Duration and ownership conditions
- The franchise term is fifty (50) years from the date of effectivity of Republic Act No. 9511.
- Congress may amend, alter, or repeal the franchise when the common good so requires.
- During the franchise’s operation, at least sixty percent (60%) of the Grantee’s capital must be owned by Philippine citizens.
- The Grantee must comply with the Constitution and applicable laws on foreign ownership and management of public utilities.
Operation standards and regulatory duties
- The Grantee’s transmission system, grid, and related facilities must be operated and maintained at all times in accordance with industry standards.
- The Grantee must, whenever required by the Energy Regulatory Commission (ERC) or its legal successor, modify, improve, and change the system or facilities to the extent and in the manner that the progress in science and improvements in electric power services reasonably require.
Eminent domain power limits
- The Grantee is authorized to exercise the right of eminent domain only insofar as reasonably necessary for the construction, expansion, and efficient maintenance and operation of the transmission system and grid, and for efficient operation and maintenance of the subtransmission systems not yet disposed by TRANSCO.
- The Grantee may acquire private property that is actually necessary to realize the purposes of the franchise.
- The Grantee’s eminent domain must follow the applicable law’s limitations and procedures, including prerequisites of taking of possession and the determination and payment of just compensation.
Government special right in emergencies
- The President of the Philippines is granted a special right in times of war, rebellion, public peril, calamity, emergency, disaster, or disturbance of peace and order to:
- temporarily take over and operate the transmission and/or subtransmission systems operated and maintained by the Grantee; and/or
- temporarily suspend operation of any portion or facility in the interest of public safety, security, and public welfare; or
- authorize temporary use and operation of the systems or any portion by any government agency.
- Government temporary operation or use must be upon due compensation to the Grantee for use during the period of such government operation.
Limits on transfers and corporate control
- The Grantee must not, without prior Congressional approval, lease, transfer, grant usufruct of, or sell the franchise or the rights and privileges acquired under it.
- The Grantee must not, without prior Congressional approval, merge with any other company or entity.
- The Grantee must not, without prior Congressional approval, have its controlling interest transferred, whether in whole or in part, whether simultaneously or contemporaneously, to any other person, firm, company, or entity.
- These prohibitions do not apply to transfer or issuance of shares necessary to implement the Grantee’s ownership dispersal requirement under Section 8.
- These prohibitions do not apply to share issuances to foreign or local investors in connection with an increase in the Grantee’s authorized capital stock that results in dilution of then-existing stockholders.
- These prohibitions do not apply to transfers, sales, or issuances of shares at the level of corporate stockholders of the Grantee, subject to applicable constitutional limitations.
- Any person or entity acquiring shares under these allowances must be subject to the same conditions, terms, restrictions, and limitations of Republic Act No. 9511.
- These prohibitions do not apply in case of assignment or transfer of the operation of any related business (including but not limited to telecommunications business) to another entity.
Cross-ownership, market power limits
- The Grantee must not engage in anti-competitive behavior, including cross-subsidization, price or market manipulation, or other unfair trade practices detrimental to contestable markets.
- The Grantee and its relevant decision-makers and related persons must not hold shares in any Power Industry Player as defined in Section 7.
- A Power Industry Player includes a generation company, a distribution utility, or its respective subsidiary or affiliate, or other entity engaged in generating and supplying electricity specified by the ERC.
- The Grantee’s prohibited cross-ownership applies to:
- the Grantee,
- the Grantee’s stockholders, directors, or officers,
- any relative within the fourth civil degree of consanguinity of such stockholders, directors, or officers, and
- the relatives’ respective spouses.
- Power Industry Players and their relevant persons must not hold shares in the Grantee, subject to specific percentage exceptions and listed limitations.
- The cross-ownership prohibition includes exceptions where a relative has no employment, consultancy, fiduciary, contractual, commercial, or other economic relationship or interest in the Grantee (or conversely, in the Power Industry Player).
- Cross-ownership restrictions do not apply to ownership of:
- shares in a company listed in the Philippine Stock Exchange (PSE) as long as ownership is not more than one percent (1%) of the total outstanding shares of that listed Power Industry Player; or
- shares in a PSE-listed company that owns or controls shares of stock in the Grantee, as long as ownership is not more than one percent (1%).
- Any owner under the listed corporate-stockholder exception must not own more than one percent (1%) of shares or equity interest in any Power Industry Player.
- Any shares issued or acquired in violation of the cross-ownership rules cannot vote and cannot confer representation at Grantee stockholders’ meetings.
- Holders of prohibited shares are not entitled to stockholder rights in the Grantee, including the right to dividends, during the existence of the prohibited cross-ownership.
- Losing bidders in the bid to operate TRANSCO’s transmission and subtransmission facilities, and their principals, subsidiaries, affiliates, stockholders, directors, and officers, are barred from becoming transferees or beneficial owners of Grantee shares or any ownership rights pertaining thereto for ten (10) years from the effectivity of Republic Act No. 9511.
- Losing bidders and their relevant persons are also barred for ten (10) years from the effectivity of Republic Act No. 9511 from acquiring or receiving any pecuniary interest in the Grantee’s franchise operations.
- “Affiliate” is defined as any person which, alone or together with others, directly or indirectly through one (1) or more intermediaries:
- controls, is controlled by, or is under common control with another person.
- “Control” means the power to direct or cause the direction of management policies of a person by contract, agency, or otherwise.
- Where cross-ownership provisions under Section 45 of Republic Act No. 9136 conflict with Section 7, those provisions are deemed modified accordingly insofar as the Grantee is concerned.
- The Grantee may provide ancillary services or engage in related business that maximizes utilization of its assets.
Ownership dispersal requirement
- The Grantee must list and make a public offering of shares representing at least twenty percent (20%) of its outstanding capital stock, or a higher percentage that may later be required by law.
- The dispersal/listing must be completed within ten (10) years from the commencement of operations.
- Listing compliance is deemed satisfied if a company that directly or indirectly owns or controls at least thirty percent (30%) of the Grantee’s outstanding shares is listed in the PSE.
- If listing/dispersal is not reached, the ERC may, upon application of the Grantee and after notice and hearing, grant a reasonable extension of the period for listing if market conditions are not suitable.
Franchise tax regime
- In consideration of the franchise and rights granted, the Grantee must pay a franchise tax equivalent to three percent (3%) of all gross receipts derived from operations under the franchise.
- The franchise tax is in lieu of income tax and any and all taxes, duties, fees, and charges of any kind levied by any authority, local or national, on the franchise, rights, privileges, receipts, revenues, profits, and properties used in connection with the franchise that the Grantee would otherwise be exempted from.
- The Grantee remains liable to pay the same taxes on its real estate, buildings, and personal property, exclusive of the franchise, as other corporations must pay under law.
- Payments of concession fees due to PSALM under the concession agreement are not subject to income tax and value-added tax (VAT).
Acceptance of franchise
- The Grantee must give written acceptance of the franchise within sixty (60) days after the effectivity of Republic Act No. 9511.
Government and local government warranty
- The Grantee must hold the national, provincial, and other local governments harmless from all claims, accounts, demands, or actions arising from accidents or injuries—whether to property or persons—caused by the construction, installation, operation, and maintenance of the transmission system and grid.
Right of ingress and egress
- The Grantee may, with approval of the relevant national and local government agencies concerned and after posting bonds as appropriate, make excavations or lay conduits in public places, highways, streets, lanes, alleys, avenues, sidewalks, or bridges within the Philippines for construction and/or maintenance of transmission and subtransmission assets and related support facilities.
- Any disturbed, altered, or changed public place or facility must be immediately repaired and properly restored at the Grantee’s expense, in accordance with standards set by the relevant national and local government agencies concerned.
TRANSCO personnel transfer preference
- Within a period of one hundred sixty-five (165) days from the commencement date, current employees of TRANSCO must be given preference over new job applicants for hiring by the Grantee’s manpower requirements.
- This preference is made pursuant to Section 63 of Republic Act No. 9136 and subject to any qualification requirements set by the Grantee, and subject further to the continued existence of the employees’ positions and functions in the Grantee’s workforce.
- TRANSCO employees remain entitled to receive benefits provided under Section 63 of Republic Act No. 9136 from the government, without prejudice to additional benefits that TRANSCO’s Board of Directors may determine.
Public Services Act applicability
- The Grantee must comply with and be subject to Commonwealth Act No. 146, as amended (the Public Services Act), to the extent not otherwise modified or repealed by Republic Act No. 9136.
Reporting to Congress
- The Grantee must submit an annual report of finances and operations to the Congress of the Philippines.
Separability and effectivity
- Separability: If any section or provision is declared unconstitutional or invalid, the remaining sections and provisions remain in full force and effect.
- Effectivity: Republic Act No. 9511 takes effect fifteen (15) days from publication upon the Grantee’s initiative in at least two (2) newspapers of general circulation in the Philippines.
Issuance details
- Republic Act No. 9511 is titled “AN ACT GRANTING THE NATIONAL GRID CORPORATION OF THE PHILIPPINES A FRANCHISE TO ENGAGE IN THE BUSINESS OF CONVEYING OR TRANSMITTING ELECTRICITY THROUGH HIGH VOLTAGE BACK-BONE SYSTEM OF INTERCONNECTED TRANSMISSION LINES, SUBSTATIONS AND RELATED FACILITIES, AND FOR OTHER PURPOSES.”
- The Act is approved on December 01, 2008 and enacted as a consolidation of Senate Bill No. 1699 and House Bill No. 4381, finally passed by the House of Representatives on November 19, 2008 and by the Senate on November 17, 2008.