Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 403

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

EXPLANATORY NOTE

The quality of the daily life of every Filipino is largely affected by the efficient delivery
of public services. Unlike years ago, it is only now that we often find ourselves
complaining about the high prices and poor quality of public services. Such complaints
grow into ever increasing frustration because we simply find ourselves at a dead end
= under the mercy of a few oligarchs that effectively control the market.

One key to addressing the said problem is to amend the antiquated provisions of The
Public Service Act (Commonwealth Act No. 146) that remains to be the principal law,
enacted more than 80 years ago, on business activities that are classified as public
utilities or public services. Vast advances in technology and the modes of delivery of
services require changes in our laws to be responsive to the changing times.

Among others, this bill seeks to clarify the existing confusion between “public utility”
and “public service’. It seeks to formalize the transfer of functions of the Public Service
Commission to various administrative agencies; give power for creating a mechanism
to fix rates while considering a reasonable rate of return; and improve the
administrative remedies of the agencies through the fixing of the fines and penalties.

These proposed amendments are intended to respond to our changing concerns and
give the general public better services at lower prices. The idea is to protect the public
interest by increasing competition, which is seen to spur innovation and create a more
competitive economy.

In view of the foregoing, the immediate passage of this bill is respectfully sought.

tn [Ly hr —

LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session
403

HOUSE BILL NO. ___

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

—

AN ACT
AMENDING COMMONWEALTH ACT NO. 146, OTHERWISE KNOWN AS THE
PUBLIC SERVICE ACT, AS AMENDED, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the “The New Public Service
Law of the Philippines.”

SECTION 2, Declaration of Policy. — It is a Constitutionally enshrined policy of the
State to promote a just and dynamic social order that will free the people from poverty
through measures that promote an improved quality of life for all.

The State recognizes that public utilities are necessary to the public and are
natural monopolies that must be regulated as required by public interest. It is the policy
of the State to ensure that the consuming public’s satisfaction and quality of life shall
be the yardstick for an effective regulation of public utility providers without
compromising the reasonable rate of return of the latter. It is likewise the policy of the
‘State to encourage private enterprise and provide incentives for needed investments.

The above policies are fulfilled by ensuring: (a) effective regulation of public
utilities and public services; (b) a reasonable rate of return to public utlities and public
services; (c) the lifting of foreign equity restrictions by clearly defining what are
considered to be public utilities.


SECTION 3. Definitions of Terms. — For the purpose of this Act, the terms below
shall be defined as follows:

a. Cost-of-Living Adjustment - refers to the percentage by which the Philippine
Statistics Authority (PSA) Consumer Price Index for the month of June of
the calendar year preceding the adjustment exceeds the PSA Consumer
Price Index for the month of June of the calendar year in which the maximum
amount of the fine was last set or adjusted pursuant to law;

b. Disgorgement of Profits — refers to the giving up or recapturing of profits
traceable to a certain transaction or wrongdoing upon demand or by legal
compulsion;

c. Distribution of Electricity — refers to the conveyance of electric power by a
distribution utility through its distribution system pursuant to the provisions
of RA 9136, pursuant to Section 4 (n) of said law;

d. Transmission of Electricity — refers to the conveyance of electricity through
the high voltage backbone system, pursuant to Section 4 (ccc) of RA 9136;

e. Treble Damages — refers to an additional sum, depending on the discretion
of the agency or court involved, which is thrice the amount of the monetary
award granted; and

f. Water Works and Sewerage Systems - refers to the entire water systems
to ensure an uninterrupted and adequate supply and distribution of portable
water for domestic and other purposes and the proper operation and
maintenance of sewerage systems as defined and referred to in RA 6234,
as amended, and PD 198, as amended.

SECTION 4. Recognition of Previous Transfer of Jurisdiction to Various
Administrative Agencies — Since the enactment of Commonwealth Act No. 146, the
jurisdiction over several public services had been transferred to various administrative
agencies such as, but not limited to, the following:

a. Department of Transportation (DOTr);
b. Land Transportation Franchising Regulatory Board (LTFRB);
c. Land Transportation Office (LTO);


|. Civil Aeronautics Board (CAB);
. Civil Aviation Authority of the Philippines (CAAP);
Philippine Ports Authority (PPA);
Maritime Industry Authority (MARINA);
. Philippine Coast Guard;
i. Department of Information and Communications Technology (DICT);
National Telecommunications Commissions (NTC);

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. Department of Energy (DOE);

Energy Regulatory Commissions (ERC);
. Department of Environment and Natural Resources (DENR);
|. League of Cities;

30>

. National Water Resources Board;
. Local Water Utilities Administration;
|. Philippine Competition Commission (PCC).

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For purpose of this act, the term “Administrative Agencies” shall refer to existing
agencies with which the powers and duties of the Public Service Commission were
transferred, are hereby authorized and ordered to charge and collect from any public
service or public utility or applicant, as the case may be, reasonable fees as
reimbursement of its expenses in the exercise of its authorization, supervision, and
regulation duties, and to impose appropriate penalties and fines as provided by law.
These Administrative Agencies are govern by their respective charters and related
statutes.

SECTION 5. Public Utility. - A new Section 13 (d) of Commonwealth Act No. 146 as
amended, is hereby inserted to read as follows;

“(D) PUBLIC UTILITY — A SUBSET OF PUBLIC SERVICE, IT REFERS TO
THE DIRECT TRANSMISSION DISTRIBUTION, AND DELIVERING THROUGH A.
NETWORK, A COMMODITY OR SERVICE OF PUBLIC CONSEQUENCE AND IS A
NATURAL MONOPOLY THE OPERATION OF WHICH MUST BE RESTRICTED
PURSUANT TO SECTION 11, ARTICLE XII OF THE 1987 CONSTITUTION.


THE FOLLOWING SHALL BE AN EXCLUSIVE LIST OF PUBLIC
UTILITIES:

(1) TRANSMISSION OF ELECTRICITY;

(2) DISTRIBUTION OF ELECTRICITY; AND

(3) WATER WORKS AND SEWERAGE SYSTEMS,

NO OTHER BUSINESS OR SERVICE SHALL BE DEEMED A PUBLIC

UTILITY OTHER THAN THISE LISTED IN THIS SECTION UNLESS

OTHERWISE SUBSEQUENTLY PROVIDED BY LAW _ UPON

RECOMMENDATION BY THE NATIONAL ECONOMIC AND DEVELOPMENT

AUTHORITY (NEDA), THROUGH ITS BOARD, IN CONSULTATION WITH

THE PHILIPPINE COMPETITION COMMISSION (PCC) AND THE

CONCERNED ADMINISTRATIVE AGENCIES, TAKING INTO.

CONSIDERATION SECTIONS 2 AND 4 OF THIS ACT AND THE FOLLOWING

CRITERIA:

1. THE PERSON OR JURIDICAL ENTITY REGULARLY SUPPLIES AND
DIRECTLY TRANSMIT AND DISTRIBUTES TO THE PUBLIC THROUH A
NETWORK A COMMODITY OR SERVICE OF PUBLIC CONSEQUENCE;

2. THE COMMODITY OR SERVICE IS NECESSARY TO THE PUBLIC AND
A NATURAL MONOPOLY THAT NEEDS TO BE REGULATED WHENT
THE GOOD SO REQUIRES;

3. THE COMMODITY OR SERVICE IS NECESSARY FOR THE
MAINTENANCE OF LIFE AND OCCUPATION OF RESIDENTS; AND

4. THE COMMODITY OR SERVICE IS OBLIGATED TO PROVIDE
ADEQUATE SERVICE TO THE PUBLIC ON DEMAND.’

THIS SECTION AND THIS ACT DO NOT HAVE ANY EFFECT ON THE
EXISTING REGULATIONS OF PUBLIC SERVICES AND DO NOT, IN
ANY WAY, DIMINISH THE CONSTITUTIONAL RESTRICTIONS
PROVIDED UNDER SECTIONS 11 AND 17, ARTICLE XII AND
SECTION 4, ARTICLE IX (PART C) OF THE CONSTITUTION.
NEITHER DOES THIS SECTION NOR THIS ACT REDEFINE
“COMMON CARRIERS" AND ALTER THE EXISTING HIGH
STANDARDS ACCORDED TO IT.”


SECTION 6. Authorization to Operate - The first paragraph of Section 15 of
Commonwealth Act No. 146, as amended, is hereby amended to read as follows:

“With the exception of those enumerated in the preceding section, no public
service shall operate in the Philippines without possessing a valid and subsisting
FRANCHISE, certificate, OR ANY OTHER APPROPRIATE FORM OF
AUTHORIZATION FOR THE OPERATION OF A PUBLIC SERVICE ffrom-the-Public

public-convenience-and-necessity,"} as the case may be, FROM THE CONGRESS,
THE SECURITIES EXCHANGE COMMISSION (SEC) AND/OR THE PROPER
ADMINISTRATIVE AGENCY to the effect that the operation of said service and the
authorization to do business will promote the public interest in a proper and suitable

manner.”

SECTION 7. Issuance of Authorization and Fixing of Rates, Tolls and the like and
the Reasonable Rate of Return - Section 16 (a) and (c) of Commonwealth Act No.
146, amended, are hereby amended to read as follows:

(a) To issuance certificates {which-shall_be-known-as—certificates-of_ public
eenvenience} authorizing the operation of public service within the
Philippine whenever the {Cemmission} ADMINISTRATIVE AGENCY finds
that the operation of public service interest in a proper and suitable manner.

[Provided That Thereafter, cerlificates-of publi d ity
will be-granted-only-to-elt the Philippi f-the-United Stat
to corporations, co-partnerships, associati joint-stock panies:

fituted and. ized-under the taws-of the Philippines;Provided_That
gi G ;

(¢ ) To fix and determine THE MAXIMUM CEILING FOR individual of joint
rates, tolls, charges, classifications, or schedules thereof, as well as


commutation, mileage, kilometrage, and other special rated which shall be
imposed, observed, and followed thereafter by any public service WHEN THE
PUBLIC INTEREST SO REQUIRES: Provided, That the {Commission}
ADMINISRATIVE AGENCY may, in its discretion, approve rates proposed by
the public services provisionally and without necessity of any hearing; but it
shall call a hearing thereon within [thirty] FIFTEEN days, thereafter, upon
publication and notice to the concerns operating in the territory affected, TO
RATIFY ITS PRIOR PROVISIONAL APPROVAL OR CHANGE, MODIFY OR
ALTER THE APPROVED RATE BASED ON PUBLIC INTEREST: Provided,
further, That in case the public service equipment of an operator is used
principally or secondarily for the promotion of a private business, the net profits
of said private business shalll be considered in relation with the public service
of such operator for the purpose of fixing the rates; PROVIDED THAT THE
MAXIMUM RATE OF RETURN SHALL BE EQUAL TO THE POST-TAX
WEIGHTED AVERAGE COST OF CAPITAL FOR THE SAME OR
COMPARABLE BUSINESSES COMPUTED USING ESTABLISHED
MODERN AND UP TO DATE METHODOLOGIES SUCH AS THE CAPITAL
ASSET PEICING MODEL: PROVIDED ALSO, THAT INCOME TAX BE
ALLOWED AS A CASH EXPENDITURE OR OUTFLOW FOR RATE
DETERMINATION PURPOSES: PROVIDED FURTHER, THAT THIS
PROVISION SHALL NOT BAR THE APPLICATION OF PERFORMANCE-
BASED RATE REGULATION SHOULD THE ADMINISTRATIVE AGENCY
REGULATING SUCH PUBLIC SERVICE DEEM IT EFFICIENT AND IN THE
PUBLIC INTEREST; PROVIDED FINALLY, THAT THIS SHALL NOT BE
INTERPRETED AS AMENDING OR REPEALING REGULATIONS
PROMULGATED BY THESE ADMINISTRATIVE AGENCIES TO
DEREGULATE RATES.

SECTION 8. Reasonable Costs — Section 17 (b) of Commonwealth Act No. 146 as
amended hereby amended to read as follows:

“(b) To require any public service to pay the actual expenses incurred by the
{Commission} ADMINISTRATIVE AGENCY in any investigation if it shall be found in
the same that any rate, toll, charge, schedule, regulation, practice, act or service


thereof is in violation of any provision of this Act or any certificate, order, rule,
regulation or requirement issued or established by the {Commission}
ADMINISTRATIVE AGENCY. The {Commission} ADMINISTRATIVE AGENCY may

also asses against any public service REASONABLE costs {net-to-exeeed- twenty-five
peses} with reference to such investigation.”

SECTION 9. Section 20 (i) of Commonwealth Act No. 146, as amended, is hereby
amended to read as follows:

*(i) To sell, alienate or in any manner transfer shares of its capital stock to any
alien if the result of that sale, alienation, or transfer in itself or in connection with
another previous sale shall be the reduction to less than sixty per centum of the capital
stock belonging to Philippine citizens IN THE OPERATION OF A PUBLIC UTILITY
AS REQUIRED BY THE CONSTITUTION. Such sale, alienation or transfer shall be
void and of no effect and shall be sufficient cause for ordering the cancellation of the
certificate.”

SECTION 10. Section 21 of Commonwealth Act No. 146, as amended, is hereby
amended to read as follows:

“Every public service violating or failing to comply the terms and conditions of
any certificate or any orders, decisions or regulations of the {Commission}
ADMINISTRATIVE AGENCY shall be subject to DISGORGEMENT OF PROFITS,
TREBEL DAMAGES, a fine NOT EXCEEDING FIVE MILLION PESOS
(PHP5,000,000.00) OR ALL OR ANY COMBINATION THEREOF {of-not-exceeding
two-hundred_peses} per day for every day during which such default or violation
continues; and the {Gemvnission} ADMINISTRATIVE AGENCY is hereby authorized
and empowered to impose such PENALTY OR fine, after due notice and hearing.

The PENALTIES AND fines so imposed shall be paid to the Government of the
Philippines through the {Commission} ADMINISTRATIVE AGENCY, and failure to pay
the PENALTY OR fine in any case within the same specified in the order or decision
of the-{Commission} ADMINISTRATIVE AGENCY shall be deemed good and
sufficient reason for the suspension of the certificate of said public service until


payment shall be made. Payment may also be enforced by appropriate action brought
in a court of competent jurisdiction. The remedy provided in this Act but shall be
cumulative and additional to such remedy or remedies.”

SECTION 11. Section 23 of Commonwealth Act No. 146, as amended, is hereby
amended to read as follows:

“Any public service corporation that shall perform, commit, or do any act or thing
forbidden or prohibited or shall neglect, fail or omit to do or perform any act or thing
herein to be done or performed, shall be punished by a fine not exceeding twenty-five
thousand pesos} FIVE MILLION PESOS (PHP5,000,000.00), or by imprisonment fret
exceeding five-years] OF NOT LOWER THAN SIX (6) YEARS AND NOT HIGHER
THAN TWELVE (12) YEARS, or both, in the discretion of the court.”

SECTION 12. Section 24 of Commonwealth Act No. 146, as amended, is hereby
amended to read as follows:

“Any persons who shall knowingly and willfully perform, commit, or do, or
participate in performing, committing, or doing, or who shall knowingly and willfully
cause, participate, or join with others in causing any public service corporation or
company to do, perform or commit, or who shall advice, solicit, persuade, or knowingly
and willfully instruct, direct, or order any officer, agent, or employee of any public
service corporation or company to perform, commit, or do any act or thing forbidden
or prohibited by this Act, shall be punished by a fine not exceeding ftwe-thousand
peses} FIVE MILLION PESOS (PHP5,000,000.00), or imprisonment frot-exceeding
two-years] OF NOT LOWER THAN SIX (6) YEARS AND NOT HIGHER THAN
TWELVE (12) YEARS, or both, in the discretion of the court. [;-Provided, however,

tf ‘i tomobil lic service-without havi
tha’ perating-a private pi ig Pi swith ge
certificate_of-public-convenience forth the-offender shall be-subject-toth
penalties provided for in-section <i ' —

SECTION 13. Section 25 of Commonwealth Act No. 146, as amended, is hereby to
read as follows:


“Any person who shall knowingly and willfully neglect, fail, or omit to do or
perform, or who shall knowingly and willfully cause or join or participate with others in
causing any public service corporation or company to neglect, fail or omit to do or
perform, or who shalll advise, solicit, or persuade, or knowingly and willfully instruct,
direct, or order any officer, agent, or employee of any public service corporation or
company to neglect, fail, or omit to do any act or thing required to be done by this Act,
shall be published by a fine not exceeding {two-thousand-pesos} FIVE MILLION
PESOS (PHP5,000,000.00), or imprisonment {ret-exceeding-two-years] OF NOT
LOWER THAN SIX (6) YEARS AND NOT HIGHER THAN TWELVE (12) YEARS, or
both, in the discretion of court.”

SECTION 14. Section 26 of Commonwealth Act No. 146, as amended, is hereby to
read as follows:

“Any person who shall destroy, injure, or interfere with any apparatus or
appliances owned or operated by to in charge of the [Commission- ADMINISTRATIVE
AGENCIES or its agents, shall be deemed guilty of a misdemeanor and upon
conviction shall be punished by a fine OF THE AMOUNT EQUIVALENT TO THE
ACTUAL MARKET VALUE OF THE APPARATUS OR APPLIANCE DESTROYED
OR INJURED PLUS A FINE NOT EXCEEDING ONE MILLION PESOS
(PHP1,000,000.00) [not~exceeding—~ene—theusand—peses} or imprisonment {not
exeeeding-six menths} OF NOT LOWER THAN SIX (6) YEARS AND NOT HIGHER
THAN TWELVE (12) YEARS, or both in the discretion of the court.

SECTION 15. Section 28 of Commonwealth Act No. 146, as amended, is hereby to
read as follows:

“Violations of the orders, decisions, and regulations of the {Cormmission}
ADMINISTRATIVE AGENCIES and of the terms and conditions of any certificate

10


issued by the [Commission] ADMINISTRATIVE AGENCIES {shall-preseribed-after
sixty-days,] and violations of the provisions of this Act shall [prescribed-afterone
hundred-and-eighty days] BE IMPRECRIPTIBLE.”

SECTION 16. Subsequent Adjustment of Fines imposed under this Act - The
maximum amounts of fines imposed under this Act, as well those imposed under
Commonwealth Act No. 146, shall be adjusted by the head of each administrative
agency under Section 4 of this Act by a Cost-of-Living Adjustment on January 4 of the
year immediately following the date of enactment of this Act and every fifth calendar
year thereafter. Each head of the administrative agency shall file copies of the
adjustment with the University of the Philippines Law Center in accordance with
Executive Order No. 292 (1987), as amended.

Any increase shall apply only to fines, including those whose associated
violation predated such increase, which are assessed after the increase takes effect.

SECTION 17. Interpretation — This Act shall be subject to and consistent with the
regulatory powers of the State to promote public interest in Article IX-C, Section 4 and
Article XIl, Section 17 of the Constitution.

No franchise, certificate, or authorization granted by the Congress and the
appropriate administrative agencies under Section 3 of this Act shall be (a) exclusive
in character, (b) for a longer period than fifty years, and (c) granted except under the
condition that it shall be subject to amendment, alteration, or repeal by Congress when
the public interest so requires.

The power to grant any franchise, certificate, or any other form of authorization
for the operation of a public service still belongs to the Congress, unless otherwise
provided by law to an administrative agency.

SECTION 18. Non-Impairment of Existing Agreements — The Application and
implementation of the pertinent provisions of this act shall not impair vested rights or
obligations of contracts. Current and subsisting concession agreements and other
similar contracts of juridical persons with government agencies or government owned
and —controlled corporations covering activities hereunder classified as public utilities

i


shall remain valid and in force in accordance with the existing terms and conditions
the parties agreed to thereunder until expiration or termination thereof.

SECTION 19. Suppletory Application of Commonwealth Act No. 146 —
Commonwealth Act No. 146, as amended, shall be construed as a general law that
shall apply suppletorily to special laws or existing sector-specific laws governing public.
services, except for Section 13 (d) of Commonwealth Act No. 146, as amended,
created by Section 4 of this Act.

SECTION 20. Comprehensive Baseline Survey — The University of the Philippines
Law Center shall conduct a comprehensive baseline survey of the public services
governance within six (6) months from the effectivity of this Act. Copies of the results
of said survey shall be furnished to the Congress, the NEDA and PCC.

The PCC, in coordination with the NEDA, is mandated to conduct regular
studies on whether deregulation is warranted in a sector to improve consumer welfare
and to submit its recommendation to Congress.

SECTION 21. Implementing Rules and Regulations — All administrative agencies
under Section 13 of this Act shall, in coordination with the NEDA, PCC and the
University of the Philippines Law Center, promulgate rules and regulations to
implement the provisions of this Act within ninety (90) days from the effectivity of this
Act, including the criteria for the determination of imposable fines, as provided for in
this Act, to be based in the capitalization of a public service provider and peculiarities
of the public service concerned.

SECTION 22. Repealing Clauses — All laws, including Commonwealth Act No. 146,
as amended, decrees, orders, rules and regulations, or other issuances or parts
thereof inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.

SECTION 23. Appropriations — The initial funding to carry out the provisions of this
Act shall be charged against the current year’s appropriation. Thereafter, such sums
as may be necessary shall be included in the General Appropriations Act.

12


SECTION 24. Separability Clause — If any portion of provisions of this Act is declared
unconstitutional, the remainder of this Act or any Provision not affected thereby shall
remain in force and effect.

SECTION 12. Effectivity — This Act shall take effect fifteen (15) days following the
completion of its publication either in the Official Gazette or in a newspaper of general

circulation in the Philippines.

Approved,