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ENERGY

 

REGULATORY FRAMEWORK

Republic Act No. 9136, also known as the Electric Power Industry Reform Act of 2001 (EPIRA) primarily governs the electric power industry and its participants, together with other special laws. The main objectives of the EPIRA include ensuring and accelerating the total electrification of the country and the quality, reliability, security and affordability of the supply of electric power. 

 

For this purpose, the EPIRA has mandated the Department of Energy (DOE) to supervise the restructuring of the electric energy industry. The EPIRA also created the Energy Regulatory Commission (ERC), an independent quasi-judicial regulatory body. Its functions include to promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the restructured electricity industry. The Wholesale Electricity Spot Market was also created to serve as the mechanism for identifying and setting the price of actual variations from the quantities transacted under contracts between sellers and purchasers of electricity.

 

On the other hand, Republic Act No. 9513, also known as the Renewable Energy Act of 2008 (RE Act) provides for a framework for the accelerated development and advancement of Renewable Energy (RE) Resources,  and the development of a strategic program to increase the utilization of RE Resources. The RE Act governs the renewable energy power generation in the Philippines. Under the RE Act the DOE was designated as the lead agency to implement the provisions thereof. The National Renewable Energy Board (NREB) and Renewable Energy Management Bureau were also created to perform the functions necessary to attain the objectives of the RE Act.

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ORGANIZATION OF THE PHILIPPINE ELECTRIC POWER INDUSTRYFOREIGN EQUITY RESTRICTIONS

The EPIRA restructured and divided the Philippine electric power industry into four sectors: generation, transmission, distribution and supply. 

 

1. Generation

 

Generation of electricity refers to the production of electricity by a generation company or a co-generation facility. Generally, generation of electricity is not subject to foreign equity limitations. According, a company engaged in the generation of electricity may be 100% foreign-owned. 

 

However, regulations issued by the DOE pursuant to the RE Act impose a Filipino nationality requirement of at least 60% on the generation of electricity from RE Resources. Accordingly, RE Developers9 are generally subject to a foreign equity limitation of a maximum of 40%. By way of exception, large-scale geothermal projects undertaken by way of foreign technical or financial assistance (FTAA) can be 100% foreign-owned. Hence, an RE Developer must be at least 60% Filipino-owned, unless the RE project is a large-scale geothermal project undertaken by way of FTAA.

 

2. Transmission

 

Transmission of electricity refers to the conveyance of electricity through the high voltage backbone system or the Philippine Grid. Under the EPIRA, the transmission of electricity shall be a regulated common electricity carrier business, which is considered a public utility requiring a franchise from the Philippine Congress. In this connection, the 1987 Philippine Constitution imposes a 60% Filipino ownership requirement on public utility operators. Accordingly, corporations and associations engaged in the transmission of electricity may have up to a maximum of 40% foreign equity and are required to obtain a franchise from the Philippine Congress.

 

In 2009, the transmission sector was privatized through a grant of a 25-year concession to the National Grid Corporation of the Philippines (NGCP) to operate the Philippine Grid. A congressional franchise was granted to NGCP for this purpose. Prior to the privatization, National Transmission Corporation (or TRANSCO) assumed the electrical transmission function of the National Power Corporation, including the authority and responsibility for the planning, construction and centralized operation and maintenance of the Philippine Grid.

 

3. Distribution

 

Distribution of electricity refers to the conveyance of electric power by a distribution utility through its distribution system. Under the EPIRA, the distribution of electricity to end-users shall be a regulated common carrier business requiring a franchise. The EPIRA provides that the power to grant franchises to persons engaged in the distribution of electricity shall be vested exclusively in the Philippine Congress. Thus, similar to transmission of electricity, corporations or associations that will engage in the business of distribution of electricity must at least be 60% Filipino-owned and must also obtain a franchise from the Philippine Congress. 

 

4. Supply

 

“Supply of electricity” means the sale of electricity by authorized persons or entities. There are no foreign equity restrictions imposed on corporations engaged in the business of supply of electricity to the contestable market subject to meeting certain requirements such as capitalization.

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