ke "ecg VED ~\
OaTE: 3

Republic of the Philippines TIME ay

HOUSE OF REPRESENTATIVES ee

Quezon City

EIGHTEENTH CONGRESS
First Regular Session

4086
HOUSE BILL NO.

Introduced by: HON. JOY MYRA S. TAMBUNTING

EXPLANATORY NOTE

Over the years, consumers have been expressing their growing dissatisfaction concerning the
delivery of basic services such as electricity, water, transportation and telecommunications. The
dissatisfaction of consumers over the poor of quality services at high costs can be rooted from the
lack of competition and inhibition of foreign investment in the country.

This bill seeks to amend and update the Public Service Act which was passed in 1936. To date, the
more than 80-year-old law remains to be the law that governs public services in the Philippines. The
Public Service Act has since been amended several times already and many of its sections have been
expressly or impliedly repealed, including the Public Service Commission as per Presidential Decree
No. 1 in 1972.

This Representation believes that the Public Service Act with its outdated and restrictive provisions,
no longer serves its true purpose of serving the public. Considering the situation for the past few
years, wherein technological innovation has swamped the market and has since allowed for
ingenious and new modes of delivery services, a review of the Public Service Act is needed to realign
the said law to the realities of the 21% Century.

This proposed measure allows the New Public Service Law to: 1) recognize the transfer of functions
of the Public Service Commission to various administrative agencies; 2) distinguish and clarify the
definition public services from public utilities; 3) institute an appropriate mechanism for fixing rates;
and 4) increase the penalties for violations. I acknowledge Senate Bill 1754 as reported in Senate
Committee Report 301 during the 17 Congress from which this proposal has been based upon.

For the good of the Filipino people, the passage ofthis bis eemesty sought.

RAS. ib
City, 2" District


Republic of the Philippines
HOUSE OF REPRESENTATIVES.
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

4086
HOUSE BILLNO.

Introduced by: HON. JOY MYRA S. TAMBUNTING

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 as
assembled:

SECTION 1. Short Title. - This Act shall be known as "The New Public Service Act of the
Philippines. *

Sec. 2. Declaration of Policy — \t 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 al

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
satisfaction of the consuming public and quality of life shall be the yardsticks for an effective
regulation of public utility providers without compromising the reasonable rate of return of the latter.
tis 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 utilities and public services; and (c) the lilting of
foreign equity restrictions by clearly defining what are considered to be public utilities.

Sec. 3. Definition of Terms. — For the purposes 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;


©) 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 taw;

Transmission of Electricity - refers to the conveyance of electricity through the high voltage

backbone system, pursuant to Section 4 (ccc) of RA 9136;

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.

d)

2)

Sec. 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 (DOT?);

b) Land Transportation Franchising Regulatory Board (LTFRB);
©) Land Transportation Office (LTO);

) Civil Aeronautics Board (CAB);

e) Civil Aviation Authority of the Philippines (CAAP);

f) Philippine Ports Authority (PPA);

9) Maritime Industry Authority (MARINA);

h) Philippine Coast Guard;

') Department of Information and Communications Technology (DICT);
i). National Telecommunications Commission (NTC);

k)_ Department of Energy (DOE);

)_ Energy Regulatory Commission (ERC);

m) Department of Environment and Natural Resources (DENR);
Nn) League of Cities;

©) National Water Resources Board;

p) Local Water Utilities Administration;

q) Philippine Competition Commission (PCC).

For purposes 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.


Sec. 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 OR UNDERTAKING SHALL BE DEEMED A PUBLIC
UTILITY OTHER THAN THOSE 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 TRANSMITS AND DISTRIBUTES TO THE PUBLIC THROUGH 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 WHEN THE
COMMON 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."

Sec. 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
[From-the-Publie Service Commission-known-a5-% “1 ieate

ve Hy as the case may be, , 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."

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

" (@) To issue certificates [\ :

eenvenience;] authorizing the operation of public service within the Philippines whenever the
[Commission] ADMINISTRATIVE AGENCY finds that the operation of the public service
proposed and the authorization to do business will promote the public interest in a proper and
suitable manner. he conve 20

(0) To fix and determine THE MAXIMUM CEILING FOR 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
WHEN THE PUBLIC INTEREST SO REQUIRES: Provided, That the [Commission]
ADMINISTRATIVE AGENCY 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] TEN 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 shall 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 PRICING 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.

Sec. 8. Reasonable Costs — Section 17 (b) of Commonwealth Act No. 146, as amended, is
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 the
[Commission] by ADMINISTRATIVE AGENCY. The [Commission] ADMINISTRATIVE
AGENCY may also assess against any public service REASONABLE costs [not to-exceed twenty
five-peses] with reference to such investigation."

Sec. 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."

Sec. 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 with 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, TREBLE DAMAGES, a fine NOT EXCEEDING
FIVE MILLION PESOS (PHP 5,000,000.00) OR ALL OR ANY COMBINATION THEREOF
[ ]] per day for every day during which such default or
violation continues; and the [Commission] 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 franchise/certificate/authorization issued to the 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. 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-theusand—peses] FIVE
MILLION PESOS (PHP 5,000,000.00), or by imprisonment [net-exeeeding-five-years] OF
NOT LOWER THAN SIX (6) YEARS AND NOT HIGHER THAN TWELVE (12) YEARS, or
both, in the discretion of the court.” .


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

"Any person who shall knowingly and willfully Perform, commit, or do, or Participate in
Performing, committing, or doing, or who shall knowingly and wilfully 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 [two
thousand—pesos] FIVE MILLION PESOS (PHP 5,000,000.00), or imprisonment [not
exeeeding-twe-years] OF NOT LOWER THAN SIX (6) YEARS AND NOT HIGHER THAN
TWELVE (12) YEARS, or both, in the discretion of the court. [:-Provided-hewever,-that-for

Wel ers aA her je 5)"

Sec. 13. Section 25 of Commonwealth Act No. 146, as amended, is hereby amended 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 shall advise, solicit, or
Persuade, or knowingly and wilfully 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 (PHP 5,000,000.00) or by imprisonment [ i |] OF
NOT LOWER THAN SIX (6) YEARS AND NOT HIGHER THAN TWELVE (12) YEARS, or
both, in the discretion of the court."

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

“Any person who shall destroy, injure, or interfere with any apparatus or appliance 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 FIVE MILLION
PESOS ( PH P 5,000,000.00) [net-exceeding-one-thousand-peses] or imprisonment [pet

ing-Sb |] OF NOT LOWER THAN SIX (6) YEARS AND NOT HIGHER THAN
TWELVE (12) YEARS, or both in the discretion of the court. F,

ic
offense)”

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


"Violations of the orders, decisions, and regulations of the [Commission] ADMINISTRATIVE
AGENCIES and of the terms and Conditions of any certificate issued by the [Commission]
ADMINISTRATIVE AGENCIES [shalt—preseribe—after—sixty—days,] and violations of the
Provisions of this Act shall [j : “| BE
IMPRESCRIPTIBLE."

Sec. 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

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

Sec. 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 XII, 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 (@) exclusive in character, (b) for a longer period than
fifty years, and (c) granted xcept 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
@ Public service still belongs to the Congress, unless otherwise Provided/delegated by law to an
administrative agency.

Sec. 19. Suppletory Application of Commonwealth Ad 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.

Sec. 20. Comprehensive Baseline Survey. — The University of the Philippines Law Center shall
conduct and complete a comprehensive baseline survey of public services governance within six (6)


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
recommendations to Congress at least once every three years from the effectivity of this Act.

Of the public service concerned.

Sec. 22. Repealing Clause. — 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.

Sec. 23. 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.

Sec. 24. 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.

Sec. 25. Effectivity. — This Act shall take effect alter fifteen (15) days following the completion of
its publication either in the Official Gazette or ina Newspaper of general circulation in the Philippines.

Approved,