of tlif ftftrrUty
SEVENTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
)
SENATE
S. No. ,1291
Introduced by JUAN MIGUEL F. ZUBIRI
AN ACT FURTHER AMENDING COMMONWEALTH ACT NO. 146 
OTHERWISE KNOWN AS THE PUBLIC SERVICE ACT, AS AMENDED
EXPLANATORY NOTE
It has been a norm in our society that when it comes to basic and public 
services, consumers often get poor quality of services priced at a high cost and it has 
been an accepted reality being a developing country in Asia. Public has a limited choice 
when it comes to service providers because very few parties are dominating control of 
the market. Competition and foreign investment are inhibited because limitations that 
are rightly applied to public utilities are usually also applied to all public services. Public 
utility has been synonymous to public service and that situation is due to the ambiguity 
in the definition of public utility under Commonwealth Act No. 146 or the Public Service 
Act. To resolve such problem, a policy as to the clear and legal definition of public utility 
must be laid down, amending thereof the Public Service Act.
The said law was enacted in 1936 to govern public services; undeniably it is no 
longer apt with our current market situation considering the rapid innovation and 
technological upgrade that took place. The cause for its revision is justifiable to fully 
serve its intents and purposes. This proposed measure intends to: 1) transfer functions 
of the Public Service Commission to various administrative agencies; 2) provide a clear 
definition of public service and public utility; 3) the appropriate mechanism for fixing 
rates based on reasonable rate of return; and 4) the applicable penalties and fees for 
public services.
The proposed amendments will cause the necessary changes in the antiquated 
provisions of the law to ensure that the general public will have more choices, better 
services and enjoy lower prices. It will significantly change the competition game of 
public services and utilities and thereby creating a more competitive economy in the 
country.
N MIGUEL F. ZUBIRI


of the ^ffrrtor/
SEVENTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
)
SENATE
S. No. 1291
Introduced by JUAN MIGUEL F. ZUBIRI
AN ACT FURTHER AMENDING COMMONWEALTH ACT NO. 146 
OTHERWISE KNOWN AS THE PUBLIC SERVICE ACT, AS AMENDED
Be it enacted by the Senate and the House of Representatives of the Philippines 
in Congress assembled
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SECTION 1. Transfer o f Functions o f the Public Service Commission. -  The
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relevant provisions of Commonwealth Act No. 146 or the Public Service Act, as
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amended, referring to the Public Service Commission, its powers and duties, are hereby
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transferred to the various administrative agencies of the government according to their
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respective jurisdictions, such as:
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(a) 
Department of Transportation;
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(b) 
Land Transportation Franchising and Regulatory Board;
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(c) 
Land Transportation Office;
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(d) 
Civil Aeronautics Board;
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(e) 
Civil Aviation Authority of the Philippines;
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(f) 
Philippine Ports Authority;
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(g) 
Maritime Industry Authority;
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(h) 
Philippine Coast Guard;
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(i) 
Department of Information and Communications Technology;
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(j) 
National Telecommunications Commission;
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(k) 
Department of Energy;
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(I) 
Energy Regulatory Commission;
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(m) 
Department of Environment and Natural Resources;
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(n) 
National Water Resources Board;
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(o) 
Local Water Utilities Administration;
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(p) 
Philippine Competition Commission; and others.
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All references to the Public Service Commission in Commonwealth Act No. 146 or the
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Public Service Act, as amended, shall mean any such administrative agencies concerned
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in accordance with their respective charters.


All administrative agencies to which the powers and duties of the Public Service 
Commission have been transferred are hereby authorized and ordered to charge and 
collect from any public service or applicant, as the case may be, reasonable fees as 
reimbursement of its expenses in the authorization, supervision, and regulation of 
public services, and to impose appropriate penalties as provided by law.
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Sec. 2. Public Utility. -  A new Section 13 (d) of Commonwealth Act No. 146 or
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the Public Service Act, as amended, is hereby inserted to read as follows:
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"(D) I. PUBUC U nU TY  DEFINITION. -  THE TERM "PUBLIC
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UTILnY" REFERS TO A PUBLIC SERVICE THAT REGULARLY SUPPLIES
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THE PUBLIC AND DIRECTLY TRANSMITS AND DISTRIBUTES TO THE
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PUBLIC THROUGH A NETWORK ITS COMMODITY OR SERVICE OF PUBLIC
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CONSEQUENCE. A PUBLIC UTILITY IS NECESSARY TO THE PUBLIC AND A
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NATURAL MONOPOLY THAT NEEDS TO BE REGULATED WHEN THE
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PUBLIC INTEREST SO REQUIRES AS DETERMINED BY CONGRESS.
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II. PUBLIC UTILITY ENUMERATION. -  A PUBLIC UTILITY SHALL
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MEAN 
ELECTRIC 
POWER 
TRANSMISSION, 
ELECTRIC 
POWER
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DISTRIBUTION, WATER PIPELINE 
DISTRIBUTION, AND SEWERAGE
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PIPELINE SYSTEM, UNLESS OTHERWISE SUBSEQUENTLY PROVIDED BY
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LAW. ANY EXISTING LAW TO THE CONTRARY NOTWITHSTANDING, NO
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OTHER BUSINESS OR SERVICE SHALL BE DEEMED A PUBUC UTILITY,
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UNLESS 
OTHERWISE 
SUBSEQUENTLY 
PROVIDED 
BY 
LAW 
UPON
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RECOMMENDATION BY THE NATIONAL ECONOMIC AND DEVELOPMENT
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AUTHORITY (NEDA).
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III. PUBLIC UTILITY EXEMPTIONS. -  ANY EXISTING LAW TO THE
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CONTRARY NOTWITHSTANDING, THE FOLLOWING SHALL NOT BE
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CONSIDERED A PUBLIC UTILITY OPERATION:
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(1) ELECTRIC POWER GENERATION IN SECTION 6 OF REPUBLIC
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ACT NO. 9136 OR THE ELECTRIC POWER INDUSTRY REFORM ACT OF
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2 001;
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(2) ELECTRIC POWER SUPPLY IN SECTION 29 OF REPUBUC ACT
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NO. 9136 OR THE ELECTRIC POWER INDUSTRY REFORM ACT OF 2001;
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(3) CRUDE OIL AND PETROLEUM PRODUCTS UNDER REPUBLIC
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ACT NO. 8479 OR THE DOWNSTREAM OIL INDUSTRY DEREGULATION
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ACT OF 1998;


(4) TRANSPORTATION IN THIS ACT, EXECUTIVE ORDER NO. 202 
(1987), PRESIDENTIAL DECREE NO. 474 (1974) AS AMENDED, AND 
REPUBLIC ACT NO. 776 (1951) AS AMENDED;
(5) BROADCASTING, TELECOMMUNICATIONS, AND VALUE-ADDED 
SERVICES 
IN 
REPUBLIC 
ACT 
NO. 
7925 
OR 
THE 
PUBLIC 
TELECOMMUNICATIONS POLICY ACT OF THE PHILIPPINES; AND
(6) OTHER PUBLIC SERVICES IN THIS ACT."
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Sec. 3. Certificate o f Authority. -  The first paragraph of Section 15 of 
Commonwealth Act No. 146 or the Public Service Act, 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 certificate OF AUTHORIZATION OBTAINED APPROPRIATELY 
from—the—Public Service Commission known as - "cortificato of public 
eonvonionco," or "cortificate of public convenienco and necessity,11 as the 
case may be, 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."
All references to a certificate of public convenience or a certificate of public convenience 
and necessity in Commonwealth Act No. 146 or the Public Service Act, as amended, 
shall mean any authorization obtained appropriately as the case may be.
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Sec. 4. Proceedings Upon Notice and Hearing. -  Section 16 (a) and (c) of
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Commonwealth Act No. 146 or the Public Service Act, as amended, are hereby
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amended to read as follows:
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"(a) To issue certificates which sholl-bc known as certificates of
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public convenience, authorizing the operation of public service within the
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Philippines whenever the Commission finds that the operation of the
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public service proposed and the authorization to do business will promote
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the public interest in a proper and suitable manner. Provided, That
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thereafter, cortificatos- o f -public eonvonionco and- ccrtificates- of public
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eonvonionco and nocosGity -w ill be granted only to citizens of the
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Phtiippines -or- of the United States or to corporations, co-partnerships,
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associations-OF jo int-stock companies-constituted and organized-under the
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laws-of the Philippines; Provided,- That sixty- per centum of the stock or


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paid-up capital of any-such corporationg, co-partncrGhip, agGociation or 
jo int-stock company must belong entirely to citizens of the PhilippincG or 
of the United-States: Provided, further; That no such certificates shall be 
issued for a period of more than fifty years.
(c) To fix and determine individual or joint rates, tolls, charges, 
classifications, or schedules thereof, as well as commutation, mileage, 
kilometrage, and other special rates which shall be imposed, observed, 
and followed thereafter by any public service: Provided, That the 
Commission may, in its discretion, approve rates proposed by public 
services provisionally and without necessity of any hearing; but it shall call 
a hearing thereon within thirty days, thereafter, upon publication and 
notice to the concerns operating in the territory affected: 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 shall be considered in relation with the 
public service of such operator for the purpose of fixing the rates: 
PROVIDED FURTHERMORE, 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 METHODOLOGIES SUCH AS THE CAPITAL ASSET 
PRICING MODEL: PROVIDED ALSO, THAT INCOME TAX SHALL BE 
ALLOWED AS A CASH OUTFLOW FOR RATE-DETERMINATION PURPOSES: 
PROVIDED FINALLY, 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."
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Sec. 5. Proceedings Without Hearing. -  Section 17 (b) of Commonwealth Act No.
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146 or the Public Service Act, as amended, is hereby amended to read as follows:
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"(b) To require any public service to pay the actual expenses
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incurred by the Commission in any investigation if it shall be found in the
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same that any rate, toll, charge, schedule, regulation, practice, act or
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service thereof is in violation of any provision of this Act or any certificate,
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order, rule, regulation or requirement issued or established by the
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Commission. The Commission may also assess against any public service


REASONABLE costs not to exceed twenty-five pesos with reference to 
such investigation."
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Sec. 6. Acts Requiring Approval. -  Section 20 (i) of Commonwealth Act No. 146 
or the Public Service Act, 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."
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Sec. 7. Penalties for Violations. -  Section 21 of Commonwealth Act No. 146 or
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the Public Service Act, as amended, is hereby amended to read as follows:
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"Every public service violating or failing to comply with the terms
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and conditions of any certificate or any orders, decisions or regulations of
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the Commission shall be subject to DISGORGEMENT OF PROFITS, TREBLE
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DAMAGES, a fine OF UP TO FIVE MILLION PESOS, OR ALL OR ANY
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COMBINATION THEREOF of not exceeding two hundred pesos per day for
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every day during which such default or violation continues; and the
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Commission is hereby authorized and empowered to impose such fine,
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after due notice and hearing. THE FINE OF UP TO FIVE MILLION PESOS
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SHALL BE INCREASED EVERY FIVE (5) YEARS UPON CERTIFICATION BY
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NEDA ON THE COMPUTATION OF THE COST OF MONEY BASED ON THE
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CURRENT CONSUMER PRICE INDEX.
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The PENALTIES AND fines so imposed shall be paid to the
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Government of the Philippines through the Commission, and failure to pay
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the PENALTY OR fine in any case within the same specified in the order or
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decision of the Commission shall be deemed good and sufficient reason
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for the suspension of the certificate of said public service until payment
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shall be made. Payment may also be enforced by appropriate action
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brought in a court of competent jurisdiction. The remedy provided in this
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section shall not be a bar to, or affect any other remedy provided in this
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Act but shall be cumulative and additional to such remedy or remedies."


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Sec. 8. Interpretation. -  Commonwealth Act No. 146 or the Public Service Act, as 
amended, shall be interpreted to apply suppletorily to existing sector-specific laws 
governing public services and public utilities, unless otherwise expressly provided.
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Sec. 9. Comprehensive Baseline Survey. -  The University of the Philippines Law 
Center shall conduct a comprehensive baseline survey of public services and public 
utilities governance within six (6) months from the effectivity of this Act.
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Sec. 10. Rules and Regulations. -  All administrative agencies to which the 
powers and duties of the Public Service Commission have been transferred shall, in 
coordination with the University of the Philippines Law Center, promulgate rules and 
regulations to implement the provisions of this Act.
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Sec. 11. Repealing Clause. -  All laws, decrees, orders, rules and regulations or 
other issuances or parts thereof, including Commonwealth Act No. 146 or the Public 
Service Act, as amended, inconsistent with the provisions of this Act are hereby 
repealed or modified accordingly.
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Sec. 12. Appropriation. -  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.
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Sec. 13. Separability Clause. -  If any portion or provision of this Act is declared
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unconstitutional, the remainder of this Act or any provision not affected thereby shall
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remain in force and effect.
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Sec. 14. Effectivity. -  This Act shall take effect after fifteen (15) days following
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the completion of its publication either in the Official Gazette or in a newspaper of
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general circulation in the Philippines.
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Approved,