PART II. Master script Q&A
Parang ngayon lang po namin narinig ng mga manonood
Marga: Magandang hapon po sainyong lahat. Welcome to Usapang Enerhiya with
yours truly (Ka-Marga HAHAHA). Ngayong hapon tatalayakin natin ang ibat ibang
paraan ng energy resource exploration, development, and use. Kaya naman
inimbitahan natin ang tatlong kagalang galang na binibi na galling sa ibat ibang
kagawaran ng gobyerno upang bigyang linaw ang mga tanong natin ukol sa usapang
enerhiya. Maraming salamat sap pag papaunlak saming imbetasyon. (Insert adlib)
MOPPET PD 87
Q1: Magandang hapon po Sec. Samson. Ngayon, talakayin na natin ang subject
ng oil exploration sa ating bansa. Anong batas ba ang ipinatupad ng gobyerno
ukol sa Oil Exploration and Development?
Ans1: Magandang hapon sayo Ka-Marga. It was way back in 1972 under President
Marcos when PD 87 was crafted and implemented. Now, what is PD 87? Under its
declaration policy on SECTION 2 - its aim was to hasten the discovery and production
of indigenous petroleum through the utilization of government and/or private resources,
local and foreign under the arrangements embodied in this Act which are calculated to
yield the maximum benefit to the Filipino people and the revenues to the Philippine
GOVERNMENT for use in furtherance of national economic development, and to
assure just returns to participating private enterprises, particularly those that will provide
the necessary services, financing and technology and fully assume all exploration risks.
Q2? Does this mean that the GOVERRNMENT may directly explore for and
produce indigenous petroleum?
Ans2: Yes, you're right. Etong PD 87 kasi under SECTION 4 vests the power to the
government wherein it may may undertake petroleum and production. Subject to the
existing private rights, the GOVERNMENT may directly explore for and produce
indigenous petroleum. It may also indirectly undertake the same under service
contracts. It may also indirectly undertake the same under service contracts.
Q3: Pakipaliwanag naman po ang service contracts? Ano ba ito under PD 87?
Ans3: Service contracts may cover free areas, national reserve areas and/or petroleum
reservations, as provided for in the Petroleum Act of 1949, whether onshore or offshore.
In every case, however, the contractor must be technically competent and financially
capable as determined by the Board to undertake the operations required in the
contract. Now since we know about service contracts, may tinatawag din tayong
CONTRACT AREAS. These are the exclusive areas where the contractors may
undertake petroleum exploration. A contractor or its affiliate may enter into one or more
contracts with the GOVERNMENT.
Q4: Thank you for clarifying that area SEC. Samson. Now, gusto mo malaman ng
mga manonood ang offshore areas. Ano po ba ito?
Ans4: Contracts for offshore areas may cover any portion beneath the Philippine
territorial waters or its continental shelf, or portion of continental slope, terrace or areas
which are or may be subject to Philippine jurisdiction: Provided, That for offshore areas
beyond water depths of 200 meters, the Petroleum Board may provide for more liberal
terms that provided for herein with respect to contract area, exploration period and
relinquishment.
Q5: Petroleum Board?
ang kagawaran o sanagay na ito? Ano po ang Peteroleum Board?
Ans6: Tama ka dyan. Hindi lahat ng tao alam na merong ganitong opisina o sangay,
Under PD 87 na establish ang Petroleum Board. Under Section 17 - Petroleum Board
composed of the President of the Philippine National Oil Company as Chairman, and
the Secretary of National Defense, the Executive Secretary of Natural Resources, the
Secretary of Finance, the Secretary of Justice, the Secretary of Industry, the Governor
of the Central Bank and the Director of Mines as members. The Board shall designate
and appoint its Executive Director.
Q6: Pwede nyo ba kaming bigyan ng onting overview kung ano ang function ng
opisina na ito?
Ans6: Originally ang Petroleum Board was created under Section 17 of PD 92 to govern
oil exploration and development in the Philippines BUT it was eventually ABOLISHED
by PD 910 - where the The Energy Development Board was created. The abolition of
the Petroleum Board and its powers and functions were transferred to the Energy
Development Board. Essentially, hile the Petroleum Board was tasked to regulate the
exploration, development, production and exploitation of indigenous petroleum and
natural gas through the Service Contract system, the Energy Development Board had
wider powers and functions in the sense that it regulated not only petroleum and natural
gas but also coal, geothermal and natural resources and other less conventional forms
of indigenous energy resources.
Q7: One of our viewers, asked about the case of Resident Marine Mammals, can
you relate this case to PD 87?
Ans7: In this case, The Government of the Philippines, through DOE, entered into a
Geophysical Survey and Exploration Contract with JAPEX. This contract involved
geological and geophysical studies of the Taon Strait. Now here lies the problem,
Taon Strait kasi was declared a a protected seascape in 1988. So kaya the dolphins,
sabi mo nag, or the RESIDENT MARINE MAMMALS of Taon Strait live here.
And being a protected seascape it only means that, any exploration in this area has to
go through an EIA or Environmental Impact Assessment. After the assessment, there
has to be an ECC or and Environmental Compliance Certificate issued. Additionally,
the exploration of a protected area is only for the purposes of gathering information on
energy resources lang. Thats Secs. 12 and 14 of the NIPAS Act (National Integrated
Protected Area Systems Act of 1992.
Eh what happened here JAPEX only started to secure an ECC after the fact na. Typos
na yung seismic surveys. So meaning to say, no environmental impact evaluation was
done before they actually stared with the surveying.
Q8: So did it violate PD 87?
Ans8: 87. PD 87 kasi or Exploration and Development Act of 1972 states that:
The disposition, exploration, development, exploitation, and utilization of indigenous
petroleum in the Philippines are governed by Presidential Decree No. 87 or the Oil
Exploration and Development Act of 1972. This was enacted by then President
Ferdinand Marcos to promote the discovery and production of indigenous petroleum
through the utilization of government and/or local or foreign private resources to yield
the maximum benefit to the Filipino people and the revenues to the Philippine
Government. So bale, this is considered the General Law of Oil Exploration.
We have to note however that the Constitution provides that while the President may
enter into agreements with foreign-owned corporations involving either technical or
financial assistance for large-scale exploration, development, and utilization of
minerals, petroleum, and other mineral oils according to the general terms and
conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the
development and use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution.
In the case at bar, while the Court finds that Presidential Decree No. 87 is sufficient to
satisfy the requirement of a general law, the absence of the two other conditions, that
the President be a signatory to SC-46, and that Congress be notified of such contract,
renders it null and void. As SC-46 was executed in 2004, its terms should have
conformed not only to the provisions of the PD 87, but also to those of the 1987
Constitution. SC- 46 appeared to have been entered into and signed only by the DOE
through its then Secretary, Vicente S. Perez, Jr., contrary to the said constitutional
requirement. Moreover, public respondents have neither shown nor alleged that
Congress was subsequently notified of the execution of such contract.
Additionally, under Proclamation No. 2146, the Taon Strait is an environmentally
critical area, having been declared as a protected area in 1998; therefore, any activity
outside the scope of its management plan may only be implemented pursuant to an
ECC secured after undergoing an EIA to determine the effects of such activity on its
ecological system.
MOPPET PD 972
Q1: Ngayon Sec. Samson ano, yung mga manonood natin ay madami pang gusto
itanong sayo. Ngayong tungkol naman sa coal production. Earlier in the show
we were told that the Philippines holds 260 million short tons of usable coal
reserves. Are there any laws regulating coal development?
Ans1: Very interesting ang topic na ito ka-Marga. It was on 1976 when PD 972 was
created that was later on AMENDED by PD 1174. The law encourages the participation
of the private sector with adequate and sufficient financial, technical and managerial
resources to undertake a work program to effectively explore, develop and exploit
indigenous coal resources calculated yield maximum benefit to the Filipino people and
revenues to the Philippine Government and assure just and fair returns to the
participating private enterprises
Q2: Can you tell us about The Coal Development Program?
Ans2: Yes, under this program, the country shall be divided into coal regions and
exploration and exploitation programs shall be instituted and implemented pursuant to
this Decree.
These programs shall be geared towards the promotion and development of the
necessary technical and financial capability to undertake a work program to effectively
explore exploit coal resources.
In recognition, however, of the social constraints that may be encountered in effecting
the establishment of coal units in regions where there is high concentration of small
coal miners, a special coal program shall be formulated and implemented in
coordination with the appropriate government agency/agencies to meet the particular
needs of such regions.
Q3: What the active role of the government with coal exploration?
Ans3: Under section 4 - The Government, through the Energy Development Board, its
successors or assigns, shall undertake by itself the active exploration, development
and production of coal resources. It may also execute coal operating contracts as
hereafter defined. The active exploration and exploitation of coal resources by the
Government or through coal operating contracts may cover public lands, any
unreserved or unappropriated coal bearing lands, claims located and recorded by
private parties areas covered by valid and subsisting coal revocable permits, coal
leases and other existing rights granted by the Government for the exploration and
exploitation of coal lands, government mineral reservations, coal areas/mines whose
leases or permits are presently owned or operated or held by government-owned or
controlled corporations and coal mineable areas operated or held by government
agencies.
Q4: Sec. Samson, may tintawag kayong Blocking System in terms of coal
exploration hindi ba? Ano ho ba ito?
Ans4: Yes tama ka. Blocking System is under Section 5 wherein the Energy
Development Board shall establish coal regions delimiting its extent and boundaries
after taking into consideration the various coal bearing lands of the Philippines. Each
coal region shall be divided into meridional blocks or quadrangles of two minutes (2')
of latitude and one and one-half minutes (1-1/2) of longtitude, each block containing an
area of one thousand (1,000) hectares, more or less, the boundaries thereof to coincide
with the full two minutes and one and one-half minutes of latitude and longtitude,
respectively, based on the Philippine Coast and Geodetic Survey Map, scale of
1:50,000.
Q6: Eh Sec. Earlier on the show you discussed about contract areas in oil
exploration, is there anything like that under coal exploration too?
Ans6: Yes, we do have something like that under the Coal Development Act. Under
Section 6 There shall be Coal Contract Areas that shall be in conformity with the
blocking system, the Energy Development Board shall determine in each coal region
what areas, are available for coal operating contracts. In opening such contract areas,
the Energy Development Board may resort to either of the following alternative
procedures:
(a) By offering an area or areas for bids, specifying the minimum requirements and
conditions in accordance with this Decree: or
(b) By negotiating with a qualified party for a coal operating contract under the terms
and conditions provided in this Decree.
No person shall be entitled to more than fifteen (15) blocks of coal lands in any one
coal region.
FRANCES RA 7638
Q1: So Secretary ano po yung saklaw ng energy projects sa RA 7638?
Kumbaga, what is meant by such term? Lets make it clear lang po para malinaw
sa ating audience.
Ans1: "Energy projects" shall mean activities or projects relative to the exploration,
extraction, production, importation-exportation, processing, transportation, marketing,
distribution, utilization, conservation, stockpiling, or storage of all forms of energy
products and resources.
Actually, as of todaym three of the projects will harness wind resource and will be
developed by Currimao Solar Energy Corp. These are the 150-MW Talisay Wind Power
Project in Camarines Norte, the 140-MW Talim Wind Power Project in RIzal and the
80-MW Calatagan Wind Power Project in Batangas.
Sindicatum C-Solar Power Inc. is working on the Capas Solar Power Plant located in
Tarlac. It is estimated to have a capacity of 22 MW.
Two solar farms are located in San Manuel, Pangasinan. Pilipinas Newton Energy
Corp. and Pilipinas Einstein Energy Corp. will each work on 70-MW solar project.
Meanwhile, Silay Global Energy Solutions is working on a 30-MW battery energy
storage in Negros Occidental.
Year-to-date, 22 projects have been cleared for the conduct of GIS.
*Geographic Information System--an integrated collection of computer software and
data used to view and manage information about geographic places, analyze spatial
relationships, and model spatial processes.
Q2: Ano po yung mga related agencies or corporations sa DOE? And what are
their functions?
Ans2: The Philippine National Oil Company (PNOC), the National Power Corporation
(NPC), and the National Electrification Administration (NEA) are hereby placed under
the supervision of the Department, but shall continue to perform their respective
functions insofar as they are not inconsistent with this Act.
PNOC - PNOC was created in response to the 1970s oil crises. The Philippine
government, then under martial law and governed by President Ferdinand Marcos,
responded to the crises by founding PNOC and forging oil-supply partnerships with
supplier countries. The government later acquired refineries and petroleum transport
and marketing firms with the aim of being a total energy company. PNOC also initiated
the exploration of the countrys oil and non-oil energy resources, such as geothermal.
PNOC Exploration Corporation concentrates on the oil and gas business.
PNOC currently has 2 subsidiaries working together to realize PNOCs vision: PNOC
Exploration Corporation and PNOC Renewables Corporation.
PNOC Exploration Corporation
PNOC Exploration Corporation is the upstream oil, gas and coal subsidiary of the state-
owned Philippine National Oil Company. A government owned and controlled
corporation, the Company was incorporated on 20 April 1976 and is mandated by the
government through the Department of Energy (DOE) to take the lead in exploration,
development and production of the countrys oil, gas and coal resources. The Company
was listed in the Makati Stock Exchange and the Manila Stock Exchange in 1976 and
1977, respectively.
At present, PNOC EC has seven (7) petroleum Service Contracts (SCs). PNOC EC
used to operate the very first natural gas facility in the country- the San Antonio Gas
Power Plant within SC 37 before joining the Malampaya consortium (SC 38) in 1999
with a 10% stake. Malampaya is the countrys single biggest investment of its kind.
PNOC EC also holds six (6) Coal Operating Contracts (COCs). As part of its coal
business, the company also trades coal from other sources through its two (2) coal
terminals located in Malangas and Cebu.
PNOC Renewables Corporation
PNOC Renewables Corporation (PNOC RC) is a fully owned subsidiary of state-owned
Philippine National Oil Company (PNOC). PNOC RC will be the primary vehicle of
PNOC in promoting, developing and implementing new and renewable energy sources
in the country. Through renewable energy, the country would be able to reduce its
dependence on imported oil, while mitigating climate change. Renewable energy is an
important component in the country's drive towards energy self-sufficiency, security and
independence. Renewable energy projects include Hydropower Projects, Wind Project,
Biomass and/or Waste to Energy Projects, Solar Electrification Projects, Geothermal
Projects.
NAPOCOR - is a Philippine government-owned and controlled corporation that is
mandated to conduct missionary electrification throughout the Philippine archipelago.
It was also the principal power provider for Manila Electric Company, the only power
distributor in the Metro Manila area and its nearby provinces (including all towns or
cities such as Santo Tomas, Batangas on some of their respective provinces that cover
the Meralco franchise). Napocor used to be the country's largest corporation in terms
of revenue. Profitability however is a main concern now because it is in the business of
missionary electrification that provides electricity to far-flung, off-grid remote areas and
islands at subsidized rates. As a government owned and controlled corporation,
Napocor is subject to the scrutiny of the Commission on Audit (COA) and the
Governance Commission for Government Owned and Controlled Corporations (GCG).
It also manages 17 large dams and 11 watersheds in the country and continues to
oversee the privatization of the government's remaining undisposed power assets. As
of December 2015, NPC has a total of 1,735 Megawatts of generating capacity, which
includes 345 MW of small generators in small islands and off-grid locations and 1,390
MW in hydroelectric power plants and independent power producing plants in the main
grids.
NEA - is a Philippine Government-Owned and Controlled Corporation (GOCC)
attached to the Department of Energy tasked in the full implementation of the Rural
Electrification program (REP) of the Philippine government and reinforce the technical
capability and financial viability of the 119 rural Electric Cooperatives (ECs). The most
significant among these powers were its regulatory function with regard to rate fixing
and the authority to grant and revoke franchises. The latter was formerly vested in the
old Congress that granted hundreds of franchises to interested groups, the essence of
which stood in the way to a meaningful electrification program.
This is governed by RA 6038 (AN ACT DECLARING A NATIONAL POLICY
OBJECTIVE FOR THE TOTAL ELECTRIFICATION OF THE PHILIPPINES ON AN
AREA COVERAGE SERVICE BASIS, PROVIDING FOR THE ORGANIZATION OF
THE NATIONAL ELECTRIFICATION ADMINISTRATION, THE ORGANIZATION,
PROMOTION AND DEVELOPMENT OF ELECTRIC COOPERATIVES TO ATTAIN
THE OBJECTIVE, PRESCRIBING TERMS AND CONDITIONS FOR THEIR
OPERATION, THE REPEAL OF R.A. NO. 2717, AND FOR OTHER PURPOSES.)
Q3: Totoo ho bang booming ang renewable energy sector ng Pilipinas?
Ans3: First of all, renewable energy is energy that is collected from renewable
resources, which are naturally replenished on a human timescale, such as sunlight,
wind, rain, tides, waves, and geothermal heat.
Ika nga ni, Juan Miguel Zubiri, who authored the Renewable Energy Act of 2008, I'm
very proud to say that since we passed the law in 2008, from what used to be just 22
renewable energy projects, we now have 406 projects, either already built or being
constructed,"
"In the last four years, we produced about 3 million jobs for engineers, construction
workers all over the country. It's a booming industry."
Long reliant on fossil fuels, The Philippines now meets over a third of its energy needs
through renewable sources.
The frenetic growth has attracted the attention of investors including David Russell, the
chief executive officer of Equis, Asia's largest independent infrastructure fund manager.
The company has commissioned the largest solar farm in Southeast Asia in Cadiz City.
"In the Philippines we've seen over last couple of years, over 1100 megawatts of
renewable energy, just in the wind and solar space installed. That's about two billion
dollars just flying into what was an industry that didn't exist till three years ago,"
"What we're seeing going forward is, over the next ten years, and expectation that that
market will grow by about 20 times," he adds.
Q4: Ano po yung challenges ng renewable energy sector?
Still, the growing push towards cleaner energy hasn't been come without detractors.
Some complain that the country's feed-in tariff, offered as an incentive for developers
of clean energy projects, actually made electricity in the archipelago more expensive.
"We have been subsidizing renewable energy," says George Chua, President of the
Federation of Philippine Industries. Chua says as rates for clean energy projects are
locked in for 20 years, users in the country won't be able to enjoy the fall in prices, even
if renewable energy technology gets cheaper.
"We're not against renewable energy, but why do we need to go into technologies that
are not fully developed? We could wait a few more years when they become
commercially viable," Chua says.
"The cost of electricity in the Philippines is twice the cost as it is other countries, while
the cost of a solar panel is the same cost here as it is in other countries. You take the
solar panel costs in other countries, put them here, and solar is just significantly
cheaper than even coal," Leviste says.
"I think that it's just obvious, that solar is in fact going to disrupt the entire power industry
in Philippines, which is the most expensive and inefficient in Asia," he says.
Leviste's company already has a solar farm in Batangas province, and wants to prove
solar energy's viability by building a new 150 megawatt solar farm in the north of Manila,
by the first quarter of next year.
"The solar farm will have batteries, to smoothen the output of intermittent renewable
energy plants, and it will be cheaper than coal. Our claim is that, rather than strapping
our country's energy supplies to 20 more years of dirty fossil fuel, we have a cleaner
alternative," he said
Zubiri, who recently returned to the Philippine senate after his resignation in 2011,
wants to continue to push his green agenda in his next six years in office.
"After a few years of its actual implementation, we see a lot of bottlenecks for the
developers and the consumers. There are agencies with overlapping functions, so
coming back as a senator, I'm going to look at the amendments to the law, or to the
rules and regulations, because there's still a lot of tweaking that can be done," he says.
FRANCES - RA 9136.
Q1: Ano po ba ung general framework ng batas na ito?
This Act shall provide a framework for the restructuring of the electric power industry,
including the privatization of the assets of NPC, the transition to the desired competitive
structure, and the definition of the responsibilities of the various government agencies
and private entities.
Q2: The electric power industry is divided into 4 sectors. Maaari niyo po bang
idiscuss ang mga ito?
Totoo yan. The electric power industry is divided into four (4) sectors, namely:
generation; transmission; distribution and supply.
*Power generation in the Philippines is not considered as a public utility operation,
which means interested parties do not need to secure a congressional franchise to
operate a power generation company. However, power generation is regulated by the
Energy Regulatory Commission (ERC) who must issue a certificate of compliance to
interested parties to ensure that the standards set forth in the Electric Power Industry
Reform Act of 2001 (EPIRA) are followed.[4] The ERC is also responsible for
determining any power abuse or anti-competitive behavior. Power generation is a value
added tax zero-rated (i.e. not subject to 12% VAT) to ensure lower rates for end-users.
Electricity in the Philippines is produced from various sources such as coal, oil, natural
gas, biomass, hydroelectric, solar, wind, and geothermal sources. The allocation of
electricity production can be seen in the table below, according to data from the
Department of Energy Power Statistics:
Source Percentage
Coal 42.8%
Oil-Based 7.4%
Natural Gas 24.2%
Hydro 11.8%
Geothermal 13.3%
Other (Wind, Solar, Biomass) 0.5%
*Power transmission in the Philippines is a common carrier business (i.e. regulated by
the government, serves its franchise area without discrimination, responsible for any
losses incurred during delivery). It is regulated by the ERC who has rate-making powers
and the final say in the valuation of transmission assets. Pursuant to the EPIRA and
the Transmission Development Plan or TDP,[7] maintenance and operations of the
nationwide transmission system was subjected to competitive public bidding conducted
by the Power Sector Assets and Liabilities Management (PSALM).[8] The National Grid
Corporation of the Philippines (NGCP)[9] was the highest bidder. It assumed control of
the national transmission system from the National Transmission Corporation
(TransCo),[10] whom assumed the same function from the now defunct National Power
Corporation, by way of RA 9511 its congressional franchise of 25 years renewable for
another 25 years for a total of 50 years. Assuming it secures a renewal, NGCP's
franchise will end on December 1, 2058. Concession, unlike outright sale, allowed
government, through TransCo, to retain ownership of the country's transmission assets
such as poles, towers, substations, lines, right-of-way (ROW), cables, etc., according
to Section 8 of Electric Power Industry Reform Act (EPIRA) law which states that no
entity, company, or person other than TransCo who shall own any transmission
facilities.[11][12][13][14] TransCo is also responsible for making sure that NGCP
complies with the standards set by its congressional franchise.
There is hereby created a National Transmission Corporation, hereinafter referred to
as TRANSCO, which shall assume the electrical transmission function of the National
Power Corporation, and have the powers and functions hereinafter granted. The
TRANSCO shall assume the authority and responsibility of NPC for the planning,
construction and centralized operation and maintenance of its high voltage
transmission facilities, including grid interconnections and ancillary services.
*Distribution & supply -- The circulation of electricity to end-users is a controlled
common carrier business requiring a national franchise.[20] The power to grant national
franchises is exclusively vested to the Congress of the Philippines. Distribution of
electric power to all end-users or consumers of electricity may be handled by private
distribution utilities, cooperatives, local government units presently undertaking this
function and other duly authorized entities, under the regulation of the ERC.
A distribution utility has the task to provide distribution services and connections to its
system for any end-user within its franchise area, as there are different distribution
utilities available for different areas, consistent with the distribution code. They are
required to provide open and non-discriminatory access to its distribution system to all
users.
Retail rates charged by distribution utilities are subject to regulation of the ERC under
the principle of full recovery. Under full recovery, distribution utilities subdivide their
retail rate into two distinct categories, namely pass through charges and wheeling
charges. Pass through charge follows the principle of full economic recovery where a
distribution utility may pass on all the charges it incurred in the distribution of power
such as the price of the power, transmission charge, systems loss charge, etc. to its
customers. The wheeling charge is an additional premium charged to the customer akin
to a mark-up on the cost of power acquired by the distribution utility. The wheeling
charge follows the principle of reasonable return on base (RORB) which allows the
distribution utility to operate viably as determined by the ERC.
According to the National Electrification Administration (NEA), the distribution sector is
composed of 119 electric cooperatives, 16 privately owned utilities and six local
government-owned utilities as of 2009.[22] These distribution utilities may acquire
electricity from generation companies or the WESM, when certified as the distribution
of electricity requires a national franchise, for distribution to residential, commercial,
industrial and other users. NEA, the government agency in charge of implementing
programs to reinforce the technical capability and financial viability of rural electric
cooperatives, may act as guarantor for purchases of electricity in the WESM by any
electric cooperative or small distribution utility to support their credit standing.
Currently, Meralco is the Philippines' largest distribution utility with a franchise area of
9,337 square kilometers covering Metro Manila, the entire provinces of Bulacan, Rizal
and Cavite, parts of the provinces of Laguna, Quezon and Batangas, and 17 barangays
in Pampanga. The franchise area is home to 23 million people, roughly a quarter of the
entire Philippine population of 89 million.
Power distribution outside the Metro Manila area is handled by private distribution
utilities and electric cooperatives.
Supply Sector. - The supply of electricity to the contestable market shall require a
license from the ERC, except for distribution utilities and electric cooperatives with
respect to their existing franchise areas.
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.
Q3: Sino po ang may power to grant franchises to persons engaged in
transmission & distribution of electricity?
Franchising Power in the Electric Power Sector. - The power to grant franchises to
persons engaged in the transmission and distribution of electricity shall be vested
exclusively in the Congress of the Philippines and all laws inconsistent with this Act
particularly, but not limited to, Section 43 of PD 269, otherwise known as the "National
Electrification Decree," are hereby deemed repealed or modified accordingly: Provided,
That all existing franchises shall be allowed to their full term: Provided, further, That in
the case of electric cooperatives, renewals and cancellations shall remain with the
National Electricity Commission under the National Electrification Administration for five
(5) more years after the enactment of this Act.
8Q4: Ano po ang impact ng NPC Privatization?
Section 47. NPC Privatization. - Except for the assets of SPUG, the generating assets,
real estate, and other disposable assets as well as generation 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 generation contracts of NPC and thereafter, implement the same, in
accordance with the following guidelines, except as provided for in paragraph (e)
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;
In the case of foreign buyers at least seventy-five percent (75%) of the funds used to
acquire NPC-generating assets and generating contracts shall be inwardly remitted and
registered with the Bangko Sentral ng Pilipinas.
(c) The NPC plants, its related assets and assigned liabilities, if any, shall be grouped
in a manner which shall promote the viability of the resulting generating companies
(gencos), ensure economic efficiency, encourage competition, foster reasonable
electricity rates and create market appeal to optimize returns to the government from
the sale and disposition of such assets in a manner consistent with the objectives of
this Act. In the grouping of the generating assets of NPC, the following criteria shall be
considered:
(1) A sufficient scale of operations and balance sheet strength to promote the financial
viability of the restructured units;
(2) Broad geographical groupings to ensure efficiency of operations but without the
formation of regional companies or consolidation of market power;
(3) Portfolio of plants to achieve management and operational synergy without
dominating any part of the market or of the load curve; and
(4) Such other factors as may be deemed beneficial to the best interest of the national
government while ensuring attractiveness to potential investors.
(d) All generation assets and IPP contracts shall be sold in an open and transparent
manner through public bidding;
(e) The Agus and the Pulangui complexes in Mindanao shall be excluded from among
the generating companies that will be initially privatized. Their ownership shall be
transferred to the PSALM Corp. and both shall continue to be operated by NPC. In case
of privatization, said complexes may be privatized not earlier than ten (10) years from
the effectivity of this Act, and, until privatized, shall not be subject to Build-Operate-
Transfer (B-O-T), Build-Rehabilitate-Operate-Transfer (B-R-O-T) and other variations
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;
(f) The steamfield assets and generating plants of each geothermal complex shall not
be sold separately. They shall be combined and each geothermal complex shall be sold
as one package through public bidding. The geothermal complexes covered by this
requirement include, but not limited to, Tiwi-Makban, Leyte A and B (Tongonan),
Palinpinon, and Mt. Apo;
(g) The ownership of the Caliraya-Botokan-Kalayaan (CBK) pump storage complex
shall be transferred to the PSALM Corporation and shall continue to be operated by
NPC;
(h) Not later than three (3) years from the effectivity of this Act, and in no case later
than the initial implementation of open access, at least seventy percent (70%) of the
total capacity of generating assets of NPC and of the total capacity of the power plants
under contract with NPC located in Luzon and Visayas shall have been privatized; and
(i) NPC may generate and sell electricity only from the undisposed generating assets
and IPP contracts of PSALM Corp.: Provided, That any unsold capacity shall be
privatized not later than eight (8) years from the effectivity of this Act.
The Philippine power industry, which emerged from a virtually crippling energy crisis in
the 1990s, continues to face major challenges that it will have to hurdle if it is to provide
consumers a reliable and secure electricity supply at reasonable prices. The
privatization of the sector is seen as an appropriate response to these challenges. The
strategy is also expected to attract substantial investments in the energy sector to fend
off a looming power crisis.
The privatization of the assets assumed by PSALM from the National Power
Corporation (NPC) is anticipated to raise this needed capital. For one, the new owners
of the privatized assets will have to undertake improvements in their assets to ensure
that they remain competitive and viable. On the other hand, the government will be able
to use the proceeds from the sold assets to settle the debts of NPC, thereby helping
reduce the country's consolidated public sector deficit.
Seen as the key to dismantling the monopoly by government, the privatization of the
generation assets is programmed to promote competition in the sector by expanding
the ownership base. Republic Act No. 9136, the Electric Power Industry Reform Act
(EPIRA), limits the ownership of generation assets by a single owner to only 30% of
the generating capacity within a single grid. This means that in any single grid, there
can be at least four different owners of generation assets to allow competition. The
privatization of the generation assets will help bolster competition as envisioned by the
EPIRA. This will also usher in a new regime where open access and retail competition
will prevail to enable electricity consumers to enjoy the benefits of a restructured
electricity industry.
In summary, the objectives of power privatization are:
Orderly and transparent privatization of the government's power and other disposable
assets in order to liquidate NPC's financial obligations
Broader ownership base
Inflow of private capital
Reliable and secure power supply
Transparent and reasonable electricity prices
Competitive operation of the electricity market
Ultimately, the privatization of the Philippine power industry will significantly contribute
to promoting competition; thus, providing the electricity consumers the "power of
choice".
MARIE RA 3637
Q1: Briefly give us an overview of RA 9637 before we delve into details later.
A: RA 9367 or The Biofuels Act was signed in January 2007 which makes the
Philippines the first country in Southeast Asia to have biofuels legislation in place. This
law mandated that all liquid fuels for motors and engines sold in the Philippines shall
contain locally-sourced biofuel components within two years from the effectivity. With
the enactment of this law, the Department of Energy, the lead agency responsible for
the Philippines Biofuel Program, has predicted that by 2014, the demand for local
ethanol will reach 455 million liters and is expected to grow by an average of 5 percent
annually in the future.
Q2: What are biofuels?
A: Biofuels are fuels produced directly or indirectly from organic material (biomass)
which include trees, crops and associated residues, plant fiber, poultry litter and other
animal wastes, industrial wastes, and the biodegradable component of solid waste. In
the Philippines, RA 9367 mandates that the Sugar Regulatory Administration will
ensure that the supply of sugar is sufficient to meet the domestic demand and that the
price of sugar is stable. Why sugar? While we have other sources that can be tapped
for ethanol production such as corn and cassava, sugarcane, according to studies,
yields the highest gross ethanol. In fact it is proven to be 7 to 11 times more productive
than corn and cassava. In terms of resources use, labor, capital, and production inputs
like fertilizer, sugarcane proved to be most efficient and cheapest. Compared to other
crops, sugarcane can withstand strong typhoons as the stems simply lodge and they
recline when weather becomes favorable.
Q3 Why do we need biofuels?
A: The spiraling cost of petroleum and the need for environment-friendly or less
greenhouse gas emitting energy due to global warming or climate change has paved
the way for alternative and renewable energy such as biofuels. On the environmental
side, burning of fossil fuel is the largest source of greenhouse gases from human
activities which is one of the major causes of global warming. Biofuel is designed not
to replace fossil fuel but to help form a balanced policy. It is created to be an ideal
substitute to extending the use of longevity of diesel. Simply put, the primary goal is to
provide energy security and employment opportunities to the local communities.
Q4: How has the Biofuels Act fared over the years?
A: Since its enactment on 2006, the Biofuels Act, sadly has not progressed so much.
The Department of Energy has not progressed in terms of fully implementing the law
particularly in increasing further the blend for biodiesel. It was intended to increase the
current coco-biodiesel blend of 2 percent to 5 percent in all diesel fuel requirements. In
January 2009, the Department of Energy, the agency empowered to increase the
biodiesel blend to all diesel fuel sold and distributed across the country by all oil
companies, has only implemented an increase of 2 percent blend from 1 percent,
through the National Biofuels Board. This can be attributed to several factors such as
typhoons have badly hit coconut-producing areas and the declining coconut oil
production from aging trees and loss of productivity because of insect infestations. In
terms of ethanol production, the 10-percent mandate for ethanol blend in gasoline
seemed challenging as well because of the lack of capacity of existing sugarcane
distilleries, low productivity, and high production costs. Our country aims to be self-
sufficient and lessen the imports of fuel but with the concerns mentioned, Philippines
would likely remain to be a net importer of fuel. Unfortunately, the Biofuels Act has not
met its intended outcome yet.
MARIE - RA 9153
Q1: What is RA 9513 all about?
A: RA 9513 or The Renewable Energy Act of 2008 provides that the State shall:
(a) Accelerate the exploration and development of renewable energy resources such
as, but not limited to, biomass, solar, wind, hydro, geothermal and ocean energy
sources, including hybrid systems, to achieve energy self-reliance, through the
adoption of sustainable energy development strategies to reduce the country's
dependence on fossil fuels and thereby minimize the country's exposure to price
fluctuations in the international markets, the effects of which spiral down to almost all
sectors of the economy;
(b) Increase the utilization of renewable energy by institutionalizing the development of
national and local capabilities in the use of renewable energy systems, and promoting
its efficient and cost-effective commercial application by providing fiscal and nonfiscal
incentives;
(c) Encourage the development and utilization of renewable energy resources as tools
to effectively prevent or reduce harmful emissions and thereby balance the goals of
economic growth and development with the protection of health and the environment;
and
(d) Establish the necessary infrastructure and mechanism to carry out the mandates
specified in this Act and other existing laws.
Q2: How does the government intend to implement this to maximize the
utilization?
A: This law calls for all stakeholders in the electric power industry shall contribute
to the growth of the renewable energy industry of the country. The National Renewable
Energy Board (NREB), created under Section 27 of this Act, shall set the minimum
percentage of generation from eligible renewable energy resources and determine to
which sector RPS shall be imposed on a per grid basis within one (1) year from the
effectivity of this Act. To accelerate the development of emerging renewable energy
resources, a feed-in tariff system for electricity produced from wind, solar, ocean, run-
of-river hydropower and biomass is hereby mandated. Towards this end, the ERC in
consultation with the National Renewable Energy Board (NREB) created under Section
27 of this Act shall formulate and promulgate feed-in tariff system rules within one (1)
year upon the effectivity of this Act which shall include, but not limited to the following:
(a) Priority connections to the grid for electricity generated from emerging renewable
energy resources such as wind, solar, ocean, run-of-river hydropower and biomass
power plants within the territory of the Philippines;
(b) The priority purchase and transmission of, and payment for, such electricity by the
grid system operators;
(c) Determine the fixed tariff to be paid to electricity produced from each type of
emerging renewable energy and the mandated number of years for the application of
these rates, which shall not be less than twelve (12) years;
(d) The feed-in tariff to be set shall be applied to the emerging renewable energy to be
used in compliance with the renewable portfolio standard as provided for in this Act and
in accordance with the RPS rules that will be established by the DOE.
In terms of compliance, the DOE shall establish the REM and shall direct PEMC to
implement changes to the WESM Rules in order to incorporate the rules specific to the
operation of the REM under the WESM.
The PEMC shall, under the supervision of the DOE, establish a Renewable Energy
Registrar within one (1) year from the effectivity of this Act and shall issue, keep and
verify RE Certificates corresponding to energy generated from eligible RE facilities.
Such certificates will be used for compliance with the RPS. For this purpose, a
transaction fee, equal to half of what PEMC currently charges regular WESM players,
may be imposed by PEMC.
Moreover, the DOE shall establish a Green Energy Option program which provides
end-users the option to choose RE resources as their sources of energy. In consultation
with the NREB, the DOE shall promulgate the appropriate implementing rules and
regulations which are necessary, incidental or convenient to achieve the objectives set
forth herein.
Upon the determination of the DOE of its technical viability and consistent with the
requirements of the green energy option program, end users may directly contract from
RE facilities their energy requirements distributed through their respective distribution
utilities.
Consistent herewith, TRANSCO or its successors-in-interest, DUs, PEMC and all
relevant parties are hereby mandated to provide the mechanisms for the physical
connection and commercial arrangements necessary to ensure the success of the
Green Energy Option. The end-user who will enroll under the energy option program
should be informed by way of its monthly electric bill, how much of its monthly energy
consumption and generation charge is provided by RE facilities.
Q3: This sounds challenging, how does the government encourage compliance?
A: To boost compliance, the government offers incentives to renewable energy
developers and these are:
(a) Income Tax Holiday (ITH) - For the first seven (7) years of its commercial operations,
the duly registered RE developer shall be exempt from income taxes levied by the
national government.
Additional investments in the project shall be entitled to additional income tax
exemption on the income attributable to the investment: Provided, That the discovery
and development of new RE resource shall be treated as a new investment and shall
therefore be entitled to a fresh package of incentives: Provided, further, That the
entitlement period for additional investments shall not be more than three (3) times the
period of the initial availment of the ITH.
(b) Duty-free Importation of RE Machinery, Equipment and Materials - Within the first
ten (10) years upon the issuance of a certification of an RE developer, the importation
of machinery and equipment, and materials and parts thereof, including control and
communication equipment, shall not be subject to tariff duties:Provided, however, That
the said machinery, equipment, materials and parts are directly and actually needed
and used exclusively in the RE facilities for transformation into energy and delivery of
energy to the point of use and covered by shipping documents in the name of the duly
registered operator to whom the shipment will be directly delivered by customs
authorities: Provided, further, That endorsement of the DOE is obtained before the
importation of such machinery, equipment, materials and parts are made.
Endorsement of the DOE must be secured before any sale, transfer or disposition of
the imported capital equipment, machinery or spare parts is made: Provided, That if
such sale, transfer or disposition is made within the ten (10)-year period from the date
of importation, any of the following conditions must be present:
(i) If made to another RE developer enjoying tax and duty exemption on imported capital
equipment;
(ii) If made to a non-RE developer, upon payment of any taxes and duties due on the
net book value of the capital equipment to be sold;
(iii) Exportation of the used capital equipment, machinery, spare parts or source
documents or those required for RE development; and
(iv) For reasons of proven technical obsolescence.
When the aforementioned sale, transfer or disposition is made under any of the
conditions provided for in the foregoing paragraphs after ten (10) years from the date
of importation, the sale, transfer or disposition shall no longer be subject to the payment
of taxes and duties;
(c) Special Realty Tax Rates on Equipment and Machinery. - Any law to the contrary
notwithstanding, realty and other taxes on civil works, equipment, machinery, and other
improvements of a Registered RE Developer actually and exclusively used for RE
facilities shall not exceed one and a half percent (1.5%) of their original cost less
accumulated normal depreciation or net book value: Provided, That in case of an
integrated resource development and generation facility as provided under Republic
Act No. 9136, the real property tax shall only be imposed on the power plant;
to a cash generation-based incentive per kilowatt hour rate generated, equivalent to
fifty percent (50%) of the universal charge for power needed to service missionary
areas where it operates the same, to be chargeable against the universal charge for
missionary electrification;
(i) Tax Exemption of Carbon Credits. - All proceeds from the sale of carbon emission
credits shall be exempt from any and all taxes;

(d) Net Operating Loss Carry-Over (NOLCO). - The NOLCO of the RE Developer during
the first three (3) years from the start of commercial operation which had not been
previously offset as deduction from gross income shall be carried over as a deduction
from gross income for the next seven (7) consecutive taxable years immediately
following the year of such loss: Provided, however, That operating loss resulting from
the availment of incentives provided for in this Act shall not be entitled to NOLCO;
(e) Corporate Tax Rate. - After seven (7) years of income tax holiday, all RE Developers
shall pay a corporate tax of ten percent (10%) on its net taxable income as defined in
the National Internal Revenue Act of 1997, as amended by Republic Act No. 9337.
Provided, That the RE Developer shall pass on the savings to the end-users in the form
of lower power rates.
(f) Accelerated Depreciation. - If, and only if, an RE project fails to receive an ITH before
full operation, it may apply for Accelerated Depreciation in its tax books and be taxed
based on such: Provided, That if it applies for Accelerated Depreciation, the project or
its expansions shall no longer be eligible for an ITH. Accelerated depreciation of plant,
machinery, and equipment that are reasonably needed and actually used for the
exploration, development and utilization of RE resources may be depreciated using a
rate not exceeding twice the rate which would have been used had the annual
allowance been computed in accordance with the rules and regulations prescribed by
the Secretary of the Department of Finance and the provisions of the National Internal
Revenue Code (NIRC) of 1997, as amended. Any of the following methods of
accelerated depreciation may be adopted:
(j) Tax Credit on Domestic Capital Equipment and Services. - A tax credit equivalent to
one hundred percent (100%) of the value of the value-added tax and custom duties that
would have been paid on the RE machinery, equipment, materials and parts had these
items been imported shall be given to an RE operating contract holder who purchases
machinery, equipment, materials, and parts from a domestic manufacturer for purposes
set forth in this Act: Provided, That prior approval by the DOE was obtained by the local
manufacturer: Provided, further, That the acquisition of such machinery, equipment,
materials, and parts shall be made within the validity of the RE operating contract.
Q4: These incentives only apply to companies engaged in developing renewable
energy?
A: No, in fact, all individuals and entities engaged in the plantation of crops and trees
used as biomass resources such as but not limited to jatropha, coconut, and sugarcane,
as certified by the Department of Energy, shall be entitled to duty-free importation and
be exempted from Value-Added Tax (VAT) on all types of agricultural inputs, equipment
and machinery such as, but not limited to, fertilizer, insecticide, pesticide, tractor,
trailers, trucks, farm implements and machinery, harvesters, threshers, hybrid seeds,
genetic materials, sprayers, packaging machinery and materials, bulk handling
facilities, such as conveyors and mini-loaders, weighing scales, harvesting equipment,
and spare parts of all agricultural equipment.

i) Declining balance method; and

ii) Sum-of-the years digit method

(g) Zero Percent Value-Added Tax Rate. - The sale of fuel or power generated from
renewable sources of energy such as, but not limited to, biomass, solar, wind,
hydropower, geothermal, ocean energy and other emerging energy sources using
technologies such as fuel cells and hydrogen fuels, shall be subject to zero percent
(0%) value-added tax (VAT), pursuant to the National Internal Revenue Code (NIRC)
of 1997, as amended by Republic Act No. 9337.

All RE Developers shall be entitled to zero-rated value added tax on its purchases of
local supply of goods, properties and services needed for the development,
construction and installation of its plant facilities.

This provision shall also apply to the whole process of exploring and developing
renewable energy sources up to its conversion into power, including but not limited to
the services performed by subcontractors and/or contractors.

(h) Cash Incentive of Renewable Energy Developers for Missionary Electrification. - A

renewable energy developer, established after the effectivity of this Act, shall be entitled