Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

2172

House Bill No._*""

Introduced by Rep. BERNADETTE “BH” HERRERA-DY

AN ACT RATIONALIZING THE ECONOMIC REGULATION OF WATER UTILITIES,
CREATING THE WATER REGULATORY COMMISSION AND
FOR OTHER PURPOSES

EXPLANATORY NOTE

The Philippines is a water rich country, yet despite an overflowing capital, many
Filipinos experience deprivation from affordable, safe drinking water and a working sanitation
system. This perennial problem has seriously affected the lives of our citizens in terms of
health, sanitation, food, security and livelihood, in addition to negatively impacting the
environment.

As noted at the 6" World Water Forum,’ the lack of sufficient, safe, acceptable,
accessible, affordable drinking water and sanitation is not a problem unique to the Philippines,
but itis incumbent on each country to push for strong standards within its government and to
contribute to global governance on the issues of water and sanitation.

The Philippines is lacking a strong liquid in-liquid out system, meaning that even if
households are serviced with clean drinking water, a minute number receive adequate
sanitation and sewerage services, leading to severe cases of leptospirosis, dengue, typhoid,
and related tropical and water-borne illnesses. This year alone there has been a 16% increase
in cases of dengue fever over the same period last year. Moreover, 31% of illnesses in the
country are water-related.

The Water Regulatory Act seeks to rationalize the economic as well as administrative
regulation of water utilities through an independent, quasi-judicial body called the Water
Regulatory Commission. Among its functions are to set the policy for water supply, sewerage
and septage management; issue and licenses; set, review and approve rates; review and
suspend contracts; initiate investigations on erring officials through its quasi-judicial nature;
review and revoke issuances, memoranda and the like that are not in accordance with the
spirit of the Commission and ensure that the welfare of consumers are prioritized. To
streamline organizational functions and responsibilities, the pertinent regulatory units of the
MWSS, NWRB and LWUA will also be transferred to the Commission.

To live in a community that is clean, free from human waste, and abundant with safe
and affordable drinking water is an utmost human right, so much so that 189 states recognized
the Right to Water and Sanitation at the United Nations in 2011, according to the World Water
Forum? In step with the international movement, through this bill the Philippines is declaring

1 Held at Marseille, France. See http://www.worldwaterforum6.org/en
2 See About page, 6" World Water Forum, http://www.worldwaterforum6.org/en/the-forum/about/


a primary political priority the universal access to water and sanitation and sustainable
management of water resources, forming an indispensable basis for social and economic
improvement and basic health and prosperity. The Philippines is also committing to meeting
and exceeding the Millennium Development Goals for water and sanitation, To ensure
Filipinos the benefit of this most fundamental human right, the urgent approval of this bill is
earnestly sought.

BERNAI “BH” HEBRERA-DY


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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

2172

House Bill No.

Introduced by Rep. BERNADETTE “BH” HERRERA-DY

AN ACT RATIONALIZING THE ECONOMIC REGULATION OF WATER UTILITIES,

CREATING THE WATER REGULATORY COMMISSION AND
FOR OTHER PURPOSES

Be it enacted in the Senate and House of Representatives of the Philippines in the

Congress assembled:

CHAPTER 1 ~ GENERAL PROVISIONS
SEC. 1. Short Title. This Act shall be known as the “Water Regulatory Act of 2019.”
‘SEC. 2. Declaration of National Policy. — It is hereby declared the policy of the State

‘o recognize, protect, realize and enhance the right of all Filipinos to safe and clean drinking
water and sanitation as essential to the full enjoyment of life and all human rights.

In the pursuit of this Policy, this Act shall have the following objectives:

a) To prioritize and seek the immediate attainment of universal access to safe,
adequate, affordable and sustainable water supply and sanitation services for all
Filipinos, and adopt all necessary measures directed towards the realization of the
human right to water;

b) To accelerate the expansion, improvement and ultimately, efficient provision of
Level Ill water supply systems and sanitation services for the entire country, in a
manner consistent with the protection, preservation and revival of the quality of the
country’s water resources;

©) To encourage and enable private school leadership in the continued growth and
development of water supply and septage management and sewerage facilities
and services;

4) To create a business and regulatory environment that is level, transparent and
conducive for public and private domestic and foreign investment in water supply
and sanitation services;

€) To provide incentives and/or support to encourage investments, and/or take all
steps necessary for the provision of affordable access to water supply and
sanitation services in unserved and undeserved areas;

f) To ensure that water resources allocated to water service providers are used
efficiently to meet public demand;

9) To ensure fair, just and reasonable tariffs, rates and charges for water supply and
sanitation services;

h) To protect the legal and other interests of consumers of water supply and sanitation
services rendered by public and private sector licensees;


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a)

To establish an administrative Process for economic regulation that is stable,
transparent and fair, giving due emphasis to technical, legal, environmental,
economic and financial considerations and with due regard to the observance of
due process at all times; and

To establish a strong and independent economic regulatory body to ensure
consumer protection, promote good business practice and competition among
Service Providers and full accountability to achieve greater operational economic
efficiency.

SEC. 3. Definition of Terms. - As used under this Act, the following words or terms
shall have the following meaning:

a)

b)
°)

k)

“Bulk water suppliers" shall refer to any entity, natural or juridical, whether public
oF private, supplying or intending to supply large quantities of raw or treated water
to buyers who will use it for own consumption, such as industrial companies, or for
retall distribution to consumers, such as Water Districts or subdivisions managing
their own distribution network.
‘Commission” shall mean the Water Regulatory Commission.
Levels of water supply service” ~ consistent with the definitions provided under
NEDA Board Resolution no. 12 (Series of 1995) shall mean as follows:
Level I (point source) — a protected well or a developed spring with an outlet
but without a distribution system, generally adaptable for rural areas where the
houses are thinly scattered. A Level | facility normally serves an average of 15
households.
Level Il (communal faucet system or standposts) - a system composed of a
source, a reservoir, a piped distribution network, and communal faucets.
Usually, one faucet serves 4 to 6 households. Generally suitable for rural and
urban fringe areas where houses are clustered densely to justify a simple piped
system.
Level Ill (waterworks system or individual house connections) — a system with
@ source, reservoir, a piped distribution network and household taps. It is
generally suited for densely populated urban areas.
“License” shall mean the Water Supply and/or Sanitation Services Operating
License that the Commission is authorized to grant and issue to Service Providers.
“Licensee” shall mean the Service Provider to whom a License is granted or issued
by the Commission,
“LWUA" shall mean the Local Water Utlities Administration created under
Presidential Decree No. 198, as amended.
“MWSS" shall mean the Metropolitan Waterworks and Sewerage System, created
by Republic Act 6234,
“NWRB" shall mean the National Water Resources Board created by Presidential
Decree No. 424, as amended by Executive Order No. 124-A,
“Regulatory Units” shall refer to the regulatory offices established under Section 5
of this Act to issue Licenses authorizing the operation of Water Supply and
Sanitation Services provide, review, determine, fix and approve water and
‘sewerage tariffs, rates and charges that Licensees may impose; and exercise such
other functions and powers as may be provided hereunder.
“Sanitation” as used under this Act, refers only to sewerage, sanitation and septage
management.
“Service Area” shall refer to the area covered by the water distribution system,
sewerage and septage management services.



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') “Service Provider" shall refer to any entity, natural or juridical, whether private or
Public, providing or intending to provide levels Il & II water supply, including bulk
water suppliers; sewerage; and/or septage treatment and disposal services for
domestic/residential, industrial or commercial use.

™m) “Sewerage” shall refer to any system or network of sanitary pipelines, ditches,
channels or conduits including pumping stations, lift stations and force mains,
service connections including other constructions, devices or appliances
appurtenant thereof, which includes the collection, sanitary piping transport,
pumping and treatment of water-borne human or animal waste removed from
residences, buildings, institutions, industrial and commercial establishments to
point of sewerage treatment plant disposal.

n) “Septage” shall refer to sludge produced on individual onsite wastewater disposal
systems, principally septic tanks and cesspools.

©) “Septage Management” shalll refer to the provision of proper collection septage
treatment and disposal of septage.

P) “Tariffs” shall refer to such amounts which may be charged by Licensees of Water
Supply and/or Sanitation Services for their services based on principles, standards,
and guidelines established by the Commission.

) ‘Water District” shall refer to government-owned and controlled corporations
organized under Presidential Decree No. 198, as amended, created primarily to
acquire, install, operate, maintain and improve water supply and distribution
systems for domestic, industrial and municipal uses of residents and to provide,
maintain and operate waste water collection, treatment and disposal facilities within
the boundaries of the district.

") “Water Supply and/or Sanitation Service” ~ refers to any activity comprising of
Levels II and II! water supply including ‘suppliers to subdivisions and other Service
Providers; sewerage; and septage treatment and disposal services.

CHAPTER 2 - ORGANIZATION

SEC. 4. The Water Regulatory Commission. - There is hereby created and
established an independent, quasi-judicial regulatory board to be named the Water Regulatory
Commission, hereinafter referred to as the “Commission”, which shall be organized within one
hundred-twenty (120) days after the effectivity of this Act.

The Commission shall have a Board of Commissioners, and shall be vested with
powers and functions, as conferred and set forth hereunder.

SEC. 5. The Regulatory Units. - The Regulatory Units of the Commission in
accordance with such rules, regulations, guidelines and standards as he Commission shall
issue, and as provided hereunder.

Moreover, the pertinent regulatory divisions or units of MWSS, NWRB AND LWUA are
hereby transferred to the Commission, and they shall collectively comprise its Central
Regulatory Unit for water supply and sanitation services that

a) provide services to more than one province;
b) are owned, operated and/or maintained by special economic zones and Metro
Manila Concessionaires


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SEC. 6. Powers and Functions of the Commission, ~ The overall authority and
Powers of the Commission shall cover and apply to all Service Providers, whether
Private or public, providing or intending to provide levels Il & Il water supply, including
Suppliers to subdivisions and/or other Service Providers ; sewerage; and/or septage
treatment and disposal services for domestic/residential, industrial or commercial use

‘The Commission shall have the following powers and functions:

@) Provide the overall policy directions, strategies and targets to meet the
goals and objectives for water supply, sewerage and septage management;

b) Issue and promulgate rules, regulations and guidelines as may be
necessary to implement and enforce its powers and functions under this.
Act

©) Set and enforce just and reasonable technical standards, classifications
and measurement of service;

4) Appoint the central and provincial regulators;

©) Establish rules and regulations to monitor, avoid and provide remedies for
any market power abuse or anti-competitive or discriminatory act or
behavior by or against any participant in the water supply and sanitation
sector. Upon finding that a market participant has engaged in, or fell victim
to such act or behavior, the WRC shall act to stop and/or redress the same.
Such remedies may, without limitation, include the imposition of price
controls, issuance of injunctions, requirement of divestment or
disgorgement of excess profits, invalidation of contracts and imposition of
fines and penalties pursuant to this Act;

f) Adopt and require that books, records and accounts be kept and
maintained in accordance with the prescribed uniform accounting system;

9) Fix and determine proper and adequate rates of depreciation of properties
and equipment used in Water Supply and Sanitation Service/s:

h) Impose and collect annual levels determined as a percentage of gross
revenue accruing in relation to the licensed activities, and reasonable fees
and surcharges as may be necessary for achieving the purposes, powers
and functions of the Commission;

|) Require the submission reports of finances and operations, verified under
oaths by the owner or president and secretary of the Licensee;

j) Determine and require the monitoring and submission of such data,
statistics and other information from Regulatory Units and any or all
licensees as may be necessary for the effective and efficient exercise of its
duties, functions, powers and responsibilities;

k) Investigate, moto propio or upon complaint in writing, any matter
concerning the operation of the service and require that service be provided
in proper and suitable manner;

!) Impose penalties and fines against any Licensee or against its owners,
directors, officers, agents or representatives for any violation of this Act or
of the license, order, rule regulation or requirement issued by the
Commission;

m) Require and Licensee to pay the actual expenses incurred by the
Commission in any investigation if it shall be found that a Licensee violated
any provision of this Act or of the license, order, rule regulation or
requirement issued by the Commission;



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n) Advise, apprise and coordinate with other relevant agencies of the national
or local government on any matter relating to Water Supply and/or
Sanitation Services;

©) Deputize agents, whether from the public or private sector, to assist in the
performance of any of the powers and functions of the Commission:

P) Upon appeal and after due hearing, appoint an interim or temporary
‘management committee to ensure continuity of service in cases a Licensee
fails to meet conditions of the license and the concerned Regulatory Unit
falls to refuses to appoint an interim management committee as provided
in the following section;

q) Appoint, hire and maintain adequate staff and personnel, advisers, and/or
consultants, with suitable qualifications and experience, as necessary;

1) Original and exclusive jurisdiction over all cases contesting rates, fees,
fines and penalties imposed by the Regulatory Units in the exercise of their
Powers, functions and responsibilities, as set forth herein, and over all
cases involving disputes between and among participants or stakeholders
in the Water Supply and Sanitation services ; and

8) Such other incidental powers and functions as may be necessary to attain
the objectives of this Act.

‘SEC. 7. Powers and Functions of Regulatory Units. ~ The Regulatory Units of the
Commission shall have the following powers and functions:

a) Subject to the review and approval of the Commission, issue and
promulgate rules, regulations and guidelines as may be necessary to
implement and enforce its powers and functions under this Section;

b) Issue Licenses authorizing the operation of Water Supply and Sanitation
Services in any specified area or areas within the Philippines;

©) Impose fines, charges and other penalties upon any Provider andior its
officers and stockholders who shall fail or refuse to register and/or obtain a
License prior to operation or commencement of business, as provided
hereunder;

4) Consistent with rules, guidelines, procedures and methodologies which the
Commission shall provide, review, determine, fix and approve proposed
water and sewerage tariffs, rates and charges that Licenses may impose
upon their customers/consumers;

©) Appraise and value property and equipment used by Licenses in providing
water supply and sanitation service/s;

) Enforce technical, financial and other performance standards set by the
Commission for licenses/utilities;

9) Respond to consumer complaints and ensure the adequate promotion of
consumer interests;

h) Investigate accidents directly or indirectly arising from or connected with
the maintenance or operation of the service, and make such order or
recommendation as the public interest may warrai

i) Upon petition or motu propio where in its determination public interest so
dictates, require the review and/or approval of contracts or agreements that
may impact on the tariff and rates of service provision entered into by
Service Providers;

j) Require the submission of reports, plans and other documents that set out
the performance targets of the ficenseesiutlities, and regular
accomplishment reports;



k) Impose and collect annual levies determined as a percentage of gross
fevenue accruing in relation to the licensed activities, and reasonable fees
and surcharges as may be necessary for achieving the purposes, powers
and functions of the regulator;

1) Conduct benchmarking and monitor the performance of licensees/utilties
under their jurisdiction, and publish reports detailing the results thereof, as.
may be necessary or required by the Commission;

m) Amend, modify, suspend or revoke any License issued by them, after due
notice and hearing, on any of the following grounds:

i, when the facts and circumstances on the strength of
which the license was issued have been misinterpreted
or has materially changed;

|i, where the Licensee has failed to meet or comply with
terms, conditions and performance targets — including
but not limited to service expansion ~ that may have
been set in the license;

il, where the Licensee is found to be manifestly
incompetent in the operation of or provision of Water
‘Supply and Sanitation services in its area; or

iv. when the holder thereof has violated or willfully refused
to comply with any order, rule or regulation of the
Commission or any provision of this Act;

'n) Appoint an interim management committee to ensure continuity of service
in case a licensee fails to meet conditions of the license; and

©) Submit performance plans and reports as required by the Commission.

SEC. 8. Composition. ~ The Commission shall be collegial body composed of five
(5) full time members composed of a Chairperson and four (4) members, who shall all be
appointed by the President of the Philippines. All members of the Commission must be
citizens and residents of the Philippines, at least thirty five (35) years of age, and of good
moral character, recognized integrity and competence in the field of law, business,
commerce, finance, accounting or public administration, water or utility economies,
management, physical or engineering, services, hydrology and other related services, with
at least three (3) years actual and distinguished experience in their respective fields of
expertise; Provided, that out of the four members of the Commission, at least one (1) shall
be a member of the Philippine Bar with at least ten years’ experience in the active practice
of law, and at least one (1) shall be certified public accountant with at least ten years
experience in active practice.

The term of office of each member of the Commission shall be seven (7) years;
Provided, however, that among the members first appointed, the Chairperson shall serve
for a period of seven (7) years, two (2) members shall serve for five (5) years and the other
two (2) members shall serve for three (3) years; Provided, further, that any member whose
term has expired as specified herein shall serve as such until his successor shall have been
appointed and qualified; Provided, moreover, that any appointment to fill a vacancy in the
Commission arising from death, removal, retirement or resignation shall be made only for
the unexpired term; and Provided, finally, that in no case shall any member serve for more
than seven (7) years in the Commission.

The Commission shall meet as often as may be necessary on such day or days as the
Chairperson may fix. The presence of at least three (3) members of the Commission shall
constitute a quorum, which shall be necessary for the transaction of any business, The
affirmative vote of majority of the members of the Commission where a quorum is present

6


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shall be necessary for the adoption of any order, resolution, decisions, or other act of the
Commission in the exercise of its quasi-judicial functions; Provided that in promulgating
Tules, regulations, guidelines and in the exercise of its quasi-legislative functions, an
affirmative vote of three (3) members shall be required,

The Chairman of the Commission shall exercise general executive control and
Supervision of the Commission and its members, staff and personnel, agents and
representatives,

Within three (3) months from the creation of WRC and the appointment of all Members
of the Commission, the Chairman shall submit for the approval by the President of the
Philippines the new organizational structure and plantila positions necessary to carry out
the powers and functions of the Commission, including those of the Central and Provisional
Regulatory Units.

The staff and personnel positions of the WRC shall be filled by regular appointments
in accordance with a staffing plan to be prepared by the Commission.

Members of the Commission shall enjoy security of tenure and shall not be suspected
oF removed from office except for just cause as specified by law.

The Chairman and members of the Commission or any of their relatives within the forth
civil degree of consanguinity or affinity legitimate or common law, shall be prohibited from
holding any interest whatsoever, either as investor, stockholder, officer, or director, in any
company or entity engaged the business of transmitting, generating, supplying or
distributing any form of energy and must, therefore, divest through sale or legal disposition
of any and all interests in the water sector upon assumption of office.

SEC. 9, Executive Director. — The WRC shall appoint an Executive Director who
shall head the WRC Secretariat, keep and maintain the official record and report of the
Proceedings of the Commission, and have the authority to administer oaths in all
matters falling within the jurisdiction of the Commission.

The Executive Director shall be responsible for the effective implementation of the
Policies, plans, programs, rules, regulations and directives of the Commission;
coordinate and supervise the activities of the different operating units under the
Commission; and perform such functions as may be assigned by the Chairperson and/or
other members of the Commission,

SEC. 10. WRC Secretariat. — The Commission shall also establish a Secretariat
which shall provide the Commission with technical and other support including, among
others. ~

) Providing the necessary technical inputs and secretariat support to the Commission

to facilitate the conduct of its functions;

b) Coordinating with Regulatory Units to ensure proper implementation of the

rules, regulations and guidelines promulgated by the Commission;

¢) Monitoring and assessing activities of the Regulatory Units vis-a-vis their respective
annual performance plans and targets;


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d) Maintaining a database on the WSS sector; and

©) Coordinating with other relevant agencies of the national or local government
‘on any matter relating to WSS.

SEC. 11. Compensation and Other Emoluments. — The compensation of
the members of the Commission and its staff shall be exempt from the coverage of
Republic Act. No. 6758, otherwise known as the “Salary Standardization Act."
Provided, that the salaries of the Commission and its staff shall conform as closely
as possible to the principles of R.A. 6758,

For this purpose, the schedule of compensation of the Commission and its
Regulatory Units and staff shall be submitted for approval of the President of the
Philippines. The compensation schedule of the Commission and its Regulatory Units
and staff shall be implemented within six (6) months from the effectivity of this Act and
maybe upgraded by the President of the Philippines as the need arises: Provided further,
that in no case shall the compensation of the Commission and its staff be upgraded more
than once a year.

Pertinent civil service laws, rules and regulations of the Philippines shall be applicable
to the Commission.

The Chairman and members of the Commission shall initially be entitled to the same
salaries, allowances and benefits as those of the Presiding Justice and Associate Justices
of the Supreme Court, respectively.

CHAPTER 3- REGISTRATION AND LICENSING

SEC. 12, Registration and Licensing of All Water Supply and/or Sanitation
Services — All Water Supply and/or Sanitation Service Providers, including Bulk Water
Suppliers and those providing services to subdivisions and/or other Service Providers,
shall register with the Commission and, subject to such rules, guidelines, procedures and
other issuances as the Commission may issue, obtain a License to operate from the
appropriate Regulatory Units.

The Commission shall also ensure that the granting and revocation of licenses
are carried out fairly, transparently, and without discrimination. Its issuances shall
therefore specify, among others, the qualifications, requirements and procedure for the
granting and revocation of Licenses, as well as the standards and performance
targets that must continuously be complied with in order to keep such licenses valid.

Unless otherwise provided herein or by the Commission, no public Water Supply
and/or Sanitation Service provider shall commence or conduct the business of
providing water supply and sanitation services without first obtaining a license.


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Concession agreements and other contracts for water supply provision currently
existing shall remain valid and in force, unless otherwise invalidated by the
Commission where public interest so dictates, after due notice and hearing

SEC 13. Conditions of License. — The Commission and/or the concerned
Regulatory Unit, may impose such conditions in the issued License, as it may be deeming
necessary, such as but not limited to:

@) Tariffs, rates and charges that may be imposed from its customers/consumers.

b) Term fixing the duration of the privilege.

©) Grounds for modification, suspension or cancellation of the License.

d) Minimum technical performance and service level standards.

€) Expansion targets and service level improvements over time.

1) Restrictions or conditions for transferability of the business or controlling interest

in
the business.

9) Reportorial requirements and obligations of the grantee.

h) Submission to annual performance audit by the Commission or its duly authorized
representative(s).

The Commission shall specify the requirements and procedure for existing holders
of Certificate of Public Convenience/Certificates of Public Convenience and Necessity
issued by NWRB, and/or Conformance issued by LWUA, to convert their existing
certificates into Licenses issued by the Commission

All existing providers of Water Supply and/or Sanitation Services without a legal and
valid Certificate of Public Convenience/Certificate of Public Convenience and
Necessity or Certificate of Conformance shall register with the Commission and apply
for a License within six (6) months from the effectivity of this Act.

SEC. 14. Rights and Duties of Licensees. —

(1) Any person granted a License under this Act shall have the obligation to ensure that
its
licensed activities are conducted so as to further the public interest and, in particular,
that they:
) foster the maintenance and development of efficient, coordinated, and
viable operation of their licensed activities;
b) ensure that their Water Supply and/or Sanitation Services are provided in a
diligent, conscientious and workmanlike manner, in accordance with applicable laws
and the standards and practices set by the Commission and generally accepted
in the Philippine and inter-water supply and/or sanitation industry;
©) comply with drinking water quality requirements and other requirements
and standards that may be set by the Commission; and


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4) not abandon its service without notice to and approval by the Commission,

(2) Any person granted a License under this Act shall, to the extent allowed by law and
Specified in the License, have the right to acquire or lease land and lay or repair water
or sanitation mains and other relevant facilities in public ways, when required to fulfil
their obligations,

(3) Subject to any condition or limitation laid down in the License, a Licensee may
disconnect the supply of Water Supply and/or Sanitation services to a customer if

Such customer defaults in the payment of amount(s) due to that Licensee in respect of

water supplied or sanitation services provided, or for acts of pilferage pursuant to Section

8,

8, 10, and 11 of Republic Act No, 8041, otherwise known as the "Water Crisis Act of
1995

(4) Any License issued under this Act shall contain provisions designed to ensure

that
Licensees:

a) Publish the Tariff and other charges approved by the Commission, and other

terms and conditions imposed by the Commission for the provision of Water Supply
and/or Sanitation Services

») Prepare, within three (3) months from the issuance of a License, in consultation
with its customers, a customer service code specifying the manner and

procedure
for: (a) metering, billing, and collection of the Licensee's approved tariff and other
charges, (b) disconnection or suspension of service in case of non-payment of
tariffs and/or other charges, or acts of pilferage, and (c) recommendation
and recovery of arrears in tariffs and other charges; and

c) Maintain financial accounts in accordance with the manner and procedure

specified in the License and as may be required by the Commission,

4) Maintain and upon request by anyone during regular office hours, promptly make

available for scrutiny and inspection such data, statistics and other information, as

may be required by the Commission.

SEC. 1. Setting Tariffs, Rates and Other Charges. — Regulatory Units shall
establish tariffs, rates and other charges which are fair and reasonable and which
provide for the economic viability of the service and a fair return on their investments
considering the prevailing cost of capital in the domestic and international markets.

‘Such tariffs, rates and charges shall be based on and consistent with a rate-
setting methodology that the Commission shall, after due public consultation, define and
Publish in consecutively for three weeks in newspapers of general circulation, taking into
account the following, among others:

i. reasonable and prudent capital and recurrent costs of providing the service including
a reasonable rate of return on capital;

ii, efficiency of the service;

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incentives for enhancement of efficiency;

'v. willingness to pay of the customers/consumers; v, equity considerations; and
vi. administrative simplicity.

Tariffs, rates and charges set by the Regulatory Units shall be presumed valid
and reasonable unless a protest or contest is filed with the Commission.

SEC. 16. Promotion of Innovative Schemes to Improve Efficiency and
Management of Systems. — The Commission shall promote innovative schemes,
including but not limited to the consolidation and/or integration of Water Supply and/or
Sanitation Services and/or Providers in the same Service Area, where it will result in
improved efficiency, services expansion and/or lowering of costs.

To this end, the Commission shall establish and issue such rules and guidelines as
may be necessary to (a) create incentives to encourage efficiency and service
expansion; (b) establish the standards and targets that service providers are required
to meet; and (c) set the fines and penalties that would be imposed for failure to meet such
standards and targets.

SEC. 17. Twelve percent (12%) investment cap. — Pursuant to Commonwealth Act
No. 146, as amended, otherwise known as the "Public Service Act," shalll further provide
that any and all government agencylies or such government agencylies’ private
sector concessionaires, agents, operators, contractors and the like delivering public
services to the people must be subjected to the Twelve (12%) cap financial formula
on Return of Investment. Furthermore the Commission on Audit (COA) is hereto
designated as the sole and official Auditor to determine the Actual Physical
Investments of such government agency/es or private sector concessionaires,
operators, agents, contractors and the like delivering public to the people for purposes
of computing the Twelve (12%) Return on Investment Cap.

CHAPTER 4- QUASI-JUDICIAL FUNCTIONS OF THE COMMISSION

SEC. 18. Proceedings Before the Commission. — For the purpose of any
investigation, inquiry or proceeding, the Commission shall have the requisite power to:

4) Issue subpoena duces tecum and subpoena duces tecum ad testificandum;

b) Appoint a Commissioner to hear and receive evidence on behalf of the
Commission;

¢) Cite any person or party for contempt for refusal to appear, testify or comply with
an order of the Commission on any matter that is the subject of investigation,
inquiry or proceeding before the Commission.

SEC. 19. Orders and Decisions of the Commission. —

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The orders, resolutions and decisions of the Commission, which must be reached
as promptly and expeditiously as reasonably and fairly possible, shall be in writing and
shall state clearly and distinctly the facts and law on which ills based,

The Commission shall publish and make available for public inspection all
decisions and final orders in the adjudication of contested cases or applications,

SEC. 20. Appeals Procedure and Prohibition Against Injunction. —

(1) The orders, rulings, and decisions of the Commission are final and executory
unless appealed to the Court of Appeals within fifteen (15) days from receipt of notice of
Such order, ruling or decision; Provided that orders, tulings, and decisions of
the Commission approving tariffs shall be immediately executory and may be
suspended only upon appeal and filing of a bond, in an amount to be fixed by the
Commission, to answer for damages occasioned by the suspension or stay of execution
of such orders, rulings, and decisions.

(2) No injunction may be issued by any court or administrative agency to restrain any
Proceeding before, or the implementation or execution of any order, ruling, or decision
of the Commission, except on the basis of a question of law brought before the
Supreme Court on certiorari

(3) Subject to Sec, 7, paragraph 3 of this Act, an act or decision of the Commission shall

not be invalid merely because of a defect or irregularity in, or in connection with, the

appointment or vacancy in the Office of the Chairperson or any other member of the

Commission.

CHAPTER 5- TRANSITORY PROVISIONS
SEC. 21. Interface with Other Sector Regulators. —

(1) The Department of Environment and Natural Resources shall continue to have
the primary authority and responsibility for protecting the environment and the quality
water sources from waste and pollution and shall promulgate rules, regulations, and
standards in this regard,

(2) The Department of Health shall have primary authority and responsibility for
determining and enforcing drinking water quality and sanitation standards. The
Commission shall coordinate with the DOH in this regard, and shall ensure the
Consistency of the standards and targets that it will set for compliance by licensees
with the DOH's mandated standards.

(3) The Commission shall coordinate with the NWR13 for water allocation and
data collection, the local government units for development projects relating to water
supply and sanitation, and the Department of Public Works and Highways for flood
control and the harnessing and impounding of water.

‘SEC. 22. Transfer of Rights and Obligations. — The Commission shall, by virtue of
this Act, be subrogated to all the rights, and assume all the obligations, of the Water Utilities
Division of the NWRB, the Regulatory Offices of MWSS and LWUA, the Regulatory Units
of all special economic zones, and all other government agencies and units whose powers
and functions have been transferred to the Commission.

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The transfer of powers and functions in the Department and agencies attached thereto,
as herein provided for, shall take effect within six (6) months after the effectivity of this
Act, The foregoing transfer of powers and functions shall include all applicable funds,
Personnel, records, property and equipment, as may be necessary. The same shall
apply to agencies which have been attached to the Department by virtue of this Act.

As such, all offices under the Department and all attached agencies affected by
the provisions of this Act shall continue to function under their present mandates until
transition is effected as provided for under this Act.

The heads of the agencies shall continue to serve until replaced as provided for under
this Act,

All rights and obligations of the said government agencies are hereby transferred to
and assumed by the Commission and shall be acted upon in accordance with the rules
and regulations of the Commission on Audit and other pertinent laws, rules, and regulations,

SEC. 23. Separation form Service. — Employees separated from government service
8 @ result ofthis Act shall be entitled to the benefits which they may receive under existing
laws, rules and regulations.

SEC. 24. Funding. — The sum of THREE HUNDRED MILLION (P 300,000.00)
Pesos shall be set aside from any available funds of the National Treasury, and is hereby
appropriated and authorized to be released, for the organization of the Commission and
its initial operations,

Thereafter, funds sufficient to fully carry out the objectives, powers, and functions of
the Commission and its Regulatory Units shall be appropriated every fiscal year in the
General Appropriations Act, in an amount that shall not be less than the amount
appropriated for it the previous year.

The Commission shall submit its annual budget, which shall include, among
others, detailed information on the compensation and benefits received by their
employees, to the Office of the President for approval.

SEC. 28. Effectivity. — This Act shall take effect immediately upon its approval. The
Chairman of the Commission shall, after due consultation with stakeholders, promulgate
Such other rules and regulations as may be necessary and appropriate to implement this
Act.

SEC. 26. Separability Clause, — In the event that any provision of this Act is
declared unconstitutional, invalid, or illegal, the constitutionality, validity, or legality of the
remainder of the provisions of this Act shall not be affected thereby.

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SEC. 27. Repealing Clause. - The provision with respect to fixing of water rates
and sanitation service fees of Section 3 (h) and Section 12, and regulation of
waterworks and deep wells of Section 3 (n), regulation of waterworks and sanitation
systems in privately owned subdivisions of Section 3 (p) of Republic Act 6234, as
amended, is hereby repealed or modified accordingly,

Section 62 on regulation and Section 63 on rate review of Presidential Decree 198,
as amended by LOT 700 (1978), LOT 744 (1978), EO 124 (1987), EO 123 (2002), is
hereby repealed or modified accordingly.

The provisions of the Local Government Code and its Implementing Rules
and Regulations of Republic Act No, 7160 which allow local government units to fix the
rates of water utilities owned, operated and maintained by them within their
jurisdiction is hereby repealed or modified accordingly.

Section 13 (b) on regulation of enterprises in ECOZONE of Republic Act No. 7916 as
amended, also known as the Special Economic Zone Act of 1996, is hereby repealed
or modified accordingly.

Provisions under Section 69 of Republic Act No, 9593 or the Tourism Act of 2009 and its
Implementing Rules and Regulations which mandates the Tourism Infrastructure
and Enterprise Zone Authority to grant franchises, supervise the operation of public
utilities, and register, monitor and regulate enterprises within Tourism Enterprise
Zones, are hereby repealed or modified accordingly.

Commonwealth Act No, 146, as amended, otherwise known as the “Public
Service Act," and all laws, decrees, rules and regulations, or portion thereof, inconsistent

with this Act are hereby repealed or modified accordingly.

Al] other laws, decrees, rules and regulations and executive orders that are contrary to
or inconsistent with this Act are hereby repealed or modified accordingly.

SEC. 28. Effectivity Clause. — This Act shall take effect fifteen (15) days following
the completion of its publication in a national newspaper of general circulation.

Approved,

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