POSITION PAPER ON THE AMENDMENT
TO THE IRR OF SECTION 28 OF EPIRA
By ENGR. BIENVENIDO ANATAN
Technical Consultant
Alliance of Pinoy Volunteers
for a Better Tomorrow
(ALL-PINOY)
Wire business in the Transmission and
Distribution of power is, technically speaking, a natural monopoly. This means
that only one Distribution Utility can be given a franchise to operate in one
locality. The implication is there can be no competition because there can be
no competitors. The way to de-monopolize the “naturally monopolistic industry”
according to the framers of the EPIRA is to disperse the stockholding and limit
the ownership of persons or parties. It is common knowledge that many of the
Distribution Utilities are close “family-owned” corporations.
The constitutional mandate is quite clear in the
Article XII – National Economy and Patrimony - Section 11,
“The State shall encourage equity participation in public utilities by
the general public.”
This is consistent with the earlier government
economic and corporate policy in the PHILIPPINE CORPORATION CODE OF BP 68 of
1980 Section 140 which states:
“Maximum limits may be set by the Batasang Pambansa for stockholdings
in corporations declared by it to be vested with a public interest pursuant to
the provisions of this section, belonging to individuals or groups of
individuals related to each other by consanguinity or affinity or by close
business interests, or whenever it is necessary to achieve national objectives,
prevent illegal monopolies or combinations in restraint or trade, or to
implement national economic policies declared in laws, rules and regulations
designed to promote the general welfare and foster economic development.”
It
is therefore not surprising that R. A. 9136 – “EPIRA” implemented de-monopolization through shareholding
dispersal by public utility owners / related interests and limiting
ownership by 25%;
SEC. 28. De-Monopolization
and Shareholding Dispersal. – In
compliance with the constitutional mandate for dispersal of ownership and de-monopolization
of public utilities, the holdings of persons, natural or juridical, including
directors, officers, stockholders and related
interests, in a distribution utility and their respective holding companies shall not exceed twenty-five (25%) percent of the voting shares of
stock unless the utility or the company holding the shares or its controlling
stockholders are already listed in the Philippine Stock Exchange (PSE): Provided, That controlling
stockholders of small distribution utilities are hereby required to list in the
PSE within five (5) years from the enactment of this Act if they already own
the stocks. New controlling stockholders shall undertake such listing within
five (5) years from the time they acquire ownership and control. A small
distribution company is one whose peak demand is equal to or less than Ten
megawatts (10MW).
The IRR – Rule 4 Definition of Terms, item (rrr)
of the EPIRA further defined “related group”;
“Related Group” refers
to a Person and any business entity Controlled by that Person, along with the
Affiliates of such business entity, and the directors and officers of the
business entity or its Affiliates, and relatives
by consanguinity or affinity, legitimate or common law, within the fourth civil degree, of the Person or any
of the foregoing directors or officers;
Again consistent to international laws and
jurisprudence as well as to the EPIRA, the special IRR for EPIRA - Section 28
dated March 13, 2002 of the original Honorable Commission, in order to avoid ANY
doubt or ambiguity, defined “related interests” within the “fourth
civil degree of consanguinity or affinity” as the legal limit on
affiliation and control.
(m) “Related Interests” shall refer to either a natural
person related within the fourth
civil degree of consanguinity or affinity to a director, officer or stockholder
of a distribution company, or to juridical persons affiliated to each other
through common business interest or belonging to a business group where the
holdings of the stockholders altogether constitute a majority or control in one
(1) or more enterprises;
The “fourth civil degree of
consanguinity or affinity” has been consistently used
to limit and restrict ownership, market power abuse and anti-competitive behavior. The same
was applied to de-monopolization and dispersal of ownership.
See also EPIRA Section
11, 38, 45, and its IRR Rule 4 (rrr), Rule 5. Section 3, Rule 6 Section 3, Rule
7. Section 3, Rule 8. Section 3, Rule 22. Section 4.
Here now comes the proposed amendment to the IRR
of Section 28 of the EPIRA to wit,
SECTION 1. DEFINITION OF TERMS:
(m) Related
Interests shall refer to:
Either a natural person
related within the FIRST civil deqree of consanguinity or affinity to a director, officer
or stockholder of a distribution company, or to juridical persons affiliated to each other through common business
interest or belonging to a business group where the holdings of the
stockholders altogether constitute a majority or control in one (1) or more enterprises;
The proposed narrowing of the legal relations
limit is objectionable on the following grounds:
1. It is contrary to the very
intent EPIRA’s Declaration of Policies Section 2 (d) which states;
“enhance
the inflow of private capital and broaden the ownership base of the power
generation, transmission and distribution sectors”.
Unlike the power
generation, where investors can put up the power plant anywhere, distribution
operation is a natural monopoly and the only way to broaden ownership base is
broadening ownership and not limiting it to only a few families or affiliates.
2. It
is not in compliance with the constitutional mandate for “dispersal of ownership and de-monopolization of public utilities”. Simply
put the law wants to do away with a single family or clan having control of one
distribution utility! However, the proposed amendment will allow brothers and
sisters, as is the present situation, ownership and control of a distribution
utility! Where then is dispersal of ownership and de-monopolization?
3.
It is definitely not consistent with the existing IRR of Section 28 of
the EPIRA. The present Commission has to show proof of any jurisprudence or
precedence on the concept of “first civil degree”, the wisdom of the proposal
and how well it fits, both to the letter and spirit of the constitution, the
EPIRA, and its original IRR?
ADDITIONAL COMMENTS:
4.
The IRR of Section 28 provides the time table for the implementation.
What happened?
Section 5. Period
of Divestment for Distribution Utilities. – Consistent with the
Constitutional
mandate for the State to encourage equity participation in public utilities by
the general public, Distribution Utilities with peak demand of more than 10 MW but not exceeding
100 MW, whose directors, officers stockholders and their related
interests together with their respective holding companies, own more than
twenty-five (25%) percent of the total voting shares of stocks shall effect the
divestment of the excess of the prescribed ceiling in accordance with Section 3
hereof, within three (3)years from the effectivity of these Rules, but not later than five (5)
years from the effectivity of RA 9136, while those with peak demand of more than 100 MW
shall effect the divestment of the excess of the prescribed ceiling in
accordance with Section 3 hereof, within one (1) year from the
effectivity of these Rules, but not later than two (2) years from the
effectivity of RA 9136.
5.
Another divestment is found in EPIRA Section 43. What happened?
SEC.
43. Functions of the ERC
(t)
Perform such other regulatory functions
as are appropriate and necessary in order to ensure the successful
restructuring and modernization of the electric power industry, such as, but
not limited to, the rules and guidelines under which generation companies, distribution
utilities which are not publicly listed shall offer and sell to the public a
portion not less than fifteen percent (15%) of their common shares of stocks:
Provided, however, That generation companies, distribution utilities or
their respective holding companies that are already listed in the PSE are
deemed in compliance. For existing companies, such public offering shall be
implemented not later than five (5) years
from the effectivity of this Act. New companies shall implement their
respective public offerings not later than five (5) years from the issuance of
their certificate of compliance;
REFERENCES / SOURCES:
I.
THE LAW
THE
ORIGINAL PROVISION ON R. A. 9136 - EPIRA
SEC. 28. De-Monopolization and Shareholding
Dispersal. – In compliance with the constitutional mandate for dispersal of ownership and de-monopolization
of public utilities, the holdings of persons, natural or juridical, including
directors, officers, stockholders and related
interests, in a distribution utility and their respective holding companies shall not exceed
twenty-five (25%) percent of the voting shares of stock unless the utility or
the company holding the shares or its controlling stockholders are already
listed in the Philippine Stock Exchange (PSE): Provided, That
controlling stockholders of small distribution utilities are hereby required to
list in the PSE within five (5) years from the enactment of this Act if they
already own the stocks. New controlling stockholders shall undertake such
listing within five (5) years from the time they acquire ownership and control.
A small distribution company is one whose peak demand is equal to or less than
Ten megawatts (10MW).
The ERC shall, within
sixty (60) days from the effectivity of this Act, promulgate the rules and
regulations to implement and effect this provision.
This Section shall not
apply to electric cooperatives.
II.
THE IRR OF SECTION 28 AS OF MARCH 13, 2002
Definition of Terms:
(m) Related Interests shall refer to either a natural person
related within the fourth
civil degree of consanguinity or affinity to a director, officer or
stockholder of
a distribution company, or to juridical persons affiliated to each
other through
common business interest or belonging to a business group where the
holdings
of the stockholders altogether constitute a majority or control in one
(1) or
more enterprises;
III.
THE PROPOSED AMENDMENT OF THE IRR OF SECTION 28
OF THE EPIRA
SECTION 1. DEFINITION OF
TERMS:
(m) Related Interests shall
refer to:
Either a natural person
related within the FIRST civil deqree of consanguinity or affinity to a director, officer
or stockholder of a distribution company, or to juridical persons affiliated to each other through common business
interest or belonging to a business group where the holdings of the stockholders
altogether constitute a majority or control in
one (1) or more enterprises;
IV.
RELATED PROVISIONS
A.
R. A. 9136 – ELECTRIC POWER INDUSTRY
REFORM ACT
SECTION
2. Declaration of Policy. – It is hereby declared the policy of the
State:
(d) To enhance the inflow of private capital and
broaden the ownership base of the power generation, transmission and distribution sectors;
SEC. 11.
TRANSCO Board of Directors. – All the powers of the TRANSCO shall be vested in
and exercised by a Board of Directors. The Board shall be composed of a
Chairman and six (6) members. The Secretary of the Department of Finance (DOF)
shall be the ex officio Chairman of the Board. The other members of the
TRANSCO Board shall include the Secretary of the Department of Energy (DOE),
the Secretary of the Department of Environment and Natural Resources (DENR),
the President of TRANSCO, and three (3) members to be appointed by the
President, each representing Luzon, Visayas and Mindanao.
The members of the Board so appointed by the President of the Philippines shall
serve for a term of six (6) years, except that any person appointed to fill-in
a vacancy shall serve only the unexpired term of his/her predecessor in office.
All members of the Board shall be professionals of recognized competence and
expertise in the fields of engineering , finance, economics, law or business
management. No member of the Board or any of his relatives within the fourth civil degree of consanguinity or affinity shall
have any interest, either as investor, officer or director, in any generation
company or distribution utility or other entity engaged in transmitting,
generating and supplying electricity specified by ERC.
SEC. 38. Creation of the Energy Regulatory
Commission.
The Chairman and
members of the Commission or any of their relatives within the fourth civil degree of consanguinity or affinity,
legitimate or common law, shall be prohibited from holding any interest
whatsoever, either as investor, stockholder, officer or director, in any
company or entity engaged in the business of transmitting, generating,
supplying or distributing any form of energy and must, therefore, divest
through sale or legal disposition of any and all interests in the energy sector
upon assumption of office.
SEC. 45.
Cross Ownership, Market Power Abuse and Anti-Competitive Behavior. – No participant in the
electricity industry or any other person may engage in any anti-competitive
behavior including, but not limited to, cross-subsidization, price or market
manipulation, or other unfair trade practices detrimental to the encouragement
and protection of contestable markets.
No generation company,
distribution utility, or its respective subsidiary or affiliate or stockholder
or official of a generation company or distribution utility, or other entity
engaged in generating and supplying electricity specified by ERC within the fourth
civil degree of consanguinity or affinity, shall be allowed to
hold any interest, directly or indirectly, in TRANSCO or its concessionaire.
Likewise, the TRANSCO, or its concessionaire or any of its stockholders or
officials or any of their relatives within the fourth
civil degree of consanguinity or affinity, shall not hold any interest,
whether directly or indirectly, in any generation company or distribution
utility. Except for ex officio government-appointed representatives,
no person who is an officer or director of the TRANSCO or its concessionaire
shall be an officer or director of any generation company, distribution utility
or supplier.
An “affiliate” means any person
which, alone or together with any other person, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with another person. As used herein, “control” shall mean the power to direct or cause the
direction of the management policies of a person by contract, agency or
otherwise.
To promote true market
competition and prevent harmful monopoly and
market power abuse, the ERC shall enforce the following safeguards:
(a) No company or related group can own,
operate or control more than thirty percent (30%) of the installed generating
capacity of a grid and/or twenty-five percent (25%) of the national installed
generating capacity. “Related group”
includes a person’s business interests, including its subsidiaries, affiliates,
directors or officers or any of their relatives by consanguinity or affinity,
legitimate or common law, within the fourth
civil degree;
B.
R. A. 9136 - RULES AND REGULATIONS TO
IMPLEMENT (IRR)
RULE 2. DECLARATION OF POLICY
(d) To enhance the inflow of private
capital, participation in the attendant risks, and broaden the ownership base
of the power generation, transmission and distribution sectors;
RULE 4. DEFINITION OF TERMS
(rrr) “Related
Group” refers to a Person and any business entity
Controlled by that Person, along with the Affiliates of such business entity,
and the directors and officers of the business entity or its Affiliates, and
relatives by consanguinity or affinity, legitimate or common law, within the
fourth civil degree, of the Person or any of the foregoing
directors or officers;
RULE 5. GENERATION
SECTOR
Section
3. Ownership Limitation.
No Generation Company,
Distribution Utility, or its respective subsidiary or Affiliate or stockholder
or official of a Generation Company or Distribution Utility, or other entity
engaged in generating and supplying electricity specified by ERC within the fourth civil degree of consanguinity or affinity,
legitimate or common law, shall be allowed to hold any interest,
directly or indirectly, in TRANSCO or its Buyer or Concessionaire. Likewise,
the TRANSCO or its Buyer or Concessionaire or any of its stockholders or
officials or any of their relatives within the fourth
civil
degree of consanguinity or affinity, legitimate or common law, shall
not hold any interest, whether directly or indirectly, in any Generation
Company or Distribution Utility. Except for ex officio government-appointed
representatives, no Person who is an officer or director of the TRANSCO or its
Buyer or Concessionaire shall be an officer or director of any Generation
Company, Distribution Utility or Supplier. This section shall not apply to
PSALM during the period that its generation assets are being privatized
pursuant to Section 47 of the Act.
RULE 6. TRANSMISSION
SECTOR
Section 3. Ownership Limitation.
The TRANSCO or its
Buyer or Concessionaire or any of its stockholders, directors, officers or any
of their relatives within the fourth civil
degree of consanguinity or affinity, legitimate or common law, shall
not hold any interest, whether directly
or indirectly, in any Generation Company, Distribution Utility, IPP
Administrator and Supplier.
RULE 7. DISTRIBUTION SECTOR
Section
1. Guiding Principles.
(a)
Pursuant to Section 22 of the Act, the Distribution of Electricity to
End-users shall be a regulated common carrier business, requiring a national
franchise. For purposes of these Rules, distribution franchise shall mean the
privilege of a Distribution Utility to convey electric power through its
Distribution System in a given geographical area granted by the Congress of the
Republic of the Philippines.
The Distribution of Electricity is a business affected with public interest.
(b) The following rules shall
apply to the Distribution of Electricity.
Section 2. Scope of Application.
This Rule shall apply to an
entity that owns, operates, or Controls one or more Distribution Systems such
as but not limited to:
(a)
ECs;
(b)
Privately-Owned Distribution Utilities;
(c)
Local Government Unit Owned-and-Operated Distribution Systems;
(d)
Entities duly authorized to operate within the EZs; and
(e)
Other duly authorized entities engaged in the Distribution of
Electricity.
Section
3. Ownership Limitation.
(a)
A Distribution Utility and any
of its subsidiaries, Affiliates, stockholders, directors, officers or their
relatives within the fourth civil degree of consanguinity or affinity,
legitimate or common law, shall not hold any interest, directly or indirectly,
in the TRANSCO or its Buyer or Concessionaire, or the IMO.
(b)
The holdings of any Person, natural or juridical, including its
directors, officers, stockholders, and their related interests in a
Distribution Utility and their respective holding companies shall not exceed
twenty-five percent (25%) of the total voting shares of stock. This shall not
apply to a Distribution Utility or the company holding the shares or its
controlling stockholders whose shares are listed in the PSE. Implementation of
this provision shall be in accordance with the rules and regulations issued by
ERC. This section shall not apply to ECs in accordance with Section 28 of the
Act.
(c)
A Distribution Utility shall be required to sell to the public a
portion of not less than fifteen percent (15%) of its common shares of stock
not later than five (5) years from the effectivity of the Act, except those
Distribution Utilities or its respective holding companies listed in the PSE,
subject to the rules and regulations of the ERC to be issued for this purpose.
RULE 8. SUPPLY SECTOR
Section
3. Ownership Limitation and
Restrictions.
(a)
A Supplier or Affiliate thereof or any stockholder, director or
officer or any of their relatives within the fourth
civil degree of consanguinity or affinity, legitimate or common law,
shall not own any interest, directly or indirectly, in TRANSCO or its Buyer or
Concessionaire, or IMO.
RULE 22. NATIONAL
TRANSMISSION CORPORATION (TRANSCO)
Section 4. TRANSCO Board of Directors.
The members of the
Board so appointed by the President of the Philippines shall serve for a term
of six (6) years, except that any Person appointed to fill-in a vacancy shall
serve only the unexpired term of his/her predecessor in office. All members of
the Board shall be professionals of recognized competence and expertise in the
fields of engineering, finance, economics, law or business management. No
member of the Board or any of his relatives within the fourth
civil degree of consanguinity or affinity, legitimate or common law,
shall have any interest, either as investor, officer or director, in any
Generation Company or Distribution Utility or other entity engaged in
transmitting, generating and supplying electricity specified by ERC.
SEC. 43. Functions
of the ERC
(t) Perform such other regulatory functions
as are appropriate and necessary in order to ensure the successful
restructuring and modernization of the electric power industry, such as, but
not limited to, the rules and guidelines under which generation companies, distribution
utilities which are not publicly listed shall offer and sell to the public a
portion not less than fifteen percent (15%) of their common shares of stocks:
Provided, however, That generation companies, distribution utilities or
their respective holding companies that are already listed in the PSE are
deemed in compliance. For existing companies, such public offering shall be
implemented not later than five (5) years from the effectivity of this Act.
New companies shall implement their respective public offerings not later than
five (5) years from the issuance of their certificate of compliance;
No comments:
Post a Comment