PHILIPPINES Law and Practice Contributed by: Maria Lethel C. Alburo-Mejia, Puno Law
1. Structure and Ownership of the Power Industry 1.1 Law Governing the Structure and Ownership of the Power Industry Republic Act No 9136, also known as the Elec- tric Power Industry Reform Act of 2001 (the “EPIRA”), was passed in June 2001 with the main objective of providing affordable and reli- able electricity supply by: (i) restructuring and deregulating the industry; and (ii) privatising National Power Corporation (NPC) assets and NPC contracts with independent power produc- ers (IPPs). Prior to the EPIRA, the industry was mainly made up of the NPC and the distribu- tion utilities in the country. The NPC, which at that time controlled approximately 90% of the country’s installed generating capacity, also per- formed generation and transmission functions. Distribution utilities were responsible for distri- bution, pertaining to physical distribution, and supply, pertaining to the buying and selling, of electricity. As of April 2024, the Power Sector Assets and Liabilities Management Corporation (PSALM) has privatised 84% of the generating facilities and 78% of the NPC-IPP contracts in the Philippines. Today, the industry has transitioned into four sectors — the generation, transmission, distri- bution and supply sectors. Of these sectors, only the transmission and distribution sectors are regulated. Generation The generation sector converts fuel and other forms of energy into electricity. Under the EPIRA, generation companies are allowed to sell elec- tricity to distribution utilities or retail electricity suppliers through either bilateral contracts or the Wholesale Electricity Spot Market (WESM).
The goal of the EPIRA is for the generation sec- tor to be open and competitive and for the pri- vate sector to introduce additional generation capacity. However, no generation company is allowed to own more than 30% of the installed generating capacity of the Luzon, Visayas or Mindanao grids and/or 25% of the total nation- wide installed generating capacity. Further, no generation company associated with a distri- bution utility may supply more than 50% of the distribution utility’s total demand under bilateral contracts, without prejudice to the bilateral con- tracts entered into prior to the enactment of the EPIRA. Transmission Electricity generated by power generation facili- ties is generally transported via a high-voltage transmission system to various distribution utili - ties or electricity co-operatives. Transmission is critical in ensuring that generated electric- ity is delivered to the distribution utility’s load centres within proper technical standards. It is a regulated common electricity carrier business subject to the rate-making powers of the Energy Regulatory Commission (ERC). The operation of the transmission system requires a national fran- chise. Pursuant to the EPIRA, the NPC transferred its transmission and sub-transmission assets to the National Transmission Corporation (“TransCo”), which was created to operate the transmission systems throughout the Philippines. The princi- pal function of TransCo is to ensure and maintain the reliability, adequacy, security, stability and integrity of the national electrical grid in accord- ance with the Philippine Grid Code (the “Grid Code”). TransCo is also mandated to provide open access to all industry participants. The EPIRA granted TransCo a monopoly over the high-voltage network and subjected it to perfor-
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