
assumed by PSALM. “PSALM Corp.”, which shall take
ownership of all existing NPC
contracts, real estate and all
other disposable assets. All
outstanding obligations of the
NPC arising from loans,
issuances of bonds, securities
and other instruments of
indebtedness shall be
transferred to and assumed by
the PSALM Corp. within one
hundred eighty (180) days from
the approval of this Act.
(b) The PSALM shall formulate and Section 51. Powers.
implement a program for the sale
and Privatization of the NPC (a) To formulate and implement
assets and IPP contracts and a program for the sale and
the liquidation of NPC Debts privatization of the NPC assets
and Stranded Contract Costs in and IPP contracts and the
accordance with the liquidation of NPC debts and
Act. It shall calculate the amount stranded contract costs, such
of the Stranded Debts and liquidation to be completed
Stranded Contract Costs of NPC, within the term of existence of
which amount shall form part of the PSALM Corp.;
the Universal Charge to be
determined, fixed, and approved
by the ERC.
(c) Pursuant to Section 60 of the Section 60. Debts of Electric
Act, the PSALM shall assume Cooperatives.
all outstanding financial
obligations of ECs to NEA and Upon the effectivity of this Act,
other government agencies all outstanding financial
arising from their respective obligations of electric
Rural Electrification Program. cooperatives to NEA and other
This shall be done in accordance government agencies incurred
with the program duly approved for the purpose of financing the
byhe President of the Philippines. rural electrification program shall
be assumed by the PSALM
Corp. in accordance with the
program approved by the
President of the Philippines
within one (1) year from the
effectivity of this Act which shall
be implemented and completed
within three (3) years from the
effectivity of this Act. The ERC
shall ensure a reduction in the
rates of electric cooperatives
commensurate with the resulting
savings due to the removal of
the amortization payments of
their loans. Within five (5) years
from the condonation of debt,
any electric cooperative which
shall transfer ownership or
control of its assets, franchise or
operations thereof shall repay
PSALM Corp. the total debts
including accrued interests
thereon.
RULE 4. DEFINITION OF TERMS
As used in these Rules, the
following terms shall have the
following respective meanings:
(a) “Act” unless otherwise stated,
refers to, Republic Act No. 9136,
otherwise known as the “Electric
Power Industry Reform Act of
2001”;
(b) “Accredited Facility” refers to a
facility granted the certificate of
accreditation by NPC or DOE
pursuant to Executive 0rder No.
215 and its implementing rules
and regulations;
(c) “Affiliate” means any Person Section 45. Cross Ownership,
which, alone or together with any Market Power Abuse and Anti-
other Person, directly or Competitive Behavior.
indirectly, through one or more
intermediaries, Controls, is An “affiliate” means any person
Controlled by, or is under which, alone or together with any
common Control with another other person, directly or
Person. Affiliates shall include a indirectly, through one or more
subsidiary company and parent intermediaries, controls, is
company and subsidiaries, controlled by, or is under
directly or indirectly, of a common common control with another
parent; person. 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.
(d) “Aggregator” refers to a Person Section 4. Definition of Terms.
or entity duly licensed by the
ERC to engage in consolidating (a) “Aggregator” refers to a
electric power demand of End- person or entity, engaged in
users in a Contestable Market consolidating electric power
for the purpose of purchasing demand of end-users in the
and reselling electricity on a contestable market, for the
group basis; purpose of purchasing and
reselling electricity on a group
basis;
(e) “Ancillary Services” refer to (b) “Ancillary Services” refer to
those services that are those services that are
necessary to support the necessary to support the
transmission of capacity and transmission of capacity and
energy from resources to loads energy from resources to loads
while maintaining reliable while maintaining reliable
operation of the transmission operation of the transmission
system in accordance with system in accordance with good
good utility practice and the utility practice and the Grid code
Grid Code to be adopted in to be adopted in accordance
accordance with the Act; with this Act;
(f) “Bureau of Internal Revenue” or
“BIR” refers to an attached
agency of the Department of
Finance (DOF);
(g) “Board of Investments” or “BOI”
refers to an attached agency of
the Department of Trade and
Industry (DTI) created under
Republic Act No. 5186, as
amended;
(h) “Bonafide Member” refers to a
Person that has met all the
requirements set forth under
the applicable EC by-laws and
has been enlisted as such, with
voting rights under the “one-
man-one-vote” cooperative
principle;
(i) “Build-Operate-Transfer” or
“BOT” shall have the meaning
specified by Republic Act No.
6957, as amended, otherwise
known as “BOT Law” and its
implementing rules and
regulations;
(j) “Buyer or Concessionaire”
refers to a qualified party
awarded the sale agreement or
Concession Contract for
transmission assets;
(k) “Captive Market” refers to (c) “Captive Market” refers to
electricity End-users who do electricity end-users who do not
not have the choice of a have the choice of a supplier of
Supplier of electricity, as may electricity, as may be determined
be determined by the ERC in by the Energy Regulatory
accordance with the Act; Commission (ERC) in
accordance with this Act;
(l) “Central Dispatch” refers to the (d) “Central Dispatch” refers to
process of issuing direct the process of issuing direct
instructions to Electric Power instructions to electric power
Industry Participants by the industry participants by the grid
grid operator to achieve the operator to achieve the
economic operation and economic operation and
maintenance of quality, maintenance of quality, stability,
stability, reliability and security reliability and security of the
of the transmission system; transmission system;
(m) “Competition Rules” refer to
the rules promulgated by ERC
to promote and ensure
competition in the electric
power industry pursuant to the
Act and these Rules;
(n) “Concession Contract” refers
to the award by the
government to a qualified
private entity of the
responsibility for financing,
operating, expanding,
maintaining and managing
specific Government-owned
transmission assets;
(o) “Condonation” refers to the
setting aside or suspension
from the ECs’ books of
accounts of all their financial
obligations to NEA and other
government agencies as a
result of PSALM’s assumption
of the same, subject to their
compliance with the Program
approved by the President of
the Philippines;
(p) “Contestable Market” refers to (h) “Contestable Market” refers [PEPOA] [PEPOA]
the electricity End-users who to the electricity end-users who (p) “Contestable Market” refers to Electricity end-users should have
have a choice of a Supplier of have a choice of a supplier of the electricity End-users who have a the option to remain in the Captive
electricity, as may be electricity, as may be determined choice of a Supplier of electricity, as Market despite being certified as
determined by the ERC in by the ERC in accordance with may be determined by the ERC in belonging to the Contestable
accordance with the Act; this Act; accordance with Section 31 of the Market if there is no advantage to
Act. An electricity End-user may switch to the Contestable Market.
choose to remain in the Captive After all, it is the declared policy of
Market despite being certified as the EPIRA to ensure the quality,
belonging to the Contestable reliability, security and
Market; affordability of the supply of
electric power (Section 2a,
EPIRA).
(q) “Contiguous Area” refers to
areas which are within the
same boundaries such as
subdivisions, villages,
Economic Zones, business
districts and other similarly
situated End-users in which
Supply of Electricity can be
measured through metering
devices;
(r) “Control” shall mean the power Section 45. Cross Ownership,
to direct or cause the direction Market Power Abuse and Anti-
of the management policies of Competitive Behavior.
a Person by contract, agency
or otherwise; An “affiliate” means any person
which, alone or together with any
other person, directly or
indirectly, through one or more
intermediaries, controls, is
controlled by, or is under
common control with another
person. 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.
(s) “Cooperative Development
Authority” or “CDA” refers to an
entity created under Republic
Act No. 6939;
(t) “Corporation Code” refers to
Batas Pambansa Bilang 68,
otherwise known as “The
Corporation Code of the
Philippines;”
(u) “Demand Side Management” Section 4. Definition of Terms.
or “DSM” refers to measures
undertaken by Distribution (j) “Demand Side Management”
Utilities to encourage End- refers to measures undertaken
users in the proper by distribution utilities to
management of their load to encourage end-users in the
achieve efficiency in the proper management of their load
utilization of fixed to achieve efficiency in the
infrastructures in the system; utilization of fixed infrastructures
in the system;
(v) “Department of Budget and
Management” or “DBM” refers
to the government agency
created pursuant to Executive
Order No. 25, as amended;
(w) “Department of Energy” or (k) “Department of Energy” or
“DOE” refers to the “DOE” refers to the government
government agency created agency created pursuant to
pursuant to Republic Act No. Republic Act No. 7638 whose
7638 whose expanded expanded functions are provided
functions are provided in the herein;
Act;
(x) “Department of Finance” or (l) “Department of Finance” or
“DOF” refers to the government “DOF” refers to the government
agency created pursuant to agency created pursuant to
Executive Order No. 127, as Executive Order No. 127;
amended;
(y) “Distribution Code” refers to a (m) “Distribution Code” refers to
compilation of rules and a compilation of rules and
regulations governing electric regulations governing electric
utilities in the operation and utilities in the operation and
maintenance of their maintenance of their distribution
Distribution Systems, which systems which includes, among
includes, among others, the others, the standards for service
standards for service and and performance, and defines
performance, and defines and and establishes the relationship
establishes the relationship of of the distribution systems with
Distribution Systems with the facilities or installations of
facilities or installations of the parties connected thereto;
parties connected thereto;
(z) “Distribution of Electricity” (n) “Distribution of Electricity”
refers to the conveyance of refers to the conveyance of
electric power from electric power by a distribution
transmission facilities or utility through its distribution
Embedded Generators to End- system pursuant to the
sers by a Distribution Utility provisions of this Act;
through its Distribution System
pursuant to the provisions of
the Act and these Rules;
(aa) “Distribution System” refers to (o) “Distribution System” refers
the system of wires and to the system of wires and
associated facilities belonging associated facilities belonging to
to a franchised Distribution a franchised distribution utility
Utility extending between the extending between the delivery
delivery points on the points on the transmission or
transmission or subtransmission system or
Subtransmission System or generator connection and the
generator connection and the point of connection to the
point of connection to the premises of the end-user;
premises of the End-user;
(bb) “Distribution Wheeling (p) “Distribution Wheeling
Charge” refers to the cost or Charge” refers to the cost or
charge egulated by the ERC charge regulated by the ERC for
for the use of a Distribution the use of a distribution system
System and/or the availment of and/or the availment of related
related services; services;
(cc) “Distribution Utility” refers to (q) “Distribution Utility” refers to
any EC, private corporation, any electric cooperative, private
government-owned utility or corporation, government- owned
existing local government unit utility or existing local
which has an exclusive government unit which has an
franchise to operate a exclusive franchise to operate a
Distribution System in distribution system in
accordance with its franchise accordance with this Act;
and the Act;
(dd) “Economic Zones” or “EZs”
refer to selected areas which
are being developed into agro-
industrial, industrial, tourist,
recreational, commercial,
banking, investment and
financial centers. An EZ may
refer to any of the following:
Industrial Estates (IEs), Export
Processing Zones (EPZs),
Free Trade Zones (FTZs),
Information
Technology Parks and
Tourist/Recreational Centers,
such as those
managed, administered, or
operated by the Bases
Conversion evelopment
Authority (BCDA), Cagayan
Economic Zone Authority
(CEZA), Clark Development
Corporation (CDC), Philippine
Economic one Authority
(PEZA), Phividec Industrial
Authority (PIA), and
Zamboanga City Economic
Zone Authority (ZCEZA);
(ee) “Electric Cooperative” or “EC” (r) “Electric cooperative” refers to
refers to a Distribution Utility a distribution utility organized
organized pursuant to pursuant to Presidential Decree
Presidential Decree No. 269, No. 269, as amended, or as
as amended or as otherwise otherwise provided in this Act;
provided in the Act;
(ff) “Electric Power Industry (s) “Electric Power Industry
Participant” refers to any Participant” refers to any person
Person or entity engaged in the or entity engaged in the
generation, transmission, generation, transmission,
distribution or Supply of distribution or supply of
Electricity; electricity;
(gg) “Embedded Generators” refer
to generating units that are
indirectly connected to the Grid
through the Distribution
Utilities’ lines or industrial
generation facilities that are
synchronized with the Grid;
(hh) “End-user” refers to any (t) “End-user” refers to any
Person or entity requiring the person or entity requiring the
supply and delivery of supply and delivery of electricity
electricity for its own use; for its own use;
(ii) “Energized Area” refers to a
geographical area enjoying
dependable and adequate
electric service;
(jj) “Energy Regulatory Board” or (u) “Energy Regulatory Board” or
“ERB” refers to the “ERB” refers to the independent,
3independent, quasi-judicial quasi-judicial regulatory body
regulatory body created under created under Executive Order
Executive Order No. 172, as No. 172, as amended;
amended;
(kk) “Energy Regulatory (v) “Energy Regulatory
Commission” or “ERC” refers Commission” or “ERC” refers to
to the regulatory agency the regulatory agency created
created by Section 38 of the herein;
Act;
(ll) “Financing for Rural
Electrification” refers to those
loans and grants extended to
ECs, for the construction or
acquisition, operation and
maintenance of distribution,
generation, and
subtransmission facilities for
the purpose of supplying
electric service, and those
loans for the restoration,
upgrading and expansion of
such facilities, in areas which
are considered rural at the time
of the grant of such loans;
(mm) “Franchise Area” refers to a (w) “Franchise Area” refers to a
geographical area exclusively geographical area exclusively
assigned or granted to a assigned or granted to a
Distribution Utility for distribution utility for distribution
Distribution of Electricity; of electricity;
(nn) “Generation Company” refers (x) “Generation Company” refers
to any Person or entity to any person or entity
authorized by the ERC to authorized by the ERC to
operate facilities used in the operate facilities used in the
Generation of Electricity; generation of electricity;
(oo) “Generation Facility” refers to
a facility for the production of
electricity;
(pp) “Generation of Electricity” (y) “Generation of Electricity”
refers to the production of refers to the production of
electricity by a Generation electricity by a generation
Company or a co-generation company or a co-generation
facility pursuant to the facility pursuant to the provisions
provisions of the Act; of this Act;
(qq) “Grid” refers to the high (z) “Grid” refers to the high
voltage backbone system of voltage backbone system of
interconnected transmission interconnected transmission
lines, substations and related lines, substations and related
facilities, located in each of facilities;
Luzon, Visayas and Mindanao,
or as may otherwise be Section 45. Cross Ownership,
determined by the ERC in Market Power Abuse and Anti-
accordance with Section 45 of Competitive Behavior.
the Act;
For purposes of this Section, the
grid basis shall consist of three
(3) separate grids, namely
Luzon, Visayas and Mindanao.
The ERC shall have the
authority to modify or amend this
definition of a grid when two or
more of the three separate grids
become sufficiently
interconnected to constitute a
single grid or as conditions may
otherwise permit.
(rr) “Grid Code” refers to the set of Section 4. Definition of Terms.
rules and regulations governing
the safe and reliable operation, (aa) “Grid Code” refers to the set
maintenance and development of rules and regulations
of the high voltage backbone governing the safe and reliable
transmission system and its operation, maintenance and
related facilities; development of the high voltage
backbone transmission system
and its related facilities;
(ss) “Independent Market
Operator” or “IMO” refers to a
person who is financially and
technically capable, with
proven experience and
expertise of not less than two
(2) years as a leading
independent market operator of
similar or larger size electricity
markets endorsed jointly by the
DOE and Electric Power
Industry Participants to assume
the functions, assets and
liabilities from the Autonomous
Group Market Operator
(AGMO), pursuant to Section
30 of the Act;
(tt) “Independent Power Producer” (bb) “Independent Power
or “IPP” refers to an existing Producer” or “IPP” refers to an
power generating entity which existing power generating entity
is not owned by NPC as of the which is not owned by NPC;
effectivity of the Act;
(uu) “Inter-Class Cross Subsidy” (cc) “Inter-Class Cross Subsidy”
refers to an amount charged by refers to an amount charged by
Distribution Utilities to industrial distribution utilities to industrial
and commercial End-users as and commercial end-users as
well as to other subsidizing well as to other subsidizing
customer sectors in order to customer sectors in order to
reduce electricity rates of other reduce electricity rates of other
customer sectors such as the customer sectors such as the
residential End-users, residential end-users, hospitals,
hospitals, and streetlights; and streetlights;
(vv) “Inter-Regional Grid Cross (dd) “Inter-Regional Grid Cross
Subsidy” refers to an amount Subsidy” refers to an amount
embedded in the electricity embedded in the electricity rates
rates of NPC charged to its of NPC charged to its customers
customers located in a viable located in a viable regional grid
regional grid in order to reduce in order to reduce the electricity
the electricity rates in a less rates in a less viable regional
viable regional grid; grid;
(ww) “Intra-Regional Grid Cross (ee) “Intra- Regional Grid Cross
Subsidy” refers to an amount Subsidy” refers to an amount
embedded in the electricity embedded in the electricity rates
rates of NPC charged to of NPC charged to distribution
Distribution Utilities and non- utilities and non-utilities with
utilities with higher load factor higher load factor and/or delivery
and/or delivery voltage in order voltage in order to reduce the
to reduce the electricity rates electricity rates charged to
charged to Distribution Utilities distribution utilities with lower
with lower load factor and/or load factor and/or delivery
delivery voltage located in the voltage located in the same
same regional grid; regional grid;
(xx) “IPP Administrator” refers to (ff) “IPP Administrator” refers to
qualified independent entities qualified independent entities
appointed by PSALM who shall appointed by PSALM
administer, conserve and Corporation who shall
manage the contracted energy administer, conserve and
output of NPC IPP contracts, manage the contracted energy
including selling the contracted output of NPC IPP contracts;
energy output of these
contracts and offering Ancillary
Services, where applicable;
(yy) “Lifeline Rate” refers to the (hh) “Lifeline Rate” refers to the
subsidized rate given to subsidized rate given to low-
Marginalized/low-income income captive market end-
Captive Market End-users who users who cannot afford to pay
cannot afford to pay at full cost; at full cost;
Section 73. Lifeline Rate
A socialized pricing mechanism

called a lifeline rate for the
marginalized end-users shall be
set by the ERC, which shall be
exempted from the cross
subsidy phase-out under this Act
for a period often (10) years,
unless extended by law. The
level of consumption and the
rate shall be determined by the
ERC after due notice and
hearing.
(zz) “Marginalized End-users” Definition of Terms:
refer to low-income, captive,
household electricity "Lifeline Rate" refers to the
consumers who cannot afford subsidized rate given to low-
to pay at full cost and have income captive market end-
levels of electricity users who cannot afford to pay
consumption below a threshold at full cost
level to be determined by the
ERC; Section 73. Lifeline Rate.
A socialized pricing mechanism

called a lifeline rate for the
marginalized end-users shall be
exempted from cross-subsidy
phase-out under this Act for a
period often 10 years, unless
extended by law. The level of
consumption and the rate shall
be determined by the ERC after
due notice and hearing.
(aaa) “Market Fees” refer to the Section 30. Wholesale
charges imposed on all market Electricity Spot Market
members by the Market
Operator to cover the cost of The cost of administering and
administering and operating operating the wholesale
the WESM, as approved by the electricity spot market shall be
ERC; recovered by the market
operator through a charge
imposed to all market members:
Provided, That such charge shall
be filed with and approved by
the ERC.
(bbb) “Market Operator” refers to (bbb) “Market Operator” refers
either the “Autonomous Group to either the “Autonomous
Market Operator” or “AGMO” Group Market Operator” or
constituted by the DOE under “AGMO” constituted by the DOE
Section 30 of the Act, with under Section 30 of the Act, with
equitable representation from equitable representation from
Electric Power Industry Electric Power Industry
Participants, initially under the Participants, initially under the
administrative supervision of administrative supervision of the
the TRANSCO, which shall TRANSCO, which shall assume
assume the functions, assets the functions, assets and
and liabilities of the AGMO or liabilities of the AGMO or the
the IMO, the entity jointly IMO, the entity jointly endorsed
endorsed by the DOE and by the DOE and Electric Power
Electric Power Industry Industry Participants to assume
Participants to assume the the functions, assets and
functions, assets and liabilities liabilities from AGMO pursuant
from AGMO pursuant to to Section 30 of the Act;
Section 30 of the Act;
(ccc) “Merit Order Dispatch
Instructions” refer to the
dispatch schedule that will be
submitted by the Market
Operator to the Grid/system
operator for the purpose of
providing Central Dispatch;
(ddd) “Missionary Electrification” Section 70. Missionary
refers to the provision of basic Electrification.
electricity service in Unviable
Areas with the ultimate aim of Notwithstanding the divestment
bringing the operations in these and/or privatization of NPC
areas to viability levels; 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 shall be responsible
for 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 4. Definition of Terms

(ssss) “Unviable Area” refers
to a geographical area within the
Franchise Area of a Distribution
Utility where immediate
extension of distribution line is
not feasible;
(eee) “National Electrification Section 4. Definition of Terms.
Administration” or “NEA” refers
to the government agency (ii) “National Electrification
created under Presidential Administration or “NEA” refers to
Decree No. 269, as amended, the government agency created
with additional mandate set under Presidential Decree No.
forth in the Act; 269, as amended, and whose
additional mandate is further set
forth herein;
(fff) “National Power Corporation” (jj) “National Power Corporation”
or “NPC” refers to the or “NPC” refers to the
government government corporation created
corporation created under under Republic Act No. 6395, as
Republic Act No. 6395, as amended;
amended;
(ggg) “National Transmission (kk) “National Transmission
Corporation” or “TRANSCO” Corporation or “TRANSCO”
refers to the corporation refers to the corporation
organized pursuant to the Act organized pursuant to this Act to
to acquire all the acquire all the transmission
transmission assets of the assets of the NPC;
NPC;
(hhh) “Open Access” refers to the (ll) “Open Access” refers to the
system of allowing any system of allowing any qualified
qualified Person the use of person the use of transmission,
transmission, and/or and/or distribution system, and
Distribution System and associated facilities subject to
associated facilities subject to the payment of transmission
the payment of transmission and/or distribution retail wheeling
and/or distribution retail rates duly approved by the ERC;
wheeling rates duly approved
by the ERC. For this purpose,
qualified Persons shall include
all WESM Participants;
(iii) “Person” refers to a natural or
juridical person, as the case
may be;
(jjj) “Philippine Energy Plan” or (mm) “Philippine Energy Plan” or
“PEP” refers to the overall “PEP” refers to the overall
energy program formulated energy program formulated and
and updated yearly by the DOE updated yearly by the DOE and
and submitted to Congress submitted to Congress pursuant
pursuant to Republic Act No. to Republic Act No. 7638;
7638;
(kkk) “Philippine Stock Exchange”
or “PSE” refers to the corporate
body duly organized and
existing under Philippine law,
licensed to operate as a
securities exchange by the
Securities and Exchange
Commission (SEC);
(lll) "Power Commission” refers to
the Joint Congressional Power
Commission created pursuant
to Section 62 of the Act;
(mmm) “Power Development (nn) “Power Development
Program” or “PDP” refers to the Program” or “PDP” refers to the
indicative plan for managing indicative plan for managing
electricity demand through electricity demand through
energy-efficient programs and energy-efficient programs and
for the upgrading, expansion, for the upgrading, expansion,
rehabilitation, repair and rehabilitation, repair and
maintenance of power maintenance of power
generation and transmission generation and transmission
facilities, formulated and facilities, formulated and
updated yearly by the DOE in updated yearly by the DOE in
coordination with the coordination with the generation,
generation, transmission and transmission and distribution
Distribution Utility companies; utility companies;
(nnn) “Power Sector Assets and (oo) “Power Sector Assets and
Liabilities Management Liabilities Management
Corporation” or “PSALM Corp.” Corporation” or “PSALM Corp.”
or “PSALM” refers to the refers to the corporation created
corporation created pursuant to pursuant to Section 49 hereof;
Section 49 of the Act;
(ooo) “Privatization” refers to the (pp) “Privatization” refers to the
sale, disposition, change and sale, disposition, change and
transfer of entire ownership transfer of ownership and control
and control of all assets and of assets and IPP contracts from
IPP contracts from the the Government or a
Government or a government government corporation to a
corporation to a private Person private person or entity;
or entity;
(ppp) “Qualified Distribution
Utilities” refer to Distribution
Utilities that are technically and
financially capable of owning,
operating, maintaining,
upgrading and expanding
subtransmission facilities in
accordance with the
requirement of the Act;
(qqq) “Referendum” refers to an
electoral process which
Bonafide Members of ECs
register their respective vote on
the issue of conversion,
through secret balloting, in
designated voting centers, the
conduct of which shall be
under the supervision of NEA;
(rrr) “Related Group” refers to a
Person and any business entity
Controlled by that Person,
along with the Affiliates of such
business entity, and the
directors and officers of the
business entity or its Affiliates,
and relatives by consanguinity
or affinity, legitimate or
common law, within the fourth
civil degree, of the Person or
any of the foregoing directors
or officers;
(sss) “Renewable Energy (qq) “Renewable Energy
Resources” refer to energy Resources” refers to energy
resources that do not have an resources that do not have an
upper limit on the total quantity upper limit on the total quantity
to be used. Such resources are to be used. Such resources are
renewable on a regular basis renewable on a regular basis
and the renewable rate is rapid and the renewable rate is rapid
enough to consider availability enough to consider availability
over an indefinite time. These over an indefinite time. These
include, among others, include, among others, biomass,
biomass, solar, wind, hydro solar, wind, hydro and ocean
and ocean energy; energy;
(ttt) “Restructuring” refers to the (rr) “Restructuring” refers to the
process of reorganizing the process of reorganizing the
electric power industry in order electric power industry in order
to introduce higher efficiency, to introduce higher efficiency,
greater innovation and End- greater innovation and end-user
user choice. It shall be choice. It shall be understood as
understood as covering a covering a range of alternatives
range of alternatives enhancing enhancing exposure of the
exposure of the industry to industry to competitive market
competitive market forces; forces;
(uuu) “Retail Rate” refers to the (ss) “Retail Rate” refers to the
total price paid by End-users total price paid by end-users
consisting of the charges for consisting of the charges for
generation, transmission and generation, transmission and
related Ancillary Services, related ancillary services,
distribution, supply and other distribution, supply and other
related charges for electric related charges for electric
service; service;
(vvv) “Retail Competition” refers to
the provision of electricity to a
Contestable Market by
Suppliers through Open
Access;
(www) “Return-On-Rate-Base” or Section 43. Functions of the
“RORB” refers to the rate ERC.
setting methodology as
determined by the ERC (f) In the public interest,
whereby TRANSCO or its establish and enforce a
Buyer or Concessionaire and methodology for setting
Distribution Utilities are allowed transmission and distribution
to recover just and reasonable wheeling rates and retail rates
costs and earn a reasonable for the captive market of a
return so as to enable such distribution utility, taking into
entities to operate viably; 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 on
entity to operate viably. The
ERC may adopt alternative
forms of internationally-accepted
rate-setting methodology as it
may deem appropriate. The rate-
non-discriminatory. To achieve
this objective and to ensure the
complete removal of cross
subsidies, the cap on the
recoverable rate of system
losses prescribed in Section 10
of Republic Act No. 7832, is
hereby amended and shall be
replaced by caps which shall be
on load density, sales mix, cost
of service, delivery voltage and
other technical considerations it
may promulgate. The ERC shall
determine such form or rate-
following guidelines:
(xxx) “Rural Electrification” refers
to the delivery of basic electric
services, consisting of power
generation, subtransmission
and/or extension of associated
power delivery system that
would bring about important
social and economic benefits to
the countryside;
(yyy) “Rural Electrification Loan”
refers to financial obligations
strictly incurred for Rural
Electrification;
(zzz) “Rural Electrification
Program” refers to the National
Government plan to achieve
total electrification of the
countryside for the purpose of
fostering economic
development and uplifting the
living standards of the Filipino
people;
(aaaa) “Self-Generation Facility”
refers to a power Generation
Facility owned and constructed
by an End-user for such End-
user’s own consumption or
internal use excluding
Generation Facilities for use by
households, clinics, hospitals
and other medical facilities;
(bbbb) “Small Power Utilities Section 4. Definition of Terms.
Group” or “SPUG” refers to the
functional unit of NPC created (tt) “Small Power Utilities Group”
to pursue Missionary or “SPUG” refers to the
Electrification function; functional unit of NPC created to
pursue missionary electrification
function;
(cccc) “Small Distribution Section 28. De-Monopolization
Company” refers to a and Shareholding Dispersal.
Distribution Utility whose peak
demand is equal to or less than xxx A small distribution company
ten (10) megawatts; is one whose peak demand is
equal to or less than Ten
megawatts (10MW).
(dddd) “Stock Cooperative” refers
to a duly-registered association
of persons with a common
bond of interest, who have
voluntarily joined together to
achieve a lawful common
social or economic end,
making equitable contributions
to the capital required and
accepting a fair share of the
risks and benefits of the
undertaking in accordance with
the universally-accepted
cooperative principles as
defined under Article 4,
Chapter 1 of Republic Act No.
6938, otherwise known as the
“Cooperative Code of the
Philippines;”
(eeee) “Stock Corporation” refers
to an artificial being created by
operation of law with capital
stock divided into shares and
authorized to distribute to its
shareholders dividends out of
its surplus profits, having the
right of succession and the
powers, attributes and
properties expressly authorized
by law or incident to its
existence;
(ffff) “Stranded Contract Costs of (uu) “Stranded contract costs of
Eligible Contracts of NPC or distribution utility” refer
Distribution Utilities” refer to the to the excess of the contracted
excess of the contracted cost cost of electricity under eligible
of electricity under eligible contracts over the actual selling
contracts of Distribution Utilities price of the contracted energy
over the actual selling price of output of such contracts in the
the contracted energy output of market. Such contracts shall
such contracts that would be have been approved by the ERB
incurred upon Retail as of December 31, 2000;
Competition and Open Access.
For this purpose, “eligible
contracts” are contracts which
have been approved by the
ERB as of 31 December 2000;
(gggg) “Stranded Contract Costs (uu) “Stranded contract costs of
of NPC” refer to the excess of NPC or distribution utility” refer
the contracted cost of to the excess of the contracted
electricity under eligible cost of electricity under eligible
contracts of NPC over the contracts over the actual selling
actual selling price of the price of the contracted energy
contracted energy output of output of such contracts in the
such contracts in the market. market. Such contracts shall
Such contracts shall have been have been approved by the ERB
approved by the ERB as of 31 as of December 31, 2000;
December 2000;
(hhhh) “Stranded Debts of NPC” (vv) “Stranded Debts of NPC”
or “Stranded Debts ” refer to refer to any unpaid financial
any unpaid financial obligations obligations of NPC which have
of NPC which have not been not been liquidated by the
liquidated by the proceeds from proceeds from the sales and
the sales and Privatization of privatization of NPC assets;
NPC assets: Provided,
however, That such obligations
include any of such obligations
refinanced by PSALM:
Provided, further, That such
refinancing of such unpaid
obligations shall not result in
increasing the Universal
Charge burden;
(iiii) “Subtransmission Assets” (ww) “Subtransmission Assets”
refer to the facilities related to refer to the facilities related to
the power delivery service the power delivery service below
below the transmission the transmission voltages and
voltages and based on the based on the functional
functional assignment of assets assignment of assets including,
including, but not limited to but not limited to step-down
step- down transformers used transformers used solely by load
solely by load customers, customers, associated
associated switchyard/substation, control
switchyard/substation, control and protective equipment,
and protective equipment, reactive compensation
reactive compensation equipment to improve customer
equipment to improve power factor, overhead lines,
customer power factor, and the land such facilities/
overhead lines, and the land equipment are located. These
where such facilities/equipment include NPC assets linking the
are located. These include transmission system and the
NPC assets linking the distribution system which are
transmission system and the neither classified as generation
Distribution System which are nor transmission;
neither classified as generation
nor transmission;
(jjjj) “Subtransmission System”
refers to systems comprised of
Subtransmission Assets;
(kkkk) “Supplier” refers to any (xx) “Supplier” refers to any
Person licensed by the ERC to person or entity authorized by
sell, broker, market or the ERC to sell, broker, market
aggregate electricity to End- or aggregate electricity to the
users; end-users;
Section 29. xxx

(llll) “Supplier’s Charge” refers to (yy) “Supplier’s Charge” refers to
the charge imposed by the charge imposed by electricity
Suppliers for the sale of suppliers for the sale of
electricity to End-users, electricity to end-users,
excluding the charges for excluding the charges for
generation, transmission and generation, transmission and
distribution wheeling; distribution wheeling;
(mmmm) “Supply of Electricity” (zz) “Supply of Electricity” means
refers to the sale of electricity the sale of electricity by a party
by a party other than a other than a generator or a
Generation Company or a distributor in the franchise area
Distribution Utility in the of a distribution utility using the
Franchise Area of a wires of the distribution utility
Distribution Utility using the concerned;
wires of such Distribution
Utility;
(nnnn) “Technical Constraints”
refer to line, equipment, and
other limitations as defined in
the WESM Rules, Grid Code
and Distribution Code;
(oooo) “Transmission Charge” (aaa) “Transmission Charge”
refers to the regulated cost or refers to the regulated cost or
charges for the use of a charges for the use of a
transmission system which transmission system which may
may include the availment of include the availment of ancillary
Ancillary Services; services;
(pppp) “Transmission (bbb) “Transmission [NGCP]* This proposes that the TDP
Development Plan” or “TDP” Development Plan” or “TDP” (pppp) “Transmission Development should now include the
refers to the program for refers to the program for Plan” or “TDP” refers to the development, operation and
managing the transmission managing the transmission program for managing the maintenance of the viable SPUG
system through efficient system through efficient planning transmission system including areas.
planning for its expansion, for the expansion, upgrading, isolated or island transmission
upgrading, rehabilitation, repair rehabilitation, repair and system, through efficient planning
and maintenance, to be maintenance, to be formulated for its expansion, upgrading,
formulated by DOE and by DOE and implemented by the rehabilitation, repair and
implemented by the TRANSCO TRANSCO pursuant to this Act; maintenance, to be formulated by
or its Buyer or Concessionaire DOE and implemented by the
pursuant to the Act; TRANSCO or its Buyer or
Concessionaire pursuant to the Act;
(qqqq) “Transmission of (ccc) “Transmission of
Electricity” refers to the Electricity” refers to the
conveyance of electricity conveyance of electricity through
through the high voltage the high voltage backbone
backbone system; system; and
(rrrr) “Universal Charge” refers to (ddd) “Universal Charge” refers
the charge, if any, imposed for to the charge, if any, imposed for
the recovery of the Stranded the recovery of the stranded cost
Debts, Stranded Contract and other purposed pursuant to
Costs of NPC, and Stranded Section 34 hereof.
Contract Costs of Eligible
Contracts of Distribution
Utilities and other purposes
pursuant to Section 34 of the
Act;
(ssss) “Unviable Area” refers to a
geographical area within the
Franchise Area of a
Distribution Utility where
immediate extension of
distribution line is not feasible;
(tttt) “Wholesale Electricity Spot
Market” or “WESM” refers to
the Wholesale Electricity Spot
Market to be created in
accordance with the Act;
(uuuu) “WESM Participants” refer
to all Generation Companies,
Distribution Utilities, Suppliers,
Aggregators, End-users, the
TRANSCO or its Buyer or
Concessionaire, IPP
Administrators, and other
entities authorized by the ERC
to participate in the WESM in
accordance with the Act; and
(vvvv) “WESM Rules” refer to the
detailed rules that govern the
administration and operation of
the WESM.
PART II - STRUCTURE AND
OPERATION OF THE ELECTRIC
POWER INDUSTRY
RULE 5. GENERATION SECTOR
Section 1. Guiding Principle.
Pursuant to Section 6 of the Act, Section 6. Generation Sector.
generation of electric power, a
business affected with public Generation of electric power, a
interest, shall be competitive and business affected with public
open to all qualified Generation interest, shall be competitive and
Companies. Generation shall not be open.
considered a public utility operation.
For this purpose, any Person Upon the effectivity of this Act,
engaged or intending to engage in any new generation company
Generation of Electricity shall not shall, before it operates, secure
be required to secure a national from the Energy Regulatory
franchise. No Person may engage in Commission (ERC) a certificate
the Generation of Electricity as a of compliance pursuant to the
new Generation Company unless standards set forth in this Act, as
such Person has received a COC well as health, safety and
from the ERC to operate facilities environmental clearances from
used in the Generation of Electricity. the appropriate government
A Person that demonstrates agencies under existing laws.
compliance with the standards and
requirements of this Rule 5, and Any law to the contrary
such other terms and conditions as notwithstanding, power
determined by the ERC to be generation shall not be
appropriate to ensure that Persons considered a public utility
comply with all applicable legal and operation. For this purpose, any
regulatory requirements, shall be person or entity engaged or
issued a COC. which shall engage in power
generation and supply of
electricity shall not be required to
secure a national franchise.
Upon implementation of retail

competition and open access,
the prices charged by a
generation company for the
supply of electricity shall not be
subject to regulation by the ERC
except as otherwise provided in
this Act.
Pursuant to the objective of

lowering electricity rates to end-
users, sales of generated power
by generation companies shall
be value added tax zero-rated.
The ERC shall, in determining

the existence of market power
abuse or anti-competitive
behavior, require from
generation companies the
submission of their financial
statements.
Section 2. Scope of Application.
This Rule shall apply to all facilities
used or to be used for the
Generation of Electricity, including
but not limited to the following:
(a) Existing Generation Facilities. Section 6. Generation Sector. -
Existing Generation Facilities Generation of electric power, a
shall include: business affected with public
(i) Spin-off Facilities of NPC interest, shall be competitive and
or their transferees, open.
including Generation
Facilities owned by Upon the effectivity of this Act,
NPC transferred to any new generation company
PSALM and shall, before it operates, secure
subsequently privatized from the Energy Regulatory
pursuant to the Act; Commission (ERC) a certificate
(ii) Agus and Pulangui of compliance pursuant to the
Complexes; standards set forth in this Act, as
(iii) Facilities owned and well as health, safety and
operated by SPUG; environmental clearances from
(iv) Accredited facilities under the appropriate government
BOT arrangement and agencies
other variants with under existing laws.
NPC, SPUG, National
Irrigation Administration Any law to the contrary
(NIA), Philippine notwithstanding, power
National Oil Company- generation shall not be
Energy Development considered a public utility
Corporation (PNOC- operation. For this purpose, any
EDC) and other person or entity engaged or
government agencies; which shall engage in power
(v) Accredited facilities under generation and supply of
BOT arrangement and electricity shall not be required to
other variant with secure a national franchise.
Distribution Utilities;
(vi) Facilities Owned or Upon implementation of retail
Operated by a competition and open access,
Distribution Utility; the prices charged by a
(vii) Facilities under Contract generation company for the
with a Distribution supply of electricity shall not be
Utility; subject to regulation by the ERC
(viii) Self-Generation except as otherwise provided in
Facilities; this Act.
(ix) Facility operating in EZs;
and Pursuant to the objective of
(x) Facility operating in lowering electricity rates to end-
isolated areas. users, sales of generated power
by generation companies shall
be value added tax zero-rated.
The ERC shall, in determining

the existence of market power
abuse or anti-competitive
behavior, require from
generation companies the
submission of their financial
statements.
(b) Generation Facilities Under
Construction. Generation Facilities
under construction shall include:
(i) DOE-Accredited Facility
under BOT
arrangement and other
variants with NPC,
SPUG, PNOC-EDC,
NIA and other
government agencies;
(ii) DOE-Accredited Facility
under BOT
variants with
(iii) Non DOE-Accredited
Facility under contract
with Distribution
Utilities;
(iv) Self-Generation Facility;
(v) Facility locating in EZs;
and
(vi) Facility operating in
isolated areas.
(c) New Generation Facilities
New Generation Facilities
shall include:
(i) Any newly-
constructed facility
with appropriate
health, safety
and environmental
clearances connected
to the Grid;
(ii) Any facility
currently under BOT
arrangement and
other variants with
NPC, SPUG, PNOC-
EDC, other
government
agencies, and
government owned
and- controlled
corporations; and
(iii) Any facility that
shall operate in an
isolated area.
d) This Rule shall also
apply to the PSALM-
appointed IPP
Administrators.
Section 3. Ownership Limitation.
No Generation Company, Section 45. Cross Ownership,
Distribution Utility, or its respective Market Power Abuse and Anti-
subsidiary or Affiliate or stockholder Competitive Behavior.
or official of a Generation Company
or Distribution Utility, or other entity No generation company,
engaged in generating and distribution utility, or its
supplying electricity specified by respective subsidiary or affiliate
ERC within the fourth civil degree of or stockholder or official of a
consanguinity or affinity, legitimate generation company or
or common law, shall be allowed to distribution utility, or other entity
hold any interest, directly or engaged in generating and
indirectly, in TRANSCO or its Buyer supplying electricity specified by
or Concessionaire. Likewise, the ERC within the fourth civil
TRANSCO or its Buyer or degree of consanguinity or
Concessionaire or any of its affinity, shall be allowed to hold
stockholders or officials or any of any interest, directly or indirectly,
their relatives within the fourth in TRANSCO or its
civil degree of consanguinity or concessionaire. Likewise, the
affinity, legitimate or common law, TRANSCO, or its concessionaire
shall not hold any interest, whether or any of its stockholders or
directly or indirectly, in any officials or any of their relatives
Generation Company or Distribution within the fourth civil degree of
Utility. Except for ex officio consanguinity or affinity, shall
government-appointed not hold any interest, whether
representatives, no Person who is directly or indirectly, in any
an officer or director of the generation company or
TRANSCO or its Buyer or distribution utility. Except for ex
Concessionaire shall be an officer officio government-appointed
or director of any Generation representatives, no person who
Company, Distribution Utility or is an officer or director of the
Supplier. This Section shall not TRANSCO or its concessionaire
apply to PSALM during the period shall be an officer or director of
that its generation assets are any generation company,
being privatized pursuant to Section distribution utility or supplier.
47 of the Act.
Section 4. Obligations of a
Generation Company.
(a) A COC shall be secured from the Section 6. Generation Sector. Law and IRR provides that
ERC before commercial Generation Company shall secure
operation of a new Generation Upon the effectivity of this Act, COC prior to commercial operation,
Facility. The COC shall stipulate any new generation company however, Revised Rules for
all obligations of a Generation shall, before it operates, secure Issuance of COC allows GenCo to
Company consistent with this from the Energy Regulatory operate with Provisional Authority to
Section and such other Commission (ERC) a certificate Operate (PAO).
operating guidelines as ERC of compliance pursuant to the
may establish. The ERC shall standards set forth in this Act, as
establish and publish the well as health, safety and
standards and requirements for environmental clearances from
issuance of a COC. A COC the appropriate government
shall be issued upon agencies under existing laws.
compliance with such
standards and requirements.
(i) A Person owning an existing Section 6.
Generation Facility or a xxx
Generation Facility under Upon the effectivity of this Act,
construction, shall submit any new generation company
within ninety (90) days from shall, before it operates, secure
effectivity of these Rules to from the Energy Regulatory
ERC, when applicable, a Commission (ERC) a certificate
certificate of DOE/NPC of compliance pursuant to the
accreditation, a three (3) standards set forth in this Act, as
year operational history, a well as health, safety and
general company profile environmental clearances from
and other information that the appropriate government
ERC may require. Upon agencies under existing laws.
making a complete
submission to the ERC,
such Person shall be issued
a COC by the ERC to
operate such existing
Generation Facility.
(ii) A Generation Facility which The provision apparently states that
has been previously issued COC is perpetual. Revised Rules
a COC shall not be required for Issuance of COC provides that
to secure a COC even if COC has only validity of 5 years.
acquired by a new owner:
Provided, That such new
owner shall register with
ERC as specified above.
Upon registration, such
Person shall be deemed
authorized to operate such
(b) A Generation Company shall
comply with the following
operating standards:
(i) Technical Standards. A Current implementation provides
Generation Company shall that generation company with ASPP
ensure that all its facilities contract with NGCP supplies ASPP
connected to the Grid meet but herein, set forth that A
the technical design and Generation Company shall comply
operational criteria of the with standards including the
Grid Code and Distribution provision of Ancillary Services in
Code promulgated by accordance with operational criteria.
ERC, Philippine Electrical
Code, and the TRANSCO
or its Buyer or
Concessionaire including,
among others, standards
for voltage fluctuation,
frequency, harmonics,
security, reliability,
unplanned outages and
provision of Ancillary
Services and shall operate
in accordance with such
operational criteria.
(ii) Financial Standards. A Financial Standards set forth under
Generation Company with the Grid Code enlist only financial
facilities connected to the ratios that shall be used to evaluate
Grid shall conform to the capability of Generation
financial standards Companies. These does not provide
provided in the Grid Code. specific figures that need to be
These standards shall take observed.
into consideration the
nature and function of a
Furthermore, such
standards are set to
ensure that the Generation
Company meets the
minimum financial
standards to protect the
public interest and any
customer procuring
services from the said
Generation Company.
(iii) Environmental Standards. A
Generation Company shall
ensure that its facilities
comply with applicable
environmental laws, rules
and regulations.
(c) A Generation Company
operating a Generation
Facility in isolated areas shall
meet the technical and financial
standards to be issued by the
ERC using applicable and
practicable criteria within two
(2) years, or such other
period as may be specified
by the ERC, from the
issuance of such technical and
financial standards.
(d) A Generation Company shall Section 36. Unbundling of
structurally and functionally Rates and Functions.
unbundle its generation
business activities and rates Any electric power industry
from its distribution and supply participant shall functionally and
businesses as provided in structurally unbundle its
Rule 10 on Structural and business activities and rates in
Functional Unbundling of accordance with the sectors as
Electric Power Industry identified in Section 5 hereof.
Participants and Rule 15 on The ERC shall ensure full
Unbundling of Rates. compliance with this provision.
(e) Prior to the implementation of Section 67. NPC Offer of Bilateral Supply Contract being [PSALM] Classification and regulation of
Open Access and Retail Transition Supply Contracts. entered into by a Generation PSALM as a generation company
Competition, the prices Company and Distribution is being (e) Prior to the implementation of
charged by a Generation Within six (6) months from the subjected to ERC approval. Open Access and Retail The justification for the inclusion
Company for the Supply of effectivity of this Act, NPC shall Implementation of Open Access has Competition, the prices charged by of the provision is to allow
Electricity shall be subject to file with the ERC for its approval already commenced in June 2013. a Generation Company for the PSALM to impose rates without
ERC regulation on the Retail a transition supply contract duly Supply of Electricity shall be subject regulation to level the playing
Rates charged by Distribution negotiated with the distribution to ERC regulation on the Retail field for PSALM where it exists in
Utilities and transition supply utilities containing the terms and Rates charged by Distribution competition with other
contracts (TSCs) as specified in conditions of supply and a Utilities and transition supply generators.
Section 67 of the Act. corresponding schedule of rates, contracts (TSCs) as specified in
consistent with the provisions Section 67 of the Act.
Upon introduction of Open hereof, including adjustments
Access and Retail and/or indexation formulas which Upon introduction of Open Access
Competition or establishment shall apply to the term of such and Retail Competition or
of WESM, whichever comes contracts. The term of the establishment of WESM, whichever
first, the rates of a Generation transition supply contracts shall comes first, the rates of a
Company shall not be subject not extend beyond one (1) year Generation Company shall not be
to regulation by the ERC from the introduction of open subject to regulation by the ERC
except as otherwise provided by access. Such contracts shall be except as otherwise provided by the
the Act. based on the projected demand Act.
of such utilities less any of their
However, for a Generation currently committed quantities This provision shall also apply to
Company operating a facility in under eligible IPP contracts as the undisposed NPC generating
SPUG areas and isolated defined in Section 33 hereof: assets owned by PSALM and IPP
areas, the generation rates for Provided, That the total contracts that have yet to be
such facility shall be fixed and generation capacity of such privatized.
determined by ERC as set signed transition supply
forth in Rule 13 on contracts shall not exceed the However, for a Generation
Missionary Electrification. level of NPC owned, controlled Company operating a facility in
or committed capacity as of the SPUG areas and isolated areas, the
effectivity of this Act. Such generation rates for such facility
transition supply contracts shall shall be fixed and determined by
be assignable to the NPC ERC as set forth in Rule 13 on
successor generating Missionary Electrification.
companies. [Aboitiz Power]
[Aboitiz Power] The initial implementation of
Within six (6) months from the (e) Prior to the initial implementation Open Access and Retail
date of submission of the of Open Access and Retail Competition is June 2013. There
transition supply contract by Competition, the prices charged by are other reckoning dates in the
NPC, the ERC shall notify NPC a Generation Company for the implementation of Open Access
of their approval of the rates Supply of Electricity shall be subject depending on whether mandatory
contained therein. to ERC regulation on the Retail or voluntary and depending on
Rates charged by Distribution the different thresholds. So we
The ERC shall maintain a record Utilities and transition supply suggest to clarify this provision to
of the contract terms and rates contracts (TSCs) as specified in refer to the INITIAL
offered by NPC. Likewise, the Section 67 of the Act. implementation of Open Access
ERC shall update monthly, the and Retail Competition, to be
rates using the appropriate Upon initial introduction of Open clear that it is referring to June
adjustment and/or indexation Access and Retail Competition or 2013, and that from said date, the
formula. establishment of WESM, whichever prices charged by a generation
comes first, the rates of a company should already be
Notwithstanding the provisions Generation Company shall not be competitive and not subject to
of Section 25 hereof, the rates subject to regulation by the ERC regulation. With the
charged by a distribution utility except as otherwise provided by the implementation of a competitive
for the generation component of Act. selection process requirement for
the supply of electricity in their distribution utilities, what should
distribution retail supply rate only be regulated is the process
shall, for the term of the by which the distribution utility
transition supply contracts, not procures power for its captive
exceed the transition supply market.
contract rates, as updated
monthly. The recovery of costs
incurred by a distribution utility
for any generation component in
excess of the transition supply
contract rates shall be
disallowed by the ERC, except
for eligible contracts as defined
under Section 33 hereof:
Provided, That such limitation on
the recovery of generation
component costs by a
distribution utility shall apply only
to the equivalent quality and
quantity of electricity still
available to the distribution utility
from NPC.
(f) A self-generation company not Section 34. Universal Charge. Self-Generation Companies
connected to a Distribution connected to the grid pay for UC to
Utility, unless otherwise The universal charge shall be NGCP. However, for others, it is
provided under these Rules, non-bypassable charge which difficult to implement.
shall remit directly to shall be passed on and collected
TRANSCO the corresponding from all end-users on a monthly
Universal Charge set by ERC. basis by the distribution utilities.
In relation to this, TRANSCO Collections by the distribution
or its Buyer or Concessionaire utilities and the TRANSCO in
or the appropriate Distribution any given month shall be
Utility, when connected to the remitted to the PSALM Corp. on
self-generation company, shall or before the fifteenth (15th) of
have access to the customer the succeeding month, net of
side of the meter in order to any amount due to the
determine the utilization of distribution utility. Any end-user
such Generation Facility for the or self-generating entity not
purpose of assessing the connected to a distribution utility
corresponding Universal Charge shall remit its corresponding
as provided in Rule 18 on universal charge directly to the
Universal Charge. TRANSCO.
(g) A Generation Company shall Section 66. Benefits to Host Implementation of ER1-94
comply with Rule 29 on Communities.
Benefits to Host Communities.
The obligations of generation
companies and energy resource
developers to communities
hosting energy generating
facilities and/or energy resource
developers as defined under
Chapter II, Sections 289 to 294
of the Local Government Code
and Section 5(i) of Republic Act
No. 7638 and their implementing
rules and regulations and
applicable orders and circulars
consistent with this Act shall
continue: Provided, That the
obligations mandated under
Chapter II, Section 291 of
Republic Act No. 7160, shall
apply to privately-owned
corporations or entities utilizing
the national wealth of the
locality.
To ensure the effective

implementation of the reduction
in cost of electricity in the
communities where the source
of energy is located, the
mechanics and procedures
prescribed in the Department of
the Interior and Local
Government (DILG)-DOE
Circulars No. 95-01 and 98-01
dated October 31, 1995 and
September 30, 1998,
respectively and other issuances
related thereto shall be pursued.
Towards this end, the fund

generated from the eighty
percent (80%) of the national
wealth tax shall, in no case, be
used by any local government
unit for any purpose other than
those for which it was intended.
In case of any violation or

noncompliance by any local
government official of any
provision thereof, the DILG shall,
upon prior notice and hearing,
order the project operator,
through the DOE, to withhold the
remittance of the royalty
payment to the host community
concerned pending completion
of the investigation. The
unremitted funds shall be
deposited in a government bank
under a trust fund.
(h) Upon the establishment of the Membership criteria are in place.
WESM by the DOE, jointly
with Electric Power Industry
Participants, a Generation
Company shall comply with the
membership criteria as
prescribed under the WESM
Rules as set forth in Rule 9 on
WESM.
(i) Pursuant to Section 9(e) of the Section 9. (e) Subject to Scheduling by MO and Dispatching [PEMC] [PEMC]
Act, a Generation Company technical constraints, the grid by SO are in place. (i) Pursuant to Section 9(e) of the The WESM employs a gross pool
with facilities connected to a operator of the TRANSCO shall Act, a Generation Company with scheduling concept. In order to
Grid shall make information provide central dispatch of all facilities connected to a Grid shall be dispatched, all generation
available to the Market generation facilities connected, make information available to the companies must submit offers
Operator to enable the Market directly or indirectly, to the Market Operator to enable the and those offers should clear in
Operator to implement the transmission system in Market Operator to implement the the market. There are no special
appropriate dispatch accordance with the dispatch appropriate dispatch scheduling and considerations for bilateral
scheduling and shall comply schedule submitted by the shall comply with the said scheduling contracts during scheduling.
with the said scheduling in market operator, taking into in accordance with the WESM Rules.
accordance with the WESM account outstanding bilateral A Generation Company shall
Rules. A Generation Company contracts; and likewise make information available
shall likewise make information to the grid operator to facilitate
available to the grid operator to Central Dispatch by the grid operator.
facilitate Central Dispatch by the Subject to Technical Constraints, the
grid operator. Subject to grid operator of the TRANSCO or its
Technical Constraints, the grid Buyer or Concessionaire shall
operator of the TRANSCO or its provide Central Dispatch to a
Buyer or Concessionaire shall Generation Facility connected,
provide Central Dispatch to a directly or indirectly, to the
Generation Facility connected, transmission system in accordance
directly or indirectly, to the with the dispatch schedule submitted
transmission system in by the Market Operator, which
accordance with the dispatch schedule shall take into account
schedule submitted by the outstanding bilateral contracts.
Market Operator, which
schedule shall take into
account outstanding bilateral
contracts.
(j) A Generation Company shall Section 45. Cross Ownership,
comply with Rule 11 on Cross Market Power Abuse and Anti-
Ownership, Market Abuse and Competitive Behavior.
Anti-Competitive Behavior.
No participant in the electricity
industry or any other person may
engage in any anti-competitive
behavior including, but not
limited to, cross-subsidization,
price or market manipulation, or
other unfair trade practices
detrimental to the
encouragement and protection
of contestable markets.
(k) A Generation Company that Section 9. Functions and

owns a dedicated point-to-point Responsibilities.
limited transmission facility
shall transfer ownership of A generation company may
such facility to the TRANSCO develop and own or operate
at a fair market price in the dedicated point-to-point limited
event that such facility is transmission facilities that are
required for competitive consistent with the TDP:
purposes as prescribed in Provided, That such facilities are
Section 5 (b) of this Rule. required only for the purpose of
connecting to the transmission
system, and are used solely by
the generating facility, subject to
prior authorization by the ERC:
Provided, further, That in the
event that such assets are
required for competitive
purposes, ownership of the
same shall be transferred to the
TRANSCO at a fair market price:
Provided, finally, That in the
case of disagreement on the fair
market price, the ERC shall
determine the fair market value
of the asset.
(l) A Generation Company shall Section 37. Powers and
submit to DOE any information Functions of the DOE.
as may be required by the
DOE for the preparation of (c) Prepare and update annually
the PDP, subject to a Power Development Program
appropriate measures to (PDP) and integrate the same
preserve the confidentiality of into the Philippine Energy Plan.
proprietary or commercially The PDP shall consider and
sensitive information. integrate the individual or joint
development plans of the
transmission, generation, and
distribution sectors of the electric
power industry, which are
submitted to the Department:
Provide, however, That the ERC
shall have exclusive authority
covering the Grid Code and the
pertinent rules and regulations it
may issue;
(m) A Generation Company that Section 46. Fines and ERC promulgated guidelines on
fails to comply with any of Penalties. imposition of administrative
these obligations, including sanctions in form of fines and
compliance with technical The fines and penalties that shall penalties. Wherein, penalties would
standards, shall be subject to be imposed by the ERC for any reach from PhP100,000 to
fines and penalties as may be violation of or non-compliance PhP500,000.00 only, depending on
imposed by the ERC. with this Act or the IRR shall number of times of violations.
range from a minimum of fifty
thousand pesos (P50,000.00) to
a maximum of Fifty million pesos
(P50,000,000.00).
Section 5. Dedicated Point-to-
Point Limited Transmission
Facility of a
Generation Company.
(a) Subject to prior authorization Section 9. Functions and
from ERC, TRANSCO or its Buyer Responsibilities.
or Concessionaire may allow a
Generation Company to develop, A generation company may
own and/or operate dedicated develop and own or operate
point-to-point limited transmission dedicated point-to-point limited
facilities: Provided, That: transmission facilities that are
consistent with the TDP:
Provided, That
(i) Such dedicated point-to- such facilities are required only
point limited transmission for the purpose of connecting to
facilities are required only for the transmission system, and
the purpose of connecting to are used solely by the
the Grid which will be used generating facility, subject to
solely by the Generation prior authorization by the ERC:
Facility, and are not used to
serve End-users or Suppliers
directly;
(ii) The facilities are included
and consistent with the TDP
as certified by TRANSCO or
its Buyer or Concessionaire;
and
(iii) Any other documents that [Aboitiz Power] [Aboitiz Power]
may be required by the ERC. (New Provision) We propose the insertion to make
This notwithstanding, the primary it clear that it is the transmission
responsibility and obligation to connect sector’s obligation to connect a
the generator to the grid should be generator to the grid.
borne by TRANSCO or its Buyer or
Concessionaire, or in case of
embedded generators, by the host
Distribution Utility.
(b) In the event that such assets Provided, further, That in the
are required for competitive event that such assets are
purposes, ownership of the same required for competitive
shall be transferred to the purposes, ownership of the
TRANSCO at a fair market price. In same shall be transferred to the
case of disagreement on the fair TRANSCO at a fair market price:
market price, the ERC shall Provided, finally, That in the
determine the fair market value of case of disagreement on the fair
such asset, either directly or through market price, the ERC shall
such dispute resolution mechanisms determine the fair market value
as ERC may specify. of the asset.
Section 6. Generation Charges
and VAT.
(a) Within ninety (90) days from the Superseded by E-VAT Law
effectivity of these Rules, the ERC
shall issue guidelines for the
regulation of power sales by
Generation Companies applicable
prior to the implementation of
Retail Competition and Open
Access or establishment of WESM,
whichever comes first.
(b) Pursuant to the policy of Section 6. Generation Sector. Superseded by E-VAT Law
reducing electricity rates to End-
users, sales of generated power by Pursuant to the objective of
a Generation Company shall, from lowering electricity rates to end-
the effectivity of the Act, be zero- users, sales of generated power
rated for the purpose of imposition by generation companies shall
of value-added tax. Towards this be value added tax zero-rated.
end, the imposition of zero percent
(0%) VAT shall apply to the sale of
generated power by a Generation
Company through all stages of sale
until it reaches the End-user. The
DOF, through the BIR, shall issue
the necessary revenue regulation
within sixty (60) calendar days from
effectivity of these Rules.
RULE 6. TRANSMISSION
SECTOR
The transmission of electric power Section 7 Transmission
is affected with public interest and Sector.
shall be a regulated common
electricity carrier business, subject The transmission of electric
to the ratemaking powers of the power shall be regulated
ERC. common electricity carries
business, subject to the
ratemaking powers of the ERC.
The ERC shall set the standards

of the voltage transmission that
shall distinguish the transmission
from the subtransmission assets.
Pending the issuance of such
new standards, the distinction
between the transmission and
subtransmission assets shall be
as follows: 230 kilovolts and
above in the Luzon grid, 69
kilovolts and above in the
Visayas and in the isolated
distribution systems, and 138
Mindanao Grid: Provided, That
for the Visayas and the isolated
distribution system, should the
69 kilovolt line not form part of
the main transmission grid and
be directly connected to the
substation of the distribution
utility, it shall form part of the
subtransmission system.
This Rule shall apply to TRANSCO
or its Buyer or Concessionaire and
any other successor-in-interest
thereto.
The TRANSCO or its Buyer or Section 45. Cross Ownership,
Concessionaire or any of its Market Power Abuse and Anti-
stockholders, directors, officers or Competitive Behavior.
any of their relatives within the
fourth civil degree of consanguinity Likewise, the TRANSCO, or its
or affinity, legitimate or common concessionaire or any of its
law, shall not hold any interest, stockholders or officials or any of
whether directly or indirectly, in any their relatives within the fourth
Generation Company, Distribution civil degree of consanguinity or
Utility, IPP Administrator and affinity, shall not hold any
Supplier. interest, whether directly or
indirectly, in any generation
company or distribution utility.
Except for ex officio government-
appointed representatives, no
person who is an officer or
director of the TRANSCO or its
concessionaire shall be an
officer or director of any
generation company, distribution
utility or supplier
Section 4. Separation Between
Transmission and
Subtransmission.
The ERC shall set the standards of Section 7. Transmission …
the transmission voltages and Sector.
other factors that shall distinguish The ERC shall set the standards ERC decides on Petitions for re-
transmission assets from of the voltage transmission that classification filed by industry
Subtransmission Assets. Towards shall distinguish the transmission participants
this end, ERC shall issue from the subtransmission assets.
appropriate guidelines to distinguish Pending the issuance of such
between these categories of assets new standards, the distinction
according to voltage level and between the transmission and
function. The ERC shall take into subtransmission assets shall be
account the objective of allowing as follows: 230 kilovolts and
non-discriminatory Open Access to above in the Luzon grid, 69
the transmission and kilovolts and above in the
Subtransmission Systems. Visayas and in the isolated
distribution systems, and 138
Mindanao Grid: Provided, That
for the Visayas and the isolated
distribution system, should the
69 kilovolt line not form part of
the main transmission grid and
be directly connected to the
substation of the distribution
utility, it shall form part of the
subtransmission system.
The technical and functional
criteria to be considered in
distinguishing transmission assets
from Subtransmission Assets shall
include, but not limited to:
(a) Subtransmission Assets are
normally in close proximity to
retail customers;
(b) Subtransmission Assets are
primarily radial in character;
(c) Power flows into
Subtransmission Assets; it
rarely, if ever, flows out;
(d) When power enters
Subtransmission Assets, it is
not reconsigned or transported
on to some other market;
(e) Power entering
Subtransmission Assets is
consumed in a comparatively
restricted geographic area;
(f) Meters are based at the
interface of transmission and
Subtransmission Assets to
measure flows into the
Subtransmission Assets; and
(g) Subtransmission Assets will be
of reduced voltage.
Section 5. Initial Classification of
Transmission Assets.
Pending the issuance of the new Pending the issuance of such
standards for classification of new standards, the distinction
transmission assets by ERC, between the transmission and
transmission assets shall be defined subtransmission assets shall be
as follows: as follows:
(a) For the Luzon Grid, 230 kilovolts and above in the TL voltage level, as per TDP 2014-
transmission facilities rated 230 Luzon grid, 2015:
kV and above shall generally be 500kV, 230kV, 115kV and 69kV;
considered transmission assets; and L-V interconnection: 350 kV
(b) For the Visayas Grid, 69 kilovolts and above in the TL voltage level, as per TDP 2014-
transmission facilities rated 69 Visayas and in the isolated 2015:
kV and above shall generally be distribution systems, and 230kV, 138kV, 69kV; and L-V
considered transmission assets; interconnection: 350 kV
Provided, That for the Visayas
and the isolated distribution
system, should the 69 kilovolt
line not form part of the main
transmission grid and be directly
connected to the substation of
the distribution utility, it shall
form part of the subtransmission
system.
(c) For the Mindanao Grid, 138 kilovolts and above in the TL voltage level, as per TDP 2014-
transmission facilities rated 138 Mindanao Grid: 2015:
kV and above shall generally be (230) 138 kV and 69kV
considered transmission assets;
and
(d) Notwithstanding the foregoing [NGCP] [NGCP]
provisions, any line at the (d) For the avoidance of doubt, The EPIRA allows the ERC to set
specified level for each Grid that any lines that is 69kV and the standards of voltage
serves an End-user or customer above, as well as any line transmission to distinguish
shall be considered a below 69kV that serves a transmission from
subtransmission line, and any transmission function, shall subtransmission. It did so by
line below the specified level for be considered a starting with the standard
each Grid that serves a transmission line. technical transmission voltage of
transmission function shall be 69kV and above. The IRR should
considered a transmission line. only distinguish that function of
69kV whether it is transmission or
subtransmission
Section 6. Initial Classification of
Subtransmission Assets.
Step-down transformers used solely [NGCP] [NGCP]
by load customers are considered Stepdown transformers with voltage The EPIRA allows the ERC to set
Subtransmission Assets. In the case rating of 115kV and above on the the standards of voltage
of step-down transformer banks primary side should be classified as transmission to distinguish
serving a single Distribution Utility, transmission assets transmission from
the Distribution Utility or Distribution subtransmission. It did so by
Utilities shall have the option to starting with the standard
purchase said facility, provided, it technical transmission voltage of
will guarantee the reliable Supply 69kV and above. The IRR should
of Electricity to grid control only distinguish that function of
equipment. 69kV whether it is transmission or
subtransmission
Section 7. Functions and
Responsibilities of TRANSCO or
its Buyer or Concessionaire.
The TRANSCO or its Buyer or Section 9. Functions and NGCP assumes the function of
Concessionaire shall have, among Responsibilities. TRANSCO thru Concession
others, the following functions and agreement and the franchise given
responsibilities: Upon the effectivity of this Act, by Congress
the TRANSCO shall have the
following functions and
responsibilities:
(a) Act as the system operator of (a) Act as the system operator of
the nationwide electrical the nationwide electrical
transmission and Subtransmission transmission and
System, transferred to it by NPC; subtransmission system, to be
transferred to it by NPC;
(b) Provide open and non- b) Provide open and non-
discriminatory access to its system discriminatory access to its
to all electricity users; transmission system to all
electricity users;
(c) Ensure and maintain the (c) Ensure and maintain the [Aboitiz Power] [Aboitiz Power]
reliability, adequacy, security, reliability, adequacy, security, (c) Ensure and maintain the The proposed addition is
stability and integrity of the Grid in stability and integrity of the reliability, adequacy, security, intended to ensure the
accordance with the performance nationwide electrical grid in stability and integrity of the Grid in procurement of ancillary services
standards for the operation and accordance with the accordance with the performance by the SO.
maintenance of the Grid, as set performance standards for the standards for the operation and
forth in the Grid Code and the operations and maintenance of maintenance of the Grid, as set forth
Distribution Code. the grid, as set forth in a Grid in the Grid Code and the Distribution
Code to be adopted and Code. TRANSCO or its Buyer or
promulgated by the ERC within Concessionaire shall procure the
six (6) months from the necessary Ancillary Services for
effectivity of this Act; this purpose.
The performance indicators for
reliability, security, adequacy,
integrity and stability shall include but
are not limited to the following:
(i) Number of Interruption
Events;
(ii) Sustained Average
Interruption Frequency Index;
(iii) Momentary Average
Interruption Frequency Index;
(iv) Sustained Average
Interruption Duration Index;
(v) System Interruption Severity
Index;
(vi) Frequency of tripping per 100
c-km;
(vii) Average Forced Outage
Duration;
(viii) Accumulated Time Error;
(ix) Frequency Limit Violation;
and
(x) Voltage limit Violations.
(d) Improve and expand its (d) Improve and expand its
transmission facilities, consistent transmission facilities, consistent
with the TDP and the Grid Code, to with the Grid Code and the
adequately serve GenerationTransmission Development Plan
Companies, Distribution Utilities and (TDP) to be promulgated
Suppliers requiring transmission pursuant to this Act, to
service and/or Ancillary Services adequately serve generation
through the transmission system. companies, distribution utilities
TRANSCO or its Buyer or and suppliers requiring
Concessionaire shall submit any transmission service and/or
plan for expansion or improvement ancillary services through the
of its facilities for approval by the transmission system: Provided,
ERC; and That TRANSCO shall submit any
(e) Provide Central Dispatch, (e) Subject to technical
through its grid operator, to all constraints, the grid operator of
Generation Facilities and loads the TRANSCO shall provide
connected, directly or indirectly, to central dispatch of all generation
the transmission system in facilities connected, directly or
accordance with the dispatch indirectly, to the transmission
schedule submitted by the Market system in accordance with the
Operator, taking into account dispatch schedule submitted by
outstanding bilateral contracts and the market operator, taking into
subject to Technical Constraints. account outstanding bilateral
contracts; and
Section 8. Obligations of
TRANSCO.
The TRANSCO shall have, among
others, the following obligations:
(a) Prepare the TDP in consultation (f) TRANSCO shall undertake
with Electric Power Industry the preparation of the TDP.
Participants.
(b) Submit an updated TDP for In the preparation of the TDP,
approval to the DOE on a TRANSCO shall consult the
timely basis each year for other participants of the electric
integration with the PDP and power industry such as the
PEP. generation companies,
distribution utilities, and the
electricity end-users. The TDP
shall be submitted to the DOE
for integration with the Power
Development Program and the
Philippine Energy Plan, provided
for in Republic Act No. 7638
otherwise known as ‘the
1992”.
(c) Remit its net profit, if any, to the Section 18. Profits.
PSALM not later than ninety
(90) days after the immediately The net profit, if any, of
preceding quarter subject to TRANSCO shall be remitted to
annual reconciliation when the the PSALM Corp. not later than
audited and certified annual ninety (90) days after the
financial statements are finally immediately preceding quarter.
made available. Net profit is
defined as:
Net Profit = Total Utility
Revenue - (Total
Operating Expenses -
Other Income + Interest &
Other Charges)
Net proceeds from the
Privatization of
TRANSCO shall be
immediately remitted to
PSALM.
(d) TRANSCO shall secure approval Section 19. Transmission
of its Transmission Charges Charges.
from the ERC pursuant to
Section 43(f) of the Act. The transmission charges of the
TRANSCO shall be filed with
and approved by the ERC
pursuant to Paragraph (f) of
Section 43 hereof.
(e) TRANSCO shall sell its Section 8. Creation of the
Subtransmission Assets to National Transmission
qualified Distribution Utilities Company.
pursuant to the Act and, Part
IV, Section 13 of Rule 22 on The subtransmission functions
National Transmission and assets shall be segregated
Corporation. In the event that a from the transmission functions,
Distribution Utility is not assets and liabilities for
qualified or a qualified transparency and disposal:
Distribution Utility refuses to Provided, That the
acquire such assets, then subtransmission assets shall be
TRANSCO shall be deemed in operated and maintained by
compliance with this obligation. TRANSCO until their disposal to
qualified distribution utilities
which are in a position to take
over the responsibility for
upgrading, and expanding said
assets. All transmission and
subtransmission related liabilities
of NPC shall be transferred to
and assumed by the PSALM
Corp.
(f) The Buyer or Concessionaire
obligations under SubSections
(a), (b), and (d) hereof.
Section 9. Compliance with Grid
Code.
Concessionaire shall comply with the
provisions of the Grid Code in the
process of improving and
expanding its transmission facilities
in order to ensure and maintain the
reliability, adequacy, security,
stability and integrity of the Grid and
adequately serve Electric Power
Industry Participants requiring
transmission service or Ancillary
Services through the Grid.
Section 10. Transmission
Development Plan.
(a) The TDP refers to a plan for Section 4. Definition of Terms. TDP 2016-2040 Consultation Draft
managing the transmission is posted on NGCP website.
system through efficient (bbb) “Transmission
planning for expansion, Development Plan” or “TDP”
upgrading, rehabilitation, repair refers to the program for
and maintenance, to be managing the transmission
prepared and implemented by system through efficient planning
TRANSCO or its Buyer or for the expansion, upgrading,
Concessionaire. rehabilitation, repair and
maintenance, to be formulated
by DOE and implemented by the
TRANSCO pursuant to this Act;
(b) TRANSCO or its Buyer or Section 9. Functions and
Concessionaire shall be Responsibilities of TransCo.
responsible for the preparation of
the TDP, in consultation with the In the preparation of the TDP,
Electric Power Industry TRANSCO shall consult the
Participants. TRANSCO or its other participants of the electric
Buyer or Concessionaire shall power industry such as the
submit the TDP for approval by generation companies,
DOE for integration into the PDP distribution utilities, and the
and PEP. electricity end-users. The TDP
shall be submitted to the DOE
for integration with the Power
Development Program and the
Philippine Energy Plan, provided
for in Republic Act No. 7638
otherwise known as “the
1992”.
(c) Any plan for expansion or (d) Improve and expand its
improvement of transmission transmission facilities, consistent
facilities shall be approved by the with the Grid Code and the
ERC: Provided, That such Transmission Development Plan
approval shall not be (TDP) to be promulgated
unreasonably withheld. pursuant to this Act, to
adequately serve Generation
companies, distribution utilities
and suppliers requiring
transmission service and/or
Ancillary services through the
transmission system: Provided,
That TRANSCO shall submit any
Section 11. TRANSCO Related
Businesses.
The TRANSCO or its Buyer or
Concessionaire shall be primarily
responsible for maintaining and
operating the Grid pursuant to this
Rule.
(a) TRANSCO or its Buyer or Section 20. TRANSCO Related
Concessionaire may engage in Businesses.
any related business which
maximizes utilization of its assets; TRANSCO may engage in any
related business which
maximizes utilization of its
assets:
(b) A portion of the annual net Provided, That a portion of the
income of not more than fifty net income derived from such
percent (50%) derived from such undertaking utilizing assets
undertaking utilizing assets which form part of the rate base
which form part of the rate base shall be used to reduce
shall be used to reduce the transmission wheeling rates as
transmission wheeling charges determined by the ERC. Such
as determined by ERC; and portion of net income used to
reduce the transmission
wheeling rates shall not exceed
fifty percent (50%) of the net
income derived from such
undertaking.
(c) Separate audited accounts Separate accounts shall be
shall be maintained for each maintained for each business
business undertaking to ensure undertaking to ensure that the
that the transmission business transmission business shall
shall neither subsidize in any neither subsidize in any way
way such business undertaking such business undertaking nor
nor encumber its transmission encumber its transmission
assets in any way to support such assets in any way to support
business. such business
Charges.
(a) Transmission Charges shall be Sec 19. Transmission Charges. - Rules for Setting Transmission
paid to TRANSCO or its Buyer The transmission charges of the Wheeling Rates promulgated by the
or Concessionaire for the use of TRANSCO shall be filed with ERC govern the ratemaking
the transmission system. and approved by the ERC process wherein rates are
Transmission users shall also pursuant to paragraph (f) of controlled thru a Maximum Annual
pay charges for the use of Section 43 hereof. Revenue.
Ancillary Services. The WESM
Rules shall provide for the Section 43. (f) Functions of ERC: Ancillary Service price and cost
methodology for the price and xxx methodology is incorporated in the
cost recovery of Ancillary (f) In the public interest, NMMS
Services that are to be establish and enforce a
provided by the Generation methodology for setting
Company. transmission and distribution
wheeling rates and retail rates
for the captive market of a
distribution utility, taking intro
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 on
entity to operate viably. The
ERC may adopt alternative
forms of internationally-accepted
rate-setting methodology as it
may deem appropriate. The rate-
non-discriminatory. xxx
(b) Transmission Charges and fees Section 43. Functions of the
for Ancillary Services shall be ERC.
fixed by the ERC.
Allow the TRANSCO to charge
user fees for ancillary services to
all electric power industry
participants or self-generating
entities connected to the grid. Such
fees shall be fixed by the ERC
after due notice and public hearing;
RULE 7. DISTRIBUTION SECTOR
Section 1. Guiding Principles.
(a) Pursuant to Section 22 of the Section 22. Distribution
Act, the Distribution of Electricity Sector.
to End-users shall be a regulated
common carrier business, The distribution of electricity to
requiring a national franchise. end-users shall be a regulated
For purposes of these Rules, common carrier business
distribution franchise shall mean requiring a national franchise.
the privilege of a Distribution Distribution of electric power to
Utility to convey electric power all end-users may be undertaken
through its Distribution System in by private distribution utilities,
a given geographical area cooperatives, local government
granted by the Congress of the units presently undertaking this
Republic of the Philippines. The function and other duly
Distribution of Electricity is a authorized entities, subject to
business affected with public regulation by the ERC.
interest.
Section 23. Functions of
Distribution Utilities.
A distribution utility shall have
the obligation to provide
distribution services and
connections to its system for any
end-user within its franchise
area consistent with the
distribution code.
(b) The following rules shall apply to
the Distribution of Electricity.
This Rule shall apply to an entity
that owns, operates, or Controls
one or more Distribution Systems
such as but not limited to:
(a) ECs;
(b) Privately-Owned
(c) Local Government Unit
Owned-and-Operated
Distribution Systems;
(d) Entities duly authorized
to operate within the EZs;
and
(e) Other duly authorized
entities engaged in the
Distribution of Electricity.
(a) A Distribution Utility and any Section 45. Cross Ownership,
of its subsidiaries, Affiliates, Market Power Abuse and Anti-
stockholders, directors, officers Competitive Behavior.
or their relatives within the
fourth civil degree of
No generation company,
consanguinity or affinity,
distribution utility, or its
legitimate or common law, shall respective subsidiary or affiliate
not hold any interest, directly or or stockholder or official of a
indirectly, in the TRANSCO or its generation company or
Buyer or Concessionaire, or the distribution utility, or other entity
IMO. engaged in generating and
supplying electricity specified by
ERC within the fourth civil
degree of consanguinity or
affinity, shall be allowed to hold
any interest, directly or indirectly,
in TRANSCO or its
concessionaire.
(b) The holdings of any Person, Section 28. De-Monopolization
natural or juridical, including its and Shareholding Dispersal.
directors, officers, stockholders, In compliance with the
and their related interests in a constitutional mandate for
Distribution Utility and their dispersal of ownership and de-
respective holding companies monopolization of public utilities,
shall not exceed twenty-five the holdings of persons, natural
percent (25%) of the total voting or juridical, including directors,
shares of stock. This shall not officers, stockholders and
apply to a Distribution Utility or related interests, in a distribution
the company holding the shares utility and their respective
or its controlling stockholders holding companies shall not
whose shares are listed in the exceed twenty-five (25%)
PSE. Implementation of this percent of the voting shares of
provision shall be in accordance stock unless the utility or the
with the rules and regulations company holding the shares or
issued by ERC. This Section shall its controlling stockholders are
not apply to ECs in accordance already listed in the Philippine
with Section 28 of the Act. Stock Exchange (PSE):
Provided, That controlling
stockholders of small distribution
utilities are hereby required to
list in the PSE within five (5)
years from the enactment of this
Act if they already own the
stocks. New controlling
stockholders shall undertake
such listing within five (5) years
from the time they acquire
ownership and control. A small
distribution company is one
whose peak demand is equal to
or less than Ten megawatts
(10MW).
The ERC shall, within sixty (60)

days from the effectivity of this
Act, promulgate the rules and
regulations to implement and
effect this provision.
This Section shall not apply to

electric cooperatives
(c) A Distribution Utility shall be Section 43. Functions of ERC.
required to sell to the public a Perform such other regulatory
portion of not less than fifteen functions as are appropriate and
percent (15%) of its common necessary in order to ensure the
shares of stock not later than successful restructuring and
five (5) years from the modernization of the electric power
effectivity of the Act, except industry, such as, but not limited
those Distribution Utilities or its to, the rules and guidelines under
respective holding companies which generation companies,
listed in the PSE, subject to the distribution utilities which are not
rules and regulations of the ERC publicly listed shall offer and sell to
to be issued for this purpose. the public a portion not less than
fifteen percent (15%) of their
common shares of stocks:
Provided, however, That
generation companies, distribution
utilities or their respective holding
companies that are already listed
in the PSE are deemed in
compliance. For existing
companies, such public offering
shall be implemented not later than
five (5) years from the effectivity of
this Act. New companies shall
implement their respective public
offerings not later than five (5)
years from the issuance of their
certificate of compliance; and
(a) A Distribution Utility shall Section 23. Functions of
provide distribution services Distribution Utilities.
and connections to its systems
for any End-user within its A distribution utility shall have the
Franchise Area consistent with obligation to provide distribution
the Distribution Code. Any services and connections to its
existing End-user within the system for any end-user within its
Franchise Area of a Distribution franchise area consistent with the
Utility that is connected to distribution code. Any entity
TRANSCO facilities shall be engaged therein shall provide
served by the franchised open and non-discriminatory
Distribution Utility upon access to its distribution system
acquisition of the to all users.
subtransmission facilities:
Provided, however, That the Section 8. Creation of the
Distribution Utility which National Transmission
acquired the subtransmission Company.
facilities shall be paid by the
End-user the corresponding TRANSCO shall negotiate with
subtransmission rates or and thereafter transfer such
wheeling charge imposed by functions, assets, and associated
NPC in accordance with its liabilities to the qualified
contract to the End-user as distribution utility or utilities
approved by ERC. connected to such
subtransmission facilities not
later than two (2) years from the
effectivity of this Act or the start of
open access, whichever comes
earlier: Provided, That in the case
of electric cooperatives, the
TRANSCO shall grant
concessional financing over a
period of twenty (20) years:
Provided, however, That the
installment payments to
TRANSCO for the acquisition of
subtransmission facilities shall be
given first priority by the electric
cooperatives out of the net
facilities. The TRANSCO shall
determine the disposal value of
the subtransmission assets based
on the revenue potential of such
assets.
(b) A Distribution Utility shall Section 36. Unbundling of Distribution Business is exactly the
structurally and functionally Rates and Functions. wire business thus unbundling may
unbundle its distribution not possible
business activities and rates Within six (6) months from the
from its wires, generation and effectivity of this Act, each
supply businesses. A Distribution distribution utility shall file its
Utility shall comply with Rule 10 revised rates for the approval by
on Structural and Functional the ERC. The distribution
Unbundling of Electric Power wheeling charge shall be
Industry Participants. unbundled from the retail rate
(c) A Distribution Utility shall provide
open and non-discriminatory
access to its Distribution System
to all End-users, including
Suppliers and Aggregators.
(d) A Distribution Utility shall comply Section 23. Functions of Financial Standards set forth under
with the technical specifications Distribution Utilities. the Distribution Code enlist only
and financial standards financial ratios that shall be used to
prescribed in the Distribution Distribution utilities shall submit evaluate capability of Distribution
Code and the performance to the ERC a statement of their Utilities. These does not provide
standards prescribed in these compliance with the technical specific figures that need to be
Rules. To this end, ERC shall specifications prescribed in the observed.
issue submission requirements Distribution Code and the
for Distribution Utilities to comply performance standards
with the technical prescribed in the IRR of this Act.
specifications, financial and the Distribution utilities which do not
performance standards after comply with any of the
the effectivity of these Rules prescribed technical
and the Distribution Code. specifications and performance
standards shall submit to the
ERC a plan to comply, within
three (3) years, with said
prescribed technical
specifications and performance
standards. The ERC shall, within
sixty (60) days upon receipt of
such plan, evaluate the same
and notify the distribution utility
concerned of its action. 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.
(i) A Distribution Utility shall Section 23. Functions of
submit to ERC a statement Distribution Utilities.
of compliance.
Distribution utilities shall submit
to the ERC a statement of their
compliance with the technical
specifications prescribed in the
Distribution Code and the
performance standards
prescribed in the IRR of this Act.
(ii) A Distribution Utility that does Distribution utilities which do not
not comply with the comply with any of the
technical specifications, prescribed technical
performance standards and specifications and performance
financial capability standards shall submit to the
standards as prescribed in ERC a plan to comply, within
the Distribution Code shall three (3) years, with said
submit to ERC a plan to prescribed technical
comply within three (3) years specifications and performance
therewith. The ERC shall, standards. The ERC shall, within
within sixty (60) days from sixty (60) days upon receipt of
receipt of such plan, such plan, evaluate the same
evaluate the same and notify and notify the distribution utility
the Distribution Utility concerned of its action. Failure
concerned of its action. 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.
(iii) A Distribution Utility is Distribution utilities which do not
required to implement the comply with any of the
ERC-approved plan to prescribed technical
comply with the said specifications and performance
technical specifications standards shall submit to the
prescribed in the ERC a plan to comply, within
Distribution Code and the three (3) years, with said
performance standards of prescribed technical
these Rules within three (3) specifications and performance
years from the approval of standards.
said plan.
(iv) Failure by the Distribution

Utility to submit a feasible
and credible plan or failure
to implement the same
shall serve as ground for
the imposition of
appropriate sanctions,
fines or penalties as may be
prescribed by ERC.
(e) A Distribution Utility shall comply Section 23. Functions of
with the requirements in the Grid Distribution Utilities.
Code, WESM Rules and all
applicable laws. Distribution utilities shall provide
universal service within their
franchise, over a reasonable
time from the requirement
thereof, including unviable
areas, as part of their social
obligations, in a manner that
shall sustain the economic
viability of the utility, subject to
the approval by the ERC in the
case of private or government-
owned utilities. To this end,
distribution utilities shall submit
to the DOE their plans for
serving such areas as part of
their distribution development
plans.
(f) A Distribution Utility shall Section 23. Functions of
provide universal service within Distribution Utilities.
its Franchise Area, over a
reasonable time, including Areas which a franchised
Unviable Areas, as part of its distribution utility cannot or does
social obligations. This obligation not find viable may be
shall be performed in a manner transferred to another
that shall allow such Distribution distribution utility, if any is
Utilities to collect different rates available, who will provide the
in Unviable Areas to sustain its service, subject approval by
economic viability, subject to ERC. In cases where franchise
approval by the ERC. holders fail and/or refuse to
service any area within their
franchise territory and allowed
another utility to service the
same, then the status quo shall
be respected.
(g) A Distribution Utility shall file Section 23. Functions of
with the ERC its petition to allow Distribution Utilities.
another Distribution Utility to
provide electricity to areas that it A distribution utility shall have
does not find viable, pursuant to the obligation to supply
Section 6 of this Rule. electricity in the least cost
manner to its captive market,
subject to the collection of retail
rate duly approved by the ERC.
(h) A Distribution Utility shall supply A distribution utility shall have
electricity in the least cost the obligation to supply
manner to the Captive Market electricity in the least cost
within its Franchise Area, subject manner to its captive market,
to the collection of Retail Rates subject to the collection of retail
duly approved by ERC. rate duly approved by the ERC.
(i) A Distribution Utility shall file for Section 36. Unbundling of Rates
review and approval by the ERC and Functions.
its unbundled rates reflecting the
true costs of service pursuant to Within six (6) months from the
Rule 15 on Unbundling of Rates, effectivity of this Act, each
and the proposal for the removal distribution utility shall file its
of cross subsidies among the revised rates for the approval by
customers it serves pursuant to the ERC. The distribution
Rule 16 on Removal of Cross wheeling charge shall be
Subsidies. unbundled from the retail rate
accordance with this Act. Within
six (6) months from the
effectivity of this Act, each
distribution utility shall file its
the ERC. The distribution
unbundled from the retail rate
(j) A Distribution Utility shall file with
Section 73. Lifeline Rate
the ERC its petition on the
Lifeline Rate to be applied to its A socialized pricing mechanism
Marginalized End-users, pursuant called a lifeline rate for the
to Rule 20 on Lifeline Rate. marginalized end-users shall be
for a period often (10) years,
level of consumption and the
rate shall be determined by the
ERC after due notice and
hearing.
(k) A Distribution Utility shall Section 33. Distribution
recover Stranded Contract Utilities Stranded Contract
Costs under eligible contracts Costs Recovery.
approved by ERB as of 31
December 2000, subject to A distribution utility shall recover
review by ERC pursuant to Rule stranded contract costs:
17 on Stranded Debts and Provided, however, That such
Contract Costs Recovery. costs of the IPPs of distribution
utilities are subject to review by
ERC in order to determine
fairness and reasonableness in
relation to the average price of
land-based IPP projects entered
into by NPC at the time they
were contracted. The ERC shall
take into consideration all factors
that affect the total cost of NPC
IPP generation projects,
including direct or indirect
subsidies or incentives provided
by the Government.
(l) A Distribution Utility shall collect Section 34. Universal Charge
on a monthly basis from all End-
users a Universal Charge set by The universal charge shall be
ERC, to be remitted to PSALM non-bypassable charge which
on or before the fifteenth (15th) ofshall be passed on and collected
the succeeding month, net of any from all end-users on a monthly
amount due to the Distribution basis by the distribution utilities.
Utility. Collections by the distribution
utilities and the TRANSCO in
any given month shall be
remitted to the PSALM Corp. on
or before the fifteenth (15th) of
the succeeding month, net of
any amount due to the
distribution utility. Any end-user
or self-generating entity not
connected to a distribution utility
shall remit its corresponding
universal charge directly to the
TRANSCO
(m) A Distribution Utility shall Section 25. Retail Rate.
identify and segregate in its
customer billing statements the Every distribution utility shall
components of the Retail Rate. identify and segregate in its bills
to end-users the components of
the retail rate, as defined in this
Act.
(n) A Distribution Utility shall comply
with Rule 11 on Cross
Ownership, Market Abuse and
Anti-Competitive Behavior.
(o) A Distribution Utility shall file for Section 43. Functions of the
review and approval by the ERC ERC
any changes in the terms and
conditions of services to its (h) Review and approve any
Franchise Areas. changes on the terms and
conditions of service of the
TRANSCO or any distribution
utility;
(p) A Distribution Utility shall prepare Section 23. Functions of
and submit to the DOE an annual Distribution Utilities.
5-year distribution development
plan not later than the fifteenth Distribution utilities shall prepare
(15th) of March of every year, for and submit to the DOE their
integration with the PDP and annual distributions
PEP. In the case of the ECs, such developments plans. In the case
plans shall be submitted through of electric cooperatives, such
NEA for review and plans shall be submitted through
consolidation. To this end, NEA the National Electrification
shall submit to the DOE the Administration.
National Electric Cooperatives
Distribution Development Plan
not later than the 15th of March of
every year.
(q) A Distribution Utility shall pay a [Aboitiz Power] [Aboitiz Power]
franchise tax only on its (q) A Distribution Utility shall pay a We suggest to delete the
distribution wheeling and Captive franchise tax only on its distribution requirement for a DOF issuance
Market supply revenues. To this wheeling and Captive Market supply of guidelines. To date, the DOF
end, the DOF shall issue the revenues. To this end, the DOF has not issued guidelines for
necessary guidelines. shall issue the necessary private distribution utilities,
guidelines. notwithstanding the EPIRA IRR
requirement.
(r) A Distribution Utility shall comply
with the reportorial requirements
as may be prescribed by the ERC
and the DOE.
Section 5. Privileges of a
(a) A Distribution Utility shall be Any distribution utility shall be
entitled to impose and collect entitled to impose and collect
Distribution Wheeling Charges distribution wheeling charges
and connection fees, Retail and connection fees from such
Rates and other charges as end-users as approved by the
approved by the ERC from the ERC.
End-user and other qualified
customers.
(b) A Distribution Utility may exercise Distribution utilities may exercise
the power of eminent domain the power of eminent domain
subject to the requirements of the subject to the requirements of
Constitution and existing laws. the Constitution and existing
laws.
(c) A Distribution Utility may, directly Section 26. Distribution
or indirectly, engage in any Related Businesses.
related business undertaking
that maximizes the utilization of Distribution utilities may, directly
its assets: Provided, That quality or indirectly, engage in any
of service shall not deteriorate related business undertaking
pursuant to the standards which maximizes the utilization
provided in the Grid Code and of their assets: Provided, That a
Distribution Code and Rule 10 portion of the net income derived
on Structural and Functional from such undertaking utilizing
Unbundling of Electric Power assets which form part of the
Industry Participants. To this rate base shall be used to
end, the Distribution Utility shall reduce its distribution wheeling
submit to the ERC the appropriate charges as determined by the
documents to effect the following: ERC.
(i) A portion of the net annual Provided, further, That such
income derived from such portion of net income used to
undertaking utilizing assets reduce their distribution wheeling
which form part of the rate charges shall not exceed fifty
base shall be used to reduce percent (50%) of the net income
its Distribution Wheeling derived from such undertaking:
Charges: Provided, That,
such portion shall not exceed
fifty percent (50%) of the net
undertaking.
(ii) Separate accounts shall be Provided, finally, That separate
maintained for each accounts are maintained for
business undertaking to each business undertaking to
ensure that the distribution ensure that the distribution
business shall neither business shall neither subsidize
subsidize in any way such in any way such business
business undertaking nor undertaking nor encumber its
encumber its distribution distribution assets in any way to
assets in any way to support such business.
support such business.
Section 6. Provision of Service in
Unviable Areas.
(a) Unenergized areas that a Section 23. Functions of
Distribution Utility does not find Distribution Utilities.
viable may be transferred to
another Distribution Utility, if Distribution utilities shall provide
any is available, which will universal service within their
provide the service, subject to franchise, over a reasonable
approval by ERC. In cases time from the requirement
where a Distribution Utility failed thereof, including unviable
or refused to service any area areas, as part of their social
within its Franchise Area and obligations, in a manner that
allows another utility to service shall sustain the economic
the same, the arrangements viability of the utility, subject to
between the Distribution the approval by the ERC in the
Utilities shall not affect their case of private or government-
respective Franchise Areas. owned utilities. To this end,
The ERC shall issue the distribution utilities shall submit
appropriate guidelines to to the DOE their plans for
implement this provision. serving such areas as part of
their distribution development
plans. Areas which a franchised
distribution utility cannot or does
not find viable may be
transferred to another
distribution utility, if any is
available, who will provide the
service, subject approval by
ERC. In cases where franchise
holders fail and/or refuse to
service any area within their
franchise territory and allowed
another utility to service the
same, then the status quo shall
be respected.
(b) In remote and Unviable Areas Section 59. Alternative Electric
where the Distribution Utility is Service for Isolated Villages.
unable to serve for any reason
as authorized by ERC in The provision of electric service
accordance with the Act, the in remote and unviable villages
areas shall be opened to other that the franchised utility is
qualified third parties that may unable to service for any reason
provide the service pursuant to shall be opened to other
Rule 14 on Provision of qualified third parties
Electricity by Qualified Third
Parties.
Section 7. Structural and
Operational Reforms Between
and Among Distribution Utilities.
(a) Pursuant to Section 23 of the Act, Section 23. Functions of
the ERC shall issue the Distribution Utilities.
appropriate guidelines for the
structural and operational
To achieve economies of scale
reforms of a Distribution Utility.
in utility operations, distribution
Such reforms shall include, but
utilities may, after due notice and
not limited, to merger,
public hearing, pursue structural
consolidation, integration, bulk
and operational reforms such as
procurement and joint ventures.
but not limited to, joint actions
between or among the
distribution utilities, subject to
the guidelines issued by the
ERC. Such joint actions shall
result in improved efficiencies,
reliability of service, reduction of
costs and compliance to the
performance standards
prescribed in the IRR of this Act.
(b) With respect to ECs, the DOE Section 37. Powers and
through NEA shall facilitate Functions of the DOE.
and encourage reforms in the
structure and operations of a (e) Following the restructuring of
Distribution Utility for greater the electricity sector, the DOE
efficiency and lower costs. shall, among others:
(ii) Facilitate and encourage
reforms in the structure and
operations of distribution utilities
for greater efficiency and lower
costs;
(c) Pursuant to Section 57 of the Act, Section 57. Conversion of
ECs are given the option to Electric Cooperatives. -Electric
convert into Stock Cooperatives cooperatives are hereby given
under the CDA or Stock the option to convert into either
Corporations under the stock cooperative under the
Corporation Code. Nothing Cooperatives Development Act
contained in the Act shall or stock corporation under the
deprive ECs of any privilege or Corporation Code. Nothing
right granted to them under contained in this Act shall
Section 39 of Presidential deprive electric cooperatives of
Decree No. 269, as amended, any privilege or right granted to
and other existing laws. The them under Presidential Decree
conversion and registration of No. 269, as amended, and other
ECs shall be implemented in existing laws.
the following manner:
(i) ECs shall, upon approval of
a simple majority of the
required number of turnout of
voters as provided in the
Guidelines in the Conduct of
Referendum (Guidelines),
in a referendum conducted
for such purpose, be
converted into a Stock
Cooperative or Stock
Corporation and thereafter
shall be governed by the
Cooperative Code of the
Philippines or the
Corporation Code, as the
case may be. The NEA,
within six (6) months from
the effectivity of these Rules,
shall promulgate the
guidelines in accordance
with Section 5 of
Presidential Decree No.
1645.
(ii) ECs converted into Stock
Corporations shall be
registered with the SEC in
accordance with the
Corporation Code, while
those converted into Stock
Cooperatives, shall be
registered with the CDA:
Provided, however, That the
ECs which opt to remain as
non-Stock Cooperatives shall
continue to be registered with
the NEA and shall be
governed by the provisions
of Presidential Decree No.
269, as amended.
(iii) An EC heretofore converted,
regardless of the corporate
form, or its successor entity,
shall retain its franchise
rights: Provided, further,
That its operations shall be
regulated by the ERC and
other Government
instrumentalities insofar as
practicable and consistent
with the Act.
Section 8. Franchise for a
(a) Pursuant to Section 27 of the Act,
a franchise to a Person intending
to engage in Distribution of
Electricity shall be granted
exclusively by the Congress of
the Philippines.
(b) All existing franchises shall be
allowed to their full term.
(c) In the case of ECs, renewals
and cancellations of franchise
shall remain with the National
Electrification Commission
(NEC) under the NEA for five (5)
more years after the effectivity of
the Act.
RULE 8. SUPPLY SECTOR
Section 1. Guiding Principles.
(a) Pursuant to Section 29 of the Section 29. Supply Sector.
Act, the Supply of Electricity to End
users is a business affected with The supply sector is a business
public interest. affected with public interest.
(b) The Supply of Electricity to End- Except for distribution utilities and PEZA and its accredited utility zone (b) The Supply of Electricity to End- Distribution Utilities supplying
users in Contestable Market requires electric cooperatives with respect enterprise are considered Local users in Contestable Market requires electricity to End-users in the
a license from the ERC except for to their existing franchise areas, allSuppliers. PEMC would like to be a license from the ERC except for the Contestable Market located within
the Supply of Electricity by suppliers of electricity to the clarified that if Ecozone enterprises Supply of Electricity by Distribution their Franchise Areas should no
Distribution Utilities within their contestable market shall require a are required authorizations from ERC. Utilities to End-users in Contestable longer be required to get a license
Franchise Areas and Persons license from the ERC. There are pending applications from Market located within their Franchise from the ERC for they have
authorized to supply electricity within distributors in Ecozones submitting Areas and Persons authorized to already proven themselves to be
their respective EZs. For this purpose, the ERC shall authorizations from PEZA instead of supply electricity within their technically and financially capable
promulgate rules and regulations ERC. PEMC also requests clarification respective EZs. when they were granted their
prescribing the qualifications of on how to resolve authorizations legislative franchises, and
electricity suppliers which shall coming from PEZA for distributors to Certificates of Public Convenience
include, among other act as Local Suppliers. and Necessity (CPCN).
requirements, a demonstration of
their technical capability, financial
capability, and creditworthiness:
Provided, That the ERC shall have
authority to require electricity
suppliers to furnish a bond or other
evidence of the ability of a supplier
to withstand market disturbances
or other events that may increase
the cost of providing service.
(a) This Rule shall apply to all
Suppliers.
(b) Subject to the qualifications set
by the ERC, any of the
following may obtain a license
to become a Supplier:
(i) A Generation Company or
Affiliate thereof;
(ii) An Affiliate of a Distribution
Utility with respect to the
latter’s Contestable
Market within or outside its
Franchise Area;
(iii) Aggregators;
(iv) An IPP Administrator; and
(v) Any other Person
authorized by the ERC
to engage in the selling,
brokering or marketing of
electricity to the
Contestable Market,
consistent with the Act and
these Rules.
Section 3. Ownership Limitation
and Restrictions.
(a) A Supplier or Affiliate Section 45. Cross Ownership,
thereof or any stockholder, Market Power Abuse and Anti-
director or officer or any of Competitive Behavior.
their relatives within the
fourth civil degree of No generation company,
consanguinity or affinity, distribution utility, or its
legitimate or common law, respective subsidiary or affiliate
shall not own any interest, or stockholder or official of a
directly or indirectly, in generation company or
TRANSCO or its Buyer or distribution utility, or other entity
Concessionaire, or IMO. engaged in generating and
ERC within the fourth civil
degree of consanguinity or
in TRANSCO or its
concessionaire.
(b) Except for ex-officio
government-appointed
representatives, no Person
who is an officer or director
of the TRANSCO or its
Buyer or Concessionaire
shall be an officer or director
of any Supplier.
Supplier.
(a) A Supplier shall secure a Section 29. Supply Sector.
license from the ERC prior
to engaging in the Supply of The supply sector is a business
Electricity to End-users in any affected with public interest.
Contestable Market. Except for distribution utilities
and electric cooperatives with
respect to their existing franchise
areas, all suppliers of electricity
to the contestable market shall
require a license from the ERC.
(b) A Supplier, where Section 36. Unbundling of
applicable, shall functionally Rates and Functions.
and structurally unbundle its
supply business activities Any electric power industry
and rates from its generation participant shall functionally and
and distribution businesses, structurally unbundle its
if any, as presented in Rule business activities and rates in
10 on Structural and accordance with the sectors as
Functional Unbundling of identified in Section 5 hereof.
Electric Power Industry The ERC shall ensure full
Participants. compliance with this provision.
(c) A Supplier shall identify Section 29. Supply Sector.
and segregate the
components of its Supplier’s In its billings to end-users, every
Charge, as required by the supplier shall identify and
Act and further provided in segregate the components of its
Rule 15 on Unbundling of supplier’s charge, as defined
Rates. herein.
(d) A Supplier shall comply
with the WESM Rules.
(e) A Supplier shall comply
with any reportorial
requirements prescribed by
the ERC for monitoring
purposes.
(f) A Supplier shall comply Electricity suppliers shall be
with the Competition Rules subject to the rules and
to be prescribed by the ERC regulations concerning abuse of
concerning abuse of market market power, cartelization, and
power, cartelization, and any other anti-competitive or
other anti-competitive or discriminatory behavior to be
discriminatory behavior. promulgated by the ERC.
(g) A Supplier that fails to ERC promulgated guidelines on
comply with any of these imposition of administrative
obligations shall be sanctions in form of fines and
subject to fines and penalties penalties. Wherein, penalties would
imposed by the ERC and, as reach from PhP100,000 to
so required to protect the PhP500,000.00 only, depending on
public interest, may have its number of times of violations.
license suspended, revised
or revoked.
Section 5. Licensing of Suppliers.
The ERC shall issue the For this purpose, the ERC shall Revised Rules for the issuance of
appropriate licensing rules, promulgate rules and regulations RES License is under SC TRO
guidelines and procedures for the prescribing the qualifications of
issuance of licenses to Suppliers, electricity suppliers which shall
which shall include but not limited to include, among other
the following: requirements, a demonstration
of their technical capability,
financial capability, and
creditworthiness: Provided, That
the ERC shall have authority to
require electricity suppliers to
furnish a bond or other evidence
of the ability of a supplier to
withstand market disturbances
or other events that may
increase the cost of providing
service.
(a) General Procedures for License
Applications and Monitoring.
(i) The applicant shall submit all [Aboitiz Power] [Aboitiz Power]
pertinent information and (i) Compliance with EPIRA We propose these revisions to
documents required by provisions. align the IRR’s requirements for
ERC for purposes of (i) The applicant shall submit all RES licensing with the EPIRA
evaluating the application pertinent information and requirements. We suggest that
for a license to supply documents required by ERC for for purposes of licensing of a
electricity to End-users in a purposes of evaluating the RES, ERC issue regulations only
Contestable Market. application for a license to supply in relation to the technical and
electricity to End-users in a financial capability of a RES.
Contestable Market.
(ii) Upon receipt of all the [Aboitiz Power] [Aboitiz Power]
information required to (ii) Technical and Financial We propose these revisions to
evaluate compliance with Standards, Creditworthiness align the IRR’s requirements for
the requirements applicable Criteria as set in the EPIRA. RES licensing with the EPIRA
to obtaining a license to (ii) Upon receipt of all the requirements. We suggest that
supply electricity to End- information required to evaluate for purposes of licensing of a
users in a Contestable compliance with the requirements RES, ERC issue regulations only
Market, and upon applicable to obtaining a license to in relation to the technical and
demonstration of compliance supply electricity to End-users in a financial capability of a RES.
with such requirements, the Contestable Market, and upon
ERC shall issue the demonstration of compliance with
necessary resolution, order, such requirements, the ERC shall
and/or the appropriate license issue the necessary resolution,
as a Supplier. order, and/or the appropriate
license as a Supplier.
(iii) The ERC shall monitor the (iii) The ERC shall monitor the
compliance of Suppliers compliance of Suppliers with the
with the requirements of requirements of their respective
their respective licenses and licenses and the rules and
the rules and regulations regulations applicable to Suppliers.
applicable to Suppliers.
(b) Qualification Criteria
(i) Compliance with Section 3 of
this Rule 8.
(ii) Technical and Financial
Standards, Creditworthiness
Criteria and such financial
security to secure proper
performance as a Supplier
as may be determined by
the ERC to protect the
interests of End-users in
Contestable Markets.
(iii) Such other qualification or
criteria as may be determined
by the ERC to protect the
public interest.
RULE 9. WHOLESALE
ELECTRICITY SPOT MARKET
(WESM)
Pursuant to Section 30 of the Act,
all WESM Participants shall comply
This Rule shall apply to the Market
Operator and all WESM Participants.
Section 3. Organization.
Within one (1) year from the Section 30. Wholesale
effectivity of the Act, the DOE shall Electricity Spot Market.
establish a WESM composed of the
WESM Participants. For this Within one (1) year from the
purpose, the DOE shall, jointly with effectivity of this Act, the DOE
Electric Power Industry Participants, shall establish a wholesale
promulgate the WESM Rules, and electricity spot market composed
undertake actions including but of the wholesale electricity spot
not limited to the following: market participants. The market
shall provide the mechanism for
identifying and setting the price
of actual variations from the
quantities transacted under
contracts between sellers and
purchasers of electricity.
(a) Organize and establish
the appropriate market
design and governance
structure of the WESM;
(b) Pursuant to Section 30 of
the Act, constitute the
AGMO, which shall
undertake the preparatory
work and initial operation of
the WESM;
(c) Oversee the development
of the WESM organization
and necessary supporting
infrastructure, including the
funding requirements.
Section 4. Membership.
Subject to compliance with the Section 30
membership criteria specified in the
WESM Rules, the following The ERC may authorize other
Persons shall be eligible to similar entities to become
become members of the WESM: eligible as members, either
(a) Generation Companies; directly or indirectly, of the
(b) Distribution Utilities; wholesale electricity spot
(c) Suppliers; market. All generating
(d) IPP Administrators; companies, distribution utilities,
(e) End-users; and suppliers, bulk consumers/end-
(f) Other similar Persons users and other similar entities
authorized by the ERC authorized by the ERC, whether
eligible to become members direct or indirect members of the
of the WESM. wholesale electricity spot
wholesale electricity spot market
rules with respect to transactions
in that market.
Section 5. The WESM Rules.
(a) The WESM Rules shall provide
the mechanism for identifying
and setting the price of actual
variations from the quantities
transacted under contracts
between sellers and
purchasers of electricity. The
WESM Rules shall include
rules governing the central
scheduling and dispatch, and
settlement of quantities sold
and purchased under bilateral
contracts in order to identify
variations therefrom. The
WESM Rules shall also reflect
accepted economic principles
and provide an open,
competitive market for all
WESM Participants.
(b) Jointly with the Electric Power Jointly with the electric power
Industry Participants, the DOE industry participants, the DOE
shall formulate the detailed shall formulate the detailed rules
rules for the WESM, in for the wholesale electricity spot
accordance with the following market. Said rules shall provide
principles: the mechanism for determining
the price of electricity not
covered by bilateral contracts
between sellers and purchasers
of electricity users. The price
determination methodology
contained in said rules shall be
subject to the approval of ERC.
Said rules shall also reflect
accepted economic principles
and provide a level playing field
to all electric power industry
participants. The rules shall
provide, among others,
procedures for:
(i) Provide an efficient,
competitive, transparent
and reliable spot market;
(ii) Ensure efficient operation of

the WESM by the Market
Operator in coordination
with the system operator in
a way which: (1) Minimizes
adverse impacts on system
security; (2) Encourages
market participation; and (3)
Enables access to the
market.
(iii) Subject to the provisions of

Section 43(u) of the Act,
provide a cost-effective
framework for resolution of
disputes among WESM
Participants, and between
WESM Participants and
the Market Operator;
(iv) Provide for adequate

sanctions in cases of
breaches of the WESM
Rules; and
(v) Provide efficient,
transparent and fair
processes for amending
the WESM Rules.
(c) The WESM Rules shall provide, The rules shall provide, among
among others, procedures for: others, procedures for:
(i) Establishing the Merit (a) Establishing the merit
Order Dispatch order dispatch
Instructions for each time instructions for each time
period for Central Dispatch; period;
(ii) Determining the market- (b) Determining the

clearing price for each market-clearing price for
time period; each time period;
(iii) Administering the market, (c) Administering the

including criteria for market, including criteria
admission to and for admission to and
termination from the termination from the
market which includes market which includes
security or performance security or performance
bond requirements, voting bond requirements,
rights of the participants, voting rights of the
surveillance and participants, surveillance
assurance of compliance and assurance of
of the participants with compliance of the
the rules and the participants with the rules
formation of the WESM and the formation of the
governing body; wholesale electricity spot
market governing body;
(iv) Prescribing guidelines for (d) Prescribing guidelines

the market operation in for the market operation
system emergencies; in system emergencies;
and
(v) Amending the WESM (e) Amending the rules

Rules; and
(vi) Establishing the transition

to full implementation of
the WESM.
(d) Methodology for Price Said rules shall provide the
Determination. The WESM mechanism for determining the
Rules shall provide the price of electricity not covered by
mechanism for determining the bilateral contracts between
price of electricity not covered sellers and purchasers of
by bilateral contracts between electricity users. The price
sellers and purchasers of determination methodology
electricity. The price contained in said rules shall be
determination methodology subject to the approval of ERC
contained in the WESM Rules
shall be subject to the approval
of the ERC.
Section 6. The Market Operator.
(a) A Market Operator in The wholesale electricity spot
accordance with the WESM market shall be implemented by
Rules shall implement the a market operator in accordance
WESM. Not later than one (1) with the wholesale electricity
year after the implementation spot market rules. The market
of the WESM, an independent operator shall be an autonomous
entity, the IMO, shall be formed group, to be constituted by DOE,
and the functions, assets and with equitable representation
liabilities of the AGMO shall be from electric power industry
transferred to such entity with participants, initially under the
the joint endorsement of the administrative supervision of the
DOE and the Electric Power TRANSCO. The market operator
Industry Participants: Provided, shall undertake the preparatory
That the IMO shall be work and initial operation of the
financially and technically wholesale electricity spot
capable, with proven market. Not later than one (1)
experience and expertise of not year after the implementation of
less than two (2) years as a the wholesale electricity spot
leading independent market market, an independent entity
operator of similar or larger size shall be formed and the
electricity market. functions, assets and liabilities of
the market operator shall be
transferred to such entity with
the joint endorsement of the
DOE and the electric power
industry participants. Thereafter,
the administrative supervision of
the TRANSCO over such entity
shall cease.
(b) Subject to Technical Section 9. Functions and [PEMC] [PEMC]
Constraints, the grid operator Responsibilities. (b) Subject to Technical Constraints, The WESM employs a gross pool
of the TRANSCO or its Buyer the grid operator of the TRANSCO or scheduling concept. In order to
or Concessionaire shall (e) Subject to technical its Buyer or Concessionaire shall be dispatched, all generation
provide Central Dispatch of all constraints, the grid operator of provide Central Dispatch of all companies must submit offers
Generation Facilities the TRANSCO shall provide Generation Facilities connected, and those offers should clear in
connected, directly or central dispatch of all generation directly or indirectly, to the the market. There are no special
indirectly, to the transmission facilities connected, directly or transmission system in accordance considerations for bilateral
system in accordance with the indirectly, to the transmission with the dispatch schedule contracts during scheduling.
dispatch schedule submitted system in accordance with the submitted by the Market Operator,
by the Market Operator, which dispatch schedule submitted by which schedule shall take into
schedule shall take into the market operator, taking into account outstanding bilateral
account outstanding bilateral account outstanding bilateral contracts.
contracts. contracts; and
(c) The Market Operator shall Section 30
have the following functions
and responsibilities: Said rules shall provide the
mechanism for determining the
price of electricity not covered by
bilateral contracts between
sellers and purchasers of
electricity users. The price
determination methodology
contained in said rules shall be
subject to the approval of ERC
(i) Operate and administer the
WESM and allocate
resources to enable it to
operate and administer the
market, in accordance with
the WESM Rules;
(ii) Determine the dispatch

schedule of all facilities in
accordance with the
WESM Rules. Such
schedule shall be submitted
to the grid operator of the
Concessionaire;
(iii) Monitor daily trading

activities in the market;
(iv) Oversee transaction billing

and settlement procedures;
and
(v) Maintain and publish a

register of all WESM
Participants and must
update and publish the
register whenever a
Person becomes or ceases
to be a WESM Participant.
[Aboitiz Power] [Aboitiz Power]
(New Provision) We propose the additional portion
(d) Governance Body of the IMO. A because the IMO is just the
governance body of the operator. The governance body
Independent Market Operator shall is the board. The governance
be established. As such, it may body can appoint an independent
appoint an entity or corporation third party operator, consistent
herein after the market operator to with the PEMC by-laws. The
perform the day to day operation of current EPIRA IRR has no
the WESM, including software discussion on the governance
management and settlements of body of IMO unlike the AGMO,
transactions to coordinate with the which has an AGMO board
System Operator, and to perform provision.
such other functions as may be
delegated by the board of directors
from time to time. The governance
body shall have the governance
committees and the Board.
Section 7. Constitution of the
AGMO.
The DOE shall, within one (1) year
from the effectivity of the Act,
constitute the AGMO which shall
undertake the preparatory work and
initial operation of the WESM.
(a) AGMO Governing Board. The
AGMO shall be governed, and its
powers and functions exercised,
by a governing body with
equitable representation from
Participants. The representatives
of the AGMO governing body
shall be selected, in accordance
with the WESM Rules. The DOE
Secretary shall chair the AGMO.
(b) Composition. Any sectoral
representation on the AGMO
governing body should as far as
possible meet the following
criteria:
(i) Representatives of each sector

of the Philippine electric
power industry on the
governing body should be
reflective of that sector’s size
in relation to the electric
industry as a whole;
(ii) The number of representatives

of each sector of the
Philippine electric power
industry should be such that
no one sector of the industry
can dominate proceedings or
decision-making by the
governing body; and be
selected in such a way that
deadlocks in decision making
will be avoided; and
(iii) There should be independent

members on the governing
body.
(c) Powers and Duties. The following
are the powers and duties of the
AGMO governing body:
(i) Govern the operation of the

WESM until the formation or
the selection of an IMO;
(ii) Develop and adopt guidelines

for the efficient, competitive,
transparent and reliable
management and operation
of the market in accordance
with WESM Rules;
(iii) Adopt and set internal

procedures for the conduct of
meetings and determination
of a quorum; and
(iv) Perform the preparatory work

(information technology
system development, testing,
and trial operation) and initial
operation of the WESM with
support from the DOE.
(d) Not later than one (1) year after
the implementation of the WESM,
the AGMO shall transfer its functions,
assets and liabilities to the IMO.
Section 8. Functions and
Responsibilities of TRANSCO with
respect to the WESM.
The TRANSCO shall provide
administrative supervision to AGMO.
Section 9. Market Fees.
(a) The cost of administering and
operating the WESM shall be
recovered by the IMO through a
charge imposed on all WESM
Participants or WESM
transactions, provided such
charge shall be filed with and
approved by the ERC, consistent
(b) The structure of Market Fees
should be transparent and
should not discriminate against a
category or categories of WESM
Participants.
(c) Upon the approval of ERC, the
Market Operator shall publish
the structure of Market Fees, the
methods used in determining the
structure and an assessment of
the extent to which the
structure complies with the
principles specified above, at
least three (3) months prior to the
implementation of WESM.
Section 10. Market Suspension.
In cases of national or international
security emergencies or natural
calamities, the ERC is empowered
to suspend the operation of the
WESM or declare a temporary
WESM failure in accordance with
the procedures set out in the WESM
Rules.
RULE 10. STRUCTURAL AND
FUNCTIONAL UNBUNDLING OF
ELECTRIC POWER INDUSTRY
PARTICIPANTS
Consistent with the last paragraph Section 36. Unbundling of
of Section 36 of the Act, any Rates and Functions.
Electric Power Industry Participant Any electric power industry
shall structurally and functionally participant shall functionally and
unbundle its business activities in structurally unbundle its
accordance with Section 5 of the business activities in accordance
Act, namely: generation, with the sectors as identified in
transmission, distribution and Section 5 hereof. The ERC shall
supply. Structural unbundling shall ensure full compliance with this
mean the separation of different provision.
activities through the creation of
separate divisions or departments
within a single company or, at the
option of any Electric Power
Industry Participant, a separation
into different juridical entities, with a
clear separation of accounts
between regulated and non-
regulated business activities.
Functional unbundling shall mean
the separation of functions into
different components. For this
purpose, business activities
resulting from the initial
unbundling process may be further
unbundled to widen the scope for
competitive activities. The ERC
shall formulate the appropriate
guidelines and shall ensure full
This Rule shall apply to all Electric Section 36. Unbundling of
Power Industry Participants that Rates and Functions.
are currently engaged or will be Any electric power industry
engaged in any of the following participants shall functionally
business activities: and structurally unbundle its
(a) Power generation; business activities and rates in
(b) Transmission; accordance with the sectors as
(c) Distribution; identified in Section 5 hereof.
(d) Supply of Electricity including The ERC shall ensure full
collection and metering; compliance with this provision.
(e) Related businesses which utilize
the generation, transmission, Section 5. Organization.
distribution or supply assets for non- The electric power industry shall
electricity related services; and be divided into four (4) sectors,
(f) Other electricity related services namely: generation,
that may be identified and authorized transmission, distribution and
by the ERC. supply.
The ERC may relax or eliminate the

unbundling requirements for
specified business activities if such
activity operates in a competitive
market.
Section 3. Procedures for the
Structural and Functional
Unbundling of
Business Activities.
The following shall govern all
Electric Power Industry Participants
in undertaking the structural and
functional unbundling of its business
activities:
(a) An Electric Power Industry
Participant shall identify its
business activities according to
each major business function
as defined in Section 2 of this
Rule.
(b) An Electric Power Industry
Participant shall prepare and
submit for approval by the ERC
its Business Separation and
Unbundling Plan (BSUP) on or
before 31 December 2002.
(c) The BSUP shall contain among
others, the following information:
(i) A complete description of the
separation of books and
records, including but not
limited to, sources of
revenues, costs as
allocated, asset transferred,
and information systems
separation;
(ii) A comprehensive description
of the functional, structural
or juridical separation of
generation, distribution and
supply as provided for in
the BSUP;
(iii) Milestones and highlights of
the planned structural and
functional unbundling of the
business activities in which
the Electric Power Industry
Participant is currently
engaged: Provided, That in
any case, no Electric Power
Industry Participant that has
not completed structural
and functional unbundling
of the business shall be
eligible to participate in
Retail Competition and
Open Access;
(iv) A plan for complying with all
Code of Conduct provisions
specified by ERC, including
training or developmental
programs for its employees
to help ensure compliance;
and
(v) Other documents or
information as may be
required by the ERC.
(d) The ERC may adopt the Electric
Power Industry Participant's
BSUP, recommend
modifications to the BSUP, or
reject the BSUP for revision and
direct the concerned Electric
Power Industry Participant to
file a new BSUP based on its
comments. In any case, ERC
shall render its decision within
six (6) months from filing of the
BSUP.
(e) Upon receipt of the ERC
decision, the Electric Power
Industry Participant shall
implement said decision fully
and promptly.
(f) The ERC shall provide for
appropriate fines and penalties
for any Electric Power Industry
Participant that fails to comply
with its decision in full.
Section 4. Guiding Principles for
Business Separation of
(a) Once a Distribution Utility has
separated and unbundled its
business activities, the
Distribution System portion of
its business shall no longer
provide competitive energy
services, i.e. generation and
supply. A Distribution Utility,
which has not structurally and
functionally unbundled its
business activities shall be
prohibited from operating in a
Contestable Market.
(b) ECs shall follow the structural
and functional unbundling
procedures set forth in these
Rules except that such
unbundling shall be
implemented no later than 26
June 2006, the start of Retail
Competition and Open Access
in the Franchise Areas of ECs.
RULE 11. CROSS OWNERSHIP,
MARKET ABUSE AND ANTI-
COMPETITIVE BEHAVIOR
Section 1. General Principle.
No Electric Power Industry Section 45. Cross Ownership,
Participant or any other Person Market Power Abuse and Anti-
may engage in any anti- Competitive Behavior. - No
competitive behavior including, participant in the electricity
but not limited to, industry or any other person may
crosssubsidization, price or market engage in any anti-competitive
manipulation, false or deceptive behavior including, but not
marketing, or other unfair trade limited to, cross-subsidization,
practices detrimental to the price or market manipulation, or
encouragement and protection of other unfair trade practices
Contestable Markets or the WESM. detrimental to the
encouragement and protection
of contestable markets.
This Rule shall apply to all
Persons, including all Electric
Power Industry Participants, such
as but not limited to Generation
Companies, subsidiaries and
Affiliates of Generation Companies,
stockholders and officials of
Generation Companies, IPP
Administrators, Distribution Utilities,
Suppliers, NPC, and the TRANSCO
or its Buyer or Concessionaire.
Section 3. Prohibition of Cross
Ownership.
(a) Pursuant to Section 45 of the Section 45. Cross Ownership,
Act, no Generation Company, Market Power Abuse and Anti-
IPP Administrators, Distribution Competitive Behavior.
Utility or Supplier, their
No generation company,
respective subsidiaries, Affiliates,
distribution utility, or its
stockholders, directors or officersrespective subsidiary or affiliate
or other entity engaged in or stockholder or official of a
generating and supplying
generation company or
electricity specified by ERC, distribution utility, or other entity
shall hold any interest, directly or
engaged in generating and
indirectly, in the TRANSCO or its supplying electricity specified by
Buyer or Concessionaire, or the ERC within the fourth civil
Market Operator. degree of consanguinity or
in TRANSCO or its
concessionaire.
(b) TRANSCO or its Buyer or Likewise, the TRANSCO, or its
Concessionaire and any of its concessionaire or any of its
stockholders, directors or stockholders or officials or any of
officers or any of their relatives their relatives within the fourth
within the fourth civil degree of civil degree of consanguinity or
consanguinity or affinity, affinity, shall not hold any
legitimate or common law, interest, whether directly or
shall not hold any interest, indirectly, in any generation
whether directly or indirectly, in company or distribution utility.
any Generation Company, IPP
Administrators, Distribution
Utility or Supplier.
(c) Except for ex officio government- Except for ex officio government-
appointed representatives, no appointed representatives, no
Person who is an officer or person who is an officer or
director of the TRANSCO or its director of the TRANSCO or its
Buyer or Concessionaire shall concessionaire shall be an
be an officer or director of any officer or director of any
Generation Company, IPP generation company, distribution
Administrators, Distribution Utility utility or supplier.
or Supplier.
(d) This Section shall not apply to Section 47. NPC Privatization.
PSALM in the course of its - Except for the assets of SPUG,
Privatization of NPC assets the generation assets, real
pursuant to Section 47 of the Act. estate, and other disposable
assets as well as IPP contracts
of NPC shall be privatized in
accordance with this Act. 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) The privatization value to the

National Government of the NPC
generation assets, real estate,
other disposable assets as well
as IPP contracts shall be
optimized;
(b) The participation by Filipino

citizens and corporations in the
purchase of NPC assets shall be
encouraged:
Section 4. Limits on Concentration
of Ownership, Operation or
Control of Installed Generating
Capacity.
(a) No company, Related Group or Section 45. Cross Ownership,
IPP Administrator, singly or in Market Power Abuse and Anti-
combination, can own, operate Competitive Behavior.
or Control more than thirty To promote true market
percent (30 %) of the installed competition and prevent harmful
generating capacity of a Grid monopoly and market power
and/or twenty-five percent (25%) abuse, the ERC shall enforce
of the national installed the following safeguards:
generating capacity: Provided,
That such restrictions shall not (a) No company or related group
apply to PSALM or NPC during can own, operate or control
the time that its assets are being more than thirty percent (30%) of
privatized pursuant to Section 47 the installed generating capacity
of the Act and isolated grids of a grid and/or twenty-five
that are not connected to the percent (25%) of the national
high voltage transmission installed generating capacity.
system. The ERC shall “Related group” includes a
determine the installed person’s business interests,
generating capacity in a Grid including its subsidiaries,
and the national installed affiliates, directors or officers or
generating capacity. any of their relatives by
consanguinity or affinity,
legitimate or common law, within
the fourth civil degree;
(b) The capacity of such facility shall
be credited to the entity
controlling the terms and
conditions of the prices or
quantities of the output of such
capacity sold in the market in
cases where different entities
own the same Generation Facility.
In cases where different
Persons own, operate or
Control the same Generation
Facility, the capacity of such
facility shall be credited to the
Person controlling the capacity of
the Generation Facility.
Section 5. Limits on Bilateral
Supply Contracts by a
(a) A Distribution Utility may enter Section 45. Cross Ownership, (a) A Distribution Utility may We suggest to delete reference to
into bilateral power supply Market Power Abuse and Anti- enter into bilateral power supply NPC transition supply contracts as
contracts subject to the Competitive Behavior. contracts subject to the provisions these have already expired.
provisions of Section 5 of Rule (b) Distribution utilities may enter of Section 5 of Rule 30 on NPC Further, considering that a
30 on NPC Offer of Transition into bilateral power supply Offer of Transition Supply Contracts competitive selection process
Supply Contracts and a review contracts subject to review by and a review by the ERC; Provided, (CSP) is already incorporated in
by the ERC: Provided, That such the That the ERC’s review shall only be the process of procuring a bilateral
review shall only be required for ERC: Provided, That such limited to ensuring that the power supply contract by a
a Distribution Utility whose level review shall only be required for bilateral power supply contracts Distribution Utility, and the ERC
of Open Access has not reached distribution utilities whose of a Distribution Utility are has already issued resolutions
household demand level. markets have not reached obtained in a transparent and defining the CSP process and
household demand level. competitive manner, and requirements, we suggest that the
Provided, further, That such ERC’s review be limited to
review shall only be required for a ensuring that the Distribution Utility
Distribution Utility whose level of has complied with the said
Open Access has not reached process and requirements.
household demand level.
(b) No Distribution Utility shall be Section 45. Cross Ownership,
allowed to source from bilateral Market Power Abuse and Anti-
power supply contracts more Competitive Behavior.
than fifty percent (50%) of its (b) For the purpose of preventing
total demand from an Affiliate market power abuse between
engaged in generation, but such associated firms engaged in
limitation shall not prejudice generation and distribution, no
contracts entered into prior to the distribution utility shall be
effective date of the Act. This allowed to source from bilateral
limitation shall apply regardless of power supply contracts more
whether demand is expressed in than fifty percent (50%) of its
terms of capacity or energy. total demand from an associated
firm engaged in generation but
such limitation, however, shall
not prejudice contracts entered
into prior to the effectivity of this
Act. An associated firm with
respect to another entity refers
to any person which, alone or
together with any other person,
directly or indirectly, through one
or more intermediaries, controls,
is controlled by, or is under
common control with, such entity
Section 6. Encouragement of
Participation in the WESM.
For the first five (5) years from the (c) For the first five (5) years
establishment of the WESM, no from the establishment of the
Distribution Utility shall source more wholesale electricity spot
than ninety percent (90%) of its total market, no distribution utility
demand from bilateral power supply shall source more than ninety
contracts. percent (90%) of its total
demand from bilateral power
supply contracts.
Section 7. ERC Responsibilities.
(a) ERC shall enforce the Section 43. Functions of the
competitive safeguards specified ERC.
in this Rule in order to promote
true market competition and The ERC shall promote
prevent harmful monopoly and competition, encourage market
market power abuse. However, development, ensure customer
ERC shall not apply the choice and penalize abuse of
limitations specified in this Rule market power in the restructured
to isolated grids that are not electricity industry. In
connected to the Grid. appropriate cases, the ERC is
authorized to issue cease and
desist order after due notice and
hearing. Towards this end, it
(a) Enforce the implementing
rules and regulations of this Act;
(b) ERC shall have the authority to Section 45. Cross Ownership,
determine the appropriate Grid Market Power Abuse and Anti-
or Grids to use in the application Competitive Behavior.
of this Rule when two or more of For purposes of this Section, the
the three separate Grids become grid basis shall consist of three
sufficiently interconnected to (3) separate grids, namely
constitute a single Grid or as Luzon, Visayas and Mindanao.
conditions may otherwise permit. The ERC shall have the
authority to modify or amend this
definition of a grid when two or
more of the three separate grids
become sufficiently
interconnected to constitute a
single grid or as conditions may
otherwise permit.
(c) ERC shall, within one (1) year Section 45. Cross Ownership,
from the effectivity of the Act, Market Power Abuse and Anti-
promulgate Competition Rules Competitive Behavior.
to ensure and promote The ERC shall, within one (1)
competition, encourage market year from the effectivity of this
development and customer Act., promulgate rules and
choice and discourage or regulations to ensure and
penalize abuse of market power, promote competition, encourage
cartelization and any anti- market development and
competitive or discriminatory customer choice and
behavior, or unfair trade practice discourage/penalize abuse of
that distorts competition or market power, cartelization and
harms consumers. Such Rules any anti-competitive or
shall define relevant markets for discriminatory behavior, in order
the purpose of establishing to further the intent of this Act
abuse or misuse of market and protect the public interest.
power, areas of isolated grids Such rules and regulations shall
that are not connected to the define the following:
high voltage transmission system, (a) the relevant markets for
and the reportorial requirements purposes of establishing abuse
of Electric Power Industry or misuse of monopoly or market
Participants as may be position;
necessary to enforce the (b) areas of isolated grids; and
provisions of Section 45 of the (c) the periodic reportorial
Act. requirements of electric power
industry participants as may be
necessary to enforce the
provisions of this Section.
(d) ERC shall, motu proprio, Section 45. Cross Ownership,
monitor and penalize any Market Power Abuse and Anti-
market power abuse or anti- Competitive Behavior.
competitive or unduly The ERC shall, motu proprio,
discriminatory act or behavior, or monitor and penalize any market
any unfair trade practice that power abuse or anti-competitive
distorts competition or harms or discriminatory act or behavior
consumers, by any Electric by any participant in the electric
Power Industry Participant. power industry. Upon finding that
Upon a finding of a prima facie a market participant has
case that an Electric Power engaged in such act or behavior,
Industry Participant has the ERC shall stop and redress
engaged in such act or behavior, the same. Such
the ERC shall after due notice remedies shall, without
and hearing, stop and redress limitation, include the imposition
the same. Such remedies shall, of price controls, issuance of
without limitation, include the injunctions, requirement of
separation of the business divestment or disgorgement of
activities of an Electric Power excess profits and imposition of
Industry Participant into different fines and penalties pursuant
juridical entities, the imposition to this Act.
of bid or price controls, issuance
of injunctions in accordance Section 46. Fines and
with the Rules of Court, Penalties. - The fines and
divestment or disgorgement of penalties that shall be imposed
excess profits, and imposition of by the ERC for any violation of
fines and penalties pursuant to or non-compliance with this Act
Section 46 of the Act. or the IRR shall range from a
minimum of fifty thousand pesos
(P50,000.00) to a maximum of
Fifty million pesos
(P50,000,000.00).
Any person who is found guilty

of any of the prohibited acts
pursuant to Section 45 hereof
shall suffer the penalty of prision
mayor and fine ranging from Ten
thousand pesos (P10,000.00) to
Ten million pesos
(P10,000,000.00), or both, at the
discretion of the court.
Section 45. Cross Ownership,
Market Power Abuse and Anti-
Competitive Behavior.
The ERC shall, within one (1)
year from the effectivity of this
Act, promulgate rules and
regulations providing for a
complaint procedure that,
without limitation, provides the
accused party with notice and an
opportunity to be heard.
(e) ERC shall, within one (1) year Section 45. Cross Ownership,
from the effectivity of the Act, Market Power Abuse and Anti-
promulgate rules and regulations Competitive Behavior.
providing for a complaint The ERC shall, within one (1)
procedure that, without limitation, year from the effectivity of this
provides the accused party with Act, promulgate rules and
its rights to due process. regulations providing for a
complaint procedure that,
without limitation, provides the
accused party with notice and an
opportunity to be heard.
Section 8. Anti-Competitive
Behavior and Other Unfair Trade
Practices.
The ERC shall promulgate Section 43. Functions of the
Competition Rules prohibiting, and ERC. -The ERC shall promote
specifying appropriate penalties and competition, encourage market
other remedies for, any contract, development, ensure customer
combination or conspiracy that choice and penalize abuse of
unreasonably restricts competition market power in the restructured
in any market for electricity, or any electricity industry. In
conduct that constitutes an abuse of appropriate cases, the ERC is
market power or an attempted authorized to issue cease and
monopolization of any market for desist order after due notice and
electricity, including but not limited hearing.
to the following:
(a) Fixing prices of products or
services: Electric Power
Industry Participants that are
competitors shall not enter into
any agreement or
understanding, tacit or explicit,
to fix, peg or stabilize the price
of any product or service. Price
fixing shall be deemed to
include agreements on bids,
price floors, price ceilings,
pricing formulas and resale
prices, and agreements on
credit or any other terms of a
transaction between a buyer and
a seller.
(b) Fixing output of products or
services: Electric Power
Industry Participants that are
competitors shall not enter into
any agreement or
to fix, limit or otherwise
determine their output of any
product or service.
(c) Customer, Product, Service or
Territorial Divisions: Electric
Power Industry Participants
that are competitors shall not
enter into any agreement or
as to the customers or the
geographic territories they will
serve, or the products or
services they will sell.
(d) Tying: Electric Power Industry
Participants shall not use a
position of market power to
condition the sale of one
product or service on the
purchase of another product or
service. No Distribution Utility
shall make access to its
Distribution System contingent
upon the purchase of
generation, metering, billing or
other services.
(e) Physical or Economic
Withholding: Electric Power
Industry Participants shall not
use physical operating practices
or bidding
strategies that limit the market
participation of a generation
unit under conditions that will
result in significant increases
in market prices.
(f) Discriminatory provision of
regulated distribution or
transmission services:
Regulated distribution and
transmission services shall be
provided on a basis that is not
unduly discriminatory.
Examples of unduly
discriminatory behavior
include, but not limited to the
following:
(i) A Distribution Utility or
Concessionaire refuses to
interconnect Generation
Company, IPP
Administrator, or Supplier
other than for reasons of
system security or reliability
or reasonable financial or
credit considerations
pursuant to the Grid or
Distribution Codes or
commission of acts
constituting grounds for
suspension of the service
under any applicable rule and
regulation.
(ii) A Distribution Utility or
Concessionaire gives a
Generation Company, IPP
Administrator, or Supplier,
including without limitation
any of the Distribution
Utility’s Affiliates, any
preference or advantage
over any other Generation
Company, IPP
Administrator, or Supplier
in
processing a request for
Transmission or Distribution
of
Electricity.
(iii) A Distribution Utility or
Concessionaire gives a
Generation Company, IPP
Administrator, or Supplier,
including without limitation
any of the Distribution
Utility’s Affiliates, any
preference or advantage in
the dissemination or
disclosure of customer or
transmission or Distribution
System information, and any
such information that has not
been made available to all
Participants at the same
time and in a non-
discriminatory manner.
(iv) A Distribution Utility or
Concessionaire provides
any preference or
advantage to any Supplier in
the disclosure of information
about operational status
and availability of the
Distribution System and
transmission system.
(v) A Distribution Utility does
not provide all regulated
services, and does not
apply Distribution Wheeling
Charges to any Supplier
that is not an Affiliate, in the
same manner as it does for
itself or its Affiliates.
Concessionaire shall
provide all regulated
services and shall apply
Transmission Charges to
any Electric Power Industry
Participant in the same
manner as it does for PSALM
or NPC.
(g) Misrepresentation or false
advertising of a Distribution
Utility: A Distribution Utility or
its Affiliate shall not state or
imply that any distribution
service provided to an Affiliate is
inherently superior, solely on
the basis of Affiliate’s
relationship with the
Distribution Utility, to that
provided to any other Supplier.
(h) Cross-Subsidization: Consistent
with Section 26 of the Act, a
Distribution Utility shall not use
its revenues or resources from
regulated distribution services
to reduce the cost or price of its
competitive services (generation
or supply).
RULE 12. RETAIL COMPETITION
AND OPEN ACCESS
Pursuant to Section 31 of the Act, Section 31. Retail Competition Initial Commercial Operation of
Retail Competition and Open Access and Open Access. - Any law to RCOA to Customers with 1MW and
shall be implemented no later than the contrary notwithstanding, above commenced in June 2013.
three (3) years from the effectivity of retail competition and open
the Act. access on distribution wires shall
be implemented not later than
three (3) years upon the
effectivity of this Act, subject to
the following conditions:
The provision of open and non-
discriminatory access to the
transmission system and Distribution
Systems shall apply to the following:
(a) WESM Participants;
(b) TRANSCO or its Buyer
or Concessionaire;
(c) Distribution Utilities;
(d) EZs;
(e) Suppliers;
(f) IPP Administrators;
(g) Market Operator; and
(h) End-users in Contestable
Markets.
Section 3. Conditions for
Declaring Initial Implementation
of Open Access.
The ERC shall, after due notice
and public hearing, declare initial
implementation of Open Access
not later than three (3) years from
the effectivity of the Act, subject to
the following conditions:
(a) Establishment of the WESM. For (a) Establishment of the  Luzon Commercial Operation,
this purpose, the “establishment” wholesale electricity spot Jun 2006
of the WESM shall be deemed to market;  Integration of Visayas Grid,
have occurred upon the Dec 2010
effectivity of the Market Rules  Trial Operation in Mindanao,
by the DOE and initial operation Jun 2017
of the AGMO pursuant to Rule 9
on the Wholesale Electricity Spot
Market (WESM).
(b) Approval of unbundled (b) Approval of unbundled Unbundling of NPC Rates, Mar
Transmission and Distribution transmission and distribution 2002
Wheeling Charges. The ERC wheeling charges; Unbundling of DU Rates, Jun 2003
shall approve the unbundled
rates of NPC and Distribution
Utilities, which shall include the
transmission and wheeling
charges, within one (1) year from
the effectivity of the Act.
(c) Initial implementation of the Cross (c) Initial implementation of the Inter-Grid, Sep 2002
Subsidy Removal scheme. For cross subsidy removal scheme; Intra-Grid, 2005
this purpose, initial Inter-Class, Oct 2006
implementation of the cross
subsidy removal scheme shall
occur on the next billing period
after the issuance of ERC
approval. The scheme for cross
subsidy removal shall include
guidelines or a schedule for the
removal of each type of cross
subsidy and may be altered,
modified and/or amended by the
ERC pursuant to Rule 16 on
Removal of Cross Subsidies.
(d) Privatization of at least seventy (d) Privatization of at least 89.7% of NPC GenCos [Aboitiz Power] [Aboitiz Power]
(70%) percent of the total seventy (70%) percent of the (d) Privatization of at least seventy We propose the additional portion
capacity of total capacity of generating (70%) percent of the total capacity of to have a clearer policy on RCOA
generating assets of NPC in assets of NPC in Luzon and generating assets of NPC in Luzon implementation in Mindanao.
Luzon and Visayas. Visayas; an and Visayas.
Retail Competition in Mindanao can

only occur when 70% of the total
capacity of generation assets of NPC
in Mindanao are privatized
(e) Transfer of the management (e) Transfer of the management 77.46% transfer to IPPAs
and control of at least seventy and control of at least seventy
percent (70%) of the total energy percent (70%) of the total energy
output of power plants under output of power plants under
contract with NPC to the IPP contract with NPC to the IPP
Administrators. Administrators.
Section 4. Specification of the
Contestable Market for Open
Access.
Upon the initial imp lementation of Upon the initial implementation
Open Access, the ERC shall allow of open access, the ERC shall
all allow all electricity end-users
electricity End-users with a monthly with a monthly average peak
average peak demand of at least demand of at least one
one megawatt (1MW) for the
megawatt (1 MW) for the preceding preceding twelve (12) months to
twelve (12) months to be the be the contestable market. Two
Contestable Market. Two (2) years (2) years thereafter, the
thereafter, the threshold level for threshold level for the
the Contestable Market shall be contestable market shall be
reduced to seven hundred fifty reduced to seven hundred fifty
kilowatts (750 kW). At this level, kilowatts (750kW). At this level,
Aggregators shall be allowed to aggregators shall be allowed to
supply electricity to End-users supply electricity to end-users
whose aggregate monthly average whose aggregate demand within
peak demand within a Contiguous a contiguous area is at least
Area is at least seven hundred fifty seven hundred fifty kilowatts
kilowatts (750 kW). Subsequently (750kW). Subsequently and
and every year thereafter, the ERC every year thereafter, the ERC
shall evaluate the performance of shall evaluate the performance
the market. On the basis of such of the market. On the basis of
evaluation, it shall gradually reduce such evaluation, it shall
the threshold level until it reaches gradually reduce threshold level
the household demand level. In the until it reaches the household
case of ECs, Retail Competition and demand level. In the case of
Open Access shall be implemented electric cooperatives, retail
not earlier than five (5) years from competition and open access
the effectivity of the Act. shall be implemented not earlier
than five (5) years upon the
RULE 13. MISSIONARY
ELECTRIFICATION
(a) Pursuant to Section 70 of the Section 70. Missionary [PSALM]
Act, the SPUG shall be Electrification. Beneficiary to the UC fund for
responsible for providing Missionary Electrification.
power generation and its Notwithstanding the divestment
associated power delivery and/or privatization of NPC Clarification on the coverage of
systems in areas that are not assets, IPP contracts and spun- Section 70 of the EPIRA
connected to the transmission off corporations, NPC shall regarding the beneficiaries of the
system. remain as a National UC-ME fund should be made.
Government-owned and This is to ascertain whether the
-controlled corporation to NPC-SPUG is the exclusive
perform the missionary beneficiary of the UC- ME fund or
electrification function through beneficiaries can be any entity
the Small Power Utilities Group that performs missionary
(SPUG) and shall be responsible electrification function in the
for providing power generation missionary areas not connected
and its associated power to the transmission system within
delivery systems in areas that the franchised distribution
are not connected to the utilities, as determined by the
transmission system. DOE.
To further clarify, the provision

should be specific as to who are
required to file a petition before
the ERC to avail of the UC-ME.
To date, only NPC-SPUG files a

petition and avails from the UC-
ME fund.
Clarification on the following may

be made:
a) Whether NPC-SPUG is the
exclusive beneficiary of the UC-
ME fund, or beneficiaries include
missionary areas not connected
to the transmission system within
the franchised distribution
utilities; and
b) The personality of the
petitioner who shall file/avail from
the UC-ME fund.
PSALM agrees that the MEDP

prepared by DOE as part of its
policy formulation function,
should serve as the basis of
ERC’s determination of UC-ME.
However, clarification must be

made whether DOE is
contemplating that big ticket
projects in missionary areas that
require NEDA’s approval, should
be funded by the UC-ME. If yes,
the proposed amendment should
be introduced with caution as it
may substantially increase the
subsidy (UC-ME) that will be
borne by the end-users
nationwide.
It should also be clarified whether

in addition to the policy
formulation and oversight
function of DOE, it will include in
the proposed amendment to
Section 37 of the program
implementation, which is part of
NPC-SPUG and DUs’ operations.
(b) The Missionary Electrification The missionary electrification
function of SPUG shall be function shall be funded from the
funded from the revenues revenues from sales in
from sales in the missionary missionary areas and from the
areas and from the Universal universal charge to be collected
Charge to be collected from from all electricity end-users as
all electricity End-users as determined by the ERC.
(c) The DOE’s Missionary
Electrification development
Plan (MEDP) shall include
capital investment and
operations regarding
capacity additions in existing
missionary areas and the
facilities to be provided in
other areas not connected to
the transmission system.
(d) The DOE shall, no later than
ninety (90) days from the
promulgation of these Rules,
issue specific guidelines on
how to encourage the inflow
of private capital and the
manner whereby other
parties, including Distribution
Utilities and qualified third
parties, as provided for in
Section 23 and Section 59 of
the Act, can participate in
the Missionary Electrification
projects set forth in the MEDP.
(e) The SPUG shall continue to
endeavor to privatize its power
generation facilities and the
necessary associated power
delivery systems.
This Rule shall apply to all entities
and areas identified in the MEDP.
Section 3. Obligations of SPUG.
(a) SPUG shall be responsible for Section 70. Missionary
providing power generation Electrification. -
and its associated power Notwithstanding the divestment
delivery systems in areas that and/or privatization of NPC
are not connected to the Grid assets, IPP contracts and spun-
and cannot be serviced by off corporations, NPC shall
Distribution Utilities and other remain as a National
qualified third parties. Government-owned and
-controlled corporation to
perform the missionary
electrification function through
(SPUG) and shall be responsible
for providing power generation
and its associated power
delivery systems in areas that
are not connected to the
transmission system. The
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
(b) SPUG shall periodically
assess the requirements
and prospects for bringing
its functions to commercial
viability on an area-by-area
basis at the earliest possible
time, including a program to
encourage private sector
participation.
(c) Whenever feasible,
SPUG shall utilize
Renewable Energy
Resources.
(d) SPUG shall file for review
and approval its unbundled
rates following Rule 15 on
Unbundling of Rates.
(e) SPUG shall file a petition
to the ERC with respect to
the Missionary Electrification
portion of the Universal
Charge as prescribed in
Rule 18 on Universal Charge.
(f) PSALM shall ensure that [BENECO]
SPUG conducts proper (Additional Provision)
monitoring, accounting and (g) The generation plants erected
control of expenditures, and in SPUG areas be transferred to
efficient utilization of the the ECs from the NPC provided
Missionary Electrification the ECs have proven to be
funds from the Universal technically and financially able to
Charge. run the said facilities.
Section 4. Source of Funds.
(a) The Missionary Electrification Section 70. Missionary [NPC]
shall be funded from the Electrification. -
revenues from sales in Notwithstanding the divestment  Item (b) of the IRR provides
missionary areas and from its and/or privatization of NPC that SPUG may also draw on
appropriate share in the assets, IPP contracts and spun- other funding sources
Universal Charge. off corporations, NPC shall including appropriations from
remain as a National Congress, the utilization of
Government-owned and private capital, multilateral
-controlled corporation to aids or grants, Official
perform the missionary Development Assistance
electrification function through (ODA) Funds and others.
(SPUG) and shall be responsible  Further Item (c) of the IRR
for providing power generation prescribes that SPUG shall
and its associated power source all the cost
delivery systems in areas that differentials between the
are not connected to the sales revenues and operating
transmission system. The expense and capital expense
missionary electrification for expansion, rehabilitation
function shall be funded from the and facilities for new areas of
revenues from sales in development based on the
missionary areas and from the approved MEDP from its
universal charge to be collected share from the Universal
from all electricity end-users as Charge and/or other sources
determined by the ERC. as it may obtain.
 Presently, only OPEX is

allowed recovery from UCME
and NPC-SPUG is dependent
on the subsidy being provided
by NG for its missionary
electrification function.
 Further, NPC-SPUG should

be allowed to directly contract
with RE Developers in
missionary areas to bring
down the UCME.
 To accelerate RE
Development in missionary
areas, NPC-SPUG should be
exempted from the provisions
of RA 7718/BOT Law and RA
9184.
(b) SPUG may also draw on
other funding sources
including appropriations from
Congress, the utilization of
private capital, multilateral aids
or grants, Official Development
Assistance (ODA) Funds and
others.
(c) SPUG shall source all the cost
differentials between the sales
revenues and operating
expense and capital expense
for expansion, rehabilitation
and facilities for new areas of
development based on the
approved MEDP from its
share from the Universal
Charge and/or other sources
as it may obtain.
(d) In accordance with DOE’s
MEDP, the proposed five- (5)
year annual budget for
operating and capital
expenditures of SPUG shall be
submitted to ERC.
Section 5. Reliability Improvement.
(a) To improve systems reliability,
the SPUG shall install
transmission systems in all
qualified areas under the
coverage of SPUG. Priority
will be given to areas showing
big growth in its electricity
demand.
(b) SPUG shall also collect
revenues in providing power
delivery and Ancillary Service
to Generation Companies or
Distribution Utilities at a rate
to be filed with and approved
by ERC. In the absence of
such rate, SPUG shall use the
applicable major Grids’ rate.
(c) SPUG shall cease providing
Missionary Electrification to
areas interconnected to the
[NGCP]* [NGCP]
(new provision) Isolated distribution system
(d) TransCo or its buyer or should be operated by NGCP.
Concessionire shall be allowed to
operate, maintain, and develop the NGCP can engage in transmitting
transmission system in any SPUG electricity to SPUG areas with
area that has been identified by the income classes First and Second.
DOE as viable in accordance with First Class Provinces have an
the Rules. Subject to the approval average annual income of
of the ERC, TransCo or its buyer or Php450 Million and above, while
Concessionaire shall connect the Second Class Provinces have an
area to the main grid. average annual income between
Php360Million to
Php449.99Million. This
classification can be used as
measure of the island’s viability.
Note that Palawan and Oriental

Mindoro are classified as First
Class Provinces while Abra and
Mountain Province are Third and
Fourth Class, respectively, yet
Abra and Mountain Province are
connected to the Luzon Grid
through ABRECO and
MOPRECO because these are
part of mainland Luzon.
Further, NGCP can pursue its

proposed interconnection
projects with initially identified
SPUG areas requiring submarine
cable length of not more than 50
kilometers. The inter-island
interconnection facilities should
be considered as Transmission
Assets.
NGCP is a regulated entity and

can be Transmission Network
Provider and System Operator in
Small Island Grids even if these
are not yet connected to the
NGCP’s mandated function as

the Transmission Network
Provider is the operation and
maintenance of the country’s
electric transmission system.
Under Section 1 of the Republic
Act 9511, NGCP is given the
exclusive authority to engage in
the business of conveying or
transmitting electricity through
high voltage back-bone
transmission sytem.
RULE 14. PROVISION OF
ELECTRICITY BY QUALIFIED
THIRD PARTIES
Pursuant to Section 59 of the Act, Section 59. Alternative Electric
the provision of electric service in Service for Isolated Villages.
remote and Unviable Areas that the
Distribution Utility is unable to The provision of electric service
service for any reason shall be in remote and unviable villages
opened to other qualified third that the franchised utility is
parties. The provision of electricity unable to service for any reason
in Unviable Areas by qualified third shall be opened to other
parties shall be a regulated qualified third parties.
business.
This Rule shall apply to third
parties qualified and authorized by
ERC in accordance with the Act to
undertake the provision of electric
service in remote and Unviable
Areas that a Distribution Utility is
unable to serve.
Section 3. Determination of
Remote and Unviable Areas.
Every September, the DOE shall
issue a declaration of all the
remote and Unviable Areas that
cannot be served by a Distribution
Utility within the following three (3)
years. The declaration shall be
consistent with the PDP and made
in consultation with the NEA and
Distribution Utilities. The remote
and Unviable Areas specified in
the declaration shall be open for
participation by qualified third parties.
Section 4. Determination of
Qualified Third Parties.
The DOE shall set criteria for
determining qualified third parties
that may participate in providing
electricity to remote and Unviable
Areas. These criteria may include
financial, technical, environmental,
and other indices of performance.
The criteria shall give preference to
parties that would utilize least-cost
new Renewable Energy Resources
in providing electricity.
Section 5. Rights and Obligations
of Qualified Third Parties.
(a) Any Distribution Utility that fails
to provide electricity to an
Unviable Area shall be
required by the ERC to enter
into a contract with a qualified
third party to provide electric
service in such an Unviable
Area.
(b) A qualified third party shall
comply with all applicable
provisions of the Distribution
Code, including the
requirement to obtain a COC
for its Generation Facilities and
other permits the ERC may
require.
(c) A qualified third party shall
charge rates in Unviable Areas
according to ERC rules for cost
recovery of Generation
Facilities and associated power
delivery systems.
(d) A qualified third party shall
submit annual financial
statements to ERC for
determining the effectiveness of
the approved rate.
(e) A qualified third party shall
report annually to DOE the rate
of electrification of its coverage
areas.
Section 6. Obligations of the ERC.
(a) The ERC shall set guidelines for
the issuance of permits to
qualified third parties that serve
a remote or unserved and
Unviable Area within the
Distribution Utility’s Franchise
Area.
(b) The ERC shall set the rules in
computing rates that allow full
cost recovery of the
Generation Facilities and
delivery systems built to serve
remote or unserved and
Unviable Areas.
PART III - ELECTRICITY RATE AND
CHARGES
RULE 15. UNBUNDLING OF
RATES
Consistent with Section 36 of the Act Section 36. Unbundling of Unbundled generation and
and Rule 10 on Structural and Rates and Functions. - Within transmission charges were
Functional Unbundling of Electric six (6) months from the approved by the ERC in June 26,
Power Industry Participants, this Rule effectivity of this Act, NPC shall 2002 while for the distribution
on file with the ERC its revised utilities (DUs), the ERC completed
the Unbundling of Rates shall result in rates. The rates of NPC shall be the resolutions of the majority of the
the identification and separation of unbundled between transmission unbundling cases in 2004 and the
the individual charge for providing a and generation rates and the last seven (7) ECs were approved
specific electric service to any End- rates shall reflect the respective in mid 2005. However, for
user for generation, transmission, costs of providing each service. September 2008, there were seven
distribution, and supply. [Consistent Inter-grid and intra-grid cross (7) DUs/ECs whose rate adjustment
with Section 36] subsidies for both the petitions/applications were
transmission and the generation approved despite of the ERC
rates shall be removed in moratorium dated April 9, 2008, for
accordance with this Act. the ECs in the filing of rate cases
petitions/applications pending
Within six (6) months from the implementation of the new rate
effectivity of this Act, each setting methodology for ECs to be
distribution utility shall file its implemented by January 2009.
the ERC. The distribution Issues and Concerns
unbundled from the retail rate • A need for a Uniform Bill Format
and the rates shall reflect the for all DUs since Electricity Bills
respective costs of providing of DUs vary;
each service. For both the • Need to further reflect
distribution retail wheeling and transparency particularly on
supplier’s charges, inter-class generation and Transmission
subsidies shall be removed in Costs where there are still room
accordance with this Act. for further unbundling per
Within six (6) months from the services and resource;
date of submission of revised • Need to reflect Bill Deposit
rates by NPC and each including interest earned
distribution utility, the ERC shall
notify the entities of their
approval.
Any electric power industry

participant shall functionally and
structurally unbundle its
business activities and rates in
accordance with the sectors as
identified in Section 5 hereof.
The ERC shall ensure full
This Rule shall apply to all Electric
Power Industry Participants that are
currently engaged or will be
engaged in any of the business
activities as stated in Section 5 of
the Act.
Section 3. Parameters for
Unbundling Rates and Costs of
Service.
(a) An Electric Power
Industry Participant shall
identify, separate and
unbundle its rates, charges,
and costs in accordance with
Rule 10 on Structural and
Functional Unbundling of
Participants.
(b) In the determination of
eligible costs of service to
be charged to the End-
users, the ERC shall
establish the minimum
efficiency standards covering
the technical, financial, and
customer service
performance criteria
including systems losses,
and interruption frequency
rates parameters among
others.
(c) The rate base of the
Concessionaire or any
Distribution Utility shall
exclude management
inefficiencies, such as but
not limited to cost of project
delays not due to any force
majeure, and penalties and
related interest during
construction and other
disallowances to be
determined by ERC.
(d) Interest expenses shall Section 43. Functions of the
not be allowed as deductions ERC.
from permissible Return on (ii) Interest expenses are not
Rate Base (RORB). allowable deductions from
permissible return on rate base;
(e) TRANSCO or its Buyer Section 26. Distribution
or Concessionaire and Related Businesses. -
Distribution Utilities may Distribution utilities may, directly
directly or indirectly engage or indirectly, engage in any
in any related business related business undertaking
which maximizes the which maximizes the utilization
utilization of their assets. of their assets: Provided, That a
portion of the net income derived
from such undertaking utilizing
assets which form part of the
rate base shall be used to
reduce its distribution wheeling
charges as determined by the
ERC. Provided, further, That
such portion of net income used
to reduce their distribution
wheeling charges shall not
exceed fifty percent
(50%) of the net income derived
from such undertaking:
Provided, finally, That separate
accounts are maintained for
each business undertaking to
ensure that the distribution
business shall neither subsidize
in any way such business
undertaking nor encumber its
distribution assets in any way to
support such business.
Section 4. Method of Rate
Unbundling.
The ERC shall prescribe the
methodology for rate unbundling.
Section 5. Ratemaking Design and
Methodology.
(a) The ERC shall, in the public Section 43 (f) The ERC promulgated the
interest, establish and enforce a Performance Based Regulation
methodology for setting In the public interest, establish (PBR):
transmission and distribution and enforce a methodology for • In May 2003, for the
wheeling rates and Retail Rates setting transmission and transmission utility, thru the
for the Captive Market of a distribution wheeling rates and Transmission Wheeling Rates
Distribution Utility, taking into retail rates for the captive market Guidelines (TWRG), wherein
account all relevant of a distribution utility, taking into rates are controlled thru a
considerations, including the account all relevant maximum annual revenue
efficiency or inefficiency of the considerations, including the (MAR) cap, later amended as
regulated entities, as well as the efficiency or inefficiency of the Rules for Setting Transmission
expansion or improvement of the regulated entities. The rates Wheeling Rates (RTWR)in
Transmission facilities pursuant to must be such as to allow the September 2009
a plan approved by the ERC recovery of just and reasonable • In December 2004, for the
under Section 10 of Rule 6 on costs and a reasonable return on private distribution utilities, thru
Transmission Sector, and the rate base (RORB) to enable the the Distribution Wheeling Rates
Distribution Utilities under Rule entity to operate viably. The Guidelines (renamed as Rules
7 on Distribution Sector. The ERC may adopt alternative for Setting Distribution Wheeling
rates must be such as to allow forms of internationally-accepted Rates, RDWR), wherein rates
the recovery of just and rate-setting methodology as it are controlled thru a maximum
reasonable costs and a may deem appropriate. The rate- average price (MAP) cap.
reasonable RORB to enable the setting methodology so adopted
entity to operate viably. The and applied must ensure a
ERC may adopt alternative reasonable price of electricity.
forms of internationally-accepted The rates prescribed shall be
rate-setting methodology as it non-discriminatory. To achieve
may deem appropriate. The this objective and to ensure the
rate-setting methodology so complete removal of cross
adopted and applied must subsidies, the cap on the
ensure a reasonable price of recoverable rate of system
electricity. The rates prescribed losses prescribed in Section 10
shall be non-discriminatory and of Republic Act No. 7832, is
shall take into consideration, hereby amended and shall be
among others, the franchise tax. replaced by caps which shall be
To achieve this objective and to determined by the ERC based
ensure the complete removal of on load density, sales mix, cost
cross subsidies, the cap on the of service, delivery voltage and
recoverable rate of system other technical considerations it
losses prescribed in Section 10 may promulgate. The ERC shall
of Republic Act No. 7832, is determine such form or rate-
hereby amended and shall be setting methodology, which shall
replaced by caps which shall be promote efficiency.
on load density, sales mix,
cost of service, delivery voltage
and other technical
considerations it may
promulgate. The ERC shall
determine such form of rate-
following guidelines:
(i) For purposes of determining i) For purposes of
the rate base, the TRANSCO determining the rate base, the
or its Buyer or TRANSCO or any distribution
Concessionaire or any utility may be allowed to revalue
Distribution Utility may be its eligible assets not more than
allowed to revalue its eligible once every three (3) years by an
assets not more than once independent appraisal company:
every three (3) years by an Provided, however, That ERC
independent appraisal may give an exemption in case
company: Provided, however, of unusual devaluation: Provided
That ERC may give an
exemption in case of unusual
devaluation: Provided,
further, That the ERC shall
exert efforts to minimize price
shocks in order to protect the
consumers;
(ii) Interest expenses are not (ii) Interest expenses are not
allowable deductions from allowable deductions from
permissible ROB; permissible return on rate base;
(iii) In determining eligible cost of (iii) In determining eligible

services that will be passed cost of services that will be
on to the End-users, the ERC passed on to the end-users, the
shall establish minimum ERC shall establish minimum
efficiency performance efficiency performance
standards for the TRANSCO standards for the TRANSCO and
or its Buyer or distribution utilities including
Concessionaire and systems losses, interruption
Distribution Utilities including frequency rates, and collection
systems losses, interruption efficiency;
frequency rates, and collection
efficiency;
(iv) Further, in determining rate iv) Further, in determining
base, the TRANSCO or its rate base, the TRANSCO or any
Buyer or Concessionaire or distribution utility shall not be
any Distribution Utility shall allowed to include management
not be allowed to include inefficiencies like cost of project
management inefficiencies delays not
like cost of project delays not excused by force majeure,
excused by force majeure, penalties and related interest
penalties and related interest during construction
during construction applicable applicable to these unexcused
to these unexcused delays; delays;
(v) Any significant operating (v) Any significant operating
costs or project investments costs or project investments of
of the TRANSCO or its Buyer the TRANSCO and distribution
or Concessionaire and utilities which shall become part
Distribution Utilities which of the rate base shall be subject
shall become part of the rate to verification by the ERC to
base shall be subject to ensure that the contracting and
verification by the ERC to procurement of the equipment,
ensure that the contracting and assets and services have been
procurement of the subjected to transparent and
equipment, assets and accepted industry procurement
services have been and purchasing practices to
subjected to transparent and protect the public interest.
accepted industry
procurement and purchasing
practices to protect the
public interest; and
(vi) The interest incurred during
construction may be
capitalized and included in the
rate base upon commissioning
of the asset.
(b) The Retail Rates charged by
Distribution Utilities for the
Supply of Electricity in their
Captive Market shall be subject to
regulation by the ERC based on
the principle of full recovery of
prudent and reasonable
economic costs incurred, or
such other principles that will
promote efficiency as may be
determined by the ERC. Every
Distribution Utility or Supplier to
the Contestable Market,
whichever is applicable, shall
identify and segregate in its bills
to Endusers the components of
the Retail Rate as follows:
generation, transmission,
distribution, supply and other
related charges for electric
service.
(c) In the case of isolated, remote
and Unviable Areas serviced
by a qualified third party as
defined in Rule 14 on Provision
of Electricity by Qualified Third
Parties, the ERC shall set the
rules for rates computation and
determination.
(d) The ERC shall recognize the The ERC issued guidelines for the
different cost structures in uniform rate filing Requirements on
serving isolated areas. 30 October 2001 as required under
Section 36 of the EPIRA.
Section 6. Unbundled Rate Filing
Requirements.
(a) As required by the Act,
NPC and Distribution Utilities
shall file within six (6)
months from the effectivity
of the Act for revised rates
with costs and other relevant
accounts unbundled by
business activity.
(b) The ERC shall within six
(6) months from the date of
submission of revised rates
by the Distribution Utility,
notify the Distribution Utility
of the action taken on the
application.
(c) The rate filing petition
shall commence with the
unbundling the cost
components of the
historical test year costs,
from which the new Retail
Rates and unbundled rates or
charges are to be developed.
The
historical test year, for this
purpose, shall be the twelve
(12) months ending 31
December 2000.
RULE 16. REMOVAL OF CROSS Section 74. Cross Subsidies -
SUBSIDIES
Pursuant to Section 74 of the Act, Cross subsidies within a grid • Inter-Regional Grid Cross
cross subsidies within a Grid, between grids and / or classes of Subsidy- fully phased out by
between Grids, and/or classes of customers shall be phased out in ERC last 26 June 2002.
customers shall be phased out in a period not exceeding three (3) • Intra-regional (TransCo) grid
a period not exceeding three (3) years from the establishment by cross subsidy – fully phased-out
years from the establishment by the the ERC of a universal charge by ERC last 27 October 2005.
ERC of a Universal Charge which which shall be collected form all • Interclass Cross Subsidy – ERC
shall be collected from all electricity electricity end-users. Such level on 11 October 2005 ordered
End-users. Such level of cross of cross subsidies shall be made MERALCO to extend the
subsidies shall be made transparent and identified implementation of inter-class
transparent and identified separately in the billing subsidy removal until October
separately in the billing statements statements provided to end- 2006. Complete removal by
provided to End-users by the users by the October 2006.
Suppliers. suppliers.
This Rule shall apply to NPC,
Concessionaire, Distribution Utilities
and PSALM.
Section 3. Calculation of Cross
Subsidies.
(a) The ERC may extend the period The ERC may extend the period The ERC on 11 October 2005
for the removal of cross subsidies for the removal of cross ordered MERALCO to extend the
for a maximum period of one (1) subsidies for a maximum period implementation of inter-class
year upon finding that cessation of of one (1) year upon finding that subsidy removal until October 2006
such mechanism would have a cessation of such mechanism to lessen the burden to customers.
material adverse effect upon the would have a material adverse The removal was completed in
public interest, particularly the effect upon the public interest, October 2006.
residential End-user; or would have particularly the residential end-
an immediate, irreparable, and user; or would have an
adverse financial effect on immediate, irreparable, and
Distribution Utility. adverse financial effect on
(b) The cross subsidy between Section 43. Function of ERC
Grids in the rates of NPC shall be
calculated on a net basis for each (d) Determine the level of
Grid as the difference between: cross subsidies in the existing
retail rate until the same is
removed pursuant to Section 74
hereof;
(i) The total revenues that
would have been collected
on the Grid
under the rates in effect
during a historical test year
that is adjusted for
differences between actual
and forecast
consumption and other
factors as ERC may specify;
and
(ii) The total unbundled true
cost of service on the Grid
as submitted in accordance
with Rule 15 on Unbundling
of Rates and the rate filing
requirements that the ERC
may issue pursuant to Rule
15, using the same historical
test year.
(c) The cross subsidy within each Section 43. Functions of ERC
Grid in the rates of NPC shall be
calculated on a net basis for each (g) Three (3) years after the
customer class within the Grid as imposition of the universal
the difference between: charge, ensure that the charges
of the TRANSCO or any
distribution utility shall bear no
cross subsidies between grids,
within grids, or between classes
of customers, except as
provided herein;
would have been
collected from a
customer class under the
rates in effect during a
historical test year that is
adjusted for differences
between actual and
forecast
factors as ERC may
specify; and
cost of service for the
same customer class as
submitted in accordance
with Rule 15 on
Unbundling of Rates and
the rate filing
requirements that ERC
may issue pursuant to
Rule 15, using the same
historical test year.
(d) The cross subsidy between
customer classes within each
Distribution Utility shall be
calculated on a net basis for
each customer class as the
difference between:
would have been
collected from a
customer class under the
rates in effect during a
historical test
year that is adjusted for
differences between
actual and forecast
factors as ERC may
specify; and
cost of service for the
customer class as
submitted in accordance
with Rule 15 on
Unbundling of Rates
and the rate filing
requirements that ERC
may issue using the
same test year.
Section 4. Procedures for
Handling Cross Subsidies.
(a) Pending the complete removal Section 74.
of cross subsidies, each
subsidy rate
Such level of cross subsidies
level shall be shown as ashall be made transparent and
separate item in customeridentified separately in the billing
billing statements. statements provided to end-
users by the suppliers.
(b) The ERC shall establish a Section 34
cross subsidy charge to
account for all forms of cross (e) A charge to account for all
subsidies that remain during forms of cross-subsidies for a
the phase out period as period not exceeding three (3)
described in Section 5 of this years.
Rule, to be recovered from all
electricity End-users through
the Universal Charge pursuant
to Rule 18 on the Universal
Charge.
Section 5. Scheme for Phasing
Out Cross Subsidies.
(a) The ERC shall issue a scheme Section 43. Functions of ERC
for phasing out all cross
subsidies, including subsidies (g) Three (3) years after the
within Grids, between Grids, imposition of the universal
and between classes of charge, ensure that the charges
customers. The phasing out of the TRANSCO or any
period shall not exceed three (3) distribution utility shall bear no
years from the establishment of cross subsidies between grids,
the Universal Charge pursuant within grids, or between classes
to Rule 18 on Universal of customers, except as
Charge. The initial provided herein;
implementation of the phase
out scheme shall occur on the
next billing period after
issuance of ERC approval.
(b) The phase out scheme shall be
designed to mitigate the effects
of the removal of the cross
subsidies. The ERC shall
determine which End-users
shall continue to receive
subsidies and the level of
subsidies such End-users shall
receive during the phase out
period.
(c) Together with their filings of
unbundled rates reflecting the
true costs of service, pursuant
to Rule 15 on Unbundling of
Rates, NPC and the
Distribution Utilities shall file
with ERC their proposals for the
removal of cross subsidies
among the End-users they
serve to be considered by ERC
in the formulation of the phase
out scheme.
(d) The ERC may extend the period
for the removal of cross
would have a material
adverse effect upon the
public interest, particularly the
residential End-user; or would
have an immediate, irreparable,
and adverse financial effect on
a Distribution Utility. Distribution
Utilities shall submit to ERC
such information as ERC may
specify to help it determine if
the cross subsidy removal
mechanism should be extended
under this provision.
(e) If ERC does not extend the
period for removal of cross
subsidies, the cross subsidies
between regions, within
regions, and between
customer classes shall cease
to exist at the end of the three
(3) year period from the
establishment of the Universal
Charge.
Section 6. Exemption from Cross Section 73. Lifeline Rate
Subsidy Removal for Distribution
Utilities.
The threshold consumption levels - A socialized pricing mechanism The implementation of lifeline rate
and the Lifeline Rates determined called a lifeline rate for the vary for each DU. The lifeline
by the ERC shall be exempted marginalized end-users shall be program as mandated under the
from the prohibition on cross set by the ERC, which shall be EPIRA shall be implemented for 10
subsidies between classes of exempted from the cross years unless extended by Law. The
customers of a Distribution Utility subsidy phase-out under this Act lifeline program was extended upon
for a period of ten (10) years, for a period often (10) years, enactment of RA10150 in 2011
unless extended by law. unless extended by law. The thereby extending the program for
level of consumption and the another 10 yrs.
rate shall be
determined by the ERC after due
notice and hearing.
RULE 17. STRANDED DEBTS
AND CONTRACT COSTS
RECOVERY
Section 1. Guiding Principle. Section 32. NPC Stranded
Debt and Contract Cost
Recovery. -
Pursuant to Sections 32 and 33 • The EC issued Resolution No.
of the Act, there are three (3) 02, Series of 2011, A Resolution
types of stranded costs recoverable Adopting the Amended Rules for
through the Universal Charge: the Recovery of NPC Stranded
Contract Costs and Stranded
Debts Portion of the Universal
Charge;
• Resolution No. 04, Series of

2007, A Resolution Adopting
Rules for Recovery of NPC
Stranded Contract Costs and
Stranded Debts Portion of the
Universal Charge
• In a Decision dated 27 June

2017 under Case No. 2013-195
RC, the Energy Regulatory
Commission (ERC) approved
with modification PSALM’s CYs
2011-2012 UC-SD True-Up
Adjustments effective next
billing period amounting to PhP
24.51 Billion. Accordingly, all
Distribution Utilities (DUs) and
the National Grid Corporation of
the Philippines (NGCP) are
directed by the ERC to collect
the amount of PhP0.0265/ kWh
from the consumers starting on
the next billing period and remit
the same to PSALM, on or
before the 15 day of the
succeeding month, until the
amount of SD True-up for CYs
2011 and CY 2012 has been
fully recovered.
• In a Decision dated 06 July

2017 under Case Nos. 2013-
160 RC and 2014-111 RC, the
ERC approved with modification
PSALM’s petitions for the
availment of the CYs 2011-2013
UC-SCC effective July 2017
billing period, amounting to Php
12.878 Billion, maintaining the
PhP0.1938/kWh rate for ten (10)
months. Accordingly, all
Distribution Utilities (DUs) and
the National Grid Corporation of
the Philippines (NGCP) are
directed by the ERC to collect
the above UC-SCC charge
starting July 2017 billing period.
(a) Stranded Debts; (b) Stranded Stranded debt of NPC shall refer
Contract Costs of NPC; and (c) to any unpaid financial
Stranded Contract Costs of Eligible obligations of NPC. Stranded
Contracts of Distribution Utilities. contract costs of NPC shall refer
to the excess of the contracted
cost of electricity under eligible
IPP contracts of NPC over the
actual selling price of the
contracted energy output of such
contracts in the market.
Section 2. Scope of the

Application.
This Rule shall apply to NPC, Such contracts shall have been
PSALM and Distribution Utilities approved by the ERB as of
with IPP contracts approved by the December 31, 2000.
ERB as of 31 December 2000.
Section 3. Procedures and
Methodology for Stranded Cost
Determination.
(a) PSALM and any Distribution
Utility that has an eligible contract
shall file with ERC their
respective petitions for cost
recovery under the Universal
Charge and include therewith
the methodology in determining
stranded costs. The ERC shall
review the methodology
submitted by PSALM and such
Distribution Utility to determine,
fix, and approve the level of
stranded costs.
(b) At the end of the first year of
the implementation of stranded
cost
recovery and every year
thereafter, the ERC shall conduct
a review to
determine whether there is an
under- or over recovery and
adjust
(true-up) the level of stranded
cost recovery charge
accordingly. In
determining whether there is an
under- or over recovery and in
determining the stranded cost
recovery portion of the Universal
Charge for the subsequent
period, the ERC shall base the
calculation on the following
information submitted by the
PSALM and the Distribution
Utility which has an eligible
contract:
(i) a report of the amounts
recovered for stranded
costs during the past year;
and
(ii) revised stranded cost
amounts based on current
market information.
Section 4. NPC Stranded Debt and
Stranded Contract Cost Recovery.
(a) Consistent with Section 32 of the The national government shall PSALM continuously implementing
Act, the National Government shall directly assume a portion of the its liability management program
directly assume a portion of the financial obligations of NPC in and strategies and was able to
financial obligations of NPC an amount not to exceed Two reduce its financial obligations to
transferred to PSALM in an hundred billion pesos PhP466.2 billion (or USD9.3 billion)
amount not to exceed Two (P200,000,000,000,00) as of 4th quarter 2017, or a
Hundred Billion Pesos decrease of PhP774.5 billion from
(P200,000,000,000.00). the 2003 level of PhP1,241 billion.
(b) The following guidelines shall
govern the recovery by the PSALM
of the Stranded Debts and Stranded
Contract Costs of NPC:
(i) PSALM shall calculate the Section 34. Universal Charge. -
amount of the Stranded Within one (1) year from the
Debts and Stranded effectivity of this Act, a universal
Contract Costs of NPC that charge to be determined, fixed
shall form part of the and approved by the ERC., shall
Universal Charge to be be imposed on all electricity end-
determined, fixed, and users for the following purposes:
approved by the ERC and
reviewed by the same body (a) Payment for the stranded
annually. In determining the debts in excess of the
amount of Stranded Contract amount assumed by the
Costs of NPC, PSALM may National Government and
include in such calculation the stranded contract costs of
principal amount and interest NPC and as well as qualified
expenses of any such debt stranded contract costs of
raised by PSALM to finance distribution utilities resulting
the buy-out or buy-down of from the restructuring of the
any eligible IPP contract, i.e industry;
contracts approved by the
ERB as of 31 December
2000 as well as any other
costs and expenses incurred in
connection with such buy-out
or buy-down: Provided, That
the amount recoverable by
PSALM from the Universal
Charge fund shall not
exceed the estimated
Stranded Contract Costs of
such eligible IPP Contract,
assuming that such buy-out or
buy-down never occurred:
Provided, further, That
PSALM demonstrates to the
ERC’s satisfaction that such
buy-out or buy-down will
benefit electricity consumers
by reducing that component
of the Universal Charge
attributable to such IPP
contract.
(ii) The ERC shall verify the The ERC shall verify the
reasonable amounts of reasonable amounts and
claims petitioned by PSALM determine the manner and
and determine the manner duration for the full recovery of
and duration by which full stranded debt and stranded
recovery of Stranded Debt contract costs as defined herein:
and Stranded Contract Costs Provided, That the duration for
of NPC is attained: Provided, such recovery shall not be
That the duration for such shorter than fifteen (15) years
recovery shall not be shorter nor longer than twenty-five (25)
than fifteen (15) years nor years. The ERC shall, at the end
longer than twenty-five (25) of the first year of the
years. implementation of stranded cost
recovery and every year
thereafter, conducts a review to
determine whether there is
under-recovery or over-recovery
and adjust (tune-up) the level of
stranded cost recovery charge
accordingly.
(iii)Any amount to be included for Any amount to be included for
stranded cost recovery shall stranded cost recovery shall be
be reflected as a separate reflected as a separate item in
item in the consumer billing the consumer billing statement.
statement. The ERC shall
monitor and ensure that there
is a separate item
in the consumer billing
statement for stranded cost
recovery.
Section 5. Recovery of Stranded Section 33. Distribution Not yet implemented
Contract Costs of Eligible Utilities Stranded Contract
Contracts of Distribution Utilities. Costs Recovery. -
Stranded contract costs of

distribution utilities shall refer to
the excess of the contracted cost
of electricity under eligible
contracts of such utilities over
the actual selling price of such
contracts in the market. Such
contracts shall have been
approved by the ERB as of
December 31, 2000.
(a) Within one (1) year from the Within one (1) year from the start
start of Retail Competition and of open access, any distribution
Open Access, a Distribution utility that seeks recovery of
Utility that seeks to recover stranded contract costs shall file
stranded contract costs arising with the ERC notice of such
from its eligible contracts shall intent together with an estimate
file with the ERC a notice of such of such obligations, including the
intent together with an estimated present value thereof and such
amount of such obligations. The other supporting data as may be
Distribution Utility shall provide required by the ERC. Any
all pertinent information as may distribution utility that does not
be required by the ERC. file within the date specified shall
Failure of the Distribution Utility not be eligible for such recovery.
to file within the date specified
shall mean non-eligibility for such
recovery.
(b) A Distribution Utility shall recover A distribution utility shall recover
stranded contract costs: stranded contract costs:
Provided, however, That such Provided, however, That such
costs of the IPPs of costs of the IPPs of distribution
Distribution Utilities are subject utilities are subject to review by
to review by ERC in order to ERC in order to determine
determine fairness and fairness and reasonableness in
reasonableness in relation to relation to the average price of
the average price of land- land-based IPP projects entered
based IPP projects entered into into by NPC at the time they
by NPC at the time they were were contracted. The ERC shall
contracted. The ERC shall take take into consideration all factors
into consideration all factors that that affect the total cost of NPC
affect the total cost of NPC IPP IPP generation projects,
generation projects, including including direct or indirect
direct or indirect subsidies or subsidies or incentives provided
incentives provided by the by the Government.
Government.
(c) Any Distribution Utility which Any distribution utility which
seeks to recover stranded costs seeks to recover stranded cost
shall have the duty to mitigate shall have a duty to mitigate its
its potential stranded costs by potential stranded contract costs
exerting reasonable best efforts by making reasonable best
to: efforts to:
(i) Reduce the costs of its (a) reduce the costs of its
existing eligible contracts with existing contracts with IPPs to a
IPPs to a level not exceeding the average
level not exceeding the buying price of other land-based
average buying price of other electric power generators; and
land-based
electric power generators; and
(ii) Submit to an annual earnings (b) submit to an annual earnings
review by the ERC and use review by the ERC and use its
itsearnings above its earnings above its authorized
authorized rate of return to rate
reduce the book of return to reduce the book
value of contracts until the value of contracts until the end
end of the stranded cost of the stranded cost recovery
recovery period. period.
(d) The Distribution Utility shall Other mitigating measures which
submit to the ERC, during its are reasonably known and
filing for stranded contract cost generally accepted within the
recovery, its detailed plan and electric power industry shall be
strategy to utilized. The ERC shall not
mitigate stranded contract costs. require the distribution utility to
Other mitigating measures that take a loss to reduce stranded
are reasonably known and contract costs or divest assets,
generally accepted within the unless the divestiture is imposed
electric power industry shall be as a penalty as provided herein.
utilized. The ERC shall not
require the Distribution Utility to
take a loss to reduce stranded
contract costs or divest assets,
unless the divestiture is
imposed as a penalty as provided
herein.
(e) Within three (3) months from The relevant distribution utility
the submission of the shall submit to the ERC quarterly
application for stranded cost reports showing the amount of
recovery by the relevant stranded costs recovered and
Distribution Utilities, the ERC the balance remaining to be
shall verify the reasonable recovered.
amounts and determine the
manner and duration for the full Within three (3) months from the
recovery of the Stranded submission of the application for
Contract Costs of Eligible stranded cost recovery by the
Contracts of Distribution Utilities: relevant distribution utilities, the
Provided, That the duration for ERC shall verify the reasonable
such recovery shall not be amounts and determine the
shorter than fifteen (15) years manner and duration for the full
nor recovery of stranded contract
longer than twenty-five (25) costs as defined herein:
years. For this purpose, “full Provided, That the duration for
recovery of Stranded Contract such recovery shall not be
Costs of Eligible Contracts of shorter than fifteen (15) years
Distribution Utilities” nor longer than twenty-five (25)
shall mean recovery of Stranded years. Any amount to be
Contract Costs of Eligible included for stranded cost
Contracts of Distribution Utilities recovery shall be reflected as a
authorized by the ERC after its separate item in the consumer
pertinent review. Any amount to billing statement.
be included for the recovery of
Stranded Contract Costs of
Eligible Contracts of Distribution
Utilities shall be reflected as a
separate item in the consumer
billing statement.
(f) In the case of an over-recovery, The ERC shall, at the end of the
the ERC shall ensure that any first year of the implementation
excess amount shall be of stranded cost recovery and
remitted to the Special Trust every year thereafter, conduct a
Fund (STF) created pursuant review to determine whether
to Section 34 of the Act. A there is under-recovery or over
separate account shall be recovery and adjust (true-up) the
created for this purpose that level of stranded cost recovery
shall be held in trust for any charge accordingly. In case of
future an over-recovery, the ERC shall
claims of Distribution Utilities for ensure that any excess amount
the recovery of their respective shall be remitted to the Special
Stranded Contract Costs of Trust Fund created under
Eligible Contracts of Distribution Section 34 hereof. A separate
Utilities. account shall be created for
At the end of the stranded cost these amounts which shall be
recovery period, any remaining held in trust for any future claims
amount or balance in this of distribution utilities for
account shall be used to stranded cost recovery. At the
reduce the end of the stranded cost
electricity rates to the End-users. recovery period, any remaining
amount in this account shall be
used to reduce the electricity
rates to the end-users.
(g) A Distribution Utility, which has
an eligible contract, duly
authorized by the ERC, shall
submit to ERC quarterly
reports showing the amount of
stranded contract costs
recovered and the balance
remaining to be recovered from
the Universal Charge. Quarterly
shall mean the calendar quarters
of January 1 to March 31
(first quarter), April 1 to June 30
(second quarter), July 1 to
September 30 (third quarter),
and October 1 to December 31
(fourth quarter). The relevant
Distribution Utility shall submit to
the ERC the
quarterly reports within thirty (30)
days from the end of each
calendar
quarter.
(h) Upon a finding by the ERC that
a Distribution Utility which seeks
to
recover stranded contract costs
has failed to comply with its
mitigation obligation under
Section 33 of the Act, the ERC
may not
allow the recovery of stranded
contract costs: Provided, That if
there is any fraud or
misrepresentation by the
Distribution Utility, the ERC
may impose appropriate
penalties in accordance with
Section 46 of
the Act.
RULE 18. THE UNIVERSAL Section 34. Universal Charge.
CHARGE
Section 1. Guiding Principle. Within one (1) year from the As of 31 January 2018, remittances [NGCP]* This is to reduce the cost of UC
effectivity of this Act, a universal of collecting entities (CEs) to NGCP should be allowed to ME and allow extension of the
Within one (1) year from the charge to be determined, fixed PSALM amounted to PhP140.173 interconnect SPUG areas to the grid to these areas to spur
effectivity of the Act, there shall be a and approved by the ERC., shall billion, while interest earnings from main grid. The interconnection economic development
Universal Charge to be be imposed on all electricity end- deposits and placements of UC should be classified as
determined, fixed and approved users for the following purposes: funds amounted to PhP0.156 billion. Transmission Asset.
by the ERC that shall be imposed On the other hand, UC fund
on all electricity End-users, including disbursement amounted to
self-generation entities. PhP138.670 billion.
This Rule shall apply to the following: (a) Payment for the stranded
(a) Petitioners for availments from the debts in excess of the
Universal Charge. amount assumed by the
(i) PSALM for the Stranded Debts National Government and
and Stranded Contract Costs of stranded contract costs of
NPC; NPC and as well as
(ii) Distribution Utilities with respect qualified stranded contract
to their Stranded Contract costs of distribution utilities
Costs of Eligible Contracts; resulting from the
(iii) Missionary Electrification; restructuring of the industry;
(iv) Qualified Generation (b) Missionary electrification; [PSALM] Exemption of self- generating
Companies with respect to the (c) The equalization of the taxes (iii) Missionary Electrification which facilities in the UC
equalization of taxes and and royalties applied to includes cash incentive for This provision intends to
royalties between indigenous or indigenous or renewable renewable energy developers harmonize EPIRA and Section 15
Renewable Energy Resources sources of energy vis-a-vis pursuant to Section 15 (h) of the (h) of RA 9513 or the RE Act of
and imported fuels; imported energy fuels; RA 9513, also known as RE Act 2008.
(v) NPC, with respect to the (d) An environmental charge of 2008;
environmental charge of equivalent to one-fourth of
P0.0025 per kilowatt-hour sales one centavo per kilowatt-
to be used for the rehabilitation hour (P0.0025/kWh), which
and shall accrue to an
management of watershed environmental fund to be
areas; and used solely for watershed
(vi) NPC/PSALM and Distribution rehabilitation and
Utilities with respect to the management. Said fund
mitigation of the removal of shall be managed by NPC
cross subsidies. under existing
arrangements; and
(e) A charge to account for all
forms of cross-subsidies for
a period not exceeding
three (3) years.
(b) Electricity End-users such as but
not limited to: (i) All End-users of
Distribution Utilities such as
residential, commercial, and
industrial including government
and/or public buildings, irrigation
systems, and special lightings; (ii)
Directly-connected End-users of
NPC such as but not limited to
government agencies and
institutions, and industrial
enterprises; (iii) Persons using
Self-Generation Facilities; (iv)
Locators, developers, operators
and facilities operating in EZs;
and (v) Other entities identified
by the ERC pursuant to the
intent of the Act.
Section 3. Mitigation on the
Removal of Cross Subsidies.
(a) Unbundled rates of the NPC and Section 36, 2nd Para. The implementation of removal of
the Distribution Utilities as cross subsidies for MERALCO was
approved Within six (6) months from the extended for 1 year upon
by the ERC in accordance with effectivity of this Act, each recommendation of the ERC to lessen
Section 36 of the Act, shall distribution utility shall file its the impact to electricity consumers.
reflect the respective costs of revised rates for the approval by
providing service to End-users the ERC. The distribution
without any type of cross wheeling charge shall be
subsidy. The removal of cross unbundled from the retail rate
subsidies to the End-users of and the rates shall reflect the
Distribution Utilities will respective costs of providing
however be mitigated and done each service. For both the
gradually in accordance with distribution retail wheeling and
Section 74 of the Act. ERC supplier’s charges, inter-class
shall issue a phase out scheme subsidies shall be removed in
to gradually remove the cross accordance with this Act.
subsidies. Any amount of
subsidy provided to End-users Se. 74, 2nd para.
during the phase out period
shall be recovered through the The ERC may extend the period
Universal Charge. for the removal of cross
would have a material adverse
effect upon the public interest,
particularly the residential end-
user; or would have an
immediate, irreparable, and
adverse financial effect on
(b) With respect to SPUG, rates for
Missionary Electrification shall be in
accordance with Rule 15 on
Unbundling of Rates.
Section 4. Procedures for Petitions
Against the Universal Charge.
(a) For the first year after the
effectivity of the Act, the following
rules shall apply:
(i) The petitioners identified in The ERC on 22 August 2011 issued
Section 2 of this Rule shall file Resolution No. 21, Series of 2011
their availments from the providing for the guidelines for the
Universal Charge with the ERC setting and approval of electricity
on or before15 March 2002 and generation rates and subsidies for
submit all pertinent documents in Missionary Electrification areas and
support of such availments made for the fixing of availment of
and the basis for their subsidies for ME areas as well as
computation. cash incentives for RE Developers
(ii) The ERC shall evaluate the Section 51
petitions and thereafter issue
the corresponding order no later (d) To calculate the amount of
than 26 June 2002 which shall the stranded debts and stranded
prescribe the following: contract costs of NPC which
shall
form the basis for ERC in the
determination of the universal
charge;
(1) The Universal Charge on a Section 34. Universal Charge. –
per kWh basis to be
included in the billing The universal charge shall be
statements to the End- non-bypassable charge which
users; shall be passed on and collected
from
all end-users on a monthly basis
by the distribution utilities.
(2) Breakdown of the applicable
Universal Charge for each
of the intended purposes:
(a) Stranded Debts and (a) Payment for the stranded
Stranded Contract debts in excess of the amount
Costs of NPC; assumed by the National
Government and stranded
contract costs of NPC and as
well as qualified stranded
contract costs of distribution
utilities resulting from the
restructuring of the industry;
(b) Missionary (b) Missionary electrification;
Electrification;
(c) Equalization of taxes (c) The equalization of the taxes Issued May 3, 2002, EO 100 was
and royalties and royalties applied to issued with the following provisions:
between indigenous indigenous or renewable
or renewable sources of energy vis-a-vis • Reduce royalty for natural gas
sources of energy imported energy fuels; and geothermal (shall be
vis-à-vis imported benchmarked with the imported
energy fuels; energy source as determined by
DOF and DOE)
• Royalty on the development and
utilization of coal shall remain
since existing royalty on coal is
lower than the duty on imported
coal
• ERC shall reduce rates of power
from all indigenous energy
sources to reflect the reduction in
royalty
(d) Environmental Charge (d) An environmental charge • As of January 2018, PhP74.895
of P0.0025 per equivalent to one-fourth of one billion and PhP1.491 billion were
kilowatt-hour sales for centavo per kilowatt-hour paid to NPC, chargeable against
the rehabilitation and (P0.0025/kWh), which shall the UC-ME and EC fund,
maintenance of accrue to an environmental fund respectively, in accordance with
watershed areas; and to be used solely for watershed the provisions of the EPIRA and
rehabilitation and management. the Energy Regulatory
Said fund shall be managed by Commission (ERC)
NPC under existing decisions/orders.
arrangements; and
(e) Mitigation Fund for the (e) A charge to account for all
removal of cross- forms of cross-subsidies for a
subsidies of NPC and period not exceeding three (3)
Distribution Utilities. years.
(3) Period of disbursement All amounts collected for the [PSALM] Deadline in the date of UC filing
by each of the beneficiaries universal charge shall be (b) Petitions for availment under the This is to coincide with the release
as well as submission of distributed to the respective Universal Charge for the of the Audited Financial
reportorial requirements beneficiaries within a reasonable succeeding years shall be Statements. In the past years,
prescribed by the ERC. period to be provided by the submitted to the ERC on or before PSALM has continuously asked
ERC. July 31 of every year. for extension of submission from
ERC.
(b) Petitions for availment under the
Universal Charge for the
succeeding years shall be
submitted to the ERC on or
before March 15 of every year.
(c) A Distribution Utility that seeks to Not yet implemented.
recover Stranded Contract Costs
of
its Eligible Contracts shall submit
a petition for availment under the
Universal Charge to the ERC
within one (1) year from the start
of
Open Access. Within three (3)
months from the submission of
the
petition by such Distribution
Utility, the ERC shall verify the
reasonable amounts and
determine the manner and
duration for the full recovery
thereof, as approved by the ERC.
(d) With respect to the equalization Section 35. Royalties, Returns Enacted EO 100 on May 3, 2002
of taxes and royalties applied and Tax Rates for Indigenous  Reduce royalty for natural gas and
to Energy Resources. - The geothermal (shall be benchmarked
indigenous or renewable sources provisions of Section 79 of with the imported energy source
of energy, qualified Generation Commonwealth Act No. 137 as determined by DOF and DOE)
Companies shall be entitled to (C.A. No. 137) and any law to  Royalty on the development and
make claims against STF the contrary notwithstanding, the utilization of coal shall remain
created for President of the Philippines shall since existing royalty on coal is
this purpose. The STF shall be reduce the royalties, returns and lower than the duty on imported
constituted out of the proceeds taxes collected for the coal
from the Universal Charge exploitation of all indigenous  ERC shall reduce rates of power
specified under Section 34 of the sources of energy, including but from all indigenous energy
Act: Provided, That said claims not limited to, natural gas and sources to reflect the reduction in
shall only be to the extent of the geothermal steam, so as to royalty
additional cost or effect parity of tax treatment with
reduction in the cost of generating the existing rates for imported Based on the simulations conducted
electricity. For this purpose, coal, crude oil, bunker fuel and by the DOF in coordination with
qualified Generation Companies other imported fuels. PSALM and the DOE using the
making said claims shall submit a formula provided under EO 100, the
detailed statement of their sales To ensure lower rates for end- following were determined in the
and costs of operation, including users, the ERC shall forthwith imposition of UC for Tax Equalization:
a breakdown of how their reduce the rates of power from
claims are estimated and the all indigenous sources of energy.  Benefit of lower electricity rates will
impact thereof on generation be selective, i.e., only customers
rates, the corresponding of Malampaya natural gas and
assumptions and justification Palinpinon I geothermal plants
therefor and such other  Poses heavy administrative and
information as may be required regulatory burden
by the PSALM. Only those  Rates for other customers will
claims that meet the foregoing increase especially in Mindanao
documentation requirements
 Even at zero tax, gas remains
shall be evaluated and acted
uncompetitive
upon by PSALM.
 Imported fuel will remain less
expensive
(e) Failure by any petitioner to
submit its petition within the
periods specified above shall
result in a forfeiture of such
petition for the
period in question.
(f) In case of over- or under-
recovery by beneficiaries, true-
up adjustments shall follow the
rules and regulations to be
prescribed by the ERC, except as
otherwise provided in these
Rules.
Section 5. Collection of the
Universal Charge.
(a) The Universal Charge shall be a The universal charge shall be • ERC promulgated the Rules
non-by passable charge that non-bypassable charge which Governing the Collection of
shall be collected from all End- shall be passed on and collected Universal Charges on December
users on a monthly basis by the from all end-users on a monthly 5, 2003;
Distribution Utilities or Suppliers basis by the distribution utilities. • The JCPC agreed to extend the
in case of Contestable Markets. Collections by the distribution moratorium provided in the law for
Any End-user or self-generation utilities and the TRANSCO in the collection of UC to SGFs until
entity not connected to a any given month shall be June 2010.
Distribution Utility shall remit its remitted to the PSALM Corp. on
corresponding Universal Charge or before the fifteenth (15th) of Issues and Concerns
directly to the TRANSCO. the succeeding month, net of
Collections by the Distribution any amount due to the • The huge stand-by power and
Utilities shall be remitted to the distribution utility. Any end-user self-generation capacity in the
PSALM on or before the fifteenth or self-generating entity not country is a result of the failure of
(15th) day of the succeeding connected to a distribution utility the electric power sector to
month, net of any amount due to shall remit its corresponding satisfactorily serve end-users
the Distribution Utility. universal charge directly to the specially industries.
TRANSCO. • Penalizing self-generators with
the universal levy will increase
their cost of power and make
them even less competitive which
is contrary to the declared
objective of the EPIRA
• Self-generators did not factor-in
this universal charge that can
alter their economics. If there is a
change in law an argument can
be made in fact that the self-
generators generating facilities
can be entitled technically to
stranded cost recovery.
• The "non-by-passable" concept of
universal charge that was
borrowed from foreign
deregulations need to be modified
for the Philippines because of the
uniquely large self-generation
(b) Separate books of accounts The ERC issues Resolution No. 49
shall be maintained by the Series of 2006 Adopting the
Distribution Utility and made Business Separation Guidelines for
available to the ERC for Distribution Utilities
purposes of monitoring,
verifying and accounting of
amounts collected from the
Universal Charge and remitted
to the PSALM.
Section 6. Administration of the
Universal Charge.
(a) Pursuant to the last paragraph of The PSALM Corp., as PSALM, with the supervision and
Section 34 of the Act, PSALM administrator of the fund, shall approval of the ERC, administers the
shall act as the administrator create a Special Trust Fund collection of the Universal Charge
of the funds generated from which shall be disbursed only for (UC), which is collected every month
the Universal Charge. For this the purposes specified herein in by the distribution utilities from all
purpose, the PSALM shall an open and transparent electric consumers. The UC fund is
create a STF to be manner. All amounts collected used to finance, as specified by law,
established in the Bureau of for the universal charge shall be missionary electrification,
Treasury (BTr) or in a distributed to the respective environmental protection projects, and
Government Financing beneficiaries within a reasonable payment of National Power's stranded
Institution (GFI) that is period to be provided by the debts.
acceptable to the DOF. ERC.
Separate STFs shall be As of 31 January 2018, remittances of
established for each of the collecting entities (CEs) to PSALM
intended purposes of the amounted to PhP140.173 billion, while
Universal Charge. Funds shall interest earnings from deposits and
be disbursed in an open and placements of UC funds amounted to
transparent manner and shall PhP0.156 billion
only be used for the intended
purposes specified in Section 3
of this Rule. UC Type PhP/kWh
UC-ME 0.1561
UC-EC 0.0025
UC-SCC 0.1938
Total 0.3789
(b) All qualified availments shall be
approved and certified by the
ERC. In this regard, PSALM,
in consultation with the DOF,
shall promulgate, within one
(1) year from the effectivity of
the Act and subject to the
approval of the ERC,
procedures and guidelines that
shall govern all remittances to
and disbursements from the
STF.
(c) The PSALM shall transfer funds (c) The PSALM shall transfer Amend to a reasonable and
from the STF and shall funds from the STF and shall feasible date the disbursement
distribute to the beneficiaries on distribute to the beneficiaries on or of UC funds to the
or before the twentieth (20th) before the 25th of each month, beneficiaries
day of each month. except for the cash incentive
which shall be disbursed to the To amend to a reasonable and
RE Developers within a feasible date the disbursement of
reasonable period to be UC funds per EPIRA, and cash
provided by the ERC in a incentive for RE Developers per
separate Guidelines for the RE Act. The proposed
purpose. disbursement date is 25 th day of
the month. This will allow
PSALM sufficient time to
validate/verify UC remittances
from the CEs, prepare monthly
remittance report, update fund
balance, transfer fund from MTF to
respective STF, and release the
fund to beneficiaries.
(d) The PSALM shall submit to As of 31 January 2018, remittances
the DOF and ERC a report of collecting entities (CEs) to PSALM
on the amounted to PhP140.173 billion,
remittances and disbursements while interest earnings from deposits
against the fund on a quarterly and placements of UC funds
basis. amounted to PhP0.156 billion
(e) Separate Books of accounts
shall be maintained by the
PSALM for over-recovery of the
Distribution Utility stranded cost
component and made available
to the ERC for purposes of
monitoring and accounting for
sums collected from the
Universal Charge.
(f) In the event that the total amount
collected for the Universal
Charge is greater than the actual
availments against the Universal
Charge, the PSALM shall retain
the balance within the STF to
pay for periods
where a shortfall occurs.
(g) In determining the amount
which a Distribution Utility can
net off
from its remittance of the
Universal Charge to PSALM,
the
Distribution Utility shall not
discriminate in its own favor at the
expense of other beneficiaries in

the event that actual collections
differ from expected collections
based on the level of kilowatt-
hour sales
used by ERC in setting the
Universal Charge per kilowatt-
hour (kwh).
In such cases, the Distribution
Utility shall only retain its
proportionate share in the actual
collection.
Section 7. Deferment. As amended 3rd paragraph of Section 34 of Section 7. Exclusion
RA 9136
All Self-Generation Facilities The universal charge shall be The moratorium on the collection of All Self-Generation Facilities It may be noted that the EPIRA
whether new, existing or under non-bypassable charge which UC from SGFs has been extended whether new, existing or under used the term self-generating
construction shall not be covered shall be passed on and collected for another 3 yrs upon consultation construction shall not be entity (SGE) while its IRR,
by the imposition of Universal from all end-users on a monthly with the JCPC in June 2007 which covered by the imposition of specifically Rule 4 thereof,
Charge for a period of three (3) basis by the distribution utilities. was effectively until June 2010. Universal Charge. xxx utilized the term self-generation
years from June 30, 2007: Collections by the distribution However since then, collection of UC facility (SGF) to refer to “a power
Provided, That, such Self- utilities and the TRANSCO in from SGFs is yet to be implemented. Generation Facility owned and
Generation Facilities shall register any given month shall be constructed by an End-user for
with the ERC, and PSALM. remitted to the PSALM Corp. on such End-user’s own
or before the fifteenth (15th) of consumption or internal use
the succeeding month, net of excluding Generation Facilities
any amount due to the for use by household, clinics,
distribution utility. Any end-user hospitals and other medical
or self-generating entity not facilities.”
connected to a distribution utility
shall remit its corresponding Given that the EPIRA made
universal charge directly to the reference to SGE while the
TRANSCO. EPIRA IRR utilized SGF, it
should be clarified whether SGE
and SGF are one and the same,
as contemplated in Section 34 of
the EPIRA.
Self-Generation Entities owning

self-generation facilities can be:
a) Large industries that are

directly-connected to the grid
which sells their excess capacity
through the grid to another entity
during capacity shortfall in the
system;
b) SGEs that are connected

to the DU and are required to sell
its excess power through the grid
during capacity shortfall in the
system; and
c) An entity with self-

generation facility located in an
isolated/remote area/s that has
no access to the distribution or
transmission system but is
capable of generating power for
its own consumption and selling
electricity to consumers in said
area.
Foregoing considered, UC should

not be imposed on SGEs that sell
excess power to the grid since
the output sold to end-users is
already subject to imposition of
UC.
Further, during PSALM’s

consultations with various self-
generation entities (SGEs)/self-
generation facilities (SGFs),
these groups expressly opposed
the imposition of UC due to
potential adverse impact on the
operating costs, competitiveness
and viability of energy-intensive
industries like the semi-conductor
industry, paper mill, cement and
sintering plants, which have
purposely put up SGFs to
preserve the quality of their
products.
Further, PSALM has observed

that majority of the SGEs/SGFs
have no metering facilities that
would measure the energy
generation and consumption that
would be subject to UC. This
brings us to the issue on who will
shoulder the cost of putting up
the metering facility, which is
estimated to cost
PhP_________________, apart
from meter-reading that will be
conducted by NGCP or the DU. A
cost-benefit analysis will have to
be conducted to determine if it is
worth pursuing the imposition of
UC for an SGE/SGF whose
generation is minimal compared
to the sum of the cost of the
metering facility and conducting
the meter-reading.
The above issues have to be

addressed if the government is
bent on pursuing the imposition
of UC, which has been deferred
twice covering a period of 4 years
each, the first one of which was
incorporated in the EPIRA IRR
while the succeeding deferment
order emanated from the
Department of Energy.
Section 8. Fines and Penalties.
(a) In cases where the TRANSCO
or its Buyer or Concessionaire or
a
Distribution Utility collects funds
earmarked for the Universal Charge
but fails to remit the same to
PSALM on or before the fifteenth
(15th) day of the succeeding
month, the ERC may impose the
appropriate fines and penalties
prescribed in Section 46 of the Act
including, but not limited to,
assessed interest charges.
(b) In cases where a Self-
Generation Facility refuses to pay
the Universal Charge, the ERC
may impose the appropriate fines
and penalties
prescribed in Section 46 of the
Act, including but not limited to,
assessed interest charges.
RULE 19. MANDATED Section 72. Mandated Rate
RESIDENTIAL REBATE Reduction. -
(a) The ERC shall monitor and Upon the effectivity of this Act, To date, the mandated rate
ensure the implementation of its residential end-users shall be reduction on electricity rates for
Resolution No. 2001-04 issued on 26 granted a rate reduction from residential customers is only
July 2001 and any amendments NPC rates of thirty centavos per implemented in Mindanao since
thereto. The ERC shall impose fines kilowatt-hour (P0.30/kWh). Such most of NPC assets and IPP
and penalties on parties who fail to reduction shall be reflected as a contracts in the area is yet to be
comply with said Resolution. separate item in the consumer privatized.
billing statement.
(b) The reduction shall be reflected
as a separate item in the consumer
billing statement.
RULE 20. LIFELINE RATE Section 73. Lifeline Rate -
Pursuant to Section 73 of the Act, a A socialized pricing mechanism The Lifeline program was extended
socialized pricing mechanism called called a lifeline rate for the upon enactment of Republic Act 1050
a Lifeline Rate for the Marginalized marginalized end-users shall be in 2011. The lifeline rate varies for
End-users shall be set by the ERC. set by the ERC, which shall be each distribution utility and is being set
exempted from the cross by the ERC.
for a period often (10) years, Issues and Concerns
level of consumption and the The determination of lifeline
rate shall be determined by the beneficiaries is based on the
ERC after due notice and consumption level of electricity
hearing consumers which raises questions to
whether these are real marginalized
sector.
The provision of Lifeline Rate shall
be applied to all Marginalized End-
users of all Distribution Utilities
pursuant to the Act. It is the
responsibility of the ERC to monitor
compliance to specific guidelines it
shall issue pursuant to the
implementation of Lifeline Rate.
Section 3. Application.
(a) The Lifeline Rate shall be
subsidy removal
under the Act for a period of ten
(10) years, unless extended by
law.
(b) Each Distribution Utility shall
file a petition with the ERC
recommending the level of
consumption (kWh per month)
to be qualified for the Lifeline
Rate.
(c)The ERC shall determine and
approve different levels of
consumption and cross-subsidy
support for each Distribution
Utility or classification of
PART IV - PRIVATIZATION OF
NATIONAL POWER
CORPORATION
RULE 21. POWER SECTOR
ASSETS AND LIABILITIES
MANAGEMENT CORPORATION
(PSALM)
Section 1. Creation of PSALM. Section 49. Creation of Power
Sector Assets and Liabilities
Management Corporation.
Pursuant to Section 49 of the Act, - There is hereby created a
a government-owned and
government-owned and
-controlled corporation known as -controlled corporation to be
the “Power Sector Assets and known as the “Power Sector
Liabilities Management Assets and Liabilities
Corporation”, hereinafter referred toManagement Corporation”,
as the “PSALM Corp.” or “PSALM,” hereinafter referred to as the
was created to take ownership of all “PSALM Corp.”, which shall take
existing NPC generation assets, ownership of all existing NPC
liabilities, IPP contracts, real estate
and all other disposable assets. All contracts, real estate and all
outstanding obligations of the NPC other disposable assets. All
arising from loans, issuances of outstanding obligations of the
bonds, securities and other
NPC arising from loans,
instruments of indebtedness shall issuances of bonds, securities
be assumed by the PSALM, within and other instruments of
one hundred eighty (180) days from indebtedness shall be
the approval of the Act. NPC and transferred to and assumed by
PSALM shall take such measures the PSALM Corp. within one
and execute such documents to hundred eighty (180) days from
effect the transfer of the ownership the approval of this Act.
and possession of all the assets,
rights,
privileges, and liabilities required
by the Act to be transferred by
NPC to
PSALM.
Section 2. Purpose and Objective. Section 50. Purpose and
Objective, Domicile and Term
of Existence. -
The principal purpose of the The principal purpose of the [PSALM]
PSALM is to manage the orderly PSALM Corp. is to manage the Clarity of financial obligations
sale, disposition, and Privatization of orderly sale, disposition, and definition
NPC generation assets, real estate privatization of NPC generation The proposed revision intends to
and other disposable assets, and assets, real estate and other clearly define NPC’s financial
IPP contracts with the objective of disposable assets, and IPP obligations
managing and liquidating all NPC contracts with the objective of
financial obligations and stranded liquidating all NPC financial
contract costs in an optimal manner. obligations and stranded
contract costs in an optimal
manner.
Section 3. Domicile.
The PSALM shall have its principal Section 50
office and place of business within
Metro Manila. The PSALM Corp. shall have its
principal office and place of
business within Metro Manila.
Section 4. Term of Existence.
Unless otherwise provided by law, Section 50 [NPC]
PSALM shall exist for a period of By 2026, the administration of the
twentyfive (25) years from the The PSALM Corp. shall exist for Universal Charge for Missionary
effectivity of the Act, and all assets a period of twenty five (25) years Electrification (UCME) and
held by it, all moneys and from the effectivity of this Act, Environmental Levy (UCEC)
properties belonging to it, and all unless otherwise provided by should be transferred from
its liabilities outstanding upon the law, and all assets held by it, all PSALM to NPC due to following
expiration of its term of existence moneys and properties reasons:
shall revert to and be assumed by belonging to it, and all its  PSALM’s life is 25 years from
the National Government. Upon liabilities outstanding upon the effectivity of EPIRA.
expiration of the term of PSALM, expiration of its term of existence  NPC-SPUG is the petitioner
the administration of the STF shall shall revert to and be assumed of the above mentioned
be transferred to the DOF or any of by the National Government. UCME and UCEC
the DOF attached agencies as  Remittance should be directly
designated by the DOF Secretary. made to NPC-SPUG by
electric cooperatives and
NGCP. Existing remittance
process is considered
another bureaucratic layer.
 Monitoring and auditing of
the UCME utilization should
now be done directly by
ERC.
PSALM should only be the
Administrator of the UCSC and
UCSD in line with its mandate
under the EPIRA Law as liquidator
of NPC generating assets and all
its liabilities
Section 5. Powers. Section 51. Powers.
PSALM shall, in the performance of The Corporation shall, in the
its functions and for the attainment performance of its functions and
of its objectives, have the following for the attainment of its
powers: objective, have the following
powers:
(a) To formulate and implement a (a) To formulate and implement
program for the sale and a program for the sale and
Privatization privatization of the NPC assets
of the NPC assets and IPP and
contracts and the management and IPP contracts and the liquidation
liquidation of Stranded Debts and of NPC debts and stranded
Stranded Contract Costs of NPC, contract costs, such liquidation
such liquidation to be completed to be completed within the term
within the term of existence of the of existence of the PSALM
PSALM; Corp.;
(b) To take title to and possession (b) To take title to and
of, administer and conserve the possession of, administer and
assets conserve the assets transferred
transferred to it, including the to it; to sell or dispose of the
execution of bilateral contracts to same at such price and under
sell power from undisposed assets such terms and conditions as it
and contracts transferred by NPC; may deem necessary or proper,
subject to applicable laws, rules
and regulations;
(c) To sell or dispose the transferred (b) To take title to and
assets at such price and under such possession of, administer and
terms and conditions as it may conserve the assets transferred
deem necessary or proper, subject to it; to sell or dispose of the
to applicable laws, rules and same at such price and under
regulations; such terms and conditions as it
may deem necessary or proper,
subject to applicable laws, rules
and regulations;
(d) To take title to and possession (c) To take title to and
of, and assume all rights and possession of the NPC IPP
obligations of NPC under IPP contracts and to appoint, after
contracts, and to appoint, after public bidding in transparent and
public bidding in a transparent and open manner, qualified
open manner, qualified independent entities who shall
independent act as the IPP Administrators in
entities who shall act as IPP accordance with this Act;
Administrators in accordance with
the
Act;
(e) To calculate the amount of the (d) To calculate the amount of
Stranded Debts and Stranded the stranded debts and stranded
Contract Costs of NPC which shall contract costs of NPC which
form part of the basis of the ERC shall form the basis for ERC in
in the determination of the Universal the determination of the
Charge; universal charge;
(f) To liquidate Stranded Contract (e) To liquidate the NPC
Costs of NPC utilizing proceeds stranded contract costs utilizing
from appropriations, sales and proceeds from sales and other
other property contributed to it, property
including contributed to it, including
the proceeds from the Universal the proceeds from the universal
Charge; charge;
(g) To adopt rules and regulations (f) To adopt rules and
as may be necessary or proper for regulations as may be necessary
the orderly conduct of its business or or proper for the orderly conduct
operations; of its business or operations;
(h) To sue and be sued in its name; (g) To sue and be sued in its
name;
(i) To appoint or hire, transfer, (h) To appoint or hire, transfer,
remove and fix the compensation of remove and fix the
its personnel and such advisors or compensation of its personnel:
other Persons as may be necessary Provided, however, That the
in the sale, Privatization and Corporation shall hire its own
disposition of NPC assets and IPP personnel only if absolutely
contracts: Provided, however, necessary, and as far as
That PSALM shall hire its own practicable, shall avail itself of
personnel only if absolutely the services of personnel
necessary, and as far as detailed from other government
practicable, shall avail itself of the agencies;
services of personnel detailed from
other government
agencies;
(j) To own, hold, acquire, or lease (i) To own, hold, acquire, or
real and personal properties as may lease real and personal
be necessary or required in the properties as may be necessary
discharge of its functions; or required in
the discharge of its functions;
(k) To borrow money and incur (j) To borrow money and incur
such liabilities, as may be required such liabilities, including the
to service all obligations transferred issuance of bonds, securities or
from NPC and loans from ECs other evidences of indebtedness
assumed from NEA in accordance utilizing its assets as collateral
with the relevant Sections of these and/or through the guarantees of
Rules, including the issuance of the National Government:
bonds, securities or other evidence Provided, however, That all such
of indebtedness utilizing its assets debts or borrowings shall have
as collateral and/or through the been paid off before the end of
guarantees of the National its corporate life;
Government: Provided, That all such
debts or borrowings shall have been
paid off or settled before the end of
its
corporate life;
(l) To restructure existing loans of the (k) To restructure existing loans
NPC; of NPC;
(m) To collect, administer, and (l) To collect, administer, and
apply NPC’s portion of the Universal apply NPC’s portion of the
Charge; universal charge; and
(n) To issue other forms of financial
instruments such as warrants,
options, convertibles and to create
Special Purpose Vehicles (SPVs) to
maximize proceeds and value, as
well as efficiently manage its
liabilities;
(o) To structure the sale, (m) To restructure the sale,
Privatization or disposition of NPC privatization or disposition of
assets and IPP Contracts and/or NPC assets and IPP contracts
their energy output based on terms and/or their energy output based
and conditions which shall on such terms and conditions
optimize the value and sale prices which shall optimize the value
of said assets; and sale prices of said assets.
(p) To create and administer STFs
under Section 34 of the Act and
these Rules;
(q) To operate the generation [NPC]
assets, directly or through NPC, PSALM should not be considered
prior to Privatization of such assets. as Generation Company due to
Towards this end, while PSALM the following:
operates the generation assets, it
shall be considered a Generation  Principal purpose of creating
Company; PSALM Corp. under the Act is
to manage the orderly sale,
disposition and privatization
of NPC generating assets.
PSALM should not operate
NPC generating assets and
be a generation company
despite their transfer of
ownership to PSALM.
 Operation and maintenance

of the generation assets while
they are not yet privatized
should continue to be under
NPC’s responsibility
notwithstanding that
ownership has been
transferred to PSALM. This is
why only net profit was
required to be remitted to
PSALM under Section 55 of
the Act.
 NPC/PSALM O&M
Agreement should allow full
transfer of PS and MOOE to
provide NPC the opportunity
to immediately and timely
address operations and
maintenance concerns of
NPC generating assets and
disposable facilities, thus,
ensuring DOE’s mandate on
energy security.
(r) To mitigate its potential stranded
costs by making reasonable best
efforts to reduce the cost of existing
contracts with IPPs;
(s) To ensure that SPUG conduct
proper monitoring, accounting and
control of expenditures, and efficient
utilization of the missionary
electrification funds from the
Universal Charge; and
(t) To do any act necessary or
proper to carry out the purpose for
which it was created, including the
formation of one or more
subsidiaries to maximize
Privatization proceeds, enter into
compromise agreements, or take
such other acts as may be
determined by the PSALM Board to
be necessary, useful, incidental or
auxiliary to accomplish its purposes
and objectives as specified in the
Act.
Section 6. PSALM Board of Section 52. Power Sector
Directors. Assets and Liabilities
Management Corporation,
Meetings, Quorum and Voting.
-
PSALM shall be administered, and The Corporation shall be
its powers and functions exercised, administered, and its powers
by a Board of Directors which shall and functions exercised, by a
be composed of the Secretary of the Board of Directors which shall be
DOF as the Chairman, and the composed of the Secretary of
Secretary of the DOE, the Secretary Finance as the Chairman, the
of the DBM, the Director-General of Secretary of Budget and
the NEDA, the Secretary of the DOJ, Management, the Secretary of
the Secretary of the DTI and the the Department of Energy, the
President of the PSALM as ex-officio Director-General of the National
members thereof. Economic and Development
Authority, the Secretary of the
Department of Justice, the
Secretary of the Department of
Trade and Industry and the
President of the PSALM Corp.
as ex officio members thereof.
Section 7. Powers of PSALM
Board.
All the powers and functions of
PSALM shall be vested in and
exercised by its Board of Directors.
Section 8. PSALM Board Meetings Section 52. Power Sector
and Quorum. Assets and Liabilities
Management Corporation,
Meetings, Quorum and Voting.
The Board of Directors shall meet The Board of Directors shall
regularly and as frequently as may meet regularly and as frequently
be necessary to enable it to as may be necessary to enable it
discharge its functions and to discharge its functions and
responsibilities. The presence at a responsibilities. The presence at
meeting of four (4) members shall a meeting of four (4) members
constitute a quorum, and the shall constitute a quorum, and
decision of the majority of three (3) the decision of the majority of
members present at a meeting three (3) members present at a
where there is quorum shall be the meeting where there is quorum
decision of the Board of Directors. shall be the decision of the
Board of Directors.
Section 9. Powers of the PSALM Section 53. Powers of the
President. President of PSALM Corp. - The
President of PSALM Corp. shall
be appointed by the President of
the Philippines. In the absence
of the Chairman, the President
shall preside over Board
meetings.
The PSALM Corp. President

shall be the Chief Executive
Officer of PSALM Corp. and
shall have the following powers
and duties:
(a) The President of PSALM shall The President of PSALM Corp.
be appointed by the President of shall be appointed by the
the Philippines. In the absence of President of the Philippines. In
the Chairman and the Vice- the absence of the Chairman,
Chairman, the PSALM President the President shall preside over
shall preside over Board meetings. Board meetings.
(b) The PSALM President shall be The PSALM Corp. President

the Chief Executive Officer of shall be the Chief Executive
PSALM and shall have the following Officer of PSALM Corp. and
powers and duties: shall have the following powers
and duties:
(i) To execute and administer the (a) To execute and administer
policies and measures approved by the policies and measures
the Board, and take responsibility approved by the Board, and take
for the efficient discharge of responsibility for the efficient
management functions; discharge of management
functions;
(ii) To oversee the preparation of the (b) To oversee the preparation of
budget of PSALM; the budget of PSALM Corp.;
(iii) To direct and supervise the (c) To direct and supervise the
operation and internal operation and internal
administration of PSALM and, for administration of PSALM Corp.
this purpose, may delegate some or and, for this purpose, may
any of his administrative delegate some or any of his
responsibilities and duties to other administrative responsibilities
officers of the PSALM; and duties to other officers of
PSALM Corp;
(iv) Subject to the guidelines and (d) Subject to the guidelines and
policies set up by the Board, to policies set up by the Board, to
appoint and fix the number and appoint and fix the number and
compensation of subordinate compensation of subordinate
officials and employees of the officials and employees of
PSALM; and for cause, to remove, PSALM Corp; and for cause, to
suspend, or otherwise discipline remove, suspend, or otherwise
any subordinate employee of discipline any subordinate
PSALM; employee of PSALM Corp;
(v) To submit an annual report to (e) To submit an annual report to
the Board on the activities and the Board on the activities and
achievements of PSALM at the achievements of PSALM Corp.
close of each fiscal year and upon at
approval thereof, submit a copy to the close of each fiscal year and
the President of the Philippines upon approval thereof, submit a
and to such other agencies as may copy to the President of the
be required by law and under these Philippines and to such other
Rules; agencies as may be required by
law;
(vi) To represent PSALM in all (f) To represent PSALM Corp. in
dealings and transactions with other all dealings and transactions
offices, agencies and with other offices, agencies, and
instrumentalities of the National instrumentalities of the
Government and with all Persons Government and with all persons
and other entities, private or public, and other entities, private or
domestic or foreign; and public, domestic or
foreign; and
(vii) To exercise such other powers (g) To exercise such other
and duties as may be vested in him powers and duties as may be
by the Board from time to time. vested in him by the Board from
time to time.
Section 10. Exemption from the Section 54. Exemption from
Salary Standardization Law. the Salary Standardization
Law.
The salaries and benefits of The salaries and benefits of
employees in the PSALM shall be employees in the PSALM Corp.
exempt from Republic Act No. 6758 shall be exempt from Republic
and shall be fixed by the PSALM Act No. 6758 and shall be fixed
Board. by the PSALM Corp. Board.
Section 11. Property of PSALM. Section 55. Property of the
PSALM Corp.
The following funds, assets, The following funds, assets,
contributions and other properties contributions and other property
shall constitute the property of the shall constitute the property of
PSALM: the PSALM Corp.:
(a) The generation assets, real (a) The generation assets, real
estate, IPP Contracts, other estate, IPP contracts, other
disposable assets of NPC, disposable assets of NPC,
proceeds from the operation or proceeds
disposition of such assets and the from the sale or disposition of
residual assets from BOT, ROT, such assets and the residual
and other variations assets from B-O-T, R-O-T, and
thereof. The proceeds from the other variations thereof;
operation and disposition of NPC
assets shall include:
(i) Net profit of NPC; (e) Net profit of NPC;
(ii) Earning before interest, (f) Net profit of TRANSCO;
taxes, depreciation and
amortization of the
Pulangui and Agus
Complexes;
(iii) Net profit of TRANSCO;
(iv) Proceeds from the
disposition and
Privatization of PSALM’s
generation, other
disposable assets, and
TRANSCO, net of all
transaction costs and fees
associated with such
disposition and
Privatization; and
(v) Net profit arising from the
administration of IPPs.
(b) Transfers from the National (b) Transfers from the National
Government; Government;
(c) Proceeds from loans incurred to (c) Proceeds from loans incurred
restructure or refinance NPC’s to restructure or refinance NPC’s
transferred liabilities: Provided, That transferred liabilities: Provided,
all borrowings shall be fully paid for however, That all borrowings
or settled by the end of the life of the shall be fully paid for by the end
PSALM; of the life of the PSALM Corp.;
(d) Proceeds from the Universal (d) Proceeds from the universal
Charge allocated for Stranded charge allocated for stranded
Debts and Stranded Contract Costs contract costs and the stranded
of NPC; debts of NPC;
(e) Official assistance, grants and (g) Official assistance, grants,
donations from external sources; and donations from external
sources; and
(f) Repayment by ECs of such ECs
loans assumed by PSALM. Such
repayments must be made within
five (5) years from such assumption
of loans by PSALM by ECs who
have transferred ownership or
Control of its assets, franchise or
operations pursuant to Section 60
of the
Act;
(g) Proceeds from insurance claims
corresponding to assets transferred
to PSALM by NPC; and
(h) Other sources of funds as may be (h) Other sources of funds as
determined by PSALM necessary for may be determined by PSALM
the above-mentioned purposes. Corp. necessary for the above-
mentioned purposes.
Section 12. Claims Against Section 56. Claims Against the
PSALM. PSALM Corp.
The following shall constitute the - The following shall constitute
claims against PSALM: the claims against the PSALM
(a) NPC liabilities transferred to Corp.:
PSALM; (b) Transfers from the (a) NPC liabilities transferred to
National Government; the PSALM Corp.;
(c) New loans, such as, but not (b) Transfers from the national
limited to those in the form of government;
bonds, convertible instruments, (c) New loans; and
warrants, leases and similar (d) NPC stranded contract costs.
structures;
(d) Obligations under IPP contracts
transferred by NPC to PSALM;
(e) Loans of ECs that are to be
assumed by PSALM under
Section 60 of the Act; and
(f) Expenses for rehabilitation and
maintenance of Agus and
Pulangi Complexes.
[PSALM] Beneficiary to the UC fund for
Missionary
Electrification.
(NEW PROVISION)
Clarification on the coverage of
Section 13. Dividend Section 70 of the EPIRA
Declaration pursuant to regarding the beneficiaries of the
Republic Act No. 7656 UC-ME fund should be made.
This is to ascertain whether the
PSALM Corp. shall be exempt from NPC-SPUG is the exclusive
Republic Act No. 7656 on the beneficiary of the UC- ME fund or
declaration and remittance of beneficiaries can be any entity
dividends to the national that performs missionary
government, consistent with electrification function in the
Sections 34 and 50 of the EPIRA missionary areas not connected
wherein the UC-SCC and UC-SD to the transmission system within
funds shall only be used for the franchised distribution
their intended purposes and utilities, as determined by the
that earnings from sale/disposal/ DOE.
privatization of generation assets,
To further clarify, the provision
IPP contracts, dividends/net profit
should be specific as to who are
of Transco remitted to PSALM are
required to file a petition before
earmarked specifically and the ERC to avail of the UC-ME.
exclusively for the optimal
liquidation of NPC financial To date, only NPC-SPUG files a
obligations and stranded contract petition and avails from the UC-
costs, and may only be disbursed ME fund.
for the claims/liabilities
enumerated in Section 56 of the Clarification on the following may
EPIRA. be made:
a) Whether NPC-SPUG is the
exclusive beneficiary of the UC-
ME fund, or beneficiaries include
missionary areas not connected
to the transmission system within
the franchised distribution
utilities; and
b) The personality of the
petitioner who shall file/avail from
the UC-ME fund.
PSALM agrees that the MEDP

prepared by DOE as part of its
policy formulation function,
should serve as the basis of
ERC’s determination of UC-ME.
However, clarification must be

made whether DOE is
contemplating that big ticket
projects in missionary areas that
require NEDA’s approval, should
be funded by the UC-ME. If yes,
the proposed amendment should
be introduced with caution as it
may substantially increase the
subsidy (UC-ME) that will be
borne by the end-users
nationwide.
It should also be clarified whether

in addition to the policy
formulation and oversight
function of DOE, it will include in
the proposed amendment to
Section 37 of the program
implementation, which is part of
NPC-SPUG and DUs’ operations.
RULE 22. NATIONAL
TRANSMISSION CORPORATION
(TRANSCO)
Section 1. Creation of TRANSCO. Section 8. Creation of the
National Transmission
Company.-
Pursuant to Section 8 of the Act, There is hereby created a
TRANSCO, which shall be wholly National Transmission
owned by PSALM, has been Corporation, hereinafter referred
created to assume the transmission to as TRANSCO, which shall
facilities of NPC, all other assets assume the electrical
related to transmission operations, transmission function of the
including nationwide franchise of National Power Corporation
NPC for the operation of the (NPC), and have the powers and
transmission system and the Grid, functions hereinafter granted.
and to assume the electrical The TRANSCO shall assume
transmission functions of the NPC, the authority and responsibility of
including among others, the NPC for the planning,
planning, construction and construction and centralized
centralized Grid operation and operation and maintenance of its
maintenance of high voltage high voltage transmission
transmission facilities, Grid facilities, including grid
interconnections, ancillary and other interconnections and ancillary
allied facilities. Pursuant to and in services.
accordance with the requirements
of the Act, NPC, PSALM and Within six (6) months from the
TRANSCO shall take such effectivity of this Act, the
measures and execute such transmission and sub-
documents to effect the transfer of transmission facilities of NPC
the ownership and possession of and all other assets related to
the transmission and transmission operations,
subtransmission facilities of NPC including the nationwide
and all other assets related to franchise of NPC for the
transmission operations. Upon operation of the transmission
such transfer, the nationwide system and the grid, shall be
franchise of NPC for the operation transferred to the TRANSCO.
of the transmission system and the The TRANSCO shall be wholly
Grid shall transfer from NPC to owned by the Power Sector
TRANSCO. Assets and Liabilities
Management Corporation
(PSALM Corp.)
Ownership and Management.
(a) For the purpose of Section 1 of
this Rule, “all other assets” related
to
transmission and subtransmission
facilities shall include, but not be
limited, to the following:
(i) System operations facilities
such as telecommunications
and Supervisory Control and
Data Acquisition (SCADA)
systems including offices and
laboratory buildings housing
these equipment; and
(ii)TRANSCO offices and real
estate properties, vehicles,
laboratory
and test equipment, spare
parts and other physical
structures.
(b) The assets of NPC related to the Sc. 8
transmission/subtransmission
function shall be transferred by Within six (6) months from the
NPC directly to TRANSCO on or effectivity of this Act, the
before 26 December 2001. transmission and
subtransmission facilities of NPC
and all other assets related to
transmission operations,
including the nationwide
franchise of NPC for the
operation of the transmission
system and the grid, shall be
transferred to the TRANSCO.
Section 8
All transmission and
subtransmission related liabilities
of NPC shall be transferred to
and assumed by the PSALM
Corp.
(c) Subtransmission Assets The subtransmission functions
transferred to TRANSCO shall be and assets shall be segregated
operated and maintained by from the transmission functions,
TRANSCO or its Buyer or assets and liabilities for
Concessionaire, until their disposal transparency and disposal:
to Qualified Distribution Utilities. Provided, That the
subtransmission assets shall be
operated and maintained by
TRANSCO until their disposal to
qualified distribution utilities
which are in a position to take
over the responsibility for
upgrading, and expanding said
assets.
Section 3. Corporate Powers of Section 10. Corporate Powers
the TRANSCO. of the TRANSCO
As a corporate entity, TRANSCO As a corporate entity, TRANSCO
shall have the following corporate shall have the following
powers: corporate powers:
(a) To have continuous succession (a) To have continuous
under its corporate name until succession under its corporate
otherwise provided by law; name until otherwise provided by
law;
(b) To adopt and use a corporate (b) To adopt and use a corporate
seal and to change, alter or modify seal and to change, alter or
the same, if necessary; modify the same, if necessary;
(c) To sue and be sued; (c) To sue and be sued;
(d) To enter into contracts, leases (d) To enter into a contract and
and execute any instrument execute any instrument
necessary or convenient for the necessary or convenient for the
purpose for which it is created; purpose for which it is created;
(e) To borrow funds from any (e) To borrow funds from any
source, whether private or public, source, whether private or
foreign or domestic, and issue public, foreign or domestic, and
bonds and other evidence of issue bonds and other evidence
indebtedness: Provided, That in the of indebtedness: Provided. That
case of the bond issues, it shall be in the case of the bond issues, it
subject to the shall be subject to the approval
approval of the President of the of the President of the
Philippines upon recommendation Philippines upon
of the Secretary of Finance: recommendation of the
Provided, further, That foreign loans Secretary of Finance: Provided,
shall be obtained in accordance further, That foreign loans shall
with existing laws, rules and be obtained in
regulations of the Bangko Sentral ng accordance with existing
Pilipinas (BSP); laws, rules and regulations of the
Bangko Sentral ng Pilipinas;
(f) To pledge, grant a security
interest in or otherwise encumber
its assets;
(g) To maintain a provident fund (f) To maintain a provident fund
which consists of contributions made which consists of contributions
by both the TRANSCO and its made by both the TRANSCO
officials and employees and their and its officials and employees
earnings for the payment of and their earnings for the
benefits to such officials and payment of benefits to such
employees or their heirs under such officials and employees or their
terms and conditions as it may heirs under such terms and
prescribe; conditions as it may prescribe;
(h) To create subsidiaries for

purposes such as the disposition of
Subtransmission Assets to Qualified
Distribution Utilities and the
operation thereof prior to disposal;
(i) To do any act necessary or (g) To do any act necessary or
proper to carry out the purpose for proper to carry out the purpose
which it is created, or any act which,
for which it is created, or which,
from time to time, may be declared from time to time, may be
by the TRANSCO Board as declared by the TRANSCO
necessary, useful, incidental or Board as necessary, useful,
auxiliary to accomplish its purposesincidental or auxilliary to
and objectives; accomplish its purposes and
objectives; and,
(j) Generally, to exercise all the (h) Generally, to exercise all the
powers of a corporation under the powers of a corporation under
Corporation Code insofar as they the corporation law insofar as
are not inconsistent with the Act; they are not inconsistent with
and this Act.
(k) The TRANSCO may exercise the
power of eminent domain on behalf
of itself, the Buyer or
Concessionaire or any successor-
in-interest thereto, subject to the
requirements of the Constitution
and other laws. Except as provided
in the Act, no Person, company or
entity other than TRANSCO shall
own any transmission facilities.
Section 4. TRANSCO Board of Section 11. TRANSCO Board
Directors. of Directors. -
All the powers of the TRANSCO All the powers of the TRANSCO [PSALM] Need for PSALM representation
shall be vested in and exercised by shall be vested in and exercised All the powers of the TRANSCO in the TransCo Board
a Board of Directors. The Board by a Board of Directors. The shall be vested in and exercised
shall be composed of a Chairman Board shall be composed of a by a Board of Directors. The As owner of TRANSCO, PSALM
and six (6) members. The Chairman and six (6) members. Board shall be composed of a is entitled to a seat in the
Secretary of the DOF shall be the The Secretary of the Department Chairman and six (6) members. TRANSCO Board as explicitly
ex-officio Chairman of the Board. of Finance (DOF) shall be the ex The Secretary of the DOF shall stated in the IRR.
The other members of the officio Chairman of the Board.
be the ex-officio Chairman of the
TRANSCO Board shall include The other members of the
Board. The other members of the Currently, PSALM PCEO does not
the Secretary of the DOE, the TRANSCO Board shall include
TRANSCO Board shall include have a seat in the TRANSCO
Secretary of the DENR, the the Secretary of the Department
the Secretary of the DOE, the Board.
President of TRANSCO, and three of Energy (DOE), the Secretary
(3) members to be appointed by the of the Department of Secretary of DENR, the
President of the Philippines, each Environment and Natural President of TRANSCO, the
representing Luzon, Visayas and Resources (DENR), the President and CEO of PSALM
Mindanao, one of whom shall be the President of TRANSCO, and which will represent Luzon, and
President of PSALM. The members three (3) members to be two (2) members to be appointed
of the Board so appointed by the appointed by the President, each by the President of the
President of the Philippines representing Luzon, Visayas and Philippines, each representing
shall serve for a term of six (6) Mindanao. Visayas and Mindanao. All the
years, except that any Person powers of the TRANSCO shall be
appointed to fill-in a vacancy shall vested in and exercised by a
serve only the unexpired term of Board of Directors. The Board
his/her predecessor
shall be composed of a
in office. All members of the Board
Chairman and six (6) members.
shall be professionals of
The Secretary of the DOF shall
recognized competence and
expertise in the fields of be the ex-officio Chairman of the
engineering, finance, economics, Board. The other members of
law or business management. No the TRANSCO Board shall
member of the Board or any of include the Secretary of the DOE,
his the Secretary of DENR, the
relatives within the fourth civil degree President of TRANSCO, the
of consanguinity or affinity, legitimate President and CEO of PSALM
or common law, shall have any which will represent Luzon, and
interest, either as investor, officer two (2) members to be
or appointed by the President of
director, in any Generation the Philippines, each
Company or Distribution Utility or representing Visayas and
other entity engaged in Mindanao.
transmitting, generating and
ERC.
Section 5. Powers and Duties of Section 12. Powers and Duties
the Board. of the Board. -
The following are the powers of the The following are the powers of
Board: the Board:
(a) To provide strategic direction for (a) To provide strategic direction
TRANSCO, and formulate medium for TRANSCO, and formulate
and long-term strategies pursuant medium and long-term strategies
to the vision, mission and pursuant to the vision, mission,
objectives of TRANSCO; and objectives of TRANSCO;
(b) To develop and adopt policies (b) To develop and adopt
and measures for the efficient and policies and measures for the
effective management and efficient and effective
operation of TRANSCO, including management and operation of
the formation of one or more TRANSCO;
subsidiaries;
(c) To organize, re-organize, and (c) To organize, re-organize, and
determine the organizational
determine the organizational
structure and staffing pattern of structure and staffing patterns of
TRANSCO; abolish and create TRANSCO; abolish and create
offices and positions; fix the offices and positions; fix the
number of its officers and number of its officers and
employees; transfer and re-align employees; transfer and re-align
such officers and personnel; and fix such officers and personnel; fix
their compensation, allowance, and their compensation, allowance,
benefits; and benefits;
(d) To fix the compensation of the (d) To fix the compensation of
President of TRANSCO and to the President of TRANSCO and
appoint and fix the compensation of to appoint and fix the
other corporate officers; compensation of other corporate
officers;
(e) For cause, to suspend or (e) For cause, to suspend or
remove any corporate officer remove any corporate officer
appointed by the Board; appointed by the Board;
(f) To adopt and set guidelines for (f) To adopt and set guidelines
the employment of personnel on the for the employment of personnel
basis of merit, technical competence on the basis of merit, technical
and moral character; competence, and moral
character; and
(g) Any provision of the law to the (g) Any provisions of the law to
contrary notwithstanding, to write-off the contrary notwithstanding, to
bad debts; and write-off bad debts.
(h) Other powers not inconsistent
with the Act.
Section 6. Board Meetings. Section 13. Board Meetings. -
The Board shall meet as often as The Board shall meet as often
may be necessary upon the call of as may be necessary upon the
the Chairman of the Board, or in call of the Chairman of the Board
his absence, the Vice-Chairman, or by a majority of the Board
or in the latter’s absence, by a members.
majority of the Board members.
Section 7. Board Per Diems and Section 14. Board Per Diems
Allowances. and Allowances. -
The members of the Board shall The members of the Board shall
receive a per diem for each receive per diem for each
regular or special meeting of the regular or special meeting of the
Board actually attended by them board actually attended by them,
and, upon approval of the and, upon approval of the
Secretary of the DOF, such other Secretary of the Department of
allowances as the Board may Finance, such other allowances
prescribe. as the Board may prescribe.
Section 8. Quorum. Section 15. Quorum. -
The presence of at least four (4) The presence of at least four (4)
members of the Board shall members of the Board shall
constitute a quorum, which shall be constitute a quorum, which shall
necessary for the transaction of any be necessary for the transaction
business. The affirmative vote of a of any business. The affirmative
majority of the members present in vote of a majority of the
a quorum shall be adequate for the members present in a quorum
approval of any resolution, decision shall be adequate for the
or order, except when the Board approval of any resolution,
shall otherwise agree that a greater decision or order, except when
vote is required. the Board shall otherwise agree
that a greater vote is required.
Section 9. Powers of the President Section 16. Powers of the

of TRANSCO. President of TRANSCO.
(a) So long as TRANSCO remains - The President of TRANSCO
wholly owned by PSALM, the shall be appointed by the
President of TRANSCO shall be President of the Philippines. In
appointed by the President of the absence of the Chairman,
the Philippines. the President shall preside over
In the absence of the Chairman board meetings
and Vice-Chairman, the
President of
TRANSCO shall preside over
Board meetings.
(b) The President of TRANSCO The President of TRANSCO
shall be the Chief Executive shall be the Chief Executive
Officer of TRANSCO and shall Officer of TRANSCO and shall
have the following powers and have the following powers and
duties: duties:
(i) To execute and administer the (a) To execute and administer
policies and measures the policies and measures
approved by the Board, approved by the Board, and
and take responsibility for take responsibility for the
the efficient discharge of efficient discharge of
management functions; management functions;
(ii) To oversee the preparation of (b) To oversee the preparation of
the budget of TRANSCO; the budget of TRANSCO;
(iii) To direct and supervise the (c) To direct and supervise the
operation and internal operation and internal
administration of administration of TRANSCO
TRANSCO and, for this and, for this purpose, may
purpose, may delegate delegate some or any of his
some or any of his administrative
administrative responsibilities and duties to
responsibilities and duties other officers of TRANSCO;
to other officers of
TRANSCO;
(iv) Subject to the guidelines (d) Subject to the guidelines and
and policies set up by the policies set up by the Board,
Board, to appoint and fix to appoint and fix the
the number and number and compensation
compensation of of subordinate officials and
subordinate officials and employees of TRANSCO;
employees of TRANSCO; and for cause, to remove,
and for cause, to remove, suspend, or otherwise
suspend or otherwise discipline any subordinate
discipline any subordinate employee of TRANSCO;
employee of TRANSCO;
(v) To submit an annual report to (e) To submit an annual report
the Board on the activities to the Board on the activities
and and achievements of
achievements of TRANSCO at the close of
TRANSCO at the close of each fiscal year and upon
each fiscal year and approval thereof, submit a
upon approval thereof, copy to the President of the
submit a copy to the Philippines and to such
President of the other agencies as may be
Philippines and to such required by law;
other agencies as may be
required by
law;
(vi) To represent TRANSCO in (f) To represent TRANSCO in all
all dealings and dealings and transactions
transactions with with other offices, agencies,
other offices, agencies, and instrumentalities of the
and instrumentalities of the Government and with all
National Government and persons and other entities,
with all Persons and other private or public, domestic
entities, private or public, or foreign; and
domestic or foreign; and
(vii) To exercise such other (g)
To exercise such other
powers and duties as may powers and duties as may
be vested in him by the be vested in him by the
Board from time to time. Board from time to time.
Section 10. Exemption from the Section 17. Exemption from
Salary Standardization Law. the Salary Standardization
Law. -
The salaries and benefits of The salaries and benefits of
employees in the TRANSCO shall employees in the TRANSCO
be exempt from Republic Act No. shall be exempt from Republic
6758 and shall be fixed by the Act. No. 6758 and shall be fixed
TRANSCO Board. by the TRANSCO Board.
Section 11. TRANSCO Section 21. TRANSCO
Privatization. Privatization.
(a) Within six (6) months from the - Within six (6) months from the
effectivity of the Act, the PSALM effectivity of this Act, the PSALM
shall submit a Privatization plan for Corp. shall submit a plan for the
endorsement by the Power endorsement by the Joint Power
Commission Commission and the approval of
and the approval of the President of the President of the Philippines.
the Philippines. The President of the The President of the Philippines
Philippines thereafter shall direct thereafter shall direct PSALM
PSALM to award, in open Corp. to award in open
competitive bidding, the competitive bidding, the
transmission facilities, including transmission facilities, including
grid interconnections and Ancillary grid interconnections and
Services to a qualified party either ancillary services to a qualified
through an outright sale, a party either through an outright
Concession Contract or any other sale or a concession contract.
means not inconsistent with the The buyer/concessionaire shall
objectives of the Act. The Buyer or be responsible for the
Concessionaire or any other improvement, expansion,
successor-in-interest to TRANSCO operation, and/or maintenance
shall be responsible for the of its transmission assets and
improvement, expansion, the operation of any related
operation or maintenance of the business. The award shall result
transmission assets and the in maximum present value of
operation of any related proceeds to the national
businesses. PSALM and TRANSCO government. In case a
shall secure a nationwide franchise concession contract is awarded,
for and in behalf of the Buyer or the concessionaire shall have a
Concessionaire. The award contract period of twenty-five
shall result in maximum present (25) years, subject to review and
value of proceeds to the National renewal for a maximum period of
Government. In case a Concession another twenty-five (25) years.
Contract is awarded, the
Concessionaire shall have a
contract period of twenty-five (25)
years, subject to review and
renewal for a maximum period of
another twenty-five (25) years.
Upon the expiration or termination
of the
Concession Contract, the
transmission facilities and assets,
including the nationwide franchise for
the operation of the transmission
system
and Grid shall revert to TRANSCO.
(b) In any case, the Buyer or In any case, the awardee shall
Concessionaire or any other comply with the Grid code and
successor-in- interest to TRANSCO the TDP as approved. The sale
shall comply with the Grid Code and agreement/concession contract
the TDP as approved. The sale shall include, but not limited to,
agreement/Concession Contract the provision for performance
shall include, but not be limited to, and financial guarantees or any
the provision for performance and other covenants which the
financial guarantees or any other national government may
covenants that the National require. Failure to comply with
Government may require. Failure to such obligations shall result in
comply with such obligations shall the imposition of appropriate
result in the imposition of appropriate sanctions or penalties by the
sanctions or penalties by the ERC. ERC.
(c) In case of joint The awardee shall be financially
venture/consortium with foreign and technically capable, with
members/participants of the Buyer proven domestic and./or
or Concessionaire or any other international experience and
successor-in-interest to TRANSCO, expertise as a leading
a foreign participant shall be transmission system operator.
financially and technically capable, Such experience must be with a
with proven domestic and/or transmission system of
international experience and comparable capacity and
expertise as a leading transmission coverage as the Philippines.
system operator. Such experience
must be in a transmission system of
comparable capacity and coverage
as the Philippines.
Section 12. Responsibilities of
Buyer or Concessionaire.
(a) This Rule shall apply to
Concessionaire or any
successor-in-interest thereto.
(b) The Buyer or Concessionaire or
any successor-in-interest
thereto, shall:
(i) Be responsible for the
improvement, expansion,
operation and/or
maintenance of the Grid;
(ii) Comply with the Grid Code
and the TDP as approved;
and
(iii) Comply with the key
performance targets and
standards set by ERC, in
terms of physical
transmission system and
the management of the
transmission activity.
(c) The performance indicators for
reliability, security, adequacy,
integrity and stability shall
include, but not limited to, the
following: (i) Number of
Interruption Events; (ii)
Sustained Average Interruption
Frequency Index; (iii)
Momentary Average Interruption
Frequency Index; (iv) Sustained
Average Interruption Duration
Index; (v) System Interruption
Severity Index; (vi) Frequency of
tripping per 100 ckt-km; (vii)
Average Forced Outage
Duration; (viii) Accumulated
Time Error; (ix) Frequency Limit
Violation; and (x) Voltage Limit
Violations.
Section 13. Privatization of Section 8 Creation of TransCo
Subtransmission.
(a) The subtransmission functions The subtransmission functions
and assets of TRANSCO shall be and assets shall be segregated
segregated from the transmission from the transmission functions,
functions, assets and liabilities for assets and liabilities for
transparency and disposal: transparency and disposal:
Provided, That the Subtransmission Provided, That the
Assets shall be operated and subtransmission assets shall be
maintained by TRANSCO or its operated and maintained by
Buyer or Concessionaire until their TRANSCO until their disposal to
disposal to Qualified Distribution qualified distribution utilities
Utilities which are in a position to which are in a position to take
take over the responsibility for over the responsibility for
operating, maintaining, upgrading, operating, maintaining,
and expanding said assets. All upgrading, and expanding said
transmission assets. All transmission and
and subtransmission related subtransmission related liabilities
liabilities of NPC shall be transferred of NPC shall be transferred to
to and assumed by the PSALM. and assumed by the
PSALM Corp.
(b) TRANSCO shall negotiate with TRANSCO shall negotiate with
and thereafter transfer such and thereafter transfer such
functions, assets, and associated functions, assets, and
liabilities to the Qualified Distribution associated liabilities to the
Utility or utilities connected to such qualified distribution utility or
subtransmission facilities not later utilities connected to such
than two (2) years from the effectivity subtransmission facilities not
of the Act or the start of Open later than two (2) years from the
Access, whichever comes earlier: effectivity of this Act or the start
Provided, That in the case of ECs, of open access, whichever
the TRANSCO shall grant comes earlier: Provided, That in
concessional financing over a the case of electric cooperatives,
period of twenty (20) years: the TRANSCO shall grant
Provided, however, That the concessional financing over a
installment payments to TRANSCO period of twenty (20) years:
for the acquisition of Provided, however, That the
subtransmission facilities shall be installment payments to
given first priority by the ECs out of TRANSCO for the acquisition of
the net income derived from such subtransmission facilities shall
facilities. The TRANSCO shall be given first priority by the
determine the disposal value of the electric cooperatives out of the
Subtransmission Assets based on net income derived from such
the revenue potential of such facilities. The TRANSCO shall
assets. In case of disagreement in determine the disposal value of
valuation, procedures, ownership the subtransmission assets
participation and other issues, the based on the revenue potential
ERC shall resolve such issues. of such assets.
(c) The take-over by a Distribution The take over by a distribution
Utility of any Subtransmission Asset utility of any subtransmission
asset shall not cause a
shall not cause a diminution of diminution of service and quality
service and quality to the End- to the end-users. Where there
users. Where there are two (2) or are two or more connected
more connected Distribution distribution utilities, the
Utilities, the consortium or juridical consortium or juridical entity
entity shall be formed by and shall be formed by and
composed of all of them and composed of all of them and
thereafter shall be granted a thereafter shall be granted a
franchise to operate the franchise to operate the
Subtransmission Assets by the ERC. subtransmission asset by the
The subscription rights of each ERC.
Distribution Utility involved shall be
proportionate to its load
requirements unless otherwise
agreed by such Distribution Utilities.
Aside from the PSALM, TRANSCO
and connected Distribution Utilities,
no third party shall be allowed
ownership or management
participation, in whole or in part, in
such subtransmission entity.
RULE 23. PRIVATIZATION OF THE Section 47. NPC Privatization.
ASSETS OF NPC -
Consistent with Section 47 of the Except for the assets of SPUG,
Act, the PSALM shall privatize the the generation assets, real
assets transferred to it from NPC estate, and other disposable
in accordance with these Rules. assets as well as IPP contracts
Within one hundred eighty (180) of NPC shall be privatized in
days from the effectivity of the Act, accordance with this Act. Within
PSALM shall submit a Privatization six (6) months from the
plan for the endorsement by the effectivity of this Act, the PSALM
Power Commission and the Corp shall submit a plan for the
approval of the President of the endorsement by the Joint
Philippines. This plan shall cover the Congressional Power
total Privatization of the transmission Commission and the approval of
and generation assets, real estate, the President of the Philippines,
and other disposable assets as on the total privatization of the
well as the existing IPP contracts generation assets, real estate,
of NPC, except for assets of SPUG. other disposable assets as well
Upon approval of the Privatization as existing IPP contracts of NPC
plan, PSALM shall implement the and thereafter, implement the
same. The participation by Filipino same, in accordance with the
citizens and corporations in the following guidelines, except as
purchase of NPC assets shall be provided for in Paragraph (f)
encouraged. herein:
Section 2. Scope of Privatization.
(a) NPC Generation, Generation-
Related, and Other Assets.
Except for the assets of
SPUG, NPC assets to be
privatized shall include:
(i) all generation assets and all
generation-related
machineries and
equipment;
(ii) all real estate and the
improvements made
thereto; and
(iii) disposable assets such as
facilities, properties,
equipment and other
assets not essential to the
operation of NPC.
To provide for an orderly disposition
of these assets, NPC shall provide
PSALM an inventory of all these
assets within one hundred and
twenty (120) days from the effectivity
of the Act.
(b) NPC Transmission,
Subtransmission,
Interconnection and Ancillary
Assets. The transmission,
subtransmission, interconnection
and ancillary assets of NPC, as
defined in Section 8 of the Act
and further detailed in Rule 6 on
Transmission Sector and Rule
22 on TRANSCO, shall be
transferred by NPC directly to
TRANSCO. For this purpose,
NPC shall submit a list of these
assets to PSALM and
TRANSCO within one hundred
and twenty (120) days from the
effectivity of the Act.
(c) IPP Contracts of NPC.
Consistent with Section 8 of
this Rule, IPP Contracts of
NPC shall refer to generation
capacities developed pursuant to
Republic Act No. 6957 (BOT
Law), as amended by Republic
Act No. 7718, and any such
generation asset whose
construction was not financed
by NPC but whose output is
bought by NPC under Purchase
Power Agreements (PPAs),
Energy Conversion Agreements
(ECAs) or any other similar
contractual relationship.
Section 3. Privatization Objectives.
The Privatization of the NPC assets [NPC]
intends to achieve the following
objectives: A. Section 47 (j) NPC
Privatization
 Section 47 (j) should be

clarified to exempt
generating assets and
other assets of NPC-
SPUG intended for its
function from the

provisions therein.
 requirements in
accordance with Section
70 until such time that
areas become viable for
private sector
privatization.
 Privatization of NPC-
SPUG generating assets
should only be made once
private sector privatization
of a particular missionary
area has been determined
viable.
 Meantime, NPC-SPUG
should be allowed to incur
obligations to borrow
loans and to enter into
bilateral contracts with
power suppliers for its
function. This will ensure
funding to timely
implement its missionary
electrification plans and to
accelerate privatization of
electricity supply in
missionary areas.
B. Section 3 and Section 4 (f) of
Rule 23 of IRR
 To ensure that price of

electricity in Mindanao will
stay at a reasonable level
while private sector
continue to invest in
additional capacities to
meet future demand,
privatization of Agus and
Pulangi should no longer
be pursued.
 Development of hydro
resources should be
retained by Government
not only to ensure cheap
and clean source of
electricity but also to serve
as buffer storage in case
of supply shortage and/or
as regulating reserve
provider for grid stability.
Moreover, the government
should consider nuclear
generation as means to
reduce electricity prices.
 Should privatization be
pursued, the Agus-Pulangi
complexes should first
undergo rehabilitation for
life extension and offered
thereafter for O&M
arrangement rather than
sale. This will ensure least
cost of electricity to
consumers in Mindanao
and may help stabilize
clearing prices in the
WESM.
 To better operate,
maintain and rehabilitate
the remaining undisposed
plants in a sustainable
manner, therefore,
management thereof
should be given to one
entity. Section 4(i)
prescribes that all assets
not sold after eight (8)
years after the effectivity
of EPIRA shall revert to
NPC.
(a) To ensure and accelerate the
total electrification of the
country;
(b) To ensure the quality, reliability,
security and affordability of the
supply of electric power;
(c) To ensure transparent and
reasonable prices of electricity
in a regime of free and fair
competition and full public
accountability to achieve
greater operational and
economic efficiency and
enhance the competitiveness of
Philippine products in the global
market;
(d) To enhance the inflow of private
capital and broaden the
ownership base of the power
generation, transmission and
distribution sectors;
(e) To ensure fair and non-
discriminatory treatment of
public and private sector
entities in the process of
Restructuring the electric power
industry;
(f) To protect the public interest as
it is affected by the rates and
services
of electric utilities and other
providers of electric power;
(g) To assure socially and
environmentally compatible
energy sources and
infrastructure;
(h) To promote the utilization of
indigenous and new and
Renewable
Energy Resources in power
generation in order to reduce
dependence
on imported energy; and
(i) To ensure consumer protection
and enhance the competitive
operation of the electricity
market.
Section 4. Privatization Guidelines. Section 47. NPC Privatization
(a) The Privatization value to the (a) The privatization value to the
National Government of the NPC National Government of the
generation assets, real estate, NPC generation assets, real
other disposable assets as well estate, other disposable
as IPP contracts shall be assets as well as IPP
optimized. contracts shall be optimized;
(b) The participation by Filipino (b) The participation by Filipino
citizens and corporations in the citizens and corporations in
purchase of NPC assets shall be the purchase of NPC assets
encouraged. Equity or similar shall be encouraged:
instruments of participation by
End-users or consumers must In the case of foreign
be explored exhaustively. In the investors, at least seventy-
case of foreign investors, at least five percent (75%) of the
seventy-five percent (75%) of the funds used to acquire NPC-
funds used to acquire NPC- generation assets and IPP
generation assets and IPP contracts shall be inwardly
contracts shall be inwardly remitted and registered with
remitted and registered with the the Bangko Sentral ng
(BSP). Pilipinas.
(c) The NPC plants and/or its IPP (c) The NPC plants and/or IPP
contracts assigned to IPP contracts assigned to IPP
Administrators, its related assets Administrators, its related
and assigned liabilities, if any, assets and assigned
shall liabilities, if any, shall be
be grouped in a manner which grouped in a manner which
shall promote the viability of shall promote the viability of
the the resulting generation
resulting Generation Companies, companies (gencos), ensure
ensure economic efficiency, economic efficiency,
encourage competition, foster encourage competition,
reasonable electricity rates and foster reasonable electricity
create market appeal to rates and create market
optimize returns to the appeal to optimize returns to
government from the sale and the government from the
disposition of such assets in a sale and disposition of such
manner consistent with the assets in a manner
objectives of the Act. In the consistent with the
grouping of the generation assets objectives of this Act. In the
and IPP contracts of NPC, the grouping of the generation
following criteria shall be assets and IPP contracts of
considered: NPC, the following criteria
shall be considered:
(i) A sufficient scale of 1) A sufficient scale of
operation and balance operations and balance
sheet strength to promote sheet strength to promote
the financial viability of the the financial viability of
restructured units; the restructured units;
(ii) Broad geographical 2) Broad geographical
groupings to ensure groupings to ensure
efficiency of operations but efficiency of operations
without the formation of but without the formation
regional companies or of regional companies or
consolidation of market consolidation of market
power; power;
(iii) Portfolio of plants and IPP 3) Portfolio of plants and
contracts to achieve IPP contracts to achieve
management and management and
operational synergy operational synergy
without dominating any without dominating any
part of the market or of the part of the market or of
load curve; and the load curve; and
(iv) Such other factors as may 4) Such other factors as
be deemed beneficial to may be deemed
the best beneficial to the best
interest of the National interest of the National
Government while Government while
ensuring attractiveness to ensuring attractiveness to
potential investors. potential investors.
(d) All assets of NPC shall be sold (d) All assets of NPC shall
in an open and transparent be sold in an open and
manner transparent manner through
through public bidding, and the public bidding, and the same
same shall apply to the shall apply to the disposition
disposition of of IPP contracts;
IPP contracts;
(e) In cases of transfer of (e) In cases of transfer of
possession, Control, operation or possession, control,
Privatization of multi-purpose operation or privatization of
hydro facilities, safeguards shall multi-purpose hydro facilities,
be prescribed to ensure that the safeguards shall be
National Government may direct prescribed to ensure that the
water usage in cases of shortage national government may
to protect potable water, direct water usage in cases of
irrigation, and all other shortage to protect potable
requirements imbued with water, irrigation, and all other
public interest. The rights of requirements imbued with
NPC over such multi-purpose public interest;
hydro facilities shall be transferred
to PSALM;
(f) The Agus and the Pulangui (f) The Agus and the Pulangui
complexes in Mindanao shall be complexes in Mindanao shall
excluded from among the be excluded from among the
Generation Companies that will generation companies that
be initially privatized. Their will be initially privatized.
ownership shall be transferred Their ownership shall be
to the PSALM and both shall transferred to the PSALM
continue to be operated by the Corp. and both shall continue
NPC. Said complexes may be to be operated by the NPC.
privatized not earlier than ten (10) Said complexes may be
years from the effectivity of the privatized not earlier than ten
Act, and, except for Agus III, (10) years from the effectivity
shall not be subject to BOT, of this Act, and except for
Build-Rehabilitate-Operate- Agus III, shall not be subject
Transfer (BROT) and other to Build-Operate-Transfer (B-
variations thereof pursuant to O-T), Build-Rehabilitate-
Republic Act. No. 6957 (BOT Operate-Transfer (B-R-O-T)
Law), as amended by Republic and other variations thereof
Act No. 7718. The Privatization pursuant to Republic Act No.
of Agus and Pulangui complexes 6957, as amended by
shall be left to the discretion of Republic Act No. 7718. The
PSALM in consultation with privatization of Agus and
Congress. PSALM, out of the Pulangui complexes shall
earnings in the operation of Agus be left to the discretion of
and Pulangui complexes, shall PSALM Corp. in consultation
ensure the availability of with Congress;
adequate funds intended for the
upkeep of facilities to include
funds for repairs, maintenance
and expansion of existing
facilities;
(g) The steamfield assets and (g)The steamfield assets and
generation plants of each generating plants of each
geothermal complex shall not be geothermal complex shall not
sold separately. They shall be be sold separately. They shall
combined andeach geothermal be combined and each
complex shall be sold as one geothermal complex shall be
package through public bidding. sold as one package through
The geothermal complexes public bidding. The
covered by this geothermal complexes
requirementinclude, but not covered by this requirement
limited to, Tiwi-Makban, Leyte A include, but are not limited to,
and B, Tongonan, Palinpinon, Tiwi-Makban, Leyte A and B
and Mt. Apo. (Tongonan), Palinpinon, and
Mt. Apo;
(h) The ownership of the Caliraya- (h) The ownership of the
Botokan-Kalayaan (CBK) pump Caliraya-Botokan-Kalayaan
storage (CBK) pump storage complex
complex shall be transferred to shall be transferred to the
PSALM and operated by NPC on PSALM Corporation;
behalf
of PSALM for a period of ten (10)
years.
(i) Not later than three (3) years (i) Not later than three (3) years
from the effectivity of the Act, from the effectivity of this Act,
and in no case later than the and in no case later than the
initial implementation of Open initial implementation of open
Access, at least seventy percent access, at least seventy
(70%) of the total capacity of percent (70%) of the total
generation assets of NPC and of capacity of generating assets
the total capacity of the power of NPC and of the total
plants under contract with NPC capacity of the power plants
located in Luzon and Visayas under contract with NPC
shall have been privatized: located in Luzon and Visayas
Provided, That any unsold shall have been privatized:
capacity shall be privatized not Provided, That any unsold
later than eight (8) capacity shall be privatized
years from the effectivity of the not later than eight (8) years
Act; from the effectivity of this Act;
and
(j) Except as otherwise provided in
these Rules, all appropriate
existing authorizations, licenses
and permits issued by the
National Government, including
its departments, bureaus and
agencies, and LGUs to NPC shall
automatically transfer to PSALM;
(k) NPC may generate and sell (j) NPC may generate and
electricity only from the sell electricity only from the
undisposed generation assets undisposed generating assets
and IPP contracts of PSALM and and IPP contracts of PSALM
shall not incur any new Corp. and shall not incur any
obligations to purchase power new obligations to purchase
through bilateral contracts with power through bilateral contracts
Generation Companies or other with generation companies or
Suppliers; and other suppliers.
(l) The sale, transfer or disposition
of NPC assets shall not affect
existing NPC contractual
obligations.
Section 5. Elements of the
Privatization Plan.
The Privatization plan for NPC
assets shall contain, among
others, the following principal
elements:
(a) Structure, sequence, timing and
terms of asset disposition; (b)
Employee issues; (c)
Management of debt obligations;
(d) Management of IPP
obligations, including
appointment of IPP
Administrators in accordance with
Section 51(c) of the Act; (e)
Options for the sale of other
assets; and (f) Overall timetable
and progress milestones.
Section 6. Privatization of
Hydroelectric Generation Plants.
(a) Consistent with Section 47(e) of Section 47
the Act and Section 4(f) of this
Rule, the Privatization of hydro (e) In cases of transfer of
facilities of NPC shall cover the possession, control, operation or
power component including privatization of multi-purpose
assignable long-term water hydro
rights agreements facilities, safeguards shall be
for the use of water, which shall prescribed to ensure that the
be passed onto and respected national government may direct
by the water usage in cases of
buyers of the hydroelectric power shortage to protect potable
plants. water, irrigation, and all other
requirements imbued with public
interest;
(b) The National Water Resources
Board (NWRB) shall ensure that
the allocation for irrigation, as
indicated by the NIA and
requirements for
domestic water supply as
provided for by the appropriate
Local Water
District(s) are recognized and
provided for in the water rights
agreements. NPC or PSALM
may also impose additional
conditions in
the shareholding agreement with
the winning bidders to ensure
national security, including, but
not limited to, the use of water
during drought or calamity.
(c) Consistent with Section 34(d) of Section 34
the Act, the NPC shall continue
to be responsible for watershed (d) An environmental charge
rehabilitation and management equivalent to one-fourth of one
and shall be entitled to the centavo per kilowatt-hour
environmental charge (P0.0025/kWh), which shall
equivalent to one-fourth of one accrue to an environmental fund
centavo per kilowatt-hour sales to be used solely for watershed
(P0.0025/kWh), which shall rehabilitation and management.
formpart of the Universal Charge. Said fund shall be managed by
This environmental fund shall be NPC under existing
used solely for watershed arrangements; and
rehabilitation and management
and shall be managed by NPC
under existing arrangements.
NPC shall submit an annual
report to the DOE detailing the
progress of the watershed
rehabilitation program.
(d) The NPC and PSALM or NIA, as [NPC]
the case may be, shall continue
to be responsible for the dam C. Section 6 (d) of Rule 23 of the
structure and all other IRR – Sustainability of the
appurtenant structures Dam Management of NPC
necessary for the safe and
reliable operation of the  The provision should read
hydropower plants. The NPC and “The NPC or NIA, as the
PSALM or NIA, as the case may case may be, shall
be, shall enter into an operations continue to be responsible
and maintenance agreement for the dam structure . . .
with the private operator of the Anyone of them shall
power plant to cover the dam enter into an operations
structure and all other and maintenance
appurtenant facilities. agreement with provision
for payment of fees by
existing private operator of
the power plants to cover
for expenses in managing
and operating the dam
structures and related
appurtenances.”
 Such payment of fees will
ensure the integrity of the
dam structures by making
available necessary funds
for inspection and timely
corrective action of
observed abnormalities.
As of today, NPC is dependent on

PSALM budget and funding. This
budget and funding requirement
should be established in the IRR
else, assumed continuously by
government.
Section 7. Undisposed Generation
Assets and IPP Contracts of NPC.
(a) NPC may generate and sell Section 47
electricity only from the
undisposed generation assets (j) NPC may generate and
and IPP contracts of PSALM; and sell electricity only from the
undisposed generating assets
and IPP contracts of PSALM
Corp. xxx
(b) NPC shall not incur any new Section 47
obligations to purchase power
through bilateral contracts with (j) xxx and shall not incur
Generation Companies or other any new obligations to purchase
Suppliers. power through bilateral contracts
with generation companies or
other suppliers.
Section 8. Privatization of IPP
Contracts Assumed by PSALM.
(a) The IPP contracts assumed by Section 47
PSALM shall be privatized taking
into consideration buy out (d) All assets of NPC shall
provisions, Government be sold in an open and
performance undertakings and transparent manner through
possible bilateral renegotiations public bidding, and the same
to minimize the liabilities of NPC shall apply to the disposition of
and the National Government. IPP contracts;
(b) Consistent with Section 75 of
the Act, with respect to IPP-
related contracts, nothing in
these Rules shall be construed
as:
(i) an implied waiver of any
right, action or claim,
against any Person or entity,
of NPC or the National
Government arising from or
relating to any such contracts;
or
(ii) a conferment of new or better
rights to creditors and IPP
contractors in addition to
subsisting rights granted by
the NPC or the National
Government under existing
contracts.
(c) PSALM shall ensure that the Section 47
Privatization of IPP contracts
assumed by it shall not cause an (a) The privatization value to the
increase in the stranded costs to National Government of the NPC
be absorbed generation assets, real estate,
by the National Government and other disposable assets as well
End-users. as IPP contracts shall be
optimized;
Section 9. Management and
Operation of Agus and
Pulangui Complexes.
The Agus and Pulangui complexes
shall be managed and operated by
NPC for PSALM as a separate
business unit, and shall have its
own organization and book of
accounts.
PART V - OTHER PROVISIONS
RULE 24. ELECTRIC POWER Section 71. Electric Power
CRISIS PROVISION Crisis Provision -
Upon the determination by the Upon the determination by the Enactment of Executive Order 30 S.
President of the Philippines of an President of the Philippines of an 2017, Creating the Energy
imminent shortage of the Supply of imminent shortage of the supply Investment Coordinating Council in
Electricity, Congress may of electricity, Congress may Order to Streamline the Regulatory
authorize, through a joint authorize, through a joint Procedures Affecting Energy
resolution, the establishment of resolution, the establishment of Projects. This ensures the effective
additional generation capacity under additional generating capacity and timely implementation of
such terms and conditions as it may under such terms and conditions projects to guarantee the immediate
approve. as it may approve. delivery of adequate and reliable
power supply.
The DOE issued DO No. DO2018-

04-0008 Operationalizing the
Procedures for the Effective and
Efficient Implementation of EO 30,
Creating the Energy Investment
Coordinating Council in Order to
Streamline the Regulatory
Procedures Affecting Energy
Projects
Issues and Concerns
Subjecting the additional capacity to

authorization of the Congress
leaves the government at the mercy
of heavy deliberation which may not
serve the need in an emergency
situation.
RULE 25. REVIEW OF IPP Section 68. Review of IPP
CONTRACTS Contracts -
An inter-agency committee chaired An inter-agency committee
by the Secretary of DOF, with the chaired by the Secretary of
Secretary of the DOJ and the Finance, with the Secretary of
Director General of the NEDA as the Department of Justice and
members thereof is hereby created the Director General of the
upon the effectivity of the Act. The National Economic Development
Committee shall immediately Authority as members thereof is
undertake a thorough review of all hereby created upon the
IPP Contracts. In cases where effectivity of this Act. The
such contracts are found to have Committee shall immediately
provisions which are grossly undertake a thorough review of
disadvantageous, or onerous to the all IPP contracts. In cases where
Government, the Committee shall, such contracts are found to have
cause the appropriate government provisions which are grossly
agency to file an action under the disadvantageous, or onerous to
arbitration clauses provided in said the Government, the Committee
contracts or initiate any appropriate shall cause the appropriate
action under Philippine laws. The government agency to file an
PSALM shall diligently seek to action under the arbitration
reduce stranded costs, if any. clauses provided in said
contracts or initiate any
appropriate action under
Philippine laws. The PSALM
Corporation shall diligently seek
to reduce stranded costs, if any.
RULE 26. RENEGOTIATION OF Section 69. Renegotiation of
POWER PURCHASE AND Power Purchase and Energy
ENERGY CONVERSION Conversion Agreements
AGREEMENTS BETWEEN NPC between Government Entities.
AND PNOC-EDC
(a) Pursuant to Section 69 of the Within three (3) months from the
Act, all power purchase and effectivity of this Act, all power
energy conversion agreements purchase and energy conversion
between the PNOC-EDC and agreements between the PNOC-
NPC, including, but not limited to, Energy Development
the Palinpinon, Tongonan and Mt. Corporation (PNOC-EDC) and
Apo Geothermal NPC, including but not limited to
complexes, shall be reviewed by the Palimpinon, Tongonan and
the ERC within three (3) months Mt. Apo Geothermal complexes,
from the effectivity of the Act. shall be reviewed by the ERC
(b) The ERC shall amend the and the terms thereof amended
terms of the agreements to to remove any hidden costs or
remove any hidden costs or extraordinary mark-ups in the
extraordinary mark-ups in the cost of power or steam above
cost of power or steam their true costs. All amended
above their true costs. contracts shall be submitted to
(c) The ERC shall ensure that all the Joint Congressional Power
savings realized from the Commission for approval. The
reduction of said mark-ups shall ERC shall ensure that all
be passed on to all End-users. savings realized from the
(d) All amended contracts shall be reduction of said mark-ups shall
submitted to the Power be passed on to all end-users.
Commission for approval.
RULE 27. ROYALTIES, RETURNS Section 35. Royalties, Returns
[RENTALS] AND TAX RATES FOR and Tax Rates for Indigenous
INDIGENOUS ENERGY Energy Resources. -
RESOURCES
The provisions of Section 79 of - The provisions of Section 79 of Enacted EO 100 on May 3, 2002
Commonwealth Act No. 137 (C.A. Commonwealth Act No. 137  Reduce royalty for natural gas and
No. 137) and any law to the (C.A. No. 137) and any law to geothermal (shall be benchmarked
contrary notwithstanding, the the contrary notwithstanding, with the imported energy source
President of the Philippines shall the President of the Philippines as determined by DOF and DOE)
reduce the royalties, returns shall reduce the royalties,  Royalty on the development and
[rentals] and taxes collected for the returns and taxes collected for utilization of coal shall remain
exploitation of all indigenous the exploitation of all indigenous since existing royalty on coal is
sources of energy, including but sources of energy, including but lower than the duty on imported
not limited to, natural gas and not limited to, natural gas and coal
geothermal steam, so as to effect geothermal steam, so as to  ERC shall reduce rates of power
parity of tax treatment with the effect parity of tax treatment from all indigenous energy
existing rates for imported coal, with the existing rates for sources to reflect the reduction in
crude oil, bunker fuel and other imported coal, crude oil, bunker royalty
imported fuels. To this end, the fuel and other imported fuels.
DOF shall recommend to the Based on the simulations conducted
President of the Philippines the To ensure lower rates for end- by the DOF in coordination with
issuance of an Executive Order users, the ERC shall forthwith PSALM and the DOE using the
within thirty (30) calendar days from reduce the rates of power from formula provided under EO 100, the
the effectivity of these Rules. To all indigenous sources of following were determined in the
ensure lower rates for End-users, energy. imposition of UC for Tax Equalization:
the ERC shall forthwith reduce the
rates of power from all indigenous  Benefit of lower electricity rates will
sources of energy. be selective, i.e., only customers
of Malampaya natural gas and
Palinpinon I geothermal plants
 Poses heavy administrative and
regulatory burden
 Rates for other customers will
increase especially in Mindanao
 Even at zero tax, gas remains
uncompetitive
 Imported fuel will remain less
expensive
RULE 28. ENVIRONMENTAL Section 65. Environmental
PROTECTION Protection.
Pursuant to Section 65 of the Act, - Participants in the generation,  On June 26, 2002, the ERC
Electric Power Industry distribution and transmission promulgated the Guidelines for
Participants in the generation, sub-sectors of the industry shall the Issuance of Certificate of
distribution and transmission sub- comply with all environmental Compliance (COC) for
sectors of the industry shall comply laws, rules, regulations and Generation/Facilities ("COC
with all environmental laws, rules, standards promulgated by the Guidelines"), which took effect
regulations and standards Department of Environment and on July 20, 2002;
promulgated by the DENR Natural Resources including, in  On March 10, 2010, the ERC
including, in appropriate cases, appropriate cases, the promulgated the Revised Rules
the establishment of an establishment of an for the Issuance of COCs for
environmental guarantee fund. environmental guarantee fund. Generation
Companies/Facilities;
On 14 September 2014, the ERC
issued the Revised Rules for the
issuance of COC for Generation
Companies, Qualified End-Users
and Entities with SGFs
RULE 29. BENEFITS TO HOST Section 66. Benefits to Host
COMMUNITIES Communities.
Pursuant to Section 66 of the Act, The obligations of generation
the obligations of Generation companies and energy resource
Companies and energy resource developers to communities
developers to communities hosting energy generating
hosting the Generation Facilities facilities and/or energy resource
and/or energy resource developers as defined under
development projects as defined Chapter II, Sections 289 to 294
under Chapter II, Section 289 to of the Local Government Code
294 of the Republic Act No. 7160 and Section 5(i) of Republic Act
(Local Government Code) and No. 7638 and their implementing
Section 5 (i) of Republic Act rules and regulations and
No.7638 (DOE Law) and their applicable orders and circulars
implementing rules and regulations consistent with this Act shall
shall continue: Provided, That the continue: Provided, That the
obligations mandated under obligations mandated under
Chapter II, Section 291 of Local Chapter II, Section 291 of
Government Code, shall apply to Republic Act No. 7160, shall
privately-owned corporations or apply to privately-owned
entities utilizing the national wealth corporations or entities utilizing
of the locality. the national
wealth of the locality.

September 30, 1998,


under a trust fund.
A. RULES FOR THE BENEFITS TO
HOST COMMUNITIES PURSUANT
TO Section 5(i) OF REPUBLIC
ACT 7638
This Rule shall apply to Generation
Facilities and/or energy resource
development projects located in all
barangays, municipalities, cities,
provinces and regions.
Section 2. Obligation to Provide
Financial Benefits.
The Generation Facilities and/or Issues and Concerns:
energy resource development
facilities, such as but not limited to Due to its small capacity the
the following, are required to provide following type of facilities will be
the financial benefits under Energy tedious to handle in terms of
Regulations No. 1-94 (E.R. 1-94) of accounting, monitoring and
the DOE: recording the collections of the
equivalent P.01/kWh as mentioned
by the Finance Division. Aside from
the fact that, LBP requires an initial
of P93,000.00 to open the three
trust accounts for each facility.
 Generation facilities owned and

operated by NPC-SPUG or its
contractors under BOT
arrangement and/or its
successors
 Generation facilities owned and

operated by Qualified Third
Party (QTP)
 Generation facilities including

power barges with aggregate
installed or operating generation
capacity below 1MW and is
moored in any location.
Economic Zones under PEZA are

governed by Republic Act No. 7915
or “The Special Economic Zone Act
of 1995”
Specific Business Registrable

Activites:
1. Export Manufacturing
2. Information Technology
Service Export
3. Toruism
4. Medical Tourism
5. Agro-Industrial Bio-Fuel
Manufacturing
6. Economic Zone
Development & Operation
7. Facilities Provider
8. Utilities for Economic Zone
Utilities Enterprise
9. Specific Fiscal & Non-Fiscal

Incentives
10. Income Tax Holiday of
specific duration
11. 5% Tax and Duty Free
Special Income Tax upon
expiration of Tax Holiday
12. Tax and Duty Free
Importation
13. Zero Percent Value-Added
Tax of goods and services
for registration activities
14. Exemption from withholding
taxes on payment of local
buyers from customs
territory
15. Exemption from payment of
any and all local government
fees, imposes, licenses or
taxes
(a) Spin-off Facilities of NPC or
their transferees, including
Generation Facilities owned
by NPC transferred to
PSALM and subsequently
privatized pursuant to the
Act;
(b) Agus and Pulangui
Complexes;
(c) Facilities owned and
operated by NPC-SPUG;
(d) Facilities under BOT
variants with NPC (NPC
IPPs), NPC-SPUG, NIA,
PNOC-EDC and other
government agencies;
(e) Facilities under BOT
variant with Distribution
Utilities (IPPs of Distribution
Utilities);
(f) Facilities owned or operated
by a Distribution Utility;
(g) Self-Generation Facilities;
(h) Facilities operating in EZs;
and
(i) Integrated energy resource
development and
Generation Facilities such
as hydro, geothermal and
coal.
Section 3. Beneficiaries.
Direct benefits shall be provided to All these energy sources/resources
the host LGU, especially the are being engaged to the Program
community and people affected prior to the issuance of COC by the
while equitable preferential benefits ERC
shall be provided to the host region.
Host LGU or host region shall be
understood as follows: ABOITIZ INPUTS/COMMENTS
1. Fund allocation among EF, DLF,
and RWMHEEF- Our host
communities expressed that a
bigger share of the remittances
must be allocated for
DLF/RWMHEEF projects
because their areas need more
development and lively hood and
environmental protection. The
objective of the ER Fund can be
2. best accomplished if meaningful

and adequately funded projects
will be implemented. Moreover,
electric cooperatives have other
sources of funds for electrification
projects, i.e. National
Electrification Administration
3. Funding scope and project type

of EF - Electric cooperatives
expressed that their target
beneficiaries in far flung areas
cannot afford to pay for the cost
of the drop-wire connections from
the transmission poles to their
residences. Host communities
prefer that funds for street lighting
projects should come from EF.
4. This will make available a larger
portion of the ER Funds for DLF
and RWMHEEF. Electrification
expansion projects and some
DLF and RWMHEEF projects
cannot
5. be implemented because
substations and upgrading of the
existing power infrastructure are
not allowed.
6. Full utilization of available funds-

Currently, LGUs with released
project funds cannot utilize their
available balance for other ER 1-
94 projects
(a) With respect to Generation
Facilities, in the case of power
barges, the host LGU or region is
that where the power barge is
moored; in all other cases, the
host LGU or region is that where
the Generation Facility is physically
located. Generation Facilities shall
not include transmission lines and
substations.
(b) With respect to energy resources:
(i) Coal. The host LGU or region is
that where the producing positive
coal reserve is located, as
delineated by detailed geophysical,
geological and exploration surveys.
(ii) Geothermal. The host LGU or
region is that where the
producing geothermal reservoir is
located as delineated by
geochemical, geophysical, and
exploration surveys. “Producing
geothermal reservoir” refers to the
subsurface geological environment
where the geothermal fluids
accumulate and circulate, inclusive
of the production and re-
injection/recharge
zone.
(iii) Hydro. The host LGU or region
is that where the hydro
reservoir is located as delineated
by detailed topographic,
geological and geo-technical
investigations, reservoir and dam
height optimization studies, and as
delineated by detailed
ground surveys. “Hydro reservoir”
refers to either a natural lake
or an artificial lake created by the
impounding of stream flow, runoff
and subsurface water including but
not limited to intakes, diversion
weirs and trans basin underground
tunnel which supplies water to a
dam. It also refers to where river or
rivers supply/ies water to a dam
reservoir through a trans basin
underground tunnel to generate
power.
(iv) Petroleum/Natural Gas. The
host LGU or region is that where
the producing petroleum/natural
gas reservoir is located, as
delineated by detailed
geochemical, geophysical
exploration
surveys.
Section 4. Nature of Benefits
Provided under E.R. 1-94.
(a) The Generation Company and/or The magnitude of funds available [BENECO]
energy resource developer shall set for the electrification of sitios and (a)The Generation Company and/or
aside one centavo per kilowatt-hour households thru the Malampaya energy resource developer shall set
(P 0.01/kWh) of the total electricity funds and thru other complementary aside one centavo per kilowatt-hour
sales as financial benefit of the host programs on Electrification such as (P 0.01/kWh) of the total electricity
communities of such Generation PAMANA and HEP has increased sales as financial benefit of the host
Facility, where applicable. the fund exposure to support the communities of such Generation
funding requirements needed to Facility, where applicable. The said
attain 90% household electrification share shall be directly remitted to
by 2017. Given this situation, we the local government units that
see the need for the fund re- have jurisdiction over the host
allocation of the Development and communities
Livelihood Fund under the E.R. No.
1-94 be increased to 50% of the
one centavo per kilowatt-hour
financial benefits to better support
the development needs of the host
communities and ensure that said
Program is harbinger of rural
development.
1. Fund allocation among EF, DLF,

and RWMHEEF- Our host
communities expressed that a
bigger share of the remittances
must be allocated for
DLF/RWMHEEF projects
because their areas need more
development and lively hood
and environmental protection.
The objective of the ER Fund
can be
2. best accomplished if meaningful
and adequately funded projects
will be implemented. Moreover,
electric cooperatives have other
sources of funds for
electrification projects, i.e.
National Electrification
Administration
3. Funding scope and project type
of EF - Electric cooperatives
expressed that their target
beneficiaries in far flung areas
cannot afford to pay for the cost
of the drop-wire connections
from the transmission poles to
their residences. Host
communities prefer that funds
for street lighting projects should
come from EF.
4. This will make available a larger
portion of the ER Funds for DLF
and RWMHEEF. Electrification
expansion projects and some
DLF and RWMHEEF projects
cannot be implemented because
substations and upgrading of
the existing power infrastructure
are not allowed.
5. Full utilization of available funds-
Currently, LGUs with released
project funds cannot utilize their
available balance for other ER
1-94 projects
(i) For a Generation Facility and/or

energy resource located in a non-
highly urbanized city, the P
0.01/kWh financial benefit shall be
allocated as follows:
(1) Fifty percent of one centavo
per kilowatt-hour (P 0.005/kWh) of
the total electricity sales shall be set
aside as an electrification fund (EF)
to be applied in the following
radiating order:
(a) Designated resettlement area/s;

(b) Host barangay/s;
(c) Host municipality/ies or city/ies;
(d) Host province/s;
(e) Host region/s; and
(f) Other areas as may be
prioritized/determined by the DOE.
(2) Twenty five percent of one
centavo per kilowatt-hour (P
0.0025/kWh) of the total electricity
sales as a development and
livelihood fund (DLF) to be applied in
the following manner: (a) Designated
resettlement area/s - 5% (b) Host
barangay/s - 20% (c) Host
municipality/ies or city/ies - 35% (d)
Host province/s - 30% (e) Host
region/s - 10% In the absence of a
designated resettlement area/s,
funds allocated for the resettlement
shall form part of the host
barangay/s.
(3) Twenty five percent of one
0.0025/kWh) of the total
electricity sales as a reforestation,
watershed management, health
and/or environment enhancement
fund (RWMHEEF) to be allocated
in the following manner:
(a) Designated resettlement area/s -
5%
(b) Host barangay/s - 20%
(c) Host municipality/ies or city/ies -
35%
(d) Host province/s - 30%
(e) Host region/s - 10%
In the absence of a designated

resettlement area/s, funds allocated
for the resettlement shall form part
of the host barangay/s.
(ii) For a Generation Facility and/or
energy resource located within
a highly urbanized city, the P
0.01/kWh financial benefit shall
be allocated as follows:
(1) Seventy five percent of one
0.0075/kWh) of the total electricity
sales of all Generation Facilities
located in a highly urbanized city
shall be set aside into one
account as an EF to be applied in
the following priority: (a) Designated
resettlement area/s; (b) Host
barangay/s; (c) Host city/ies; (d)
Province/s nearest to the host
city/ies; (e) Region/s of the host
city/ies; (f) Host communities of
other facilities with insufficient
electrification fund; (g) Areas
traversed by transmission lines and
substations or similar facilities; and
(h) Other areas as may be
(2) Twelve and one-half percent of
one centavo per kilowatt- hour (P
0.00125) as a DLF to be allocated in
the following manner: (a) Designated
resettlement area/s - 10% (b) Host
barangay/s - 30% (c) Host city/ies -
60% In the absence of designated
resettlement area/s, funds allocated
for the resettlement shall form part
of the host barangay/s.
(3) Twelve and one-half percent of
one centavo per kilowatt- hour (P
0.00125) as a RWMHEEF to be
allocated in the following manner:
(a) Designated resettlement area/s -
10% (b) Host barangay/s - 30% (c)
Host city/ies - 60% In the absence of
designated resettlement area/s,
funds allocated for the resettlement
shall form part of the host
barangay/s.
(iii) In case of integrated
hydroelectric generation projects
with
cascading Generation Facilities,
where the Generation Facilities and
energy resource are located in
different municipalities/cities or
provinces, irrespective of its
location, whether located in a
highly urbanized city or non-highly
urbanized city, allocation of
financial benefits shall follow
Section 4(a)(i), hereof. The host
communities of the Generation
Facilities and energy resource
development projects shall equally
divide said financial benefits. The
host municipality/city of the
Generation Facility adjacent to the
energy resource shall in no case be
a host to both said Generation
Facility and energy resource.
(b) All interest earnings from EF,
DLF, RWMHEEF shall be set aside
into one trust account to be utilized
for the electrification projects of the
communities in the following order of
priority:
(i) Direct host barangay/s, and host
municipality/ies or city/ies with
insufficient accrued EF;
(ii) Areas traversed by transmission
lines, and sub-stations or similar
facilities;
(iii) Areas not directly connected
to the Grid or national
transmission system which
include isolated or remote
communities; and
(iv) Other areas as may be
(c) The financial assistance
advanced by the Generation
Company and energy resource
developer during its pre-operation
stage or before the start of the
commercial operations for the
purpose of securing favorable
endorsement from the community
and people affected, after Republic
Act 7638 (DOE Law) has become
effective or pursuant to this Rule,
shall be credited by the Generation
Company, energy resource
developer or their successors-in-
interest against the accrued
financial benefits based on the
following criteria:
(i) The projects to be funded under
the advance financial assistance
should be approved by the DOE
consistent with E.R. 1-94.
(ii) The total financial assistance to
be amortized at a rate of twenty
percent (20%) from the accrued
financial benefits shall be based on
the actual amount spent for the
project/s validated by the
DOE.
(iii) Amortization of financial
assistance shall commence from
the next quarter billing, after the
DOE has issued a validated report
on the actual amount spent for the
project/s.
Section 5. Establishment of Trust
Accounts.
The DOE shall establish trust
accounts specific for EF, DLF,
RWMHEEF in the name of the DOE
and the Generation Facilities or
Generation Company and/or energy
resource developer. For purposes of
said establishment, the Generation
Company and/or energy resource
developer shall submit a report that
contains the following data:
(a) Actual generation, station/own
service use, system loss, and
electricity sales in kilowatt-hour;
(b) Accrued benefits due to the host
LGU and host region derived from
Section 5(a) hereof;
(c) Details of benefits and/or
financial assistance advanced to
the host LGU and host region, if any;
and
(d) Such other information, which
the DOE may deem necessary for
review and audit purposes.
Section 6. Project Implementation
and Approval.
The evaluation and approval of Prior to endorsement to DOE, the
project proposals/work programs Generation Company and/or Energy
endorsed by the host LGU and host Resource Developer shall
region through the Generation undertake review and validation of
Company and/or energy resource the annual work program as
developer shall strictly be guided proposed by its host LGUs and host
by the following procedures: region. The template of AWP form
will facilitate the gathering of
information needed by the DOE
Project Evaluator.
AWP will aid the ComRel of the

Generation Company and/or Energy
Resource Developer in the
assessment and evaluation whether
the project proposal can promote
rural development, uplift socio-
economic conditions, address
environmentally critical situation,
improve health, among others.
On Level of Approval
Various host communities clamored

for a fast track process in the
approval of projects and release
funds to the
proponents/beneficiaries in order to
cope with price escalation.
By instituting the level of approval

for proposed projects would ease
the process and facilitate the
smooth transfer of project funds and
speedy implementation of approved
projects.
(a) The Generation Company and/or
energy resource developer, through
its designated Community Relations
Officer (COMREL) shall assist the
host LGU and host region in the
preparation of annual work
programs/project proposals qualified
by the DOE to be implemented in
any given year. The amount of
financial benefits accruing to the
pertinent funds in the immediate
preceding year shall be used as
basis in the preparation of annual
work programs/project proposals.
The said annual work
programs/project proposals shall be
submitted by the Generation
developer to the DOE not later than
March 15 of every year.
(b) All work programs/project
proposals for DLF and RWMHEEF
shall be implemented within one (1)
year upon receipt of funds. Said
work programs/project proposals
shall be implemented, supervised
and
administered by the concerned LGU.
(c) The Generation Company
and/or energy resource developer
shall review the work
programs/project proposals on
development, livelihood,
reforestation, watershed
management, health and/or
environment enhancement duly
endorsed by the host LGU and host
region through a resolution passed
by its Sanggunian or Regional
Development Council. In the case of
official resettlement area, work
programs/project proposals may
be endorsed by the resettlement
organization, association or
cooperative duly certified by the
resource developer and registered
under the concerned government
agencies. The Generation Company
shall make the appropriate
endorsement of annual work
programs/project proposals to the
DOE for further review and
approval. The review and approval
of annual work programs/project
proposals shall be completed by
DOE within twenty (20) working
days upon receipt of complete
documentation. Thereafter, project
implementation shall proceed as
prescribed under
Sub-Section (f)(i), hereof.
(d) For reforestation and
watershed management projects,
work programs/project proposals
should be coordinated and
endorsed by the DENR Regional
Office or the watershed
management administrator in the
area.
(e) For electrification programs, the
resource developer shall coordinate
with the concerned Distribution
Utility in the development of said
program for the barangays
energization and prioritization in
any given year. The annual
electrification programs shall be
directly forwarded to DOE for review
and evaluation. The NEA shall
assist the ECs in the preparation of
documents such as but not limited to
the staking sheets or single line
diagrams and cost estimates.
Thereafter, project implementation
shall proceed as prescribed under
Sub-Section (f)(ii), hereof. The
electrification projects may be
undertaken by the Distribution Utility
or the Generation Company and/or
energy resource developer or their
accredited contractors, herein
referred to as project implementor.
(f) Upon submission of complete
documents of the work
programs/project proposals, project
implementation shall proceed in any
of the following manner:
(i) For development, livelihood,
reforestation, watershed
management, health and/or
environment enhancement
projects, a Memorandum of
Agreement (MOA) shall be entered
into by and among the DOE,
Generation Company and/or
energy resource developer, and
the concerned LGU to effect funds
commitment and project
implementation. The DOE shall then
make the necessary fund
allocation and shall forthwith
release the project funds directly to
the concerned host LGU or host
region within fifteen (15) days upon
submission of complete supporting
documents pursuant to the
provisions in the MOA.
(ii) For electrification projects, a
MOA shall be entered into by and
among the DOE, the concerned
Distribution Utility/project
implementor, Generation Company
to effect funds commitment and
project implementation. The DOE
shall then make the necessary fund
allocation and shall forthwith
release the funds to the franchised
implementor within fifteen (15) days
upon submission of complete
supporting documents pursuant to
the provisions in the MOA. For
projects to be undertaken by
contract, initial release of fund shall
be equivalent to fifteen percent
(15%) of the total approved project
cost. Subsequent release of fund
balance shall be based on the result
of qualified lowest bid cost. For
projects to be undertaken by
administration, total approved project
cost shall be released upon signing
of the MOA.
(g) All funds disbursements shall
follow government accounting and
auditing rules and regulations.
Section 7. Administration of Trust
Accounts.
(a) The administration of EF, DLF,
RWMHEEF shall be undertaken
by the DOE. All funds
administered by NPC with
regard to DLF and RWMHEEF
shall be transferred to DOE for
administration within one
hundred twenty (120) days from
the effectivity of these Rules.
Thereafter, all MOA entered
into by DOE and NPC on the
establishment of trust accounts
shall be amended to reflect
transfer of responsibilities to
NPC-successors, transferees
and/or assignees or IPPs.
(b) The obligation of the Generation
Companies to DOE with regard to
the
remittance of funds shall be
settled in the following manner:
(i) For NPC-IPPs, if applicable, to
settle all obligations before
issuance of COC/registration
certificate by ERC.
(ii) For NPC, if applicable, to
settle all obligations before
Privatization/sale and transfer of IPP
contracts to PSALM.
(iii) For IPPs of Distribution Utilities
with an outstanding financial
obligation with the DOE pursuant to
Department Circular No. 2000-03-
03 shall settle its account within
one (1) year upon effectivity of
these Rules.
(iv) After thorough investigation,
non-remittance of the Generation
developer of the financial benefits
due to the host communities shall
be a ground for DOE’s
recommendation to ERC for
appropriate action and reasonable
measures in accordance with ERC
rules and regulations.
Section 8. Audit of Financial
Benefits and Project Monitoring.
(a) The DOE shall review and audit
the source of fund, particularly on
the total electricity sales of the
Generation Facility to determine
the financial benefits due to the host
LGUs and host regions.
(b) The DOE shall conduct
financial and technical audit to
monitor compliance by the LGU
and region with regard to the
implementation of the projects. In
the event of unjustified
disbursement of fund and non-
completion or delay in the
implementation of projects by the
LGU or region concerned and the
implementor, the DOE shall defer
the releases of funds and take
appropriate reasonable measures
in accordance with any existing
and future government rules and
regulations until such time that the
LGU or region and franchised
implementor would be able to justify
disbursement of funds to the
satisfaction of the DOE or
deputized/resident auditor of the
Commission on Audit (COA).
Section 9. Other Provisions.
(a) The application of this Rule
27(A) shall take effect upon
effectivity of these Rules.
(b) Any provision in E.R. 1-94, its
amendments and other related
issuances and their amendments
that are inconsistent with these
Rules are hereby superseded,
modified or amended accordingly.
B. RULES FOR THE BENEFITS TO Section 66. Benefits to Host
HOST COMMUNITIES PURSUANT Communities.
TO
CHAPTER II, SECTIONS 289 TO The obligations of generation
294 OF THE LOCAL companies and energy resource
GOVERNMENT developers to communities
CODE hosting energy generating
facilities and/or energy resource
developers as defined under
Chapter II, Sections 289 to 294
of the Local Government Code
and Section 5(i) of Republic Act
No. 7638 and their implementing
rules and regulations and
applicable orders and circulars
consistent with this Act shall
continue: Provided, That the
obligations mandated under
Chapter II, Section 291 of
Republic Act No. 7160, shall
apply to privately-owned
corporations or entities utilizing
the national wealth of the
locality.

September 30, 1998,


under a trust fund.
The LGUs hosting the national
wealth shall have an equitable
share in the proceeds derived from
the utilization and development of
national wealth, including sharing
the same with the inhabitants by way
of direct benefits.
Section 2. Amount of Share of
Local Government Units.
Any government agency or
government-owned or controlled
corporation and private corporation
or entities engaged in the utilization
and development of the national
wealth are required to provide
share to the host LGUs, based on
the preceding fiscal year of the
proceeds, based on the following
formula, whichever will produce a
share higher for the LGU:
(a) One percent (1%) of the gross
sales or receipts of the preceding
calendar year; or
(b) Forty percent (40%) of the
national wealth taxes, royalties,
fees or
charges derived by the government
agency or government owned and
controlled corporation and privately-
owned corporation or entities.
Section 3. Nature of Benefits.
(a) Eighty percent (80%) of the
proceeds shall be applied solely to
lower the cost of electricity either
through subsidy or non-subsidy
scheme or combination of both.
(i) Non-subsidy scheme may take
the form but not limited to
electrification, technical upgrading
and rehabilitation of distribution lines
to reduce electricity losses, use of
energy saving devices, and support
of the infrastructure facilities
servicing the needs of the public
which can all redound to the
reduction of the electricity rate of the
area.
(ii) Subsidy scheme will be directly
utilized to subsidize cost of
power used by the consumers.
This may be applied with or without
ceiling or at graduated rates (per
kWh per level of consumption) in
the following form which the host
LGU may choose from.
(1) Subsidy per customer, an equal
or predetermined level or rate of
subsidy per qualified customer: (a)
All consumer types; (b) Residential
consumer only; and (c) Other
preferred types of consumer
combinations, such as:
commercial, industrial, public
buildings, irrigation/communal water
system, streetlights, etc.
(2) Subsidy of power consumption,
which amount of subsidy depends
on the magnitude of power
consumption of qualified consumers:
(a) All consumer types; (b)
Residential consumer only; and (c)
Other preferred types of consumer
combinations, such as,
commercial, industrial, public
buildings, irrigation/communal water
system, streetlights, etc.
(b) Twenty percent (20%) of the
proceeds shall be utilized for the
development and livelihood
projects which shall be appropriated
by their respective Sanggunian.
Section 4. Allocation of Shares.
The amount of share of the LGUs
shall be distributed in the
following manner:
(a) For energy resource located in
the province, share shall be
appropriated as follows: (i) Host
barangay - 35% (ii) Host component
city/municipality - 45% (iii) Host
province - 20%
(b) For energy resource located in
a highly urbanized or independent
component city, share shall be
appropriated as follows: (i) Host
barangay - 35% (ii) Host city - 65%
(c) For energy resource located in
two (2) or more provinces, or in two
(2) or more municipalities/cities or
two (2) or more barangays, their
respective shares shall be
appropriated on the basis of the
following: (i) population - seventy
percent (70%); and (ii) land area-
thirty percent (30%) Where the land
area is the area of the host
barangays found within the
technically delineated energy
resource area and where the
population refers to the population of
host barangays found wholly or
partially within the technically
delineated energy resource.
Section 5. Monitoring.
(a) The Department of Interior and
Local Government (DILG) shall
monitor the compliance of host
LGUs. To assist in the monitoring of
compliance, all host LGUs of
energy projects are required to
submit the following:
(i) The scheme of electricity rate
reduction adopted by the host
LGU (with proper documentation)
based on the prescription in
the DILG-DOE Joint Circular 95-01
dated 31 October 1995 at
the start of the use of fund or upon
the amendment of scheme
by the respective LGU councils; and
(ii) Summary of transactions thirty
(30) days after end of each
quarter.
The DILG shall furnish the DOE the
above information within fifteen (15)
days from the date of the reporting
period.
(b) The COA shall conduct yearly
audit of the national wealth
proceeds consistent with its
responsibility to examine all
accounts pertaining to uses of funds
and property owned or held in trust
by the government or any of its
agencies as mandated under
Section 2 of Presidential Decree
No. 1445 of 1976.
(c) In the event of violation or non-
compliance with the provisions of
the DILG-DOE Joint Circulars 95-
01 and 98-01, and other relevant
issuances, the DILG may, upon
prior notice and hearing, order the
project proponent the non-
remittance of the royalty payment
to the host LGU concerned
pending completion of the
investigation of the concerned LGU
if the project proponent is a GOCC;
or notify the DBM regarding such
violation and order the non-release
of the LGU shares if the project
proponent is a private company. The
unremitted funds shall be deposited
in a government bank under escrow.
RULE 30. NPC OFFER OF Section 67. NPC Offer of [Aboitiz Power]
TRANSITION SUPPLY Transition Supply Contracts We suggest that this entire section
CONTRACTS be deleted since all transition
supply contracts have already
expired.
Pursuant to Section 67 of the Act, Within six (6) months from the
NPC shall, within six (6) months effectivity of this Act, NPC shall
from the effectivity of the Act, file file with the ERC for its approval
with the ERC for its approval the a transition supply contract duly
transition supply contracts (TSCs) negotiated with the distribution
duly negotiated with the Distribution utilities containing the terms and
Utilities. conditions of supply and a
corresponding schedule of rates,
consistent with the provisions
hereof, including adjustments
and/or indexation formulas which
shall apply to the term of such
contracts.
This Rule shall apply to all
Section 3. Terms and Conditions
of the TSCs.
(a) The TSCs shall contain the Within six (6) months from the
terms and conditions of supply effectivity of this Act, NPC shall
and a corresponding schedule of file with the ERC for its approval
rates, consistent with the provision a transition supply contract duly
of the Act, including adjustments negotiated with the distribution
and/or indexation formulas which utilities containing the terms and
shall apply during the term of such conditions of supply and a
contracts. corresponding schedule of rates,
consistent with the provisions
hereof, including adjustments
and/or indexation formulas which
shall apply to the term of such
contracts.
(b) The term of the TSCs shall not The term of the transition supply
extend beyond one (1) year from contracts shall not extend
the introduction of Open Access. beyond one (1) year from the
introduction of open access.
(c) Such contracts shall be based Such contracts shall be based
on the projected demand of the on the projected demand of such
Distribution Utilities less any of their utilities less any of their currently
currently committed quantities under committed quantities under
eligible contracts, if any, as defined in eligible IPP contracts as defined
Section 33 of the Act. in Section 33 hereof:
(d) The total generation capacity of Provided, That the total
such signed TSCs shall not exceed generation capacity of such
the level of NPC owned, controlled, signed transition supply
or committed capacity as of the contracts shall not exceed the
effectivity of the Act. level of NPC owned, controlled
or committed capacity as of the
effectivity of this Act. Such
transition supply contracts shall
be assignable to the NPC
successor generating
companies.
(e) The TSCs shall be assignable to Such transition supply contracts
the NPC successor Generation shall be assignable to the NPC
Companies. successor generating
companies.
(f) Notwithstanding the provisions Notwithstanding the provisions
of Section 25 of the Act, the rates of Section 25 hereof, the rates
charged by a Distribution Utility for charged by a distribution utility
the generation component of the for the generation component of
Supply of Electricity in the Retail the supply of electricity in their
Rate shall, for the term of the TSCs, distribution retail supply rate
not exceed the TSC rates, as shall, for the term of the
updated monthly. transition supply contracts, not
exceed the transition supply
monthly.
(g) The recovery of costs incurred The recovery of costs incurred
by a Distribution Utility for any by a distribution utility for any
generation component in excess of generation component in excess
the TSC rates shall be disallowed of the transition supply contract
by the ERC except for eligible rates shall be disallowed by the
contracts and mandated ERC, except for eligible
purchases from the WESM. contracts as defined under
Section 33 hereof:
(h) The limitation on the recovery Provided, That such limitation on
of generation component costs by the recovery of generation
a Distribution Utility shall apply only component costs by a
to the equivalent quality and quantity distribution utility shall apply only
of electricity still available to the to the equivalent quality and
Distribution Utility from NPC. quantity of electricity still
available to the distribution utility
from NPC.
Section 4. TSCs Approval and
Monitoring.
(a) Within six (6) months from the Within six (6) months from the
date of submission of the TSC by date of submission of the
the NPC, the ERC shall notify NPC transition supply contract by
of their approval of the rates NPC, the ERC shall notify NPC
contained therein. of their approval of the rates
contained therein.
(b) The ERC shall maintain a The ERC shall maintain a record
record of the contract terms and of the contract terms and rates
rates offered by NPC. offered by NPC.
(c) The ERC shall update monthly Likewise, the ERC shall update
the rates using the appropriate monthly, the rates using the
adjustment and/or indexation appropriate adjustment and/or
formula. indexation formula.
Section 5. Recovery of
Generation Component by
Notwithstanding the provisions of Notwithstanding the provisions
Section 25 of the Act, the rates of Section 25 hereof, the rates
charged by a Distribution Utility for charged by a distribution utility
the generation component of the for the generation component of
Supply of Electricity in its Retail the supply of electricity in their
Rates shall, for the term of the distribution retail supply rate
TSC, not exceed the generation shall, for the term of the
component of the TSC rates, as transition supply contracts, not
updated monthly. exceed the transition supply
monthly.
(a) Recovery of cost incurred by a The recovery of costs incurred
Distribution Utility for any generation by a distribution utility for any
component in excess of the TSC generation component in excess
rates shall not be allowed, except of the transition supply contract
for eligible contracts approved by rates shall be disallowed by the
the ERC for the recovery of ERC, except for eligible
Stranded Contract Costs of Eligible contracts as defined under
Contracts of Distribution Utilities as Section 33 hereof:
provided in Section 33 of the Act
and mandated purchases from the
WESM.
(b) The limitation on the recovery Provided, That such limitation on
of generation component costs by the recovery of generation
a Distribution Utility shall apply only component costs by a
to the equivalent quality and quantity distribution utility shall apply only
of electricity still available to the to the equivalent quality and
Distribution Utility from NPC. For quantity of electricity still
purposes of the determination of available to the distribution utility
equivalent quality and quantity of from NPC.
electricity, the ERC shall consider,
among others, firm and non-firm
capacities, standards specified in
the Grid and Distribution Codes, and
other similar criteria as may be
RULE 31. DEBTS OF ELECTRIC Section 60. Debts of Electric
COOPERATIVES (ECs) Cooperatives.
Pursuant to Section 60 of the Act, Upon the effectivity of this Act,
all outstanding financial obligations all outstanding financial
of ECs to NEA and other obligations of electric
government agencies incurred for cooperatives to NEA and other
the purpose of financing the Rural government agencies incurred
Electrification Program shall be for the purpose of financing the
assumed by the PSALM in rural electrification program shall
accordance with the program be assumed by the PSALM
approved by the President of the Corp. in accordance with the
Philippines. program approved by the
President of the Philippines
within one (1) year from the
effectivity of this Act which shall
be implemented and completed
Section 2. Scope.
This Rule shall cover all outstanding
financial obligations by the ECs to
NEA and other government
agencies, incurred as of 26 June
2001 for the purpose of financing
the Rural Electrification Program.
Financial obligation shall refer to the
indebtedness, whether through
regular or restructured loans,
liabilities, or amounts payable by the
ECs to NEA and other government
agencies as of 26 June 2001, to
finance their rural electrification
projects, subject to the terms and
conditions of duly-executed loan
and mortgage contracts between
NEA and/or other government
agencies, as creditors and the ECs,
as debtors/borrowers.
Section 3. Condonation of Debts
of ECs.
From the effectivity of the Act, all
outstanding financial obligations of
ECs to NEA and other government
agencies incurred for the purpose
of financing the Rural Electrification
Program shall be assumed by the
PSALM in accordance with the
program approved by the President
of the Philippines within one (1) year
from the effectivity of the Act which
shall be implemented and completed
effectivity of the Act. These debts
shall include all outstanding
financial obligations incurred by the
ECs for the purpose of financing
the Rural Electrification Program,
exclusively utilized for capital
expenditures for the acquisition
or construction, operation and
maintenance, and/or expansion
and rehabilitation of distribution,
generation and Subtransmission
Assets/facilities and pre-operating
expenses for newly-established
ECs: Provided, however, That such
outstanding financial obligations
shall include interest, surcharges
and penalties on ECs’ Rural
Electrification Loans, released from
NEA and other government
agencies to ECs as of 26 June
2001; duly booked by NEA, validated
by COA, and confirmed by the ECs.
Section 4. Assumption of EC
Loans by PSALM.
PSALM shall assume all
the ECs to NEA and other
government agencies incurred for
the purpose of financing the Rural
Electrification Program; such
the ECs involving “Rural
Electrification Loans” shall be
determined in accordance with the
program approved by the President
of the Philippines. Correspondingly,
having assumed the ECs’
obligations, the PSALM shall repay
NEA and the other government
agencies, in accordance with a
prescribed amortization schedule
agreed between the parties.
The outstanding financial
obligations from other government
agencies referred to in Section 60 of
the Act shall include loans
contracted from the following:
(a) Development Bank of the
Philippines (DBP);
(b) Land Bank of the
Philippines (LBP);
(c) Asset Privatization Trust
(APT) now Privatization
and Management Office
(PMO);
(d) NPC, for loans on taken-
over systems, excluding
power bills;
(e) DOE; and
(f) LGUs.
Provided, however, That such loans
were contracted in accordance with
NEA policies and with prior NEA
authorization, except for loans
transferred to APT, now PMO.
Section 5. Transfer of Ownership
or Control of Assets, Franchise
or Operation.
Within five (5) years from the
completed Condonation of debt, any
EC which shall transfer ownership
or Control of its assets, franchise
or operations shall repay PSALM
the total debts, including accrued
interest thereon: Provided,
however, That the ECs may enter
into loan or financing agreements
to allow flexibility in sourcing funds
and improvement and management
system for needed rehabilitation and
modernization programs: Provided,
further, That it does not involve
permanent transfer or Control of the
assets, franchise and operations:
Provided, finally, That DOF and
NEA shall jointly issue the
necessary guidelines to protect the
member consumers of the ECs
involved.
Section 6. Reduction in ECs’
Rates.
The ERC shall ensure a reduction The ERC shall ensure a
in the rates of ECs commensurate reduction in the rates of electric
with the resulting savings due to cooperatives commensurate with
the removal of the amortization the resulting savings due to the
payments of their loans and for removal of the amortization
this purpose, NEA shall assist the payments of their loans. Within
ECs in their rate formulation five (5) years from the
consistent with the program condonation of debt, any electric
approved by the President of the cooperative which shall transfer
Philippines. Nothing in this Rule ownership or control of its
however, shall mean that ECs are assets, franchise or operations
not obliged to pay the NEA with thereof shall repay PSALM Corp.
respect to all outstanding financial the total debts including accrued
obligations assumed by PSALM, if interests thereon.
the amortization cost component of
the EC’s tariff is still collected from
the consumers.
Section 7. Reporting, Accounting
and Audit Procedures.
NEA shall have the responsibility
for the accounting of all
outstanding financial obligations
of ECs from NEA that will be
assumed by PSALM. Thereafter,
NEA shall render reports and submit
the same to PSALM. PSALM shall
have the right to conduct final
audit of all the outstanding
financial obligations of ECs in
accordance with existing
accounting and auditing rules and
regulations, before the same can be
considered for final assumption.
Likewise, PSALM shall submit
annual progress reports to the DOF
on the status of ECs’ loans that
were assumed and subsequently
condoned.
RULE 32. FISCAL PRUDENCE Section 64. Fiscal Prudence.
(a) Pursuant to Section 64 of the - To promote the prudent
Act, the creation of new positions management of government
and the levels of or increases in resources, the creation of new
salaries and all other emoluments positions and the levels of or
and benefits of TRANSCO and increase in salaries and all other
PSALM personnel shall be subject emoluments and benefits of
to the approval of the President of TRANSCO and PSALM Corp.
the Philippines. personnel shall be subject to the
approval of the President of the
Philippines. The compensation
and all other emoluments and
benefits of the officials and
members of the Board of the
TRANSCO and PSALM Corp.
shall be subject to the approval of
the President of the Philippines.
(b) Likewise, the compensation and

all other emoluments and benefits of
the officials and members of the
Board of TRANSCO and PSALM
shall be subject to the approval of the
President of the Philippines.
RULE 33. SEPARATION Section 63. Separation Benefits
BENEFITS of Officials and Employees of
Affected Agencies.
Section 1. General Statement on
Coverage.
This Rule shall apply to all National government employees
employees in the National displaced or separated from the
Government service as of 26 June service as a result of the
2001 regardless of position, restructuring of the electricity
designation or status, who are industry and privatization of NPC
displaced or separated from the assets pursuant to this Act, shall
service as a result of the be entitled to either a separation
Restructuring of the electricity pay and other benefits in
industry and Privatization of NPC accordance with existing laws,
assets: Provided, however, That the rules or regulations or be entitled
coverage for casual or contractual to avail of the privileges provided
employees shall be limited to those under a separation plan which
whose appointments were shall be one and one-half month
approved or attested by the Civil salary for every year of service
Service Commission (CSC). in the government: Provided,
however, That those who avail of
such privilege shall start their
government service anew if
absorbed by any government-
owned successor company. In
no case shall there be any
diminution of benefits under the
separation plan until the full
implementation of the
restructuring and privatization.
Section 2. Scope of Application .
This Rule shall apply to affected
personnel of DOE, ERB, NEA and
NPC.
Section 3. Separation and Other
Benefits.
(a) The separation benefit shall -National government
consist of either a separation pay employees displaced or
and other benefits granted in separated from the service as a
accordance with existing laws, result of the restructuring of the
electricity industry and
rules and regulations or a
separation plan equivalent to one privatization of NPC assets
and one half (1-½) months’ salary pursuant to this Act, shall be
for every year of service in the entitled to either a separation
government, whichever is higher: pay and other benefits in
accordance with existing laws,
Provided, That the separated or
uls or regulations or be entitled
displaced employee has rendered to avail of the privileges
at least one (1) year of service at provided under a separation
the time of effectivity of the Act. plan which shall be one and
one-half month salary for every
year of service in the
government: Provided,
however, That those who avail
of such privilege shall
start their government service
anew if absorbed by any
government-owned successor
company. In no case shall there
be any diminution of benefits
under the separation plan until
the full implementation of the
restructuring and privatization.
Displaced or separated
personnel as a result of the
privatization, if qualified, shall
be given preference in the
hiring of the manpower
requirements of the privatized
companies.
The salaries of employees of

NPC shall continue to be exempt
from the coverage of Republic
Act No. 6758, otherwise known
as “The Salary Standardization
Act”
(b) The following shall govern the
application of Section 3(a) of this
Rule:
(i) With respect to NPC officials and
employees, they shall be
considered legally terminated and
shall be entitled to the benefits or
separation pay provided in Section
3(a) herein when the restructuring
plan as approved by the NPC Board
shall have been implemented.
(ii) With respect to NEA officials and
employees, they shall be
considered legally terminated and
shall be entitled to the benefits or
separation pay provided in Section
3(a) herein when a restructuring of
NEA is implemented pursuant to a
law enacted by Congress or
pursuant to Section 5 (a)(5) of
Presidential Decree No. 269.
(iii) With respect to the affected
Bureaus of the DOE, their officials
and employees shall be considered
legally terminated and shall be
entitled to the benefits or separation
pay provided in Section 3 (a) herein
when the re-organizational plan
shall have been implemented as a
result of the Restructuring of the
electric power industry.
(c) The governing board or authority
of the entities enumerated in
Section 3 (b) hereof shall have the
sole prerogative to hire the
separated employees as new
employees who start their service
anew for such positions and for
such compensation as may be
determined by such board or
authority pursuant to its
restructuring program. Those who
avail of the foregoing privileges
shall start their government
service anew if absorbed by any
government agency or any
government-owned successor
company.
(d) In no case shall there be any
diminution of benefits under the
separation plan until the full
implementation of the Restructuring
of the electric power industry and
the Privatization of NPC assets in
accordance with the approved
Restructuring and Privatization
schedule.
(e) For this purpose, “Salary,” as a
rule, refers to the basic pay
including the thirteenth (13th) month
pay received by an employee
pursuant to his appointment,
excluding per diems, bonuses,
overtime pay, honoraria, allowances
and any other emoluments received
in addition to the basic pay under
existing laws.
(f) Likewise, “Separation” or
“Displacement” refers to the
severance of employment of any
official or employee, who is neither
qualified under existing laws, rules
and regulations nor has opted to
retire under existing laws, as a
result of the Restructuring of the
electric power industry or
Privatization of NPC assets pursuant
to the Act.
Section 4. Funding.
Funds necessary to cover the
separation pay under this Rule
shall be provided either by the
Government Service Insurance
System (GSIS) or from the
corporate funds of the NEA or the
NPC, as the case may be; and in
the case of the DOE and the ERB,
by the GSIS or from the general
fund, as the case may be. The
Buyer or Concessionaire or the
successor company shall not be
liable for the payment of the
separation pay.
Section 5. Preferential Rights of
Employees.
Displaced or separated personnel
as a result of the Restructuring of
the electric power industry and
Privatization of NPC assets shall be
given preference in the hiring of
manpower requirements of the
newly-created offices or the
privatized companies: Provided,
That the displaced or separated
personnel meet the prescribed
qualifications. With respect to
employees who are not retained
by NPC, the government, through
the Department of Labor and
Employment (DOLE), shall endeavor
to implement re-training, job
counseling, and job placement
programs.
Section 6. Implementation.
The DOE, NEA, and NPC, shall
issue guidelines applicable to their
respective employees to implement
this Rule within ninety (90) days
from effectivity of these Rules:
Provided, That in the case of ERC,
the independent quasi-judicial body
created under the Act, the manner
of, and timetable for,
implementation of its organization
shall be governed by Section 38
and Section 39 of the Act.
RULE 34. EDUCATION AND SECTION76. Education and
PROTECTION OF END-USERS Protection of End Users.-
Consistent with the declared policy End-users shall be educated
that the State shall protect the about the implementation of
public interest as it is affected by retail access and its impact on
the rates and services of electric end-users and on the proper use
utilities and other providers of of electric power. Such
electric power, and pursuant to education shall include, but not
Section 76 of the Act, the public limited to, the existence of
shall be educated on the competitive electricity suppliers,
Restructuring of the electric power choice of competitive electricity
industry and Privatization of NPC. services, regulated transmission
and distribution services,
systems reliability, aggregation,
market, itemized billing, stranded
cost, uniform disclosure
requirements, low-income bill
payment, energy conservation
and safety measures.
Section 2. Consumer Education.

The DOE shall undertake, in The DOE, in coordination with
coordination with the ERC, NPC, the NPC, NEA, ERC and the
NEA and the Department of Office of Press Secretary-
Education (DepEd), DTI, Office of Philippine Information Agency
the Press Secretary (OPS) (OPS-PIA), shall undertake an
Philippine Information Agency (PIA), information campaign to educate
the academe, and the non- the public on the restructuring of
government organizations and the electric power industry and
consumer groups or associations, privatization of NPC.
continuing information, education
and communication program for
consumers. This shall include, but
not be limited to, the following:
(a) Industry Restructuring and NPC
Privatization;
(b) Implementation of Retail
Competition and Open
Access and their impact on
End-users and on the proper
use of electric power. It shall
include the existence of
competitive electricity
suppliers, choice of
competitive electricity
services, regulated
transmission and distribution
services, systems reliability,
aggregation, market, itemized
billing, Stranded Cost, uniform
disclosure requirements, low
income bill payment, energy
conservation and safety
measures, among other topics;
and
(c) Implementation of these Rules.
Section 3. Consumer Protection.
The ERC shall ensure consumer
choice and promote consumer
interests. It shall issue the
appropriate guidelines and
mechanisms to handle the following:
(a) Speedy resolution of consumer
complaints;
(b) Creation of a permanent
consumer complaint desk at ERC
and in all electric utilities and other
providers of electric power to
oversee the promotion of consumer
interests; and
(c) Dissemination of rate-related
resolutions, including posting in the
ERC website and the publication
of all notices of hearings to be
conducted by the ERC for the
purpose of fixing rates or fees at
least twice for two (2) successive
weeks in two (2) newspapers of
nationwide circulation.
RULE 35. FINES AND PENALTIES Section 46. Fines and
Penalties.
Pursuant to Section 46 of the Act,
the following are the fines and
penalties:
(a) The fines and penalties that - The fines and penalties that
shall be imposed by the ERC for shall be imposed by the ERC for
any violation of or non-compliance any violation of or non-
with the Act or these Rules shall compliance with this Act or the
range from a minimum of Fifty IRR shall range from a minimum
Thousand Pesos (P50,000.00) to a of fifty thousand pesos
maximum of Fifty Million Pesos (P50,000.00) to a maximum of
(P50,000,000.00). Fifty million pesos
(P50,000,000.00).
(b) Any Person who is found guilty of Any person who is found guilty
any of the prohibited acts pursuant to of any of the prohibited acts
Section 45 of the Act shall suffer the pursuant to Section 45 hereof
penalty of prision mayor and a fine shall suffer the penalty of prision
ranging from Ten Thousand Pesos mayor and fine ranging from Ten
(P10,000.00) to Ten Million Pesos thousand pesos (P10,000.00) to
(P10,000,000.00), or both, at the Ten million pesos
discretion of the court. (P10,000,000.00), or both, at the
discretion of the court.
(c) The members of the Board of The members of the Board of

Directors of the juridical Directors of the juridical
companies participating in or companies participating in or
covered in the Generation covered in the generation
Companies, the Distribution companies, the distribution
Utilities, the TRANSCO or its Buyer utilities, the TRANSCO or its
or Concessionaire or Supplier who concessionaire or supplier who
violate the provisions of the Act violate the provisions of this Act
may be fined by an amount not may be fined by an amount not
exceeding double the amount of exceeding double the amount of
damages caused by the offender or damages caused by the offender
by imprisonment from one (1) year or or by imprisonment of one (1)
two (2) years or both at the discretion year or two (2) years or both at
of the court. This Rule shall apply to the discretion of the court. This
the members of the Board who rule shall apply to the members
knowingly or by neglect allows the of the Board who knowingly or
commission or omission under the by neglect allows the
law. commission or omission under
the law.
(d) If the offender is a government If the offender is a government
official or employee, he shall, in official or employee, he shall, in
addition, be dismissed from the addition, be dismissed from the
government service with prejudice government service with
to reinstatement and with perpetual prejudice to reinstatement and
or temporary disqualification from with perpetual or temporary
holding any elective or appointive disqualification from holding any
office. elective or appointive office.
(e) If the offender is an alien, he If the offender is an alien, he

may, in addition to the penalties may, in addition to the penalties
prescribed, be deported without prescribed, be deported without
further proceedings after service of further proceedings after service
sentence. of sentence.
(f) Any case which involves Any case which involves

question of fact shall be appealable question of fact shall be
to the Court of Appeals and those appealable to the Court of
which involve question of law shall Appeals and those which involve
be directly appealable to the question of law shall be directly
Supreme Court. appealable to the Supreme
Court.
(g) The administrative sanction that The administrative sanction that
may be imposed by the ERC shall may be imposed by the ERC
be without prejudice to the filing of a shall be without prejudice to the
criminal action, if warranted. filing of a criminal action, if
warranted.
(h) To ensure compliance with the To ensure compliance with this
Act, the penalty of prision Act, the penalty of prision
correccional or a fine ranging from correccional or a fine ranging
Five Thousand Pesos (P5,000.00) to from Five thousand pesos
Five Million Pesos (P5,000,000.00), (P5,000.00) to Five million pesos
or both, at the discretion of the (P5,000,000.00), or both, at the
court, shall be imposed on any discretion of the court, shall be
Person, including, but not limited to, imposed on any person,
the president, member of the board, including but not limited to the
chief executive officer or chief president, member of the Board,
operating officer of the corporation, Chief Executive Officer or Chief
partnership, or any other entity Operating Officer of the
involved, found guilty of violating or corporation, partnership, or any
refusing to comply with any other entity involved, found guilty
provision of the Act or these Rules, of violating or refusing to comply
other than those provided herein. with any provision of this Act or
[Section 46 Par. 8] its IRR, other than those
provided herein.
(i) Any party to an administrative Any party to an administrative
proceeding may, at any time, make proceeding may, at any time,
an offer to the ERC, conditionally or make an offer to the ERC,
otherwise, for a consented decree, conditionally or otherwise, for a
voluntary compliance or desistance consented decree, voluntary
and other settlement of the case. compliance or desistance and
The offer and any or all of the other settlement of the case. The
ultimate facts upon which the offer offer and any or all of the
is based shall be considered for ultimate facts upon which the
settlement purposes only and shall offer is based shall be
not be used as evidence against any considered for settlement
party for any other purpose and shall purposes only and shall not be
not constitute an admission by the used as evidence against any
party making the offer of any party for any other purpose and
violation of the laws, rules, shall not constitute an admission
regulations, orders and resolutions by the party making the offer of
of the ERC, nor as a waiver to file any violation of the laws, rules,
any warranted criminal actions. regulations, orders and
resolutions of the ERC, nor as a
waiver to file any warranted
criminal actions.
(j) In addition, Congress may, upon In addition, Congress may, upon
recommendation of the DOE and/or recommendation of the DOE
ERC, revoke such franchise or and/or ERC, revoke such
privilege granted to the party who franchise or privilege granted to
violated the provisions of the Act. the party who violated the
provisions of this Act.
PART VI - FINAL PROVISIONS
RULE 36. SEPARABILITY Section 79. Separability
CLAUSE Clause
Should any provision herein be If for any reason, any provision
subsequently declared of this act is declared
unconstitutional, the same shall not unconstitutional or invalid, the
affect the validity or the legality of the other parts or provisions hereof
other provisions. which are not affected thereby
shall continue to be in full force
and effect.
RULE 37. EFFECTIVITY
These Rules shall take effect on
the fifteenth (15th) day from the
date of its publication in the Official
Gazette or in at least two (2)
newspapers of general circulation.
February 27, 2002, Fort Bonifacio,
Taguig, Metro Manila

1 Epira Irr Consolidated Proposals v1

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1 Epira Irr Consolidated Proposals v1

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RELATED EPIRA-IRR PROPOSED

EPIRA-IRR PROVISION IMPLEMENTATION STATUS RATIONALE/ COMMENTS

In cases where the HSC has

The issuance of a HSC to a

(ii) To strengthen the (b) To strengthen the technical

(a) Enforce the

(b) Within six (6) months

(c) Enforce the rules and

(e) Amend or revoke, after

(f) In the public interest,

Impose fines or penalties for any

Section 4. Definition of Terms

Section 34. Universal Charge.

The ERC may authorize other

Within six (6) months from the

Any electric power industry

Section 43. Functions of the

(d) Determine the level of cross

(j) Set a lifeline rate for the

Section 74. Cross Subsidies

Cross subsidies within a grid

The ERC may extend the period

For this purpose, the ERC shall

Section 73. Lifeline Rate

A socialized pricing mechanism

A socialized pricing mechanism

Section 4. Definition of Terms

Section 29. xxx

Upon implementation of retail

Pursuant to the objective of

The ERC shall, in determining

The ERC shall, in determining

To ensure the effective

Towards this end, the fund

In case of any violation or

(k) A Generation Company that Section 9. Functions and

The ERC shall set the standards

The ERC shall, within sixty (60)

This Section shall not apply to

(iv) Failure by the Distribution

(ii) Ensure efficient operation of

(iii) Subject to the provisions of

(iv) Provide for adequate

(ii) Determining the market- (b) Determining the

(iii) Administering the market, (c) Administering the

(iv) Prescribing guidelines for (d) Prescribing guidelines

(v) Amending the WESM (e) Amending the rules

(vi) Establishing the transition

(ii) Determine the dispatch

(iii) Monitor daily trading

(iv) Oversee transaction billing

(v) Maintain and publish a

(i) Representatives of each sector

(ii) The number of representatives

(iii) There should be independent

(i) Govern the operation of the

(ii) Develop and adopt guidelines

(iii) Adopt and set internal

(iv) Perform the preparatory work

The ERC may relax or eliminate the

(a) The privatization value to the

(b) The participation by Filipino

Any person who is found guilty

Retail Competition in Mindanao can