Implementing Rules and Regulations of RA 9136 (EPIRA IRR)

Full title: Rules and Regulations to Implement Republic Act No. 9136, entitled “Electric Power Industry Reform Act of 2001” Issued by: Department of Energy, in consultation with ERC, DOF, NEA, NPC, DTI, DOJ, DBM, and PSALM Date: February 27, 2002 Approved by: Joint Congressional Power Commission Authority: RA 9136 (EPIRA) Sections 37 and 77 Source: raw/_pdftotext/laws/ra-9136-irr.txt (100 pages, 7,026 lines)

The EPIRA IRR operationalises the structural reforms mandated by Digest: RA 9136 — Electric Power Industry Reform Act of 2001 (EPIRA) — translating statutory provisions into specific procedures, timelines, criteria, and responsibilities for each sector participant. It is the primary operational reference for EPIRA implementation.

Ingest status: Complete — all 12 passes merged.

Document Structure

(Rules 9, 14, 20, 26 absent — those section numbers do not exist in RA 9136.)

Rules 30–37 — Transition Contracts, EC Debts, Separation, End-User Protection, Penalties

Rule 30 — NPC Transition Supply Contracts (TSCs)

NPC files TSCs with ERC within 6 months of Act effectivity; ERC approval within 6 months of submission [RA 9136 IRR, Rule 30 §§1, 4(a), 2002-02-27].

• TSC term: not beyond 1 year from RCOA introduction [§3(b)]
• Based on DU projected demand less existing committed eligible contracts [§3(c)]
• DU generation component rates capped at TSC rates (updated monthly); excess generation costs disallowed except eligible contracts and mandated WESM purchases [§§3(f), 5]
• TSCs assignable to NPC successor Generation Companies [§3(e)]

Rule 31 — Debts of Electric Cooperatives

All EC obligations to NEA and other government agencies (as of 26 June 2001) for Rural Electrification Program → assumed by PSALM per President-approved program within 1 year; completed within 3 years of Act [§3].

• Includes: principal + interest + surcharges + penalties; booked by NEA, validated by COA [§3]
• Other creditor agencies: DBP, LBP, APT/PMO, NPC, DOE, LGUs [§4]
• EC that transfers ownership/control within 5 years of condonation must repay PSALM in full [§5]
• ERC ensures rate reduction for ECs proportional to removed amortization; NEA assists ECs in formulating the corresponding rate adjustment [§6]
• NEA renders reports to PSALM; PSALM conducts final audit before assumption [§7]

Rule 32 — Fiscal Prudence

New positions, salary/benefit increases for TRANSCO and PSALM personnel (and their Board members) require President of Philippines approval [Rule 32].

Rule 33 — Separation Benefits

Applies to all NatGov employees as of 26 June 2001 displaced/separated by restructuring or NPC privatization. Covers: DOE, ERB, NEA, NPC [§§1–2].

• Benefit: statutory separation pay or 1.5 months’ salary per year of service, whichever is higher; minimum 1 year of service [§3(a)]
• Funding: GSIS or corporate funds of NEA/NPC; DOE/ERB from GSIS or general fund; Buyer/Concessionaire not liable [§4]
• Displaced employees have preferential hiring right in new/privatized entities if qualified [§5]
• DOLE implements re-training/job counseling/placement
• Guidelines issued within 90 days of Rules effectivity [§6]

Rule 34 — Education and Protection of End-Users

DOE leads consumer education (in coordination with ERC, NPC, NEA, DepEd, DTI, PIA, NGOs) on industry restructuring, RCOA, competitive suppliers, itemized billing, stranded costs [§2].

ERC ensures consumer choice and protection: speedy complaint resolution; permanent consumer complaint desk in ERC and all utilities; rate notices published in 2 newspapers of nationwide circulation for 2 successive weeks; posted on ERC website [§3].

Rule 35 — Fines and Penalties

ERC administrative sanctions do not preclude criminal action. Appeals: questions of fact → Court of Appeals; questions of law → Supreme Court directly. Settlements (consented decree/voluntary compliance) not admissible as evidence [Rule 35].

Rules 36–37 — Separability and Effectivity

• Rule 36: Standard separability clause
• Rule 37: Effective 15th day from publication in Official Gazette or 2 newspapers; signed February 27, 2002, Fort Bonifacio, Taguig by DOE Secretary Vicente S. Pérez Jr.; approved by Joint Congressional Power Commission (Co-Chairs: Sen. Cayetano + Rep. Badelles)

Rules 24–29 — Crisis, IPP Review, Environmental and Host Community Provisions

Rule 24 — Electric Power Crisis Provision

Upon President’s determination of imminent electricity shortage, Congress may authorize additional generation capacity by joint resolution [RA 9136 IRR, Rule 24, 2002-02-27].

Rule 25 — Review of IPP Contracts

Inter-agency committee: DOF Secretary (Chair), DOJ Secretary, NEDA Director-General. Immediately reviews all IPP contracts upon Act effectivity. Grossly disadvantageous or onerous contracts → arbitration clauses or Philippine legal action. PSALM must diligently seek to reduce stranded costs [Rule 25].

Rule 26 — Renegotiation of PNOC-EDC/NPC Agreements

ERC reviews all power purchase and energy conversion agreements between PNOC-EDC and NPC (including Palinpinon, Tongonan, Mt. Apo geothermal complexes) within 3 months of Act effectivity. ERC amends to remove hidden costs/extraordinary mark-ups. All savings passed to End-users. Amended contracts → Power Commission approval [Rule 26].

Rule 27 — Royalties and Tax Rates for Indigenous Energy Resources

President reduces royalties/taxes on indigenous energy (natural gas, geothermal steam) for parity with imported coal/crude/bunker fuel rates. DOF recommends EO within 30 days of Rules effectivity. ERC to reduce rates for power from indigenous sources [Rule 27].

Rule 28 — Environmental Protection

All participants in generation/distribution/transmission sectors comply with DENR environmental laws; must establish environmental guarantee fund where required [Rule 28].

Rule 29 — Benefits to Host Communities

Two parallel frameworks:

Under E.R. 1-94 (RA 7638):

• Rate: P0.01/kWh of total electricity sales for all applicable generation facilities (NPC spin-offs, privatized plants, BOT IPPs, DU-owned plants, self-generation, EZ facilities)
• Three funds: EF (electrification) 50% / DLF (development/livelihood) 25% / RWMHEEF (reforestation/watershed/health/environment) 25%
• Non-highly urbanized cities: EF 50% / DLF 25% / RWMHEEF 25%; highly urbanized cities: EF 75% / DLF 12.5% / RWMHEEF 12.5%
• Annual work programs submitted to DOE by March 15; DLF/RWMHEEF projects implemented within 1 year
• DOE administers trust accounts; NPC funds transferred to DOE within 120 days of Rules effectivity

Under Local Government Code §§289-294:

• Share = 1% of gross sales or 40% of national wealth taxes/royalties/fees, whichever is higher
• 80% of proceeds for electricity cost reduction (subsidy or non-subsidy schemes); 20% for development/livelihood
• Province allocation: 35% host barangay / 45% host municipality / 20% province; highly urbanized city: 35% barangay / 65% city
• Multi-LGU: 70% population + 30% land area of technically delineated resource
• DILG monitors compliance; COA yearly audit; non-compliance → non-remittance of royalty or non-release of LGU shares pending investigation

Rule 23 — Privatization of NPC Assets

Privatization plan: within 180 days of Act effectivity; Power Commission endorsement + President approval; Filipino participation encouraged [RA 9136 IRR, Rule 23 §§1, 4(b), 2002-02-27].

Scope [§2]:

• Generation/real estate/disposable assets of NPC (excluding SPUG)
• Transmission/subtransmission assets → TRANSCO (see Rule 22)
• IPP contracts: BOT Law (RA 6957 as amended by RA 7718) PPAs/ECAs

NPC inventory to PSALM within 120 days [§2(a)].

Key privatization rules [§4]:

• All assets sold by open public bidding [§4(d)]
• 70% privatization target: ≥70% of NPC Luzon/Visayas capacity within 3 years of Act or before RCOA; remainder by 8 years [§4(i)]
• Foreign investors: ≥75% of acquisition funds inwardly remitted + BSP registered [§4(b)]
• Multi-purpose hydro: NatGov may direct water use during shortage; water rights + safeguards transfer to buyers [§§4(e), 6]
• Agus and Pulangui complexes (Mindanao): excluded from initial privatization; transferred to PSALM; operated by NPC as separate business unit with own accounts; privatization not earlier than 10 years from Act; no BOT/BROT (except Agus III) [§§4(f), 9]
• Caliraya-Botocan-Kalayaan (CBK) pump storage: transferred to PSALM; NPC operates for 10 years [§4(h)]
• Geothermal: steamfields and plants sold together per complex (Tiwi-Makban, Leyte A&B, Tongonan, Palinpinon, Mt. Apo) [§4(g)]

Environmental charge: NPC retains P0.0025/kWh (part of UC) for watershed rehabilitation; annual DOE report [§6(c)].

Hydro plant governance [§6]: NWRB ensures irrigation/domestic water allocation; buyers inherit long-term water rights; NPC/PSALM/NIA responsible for dam structures + O&M agreement with private operator [§6(d)].

Post-Privatization NPC role: NPC may generate and sell only from undisposed PSALM assets; no new bilateral contracts with GenCos or Suppliers [§§4(k), 7].

Rules 21–22 — PSALM and TRANSCO

Rule 21 — PSALM

Creation: GOCC taking ownership of all NPC generation assets, liabilities, IPP contracts, and real estate; NPC must transfer within 180 days of Act approval [RA 9136 IRR, Rule 21 §1, 2002-02-27].

Corporate life: 25 years from Act effectivity; upon expiration all assets/moneys/liabilities revert to National Government; STF administration transfers to DOF [§4].

Board of Directors: DOF Secretary (Chair), DOE Secretary, DBM Secretary, NEDA Director-General, DOJ Secretary, DTI Secretary, PSALM President (ex-officio). Quorum: 4 members; decision by majority of 3 present at quorum [§§6, 8].

Revenue sources [§11]: NPC net profit; Agus/Pulangui EBITDA; TRANSCO net profit; privatization proceeds; UC proceeds; EC loan repayments; National Government transfers.

Powers include: May create SPVs; may operate generation assets directly (treated as Generation Company while doing so); may borrow/issue bonds; all borrowings must be paid by end of corporate life [§§5(n), 5(q), 5(k)].

PSALM exempt from Salary Standardization Law (RA 6758) [§10].

Rule 22 — TRANSCO

Creation: GOCC wholly owned by PSALM; created to assume NPC transmission facilities and nationwide franchise; NPC assets transferred to TRANSCO by 26 December 2001 [RA 9136 IRR, Rule 22 §§1, 2(b), 2002-02-27].

Board: DOF Secretary (ex-officio Chair), DOE Secretary, DENR Secretary, TRANSCO President, 3 presidential appointees (one per major Grid; one of whom = PSALM President). Board members must be professionals in engineering/finance/economics/law/business management; no interest in GenCo or DU [§4].

TRANSCO President: Appointed by Philippine President while TRANSCO is wholly PSALM-owned [§9(a)].

Eminent domain and exclusivity: TRANSCO’s eminent domain authority extends to its Buyer/Concessionaire and successors; no Person other than TRANSCO (or its Buyer/Concessionaire) may own transmission facilities [§3(k)].

Privatization (→ NGCP):

• PSALM submits privatization plan within 6 months of Act effectivity; Power Commission endorsement; President’s approval [§11(a)]
• Award via open competitive bidding: outright sale, Concession Contract, or other means
• Concession Contract term: 25 years + up to 25 more years (review-based); assets revert to TRANSCO on expiration/termination [§11(a)]
• Became NGCP in 2009 under RA 9511 with 25-year concession (2009–2034)

Subtransmission disposal:

• Must transfer to Qualified DUs within 2 years of Act effectivity or RCOA, whichever earlier [§13(b)]
• ECs: 20-year concessional financing from TRANSCO [§13(b)]
• No third party (other than PSALM, TRANSCO, connected DUs) may hold ownership in subtransmission entity [§13(c)]

TRANSCO exempt from Salary Standardization Law (RA 6758) [§10].

Rules 17–20 — Stranded Costs, Universal Charge, and Lifeline Rate

Rule 17 — Stranded Debts and Contract Costs Recovery

National Government assumption: National Government directly assumes NPC financial obligations transferred to PSALM up to PhP200,000,000,000 (PhP200B) [RA 9136 IRR, Rule 17 §4(a), 2002-02-27].

Recovery duration: Both NPC stranded debts/contract costs and DU eligible contract costs: not shorter than 15 years nor longer than 25 years [§§4(b)(ii), 5(e)].

Annual true-up: ERC conducts annual review to determine under- or over-recovery and adjusts UC charge accordingly [§3(b)].

DU eligible contracts: DU must file for stranded cost recovery within 1 year of RCOA start; failure to file = forfeiture [§5(a)].

DU mitigation obligations: DU must reduce IPP costs toward average land-based generation rates; submit annual earnings review using above-RORB earnings to reduce stranded costs [§5(c)].

DU reporting: DU submits quarterly reports to ERC on amounts recovered and the remaining balance of stranded costs [§5(g)].

Over-recovery: Excess remitted to Special Trust Fund (STF); remaining at end of period used to reduce electricity rates [§5(f)].

Rule 18 — Universal Charge

Coverage: UC must be established within 1 year of Act effectivity; collected from all End-users including self-generation entities — it is a non-bypassable charge [RA 9136 IRR, Rule 18 §1, 2002-02-27].

Six purposes [Rule 18 §2]:

1. NPC stranded debts and stranded contract costs (PSALM petitioner)
2. DU stranded contract costs of eligible contracts
3. Missionary Electrification (SPUG)
4. Equalization of taxes and royalties for indigenous/RE sources vs imported fuels
5. NPC environmental charge (P0.0025/kWh for watershed rehabilitation)
6. Cross-subsidy removal mitigation (NPC/PSALM and DUs)

Collection mechanics:

• DUs and Suppliers collect monthly from End-users
• Self-generation entities not connected to a DU: remit directly to TRANSCO
• DUs remit to PSALM by the 15th of the succeeding month [§5(a)]
• Self-generation facilities: 4-year deferment from UC imposition upon first imposition [§7]

Administration: PSALM administers all UC funds; STFs established in BTr or GFI (DOF-acceptable); separate STF for each purpose [§6(a)]. PSALM distributes to beneficiaries by the 20th of each month [§6(c)].

Annual petition cycle: Petitions filed by March 15 each year; first year deadline was 15 March 2002; ERC order by 26 June 2002 [§4(a–b)]. Over- or under-recovery is trued up per ERC rules [§4(f)].

Rules 19–20 — Mandated Residential Rebate and Lifeline Rate

• Mandated Residential Rebate (Rule 19): ERC monitors ERC Resolution 2001-04 (issued 26 July 2001); reduction shown as separate line item in bills
• Lifeline Rate (Rule 20): Socialized pricing for Marginalized End-users; ERC-set; each DU files petition recommending kWh/month threshold; ERC approves different levels per DU; exempted from cross-subsidy removal for 10 years (extended to 50 years by RA 11552, 2021) [Rule 20 §§1, 3(a), 2002-02-27]

Rules 15–16 — Rate Unbundling and Cross Subsidy Removal

Rule 15 — Unbundling of Rates

Rate base exclusions: Management inefficiencies may not be included — costs of project delays not due to force majeure, penalties and interest during construction, and other disallowances as determined by ERC [RA 9136 IRR, Rule 15 §3(c), 2002-02-27].

RORB methodology (if used):

• Asset revaluation: maximum once every 3 years by independent appraisal company
• Interest during construction: may be capitalized and included in rate base upon commissioning
• Interest expenses: not allowable deductions from permissible RORB
• Significant CAPEX investments added to rate base are subject to ERC verification of procurement transparency [§5(a)(v)]

Historical test year: 12 months ending 31 December 2000 [§6(c)].

Filing timeline: NPC and DUs file unbundled rates within 6 months of Act effectivity; ERC responds within 6 months of DU submission [§6(a–b)].

Customer billing: Bills must itemize: generation, transmission, distribution, supply, and other related charges [§5(b)].

Rule 16 — Removal of Cross Subsidies

Phase-out timeline: Cross subsidies phased out within 3 years from UC establishment; ERC may extend 1 additional year if removal would materially harm residential End-users or cause irreparable financial harm to a DU [RA 9136 IRR, Rule 16 §§1, 5, 2002-02-27]. If ERC does not grant an extension, all cross subsidies (between Grids, within a Grid, and between DU customer classes) cease at the end of the 3-year period [§5(e)].

Three types covered: Between Grids (NPC), within Grid between customer classes (NPC), between customer classes within each DU.

Pending phase-out: Cross subsidy rate shown as separate line item in customer billing; ERC establishes Cross Subsidy Charge recovered through Universal Charge [§4].

Lifeline Rate exemption: ERC-determined Lifeline Rate thresholds and rates exempted from cross-subsidy removal for 10 years from initial implementation [§6]. (Extended to 50 years by RA 11552, 2021.)

Rules 12–14 — RCOA, Missionary Electrification, Qualified Third Parties

Rule 12 — Retail Competition and Open Access (RCOA)

Timeline: Initial implementation no later than 3 years from Act effectivity (26 June 2004) [RA 9136 IRR, Rule 12 §1, 2002-02-27]. (Actual Luzon RCOA launched June 2012 after all conditions were met.)

Five conditions for ERC to declare RCOA [Rule 12 §3]:

1. WESM established (AGMO operational + WESM Market Rules in effect)
2. ERC approves unbundled transmission and distribution wheeling charges (within 1 year of Act)
3. Initial implementation of cross subsidy removal scheme
4. NPC privatization: ≥70% of total installed generating capacity in Luzon and Visayas
5. ≥70% of total NPC contracted energy output transferred to IPP Administrators

Contestable Market thresholds:

• Initial: End-users with monthly average peak demand ≥ 1 MW
• 2 years after initial implementation: reduced to 750 kW (Aggregators may serve at this level within Contiguous Areas)
• Subsequently: ERC evaluates annually and gradually reduces to household demand level
• ECs: RCOA not earlier than 5 years from Act effectivity (26 June 2006) [§4]

Rule 13 — Missionary Electrification

Mandate: SPUG responsible for power generation and associated power delivery in areas not connected to the transmission system [RA 9136 IRR, Rule 13 §1, 2002-02-27].

Funding: SPUG missionary area sales revenues + appropriate share of Universal Charge (ERC-determined) [§4(a)]. PSALM is responsible for financial monitoring and control of SPUG [§3(f)].

MEDP (Missionary Electrification Development Plan):

• DOE MEDP includes SPUG capital investment and operations, including new areas
• DOE must issue private capital participation guidelines within 90 days of IRR promulgation [§1(d)]

SPUG obligations:

• Prioritize Renewable Energy Resources wherever feasible [§3(c)]
• File unbundled rates with ERC [§3(d)]
• File UC petition with ERC [§3(e)]
• Endeavor to privatize generation facilities [§1(e)]
• Submit 5-year annual OPEX+CAPEX budget to ERC [§4(d)]
• Cease missionary electrification in any area upon interconnection with transmission system [§5(c)]

Rule 14 — Provision of Electricity by Qualified Third Parties

Annual DOE declaration: Every September, DOE declares all remote/Unviable Areas unable to be served within the following 3 years; consistent with PDP; open for third-party participation [§3].

Qualified third parties: DOE sets financial/technical/environmental criteria; preference for least-cost Renewable Energy Resources [§4].

DU obligation: If DU fails to serve an Unviable Area, ERC requires the DU to contract with a qualified third party [§5(a)].

ERC roles: Set permit guidelines and cost recovery rates for third parties in Unviable Areas [§6].

Rules 10–11 — Unbundling and Competition Safeguards

Rule 10 — Structural and Functional Unbundling

All Electric Power Industry Participants must structurally and functionally unbundle business activities into four sectors: generation, transmission, distribution, supply [RA 9136 IRR, Rule 10 §1, 2002-02-27]. ERC may relax the unbundling requirement for activities conducted in genuinely competitive markets [§2].

• Business Separation and Unbundling Plan (BSUP): Filed with ERC by 31 December 2002; ERC decision within 6 months of filing [§3(b), (d)]
• RCOA prerequisite: Any Electric Power Industry Participant that has not completed unbundling is prohibited from participating in Retail Competition and Open Access [§3(c)(iii)]
• EC deadline: ECs must unbundle by 26 June 2006 (start of RCOA in EC franchise areas) [§4(b)]

Rule 11 — Cross Ownership, Market Abuse, and Anti-Competitive Behavior

Cross-ownership prohibition (consolidation of Rules 5–8):

• GenCo, IPP Administrator, DU, Supplier — none may hold any interest in TRANSCO/Buyer/Concessionaire or Market Operator [§3(a)]
• TRANSCO/Buyer/Concessionaire — cannot hold any interest in GenCo, IPP Administrator, DU, or Supplier [§3(b)]
• PSALM exempted during NPC privatization period [§3(d)]

Market concentration caps [Rule 11 §4(a), 2002-02-27]:

• No company, Related Group, or IPP Administrator may own/operate/control more than:
  • 30% of installed generating capacity of any Grid, AND/OR
  • 25% of total national installed generating capacity
• PSALM/NPC exempted during privatization; isolated grids exempt

DU bilateral contract limits:

• DU may not source more than 50% of total demand from bilateral contracts with an Affiliate GenCo [§5(b)]
• First 5 years from WESM establishment: DU may not source more than 90% of total demand from bilateral contracts (WESM participation encouragement) [§6]

ERC Competition Rules mandate: Within 1 year of Act effectivity; must address market power abuse, cartelization, anti-competitive behavior, discrimination [§7(c)].

Prohibited practices under Competition Rules [§8]:

• Price fixing (including bid fixing, floors, ceilings, formulas)
• Output fixing or limitation
• Customer/territory division
• Tying (conditioning system access on purchasing generation/metering/billing services)
• Physical or economic withholding (using operating practices or bidding to restrict market supply)
• Discriminatory provision of regulated distribution/transmission services (favoring affiliates)
• Cross-subsidization (using regulated distribution revenues to reduce competitive service prices)

Rules 7–9 — Distribution, Supply, and WESM

Rule 7 — Distribution Sector

Guiding principle: Distribution = public utility, regulated common carrier, requiring a national franchise from Congress [RA 9136 IRR, Rule 7 §1, 2002-02-27].

Ownership limitations:

• No DU or its affiliates/stockholders/officers may hold interest in TRANSCO or IMO [§3(a)]
• Any Person’s voting shares in a DU capped at 25% (does not apply to PSE-listed DUs or ECs) [§3(b)]
• DUs must sell ≥15% common shares to the public within 5 years of Act effectivity (except PSE-listed) [§3(c)]

Key DU obligations:

• Provide universal service in franchise area, including Unviable Areas (different rates permitted in Unviable Areas) [§4(f)]
• Non-viable areas may transfer to another DU or open to Qualified Third Parties (Rule 14) [§6]
• Submit annual 5-year distribution development plan to DOE by March 15 each year; ECs via NEA [§4(p)]
• Collect UC from all End-users monthly; remit to PSALM by the 15th of the succeeding month [§4(l)]
• Structurally and functionally unbundle distribution from generation and supply [§4(b)]
• Related businesses: ≤50% of net income from rate-base assets used to reduce wheeling charges [§5(c)]

EC structural reforms:

• ECs may convert to Stock Cooperative (registered with CDA) or Stock Corporation (registered with SEC) via referendum [§7(c)(i–ii)]
• ECs not converting remain registered with NEA under PD 269 [§7(c)(iii)]
• EC franchise renewals/cancellations: remain with National Electrification Commission under NEA for 5 more years after Act effectivity [§8(c)]

Rule 8 — Supply Sector

Guiding principle: Supply = business affected with public interest; ERC license required for Contestable Market supply (exception: DUs within their own franchise area and EZ-authorized persons) [RA 9136 IRR, Rule 8 §1, 2002-02-27].

Who may become a Supplier (ERC license): GenCo or its Affiliate; DU Affiliate for Contestable Market; Aggregators; IPP Administrators; any ERC-authorized Person [§2(b)].

Ownership restriction: Suppliers and their affiliates may not hold any interest in TRANSCO/IMO [§3].

Key obligations: ERC license before supply; functional/structural unbundling; identify and segregate Supplier’s Charge components; comply with WESM Rules and Competition Rules [§4].

Rule 9 — Wholesale Electricity Spot Market (WESM)

Timeline: DOE must establish WESM within 1 year of Act effectivity (26 June 2002); Luzon launched July 2006, Visayas 2010, Mindanao January 2023 [RA 9136 IRR, Rule 9 §3, 2002-02-27].

AGMO → IMO succession:

• DOE constitutes AGMO initially; AGMO governed by equitable industry representation; DOE Secretary chairs [§7]
• TRANSCO provides administrative supervision to AGMO [§8]
• Within 1 year after WESM implementation, AGMO transfers functions/assets/liabilities to IMO (≥2 years independent market operator experience, jointly endorsed by DOE and industry) [§6(a)]. The IMO concept eventually became Independent Electricity Market Operator of the Philippines (IEMOP) in 2018.

WESM Rules: Jointly formulated by DOE and Electric Power Industry Participants; ERC approves price determination methodology; must cover Merit Order Dispatch, market-clearing price, admission/termination criteria, system emergency procedures, and amendment processes [§5].

Market Fees: Set by IMO, filed with and approved by ERC; published ≥3 months before WESM implementation [§9].

Market suspension: ERC may suspend WESM or declare temporary WESM failure in national/international security emergencies or natural calamities [§10].

Rules 5–6 — Generation and Transmission Sectors

Rule 5 — Generation Sector

Guiding principle: Generation is NOT a public utility; no national franchise required. Any qualified person may generate electricity [RA 9136 IRR, Rule 5 §1, 2002-02-27].

Certificate of Compliance (COC):

• All new Generation Facilities must obtain a COC from ERC before commercial operation [Rule 5 §4(a)]
• Existing facilities: owner must submit DOE/NPC accreditation, 3-year operational history, and company profile to ERC within 90 days of IRR effectivity; COC issued upon complete submission [Rule 5 §4(b)(i)]
• COC transfers with ownership; new owner registers with ERC rather than re-applying [Rule 5 §4(b)(ii)]

Ownership limitation: No GenCo, DU, or their affiliates/stockholders/officers may hold any interest in TRANSCO or its Buyer/Concessionaire, and vice versa. PSALM is exempted during the privatization period [Rule 5 §3].

Operating standards: Technical (Grid Code compliance), Financial (Grid Code financial standards), Environmental (applicable environmental laws) [Rule 5 §4(b)(i)–(iii)].

Generation rates:

• Pre-WESM/RCOA: subject to ERC regulation through retail rate and transition supply contracts [Rule 5 §4(e)]
• Post-WESM/RCOA: generation rates deregulated (not subject to ERC regulation), except for SPUG and isolated areas [Rule 5 §4(e)]

Generation VAT (original): Zero-rated (0% VAT) for generation company sales from EPIRA effectivity, through all stages until End-user. BIR to issue revenue regulation within 60 calendar days [Rule 5 §6(b)]. (Note: This provision was repealed by RA 9337 §24, effective November 2005.)

Point-to-point dedicated transmission: GenCo may own dedicated connection to Grid with ERC authorization, subject to TDP inclusion; must transfer to TRANSCO at fair market price if required for competitive purposes [Rule 5 §5].

Rule 6 — Transmission Sector

Guiding principle: Transmission is a public utility — regulated common electricity carrier; ERC sets rates [RA 9136 IRR, Rule 6 §1, 2002-02-27].

Ownership limitation: TRANSCO or its Buyer/Concessionaire and their stockholders/directors/officers may not hold any interest in any GenCo, DU, IPP Administrator, or Supplier [Rule 6 §3].

Initial voltage thresholds (pending ERC reclassification) [Rule 6 §5]:

Any line at the specified level serving an End-user = subtransmission; any line below the level serving a transmission function = transmission.

Subtransmission Asset disposal: TRANSCO must sell Subtransmission Assets to Qualified Distribution Utilities; if DU is not qualified or refuses, TRANSCO is deemed compliant [Rule 6 §8(e)].

TDP: TRANSCO prepares annually in consultation with Electric Power Industry Participants; submitted to DOE for integration into PDP and PEP; expansion plans require separate ERC approval (not to be unreasonably withheld) [Rule 6 §§8(a-b), 10].

TRANSCO profit remittance: Net profit remitted to PSALM within 90 days after each quarter, subject to annual reconciliation. Net privatization proceeds remitted to PSALM immediately [Rule 6 §8(c)].

Related businesses: TRANSCO may conduct related businesses; ≤50% of annual net income from rate-base assets must be used to reduce wheeling charges as determined by ERC [Rule 6 §11].

Grid reliability/security performance indicators: ERC-monitored Grid management standards cover ten indicators — interruption events, SAIFI, MAIFI, SAIDI, SISI, tripping incidents per 100 circuit-kilometers, automatic frequency operation (AFO) duration, time error, frequency violations, and voltage violations [Rule 6 §7(c)].

Rule 4 — Key Definitions

Rule 4 contains approximately 90 defined terms (a)–(vvvv). Operationally significant definitions not inferable from plain language [RA 9136 IRR, Rule 4, 2002-02-27]:

Rule 3 — Responsibilities of DOE, ERC, NPC, NEA, and PSALM

DOE (§1)

Eighteen specific functions [RA 9136 IRR, Rule 3 §1, 2002-02-27]:

• PEP: Develop and update annually; submit to Congress not later than September 15 each year; include policy direction toward privatisation and deregulation
• PDP: Prepare and update annually; integrate TDP (from TRANSCO), DU development plans, and NPC plans; incorporate in PEP
• TDP integration: After DOE approval of TRANSCO’s TDP, integrate with DU and NPC annual plans in PEP — noting that ERC has exclusive authority over Grid Code and Distribution Code
• WESM: Jointly with Electric Power Industry Participants, establish WESM and formulate detailed rules
• Reporting: Semi-annual progress report to the Power Commission on or before the last week of April and October each year; may require reports from industry participants with appropriate confidentiality protections

NPC (§2)

• Retain SPUG for missionary electrification in areas not connected to the transmission system; funded from SPUG sales revenues and Universal Charge [RA 9136 IRR, Rule 3 §2(a), 2002-02-27]
• Manage the environmental charge (P0.0025/kWh) for watershed rehabilitation nationwide [RA 9136 IRR, Rule 3 §2(b), 2002-02-27]
• Continue operating Agus and Pulangui complexes (owned by PSALM); may not incur new bilateral power purchase obligations [RA 9136 IRR, Rule 3 §2(c–d), 2002-02-27]

NEA (§3)

• Prepare ECs for Open Access and retail competition within five years of EPIRA’s effectivity [RA 9136 IRR, Rule 3 §3(a)(i), 2002-02-27]
• May act as WESM guarantor for EC and small DU electricity purchases; authorised capital stock increased to PhP15,000,000,000 for this purpose [RA 9136 IRR, Rule 3 §3(b), 2002-02-27]
• LGU billing recovery mechanism: NEA submits reports of uncollected EC billings from LGUs to the DBM, which effects withholding from the LGU’s Internal Revenue Allotment (IRA) per EO 190 (21 December 1999) — requires MOA between LGU and NEA and certification from the Municipal/City/Provincial Treasurer [RA 9136 IRR, Rule 3 §3(c), 2002-02-27]

ERC (§4)

Key procedural mandates [RA 9136 IRR, Rule 3 §4, 2002-02-27]:

PSALM (§5)

• Assumes all NPC financial obligations (loans, bonds, securities) and NPC assets (generation, IPP contracts, real estate) [RA 9136 IRR, Rule 3 §5(a), 2002-02-27]
• Formulates and implements NPC asset privatisation and debt liquidation programme [RA 9136 IRR, Rule 3 §5(b), 2002-02-27]
• Assumes all outstanding EC financial obligations to NEA and other government agencies arising from the Rural Electrification Program, per Presidential approval [RA 9136 IRR, Rule 3 §5(c), 2002-02-27]

Full text: Cleaned copy (pdftotext of the 100-page PDF; provenance gap closed 2026-07-26). Raw: pdftotext , OCR page-passes .