Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

4389

House Bill No.

Introduced by Representative GLORIA MACAPAGAL ARROYO

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 21 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terms of protecting the public interest, albeit outdated in certain aspects, particularly: 1)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 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

GLORIA MACAPAGAL ARROYO

2” District, Pampanga


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
SEVENTEENTH CONGRESS

First Regular Session

House Bill No.2 89

Introduced by Representative GLORIA MACAPAGAL ARROYO

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:
SECTION 1. 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:
(4) Civil Aeronautics Board;
(€) Civil Aviation Authority of the Philippines
(f) Philippine Ports Authority;
(9) Maritime Industry Authority;
(h) Philippine Coast Guard
() Department of information and Communications Technology;
() National Telecommunications Commission;
(k) Department of Energy;
(l)_ 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 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.

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) |. 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.

ll. 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).

I. 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;

(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 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.

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 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 no such certificates
shall be issued for a period of more than fifty years

(©) 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.”

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 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:

“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 shall be subject to

DISGORGEMENT OF PROFITS, TREBLE DAMAGES, a fine

OF UP TO FIVE MILLION PESOS, OR ALL OR ANY

COMBINATION THEREOF 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 FINE OF UP TO FIVE MILLION

PESOS SHALL BE INCREASED EVERY FIVE (5) YEARS

UPON CERTIFICATION BY NEDA ON THE COMPUTATION

OF THE COST OF MONEY BASED ON THE CURRENT

CONSUMER PRICE INDEX

The PENALTIES AND fines so imposed shall be paid to

the Government of the Philippines through the Commission, and

failure to pay the PENALTY OR 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


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.

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

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,