TitleDownstream Oil Industry Deregulation Act of 1998Policy1. To liberalize and deregulate the downstream oil industry in order to ensure a truly competitive market under a regime of:a. fair pricesb. adequate and continuous supply of environmentally-clean and high quality petroleum products.2. To promote and encourage entry of new participants in the downstream oil industry3. To introduce adequate measure to ensure the attainment of these goals.CoverageAll persons or entities engaged in any and all the activities of the domestic downstream oil industryPersons and companies directly importing refined petroleum products for their own use.TermsCrude Oil oil in its natural state excluding water, bottoms, sediments, and foreign substancesPetroleum naturally occurring mixture of compounds of hydrogen and carbon with a small proportion of impurities. Includes: mineral oil, petroleum gas, hydrogen gas, bitumen, asphalt, mineral wax, and other substances EXCEPT coal, peat, bituminous shale and/or other stratified mineral fuel depositsPetroleum products products formed in the course of refining crude petroleum through distillation, cracking, solvent refining and chemical treatment coming out as primary stocks from the refinery such as but not limited to: LPG, naphtha, gasolines, solvent, kerosenes, aviation fuels, diesel fuels, fuel oils, waxes and petrolatums, asphalt, bitumens, coke and refinery sludges, or such refinery petroleum fractions which have not undergone any process or treatment as to produce separate chemically-defined compounds in a pure or commercially pure state and to which various substances may have been added to render them suitable for particular use (resultant product must contain 50% petroleum products in weight.LiberalizationAny person or entity may:1. import or purchase any quantity of crude oil or petroleum products from a foreign or domestic source2. lease or own and operate refineries and other downstream oil facilities3. market such crude oil and petroleum products either in a generic name or his or its own trade name4. use the same for his or its own requirementTariff1. Single and uniform tariff rate of 3% but may be reduced by president.2. Starting January 1, 2004 or upon implementation of the Uniform Tariff Program under the WTO, the tariff rate shall be adjusted automatically to appropriate levels3. As long as the National Power Corporation enjoys exemptions from taxes and duties on petroleum products used for power generation, the exemption shall apply to purchase through the local refineries and to the importation of fuel and diesel.Promotion of Fair TradeDOE will conciliate and arbitrate contractual disputes between the oil companies and the dealers, haulers and LPG distributors involving:1. dealers' mark-up2. the freight rate in transporting petroleum products3. margins of LPG distributors For the protection of the public and to prevent ruinous competition. The award shall be subject to judicial reviewIncentives for New InvestmentsMay be availed of by new participants for a period of five years from registration with the BOIIn storage, marketing and distribution of new industry participants shall be entitles to incentives. Marketing includes establishment of gas stations1. Income tax holiday2. Additional deduction for labor expenses3. Minimum tac and duty of three percent (3%) and value-added tac (VAT) on imported capital requirement4. Tac credit on domestic capital equipment5. Exemption from contractor's tax6. Unrestricted use of consigned equipment7. Exemption from real property tac on production equipment or machineries8. Exemption from taxes and duties on imported spare parts9. Such other applicable incentives under Article 39 of EO 226.Promotion of Retail CompetitionEncourage building of gas stations by management and skills training and lending money to build gas stationsDOE, with TLRC and TESDA shall coordinate with new industry participants and existing petroleum dealers' association in the formulation and implementation of a two-fold program on management and skills training for the establishment, operation and maintenance of gasoline stations.Those who successfully complete the two-fold program shall be entitled to medium-to-long term loans with low interest rates from government lending agencies to serve as capital for the establishment and operation of gasoline stations. Training includes LPG retailingAnti-trust safeguardsProhibited Acts:1. Cartelization any agreement by refiners, importers and/or dealers or their representatives to:a. fix pricesb. restrict outputsc. divide markets by products or aread. allocate markets by products or areIn restraint of trade or free competition, including any contractual stipulation which prescribes pricing levels and profit margins2. Predatory pricing selling or offering to sell any oil product at a price below the seller's or offeror's average variable cost to destroy competition, eliminate competition or discourage a potential competitor to enter the market. But if purpose is to match the lower cost of competitor and not to destroy destroy competition then it's fine. Variable cost - costs that vary as the output increases or decreasesAverage variable cost = sum of all variable cost/number of units of outputPersons liable:1. any person2. COO3. CEO 4. CFOOther prohibited ActsRefusing to comply with:1. submission of any repertorial requirements2. use of clean and safe (environment and worker-benign) technologies3. any order or instruction of the DOE secretary in the exercise of his enforcement powers under Section 154. registration of any fuel additive with the DOE prior to its use as an additivePersons liable:1. Any person2. COO3. CEORemediesa. Government Action Joint Task Force will determine if there is a threatened, imminent or actual violation of Section 11. It shall direct provincial or city prosecutors with jurisdiction to institute action to prevent violation with the RTC where defendant resides or place of business. Court may order TRO. Damages may be recovered by Government, instrumentalities and agencies, including GOCC if they suffered damages as determined by the Joint Task Forceb. Private Complainant Any person person or entity may report any violation of Section 11 to the Joint Task Force. JTF will investigate and will make a report of its findings and investigations. Said report may be made public at its discretion. If there is a violation, person or entity may sue for and obtain injunctive relief and damages.Powers and Functions of DOE1. Monitor and publish daily international crude oil prices and follow movements of domestic oil prices2. Monitor quality of petroleum products and stop businesses involved in the sale of petroleum products with the national standards of quality that are aligned with the national standards/protocols of quality3. The Bureau of Product Standards of the DTI, together with DENR, DOE, DOST, representatives of the fuel and automotive industries and consumers shall set the specification for all types of fuels and fuel-related products to improve fuel composition for increased efficiency and reduced emissions4. BPS will specify allowable content of additives in all types of fuel and fuel related products5. DOE shall monitor the refining and manufacturing processes of local petroleum products to ensure that clean and safe (environment and worker-benign) technologies are applied. This also applies to the process of marketing local and imported petroleum products6. Maintain a periodic industry inventory of petroleum products to determine supply. Some people are required to submit monthly reports concerning this7. Act on any report of an unreasonable rise in prices of petroleum products.8. DOE-DOJ Task force is mandated to determine within 30 days the merit of the report and initiate actions as necessary. Task force may investigate and file compliant.9. In times of national emergency, when public interest requires, DOE may, during the emergency and under reasonable terms, temporarily take over or direct the operation of any person or entity engaged in the industry.Other PowersTo basically monitor everyone and investigate all violations.Transition PhaseTwo phases:1. Transition Phase2. Full Deregulation Phase

Automatic Pricing Mechanism shall be established to enable the domestic price of petroleum products to approximate and promptly reflect the price of oil in the international market.

During Transition Phase, the Energy Regulatory Board shall have the power to set the wholesale posted price of petroleum products and such prices shall be reflected automatically in the WPP of each product. There shall also be a public hearing to prescribe formula which will automatically set the margins of the marketers and dealers.Full Deregulation PhaseShall start five months following effectivity of this act but may be accelerated by President upon recommendation of the DOE and DOF when the prices of crude oil and petroleum products in the world market are declining and the value of the peso in relation to the US Dollar is stable.Law/StatuteRA 9513: Renewable Energy ActScope:Energy resources that do not have an upper limit on a total quantity to be used. Such resources are renewable on a regular basis and whose renewable rate is relatively rapid and available over an indefinite period of time:

1. Geothermal2. Solar3. Wind4. Biomass5. Ocean, tidal, wave6. HydroOffice in chargeNational Renewable Energy BoardContractual SchemeRenewable Energy Service (Operating) Contract service agreement between the Government through the DOE, and the RE Developer over a period of time in which RE Developer has the exclusive right to a particular RE area for exploration and development

Two stages:1. Pre-development stage preliminary assessment and feasibility study to financial closing2. Development/Commercial stage construction and installation of facilities up to operationProcess for award or appointment of contractor1. Secure Environmental Compliance Certificate from corresponding regional office of the DENR2. Registration at DOE through the Renewable Energy Management Bureau of RE developers and local manufacturers, fabricators and suppliers of locally produced renewable energy equipment.3. Issuance of certification within 15 days upon request that shall serve as the basis of their entitlement to incentives

Term/Period for ExplorationTRANSCO or its successors in interest will consult with its stakeholders and determine the maximum penetration limit of the Intermittent RE-based power plants to the grid. It shall implement technical mitigation and improvements in the system to ensure safety and reliability of electricity transmissions.

Must dispatch - qualified and registered RE generating units with intermittent RE resources. Shall be determined based on available energy and will enjoy the benefit of priority dispatch. All provisions in the WESM Rules which do not allow dispatch are deemed amended.

RE generating unit with intermittent RE resources - a RE generating unit or group of units connected to a common connection point whose RE energy resource is location-specific naturally difficult to precisely predict the availability of RE resource. This makes the energy regulated variable, unpredictable and irregular, the availability of the resource inherently uncontrollable. This includes plants utilizing wind, solar, run-of-river hydro or ocean energy.Obligations of the ContractorA registered RE developer may pay transmission and wheeling charges of TRANSCO on a per kilowatt-hour basis at a cost equivalent to the average per kilowatt-hour rate of all other electricity transmitted through the girdBenefits1 Priority connections to the grid for electricity generated form RE resources within the Philippines2. Wavier of government of share from proceeds of micro-scale projects for communal purposes and non-commercial operations which are not greater than 100 kilowatts3. Income tax holiday for the first seven (7) years of commercial operations4. Additional investments shall also be entitled to income tax exemption on income attributable to the investment for not more than 3 years from the period of initial availment of the ITH. Newly discovered and developed RE resource shall be treated as new investment. 5. Duty free importation of RE Machinery, Equipment and Materials including control and communication for 10 years upon certification. Said machinery must be directly and actually needed and used exclusively in the RE facilities for transformation and delivery of energy to point of use. It must also be covered by shipping documents under the name of registered operator to whom the BOC will directly deliver.6. Zero-rated VAT on its purchases of local supply of goods, properties and services needed for the development, construction and installation of plant facilities. This applies to the whole process of exploring and developing RE up to its conversion into power.7. Cash based incentive of 50% of the universal power charge for power needed to service missionary areas where it operated the same, to be charged against the universal charge for missionary electrification8. Exemption from payment of the universal charge for power and electricity generated for RE's own consumption and/or free distribution in the off grid area.9. Availability of preferential financial packages for development, utilization and commercial projects duly recommended and endorsed by DOE from Government financial institutions such as the DBP, LBP, etc.Tax RebateDOF shall provide rebate for all or part of the tac paid for the purchase of the RE equipment for residential, industrial or community use.

Government share: 1% but for Geothermal 1.5%Tax Provisions1. Realty and other taxes on civil works, equipment, machinery and other improvements actually and exclusively used for RE facilities shall not exceed 1.5% of original cost less accumulated normal depreciation or net book value. IF integrated resource and development facility, then real property tax shall only be imposed on the power plant.2. After 7 years of income tax holiday, all RE Developers shall pay 10% corporate tax on its taxable income. The RE Developer shall pass on savings to the end-user in the form of lower power rates.3. If RE fails to receive ITH before full operation, it may apply for Accelerated Depreciation but if they apply for this the project and its expansions are not longer eligible for ITH. Accelerated Depreciation should not exceed twice the rate of those prescribed in rules and regulations.4. Proceeds from sale of carbon emission credits are exempt from any and all taxes.5. Tax credit of 100% of value of the VAT and custom duties that would have been paid for imported machinery, equipment, materials and parts if bought from a domestic manufacturer. Prior approval must be obtained by the local manufacturer. Acquisition of such machinery, equipment, materials and parts should be made within the validity of the RE operating contract.6. Section 15 incentives also applies to RE Developer of hybrid and congeneration systems utilizing both RE and conventional energy. But the tax exemptions shall only apply to equipment, machinery and/or devices utilizing RE resources.a. Tax and duty free importation of components, parts and materialsb. Income tax holiday and exemption3. Zero-rated VAT.Special Terms and ConditionsEnd users may directly contract from RE facilities their energy requirements distributed through their respective distribution facilities.

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