Republic Act No. 9136

REPUBLIC ACT NO.
9136
AN ACT ORDAINING REFORMS IN THE
ELECTRIC POWER INDUSTRY, AMENDING FOR
THE PURPOSE CERTAIN LAWS AND FOR
OTHER PURPOSES
SEC. 33. Distribution Utilities Stranded Contract Costs
Recovery. – Stranded contract costs of distribution utilities
shall refer to the excess of the contracted cost of electricity
under eligible contracts of such utilities over the actual
selling price of such contracts in the market. Such contracts
shall have been approved by the ERB as of December 31,
2000.
A distribution utility shall recover stranded contract
costs: Provided, however, That such costs of the IPPs of
distribution utilities are subject to review by ERC in order to
determine fairness and reasonableness in relation to the
average price of land-based IPP projects entered into by
NPC at the time they were contracted. The ERC shall take
into consideration all factors that affect the total cost of NPC
IPP generation projects, including direct or indirect
subsidies or incentives provided by the Government.
Within one (1) year from the start of open access, any
distribution utility that seeks recovery of stranded contract costs
shall file with the ERC notice of such intent together with an
estimate of such obligations, including the present value thereof
and such other supporting data as may be required by the
ERC.
Any distribution utility that does not file within the date
specified shall not be eligible for such recovery. Any distribution
utility which seeks to recover stranded cost shall have a duty to
mitigate its potential stranded contract costs by making
reasonable best efforts to:
(a)reduce the costs of its existing contracts with IPPs to a level

not exceeding the average buying price of other land-based
electric power generators; and
(b) submit to an annual earnings review by the ERC and use
its earnings above its authorized rate of return to reduce the
book value of contracts until the end of the stranded cost
recovery period.
Other mitigating measures which are
reasonably known and generally
accepted within the electric power
industry shall be utilized. The ERC shall
not require the distribution utility to take a
loss to reduce stranded contract costs or
divest assets, unless the divestiture is
imposed as a penalty as provided herein.
The relevant distribution utility shall
submit to the ERC quarterly reports
showing the amount of stranded costs
recovered and the balance remaining to
be recovered.
Within three (3) months from the submission
of the application for stranded cost recovery
by the relevant distribution utilities, the ERC
shall verify the reasonable amounts and
determine the manner and duration for the
full recovery of stranded contract costs as
defined herein: Provided, That the duration
for such recovery shall not be shorter than
fifteen (15) years nor longer than twenty-five
(25) years. Any amount to be included for
stranded cost recovery shall be reflected as
a separate item in the consumer billing
statement.
The ERC shall, at the end of the first year of the
implementation of stranded cost recovery and
every year thereafter, conduct a review to
determine whether there is under-recovery or over
recovery and adjust (true-up) the level of stranded
cost recovery charge accordingly. In case of an
over-recovery, the ERC shall ensure that any
excess amount shall be remitted to the Special
Trust Fund created under Section 34 hereof. A
separate account shall be created for these
amounts which shall be held in trust for any future
claims of distribution utilities for stranded cost
recovery. At the end of the stranded cost recovery
period, any remaining amount in this account shall
be used to reduce the electricity rates to the end-
users.
SEC. 34. Universal Charge. – Within one (1) year from the
effectivity of this Act, a universal charge to be determined, fixed
and approved by the ERC., shall be imposed on all electricity
end-users for the following purposes:
(a)Payment for the stranded debts in excess of the amount
assumed by the National Government and stranded contract
costs of NPC and as well as qualified stranded contract costs
of distribution utilities resulting from the restructuring of the
industry;
(b) Missionary electrification;
(c) The equalization of the taxes and royalties applied to
indigenous or renewable sources of energy vis-a-vis imported
energy fuels;
(d) An environmental charge equivalent to one-fourth of one
centavo per kilowatt-hour (P0.0025/kWh), which shall accrue to
an environmental fund to be used solely for watershed
rehabilitation and management. Said fund shall be managed by
NPC under existing arrangements; and
(e) A charge to account for all forms of cross-subsidies for a
period not exceeding three (3) years.
The universal charge shall be non-bypassable charge
which shall be passed on and collected from all end-
users on a monthly basis by the distribution utilities.
Collections by the distribution utilities and the
TRANSCO in any given month shall be remitted to the
PSALM Corp. on or before the fifteenth (15th) of the
succeeding month, net of any amount due to the
distribution utility. Any end-user or self-generating
entity not connected to a distribution utility shall remit
its corresponding universal charge directly to the
TRANSCO. The PSALM Corp., as administrator of the
fund, shall create a Special Trust Fund which shall be
disbursed only for the purposes specified herein in an
open and transparent manner. All amounts collected
for the universal charge shall be distributed to the
respective beneficiaries within a reasonable period to
be provided by the ERC.
SEC. 35. Royalties, Returns and Tax Rates for
Indigenous Energy Resources. – The provisions
of Section 79 of Commonwealth Act No. 137
(C.A. No. 137) and any law to the contrary
notwithstanding, the President of the Philippines
shall reduce the royalties, returns and taxes
collected for the exploitation of all indigenous
sources of energy, including but not limited to,
natural gas and geothermal steam, so as to
effect parity of tax treatment with the existing
rates for imported coal, crude oil, bunker fuel
and other imported fuels.
To ensure lower rates for end-users, the ERC
shall forthwith reduce the rates of power from all
indigenous sources of energy.
SEC. 36. Unbundling of Rates and Functions. – Within six
(6) months from the effectivity of this Act, NPC shall file
with the ERC its revised rates. The rates of NPC shall be
unbundled between transmission and generation rates
and the rates shall reflect the respective costs of
providing each service. Inter-grid and intra-grid cross
subsidies for both the transmission and the generation
rates shall be removed in accordance with this Act.
Within six (6) months from the effectivity of this Act,
each distribution utility shall file its revised rates for the
approval by the ERC. The distribution wheeling charge
shall be unbundled from the retail rate and the rates shall
reflect the respective costs of providing each service. For
both the distribution retail wheeling and supplier’s
charges, inter-class subsidies shall be removed in
accordance with this Act.
Within six (6) months from the date of
submission of revised rates by NPC
and each distribution utility, the ERC
shall notify the entities of their approval.
Any electric power industry participant
shall functionally and structurally
unbundle its business activities and
rates in accordance with the sectors as
identified in Section 5 hereof. The ERC
shall ensure full compliance with this
provision.

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REPUBLIC ACT NO.

(a)reduce the costs of its existing contracts with IPPs to a level

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