Electric Power Industry Reform Act of 2001 (EPIRA)

Republic Act No. 9136 was enacted on 8 June 2001 and took effect on 26 June 2001. It dismantled the vertically integrated National Power Corporation (NPC) monopoly and reorganised the Philippine electricity industry into four competitive and regulated sectors. EPIRA is the constitutional foundation for WESM, RCOA, ERC, TRANSCO, PSALM Corp., and the universal charge framework.

Ingest status: Complete — all chapters ingested (Ch. I–IX, §1–81).

Chapter I — Title and Declaration of Policy

Section 2 — Declaration of Policy

The State declared eleven policy objectives [RA 9136, Section 2, 2001]:

Section 4 — Key Definitions

Selected statutory definitions [RA 9136, Section 4, 2001]:

Chapter II — Organisation and Operation of the Electric Power Industry

Section 5 — Four-Sector Industry Model

EPIRA divided the electric power industry into four sectors [RA 9136, Section 5, 2001]:

Section 6 — Generation Sector

• Generation is declared a business affected with public interest but is not a public utility — no national franchise required [RA 9136, Section 6, 2001]
• New generation companies must secure a Certificate of Compliance from ERC and health, safety and environmental clearances before operating
• Generation prices are not subject to ERC regulation after retail competition and open access take effect, except as otherwise provided
• Sales of generated power are VAT zero-rated
• ERC may require generation companies to submit financial statements to determine existence of market power abuse

Section 7 — Transmission Sector

• Transmission is a regulated common carrier business subject to ERC rate-making powers [RA 9136, Section 7, 2001]
• ERC sets voltage standards distinguishing transmission from subtransmission; pending new standards, the interim thresholds are:

Proviso: In Visayas, a 69-kV line not forming part of the main transmission grid and directly connected to a distribution utility substation is classified as subtransmission.

TRANSCO — Sections 8–21

Section 8 — Creation

TRANSCO was created to assume the electrical transmission function of NPC, including authority for planning, construction, and centralised operation and maintenance of high-voltage transmission facilities, grid interconnections, and ancillary services [RA 9136, Section 8, 2001].

Within six months of effectivity, all NPC transmission and subtransmission facilities, related assets, and the NPC nationwide transmission franchise transferred to TRANSCO. TRANSCO was to be wholly owned by PSALM Corp.

Subtransmission assets were to be operated by TRANSCO until transferred to qualified distribution utilities within two years of effectivity or the start of open access, whichever comes earlier. Electric cooperatives received concessional financing over 20 years for subtransmission acquisition; installment payments given first priority from net income of those facilities.

No third party other than TRANSCO, PSALM Corp., and connected distribution utilities may own transmission facilities [RA 9136, Section 8, 2001].

Section 9 — Functions and Responsibilities

TRANSCO’s mandated functions [RA 9136, Section 9, 2001]:

A generation company may develop dedicated point-to-point transmission for its own connection to the grid, subject to ERC authorisation. If required for competitive purposes, ownership transfers to TRANSCO at fair market value [RA 9136, Section 9, 2001].

Sections 10–16 — Corporate Governance

Corporate powers (Section 10): Standard powers including continuous succession, contracting, borrowing (bonds subject to Presidential approval; foreign loans per BSP rules), provident fund, and general corporation law powers [RA 9136, Section 10, 2001].

Board composition (Section 11): Chairman (DOF Secretary, ex officio) + six members: DOE Secretary, DENR Secretary, TRANSCO President, and three presidential appointees representing Luzon, Visayas and Mindanao. Presidential appointees serve six-year terms; vacancies filled for unexpired terms only. No board member or relative within the fourth civil degree may hold any interest in a generation company or distribution utility [RA 9136, Section 11, 2001].

Quorum and voting (Section 15): Four members constitute a quorum; majority of members present in a quorum approves resolutions [RA 9136, Section 15, 2001].

President (Section 16): Appointed by the President of the Philippines; serves as CEO; may delegate administrative duties; submits annual report to the Board and the President [RA 9136, Section 16, 2001].

Sections 17–20 — Financial Rules

[RA 9136, Sections 17–20, 2001]

Section 21 — TRANSCO Privatisation

Within six months, PSALM Corp. must submit a privatisation plan for endorsement by the Joint Congressional Power Commission and Presidential approval. The President directs PSALM Corp. to award transmission facilities through open competitive bidding, either as an outright sale or a 25-year concession (renewable for another 25 years) [RA 9136, Section 21, 2001].

The awardee must:

• Comply with the Grid Code and the approved TDP
• Be financially and technically capable with proven domestic and/or international experience as a leading transmission system operator with comparable capacity and coverage to the Philippines
• Provide performance and financial guarantees as required

Note: This provision was implemented via a 25-year Concession Agreement awarded in 2008 to the National Grid Corporation of the Philippines (NGCP) under RA 9511. See National Grid Corporation of the Philippines (NGCP) .

Section 22 — Distribution Sector

Distribution is a regulated common carrier business requiring a national franchise. It may be undertaken by private distribution utilities, electric cooperatives, LGUs, and other duly authorised entities, subject to ERC regulation [RA 9136, Section 22, 2001].

Section 23 — Functions of Distribution Utilities

A distribution utility (DU) must [RA 9136, Section 23, 2001]:

• Provide distribution services and open, non-discriminatory access to all end-users within its franchise area consistent with the Distribution Code
• Impose and collect ERC-approved distribution wheeling charges and connection fees
• Supply electricity in the least-cost manner to its captive market at ERC-approved retail rates
• Pursue structural and operational reforms (e.g. joint actions with other DUs) after due notice and public hearing, subject to ERC guidelines
• Submit a compliance statement on technical specifications and performance standards to ERC; non-compliant DUs must submit a plan to comply within three years
• Submit annual distribution development plans to DOE (ECs submit through NEA)
• Provide universal service within the entire franchise area over a reasonable time, including unviable areas, as a social obligation

DUs may exercise the power of eminent domain subject to constitutional requirements [RA 9136, Section 23, 2001].

Sections 24–26 — Rates and Related Businesses

[RA 9136, Sections 24–26, 2001]

Section 27 — Franchising Power

The power to grant franchises for transmission and distribution is vested exclusively in Congress. Existing franchises continue to their full term. EC franchise renewals and cancellations remain with the NEA for five years after enactment [RA 9136, Section 27, 2001].

Section 28 — De-Monopolisation and Shareholding Dispersal

No person or entity (including directors, officers, stockholders and related interests) may hold more than 25% voting shares in a distribution utility unless the utility or its controlling stockholder is already listed on the Philippine Stock Exchange (PSE). Small DUs (peak demand ≤ 10 MW) must achieve PSE listing within five years of enactment; new controlling stockholders must list within five years of acquisition. This section does not apply to electric cooperatives [RA 9136, Section 28, 2001].

Section 29 — Supply Sector

Supply to the contestable market is a business affected with public interest but is not a public utility — no national franchise required. All suppliers (except DUs and ECs within their franchise areas) must obtain an ERC licence demonstrating technical capability, financial capability, and creditworthiness. Prices to the contestable market are not subject to ERC regulation. Suppliers are subject to anti-competitive behaviour rules and must identify and segregate supplier charge components in consumer bills [RA 9136, Section 29, 2001].

Section 30 — Wholesale Electricity Spot Market (WESM)

DOE shall establish the WESM within one year of effectivity. DOE and industry participants jointly formulate the detailed market rules. The price determination methodology is subject to ERC approval [RA 9136, Section 30, 2001].

Market rules must provide procedures for [RA 9136, Section 30, 2001]:

Market operator: Initially an autonomous group under TRANSCO administrative supervision; within one year after WESM launch, an independent entity is formed and the functions, assets and liabilities transfer to it — ending TRANSCO’s administrative supervision. (This became PEMC, later replaced by IEMOP in 2018.) All GenCos, DUs, suppliers, bulk consumers/end-users authorised by ERC are eligible members [RA 9136, Section 30, 2001].

NEA may act as guarantor for EC/small DU purchases in the WESM; NEA’s authorised capital stock increased to PhP15 billion for this purpose [RA 9136, Section 30, 2001]. ERC may suspend WESM during national/international security emergencies or natural calamities.

See Wholesale Electricity Spot Market (WESM) .

Section 31 — Retail Competition and Open Access (RCOA)

Retail competition and open access on distribution wires shall be implemented not later than three years from effectivity, subject to all five of the following conditions being met [RA 9136, Section 31, 2001]:

Contestable customer thresholds upon implementation [RA 9136, Section 31, 2001]:

Electric cooperatives: RCOA not earlier than five years from effectivity. See Retail Competition and Open Access (RCOA) .

Sections 32–33 — Stranded Debt and Contract Cost Recovery

NPC stranded debt (Section 32): Unpaid NPC financial obligations. The national government directly assumes a portion not exceeding PhP200 billion. ERC verifies reasonable amounts and determines recovery manner and duration: not shorter than 15 years nor longer than 25 years. Annual ERC true-up review adjusts the recovery charge for under/over-recovery. Stranded cost recovery must appear as a separate line item in consumer bills [RA 9136, Section 32, 2001].

NPC stranded contract costs (Section 32): Excess of contracted cost of eligible IPP contracts over actual market selling price, for ERB-approved contracts as of 31 December 2000.

DU stranded contract costs (Section 33): DUs must file notice of intent to recover within one year of the start of open access; failure to file disqualifies recovery. DUs have a duty to mitigate by: (a) reducing existing IPP contracts to average buying price of other land-based generators; and (b) submitting to annual ERC earnings reviews, using excess earnings above authorised return to reduce contract book value. Recovery duration: 15–25 years [RA 9136, Section 33, 2001].

Section 34 — Universal Charge

A non-bypassable universal charge, determined by ERC, is imposed on all electricity end-users for five purposes [RA 9136, Section 34, 2001]:

Collection and remittance: Monthly collection by DUs and TRANSCO; remitted to PSALM Corp. on or before the 15th of the succeeding month, net of any amount due to the DU. Self-generating entities not connected to a DU remit directly to TRANSCO. PSALM Corp. administers a Special Trust Fund and disburses within ERC-determined periods [RA 9136, Section 34, 2001].

See Universal Charge for Missionary Electrification (UC-ME) .

Section 35 — Indigenous Energy Royalties

The President shall reduce royalties, returns and taxes on indigenous energy sources (including natural gas and geothermal steam) to achieve parity with rates for imported coal, crude oil, bunker fuel and other imported fuels. ERC shall forthwith reduce power rates from indigenous sources accordingly [RA 9136, Section 35, 2001].

Section 36 — Unbundling

Within six months of effectivity [RA 9136, Section 36, 2001]:

• NPC files revised rates with ERC unbundling transmission from generation; removes inter-grid and intra-grid cross-subsidies
• Each DU files revised rates unbundling distribution wheeling from retail; removes inter-class subsidies

Within six months of submission, ERC notifies approval. All industry participants must functionally and structurally unbundle business activities and rates in accordance with the four-sector model (Section 5).

Chapter III — Role of the Department of Energy

Section 37 — Powers and Functions of the DOE

Key DOE functions added or expanded by EPIRA [RA 9136, Section 37, 2001]:

Chapter IV — Regulation of the Electric Power Industry

Section 38 — Creation of the ERC

The Energy Regulatory Commission (ERC) was created as an independent, quasi-judicial regulatory body, replacing the abolished Energy Regulatory Board (ERB) [RA 9136, Section 38, 2001].

Composition: Chairman + four members, appointed by the President of the Philippines.

Qualifications: Natural-born citizens, permanent residents, good moral character, at least 35 years old, recognised competence in energy, law, economics, finance, commerce or engineering with at least three years of distinguished experience. At minimum: one member must be a Philippine Bar member with ≥10 years active practice; one must be a CPA with ≥10 years active practice [RA 9136, Section 38, 2001].

Chairman: Must be a member of the Philippine Bar; serves as Chief Executive Officer of the Commission.

Terms: Seven years, non-renewable; no member may serve more than seven years total.

Security of tenure: Members may not be suspended or removed except for just cause as specified by law [RA 9136, Section 38, 2001].

Conflict of interest: Members and relatives within the fourth civil degree must divest all interests in energy sector entities upon assumption of office.

Quorum and voting: Three members constitute a quorum; majority (two of three present) for most decisions; three affirmative votes required for fixing rates and tariffs [RA 9136, Section 38, 2001].

Section 39 — Compensation

ERC personnel and commissioners exempt from RA 6758 (Salary Standardization Law). Initial compensation parity [RA 9136, Section 39, 2001]:

Upon completion of term or retirement eligibility, commissioners receive the same retirement benefits and privileges as SC Presiding/Associate Justices respectively.

Section 43 — Functions of the ERC

The ERC shall promote competition, encourage market development, ensure customer choice, and penalise abuse of market power. Key functions [RA 9136, Section 43, 2001]:

All ERC hearings on rates or fees must be published at least twice in two successive weeks in two newspapers of nationwide circulation [RA 9136, Section 43, 2001].

Section 45 — Cross-Ownership, Market Power Abuse and Anti-Competitive Behaviour

Ownership prohibitions [RA 9136, Section 45, 2001]:

• No GenCo, DU, or their subsidiaries, affiliates, stockholders or officials (within 4th civil degree) may hold any interest in TRANSCO or its concessionaire — and vice versa
• No TRANSCO/concessionaire officer or director may simultaneously be an officer or director of any GenCo, DU, or supplier (except ex officio government representatives)

ERC-enforced market power safeguards [RA 9136, Section 45, 2001]:

“Related group” includes a person’s business interests, subsidiaries, affiliates, and directors, officers or relatives within the fourth civil degree [RA 9136, Section 45, 2001].

Grid basis: Luzon, Visayas and Mindanao are three separate grids; ERC may modify this definition when grids become sufficiently interconnected.

Section 46 — Fines and Penalties

Appeals: factual disputes → Court of Appeals; legal questions → directly to the Supreme Court. Administrative sanctions do not preclude criminal actions [RA 9136, Section 46, 2001].

Chapter V — Privatisation of NPC Assets

Section 47 — NPC Privatisation Guidelines

Except for SPUG assets, all NPC generation assets, real estate, disposable assets and IPP contracts shall be privatised. PSALM Corp. must submit a total privatisation plan within six months for Joint Congressional Power Commission endorsement and Presidential approval. Key guidelines [RA 9136, Section 47, 2001]:

Section 48 — NPC Board of Directors

The NPC Board was immediately reconstituted upon EPIRA’s passage. New composition [RA 9136, Section 48, 2001]: Secretary of Finance (Chairman), Secretary of Energy, Secretary of Budget and Management, Secretary of Agriculture, NEDA Director-General, Secretary of Environment and Natural Resources, Secretary of Interior and Local Government, Secretary of Trade and Industry, and NPC President.

Chapter VI — Power Sector Assets and Liabilities Management

Section 49 — Creation of PSALM Corp.

A government-owned and controlled corporation named the Power Sector Assets and Liabilities Management Corporation (PSALM Corp.) was created to take ownership of all existing NPC generation assets, liabilities, IPP contracts, real estate and other disposable assets. All outstanding NPC loan obligations, bonds, securities and indebtedness transferred to PSALM Corp. within 180 days of EPIRA’s approval [RA 9136, Section 49, 2001]. See Power Sector Assets and Liabilities Management Corporation (PSALM) .

Section 50 — Purpose and Corporate Life

PSALM Corp.’s principal purpose is to manage the orderly sale, disposition and privatisation of NPC generation assets, real estate, disposable assets and IPP contracts, with the objective of liquidating all NPC financial obligations and stranded contract costs optimally [RA 9136, Section 50, 2001].

Corporate life: 25 years from effectivity — i.e. until 26 June 2026. Upon expiration, all remaining assets, moneys, properties and outstanding liabilities revert to and are assumed by the National Government [RA 9136, Section 50, 2001].

Note: PSALM Corp.’s 25-year term expired June 2026. As of 2023, PSALM was preparing a restructuring plan for a corporate life extension [PEP 2023-2050 Vol. III, p.49, 2023].

Section 51 — Powers

PSALM Corp.’s principal powers [RA 9136, Section 51, 2001]:

Section 52 — Board Composition and Quorum

Board composition [RA 9136, Section 52, 2001]: Secretary of Finance (Chairman), Secretary of Budget and Management, Secretary of Energy, NEDA Director-General, Secretary of Justice, Secretary of Trade and Industry, and PSALM Corp. President (ex officio).

Quorum: Four members; decision requires majority of three members present in a quorum [RA 9136, Section 52, 2001].

Sections 53–55 — Governance and Property

• President (§53): Appointed by the President of the Philippines; serves as CEO; may delegate administrative duties
• Salary exemption (§54): PSALM Corp. salaries exempt from RA 6758; fixed by the Board
• Property (§55): Includes NPC generation assets, IPP contracts, real estate, privatisation proceeds, BOT residual assets, National Government transfers, UC stranded debt proceeds, NPC and TRANSCO net profits, official grants and donations

Chapter VII — Promotion of Rural Electrification

Section 57 — Conversion of Electric Cooperatives

ECs were given the option to convert to either: (a) a stock cooperative under the Cooperatives Development Act; or (b) a stock corporation under the Corporation Code. No existing EC privilege or right under PD 269 is removed by this provision [RA 9136, Section 57, 2001].

Section 58 — NEA Additional Mandate

Under EPIRA, NEA was given three additional mandates beyond its rural electrification mandate [RA 9136, Section 58, 2001]:

1. Prepare ECs for operating and competing in the deregulated electricity market within five years — specifically for open access and retail wheeling
2. Strengthen the technical capability and financial viability of rural ECs
3. Review and upgrade EC regulatory policies to enhance their viability as electric utilities

NEA remains under DOE supervision and continues to exercise functions under PD 269 (as amended by PD 1645) insofar as consistent with EPIRA.

Section 59 — Alternative Electric Service for Isolated Villages

The provision of electric service in remote and unviable villages that the franchised DU is unable to serve for any reason is opened to other qualified third parties (QTPs) [RA 9136, Section 59, 2001].

Note: Section 59 is the statutory precursor to the Microgrid Systems Act (RA 11646, 2022), which replaced QTPs with a formal Microgrid Service Provider (MGSP) framework. See Digest: RA 11646 — Microgrid Systems Act of 2022 and Microgrid Policy and Off-Grid Electrification .

Section 60 — Assumption of EC Debts

All outstanding financial obligations of ECs to NEA and other government agencies, incurred for rural electrification, shall be assumed by PSALM Corp. under a Presidential programme approved within one year and completed within three years of EPIRA’s effectivity [RA 9136, Section 60, 2001].

ERC must reduce EC rates commensurate with the savings from removal of loan amortisation payments. Any EC that transfers ownership or control of its assets, franchise or operations within five years of debt condonation must repay PSALM Corp. the total debt including accrued interest [RA 9136, Section 60, 2001].

Chapter VIII — General and Transition Provisions

Section 62 — Joint Congressional Power Commission

A Joint Congressional Power Commission (the “Power Commission”) was constituted upon EPIRA’s effectivity. Composed of 14 members: chairmen of the Senate and House Committees on Energy plus six members from each chamber [RA 9136, Section 62, 2001].

Key functions: set guidelines to monitor EPIRA implementation; endorse NPC privatisation plan; ensure transparency in bidding; review industry participant performance; recommend remedial legislation. The Power Commission exists for ten years from effectivity (i.e. until 26 June 2011), extendable by joint concurrent resolution [RA 9136, Section 62, 2001].

Note: Section 37 of RA 11285 (Energy Efficiency and Conservation Act, 2019) renamed the Joint Congressional Power Commission to the Joint Congressional Energy Commission, which also exercises oversight over RA 11285 implementation [RA 11285, Section 37, 2019].

Section 63 — Separation Benefits

Government employees displaced by the electricity restructuring and NPC privatisation are entitled to either: (a) separation pay under existing law; or (b) a separation plan of one and one-half months’ salary per year of government service — whichever they choose. Privatised company manpower requirements must give preference to displaced personnel [RA 9136, Section 63, 2001].

Section 66 — Benefits to Host Communities

Obligations of generation companies and energy resource developers to host communities under the Local Government Code (Chapter II, Sections 289–294) and RA 7638 continue under EPIRA. The obligation under LGC Section 291 applies to privately-owned corporations utilising national wealth [RA 9136, Section 66, 2001]. See Energy Regulations 1-94 (ER 1-94) .

Section 67 — NPC Transition Supply Contracts

Within six months of effectivity, NPC files transition supply contracts with the ERC for approval, covering terms, conditions and rates for supply to DUs during the transition period. Transition contracts must not extend beyond one year from the introduction of open access [RA 9136, Section 67, 2001].

Section 70 — Missionary Electrification

Notwithstanding NPC asset divestment and privatisation, NPC remains a National Government GOCC to perform missionary electrification through SPUG, responsible for power generation and associated delivery systems in areas not connected to the transmission system. Funded from SPUG sales revenues and the Universal Charge missionary electrification component [RA 9136, Section 70, 2001]. See National Power Corporation (NPC) .

Section 71 — Electric Power Crisis Provision

Upon the President’s determination of an imminent shortage of electricity supply, Congress may — through a joint resolution — authorize the establishment of additional generating capacity under such terms and conditions as it may approve [RA 9136, Section 71, 2001]. This is EPIRA’s standby emergency-capacity mechanism: it keeps the power to contract new capacity in a supply crisis with Congress (by joint resolution), not with the Executive acting alone.

Section 72 — Mandated Rate Reduction

Upon effectivity of EPIRA, residential end-users were granted a rate reduction of PhP0.30 per kilowatt-hour from NPC rates, reflected as a separate item in consumer billing [RA 9136, Section 72, 2001].

Section 73 — Lifeline Rate

A socialized pricing mechanism called the Lifeline Rate for marginalized end-users shall be set by the ERC. The Lifeline Rate is exempt from the cross-subsidy phase-out under EPIRA for a period of ten years, unless extended by law. ERC determines both the level of consumption eligible and the rate, after due notice and hearing [RA 9136, Section 73, 2001].

Note: The ten-year exemption was extended indefinitely to 2051 by RA 11552, signed 27 May 2021. See Lifeline Rate .

Section 74 — Cross-Subsidy Phase-Out

Cross subsidies — within a grid, between grids, and between customer classes — shall be phased out within three years of the ERC establishing the Universal Charge. Cross-subsidy levels must be made transparent and identified separately in consumer billing [RA 9136, Section 74, 2001].

ERC may extend the phase-out period by a maximum of one year upon finding that immediate removal would have a material adverse effect on the public interest (particularly residential end-users) or an immediate, irreparable and adverse financial effect on a DU [RA 9136, Section 74, 2001].

Chapter IX — Final Provisions

Section 77 — Implementing Rules and Regulations

DOE shall promulgate the IRR within six months of effectivity, in consultation with relevant government agencies, industry participants, NGOs and end-users, subject to approval by the Joint Congressional Power Commission [RA 9136, Section 77, 2001].

Section 78 — Injunction

Implementation of EPIRA shall not be restrained or enjoined except by an order issued by the Supreme Court of the Philippines [RA 9136, Section 78, 2001].

Section 80 — Applicability and Repealing Clause

The following laws continue in force except insofar as inconsistent with EPIRA [RA 9136, Section 80, 2001]:

• CA 146 (Public Service Act, as amended)
• RA 6395 (NPC Charter, as amended)
• PD 269 (National Electrification Decree, as amended)
• RA 7638 (Department of Energy Act of 1992)
• EO 172 (creating the ERB, as amended)
• RA 7832 (Anti-Electricity Pilferage Act of 1994)

Specifically repealed or modified: Section 11(c) of RA 7916 (as amended) and Section 5(f) of RA 7227 regarding electric power; PD 40 and all other laws, decrees, rules and regulations inconsistent with EPIRA [RA 9136, Section 80, 2001].

Section 81 — Effectivity

EPIRA took effect fifteen days after publication in at least two national newspapers of general circulation. Signed 8 June 2001; effective 26 June 2001 [RA 9136, Section 81, 2001].

Full text: Cleaned copy