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Republic of the Philippines {
HOUSE OF REPRESENTATIVES OME: ag
Quezon City

Seventeenth Congress

First Regular § tory ©

HOUSE BILL NO, 4468

Introduced by Representative JOEY SARTE SALCEDA

AN ACT FURTHER AMENDING COMMONWEALTH ACT NO. 146,
OR THE PUBLIC SERVICE ACT, AS AMENDED

EXPLANATORY NOTE

Consumers often experience high prices and poor quality of basic services in the
Philippines, because only a few local players or oligarchs effectively control the market.
Competition and foreign investment are inhibited, because limitations that should only apply
to the operation of a public utility are usually also applied to all public services. This situation
is caused by the ambiguity in the definition of public utility that is often used interchangeably
with public service under Commonwealth Act No, 146 or the Public Service Act. The key to
fixing this problem is to develop a clear statutory definition of a public utility by amending
the Public Service Act.

The Public Service Act is a law that was crafted in 1936 to govern public services in
the Philippines. Understandably, it no longer sufficiently addresses the changes in the
economic framework brought about by globalization and rapid technological innovation,
Hence, there is a need to adjust the provisions of the law to bring it to the 21st century and
enable it to fulfil its purpose of truly serving the public.

Notwithstanding numerous amendments, this 80-year old law is still a good law in
terms of protecting the public interest, albeit outdated in certain aspects, particularly: 1) the
transfer of the functions of the Public Service Commission to various administrative
agencies; 2) the definition of public service, which is often used as a proxy for public utility
in reference to the 1987 Constitution, and 3) the applicable penalties and fees for public
services.


This bill proposes to further amend the Public Service Act to effect the necessary
changes in the antiquated provisions of the law to increase its relevance to contemporary
concerns, in the interest of providing the general public with more choices, better services,
and lower prices. This bill also prescribes a 12% cap on rate of return and prohibits income
tax as operating expense for rate-determination purposes for public services, including public
utilities, consistent with administrative and judicial pronouncements

This legislative reform will significantly contribute to increasing competition, as well
as protecting the public interest. More competition among providers would result in lower
prices and improved quality of basic services in the Philippines creating a more competitive
economy towards a better quality of life for all.

In light of the foregoing, the passage of this bill is most earnestly sought



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session

HOUSE BILL No, 446

Introduced by Representative JOBY SARTE SALCEDA

AN ACT FURTHER AMENDING COMMONWEALTH ACT NO. 146,
OR THE PUBLIC SERVICE ACT, AS AMENDED

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

SECTION I, Transfer of Functions of the Public Service Commission. — The relevant
provisions of Commonwealth Act No. 146, or the Public Service Act, as amended, referring to
the Public Service Commission, its powers and duties, are hereby transferred to the various

administrative agencies of the government according to their respective jurisdictions, such as:

(a) Department of Transportation;
(b) Land Transportation Franchising and Regulatory Board;

(c) Land Transportation Office;

(d) Civil Aeronautics Board;

(e) Civil Aviation Authority of the Philippines:

(f) Philippine Ports Authority;

(gz) Maritime Industry Authority;

(h) Philippine Coast Guard;

(i) Department of Information and Communications Technology;
(ij) National Telecommunications Commission;

(k) Department of Energy,

(1) Energy Regulatory Commission;

(m) Department of Environment and Natural Resources;


(n) National Water Resources Board;
(0) Local Water Utilities Administration;
(p) Philippine Competition Commission; and others.
All references to the Public Service Commission in Commonwealth Act No. 146, or the Public

Service Act, as amended, shall mean any such administrative agencies concerned in accordance

with their respective charters,

All administrative agencies to which the powers and duties of the Public Service
Commiss

on 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.

See. 2. Public Utility. — A new Section 13 (d) of Commonwealth Act No. 146, or the

Public Service Act, as amended, is hereby inserted to read as follows:

“(D) I. PUBLIC UTILITY DEFINITION, — THE TERM "PUBLIC
UTILITY" REFERS TO A PUBLIC SERVICE THAT REGULARLY
SUPPLIES THE PUBLIC AND DIRECTLY TRANSMITS AND
DISTRIBUTES TO THE PUBLIC THROUGH A NETWORK ITS
COMMODITY OR SERVICE OF PUBLIC CONSEQUENCE. A PUBLIC
UTILITY IS NECESSARY TO THE PUBLIC AND A NATURAL
MONOPOLY THAT NEEDS TO BE REGULATED WHEN THE PUBLIC
INTEREST SO REQUIRES AS DETERMINED BY CONGRESS.

I, PUBLIC UTILITY ENUMERATION, ~ A PUBLIC UTILITY SHALL.
MEAN ELECTRIC POWER TRANSMISSION, ELECTRIC POWER
DISTRIBUTION, WATER PIPELINE DISTRIBUTION, AND SEWERAGE
PIPELINE SYSTEM, UNLESS OTHERWISE PROVIDED BY LAW UPON
ENDORSEME! BY THE NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY. ANY EXISTING LAW TO THE
CONTRARY NOTWITHSTANDING, NO OTHER BUSINESS OR
SERVICE SHALL BE DEEMED A PUBLIC UTILITY, UNLI
OTHERWISE SUBSEQUENTLY PROVIDED BY LAW.



Ill. PUBLIC UTILITY EXEMPTIONS, — ANY EXISTING LAW TO
THE CONTRARY NOTWITHSTANDING, THE FOLLOWING SHALL
NOT BE CONSIDERED A PUBLIC UTILITY OPERATION:

“TRIC POWER GENERATION;

CTRIC POWER SUPPLY;
(3) GAS SUPPLY;

(4) PETROLEUM SUPPLY;

(5) TRANSPORTATION;

(6) TELECOMMUNICATIONS,
(7) BROADCASTING; AND

(8) OTHER PUBLIC SERVICES.”

Sec. 3. Certificate of 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 eertifieate AUTHORIZATION OBTAINED APPROPRIATELY from
the Publ Sommnission-known-as-"certifieate-of publ fence,-or
“certificate of public convenience and-necessity,""as the case may be, to the effect

that the operation of said service and the authorization to do business will promote

the public interests 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.

Sec. 4. Proceedings Upon Notice and Hearing, ~ Section 16 (a) and (c) of
Commonwealth Act No. 146, or the Public Service Act, as amended, is hereby amended to read

as follows:


“(a) To issue certificates which shall-be-known-as-certificates-of public
convenience, authorizing the operation of public service within the Philippines
whenever the Commission finds that the operation of the public service
proposed and the authorization to do business will promote the public interest

ina proper and suitable manner. Provided, That thereafter; certifioates-of public

eony J certificates of publie- convenience and necessity-will-be granted

only-to-citizens-of the Philippines-or-of the United States-or-to-corporations,

pa hips-assoeiations-or joint-stock panies constituted-and-orge d
der-the-laws-of the Philippines: Provided,-That-sixty-per-eentum-of-the stock

oF paid-up capital-of any-such-corperations,-co-partnershipy joint

stock-company-must-belong itizens-o-the-Philippines-or-of-the

United States: Provided-furtherThat-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, thereafler, upon publication and notice to the concerned 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 TWELVE PERCENT (12%) AND INCOME TAX
SHALL NOT BE ALLOWED AS OPERATING EXPENSE FOR RATE-
DETERMINATION PURPOSES.”

See. 5. Proceedings Without Hearing. ~ Section 17 (b) of Commonwealth Act No. 146,

or the Public Service Act, as amended, is hereby amended to read as follows:


“(b) To require any public service to pay the actual expenses incurred by
the Commission 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. The Commission may
also assess against any public service REASONABLE costs not-to-exceed
twenty-five-pesos-with reference to such investigation.”

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.”

Sec. 7. Penalties for Violations. ~ Section 21 of Commonwealth Act No. 146, or the

Public Service Act, as amended, is hereby amended to read as follows:

ery public service violating or failing to comply with the terms and
conditions of any certificate or any orders, decisions or regulations of the
Commission shall be subject to DISGORGEMENT OF PROFITS OR a fine
EQUAL TO TREBLE DAMAGES, OR BOTH of-notexceeding-two-hundred

pesos-per day for every day during which such default or violation continues;

and the Commission is hereby authorized and empowered to impose such fine,

after due notice and hearing.

The fines, INCLUDING DISGORGEMENT OF PROFITS AND
TREBLE DAMAGES, so imposed shall be paid to the Government of the
Philippines through the Commission, and failure to pay the fine in any case
within the same specified in the order or decision of the Commission 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 section shall not be a bar to, or affect any other remedy provided

in this Act but shall be cumulative and additional to such remedy or remedies.”

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

See. 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.

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.

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.

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

See. 13. Separability Clause. — If any portion or provision of this Act is declared
unconstitutional, the remainder of this Act or any provision not affected thereby shall remain

in force and effect.

See. 14. Hffectivity, — This Act shall take effect after 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.