I,AW ON NATURAL RESOURCES

AND ENVIRONMENTAL LAW DEVELOPMENTS

No exemption shall be allowed on goods imported by the
concessionaire for his personal use or that of any others; nor for
sale or for re-export; and if any goods on which exemption has been
allowed be thus used or disposed of, the concessionaire is obliged to
make a report to the DENR Secretary to that effect and to pay such
import duty as is due.u3
a. Purpose of tax exemption
RA No. 387 was intended to encourage the exploitation, explo-
ration and development ofthe petroleum resources ofthe country by
giving it the necessary incentive in the form of tax exemptions. This
is the roison d etre for the generous grant of tax exemption to those
who would invest their financial resources towards the achievement
of this national economic goal.
In Commissioner of Customs v. Caltex (Phil.) Inc.,M respondent
Caltex (Phil.),
Inc. was granted by the then Secretary of Agriculture
and Natural Resources a petroleum refining concession with the right
to establish and operate a petroleum refinery in the municipalities
of Bauan and Batangas, province of Batangas. The concession made
the provisions of RA No. 387 as an integral part. In its operation,
Caltex (Phil.) Inc. used as basic material crude oil imported from
abroad. Customs duties were imposed on this imported crude oil
and so, Caltex sought for refund. The Court ofTax Appeals ordered
a refund. On petition for review, the Supreme Court held that
under Article 103 of the Act, the petroleum products imported by
respondent for its use during the construction of the refinery are
exempt from the customs duties and that gasoline and oil furnished
its drivers during the construction job
come within the import of the
words "material" or "supplies."
63Art.
103, lbi(/
6aSupra.
Chapter Vlll
DEPARTMENT OF ENERGY ACT OF 1992
(RePublic Act No. 7638)
A. Preliminnry
01. Law creating the Department of Energy-
RA No. 7638, or ttre
*Department
of Energy Act of 7992," ia
an Act creating the Department of Enerry, and aims to rationaliztl
the organization and functions of government agencies related to
enerry. Itwas approved on Decembet9,1992.
On December9,L992, Congress enacted RA No' 7638
(Depart-
ment ofEnerryAct of 1992)which created the Departmentof-Enorgy
to prepare, integrate, coordinate, supervise and control all plann'
p"o-gtr*., p.oiects, and activities of the government in relation
L J"""ry expioration, development, utilization, distribution und
"or*"*iiion.
The thrust of the Philippine energy program undor
the law is toward privatization of government agencies related kr
energy, deregulation ofthe power and enerry industry and reduction
of dependency on oil-fired plants. The law also aims to encourago
ffee and active participation and investment by the private,sector irr
all enerry activities. Siction 5(e) ofthe law states that "at the end ol'
four
(4)]ears from the effectivity of this Act, the Department shall,
opoo rpitoral ofthe President, institute the programs and timetabl.
oi a"r"g,l"tion of appropriate enerry projects and activities of th*
energ:y industry.'t
02- Declaration of
PolicY.
The law declares as the policy of the State the following:
(a) to ensure a continuous, adequate, and economic supply
of energy with the end in view of ultimately achieving self-relianco
__
"',,t"d
'*s,*etary
ol.the l)epartment of F)nergy, GR No. 124360, Nov. lt, l!Xl?,
28t SCRA 3:10.
l
296 LAW ON NATURAL RESOURCES
AND EI{WRONMENTAL LAW DEVELOPMENTS
in the country's enerry requirements through the integrated and
intensive exploration, production, management, and d&elopment
of the country's indigenous energy resources, and through the
judicious
conservation, renewal, and efEcient utilization of energy
to keep pace with the country's growth and economic development
and taking into consideration the active participation
ofthe private
sector in the various areas on enerry resource development; and
(b)
to rationalize, integrate, and coordinate the various pro-
grams of the Government towards self-sufficiency and enhanced pro-
ductivity in power energy without sacrificing ecological concerns.,
03. Definition of terms.
(a) "Energy projecfs" shall mean activities or projects relative
to the exploration, extracfion, production, importation-exportation,
processing, transportation, marketing, distribution, utilization, con-
servation, stockpiling, or storage of all forms of energy products and
resources.
(b)
*Board'shall
mean the Energy Regulatory Board..,
CHAPTER VIII
-
DEPARTMENT OF ENERGY ACT OF 1992
(Republic Act No. 7638)
(b) Exercise direct supervision and control over
functions and activities of the Department, as well as all
officers and personnel;
(c) Devise a program of international information on
the geological and contractual conditions obtaining in the
Philippines for oil and gas exploration in order to advance the
industry;
(d) Create regional offices and such other service units
and divisions as may be necessary;
(e) Create regional or separate grids as maybe necessary
or beneficial; and
(0 Perform such other functions as may be necessary or
proper to attain the objectives ofthis Act.
'
The Secretary shall be an ex officio member of the Board of the
National Economic and Development Authority
(NEDA). He shall
also be a member of the body authorized to formulate, prescribe,
or amend the necessary guidelines for the financing, construction,
operation, and maintenance of infrastructure projects by the privatc
sector, under RA No. 6957, otherwise known as the Build-Operate-
Transfer Law.'
b. Visitorial powers.
The Secretary or his representatives shall have visitorial and
examining authority over non-government entities with contracts
for the exploration, development, or utilization of the natural
resources for energy purposes in order to determine the share ofthe
government in the revenue or product thereof, and to ascertain all
funds collectible and products due the government, and that all such
funds collectible and products due the government, have actually
been collected or delivered.u
05. Powers and functions.
RA No. 9l-36, dated June 8, 200L, or the Electric Power Indus-
try Act of 2001, expanded the functions of the Department of Energy
by amending RA No. 7638. Under the amendatory law, the Depurt-
ment is mandated to supervise the restructuring of the electricity
aSrr:.
tl, /birl.
nSrr'.
24, /lirl
aIl
its
B. Organizational Sh-ucture
04. Department of Energy.
To carry out the above-declared policy, the Department of
Enerry, hereinafter referred to as the Department, has blen created.
The Department is tasked to prepare, integrate, coordinate, super_
vise, and control all plans, programs, projects, and activities of the
government relative to energy exploration, development, utilization,
distribution, and conservation.
a. Funetions of the Department Seeretary
The Secretary has the following functions:
(a)
Establish policies and standards for the effective,
efficient and economical operation of the Department in
accordance with the programs of the government;
zSec.
2, RA No. 76118.
3Soc.
ll, /6lrl.
298 I.AW ON NATT'RAL RESOIIRCES
AND ENVIRONMEI{TAL I,AW DEVELOPMEI{TS
industry, and, in addition to its existing powers and functions, shall
perform the following:
(a) Formulate policies for the planning and implemen-
tation of a comprehensive program for the efficient supply and
economical use of enerry consistent with the approved national
economic plan and with the policies on environmental protec-
tion and conservation and maintenance of ecological balance,
and provide a mechanism for the integration, rationalization,
and coordination ofthe various enerry programs ofthe govern-
ment;
(b) Develop and update annually the existing Philippine
Enerry Plan, hereinafter referred to as'The Plan', which shall
provide for an integrated and comprehensive exploration,
development, utilization, distribution, and conservation of
enerry resources, with preferential bias for environment-
friendly, indigenous, and low-cost sources of enerry. The plan
shall include a policy direction towards the privatization of
government agencies related to energy, deregulation of the
power and energy industry, and reduction of dependency on oil-
fired plants. Said plan shall be submitted to Congress not later
than the fifteenth day ofSeptember and every year thereafter;
(c) Prepare and update annually a Power Development
Program (PDP) and integrate the same into the Philippine
Enerry Plan. The PDP shall consider and integrate the
individual or
joint
development plans of the transmission,
generation, and distribution sectors of the electric power
industry, whieh are submitted to the Department: Prouid,ed,
howeuer, That the Enerry Regulatory Commission (ERC)
shall have exclusive authority covering the Grid Code and the
pertinent rules and regulations it may issue;
(d) Ensure the reliability, qualrty and security of supply
of electric power;
(e) Following the restructuring of the electricity sector,
the Department shall, among others:
(i) Encourage private sector investments in the
electricity sector and promote development of indigenous
and renewable enerry sources;
(ii) Facilitate and encourage reforms in the
structure and operations of distribution utilities for
greater efliciency und lower <xrsts;
CHAPTER VIII
_
DEPARTMENT OF ENERGY ACT OF 1992
(Republic Act No. 7638)
(iii) In consultation with other government agencies,
promote a system of incentives to encourage industry
participants, including new generating companies and
end-users to provide adequate and reliable electric supply;
and
(iv) Undertake, in coordination with the ERC,
NPC, NEA and the Philippine Information Agency
(PIA),
information campaign to educate the public on the re-
structuring of the electricity sector and privatizalion of
NPC assets;
(f) Jointly with the electric power industry participants,
establish the wholesale electricity spot market and formulate
the detailed rules governing the operations thereof;
(g) Establish and administer programs for the explora-
tion, transportation, marketing, distribution, utilization, con-
servation, stockpiling, and storage of enerry resources of all
forms, whether conventional or non-conventional;
(h) Exercise supervision and control over all government
activities relative to energy projects in order to attain the goals
embodied in Section 2 of RA No. 7638;
(i) Develop policies and procedures and, as appropriate,
promote a system of enerry development incentives to enable
and encourage electric power industry participants to provide
adequate capacity to meet demand including, among others,
reserve requirements;
0)
Monitor private sector activities relative to energy
projects in order to attain the goals of the restructuring,
privatization, and modernization of the electric power sector
as provided for under existing laws: Prouided, That the
Department shall endeavor to provide for an environment
conducive to free and active private sector participation and
investment in all enerry activities;
(k) Assess the requirements of, determine priorities for,
provide direction to, and disseminate information resulting
from energy research and development proglrams for the
optimal development of various forms of energy production and
utilization technologies;
(l) Formulatc and inrplerncnt programs, including a
systcur ol'providirrg inccntivcs utttl
lrcttirltics,
firt' [htl
.iudicious
,]
I,AW ON NATURAL RESOURCES
AND ENYIRONMENTAL I,AW DEVELOPMENTS
and efficient use of enerry in all energy-consuming sectors of
the economy;
(m)
Formulate and implement a program forthe acceler-
ated development of non-conventional energy systems and the
promotion and commercialization of its applications;
(n)
Devise ways and means of giving direct benefit to the
province, city, or municipality, especially the community and
people affected, and equitable preferential benefit to the region
that hosts the energy resource and/or the energy-generating
facility: Prouided, howeuer, That the other provinces, cities,
municipalities, or regions shall not be deprived of their energy
requirements;
(o)
Encourage private enterprises engaged in energy
projects, including corporations, cooperatives, and similar
collective organizations, to broaden the base oftheir ownership
and thereby encourage the widest public ownership of enerry-
oriented corporations;
(p)
Formulate such rules and regulations as may be
necessary to implement the objectives of this Act; and
(q)
Exercise such other powers as may be necessary or
incidental to attain the objectives of this Act.u
a. Issuance of implementing rules and regulations
The law empowers the Department of Energy (DOE)
to
formulate rules and regulations as may be necessary to implement
laws under its watch.
ln Perez v. LPG Refillers Association, the issue is the validity
of Circular No. 2000-06-010 issued by the DOE to implement Bp
Blg. 33 which penalizes illegal trading, hoarding, overpricing,
adulteration, underdelivery, and underfilling of petroleum products,
as well as possession for trade of adulterated petroleum products
and of underfilled liquefied petroleum gas (LpG)
cylinders, and sets
the monetary penalty for violators. In upholding the validity of the
circular, the court laid down the rule that for an administrative
regulation, such as the Circular in question, to have the force of
CIIAPTER VIII
_
DEPARTMENT OF ENERGYACT OF 1992
(Republic
Act No. 7688)
penal law: (1)
the violation of the administrative regulation must be
made a crime by the delegating statute itself; and (2) the penalty for
such violation must be provided by the statute itself. The circular
satisfies the first requirement. BP Blg. 38, as amended, criminalizes
illegal trading, adulteration, underfiIling, hoarding, and overpricing
of petroleum products. The circular merery lists the various modes
by which the said criminal acts may be perpetrated. The circular
is also in accord with the law since under Bp Blg. BB, as amended,
the monetary penalty for any person who commits any of the acts
aforestated is limited to a minimum of
p20,000
and a maximum of
P50,000. Under the Circular, the maximum pecuniary penalty for
retail outlets is P20,000, an amount within the range allowed by
law. It is BP Blg. 33, as amended, which defines what constitute
punishable
acts involving petroleum products and which set the
minimum and maximum limits for the corresponding penalties. The
Circular merely implements the said law.
The court further noted that the enabling laws on which the
circular is based were specifically intended to provide the DoE
with increased administrative and penal
-"uso""s
with which to
effectively curtail rampant adulteration and shortselling, as well
as other acts involving petroleum products, which are inimical
to public interest. To nullify the circular in this case would be to
render inutile government efforts to protect the general consuming
public against the nefarious practices of some unscrupulous LpG
traders.
301
6Sec.
37, RA No. 9136.
7GR
No. l69l49,.Iune 26, 2(X)6, 4t)2 S(lltA (;:tu
C, Bureaus and. Semtiees
06. Bureaus and services.
Section 12 of RA No. 7688 empowers the Secretary of Energy,
subject to the approval of the President, to reorganize, restructure
and redefine the functions ofthe bureaus and services, and to create
regional offices and such other service units and divisions as may be
necessary.
After the creation of the Department of Energy, several laws
wcre passed expanding the role and functions of the Department,
such as thc Downstream oil Industry Regulation Act of 19gg (RA
N,. 8479), thc Philippinc Ole,n Air Act of 1999 (RA
No.
gZ49),
and
tho I'llcctrir: l).wcr lndustr.y llofirrnr Act,f'200r (RA
No. 9186).
Owing t,rl l,ho t'x;lttttrlcrl rolc ilr tlrc rrlkxlrrtion, rrrobilization untl
303
302 LAW ON NATURAL RESOURCES
AND ENI\TIRONMENTAL LAW DEVELOPMENTS
optimum employment of the country's resources, there was a need
to institutionally strengthen the Department to cope with these
developments.
Thus, on August 23,2002, the President issued Administrative
Order
(AO) No. 38 reorganizing, restructuring and redefining the
functions of the bureaus and services of the Department as follows:
a. Energy Resource Development Bureau
(ERDB)
The ERDB shall have the following functions and services:
1) formulate and implement policies, programs, regu-
lations on the exploration, development production of enerry
from indigenous petroleum, petrochemical, coal and geother-
mal energy resources; and
2) undertake product and market development of coal
and geothermal resources/industries.
b. Enerry Utilization Management Bureau (EITMB)
The EUMB shall have the following functions and services:
1) formulate and implement policies, programs, regu-
lations on new energ:y technologies, alternative fuels and the
efficient, economical transformation, marketing and distribu-
tion ofconventional renewable enerry resources; and
2) undertake plans, programs and strategies to ensure
efficient and
judicious utilization of conventional and renewable
energy resources.
c. Energy Policy and Planning Bureau
(EPPB)
The EPPB, which replaced the Energy Planning and Monitoring
Bureau
(EPMB), shall have the following functions and services:
1) develop, prepare and update an integrated national
energ"y plan and other support plans for the energy sector;
2) formulate enerry policies, programs and strategies;
3) undertake comprehensive assessment of the demand
scenarios and supply options; and
4) undertake stttdies tln thtl impuct ol'cnorgy polit:ios
on the oconoln.y ttnd cnvir<lnmtrnl,.
C}IAPTER VIII
_
DEPARTMENT OT ENERGY ACT OF 1992
(Republic
Act No. 7638)
d. Electric Power Industry Administration Bureau
(EPTAB)
The EPIAB shall have the following functions and serwices:
1) supervise the restructuring of the electric power
industry, with a view to establishing a competitive, market-
based environment and encouragrng private sector participa-
tion;
2) forrnulate plans and programs that would ensure
adequate, efficient and reliable supply of electricity; and
3) formulate plans, programs and strategies on rural
electrification.
e. OiI Industry Administration Bureau (OIAB)
.
The OIAB shall have the following functions and seryices:
1) formulate and implement policies, programs, and
regulations on the downstream oil industry, including the
importation, exportation, stockpiling, storage, shipping, trans-
portation, refining, processing, marketing and distribution of
petroleum crude oils, products and by-products; and
2) monitor developments in the downstream oil indus-
try.
The Administrative Support Services created under RA
No. 7638 was redefined into three distinct services, namely, the
Administrative Services, the Financial Services and the Legal
Seryices.
The Philippine National Oil Company (PNOC),
the National
Power Corporation (NPC),
and the National Electrification
Administration (NEA) have been placed under the supervision of
the Department, but are to continue to perform their respective
functions insofar as they are not inconsistent with the provisions of
RA No. 7638.,
f. TIle National TYansmission Corporation
(TR,ANSCO)
Section 8 of RA No. 9136 created the National Ttansmission
Oorporation ('I'RANSCO)
which shall assume the electrical trans-
'rSr,r'. lil, /6rl
LAW ON NATURAL RESOURCES
AND EN''IIRONMENTAL LAW DEVELOPMENTS
mission functions of the National Power Corporation
(NPC),
and exercise the powers and functions specified in the law. The
TRANSCO shall assume the authority and responsibility of the
NPC for the planning, construction and centralized operation and
maintenance of its high voltage transmission facilities, including
grid inter-connections and ancillary services.'
g. The Power Sector Assets and Liabilities Manage'
ment Corporation
(PSALM)
Section 49 of RA No. 9136 created a government-owned
and -controlled corporation known as the Power Sector Assets
and Liabilities Management Corporation
(PSAIM) which shall
take ownership of all existing NPC generation assets, liabilities,
IPP contracts, real estate and all other disposable assets. All
outstanding obligations of the NPC arising from loans, issuances
of bonds, securities and other instruments of indebtedness shall be
transferred to and assumed by the PSALM.'.
The principal purpose of the PSALM is to manage the orderly
sale, disposition, and privatization of NPC generation assets, real
estate and other disposable assets, and IPP contracts with the
objective of liquidating all NPC financial obligations and stranded
contract costs in an optimal manner.rl
h. NationalElectrifieationAdministration(NEA)
NEA shall continue to be under the supervision of the Depart-
ment of Enerry and shall exercise its functions under PD No. 269,
as amended by PD No. 1645. In addition, NEA shall develop and
implement programs:
1) To prepare electric cooperatives in operating and
competing under the deregulated electricity market within five
(5) years from the effectivity of RA No. 9136, specifically in an
environment of open access and retail wheeling;
2) To strengthen the technical capability and financial
viability of rural electric cooperatives; and
sSec.
8, RA No. 9136.
roSr:c.
49, /6irl.
rrSu:.
6O. /6irl-
CHAPTER VIII
_
DEPARTMENT OF ENERGY ACT OF 1992
(Republic Act No. 7638)
305
3) To review and upgrade regulatory policies with a
view to enhancing the viability ofrural electric cooperatives as
electric utilities."
07. Relationship of the Department with other offices.
The Department and its priority projects shall enjoy preferential
attention from the Department of Environment and Natural
Resources relative to the exploration, development, exploitation,
and extraction of petroleum, coal, and geothermal resources, and in
the matter of providing technical support necessary for the estab-
lishment of power-generating plants.
Upon request of the Department or any of its bureaus, all
government agencies with functions relative to the approval qf the
projects of the Department or its duly authorized and endorsed
entities, whether government or private, shall act upon and resolve
the matter within ten
(10)
calendar days. Toward this end, the
Secretary, with the approval of the President, may establish an
inter-agency secretariat for the purpose ofexpediting the approval
ofsaid projects.'3
D. Energy Regulatory Board.
08. Energy Regulatory Board.
The supply of electricity is a public service that affects national
security, economic growth and public interest. To achieve coherent
tnd effective policy formulation, coordination, implementation and
lnonitoring within the energT sector, it became necessary to entrust
in one body the regulatory functions covering the energy sector.
'l'hus, on May 22, 1987, the President issued EO No. 172 creating
thc Energy Regulatory Board
(ERB) to provide the policy guidelines
und regulatory framework for the activities and operations of the
lx)wer
sector. The ERB was to regulate the business of importing,
ox porting, re-exporting, shipping, transporting, processing, refining,
rnrrketing and distributing energy resources. It was also given the
tx)wcr
to determine, fix and prescribe the rates
-
including penalty
clrrrrgcs
-
of all energ'y providers, including the National Power
trl{11:.
ftl, /6lrl.
rIS.x'
2:l llA No 7{illtl
306 I"AW ON NATI.]RAL RESOURCES
AND ENYIRONMENTAL I,AW DEVELOPMEI'ITS
corporation
(NPC), a government-owned and -controlled corporation
existing by virtue of CA No. 120 and RA No. 6395."
Enerry resource means any substance or phenomenon which
by itself or in combination with others, or after processing or refining
or the application to it of technolory, emanates, generates or causes
the emanation or generation of enerry, such as but not limited to,
petroleum or petroleum products, coal, marsh gas, methane gas,
geothermal and hydroelectric sources of enerry, uranium and other
similar radioactive minerals, solar enerry, tidal power' as well as
non-conventional existing and potential sources.'6
a. Jurisdiction,
trxlwers
and functions
The ERB
(now Enerry Regulatory Commission), under its
charter, exercised the following, among other powers and functions:
1) Fix and regulate the prices ofpetroleum products;
2) Fix and regulate the rate schedule or prices ofpiped
gas to be charged by duly franchised gas companies which
distribute gas by means of underground pipe system;
3) Fix and regulate the rates ofpipeline concessionaires
under the provisions of RA No. 387, as amended, otherwise
known as the 'Petroleum Act of 1949,'as amended by PD No.
1700;
4) Regulate the capacities ofnew refineries or additional
capacities of existing refineries and license refineries that may
be organized under such terms and conditions as are consistent
with the national interest;
5) Whenever the ERB has been determined that
there is a shortage ofany petroleum product, or when public
interest so requires, it may take such steps as it may consider
necessary, including the temporary a{ustment of the levels
of prices of petroleum products and the pa5rment to the Oil
Price Stabilization Fund
(OPSF) created under PD No. 1956 by
persons or entities engaged in the petroleum industry ofsuch
amounts as may be determined by the ERB, which enable the
importer to recover its cost of importation.'o
raNational
Power Corporation v. Philippinc Ek:ctric Plant
()wnr:rs Anrlrx:itrl.iort,
GR No. 159457, April 7,2006,486 SORA 677'
rr'Scc.
ll, l)O N<t. l?2.
CHAPTER VIII
_
DEPARTMENT OF ENERGY ACT OF 1992
(Republic Act No. 7638)
b. Reorganized or abolished agencies
EO No. 172 reconstituted the Board of Enerry into the ERB and
the former's powers and functions under RA No. 6173, as amended,
were transferred to the latter.
The regulatory and adjudicatory powers and functions exer-
cised by the Bureau of Energy Utilization
(renamed
Enerry
Utilization Management Bureau) under PD No. 1206, as amended,
were also transferred to the ERB.
RA No. 7638 transferred the ERB's non-price regulatory
juris-
diction, powers and functions to the Department of Energy.'?
RA No. 9l-36, the "Electric Power Industry Reform Act of 2007"
(EPIRA),
transferred the powers of the ERB to the newly-created
Energy Regulatory Commission
(ERC).*
09. Authority to grant provisional relaef.
The ERB was empowered, upon the filing of an application,
petition or complaint or at any stage thereafter and without prior
hearing, on the basis ofsupporting papers duly verified or authen-
ticated, to grant provisional relief on motion of a party in the case
or on its own initiative, without prejudice to a final decision after
hearing, should the ERB find that the pleadings, together with such
affidavits, documents and other evidence which may be submitted in
support of the motion, substantially support the provisional order.
But the ERB was mandated to immediately schedule and conduct a
hearing thereon within thirty
(30) days thereafter, upon publication
and notice to all affected parties.'e
10. Effectivity of Board's decisions or orders.
All decisions or orders of the ERB which were to continue an
existing service, or determining, fixing and prescribing rates to be
charged, shall be immediately operative; and all other decisions
or orders shall become effective upon the dates specified therein.
However, decisions, orders, or resolutions in controverted matters
and not referring to the continuance of an existing service or
dctcrmining, fixing and prescribing rates to be charged shall take
r'lSct'.
lll, ltA No. 7(iiltl.
r"Sor'.
44, ltA No. 1)lii(i.
307
308
I,AW ON NATURAL RESOURCES
AND ENVIRONMENTAL LAW DEVELOPMENTS
effect fifteen
(15) days after notice to the parties, unless otherwise
provided by the ERB.*
11. Appeal from decisions or final orders of the ERB'
Appeals from decisions or final orders of the ERB were to be
taken io tt
"
Courb of Appeals via a petition for review pursuant
to Rule 43 of the Rules or court. The appeal shall be taken within
fifteen
(15) days from notice ofthe decision or final order, or ofthe
denial of petitioner's motion for reconsideration'"
E. Eleetric Power Ind'ustry Reform Aet
12. Electric Power lndustry Reform Act of 2001'
On June 8, 2001, Congress enacted RA No' 9136' known as
the "Electric Power Ind.ustry Reform Act of 2001
(EPIRA)"' Among
others,EPIRAdeclaresaspolicyoftheStatethefollowing:
(a)Toensureandacceleratethetotalelectrificationof
the country;
(b) To ensure the quality, reliability, security and
affordability of the supply of electric power;
(c) To ensure transparent and reasonable
prices of
electricity in a regime of free and fair competition and full public
accountatility 6 achieve greater operational and-economic
efficiency and enhance the competitiveness
of Philippine
products in the global market;
(d)Toenhancetheinflowofprivatecapitalandbroaden
theownershipbaseofthepowergeneration,transmissionand
distribution sectors;
(e) To ensure fair and non-discriminatory
treatment of
public and private sector entities in the process ofrestructuring
the electric
Power
industry;
(f) To protect the public interest as it is affected by the
rates and services of electric utilities and other providers of
electric Power;
CHAPTER VIII
_
DEPARTMENT OF ENERGY ACT OF 1992
(Republic Act No. 7638)
(g) To assure socially and environmentally compatible
energ'y sources and infrastructure;
(h) To promote the utilization of indigenous and new
and renewable enerry resources in power generation in order
to reduce dependence on imported enerry;
(i) To provide for an orderly and transparent privatiza-
tion of the assets and liabilities of the National Power Corpora-
tion (NPC);
0)
To establish a strong and purely independent regu-
latory body and system to ensure consumer protection and
enhance the competitive operation of the electricity market;
and .
(k) To encourage the efficient use of energy and other
modalities of demand side management.22
13. Overview of the Energy Regulatory Commission.
The Energy Regulatory Commission
(ERC)
is an independent,
quasi-judicial regulatory agency created under the EPIRA. It abo-
lished the Energy Regulatory Board (ERB)
which was created under
EO No. 172.,,
One of the landmark pieces of legislation enacted by Congress
in recent years, the EPIRA established a new policy, legal structure
and regulatory framework for the electric power industry.
In Freedom
from
Debt Coalition v. Energy Regulatory Com-
mission,2a the Court, through Justice T'inga, stated that the new
thrust is to tap private capital for the expansion and improvement
of the industry as the large government debt and the highly capital-
intensive character of the industry itself have long been acknowl-
edged as the critical constraints to the program. To attract private
investment, largely foreign, the
jaded
structure of the industry had
to be addressed. While the generation and transmission sectors were
centralized and monopolistic, the distribution side was fragmented
with over 130 utilities, mostly small and uneconomic. The pervasive
22Scr:.2,
IIA No. 1)lll(i.
2:rSrrr.
ilU, /6irl.
'{(llt
No. l(illlll, .lrrrrr, 16, 2004,4:12 S(ill,A 167; su'tlao lhl,o.y v. I}xtrrl ol'
-
I
I
I
l
CHAPIERVIII
_
DEPARTMENT OT ENERGYACT OF 1992
(Republic
Act No. 7638)
of the Chairman and members of the Commission on Elections,
respectively.*
In his concurring and dissenting opinion, Justice, later Chief
Justice, Puno described the immensity of police power in relation
to the delegation of powers to the ERC and its regulatory functions
over electric power as a vital public utility, to wit:
"Over the years, however, the range of police power
was no longer limited to the preservation of public health,
safety and morals, which used to be the primary social
interests in earlier times. Police power noa.r requires the
State to 'assume an affirmative duty to eliminate the
excesses and injustices that are the concomitants of an
unrestrained industrial economy.' Police power is now .
exerted'to further the public welfare
-
a concept as vast
as the good of society itself.' Hence, 'police power is but
anothername forthe governmental authorityto furtherthe
welfare of society that is the basic end of all government.'
When police power is delegated to administratiue bodics
with regulatory
functions,
its exercise shnuld be giuen
a widc latitude. Police power takes on en even broader
dimension in developing countries such as ours, where the
State must take a more active role in balancing the many
conflicting interests in society. The
Questioned
Order was
issued by the ERC, acting as an agent of the State in the
exercise of police power. We should have exceptiarnlly
good grounds to curtail its exercise. This approach is
more compelling in the field of rate-regulation of electric
power rates. Electric
Inwer
generation and distribution is
a traditional instrument of economic growth that affects
not only a few but the entire nation. It is an important
factor in encouraging investment and promoting business.
The engirues of progress nx&y come to a screeching halt if
the d.eliuery of electric power is impaired.'
'14. ERB abolished, powers and functions transferred to ERC.
Pursuant to RA No. 9136, dated June 8, 2001, otherwise known
as the "Electric Power Industry Reform Act of 2001' (EPIRA),
the
functions of thc ERB have been transferred to the ERC which has
311
310
LAW ON NATURAL RESOURCES
AND ENVIRONMENTAL
LAW DEVELOPMENTS
flaws have caused a low utilization of existing
generation capacity;
extremely high and uncompetitive
power rates; poor quality of ser-
viceto.*ro-"rr;dismaltoforgettableperformanceofthegovern-
ment power sector; high system lott""; and an inability to develop a
clear strategy for overcoming these shortcomings'
Thus,theEPIRAprovidesaframeworkfortherestructuring
of the industry, including the privatization of the assets of the
National Power corporation
(NPc), the transition to a competitive
structure, and the delineation of the roles of various government
"g"rr"i"randtheprivateentities'Thelawordainsthedivisionof
tfr" i"a".try into four
(4) distinct sectors, namely:
generation'
transmissiorr,
dirtribrtion
and supply''zs Corollarily' the National
po*u.
Corporation NPC)
generating plants have to be privatized"
and its transmission business spun off and privatized thereafber'"
Intandemwiththerestructuringoftheindustryistheestab-
lishmentof..astrongandpurelyindependentregulatorybody."o
Thus, the law created the ERC in place of the ERB'"
To achieve its aforestated
goal, the law has reconfigured the
organization of the regulatory foay' tt requires the Chajrman and
foir
(a) members of t"he ERC to be equipped with "at-least
three
(3) years of active and distinguished
experience" in the fields of
energ'y, law, economics, finance, commerce or engineering' and at
least one of them with ten
(10) years or more of experience
in the
,.ti""practiceoflawandanotheronewithsimilarexperienceas
a certified
public accountant''o
Their terms of office were increased
to seven
(7) years from the four
(4) provided in EO No' 172 and
their security of tenure assured'" The Chairman and members were
Si;"tt
th" same salaries, allowances, benefits and retirement
pay
Is the Chief Justice and Associate Justices of the Supreme Court'"'
a lot higher than the salary and benefits accorded the Chairman
a.rd meirbers of the ERB which were equivalent only to those of a
f)epartment Undersecretary
and the official next in rank' and those
255ec.27,
RA No. 9136.
26Sec.
47,Ibid.
27Secs.
3 and2l, Ihid.
zsg"g.
2g(),Ibid.
"Sec.
38, lbid.
,nIhid,.
rt
I lril
:rrrSrr:.
l. hl() No 172
3I2
I"AWONNATURALRESOURCES
AND ENVIRONMENTAL
I,AW DEVELOPMENTS
newandexpandedfunctionsintendedtomeetthespecificneedsofa
deregulatei
power industry. The ERC retains the ERB's traditional
rate and service regulation functions' However' the ERC now also
hastopromotecompetitiveoperationsintheelectricitymarket.
RA No. 9136 expanied the ERC's concerns to encompass both
th"
"orr.o*"r,
und the utility investors''n EPIRA was enacted by
Corrgru* with the goal of resiructuring the electric power industry
,"aiti".tizationo?th"
assets of the National Power Corporation
(NPC).*
The ERC is tasked to promote competition' encourage- market
development, ensure customer choice and penalize abuse of market
po*"r in the restructured electricity industry' Towards this end' the
bnC i. granted, inter alia, the following functions:
(a) Enforce the rules and regulations
governing the
operationsoftheelectricityspotmarketandtheactivitiesof
tile spot market operator and other participants in the spot
-.rklt,
for the plrpo," of ensuring a greater supply and
rational
Pricing
of electricitY;
(b) Amend or revoke, after due notice and hearing' the
authority to operate of any person or entity which fails to comply
with the provisions hereof, the IRR or any order or resolution
of the
pnC.
fn the event that a divestment is required' the
ERCshallallowtheaffectedpartysuffrcienttimetoremedy
the infraction or for an orderly disposal, but in no case exceed
twelve
(12) months from the issuance of the order;
(c) Exercise original and exclusive
jurisdiction over all
cases contesting rates,?ees, fines and penalties imposed by the
ERC in the exe"rcise of the above-mentioned
powers, functions
and responsibilities
and over aII cases involving disputes
betweerr and among participants or players in the energ'y
sector.36
Under Section 36 ofthe EPIRA, the National Power Corporation
(NPC) and every distribution facility covered by the law is mandated
tounbundle,segregateoritemizeitsratesaccordingtothevarious
sectors of the electiic
power industry identified in the law' namely:
CHAPTERVIII_DEPARTMENTOFENERGYACTOF1992
313
(Republic Act No. 7638)
generation, transmission, distribution and supply. The law further
directs the ERC to regulate and facilitate the unbundling of rates
prescribed by Section 36."
The powers and functions of the ERB not inconsistent with the
provisions of the EPIRA were transferred to the ERC. The transfer
of powers and functions was to include all applicable funds and
appropriations, records, equipment, property and personnel as may
be necessary.3s
a. A public utility must submit to government regula-
tions
The business and operations of a public utility are imbued with
public interest. In a very real sense, a public utility is engaged in
public service providing basic commodities and services indispens-
able to the interest ofthe general public. For this reason, a public
utility submits to the regulation of government authorities and sur-
renders certain business prerogatives, including the amount of rates
that may be charged by it. It is the imperative duty of the State to
interpose its protective power whenever too much profits become the
priority of public utilities.3'g
As Justice Puno succinctly stated in Republic, rep. by Energy
Regulatory Board v. Meralco,4, rate regulation calls for a careful
consideration of the totality of facts and circumstances material to
each application for an upward rate revision. Rate regulators should
strain to strike a balance between the clashing interests of the pub-
lic utility and the consuming public and the balance must assure a
reasonable rate of return to public utilities without being unreason-
able to the consuming public. What is reasonable or unreasonable
depends on a calculus of changing circumstances that ebb and flow
with time. Yesterday cannot goyern today, no more than today can
determine tomorrow.
In Republic v. Medina,n' it was held that a regulatory commis-
sion's field of inquiry, however, is not confined to the computation
of the cost of service or capital nor to a mere prognostication of the
'r?Rcpublic,
rep. by Energy Regulatory Board v. Meralco, GR No. 141314' April
9,2003,40 scRA 130.
'r'Scc.
44, /6lrl.
'"'ll,cprthlic, n'1r. h.y I')rrt'rg.y ltt'gultrtory lloard v' Meralco, supro.
a"lltirt..
'"(lll.
No. l,-;12(X;tt.
()r'1,.'1,
l1)71, 4 I S(lltA
(i4;i.
-
r"
"g
mga Kawani ng ERI] v
526 SCRA 1.
116Bctoy
v. Iltxrrd o(' I)irtrt:t,ors, NAI'O()Oll, saTrtrr
Rurin,
(]R
No. I I'r0974, Jtrnc 29, 2007,
314 I,AW ON NATURAL RESOURCES
AND ENVIRONMENTAL LAW DEVELOPIi{ENTS
future behavior of the money and capital markets. It must also bal-
ance investor and consumer expectations in such a way that broad
requirements of public interest may be meaningfully realiz,ed. It
*o.rld hence appear in keeping with its public duty if a regulatory
body is allowed wide discretion in the choice of methods rationally
related to the achievement of this end.
The State, in the exercise of police power, can regulate the
rates imposed by a public utility. Thus, in surigao del Norte F,lectric
Cooperaiiue, Inc. v. Energy Regulatory Board,n' the Court held:
"The regulation of rates to be charged by public
utilities is founded upon the police powers of the State
and statutes prescribing rules for the control and
regulation ofpublic utilities are a valid exercise thereof.
Wh"r, private property is used for a public purpose and is
affecteh with public interest, it ceases to be
juris priuati
only and becomes subject to regulation. The regulation is
to promote the common good. Submission to regulation
*.y b" withdrawn by the owner by discontinuing use; but
.. iorrg as use of the property is continued, the same is
subject to public regulation."
b. ERC has authority to issue provisional rate in'
creases
The EPIRA introduced significant reforms which, although
procedural in character, bring about substantial benefits to
iorrro*"r". Specifically, the publication requirement ulder Section
4(e), Rule
g
or tne EPIRA Implementing Rules and Regulations
(IRR) is aimed to protect the public interest uis-d.-uis the rates and
services ofelectric utilities and other providers ofelectric power; to
ensure transparent and reasonable prices of electricity in a regime
of free and fair competition and full public accountability; and
to balance the interests of the consumers and the public utilities
providing electric power through the fair and non-discriminatory
treatment of the two sectors.
TheERCisendowedwiththestatutoryauthoritytoapprove
provisional rate adjustments under the aegis of sections 44 and 80
of the EPIRA which read:
CHAPTERVIII_DEPARTMENTOFENERGYACTOF1992
315
(Republic Act No. 7638)
"SEC. 44. Transfer of Powers and Functions.
-
The
powers and
functions
of the Energy Regulatory Board
not inconsistent with the prouisions of this Act are hereby
transferred to the ERC. The foregoing transfer of pow-
ers and functions shall include all applicable funds and
appropriations, records, equipment, property and person-
nel as may be necessary."
"SEC. 80. Applicability and Repealing Clause.
-
The applicabllity prouisions of Commonwealth Act No.
746, as amended, otherwise hnown as the'Public Seruices
Acfi Republic Act 6395, as amended, revising the charter
of NPC; Presidential Decree 269, as amended, referred
to as the National Electrification Decree; Republic Act
7638, otherwise known as the 'Department of Energy
Act of L992'; Executive Order 172, as amended, creating
the ERB; Republic 7832 otherwise known as the 'Anti-
Electricity and Electric Transmission Lines/lVlaterials
Pilferage Act of 1994'; shall continue to have full force
and effect except insofar as they are inconsistent with
this Act.
The provisions with respect to electric power of
Section 11(c) of Republic Act 7916, as amended, and
Section 5(f) of Republic Act 7227 are hereby repealed or
modified accordingly.
Presidential Decree 40 and all laws, decrees, rules
and regulations, or portions thereof, inconsistent with
this Act are hereby repealed or modified accordingly."
(Emphasis supplied)
The principal powers of the ERB relative to electric public
utilities transferred to the ERC are the following:
1. To regulate and fix the power rates to be charged by
electric companies;
2. To issue certificates of public convenience for the
operation of electric power utilities;
3. To grant or approve provisional electric rates.
As explained tn b'nu<ktm
f
ntm Dchl
(\talition,o"
Lhe conferment
upon the ERO of'l,he powcr [o grant pr<tvisional rtrtr: trd.iustmcnts is
,rGR-G26,
o('t..4, z0lo,
(i:12
s(llt^ lxi, tx;1, cit'ing lt.prrhli. v
hll.r.l.rie
(',tt
440 l)hil. :lttl).
l,
,i
il
MlniLr
l,AW oN NA'l'l lltAt, R,l,tSot ItOt,)S
AND IrN VI R()NMI.IN1'At, t,AW t)trvl lI I )t,M l,lN,t's
not inconsistent with any provision of the EPIRA. The powers of the
ERB transferred to the ERC under section 44 are in addition to the
new powers conferred upon the ERC under Section 48.
Section 80 of the EPIRA complements Section 44, as it man_
dates the continued efficacy of the applicable provisions of the laws
referred to therein. similarly, section 8 of Eo No. 172, or the ERB
charter, continues to be in full force by virtue of sections 44 and
g0
of the EPIRA. Said Section 8 of the ERB charter reads:
"SEC. 8. Authority to Grant
prouisional
Relief.
_
The Board may, upon the filing of an application, petition
or complaint or at any stage thereafter and without
prior hearing, on the basis of the supporting papers
duly verified or authenticated, grant provisional relief
on motion of a party in the case or on its own initiative,
without prejudice to a final decision after hearing, should
the Board find that the pleadings, together with such
affidavits, documents and other evidence which may be
submitted in support of the motion, substantially support
of the provisional order; Prouided, That the Board shall
immediately schedule and conduct a hearing thereon
within thirty (30)
days thereafter, upon publication and
notice to all affected parties."
To the Court, the goals of market competition and people
empowerrnent are not negated by the ERC's exercise of the authority
to approve provisional rate adjustments. The concerns are taken
care ofby section 43 of the EPIRA and its IRR. while section 43lays
down the publication requirement as regards the rate application,
Section 4(e), Rule 3 of the IRR fleshes out the requiremeni
Neither is the notion of provisional rate adjustment incompa-
tible with the policy to protect public interest, as enunciated in
section 2(f) of the law. The common weal is not reregated to the back-
burner simply by upholding the grant to the ERC of the authority
to approve provisional rate adjustments. Again for one, even if there
is a ground to grant the provisional rate increase, the ERC may do
so only aft,er the publication requirement is met and the consumers
affected are given the opportunity to present their side. For another,
the rate increase is provisional in character and therefore may be
modified or even recalled anytime. still for another, the ERC is
mandated to prescribe a rate-setting methodology "in the public
(lllAl"l'l,lrt
Vlll l)1,)l'All,'l'Ml,lN'l'Ol,'l,lNI,llt(lY A(l'l'()F l{)l)2
(ltogrtrlrlic Acl, No. ?6iltt)
interest"oo and "to pr<lmote effir:iency."on For that matter, there is
a plethora of'provisions in Section 43 and related sections which
seek to promote public interest, market competition and consumer
protection.oo
c. Application for rate adjustment or any relief
affecting the consumers must be verified and
published
ln National Association of Electricity Consumers
for
Reforms
(NASECORE) v. Energy Regulatory Commission,aT the Court
stressed that every application or petition for rate adjustment or for
any relief affecting the consumers must be verified, and accompanied
with an acknowledgement that a copy thereof was received by the
legislative body of the LGU concerned, together with a certification
of the notice of publication thereof in a newspaper of general
circulation in the same locality, pursuant to Section 4(e), Rule 3
of the Implementing Rules and Regulations
(IRR)
of the EPIRA.
Hence, respondent MERAICO's amended application was held to be
covered by the provision since the relief prayed for would result in
the increase of the costs of the consumers' electricity consumption.
It was also held that MERALCO's apprehension of being subjected
to a long and tedious process with respect to the recovery ofits fuel
and purchased power costs is addressed by the power ofthe ERC to
grant provisional rate adjustments.
d. Fines and penalties
The fines and penalties that shall be imposed by the ERC for
any violation of or non-compliance with this Act or the IRR shall
range from a minimum of Fifty thousand pesos (P50,000.00) to a
maximum of Fifty million pesos (P50,000,000.00).
Any person who is found guilty of any of the prohibited acts
pursuant to Section 45 of the Act hereof shall suffer the penalty
of prision mayor and a fine ranging from Ten thousand pesos
(P10,000.00)
to Ten million pesos (P10,000,000.00), or both, at the
discretion of the court.
{Sec.
43(I), RA No. 9136.
45Ibid.
GFreedom
from Debt Coalition v. Energy Regulatory Commission, supra.
aTGR
No. 163935, Feb. 2, 2006, 481 SCRA 480.
l,Aw
(
)N NA',l'l lltAl, ll,l,)s( )t llt( :1,)s
AN l) I.lN V I lt( )N M l )N'lAl, l,AW I )EVl.ll,( )l
rM
1,lN'l'S
The members of the Board of Directors ol'the.luridical com-
panies participating in or covered in the generation companies,
the distribution utilities, the TRANSCO or its concessionaire or
supplier who violate the provisions of the Act may be fined by an
amount not exceeding double the amount of damages caused by the
offender or by imprisonment of one (t) year or two
(2) years or both
at the discretion of the court. This rule shall apply to the members
of the Board who knowingly or by neglect allows the commission or
omission under the law.
If the offender is a government official or employee, he shall, in
addition, be dismissed from the government service with prejudice
to reinstatement and with perpetual or temporary disqualification
from holding any elective or appointive office.
If the offender is an alien, he may, in addition to the penalties
prescribed, be deported without further proceedings after service of
sentence.
Any case which involves a question of fact shall be appealable
to the Court of Appeals and those which involve a question of law
shall be directly appealable to the Supreme Court.
The administrative sanction that may be imposed by the
ERC shall be without prejudice to the filing of a criminal action, if
warranted.*
F. Downstreant. Oil Ind,ustry Deregulation
Act of 7996
15. Downstream Oil lndustry Deregulation Act of 1996.
Downstream oil industry refers to the business of importing,
exporting, re-exporting, shipping, transporting, processing, refining,
storing, distribution, marketing and./or selling, crude oil, gasoline,
diesel, liquefied petroleum gas (LPG), kerosene, and other petroleum
and crude oil products.n"
On March 28, L996, Congress took the audacious step of
deregulating the downstream oil industry. It enacted RA No. 8180,
entitled the "Downstream Oil Industry Deregulation Act of 1996."
Under the deregulated environment, "any person or entity may
import or purchase any quantity of crude oil and petroleum products
a8Sec.
45, RA No. 9136.
asSec.
4, RA No. 8180.
(iilAt,t't,rttvill
t)t,:l'Alt'l'Ml,:N'l'ol,'1,:Nl,:ll.(lY A()'l'()1,' l1192 :ll!l
(
ltr,grulrlic Acl. No. 7(iilttt
lirrnr u lirrcign or dorntrs[ic source, lcusc or <lwn and operate refineries
tnd othur downstream oil lacilities and market such crude oil or use
the same fbr his own requirement," subject only to monitoring by the
l)epartment of f)nergy
(DOE).
a. Antecedents of the statute
RA No. 8180 ended twenty-six
(26) years of government
regulation of the downstream oil industry. Justice Puno, inTatadv.
Secretary of the Department of Enetg!
,uo
gives a profound background
ofthe new legislation
-
Prior to 1971, there was no government agency regulating the
oil industry other than those dealing with ordinary commodities.
Oil companies were free to enter and exit the market without any
government interference. There were four
(4) refining companies
(Shell, Caltex, Bataan Refining Company and Filoil Refining) and
six (6) petroleum marketing companies
(Esso, Filoil, Caltex, Getty,
Mobil and Shell) then operating in the country. '
In 1971, the country was driven to its knees by a crippling oil
crisis. The government, realizing that petroleum and its products
are vital to national security and that their continued supply at
reasonable prices is essential to the general welfare, enacted the Oil
Industry Commission Act. It created the Oil Industry Commission
(OIC) to regulate the business of importing, exporting, re-exporting,
shipping, transporting, processing, refining, storing, distributing,
marketing and selling crude oil, gasoline, kerosene, gas and other
refined petroleum products. The OIC was vested with the power to fix
the market prices of petroleum products, to regulate the capacities
ofrefineries, to license new refineries and to regulate the operations
and trade practices of the industry.
In addition to the creation of the OIC, the government saw the
imperious need for a more active role of Filipinos in the oil industry.
Until the early seventies, the downstream oil industry was controlled
by multinational companies. All the oil refineries and marketing
companies were owned by foreigners whose economic interests
did not always coincide with the interest of the Filipino. Crude
oil was transported to the country by foreign-controlled tankers.
Crude processing wis done locally by foreign-owned refineries and
petroleum products were marketed through foreign-owned retail
outlets.
soSupra.
321) t,Aw
(
)N NA',t't [(At, til,]soutt( )t,ls
AN I ) l,lNV I It( )N M l l N',l'A t, t,AW I )t,lV t,t t,( )t'M t,)N',l'S
On November 9, 1973, President Marcos boldly creatcd the
Philippine National Oil Corporation
(PNOC)
to break the control
by foreigners of our oil industry. PNOC engaged in the business of
refining, marketing, shipping, transporting, and storing petroleum.
It acquired ownership of ESSO Philippines and Filoil to serve as its
marketing arm. It bought the controlling shares of Bataan Refining
Corporation, the largest refinery in the country. PNOC later put up
its own marketing subsidiary
-
Petrophil. PNOC operated under
the business name PETRON Corporation. For the first time, there
was a Filipino presence in the Philippine oil market.
In 1984, President Marcos, through Section 8 of PD No. 1956,
created the Oil Price Stabilization Fund (OPSF)
to cushion the
effects of frequent changes in the price of oil caused by exchange
rate adjustments or increase in the world market prices of crude oil
and imported petroleum products. The fund is used (1)
to reimburse
the oil companies for cost increases in crude oil and imporbed
petroleum products resulting from exchange rate adjustment and/
or increase in world market prices of crude oil, and (2) to reimburse
oil companies for cost underrecovery incurred as a result of the
reduction of domestic prices of petroleum products. Under the law,
the OPSF may be sourced from:
1) any increase in the tax collection from ad ualorem
tax or customs duty imposed on petroleum products subject to
tax under PD No. 1956 arising from exchange rate adjustment,
2) any increase in the tax collection as a result of the
lifting of tax exemptions of government corporations, as may
be determined by the Minister of Finance in consultation with
the Board of Enerry,
3) any additional amount to be imposed on petroleum
products to augment the resources of the fund through an
appropriate order that may be issued by the Board of EnergT
requiring payment of persons or companies engaged in the
business of importing, manufacturing and/or marketing
petroleum products, or
4) any resulting peso costs differentials in case the
actual peso costs paid by oil companies in the imporbation of
crude oil and petroleum products is less than the peso costs
computed using the reference foreign exchange rate as fixed by
the Board of Energy.
(lllAl'l'1,,.t
Vlll l)1':l'Alt'l'Ml')N't'ol" l'lNl'llt(lY A(:'l'()I I1)l)2
(
ll.r'prlhlit: At:1, No. 7(iiltt t
By 1985, only three
(3) oil companies were operating in the
country
-
Caltex, Shell and the government-owned PNOC.
In May, 1987, President Aquino signed EO No. 172 creating
the Energy Regulatory Board to regulate the business of importing,
exporting, re-exporting, shipping, transporting, processing, refining,
marketing and distributing enerry resources "when warranted and
only when public necessity requires." The Board had the following
powers and functions:
1) Fix and regulate the prices ofpetroleum products;
2) Fix and regulate the rate schedule or prices ofpiped
gas to be charged by duly franchised gas companies which
distribute gas by means of underground pipe system;
3) Fix and regulate the rates ofpipeline concessionaries
under the provisions of RA No. 387, as amended;
4) Regulate the capacities of new refineries o'r addi-
tional capacities of existing refineries and license refineries
that may be organized a{ter the issuance of
(EO No. 172) under
such terms and conditions as are consistent with the national
interest; and
5) Whenever the Board has determined that there is a
shortage of any petroleum product, or when public interest so
requires, it may take such steps as it may consider necessary,
including the temporary adjustment of the levels of prices
of petroleum products and the payment to the Oil Price
Stabilization Fund ... by persons or entities engaged in the
petroleum industry of such amounts as may be determined by
ihe Board, which may enable the importer to recover its cost of
importation.
On December 9,1992, Congress enacted RA No. 7638 which
created the Department of Enerry to prepare, integrate, coordinate,
supervise and control all plans, programs, projects, and activities
of the government in relation to energy exploration, development,
utilizaiion, distribution and conservation. The thrust of the
Philippine energ"y program under the law was toward privatization
ofgovernment agencies related to energy, deregulation ofthe po\Mer
urrd
"n".gy
industry and reduction ofdependency on oil-fired plants.
The law also aimed to encourage free and active participation and
investment by the private sector in all energy activities. section 5(e)
ofthe law states that "at the end offour
(4) years from the effectivity
322 l,AW ON N^',t'Ult^t,lil,ls0t[l.(:t,]S
AND t NVlR()NMliN'l'n l, t,AW I)t,iVt,)t,()t,Ml,lN't's
of this Act, the Department shall, upon approval oI'the Presidcnt,
institute the programs and timetable of deregulation of appropriate
energy projects and activities of the energ'y industry."
Pursuant to the policies enunciated in RA No. 7638, the
government approved the privatization of Petron Corporation in
1993. On December 16, 1993, PNOC sold 407o of its equity in Petron
Corporation to the Aramco Overseas Company.
In March 1996, Congress took the audacious step of deregulat-
ing the downstream oil industry. It enacted RA No. 8180, entitled
the "Downstream Oil Industry Deregulation Act of 1996." Under
the deregulated environment, "any person or entity may import or
purchase any quantity of crude oil and petroleum products from a
foreign or domestic source, lease or own and operate refineries and
other downstream oil facilities and market such crude oil or use the
same for his own requirement," subject only to monitoring by the
Department of Energy.
The deregulation process has two phases: the transition phase
and the full deregulation phase. During the transition phase,
controls of the non-pricing aspects of the oil industry were to be
lifted. The following were to be accomplished: (1) liberalization
of oil importation, exportation, manufacturing, marketing and
distribution, (2) implementation of an automatic pricing mechanism,
(3) implementation of an automatic formula to set margins of
dealers and rates ofhaulers, water transport operators and pipeline
concessionaires, and (4) restructuring of oil taxes. Upon full
deregulation, controls on the price of oil and the foreign exchange
cover were to be lifted and the OPSF was to be abolished.
b. Implementation
Section 15 of RA No. 8180 provides that the DOE shall, upon
approval of the President, implement the full deregulation of the
downstream oil industry not later than March, 1997. As far as
practicable, the DOE shall time the full deregulation when the
prices of crude oil and petroleum products in the world market are
declining and when the exchange rate of the peso in relation to the
US dollar is stable. Upon the implementation of the full deregulation
as provided herein, the transition phase is deemed terminated.
The first phase of deregulation commenced on August 12,
1996. On February 8, L997, the President implemented the full
deregulation of the Downstream Oil Industry through EO No. 372.
t:llAl/l'l,ll(Vlll Itl,ll'Alt'l'Ml'iN'l'()||t l')Nl')ll.(iY A(:'l'()1" ll)l)2 :12:l
{ ltr,lrrrlrlic At'1, No.'/(illllt
16. RA No. 8180 held unconstitutional.
IIA No. IllU0 did not stay long enough. On November 5, 1997'
.lrrsticc Puno, speaking Ibr the Court in Tatad,o' declared RA No.
ulll0 unconstitutional, and its implementing regulation, EO No.
i|92, void. In assailing Section 15 of RA No. 8180 and EO No. 392,
lrctitioners
offered, among others, the following submissions:
first,
EO No. 392 implementing the full deregulation of the downstream
oil industry is arbitrary and unreasonable because it was enacted
due to the alleged depletion of the OPSF fund
-
a condition not
fbund in RA No. 8180; and, second, Section 15 of RA No. 8180 and
INO No. 392 allow the formation of a de
facto
cartel among the three
cxisting oil companies
-
Petron, Caltex and Shell
-
in violation of
lhe constitutional prohibition against monopolies, combinations in
restraint of trade and unfair competition. section 19 of Article XII
of the Constitution allegedly violated mandates: "The State shall
regulate or prohibit monopolies when the public interest so requires.
No combinations in restraint of trade or unfair competition shall be
allowed."
Respondents, on the other hand, claimed that deregulation of
the downstream oil industry is a policy decision made by Congress
and it cannot be reviewed, much less be reversed by the Court.
Some provisions of RA No. 8180 which allegedly violate Section
19 of Article XII of the 1987 Constitution are:
(1) Section 5(b) which states
-
"Any law to the contrary
notwithstanding and starting with the effectivity of this Act,
tariff duty shall be imposed and collected on imported crude
oil at the rate of three percent (37o) and' imported refined
petroleum products at the rate of seven percent (7Vo) except
fuel oil and LPG, the rate for which shall be the same as that
for imported crude oil. Prouided, That beginning on January
l, 2OO4 the tariff rate on imported crude oil and refined
petroleum products shall be the same. Prouided,
further,That
this provision may be amended only by an Act of Congress."
(2) Section 6 which states
-
"To ensure the security
and continuity of petroleum crude and products supply, the
DOE shall require the refiners and importers to maintain a
minimum inventory equivalent to ten percent (L07o) of their
respective annual sales volume or forty (40) days of supply,
whichever is lower," and
6rSupra.
l,AW oN NA'l'l lll,Al, ltl,lSol llt( ll,lS
n N I ) l,lN V I ll,( )N M ],lN'l'Al, l,AW I )l,lv l,)1,( )l'M l,:N'l'S
(3) Section 9(b) which states
-
"To ensure fair competi-
tion and prevent cartels and monopolies in the downstream oil
industry, the following acts shall be prohibited:
xxx xxx xxx
(b) Predatory pricing which means selling or offer-
ing to sell any product at a price unreasonably below the
industry average cost so as to attract customers to the
detriment of competitors."
In declaring RA No. 8180 unconstitutional and EO No. 392
void, the Court held:
"section 19, Article XII of our Constitution is anti-
trust in history and in spirit. It espouses competition.
The desirability of competition is the reason for the
prohibition against restraint oftrade, the reason for the
interdiction of unfair competition, and the reason for
regulation of unmitigated monopolies. Competition is
thus the underlying principle of Section 19, Article XII
of our Constitution which cannot be violated by RA No.
8180. x x x
In the cases at bar, it cannot be denied that our downstream oil
industry is operated and controlled by an oligopoly, a foreign oligopoly
at that. Petron, Shell and Caltex stand as the only major league
players in the oil market. All other players belong to the Lilliputian
league. As the dominant players, Petron, Shell and Caltex boast of
existing refineries of various capacities. The tariffdifferential of 4Vo
therefore works to their immense benefit. Yet, this is only one edge
ofthe tariff differential. The other edge cuts and cuts deep in the
heart oftheir competitors. It erects a high barrier to the entry ofnew
players. New players that intend to equalize the market power of
Petron, Shell and Caltex by building refineries of their own will have
to spend billions of pesos. Those who will not build refineries but
compete with them will suffer the huge disadvantage of increasing
their product cost by 4Vo. They will be competing on an uneven field.
The argument that the AVo tariff differential is desirable because it
will induce prospective players to invest in refineries puts the cart
before the horse. The first need is to attract new players and they
cannot be attracted by burdening them with heavy disincentives.
Without new players belonging to the league of Petron, Shell and
Caltex, competition in our downstream oil industry is an idle dream.
xxx
(:llAlrl'1,)lt
Vlll l)1,)l'Alt'l'Ml,lN'l'()l,' l'lNl'llt(lY A(:'l'()lr ll)1)2
(ltr'prrlrlic Act, No. ?(illtl)
Again, we underline in scarlet that the fundamental
principle espoused by Section 19, Article XII of the
Constitution is competition for it alone can release the
creative forces of the market. But the competition that
can unleash these creative forces is competition that
is fighting yet is fair. Ideally, this kind of competition
requires the presence ofnot one, notjust a few but several
players. A market controlled by one player (monopoly) or
dominated by a handful of players (oligopoly) is hardly
the market where honest-to-goodness competition will
prevail. Monopolistic or oligopolistic markets deserve
our careful scrutiny and laws which barricade the entry
points of new players in the market should be viewed
withsuspicion.xxx
The provisions on tariff differential, inventory
and predatory pricing are among the principal props
of RA No. 8180. Congress could not have deregulated
the downstream oil industry without these provisions.
Unfortunately, contrary to their intent, these provisions
on tariff differential, inventory and predatory pricing
inhibit fair competition, encourage monopolistic power
and interfere with the free interaction of market forces. x
x x The aftermath of RA No. 8180 is a deregulated market
where competition can be corrupted and where market
forces can be manipulated by oligopolies."
The decision faulted the Executive when it considered the
depletion of the OPSF fund as a factor in fully deregulating the
downstream oil industry. Section 15 of RA No. 8180 enumerated
only two factors to be considered.,uiz.:
(1) the time when the prices of
crude oil and petroleum products in the world market are declining,
and
(2) the time when the exchange rate of the peso in relation to
the US dollar is stable. Section 15 did not mention the depletion of
the OPSF fund as a factor to be given weight by the Executive before
ordering full deregulation. But the Executive co-mingled the factor
of depletion of the OPSF fund with the factors of decline of the price
of crude oil in the world market and the stability of the peso to the
US dollar. On the basis of the text of EO No. 392, it is impossible
to determine the weight given by the Executive department to the
depletion of the OPSF fund- In light of this uncertainty, the early
deregulation under EO No. 392 constitutes a misapplication of RA
No.8180.
326 l^w oN NA',l'l'lt^l,ltl,ls()tllt(:l')s
AND FINVIRONM l.iN',l'Al, l,Aw I )l lv l,ll,( )l'M lrNl's
In short, RA No. 8180 was struck down as invalid because three
key provisions intended to promote free competition were shown to
achieve the opposite result. More specifically, the Court ruled that
its provisions on tariff differential, stocking of inventories, and
predatory pricing inhibit fair competition, encourage monopolistic
power, and interfere with the free interaction of the market forces.
While RA No. 8180 contained a separability clause, it was
declared unconstitutional in its entirety since the three
(3) offending
provisions so permeated the law that they were so intimately the
esse of the law. Thus, the whole statute had to be invalidated.
G. Downstream Oil Ind.ustry Deregulation
Act of 1998
17. Declaration of policy.
Following the thumping of RA No. 8180, Congress, on February
10, 1998, enacted a new deregulation law without the offending
provisions of the earlier law
-
RA No. 8479, known as the "Down-
stream Oil Industry Deregulation Act of 1998."
The new law declares it as a policy of the State to liberalize
and deregulate the downstream oil industry in order to ensure a
truly competitive market under a regime of fair prices, adequate
and continuous supply of environmentally-clean and high-quality
petroleum products. To this end, the State shall promote and
encourage the entry of new participants in the downstream oil
industry, and introduce adequate measures to ensure the attainment
of these goals.u' This applies to all persons or entities engaged in any
and all the activities of the domestic downstream oil industry, as
well as persons or companies directly importing refined petroleum
products for their own use.53
RA No. 8479, the present deregulation law, was clearly enacted
to implement Section 1-9, Article XII of the Constitution which
provides:
"The State shall regulate or prohibit monopolies
when the public interest so requires. No combinations in
restraint of trade or unfair competition shall be allowed."
52Sec.
2, RA No. 8479.
53Sec.
3,16id.
(:llAl'l'l'lltVllll)l'll'Alt'l'Ml')N'l'()l.'l'lNl'lli(lYA(:'l'()1.'191)2:J27
(lirtprtblit: At:t, No. 76iltt)
This is s0 becuuso thc government believes that deregulation
will eventually prevent monopoly. The simplest form of morropoly
cxists when there is only one seller or producer of a product or
service for which there are no substitutes. In its more complex
form, monopoly is defined as the
joint acquisition or maintenance
by members of a conspiracy, formed for that purpose, of the power
to control and dominate trade and commerce in a commodity to
such an extent that they are able, as a group' to exclude actual or
potential competitors from the field, accompanied with the intention
and purpose to exercise such power.
where two or three or a few companies act in concert to control
market prices and resultant profits, the monopoly is called an
oligopoly or cartel. It is a combination in restraint of trade'
The perennial shortage of oil supply in the Philippines is
exacerbated by the further fact that the importation, refining, and
marketing of ltris precious commodity are in the hands of a'cartel,
local but Lade up of foreign-owned corporations. Before the start
,f deregulation, SheU, Caltex and Petron controlled the entire oil
industry in the PhiliPPines.
The deregulation of the oil industry is a policy determination
of the highesi order. It is unquestionably a priority program of
gorr".rr*"-rrt. The Department of Energy Act of 1992
(RA No' 7638)
e*pressly mandates that the development and updating of the
existing
philippine
energ'y program "shall include a policy direction
towards deregulation of the power and enerry industry'"
18. Liberalization of the industry.
Under the law, any person or entity may import or purchase
any quantity of crude oil and petroleum products from a
{oreign
6r domestic source, lease or own and operate refineries and other
downstream oil facilities and market such crude oil and petroleum
products either in a generic name or his or its own trade name, or use
lh" ,u*" for his or its own requirement. It is required, however, that
any person or entity who shall engage in any such activity,shall
give
prior notice thereof to the DOE for monitoring purposes. Moreover,
such person or entity shall, for monitoring purposes, report to the
l)OE his or its every impor(ation/exportation.s'
A{Sr<:.
6, /6trl
:tzu
t,Aw
()N
NA't'lf ltAl,lil,tsoUlt(:t,ls
AN I ) t,lNVt tt( )NM t,tN,t'At, t,AW I )t,tvl,)t,( )t,M l,;N,t,S
19. Tariff treatment.
It is provided that a single and uniform tariff duty shail be
imposed and collected- both on imported crude oil and imported
refined petroleum products
at the rate of three percent (BZr),
but
the President may reduce such tariff rate when in his judgment
such reduction is warranted, pursuant to RA No. 1982, as amended,
otherwise known as the "Tariff and. customs cod,e." It is further
provided that upon implementation of the uniform Tariff
program
under the world rrade organization and ASEAN Free Trade Area
commitments, the tariffrate shall be automatically adjusted to the
appropriate level.
For as long as the National
power
Corporation (NpC)
enjoys
exemptions from taxes and duties on petroleum products used for
power generation,
the exemption shall apply to purchases through
the local refineries and to the importation of fuel oil and diesel.uu
20. Promotion of fair trade practaces.
The Department of Trade and Industry (DTI)
and DOE are
mandated to take all measures to promote fair trade and prevent
cartelization, monopolies, combinations in restraint of trade, and
arry unfair competition in the Industry as defined in Article 1g6 of
the Revised Penal code, and Articles 16g and 169 of RA No.
g298,
other,vise known as the "Intellectual
property
Rights Lq,w." The
DoE shall continue to encourage certain practices in the industry
which serve the public interest and are intended to achieve efficiency
and cost reduction, ensure continuous supply ofpetroleum products,
and enhance environmental protection. These practices may include
borrow-and-loan agreements, rationalized depot and manuiacturing
operations, hospitality agreements, joint
tanker and pipeline
utilization, and joint
actions on oil spill control and fire prevention.
The DoE shall monitor the rerationship between the oil
companies (refiners
and importers) and their dealers, haulers and
LPG distributors to help ensure the observance of fair and equitable
practices and to ensure the enforcement of existing contrais. The
DoE is empowered to conciliate and arbitrate any dlspute that may
arise with respect to the contractual rerationship beiween the oil
companies and the dealers, haulers and LpG distributors involving
the dealers' mark-up, the freight rate in transporting petroleum
t
OllAl'l'l1l(Vlll l)l,ll'AlL'l'Ml,lN'l'()lt l,:Nl,:lt(lY A(:'l'olt 11,1)2 321,
1 l11,;yrrlrlic Ar:t, No. 7(iiltt)
products and thc margins ol'LPG distributors for the protection of
the public and to prevent ruinous competition, without prejudice to
the review of the arbitration award under existing law.un
21. Anti-trust safeguards.
To ensure fair competition and prevent cartels and monopolies
in the industry, Section 11 prohibits the following acts:
a. Cartelization which means any agreement, combi-
nation or concerbed action by refiners, importers and/or
dealers, or their representatives, to fix prices, restrict outputs
or divide markets, either by products or by areas, or allocate
markets, either by products or by areas, in restraint oftrade or
free competition, including any contractual stipulation which
prescribes pricing levels and profit margins;
b. Predatory pricing which means selling or gffering
to sell any oil product at a price below the seller's or offeror's
average variable cost for the purpose of destroying competition,
eliminating a competitor or discouragrng a potential competitor
from entering the market: Prouided, howeuer, That pricing
below average variable cost in order to match the lower price of
the competitor and not for the purpose of destroying competition
shall not be deemed predatory pricing. For purposes of this
prohibition, "variable cost" as distinguished from "fixed cost,"
refers to costs such as utilities or raw materials, which vary as
the output increases or decreases and "average variable cost"
refers to the sum of all variable costs divided by the number of
units of outputs.sT
22. Other prohlbited acts.
Failure to comply with the following may result in appropriate
sanctions:
a. submission of reportorial requirements;
b. use of clean and safe
(environment and worker-
benign) technologies;
66Sec.7,Ibid.
67Sec.
ll,Ibid.
ssSec.
6,16iJ.
330 t,nw oN NA,t'UttAt,lat,lsot[t(it,]s
AN ll lrN Vl ttONM lrN'l'A l. l,AW Dl,lvt,) t,( )t,M t,:N'l'S
c. any order or instruction of the DOE Secretary issued
in the exercise of his enforcement powers under Section lb of
this Act; and
d. registration of any fuel additive with the DOE prior
to its use as an additive.u.
23. Remedies.
a. Gouernment action.
-
Whenever it is determined by the
Joint Task Force created under Section 14(d) ofthe Act that there
is a threatened, imminent or actual violation of Section 11 thereof,
it shall direct the provincial or city prosecutors havingjurisdiction
to institute an action to prevent or restrain such violation with the
regional trial court ofthe place where the defendant or any ofthe
defendants reside or has his place ofbusiness. Pending hearing of
the complaint and before final judgment,
the court may at any time
issue a temporary restraining order or an order of injunction as
shall be deemed just
within the premises, under the same conditions
and principles as injunctive relief is granted under the Rules of
Court. Whenever it is determined that the government or any of
its instrumentalities or agencies, including government-owned or
-controlled corporations, shall suffer loss or damage in its business
or property by reason of violation of Section 11, these agencies may
file an action to recover damages with the proper regional trial court.
b. Priuate complaint.
-
Any person or entity shall report
any violation of Section 11 of the Act to the Joint Task Force which
shall prepare a report of its findings and recommendations. In
case it is determined that there has been a violation of Section 11,
the private person or entity shall be entitled to sue for and obtain
injunctive relief, as well as damages, before the proper court.u,
24. Validity of FIA No. 8479 upheld.
Shortly after the passage of RA No. 8479, anew challenge to its
validity was mounted by petitioner Enrique T. Garcia, a member of
Congress, seeking to declare Section 19 thereof, which sets the time
of full deregulation, unconstitutional. The assailed provision reads:
"SEC. 19. Start of Full Deregulation.
-
Full dere-
gulation of the Industry shall start five (5) months
*Sec.
12, Ibid.
5eSec.
13,Ibid.
(:l
IAI
'l'1,)lt
V lll I llrll'Alt'l'M l':N'l'
(
)lt l'iN l'l]i( lY A( l'l' ( )1" ll)l):l :lll I
I ltrrltrhlir: At't No. 7(llltl)
{bllowing t,}re cllirctivit,.y ol'this Act: Prouided, howetter,
'Ihat when thc public intercst so requires, the President
may accelerate the start of full deregulation upon the
recommendation of the DOE and the Department of
Finance
(DOF) when the prices of crude oil and petroleum
products in the world market are declining and the value
of tn" peso in relation to the US dollar is stable, taking
into account relevant trends and prospects; Prouided,
further,That
the foregoing provision notwithstanding, the
five (5)-month Transition Phase shall continue to apply to
LPG, regular gasoline and kerosene as socially-sensitive
petroleum products and said petroleum products shall be
covered by the automatic pricing mechanism during the
said period."
Petitioner contends that Section 19, which prescribes the
period for the removal of price control on gasoline and other finished
products and for the full deregulation of the local downslream
oil industry, is patently contrary to public interest and therefore
unconstitutional because within the short span of five
(5) months,
the market is still dominated and controlled by an oligopoly of the
three
(3) private respondents, namely, Shell, Caltex and Petron'
Justice Sandoval-Gutierrez, speaking for the Court in Garciq'
v. Corona,* declared that there is a dearth of relevant, reliable,
and substantial evidence to support petitioner's theory that price
control must continue even as government is trying its best to get
out of regulating the oil industry. Petitioner overlooks the fact
that congress enacted the deregulation law exactly because ofthe
monopoly evils he mentions in his petition. congress instituted the
lifting of price controls in the belief that free and fair competition
was the best remedy against monopoly power.
"The argument that price control is not the villain
in the intrusion and growth of monopoly appears to be
pure theory not validated by experience. There can be no
denying the fact that the evils mentioned in the petition
arose while there was price control. The dominance of the
so-called 'Big 3'became entrenched during the regime of
price control. More importantly, the ascertainment of the
cause and the method of dismantling the oligopoly thus
mGR
No. l3245l,Dec. 17, 1999, 321 SCRA 218.
l,AW
(
)N NA'l'l lltAl, ltl,)S( )t,lt( :t,:S
AN I ) h:N V I lt( )NM l,:N'l'Al, l,AW I )l )V l,I r )t,M l,: N,l'S
created are a matter of legislative and executive choice.
The judicial process is equipped to handle legality but not
wisdom of choice and the efficacy of solutions.
Petitioner engages in another contradiction when
he puts forward what he calls a self-evident truth. He
states that a truly competitive market and fair prices
cannot be legislated into existence. However, the truly
competitive market is not being created or fashioned by
the challenged legislation. The market is simply freed
from legislative controls and allowed to grow and develop
free from government interference. RA No. 8479 actually
allows the free play of supply and demand to dictate
prices. Petitioner wants a government official or board
to continue performing this task. Indefinite and open-
ended price control as advocated by petitioner would
be to continue a regime of legislated regulation where
free competition cannot possibly flourish. Control is the
antithesis of competition. To grant the petition would
mean that the government is not keen on allowing a free
market to develop. Petitioner's 'self-evident truth' thus
supports the validity ofthe provision oflaw he opposes."
The Court further noted that instead of the price controls
advocated by the petitioner, Congress has enacted anti-trust
measures which it believes will promote free and fair competition.
Upon the other hand, the disciplined, determined, consistent and
faithful execution of the law is the function of the President. The
remedy against unreasonable price increases is not the nullification
of Section 19 of RA No .8479 but the setting into motion of its various
other provisions.
Chapter lX
PHILIPPINE FISHERIES CODE OF 1998
(Republic Act No. 8550)
A. Preliminany
01. Governing law.
RA No. 8550, enacted on Febru ary !7
,1998,
is an Act providing
for the development and conservation of the fisheries and aquatic
resources and integrating all laws pertinent thereto. Its short title
is "The Philippine Fisheries Code of 1998."
02. Policy considerations.
It is the declared policy ofthe State:
a. to achieve food security as the overriding conside-
ration in the utilization, management, development, conser-
vation and protection offishery resources in order to provide
the food needs of the population. A flexible poliry towards
the attainment of food security shall be adopted in response
to changes in demographic trends for fish, emerging trends in
the trade of fish and other aquatic products in domestic and
international markets, and the law of supply and demand;
b. to limit access to the fishery and aquatic resources of
the Philippines for the exclusive use and enjoyment of Filipino
citizens;
c. to ensure the rational and sustainable development,
management and conservation of the fishery and aquatic
resources in Philippine waters including the exclusive economic
zone (EEZ) and in the adjacent high seas, consistent with the
primordial objective of maintaining a sound ecological balance,
protecting and enhancing the quality of the environment;
i
I
i
1
1,