7/25/2019 Ownership Limitation Provisions

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Ownership Limitation Provisions

1.

Generation SectorProhibition to hold any interests in TRANSCO and vise-versa. Rule 5, Section

3. Ownership Limitation, EPIRA IRR

2.

Distribution Sector

Rule 7, Section 3. Ownership Limitation, EPIRA IRR

a.

Prohibition to hold any interests in TRANSCOb.

Cap ownership on DUs not publicly listed (25% of total voting stock)

c.

DUs (not publicly listed) requirement to sell not less than 15% of its common shares of

stock

Section 45.b, EPIRA

d.

50% cap on bilateral power supply contracts with associated firms

3.

Market Share Cap 30% of the installed generating capacity of the grid; 25% of the national

installed generating capacity (Section 45.a, EPIRA)

Note: Cross-ownership prohibition is only effected on Transmission. Heres an excerpt of a news

article pertaining to this:

Epira that we got

The most dangerous provisions were either worded in an innocuous and fleeting way or

disguised as protection for the consumers so that they were easy not to realize.

This was where the Epira failed the people from the beginning. There was so much lobbying

against strict cross-ownership that it was weakened. Only the transmission company was

prohibited from owning generation and distribution assets.

Section 45, under a pretentious premise of promoting true market competition and preventing

harmful monopoly and market domination, allowed distribution utilities (the main buyers of

power) to enter into bilateral supply contracts with affiliated generators of up to

50 percent of their power requirements.

A senior senator was against any form of cross-ownership but that would require Meralco and

Davao Light to divest themselves of generation assets, a sure way to incite formidable opposition

to the law.

He compromised on grandfathering the existing generating companies (gencos) and allowed up

to 30 percent of generation to be bought from a sister company. Meralco itself had been

lobbying only for 35 percent.

It was a mystery how it became 50 percent in the last two days of finalizing the law at the

bicameral conference committee.

Sweetheart deals

Section 45 consequently did not mandate competitive bidding for bilateral contracts. This led to

the current norm of sweetheart power supply agreements between the people who control the

demand of distribution utilities and the supply of their friendly gencos.

Notice that in the Meralco franchise area only those who are in a position to negotiate a power

supply contract with the utility announce their projects. Even Meralco formed its own generation

company. Since the signing of the Epira in 2001, Meralco has not called a single bidding for

power supply.

http://opinion.inquirer.net/71667/righting-whats-wrong-with-the-epira#ixzz3v6mI6fT6

http://opinion.inquirer.net/71667/righting-whats-wrong-with-the-epira#ixzz3v6mI6fT6http://opinion.inquirer.net/71667/righting-whats-wrong-with-the-epira#ixzz3v6mI6fT6http://opinion.inquirer.net/71667/righting-whats-wrong-with-the-epira#ixzz3v6mI6fT6

7/25/2019 Ownership Limitation Provisions

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References:

1. Ownership Limitation on Generation Sector

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 5, Section 3.

Ownership Limitation, EPIRA IRR)

2.

Ownership Limitation on Distribution Sector

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 thisprovision 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 7, Section 3. Ownership Limitation, EPIRA IRR)

d.

Distribution utilities may enter into bilateral power supply contracts subject to review

by the ERC: Provided, That such review shall only be required for distribution utilitieswhose markets have not reached household demand level. For the purpose of

preventing market power abuse between associated firms engaged in generation and

distribution, no distribution utility shall be allowed to source from bilateral power

supply contracts more than fifty percent (50%) of its total demand from an associated

firm engaged in generation but such limitation, however, shall not prejudice contracts

entered into prior to the effectivity of this Act. An associated firm with respect to

another entity refers to 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, such entity(Section 45.b, EPIRA)

3. 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 persons business interests, including its subsid iaries, affiliates,

directors or officers or any of their relatives by consanguinity or affinity, legitimate or common law, within

the fourth civil degree (Section 45.a, EPIRA)