Franchise nature, area, and system definition
- Section 1 grants Cagayan Electric Power and Light Co., Inc. (CEPALCO), its successors or assigns, a franchise to construct, operate and maintain in the public interest and commercial purposes an electric distribution system for conveying electric power to end-users.
- The franchise covers the City of Cagayan de Oro and the municipalities of Tagoloan, Villanueva and Jasaan, all in the Province of Misamis Oriental, except specified barangays: Balkingon, San Simon, Pagatpat, Tagpangi, Pagalungan, Taglimao, Tuburan, Pigsag-an, Tumpagon, Bayanga, Mambuaya, Dansolihon, Tignapoloan, Besigan and a portion of Canitoan, all located in the City of Cagayan de Oro.
- The franchise is granted subject to the provisions of the Constitution and applicable laws, rules and regulations under Section 1.
- “Distribution system” is defined as the system of wires and associated facilities including sub-transmission lines belonging to a franchised distribution utility, extending between the delivery point on the national transmission system or generating facility and the metering point/facility of the end-user under Section 1.
Operations standards and facility use
- All electric distribution facilities, lines and systems owned, maintained, operated or managed by CEPALCO (or its successors/assigns) must be operated and maintained at all times in a superior manner under Section 2.
- When required by the Energy Regulatory Commission (ERC) or the Department of Energy (DOE) (or their legal successor) or any other concerned government agency, CEPALCO must modify, improve and change its facilities or systems to such extent as the progress in science and improvements in electric power services may render reasonable and proper under Section 2.
- Whenever practicable, and for maintaining order, safety and aesthetics along highways, roads, streets, alleys, or right-of-way, CEPALCO may allow interested parties to use free spaces in its poles, facilities or right-of-way upon reasonable compensation considering costs incurred to accommodate and administer such use under Section 2.
- The ERC decides disputes or disagreements between parties on the use described in Section 2 under Section 2.
Regulatory approvals and public access
- CEPALCO must secure from the ERC/DOE (or any other government agency with jurisdiction) the necessary certificate of public convenience and necessity and other appropriate permits and licenses for construction and operation of its electric distribution system under Section 3.
- For erection and maintenance of poles and pipes and other supports, and for laying and maintaining distribution facilities, CEPALCO (and successors/assigns) may make excavations or lay conduits in public places, highways, streets, lanes, alleys, avenues, sidewalks or bridges in the covered area with prior approval of the Department of Public Works and Highways (DPWH) or the local government units (LGUs) concerned, as appropriate under Section 4.
- Any public place, highway, street, lane, alley, avenue, sidewalk or bridge disturbed or altered due to the erection of poles or other supports, or laying of wires, pipes, other conductors or conduits must be immediately repaired and properly restored at the expense of the grantee under Section 4.
- Restoration must be in accordance with the standards set by the DPWH and concerned LGUs under Section 4.
Public service duties, rates, and consumer interest
- CEPALCO must supply electricity to its captive market in the least cost manner under Section 5.
- When required by the ERC, and as far as feasible, CEPALCO must modify, improve or change facilities, poles, lines, pipes, systems and equipment to provide efficient and reliable service and reduced electricity costs under Section 5.
- CEPALCO must charge reasonable and just power rates for services to all types of consumers within its franchise areas so that business and industries shall be able to compete under Section 5.
- CEPALCO must provide open and non-discriminatory access to its distribution system and services for any end-user within its franchise area, consistent with Republic Act No. 9136 under Section 5.
- CEPALCO must not engage in activity constituting abuse of market power, including unfair trade practices, monopolistic schemes, and other activities that hinder competitiveness of businesses and industries under Section 5.
- Retail rates to the captive market and charges for distribution to end-users are regulated and subject to approval by the ERC/DOE under Section 6.
- CEPALCO must identify and segregate in each bill the components of the retail rate pursuant to Republic Act No. 9136, unless otherwise amended under Section 6.
- The rates charged to end-users must be made public and transparent under Section 6.
- CEPALCO must implement lifeline rate to marginalized end-users as mandated under Republic Act No. 9136 under Section 6.
- CEPALCO must establish a consumer desk to handle consumer complaints and to promote consumer interests under Section 7.
- CEPALCO must act with dispatch on all complaints brought before it under Section 7.
Government rights, taxes, eminent domain, and liability
- The President of the Philippines may take over and operate the distribution system of CEPALCO (or authorize temporary use and operation by any government agency/department) in times of war, rebellion, public peril, calamity, emergency, disaster, or disturbance of peace and order, with due compensation to CEPALCO during the period of operation under Section 8.
- Tax provisions: CEPALCO (and successors/assigns) must pay all taxes, duties, fees, and other impositions applicable to private electric utilities under the National Internal Revenue Code (NIRC) of 1997, as amended, the Local Government Code, and other applicable laws under Section 9.
- Existing and future franchise tax exemptions, incentives, or privileges granted under relevant law are not repealed under Section 9.
- Rights, privileges, benefits and exemptions accorded to existing and future private electric utilities by their respective franchises must also be extended to CEPALCO under Section 9.
- CEPALCO must file its return with the city or province where its facility is located and pay taxes due to the Commissioner of Internal Revenue or duly authorized representative in accordance with the NIRC; the return is subject to audit by the Bureau of Internal Revenue under Section 9.
- Eminent domain: subject to limitations and procedures prescribed by law, CEPALCO may exercise eminent domain when reasonably necessary for efficient maintenance and operation of services under Section 10.
- CEPALCO may install and maintain poles, wires and other facilities over and across public property, including streets, highways, forest reserves and other similar property of the government and its instrumentalities under Section 10.
- CEPALCO may acquire private property actually necessary for the purposes of the franchise, but only through proper condemnation proceedings and with just compensation paid under Section 10.
- Warranty in favor of national and local government: CEPALCO must hold the national, provincial and municipal governments harmless from claims, accounts, demands, or actions arising out of accidents or injuries caused by construction, installation, operation and maintenance of the distribution system under Section 12.
- Liability for damages: CEPALCO is liable for injury and damage arising from or caused by accident to persons and property due to defective construction under the franchise or neglect/omission to keep poles, wires and pipes in a safe condition under Section 13.
Transfer limits, equality, compliance, and reports
- CEPALCO may not lease, transfer, grant the usufruct of, or sell the franchise or the rights and privileges acquired thereunder, nor merge with another entity, nor transfer controlling interest, in whole or part, whether simultaneously or contemporaneously, to any other person or entity, without prior approval of the Congress of the Philippines, except to a wholly-owned subsidiary of CEPALCO, or where CEPALCO is the surviving corporation, under Section 14.
- Any approved transfer, sale, or assignment must be in accordance with constitutional limitations, and the transferee must be subject to the same conditions, terms, restrictions and limitations of the Act under Section 14.
- Equality clause: if a competing individual or entity receives a similar permit or franchise with terms or provisions more favorable than those granted to CEPALCO or that place CEPALCO at disadvantage, those more favorable terms are deemed part of this franchise and operate equally in CEPALCO’s favor under Section 15.
- Future franchise grantees may enjoy terms not contained in other franchises granted later, under the equality clause structure, while territory covered and the life span of the franchise are excluded from the equality clause effect under Section 15.
- Acceptance and compliance: written acceptance of the franchise must be given within sixty (60) days from effectivity under Section 11.
- Reportorial requirement: CEPALCO must submit an annual report of finances and operations to the Congress of the Philippines under Section 19.
Extension term and franchise revocation
- The franchise term under Republic Act No. 3247, as amended is extended/renewed for twenty-five (25) years commencing on the date of expiration of Republic Act No. 3247, as amended under Section 2.
- The franchise is deemed ipso facto revoked if CEPALCO fails to operate continuously for two (2) years under Section 2.
Applicability, amendment, separability, and repeals
- Applicability clause: CEPALCO must comply with and be subject to Commonwealth Act No. 146, as amended (Public Services Act), and Republic Act No. 9136 (Electric Power Industry Reform Act of 2001) under Section 17.
- The franchise is subject to amendment, alteration or repeal by the Congress of the Philippines when the public interest so requires and is not interpreted as an exclusive grant of the privileges provided under Section 18.
- If any section or provision is declared unconstitutional or invalid, the other parts not affected continue in full force and effect under Section 16.
- The Act contains a separate clause that governs franchise governance through amendment/alteration/repeal and nonexclusivity under Section 18.