Creation of the Department of Energy

Policy and purpose statements

Section 2 declares State policy to ensure a continuous, adequate, and economic supply of energy, with the end of ultimately achieving self-reliance in the country’s energy requirements.
Section 2 requires the integrated and intensive exploration, production, management, and development of the country’s indigenous energy resources.
Section 2 mandates judicious conservation, renewal, and efficient utilization of energy to keep pace with growth and economic development, considering the active participation of the private sector.
Section 2 directs the rationalization, integration, and coordination of government programs toward self-sufficiency and enhanced productivity in power and energy while maintaining ecological concerns.

Key definitions and scope concepts

Section 3 defines “Energy projects” to mean activities or projects related to: exploration, extraction, production, importation-exportation, processing, transportation, marketing, distribution, utilization, conservation, stockpiling, or storage of all forms of energy products and resources.
Section 3 defines “Board” to mean the Energy Regulatory Board.

Department creation and mandate

Section 4 creates the Department of Energy, referred to as the Department, to prepare, integrate, coordinate, supervise, and control government plans, programs, projects, and activities related to energy exploration, development, utilization, distribution, and conservation.
Section 5 empowers the Department to formulate energy policy and comprehensive planning mechanisms consistent with the approved national economic plan and with environmental protection and conservation and ecological balance.
Section 5 directs the Department to develop and update the Philippine energy program with preferential bias for environment-friendly, indigenous, and low-cost sources of energy.
Section 5 requires the Department to include policy directions toward privatization of government agencies related to energy, deregulation of the power and energy industry, and reduction of dependency on oil-fired plants.

Core powers, functions, and programs

Section 5 requires the Philippine energy program to be:
- updated within nine (9) months from the effectivity of the Act, and
- submitted to Congress within ten (10) days from its completion, and
- not later than the fifteenth day of September every year thereafter.
Section 5 requires the Department to establish and administer programs for exploration, transportation, marketing, distribution, utilization, conservation, stockpiling, and storage of energy resources of all forms (conventional or nonconventional).
Section 5 grants supervision and control over all government activities related to energy projects to attain the goals in Section 2.
Section 5 directs regulation of private sector activities related to energy projects under existing laws, while the Department must endeavor to provide an environment conducive to free and active private sector participation and investment.
Section 5 mandates that after four (4) years from effectivity, the Department—upon approval of the President—must institute programs and timetable of deregulation of appropriate energy projects and activities.
Section 5 requires the Department to assess and prioritize energy research and development requirements, disseminate information, and support optimal energy production and utilization technologies.
Section 5 requires programs, including a system of providing incentives and penalties, for the judicious and efficient use of energy in all energy-consuming sectors.
Section 5 requires a program for accelerated development of nonconventional energy systems and the promotion and commercialization of their applications.
Section 5 requires devising ways to give direct benefit to the province, city, or municipality—especially affected communities—and equitable preferential benefit to the region hosting the energy resource and/or energy-generating facility, while ensuring other provinces/cities/municipalities/regions are not deprived of their energy requirements.
Section 5 requires encouraging private enterprises (including corporations, cooperatives, and similar collective organizations) engaged in energy projects to broaden ownership to encourage widest public ownership of energy-oriented corporations.
Section 5 authorizes the Department to formulate rules and regulations and exercise other powers necessary or incidental to achieve the Act’s objectives.

Department organization and leadership

Section 6 provides that the Department Proper consists of the Office of the Secretary, the Offices of the Undersecretaries and Assistant Secretaries, and the bureaus and services of the Department.
Section 7 provides that the Office of the Secretary consists of the Secretary and his immediate staff.
Section 8 provides that the Secretary is appointed by the President, subject to confirmation by the Commission on Appointments.
Section 8 disqualifies appointment as Secretary within two (2) years from retirement, resignation, or separation: any officer, external auditor, accountant, or legal counsel of any private company or enterprise primarily engaged in the energy industry.
Section 8 assigns the Secretary functions including:
- establishing policies and standards for effective, efficient, and economical operation of the Department,
- exercising direct supervision and control over Department functions, officers, and personnel,
- devising a program of international information on geological and contractual conditions for oil and gas exploration,
- creating regional offices and service units/divisions as necessary,
- creating regional or separate grids as may be necessary or beneficial, and
- performing other functions necessary or proper to attain the Act’s objectives.
Section 8 makes the Secretary an ex officio member of the Board of the National Economic and Development Authority (NEDA), a member of NEDA’s Committee on Infrastructure (INFRACOM), and a member of the Investment Coordinating Council (ICC); Executive Order No. 292 (Administrative Code of 1987 provisions on NEDA and component agencies) is modified accordingly.
Section 8 also makes the Secretary a member of the body that formulates/prescribes/amends guidelines for financing, construction, operation, and maintenance of infrastructure projects by the private sector under Republic Act No. 6957 (Build-Operate-Transfer Law).
Section 9 provides that the Secretary is assisted by three (3) Undersecretaries, appointed by the President upon recommendation of the Secretary, and their powers/functions are those provided in Section 10, Chapter 2, Book IV of the Administrative Code of 1987.
Section 10 provides that the Secretary is assisted by three (3) Assistant Secretaries: one (1) for operations, one (1) for policy and programs, and one (1) for administrative services, appointed by the President upon recommendation of the Secretary.
Section 11 requires that appointees as Secretary, Undersecretary, or Assistant Secretary be citizens and residents of the Philippines, of good moral character, and of proven competence in at least one field: (a) energy or utility economics, (b) public administration, (c) physical or engineering sciences, (d) management, or (e) law.

Bureaus and their operative functions

Section 12 requires the Department to have these bureaus and services: Energy Resource Development Bureau, Energy Utilization Management Bureau, Energy Industry Administration Bureau, Energy Planning and Monitoring Bureau, and Administrative Support Services.
Section 12 authorizes the Secretary, with Presidential approval, to reorganize, restructure, and redefine bureau/service functions for effective discharge of the Department’s powers and functions under the Act.
Energy Resource Development Bureau (Section 12) must:
- assist in formulating and implementing policies to develop and increase domestic supply of local energy resources (including fossil fuels, nuclear fuels, and geothermal resources),
- assist in sectoral exploration/development plans and regularly review them,
- conduct energy research and studies,
- provide consultative training/advisory services for regulated activities,
- assist in formulating financial and fiscal policies, rules, guidelines, and requirements for service contractors, and implement and enforce them.
Energy Utilization Management Bureau (Section 12) must:
- assist in policy for efficient and economical transformation/conversion/processing/refining/marketing/distribution/transportation/storage of energy resources, conventional and nonconventional,
- ensure efficient and judicious utilization,
- monitor energy consumption and conduct energy audits, technical training, energy management advisory services, and technology application projects,
- develop/promote/commercialize applications of biomass, solar, small hydro, wind, wood, charcoal, and other nonconventional energy systems and related technologies,
- assist in an integrated rural energy program and regularly review it,
- assist in operational planning for allocation of oil, fuel, and energy sources during a critically low-energy supply situation provided for in Section 25,
- provide information on energy technology and develop middle- and long-term technology strategies with the Department of Science and Technology,
- monitor energy projects with the Department of Environment and Natural Resources for compliance with environmental standards,
- recommend actions to resolve issues impeding siting or causing adverse environmental impacts,
- require industrial, commercial, and transport establishments to collect or cause collection of waste oil for recycling as fuel or lubricating oil,
- develop and implement continuing energy conservation programs, including a nationwide information campaign on energy conservation.
Energy Industry Administration Bureau (Section 12) must:
- assist in regulatory policy formulation to encourage and guide operations of government and private entities in energy supply activities (including independent power production, electricity distribution, import/export, stockpiling, storage, shipping, transportation, refinement, processing, marketing, and distribution of all energy forms),
- draw plans to cope with contingencies of energy supply interruptions,
- assist in formulation of financial and fiscal policies, rules, guidelines, and requirements for entities involved in energy supply (oil companies, petroleum product dealers, coal importing/distributing companies, natural gas distributing companies, independent power producers, and other conventional supply entities), and implement and enforce them.
Energy Planning and Monitoring Bureau (Section 12) must:
- assist in developing/updating an integrated energy plan for short-, medium-, and long-term periods covering demand scenarios, supply options, and impacts on economy, poverty, and environment,
- develop and maintain a centralized unified data and information program for efficient collection, evaluation, analysis, and dissemination of energy reserves/production/demand/development technology and related economic/statistical information,
- supervise/coordinate/integrate formulation, monitoring, and review of energy supply development programs and plans (including power development, local energy resource development/production, and energy importation),
- regularly review and analyze energy consumption patterns versus growth/development performance of economic sectors to evaluate trends,
- conduct energy supply-demand balancing studies to define supply/utilization strategies, estimate resources required, and assess economic, environmental, social, and political impact of the energy program,
- assure incorporation of national environmental goals in formulation and implementation of energy programs, and advance restoring/protecting/enhancing environmental quality while assuring public health and safety,
- conduct studies on international energy issues impacting supply/utilization and provide technical advice on international negotiations involving energy resources and technologies.
Administrative Support Services (Section 12) must include the Office of the Legal Counsel and Financial and Management Services:
- Legal Counsel provides legal advice and services on policies/programs/operational matters, provides legal counseling when the Department is a party, and handles administrative cases against Department personnel with recommendations.
- Financial and Management Services (Human Resources Management Division, General Services Division, Financial Management Division) provides personnel information/records, supplies/equipment, collection and disbursements, security, custodial works, and staff advice on budgetary, financial, and management improvement matters.

Supervision of attached energy agencies

Section 13 places PNOC, NPC, and NEA under the Department’s supervision while allowing them to continue performing their respective functions insofar as not inconsistent with the Act.
Section 13 requires the annual budget of PNOC, NPC, and NEA to be submitted to Congress for approval.
Section 13 makes the Secretary ex officio chairman of the respective boards of PNOC, NPC, and NEA unless otherwise directed by the President, but the Secretary must never be the chief executive officer or chief operating officer of those agencies or their subsidiaries, notwithstanding any contrary law.
Section 13 repeals Section 6, paragraph (3) of Presidential Decree No. 927 and Section 8 of Presidential Decree No. 334 to the extent they provide that the Chairman of the PNOC shall also be its president and chief executive officer.
Section 13 authorizes the Secretary to recommend to the President the reorganization of the boards of PNOC, NPC, and NEA.

Energy affairs council

Section 14 creates a Council of Advisers on Energy Affairs consisting of five (5) members appointed from the industry, labor, and consumer sectors.
Section 14 requires the Council to advise the President on the overall energy program, especially on private sector initiatives and proposals.
Section 14 requires the President to convene the Council within thirty (30) days upon approval of the Act.

Transitory provisions, transfers, staffing

Section 15 abolishes the Office of Energy Affairs and the Energy Coordinating Council subject to Section 17.
Section 16 transfers the powers and functions of the Energy Coordinating Council and the Office of Energy Affairs to the Department, including applicable funds/appropriations, records, equipment, property, and personnel necessary.
Section 16 provides that the Department as successor-in-office administers the Technology Transfer for Energy Management (TTEM) project and continues the utilization of funds/monies/interests/reflows/properties outstanding and accruing from TTEM project upon its termination for:
- financing energy conservation projects of industrial and commercial establishments,
- monitoring implemented sub-projects and documenting actual energy savings,
- disseminating information on implemented sub-projects through case studies and seminars/workshops to encourage replication.
Section 17 subrogates the Department to all rights and assumes all liabilities of the abolished offices/agencies/government units whose functions are transferred to the Department, including funds/records/property/assets/equipment/personnel necessary and unexpended appropriations/allocations.
Section 17 transfers all contracts and liabilities of those offices/agencies/government units to and assumed by the Department for action under the Auditing Code and other pertinent laws, rules, and regulations.
Section 17 provides for holdover: officers and employees continue in a holdover capacity until new officers and employees are duly appointed under the Act.
Section 18 transfers to the Department the non-price regulatory jurisdiction, powers, and functions of the Energy Regulatory Board under Section 3 of Executive Order No. 172, including applicable funds/appropriations, records, equipment, property, and personnel.
Section 18 limits the transfer to funds/appropriations and personnel completely or primarily involved in the exercise of non-price regulatory powers and functions.
Section 18 transfers to the Energy Regulatory Board the NPC power to determine, fix, and prescribe rates under Section 4 of Republic Act No. 6395, as amended, and the power of electric cooperatives to fix rates under Section 16(o), Chapter II of Presidential Decree No. 269, as amended.
Section 18 requires the Energy Regulatory Board to exercise these new powers only after due notice and hearing and under the same procedure provided for in Executive Order No. 172.
Section 19 requires the Department’s organizational framework and staffing pattern to be prescribed and approved by the Secretary within sixty (60) days after the Act’s approval, with authorized positions filled by regular appointments by the President or Secretary as case may be.
Section 19 requires preference in filling positions for personnel of the Office of Energy Affairs, Energy Coordinating Council, and Energy Regulatory Board, provided they comply with Civil Service Commission qualification standards; if they have the same qualifications, seniority controls.
Section 20 requires employees separated due to reorganization to receive retirement benefits they may be entitled to under existing laws, rules, and regulations within six (6) months from separation.

Appropriations and funding limits

Section 21 directs that sums necessary for implementing the Act be taken from current fiscal year appropriations of the Office of Energy Affairs, the Office of Energy Affairs’ special fund under Section 8 of Presidential Decree No. 910, and amounts allocated by the President from other resources in accordance with law.
Section 21 caps the total initial amount at Three hundred million pesos (P300,000,000).
Section 21 provides that after that cap, funds needed for operation and maintenance are included in the annual General Appropriations Act.
Section 21 authorizes disbursement of funds and monies collected or otherwise possessed by the Department and its bureaus from fees, surcharges, fines, and penalties they may impose and collect under the Act, plus an amount determined at the beginning of every calendar year equal to twenty percent (20%) of the outstanding balance of funds and monies forming part of the special fund under Section 8 of Presidential Decree No. 910, for expenses necessary for effective discharge of the Department’s powers and functions.

Financial disclosure and divestment

Section 22 requires the Secretary, Undersecretaries, and Assistant Secretaries, before assumption of office, to submit to the Civil Service Commission a list of all companies/partnerships/business enterprises (including nonprofit organizations) where they or any immediate family member within the second degree of consanguinity or affinity have any form of financial interest or employment relationship, including consultancy.
Section 22 requires that all other forms of employment relationship held by heads of offices of the Department be immediately terminated upon assumption of office.
Section 22 requires complete divestment of financial interests in institutions/firms/companies under the Department’s supervisory or regulatory jurisdiction within thirty (30) days thereafter.
Section 22 requires divestment within thirty (30) days after confirmation when confirmation by the Commission on Appointments is required.
Section 22 extends the divestment requirement to immediate family members within the second degree of consanguinity having interest in any institution or activity under the Department’s regulatory jurisdiction or supervision and attached agencies.

Coordination with environment department and timelines

Section 23 provides that the Department and its priority projects enjoy preferential attention from the Department of Environment and Natural Resources for exploration, development, exploitation, and extraction of petroleum, coal, and geothermal resources and for technical support needed for power-generating plants.
Section 23 requires that, upon request of the Department or any bureau, all government agencies with functions relative to approval of the Department’s projects or duly authorized and endorsed entities (government or private) must act and resolve within ten (10) calendar days.
Section 23 authorizes the Secretary, with Presidential approval, to establish an interagency secretariat to expedite project approvals.

Visitorial powers and contract consequences

Section 24 grants the Secretary or a representative visitorial and examining authority over nongovernment entities with contracts for exploration, development, or utilization of natural resources for energy purposes.
Section 24 requires such examination to determine the Government’s share in revenue or product and to ascertain all funds collectible and products due the Government, including verification that such funds/products have been collected or delivered.
Section 24 requires that during examination the non-government entity must produce all required reports, records, books of accounts, and other papers.
Section 24 provides that refusal to allow examination or concealment of material information on financial status is a breach of contract and constitutes a legal ground for cancellation.

Energy contingency measures

Section 25 provides that in time of critically low-energy supply or imminent danger thereof, the President may issue a declaration upon determination and recommendation of the Secretary.
Section 25 authorizes the Secretary to implement the fuel and energy allocation plan provided for in Section 12(b)(5) of the Act after such declaration.
Section 25 authorizes implementation of other energy conservation measures, including power or fuel rationing, load curtailment, and restrictions on the use of government vehicles and resources.

Repeal, separability, and preservation

Section 26 repeals or modifies all laws, presidential decrees, executive orders, rules, and regulations, or parts thereof, inconsistent with the Act’s provisions.
Section 26 preserves Republic Act No. 6969: no provisions of the Act repeal, amend, or modify Republic Act No. 6969.
Section 27 provides separability: if any section or provision of the Act is held unconstitutional or invalid, the remaining sections or provisions continue in effect.