SEVENTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
of tl)f ibrcrrlai/
’16 OEC-1 
A10 ‘•49
S.B. No.
SENm
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R£CE(VCDBV.
Introduced by Senator Richard “ Dick” J. Gordon
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terms of protecting the public interest, albeit outdated in certain aspects, particularly: 1) 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; 3) the appropriate mechanism for fixing 
rates based on reasonable rate of return; and 4) 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 legislative reform will significantly contribute to increasing competition, as 
well as protecting the public interest. More competitiorTgmpng providers would result in 
lower prices and improved quality of basic servic^a^Jo^^ Philippines creating a more 
competitive economy towards a better quality oUfrelor all.
ARD “ DICK” J. GORDON
Senator


SEVENTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
S.B. No.
SENAT^
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AlO-49
RECEiViOW:
Introduced by Senator Richard “ Dick” J. Gordon
AN ACT FURTHER AMENDING COMMONWEALTH ACT NO. 146 
OR 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 of Functions of 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
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concerned in accordance with their respective charters.
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All administrative agencies to which the powers and duties of the Public Service
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Commission have been transferred are hereby authorized and ordered to charge and
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collect from any public service or applicant, as the case may be, reasonable fees as
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reimbursement of its expenses in the authorization, supervision, and regulation of public 
services, and to impose appropriate penalties as provided by law.
Sec. 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.
II. PUBLIC UTILITY ENUMERATION. -  A PUBLIC UTILITY SHALL 
MEAN 
ELECTRIC POWER TRANSMISSION. 
ELECTRIC POWER 
DISTRIBUTION, WATER PIPELINE DISTRIBUTION, AND SEWERAGE 
PIPELINE 
SYSTEM, 
UNLESS 
OTHERWISE 
SUBSEQUENTLY 
PROVIDED BY LAW. ANY EXISTING LAW TO THE CONTRARY 
NOTWITHSTANDING, NO OTHER BUSINESS OR SERVICE SHALL BE 
DEEMED A PUBLIC UTILITY, UNLESS OTHERWISE SUBSEQUENTLY 
PROVIDED BY LAW UPON RECOMMENDATION BY THE NATIONAL 
ECONOMIC AND DEVELOPMENT AUTHORITY (NEDA).
III. PUBLIC UTILITY EXEMPTIONS. -  ANY EXISTING LAW TO 
THE CONTRARY NOTWITHSTANDING. THE FOLLOWING SHALL NOT 
BE CONSIDERED A PUBLIC UTILITY OPERATION:
(1) ELECTRIC POWER GENERATION IN SECTION 6 OF 
REPUBLIC ACT NO. 9136 OR THE ELECTRIC POWER INDUSTRY 
REFORM ACT OF 2001;
(2) ELECTRIC POWER SUPPLY IN SECTION 29 OF REPUBLIC 
ACT NO. 9136 OR THE ELECTRIC POWER INDUSTRY REFORM ACT 
OF 2001;
(3) 
CRUDE 
OIL 
AND 
PETROLEUM 
PRODUCTS 
UNDER 
REPUBLIC ACT NO. 8479 OR THE DOWNSTREAM OIL INDUSTRY 
DEREGULATION 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;


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(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."
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 
certificate 
OF 
AUTHORIZATION 
OBTAINED 
APPROPRIATELY
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.
Sec. 4. Proceedings Upon Notice and Hearing. -  Section 16 (a) and (c) of 
Commonwealth Act No. 146 or the Public Service Act, as amended, are hereby 
amended to read as follows:
“(a) To issue certificates which-ehaH-be-known-as-certiflcates-Gf 
public-conveniencei-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 in a proper and suitable manner. Provided, That thereaftefr 
Gertificates-of-publk}-c^nvenienG^-anct-€ertific^te&-GL-publi€-convenienee
United-States-or-to-corporation&r-co-partnership&^associations-^f^oint- 
6tQ€k—c~empanies—constituted—and—organized—under—the—laws of the 
Philippinesh-ProvidedrTbaLsixty-pen^entum-oMhe-stock-of-paid-yp-eapital
Gompar>y-n%ist-belong entirely-to-citizensof-the-Philippines-or-of-theUnited 
States;- ProvideeL-furtherr-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.


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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 
EOUAL 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.”
Sec. 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 Ftet-to exceed-twenty-five-pesos with reference to 
such investigation."
Sec. 6. Acts Reguiring 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


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CONSTITUTION. Such sale, alienation or transfer shall be void and of no
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effect and shall be sufficient cause for ordering the cancellation of the
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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,
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TREBLE DAMAGES, a fine OF UP TO FIVE MILLION PESOS, OR ALL
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OR ANY COMBINATION THEREOF ef-not exceedir>g-two-hurKtred-pesos
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per day for every day during which such default or violation continues; and
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the 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
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CERTIFICATION BY NEDA ON THE COMPUTATION OF THE COST OF
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MONEY BASED ON THE 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
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or 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
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amended, shall be interpreted to apply suppletorily to existing sector-specific laws
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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
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Center shall conduct a comprehensive baseline survey of public services and public
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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
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powers and duties of the Public Service Commission have been transferred shall, in
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coordination with the University of the Philippines Law Center, promulgate rules and
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regulations to implement the provisions of this Act.
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Sec. 11. Repealing Clause. -  All laws, decrees, orders, rules and regulations or
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other issuances or parts thereof, including Commonwealth Act No. 146 or the Public


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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.
Sec. 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.
Sec. 14. Effectivity. -  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,