Republic of the Philippines RECEIVED

HOUSE OF REPRESENTATIVES ave:__ 27 JUL 2016

Constitution Hills URI
Quezon City et
BY: de>
SEVENTEENTHCONGRESS

First Regular Session REeISTPATION UNIT
BILLS AND NUEX SERVICE

"ene
House Bill No, 2079

Introduced by : Rep. Josephine Y. Ramirez Sato

EXPLANATORY NOTE

‘The rapid urbanization and the demand to provide the people access to safe
and affordable drinking water has never been more urgent, Provision of such,
however, requires reform in the water sector that entail upgrading of water utilities
and sewerage systems, Reforms also entails reexamination of the institutions and their
mandates, and regulatory measures that govern both the public and private sector.

Currently, the Local Water Utilities Administration have the responsibility on
the overall development of our systems. It heavily depends on government funds and
ODA which are both limited. However, the investment and capital requirements of
the water sector are so large that the LWUA is unable to fulfill its mandate. There has
always been the pressing need to look into alternative financing and partnerships on
water utilities.

Several milestones have been made in the past to bridge the financing gap. This
include tapping the private sector. In the case of MWSS, the sector absorbs the burden
of financing including responsibility of expanding and improving the system, while
lowering tariffs and significantly increasing government tax through VAT and income
tax.

However, the success of privatizing MWSS has not been repeated mainly
because of the uniqueness of its charter. Water utilities outside MWSS have different
rules and most of the time in conflict with each other. This hampers potential
investments (both local and foreign) that would have been drown into the water
sector.

Financial regulation has been one of the most pressing difficulty in privatizing
water utilities. The rules are vague in terms of where the jurisdiction lies - is it with
LWUA, NWRB, or LGUs. There is also a need to capacitate our institutions on how to

Ye



properly regulate privatized water systems to drive investments into the sector.

This bill aims to create Water Regulatory Commission to rationalize financial
regulation of water utilities (including MWSS). The bill also seeks to streamline the
operation of existing agencies and combine the different agencies involved in the
water sector, It is envisaged that this policy will help increase access to clean water
and improved service provision, which, in turn, will grow the marketplace for private
sector financing to support this expansion.

In view of the foregoing, the immediate passage of this bill is earnestly sought,

HON. JOSE!
Loy Distyfct



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Constitution Hills
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

5

House Bill No. RV%

Introduced by : Rep. Josephine Y. Ramirez Sato

“AN ACT RATIONALIZING THE ECONOMIC REGULATION OF WATER
UTILITIES, CREATING THE WATER REGULATORY COMMISSION AND FOR
OTHER PURPOSES”

Section 1, Short Title. Water Regulatory Commission Act of 2015.

Section 2. Declaration of National Policy. It is hereby declared the policy of the State to
pursue and foster, in an orderly, rational, efficient, and vigorous manner, the
attainment of complete coverage over the country of water supply and sanitation
services at reasonable rates and, in this connection, encourage the participation and
investment of the private sector, both domestic and foreign, in the provision of piped-
water supply and sanitation services. For this purpose, there is a need to establish a
single agency of government to be invested with ample powers for the rational and
effective economic regulation of all water supply and sanitation systems.

Section 3, Definition of Terms. As used under this Act, the following words or terms
shall have the following meanings, unless a different meaning clearly appears from
the context:

(a) “Certificate of Public Convenience (CPC) /Certificate of Public Necessity
(CPN)’ shall mean a formal written authority to sell water. A CPN is issued
to an applicant for the operation of a public service wherein a franchise is
required by law.

(b) “Commission” shall mean the Water Regulatory Commission.

(6) “Commissioner” shall mean persons appointed in accordance with the
provisions of this Act.

(d) “Existing Licensee” shall mean any water service and/or sanitation
service provider granted by existing regulatory institutions such as the


NWRB, LWUA, MWSS, PEZA, issued to persons and entities that are
qualified to provide water supply and sanitation services for a particular
service area or areas,

(6) “Level I (point source)’ shall mean a protected well or a developed spring
with an outlet but without a distribution system as it is generally adaptable
for rural areas where the houses are thinly scattered serving an average of 15
households with people having to fetch water from up to 250 meters distance.

() “Level II (communal faucet system or stand post)” shall mean a piped
system with communal or public faucets usually serving 4-6 households.

(g) “Level III (waterworks system)” shall mean a fully reticulated system with
individual house connections based on a daily water demand of more than
100 liters per person.

(h) “Licensee” shall mean the Water Supply and/or Sanitation Services
operating licenses that the Commission is authorized to grant and issue to
persons or entities that are qualified to provide Water Supply and/or
Sanitation Services for a particular Service Area or Areas.

(i) “LWUA” shall mean the Local Water Util
under PD No. 198 as amended.

s Administration created

(j) “NWRB” shall mean the National Water Resources Board created by
Presidential Decree No. 424, as amended by Executive Order No, 124-A,

(k) “WSS” shall mean the Metropolitan Waterworks and Sewerage System,
created by Republic Act 6234,

()) “PEZA” shall mean the Philippine Economic Zone Authority, created by
Republic Act 7916

(m) “Regulatory Units” shall mean the regulatory offices established under
Section 5 of this Act to issue Licenses authorizing the operation of Water
Supply and Sanitation Services; provide, review, determine, fix and approve
water and sewerage tariffs, rates, charges that Licensees may impose; and
exercise such other functions and powers as may be provided hereunder.

(n) “Sanitation Service” shall mean a service involving the collection of
effluent and sludge from human waste and greywater from residences and
establishments utilizing a sanitation system through pipes and structures.

(0) “Sanitation System” shall mean an infrastructure system that collects,
treats, and disposes or re-uses effluents and sludge, and may include but is


not limited to other systems such as sewerage, septage or combined drainage
interceptor systems.

(p) “Service Area” shall mean to the territory or area of operations with
respect or which a Licensee from the Commission to provide Water Supply
and/or Sanitation Services is applied for or granted.

(q@) “TIEZA” shall mean the Tourism Infrastructure Zone Authority, created
by Republic Act 9593.

(«) “Tariffs” shall mean to such amounts which may be charged by Licensees
of Water Supply and/or Sanitation Services for their services based on
principles, standards, and guidelines established by the Commission.

(s) “Water District” shall mean a government-owned and controlled
corporation organized under Presidential Decree No, 198, as amended,
created primarily to acquire, install, operate, maintain and improve water
supply and distribution systems for domestic, industrial and municipal uses
of residents and to provide, maintain, and operate waste water collection,
treatment and disposal facilities within the boundaries of the district.

(t) “Water Supply Service” shall refer to the provision of water supply
through the use of piped water distribution systems.

Section 4. The Water Regulatory Commission, (1) For purposes of carrying out and
effecting the declared policy provided for in Section 2 above, there is hereby created
and established an independent Water Regulatory Commission, hereafter referred to
after as the Commission, which shall be organized within one hundred twenty (120)
days after the effectivity of this Act. The Commission shall execute the power and
functions herein vested and conferred upon it in such a manner as will, in its
judgment, aid to the fullest possible extent in carrying out its objectives as set forth
below.

(2) The Commission shall be an attached agency of the Office of the President. For
purposes of this section, the relationship between the Commission as an attached
agency of the Office of the President shall be limited only to coordination and/or
consultation by the Commission with the Office of the President on the latter’s general
policy framework for Water Supply and Sanitation Services

Section 5. The Regulatory Units. The Regulatory Units of the Commission shall be
composed of the Regional Regulatory Units and the Central Regulatory Unit.

The Regional Regulatory Units shall be established by the Commission in accordance
with such rules, regulations, guidelines and standards as the Commission shall issue,
and as provided hereunder.


Moreover, the pertinent regulatory units of the MWSS, NWRB and LWUA are hereby
transferred to the Commission, and they shall collectively comprise its Central
Regulatory Unit for water supply and sanitation services that are owned, operated
and/or maintained by public and private sector Licensees (including those for the
special economic zones, and Metro Manila concessionaires), and for other institutions
appropriate for the Central regulatory unit.

Section 6. The Objectives of the Commission. The Commission shall have the following
objectives:

(a) to promote the expansion, improvement and efficient provision of Water
Supply and Sanitation Services throughout the Philippines,

(b) to provide an environment conducive to the adequate financing of Water
Supply and Sanitation Services provided by public and private sector
Licensees in order to facilitate financially viable Water Supply and Sanitation
Services.

(c) to protect the legal and valid interests of customers/consumers of Water
Supply and/or Sanitation Services.

(d) to promote efficient competition in the supply of Water and Sanitation
Services in order to benefit customers/consumers.

(e) to develop and maintain the national water utility database.

Section 7. Powers and Functions of the Commission. The Commission shall have the
following powers and functions:

(a) to formulate rules and regulations, strategies and targets to facilitate and
rationalize the expansion, improvement, and efficient provision of Supply
and Sewerage Services throughout the country.

(b) to formulate tariffs for Water Supply and/or Sanitation Services taking
into account, among others, the following:

(1) capital and recurrent cost of providing the service including a
reasonable rate of

return on capital,
(2) efficiency of the service.

(3) incentives for enhancement of efficiency, including demand side
management.

(4) willingness to pay of customers/consumers.


(8) equity considerations.
(6 administrative simplicity.

(0) to approve and regulate the Tariffs to be charged by Licensee of Water
Supply and/or Sanitation Services, including local government units; thereby
repealing Section 154 of RA 9160 of the Local Government Code.

(d) to regulate persons or entities, whether from the public or private sector,
that provide Water Supply and/or Sanitation Services.

(c) to issue, grant, modify, monitor, enforce, suspend and/or cancel,
prospective or existing licensees for Water Supply and/or Sanitation Services,
penalties to be imposed for administrative violations thereof, and make
decisions and determinations in connection therewith. Such penalties may be
decided by the Commission and may include the suspension/ revocation of a
license. Where necessary, the Commission may delegate the management of
the licensee through a receivership mode.

(f) to require the monitoring, and submission of utility data, statistics and
other information from all licensees as may be necessary for the effective and
efficient exercise of its duties, functions, powers, and responsibilities.

(g) to disseminate and publish comparative information on process and
service performance of Licensees of Water Supply and / or Sanitation Services.

(h) in the exercise of its powers and functions under this Act, to take into
account Licencee’s service targets and performance against such targets in
respect of consumer service standards regarding water pressure, minimum
flow rates, connections and billing and metering requirements and
procedures, among others.

(i) to provide a system for complaints and appeals relating, but not limited to:
(1) Tariffs set or collected for Water Supply and/or Sewerage Services; (2) the
quality of services provided by said Licensees; and (3) the adequate and/or
equitable distribution and reliability of Water Supply and/or Services,

(j) Investigate, motu proprio or upon complaint in writing, any matter
concerning the service and require the Licensee in writing to undertake
immediate remedial / corrective measures.

(k) to impose and collect an annual levy on all Licensees determined as a
percentage of the revenue accruing in relation to the licensed activities to be
determined by the Commission, and reasonable fees, surcharges, and fines
from Licensees of Piped-Water Supply and/or Sewerage Services to the


extent necessary for achieving the purposes, powers and functions of the
Commission.

() to advise, apprise and coordinate with other relevant agencies of the
national or local government on any matte relating to Piped-Water Supply
and/or Sewerage Services.

(m) to deputize agents whether from public or private sector, to assist in the
performance of any powers and functions of the Commission.

(n) to appoint, hire, and maintain adequate staff and personnel, advisers,
and/or consultants, with suitable qualifications and experience, as necessary.

(0) to conduct inquiries on matters relating to water supply or sanitation
disposal.

(p) to provide a system for the settlement of disputes between or among the
Licensees.

(@ to issue and promulgate rules and regulations necessary to implement,
perform and effect its aforementioned powers and functions.

(x) Such other incidental powers and functions as may be necessary to attain
the objectives of this Act.

Section 8. Powers and Functions of the Regulatory Units. The Regulatory Units of the
Commission shall have the following powers and functions

(a) Subject to review and approval of the Commission, issue and promulgate
rules, regulations, and guidelines as may be necessary to implement and
enforce its powers and functions under this Section.

(b) Issue licenses authorizing the operation of Water Supply and Sanitation
Services in a specified area.

(c) Impose fines, charges, and other penalties upon any water service
provider and/or officers and stockholders who shall fail or refuse to register
and/or obtain a License prior to operation or commencement of business, as
provided hereunder.

(d) Consistent with rules, guidelines, procedures and methodologies, which
the Commission shall provide, review, determine, fix and approve proposed
water and sewerage tariffs, rates and charges that Licensees may impose
upon their customers/ consumers.


() Appraise and value property and equipment used by Licensees in
providing water supply and sanitations services.

(f) Enforce financial, technical, and other performance standards set by the
Commission for licensees/u

(g) Respond to consumer complaints and ensure adequate protection of
consumer interests,

(h) Investigate accidents directly or indirectly arising from or connected with
the maintenance or operation of the service, and make such order or
recommendation as the public interest may warrant.

() Require the submission of reports, plans, and other documents that set out
the performance targets of licensees/utilities, and regular accomplishment
reports.

(k) Impose and collect annual levies determined as a percentage of gross
revenue accruing in relation to the licensed activities, and reasonable fees and
surcharges as may be necessary for achieving the purposes, powers, and
functions of the regulator.

()) Conduct benchmarking and monitor the performance of licensees/ utilities
under their jurisdiction, and publish reports detailing the results thereof, as
may be necessary or required by the Commission.

(m) Amend, modify, suspend or revoke any License issued by them, after due
notice and hearing, on any of the following grounds:

(1) when the facts and circumstances on which the license was issued
have been misinterpreted or has materially changed.

(2) when the Licensee has failed to meet or comply with terms,
conditions and performance targets ~ including but not limited to
service expansion - that may have been set in the license.

(3) where the Licensee is found to be manifestly incompetent in the
operation of or provision of Water Supply and Sanitation Services in the
area; or

(4) when the holder thereof has violated or willfully refused to comply
with any order, rule or regulation of the Commission or any provision
of this Act.

(n) Appoint an interim management committee to ensure continuity of
service in case a licensee fails to meet conditions of the license


(0) Submit performance plans and reports as required by the Commission.

Section 9. Composition. (a) The Commission shall be a collegial body composed of five
(8) full-time members composed of a Chairperson and four (4) members, who shall be
appointed by the President of the Philippines. All members of the Commission must
be citizens and residents of the Philippines, at least thirty five (35) years of age, and of
good moral character, recognized integrity and competency in the field of law,
business, commerce, finance, accounting or public administration, water or utility
economics, management, physical or engineering services hydrology and other
related services, with at least three (3) years actual and distinguished experience in
their respective fields of expertise.

Provided, further, that upon the expiration of his term, each member of the Commission
shall serve as much until his successor shall have been appointed and qualified;
Provided, moreover, that any appointment to fill a vacancy in the Commission that
arises prior to the expiration of the term of a member of the Commission shall only be
for the unexpired term portion of such term, and Provided, finally, that no member of
the Commission shall be appointed for more than two (2) consecutive or partial terms.

The term of office of each member of the Commission shall be five (5) years; Provided,
however, that among members of the Commission first appointed by the President; a)
the Chairman shall serve for a period of five (5) years, b) three Associate
Commissioners (Legal and Strategic Relations, Policy and Planning, and Economic
Regulation) shall serve three (3) years, and c) one other Associate Commissioner for
Administration and Finance shall serve for two (2) years, as fixed in their respective
appointments.

‘The Commission shall meet as often as may be necessary on such day or days as the
Chairman may fix. The presence of at least two (2) member of the Commission shall
be necessary of any resolution, decision or order.

The Chairman shall exercise general executive control, direction and supervision of
the work, business, and operation of the Commission and its member, staff and
personnel, agents and representatives,

‘The Chairman and four (4) Associate Commissioners shall have a rank of Secretary
and undersecretary, respectively, of an Executive Department of the national
government. The salary of the Chairman. and Associate Commissioners shall be fixed
by the President of the Philippines commensurate to the importance and
responsibility attached to such positions and shall be subject to periodic review no
more than every two (2) years. The Chairman and Associate Commissioners shall be
exempt from existing, rules, regulations on compensation, position, classification, and
qualification standards. The President shall endeavor to make the salaries of the
Commissioners conform as closely as possible with the principles under Republic Act
No. 6758 entitled “An Act Prescribing a Revised Compensation and Position

10


Classification System in the Government and Other Purposes,” as the same way may
be suspended from time to time.

Subject to the immediately preceding paragraph, the pertinent civil service laws, rules
and regulations of the Philippines shall be applicable to the Chairman, Associate
Commissioners, and other personnel of the Commission

Section 10. Qualifications. All members of the Commission must be citizens and
residents of the Philippines. In addition, the members shall be of good moral character,
at least thirty five (35) years of age, and of recognized competence in the field of
business, commerce, finance, accounting or public administration, water or utility
economics industry, management, physical, or engineering services, hydrology and
other related services, or law.

The qualifications of the members of the Commission shall be defined in the
Implementing Rules and Regulations of this law.

Section 11. Executive Director. The Commission shall appoint an Executive Director
who shall provide an official record and report of the proceedings of the Commission
and have the authority to administer oaths in all matters falling within the jurisdiction
of the Commission. The Executive Director shall be responsible for the effective
implementation of the policies, rules and directives promulgated by the Commission;
coordinate and supervise activities of the different operating units that may be created
by the Commission; and perform such functions as may be assigned to the Executive
Director by the Chairman and/or members of the Commission.

‘The Commission shall appoint a technical staff, including an administrative or
support staff, as maybe necessary to assist the Commission in fulfilling its objectives
and in exercising its powers and functions under this Act. In this connection, the
Commission shall employ persons with legal, economic, customer service, financial
accounting and technical expertise.

Section. 12. Staffing. The staff and personnel positions in the Commission herein
created shall be filled by regular appointments in accordance with a staffing plan
prepared by the Chairman of the Commission.

Section 13. Power to Obtain Information and Documents. The Commission may require
that a Licensee or any other person shall provide the Commission with any
information that may be reasonably necessary for it to attain its objectives and/or to
carry out its powers and functions under this Act. For purposes of this section, the
information required by the Commission may include any document, plan, electronic
file, record and other material.

Any requirement for information must be made in a written notice that identifies the
information or document and that specifies:

uw


(a) when requirement must be complied with.

(b) in what form the information or a copy of the document is to be given to
the Commission.

Any person who, without lawful excuse, fails to comply with any requirement for
information contained in a notice issued to him under this Section shall be subject to
administrative sanction by the Commission. It is a lawful excuse for purposes of this
Section that compliance may tend to incriminate the person liable to a penalty for any
other offense.

A person must not, in purported compliance with any requirement or order of the
Commission, knowingly give to the Commission information that is false or
misleading.

A person shall not be liable in any way for any loss, damage or injury suffered by
another person because of giving, in good faith, of a document or information to the
Commission under this Section.

Section 14, Application for Licenses for Water Supply and/or Sanitation Services, All
persons and public or private entities intending to engage in the provision of Water
Supply and/or Sanitation Services, including but not limited to operators of privately-
owned water supply systems, local government managed utilities, barangay
waterworks associations, water districts, cooperatives, etc., shall be required to apply
for and obtain a License from the Commission prior to their operation of the relevant
Water Supply and/or Sanitation Services.

An application for a license of Water Supply and/or Sanitation Services shall, in
addition to such information as may be prescribed by the Commission, contain details
of:

(a) the service for which the license is being sought.

(b) the Service Area, including location maps, within which the services will
be provided.

Service providers operating under existing agreements with MWS, local government
units, and special economic and freeport zone authorities shall register with the
Commission and, during the validity of such agreement, shall be deemed duly
licensed to provide services consistent with the terms and conditions of such existing
agreements. Provided that, the aforesaid service provider shall be regulated by the
Commission or the appropriate regulatory unit in accordance with the terms and
conditions of such existing agreements. Provided finally that, any extension or
renewal of such existing agreement shall be subject to the review and approval of the
Commission.

12


Section 15. Licenses do not Grant Exclusively. Except for Service Areas with respect to
which exclusive rights to provide Water Supply and/or Sanitation Services are
granted under existing laws, licensees do not have the exclusive right to provide
Water Supply and /or Sanitation Services within a Service Area and, consequently, the
Commission may issue one, two or more licenses for operators within any existing or
proposed Service Area(s).

Section 16. Licensees for Water Supply and/or Sanitation Services. License(s) issued by
the Commission shall include provisions, among others on:

(a) the right to provide and operate Water Supply and/or Services in a
specified Service Area or Areas.

(b) the right to charge water and sanitation tariffs as determined and
approved by the Commission

(o) the term or duration of the License, as determined by the Commission,

(d) restrictions on or conditions for the transferability or assignment shall be
subject to the prior approval of the Commission.

(©) restrictions on or conditions for the sale or disposition of the business
which is the subject of a License, or the transfer of a controlling interest in
such a business, which sale, disposition, or transfer shall require the prior
approval of the Commission,

(f) grounds for the modification of any of the provisions of, or the suspension
or cancellation of, the license and the procedure therefore.

(g) the nature of services to be provided, the minimum standards for service
efficiency such as standards on: (1) water pressure; (2) minimum flow rates;
(3) connections; and (4) sewerage discharge, billing and metering,
requirements, and sanctions for failure to comply with the standards set.

(h) the tariffs to be charged by the Licensee and the basis for the variance of
the Tariffs

(j) the reporting requirement of Licensees.

‘The Commission shall approve a tariff which are fair and reasonable and which allows
for economic viability of the operations and businesses of the Licensee, including
reasonable return on their investments considering the prevailing costs of capital in

the domestic and international markets.

‘The Commission shall promulgate the rules, guidelines and standards to be applied
in determining who, among two (2) or more competing applicants, should be awarded

13


the License for a specific Service Area, based on technical, financial, economic and
organizational considerations, managerial capacity, and past record and experience in
the provision of Water Supply and/or Sanitation Services, including the following
guidelines and procedures.

‘All holders of a license shall be subject to an annual performance audit by the
Commissioner or its designated agent(s)..

The Commission shall specify the requirements and procedures for existing holders
of Certificates of Public Convenience/Certificates of Public Convenience and
Necessity issued by NWRB and other Certificates issued by LWUA to convert their
existing certificates into Licenses issued by the Commission. Henceforth, no further
Certificates of Public Convenience/ Certificate of Public Convenience and Necessity
or LWUA Certificates shall be issued by the NWRB and LWUA, respectively.

Allexisting providers of Water Supply and/or Sanitation Services without a valid and
legal Certificate of Public Convenience/ Certificate of Public Convenience and
Necessity or Certificate of Conformance including all LGU-run utilities shall have
twelve (12) months from the effectivity of this Act to apply for the appropriate License
from the Commission.

Section 17. Procedure for Granting of Licenses. The Commission shall ensure that the
granting of a License under this Act is carried out fairly, transparently, and without
undue discrimination.

The Commission shall prescribe in appropriate regulations the procedure and
requirements to be followed in respect of the granting of a License, such regulations
shall include:

(a) the qualifications required of applicants for a License.

(b) the application procedure to be followed by all applicants, including
arrangements for the publication of details of all applications received by the
Commission.

(c) the procedure by which the Commission will consider applications,
including the consideration of all comments and objections lodged with
respect to applications.

(d) the procedure by which the Commission shall reach a determination with
respect to all such applications.

Section 18. Rights and Duties of Licensees. Any person granted a License under this Act

shall have the duty to ensure that its licensed activities are conducted so as to further
the public interest, and in particular, that they:

14


(a) foster the maintenance and development of efficient, coordinated and
viable operation of their licenses activities.

(b) ensure that their Water Supply and/or Sanitation Services are provided
in a diligent, conscientious and workmanlike manner, in accordance with
applicable laws and standards and practices set by the Commission and
generally accepted in the Philippine and international water supply and/or
sanitation industry.

(©) comply with drinking water quality requirements.

(d) pay appropriate compensation in accordance with procedures laid down
in any relevant statute or in regulations promulgated or issued by the
Commission if, in laying or repairing a water and/or sewerage main or
relevant facility, a Licensee should injure any person and/or damage any
property.

Any person granted a License under this Act shall, to the extent allowed by law and
specified in the License, have the rights to acquire or lease land and lay or repair water
and sanitation mains and other relevant facilities in public ways, when required to
fulfill their obligations.

Subject to any condition or any limitation laid down in the License, a License may
disconnect the supply of Water Supply and/or Sanitation Services to a customer if
such customer defaults in the payment of amount(s) due to that Licensee in respect of
water supplied or sanitation services, or for acts of pilferage pursuant to Sections 8, 9,
10, and 11 of Republic Act No. 8041 otherwise known as the “Water Crisis Act of 1995.”

Any License issued under this Act shall contain provisions designed to ensure that
Licensees:

(a) Publish Tariff and other charges approved by the Commission, and other
terms and conditions imposed by the Commission for the provision of Water
Supply and/or Sanitation Services.

(b) Prepare within three (3) months from the issuance of a Water Supply
and/or Sanitation License, and make available for inspection customer, codes
of practice specifying the manner and procedure for: (1) metering, billing, and
collection of the Licensee’s approved Tariff and other charges, (2)
disconnection or suspension of service in case of non-payment of Tariffs and
other charges, or acts of pilferage, and (3) recommendation and recovery of
arrears in Tariffs and other charges

(©) A Licensee shall be bound by a performance contract which will set down
all key performance targets agreed both by the Licensee and the Commission.

15


(d) Maintain financial accounts in accordance with the manner and procedure
specified in the License and as may be amended from time to time by the
Commission,
Section 19. Principles of Efficient Tariff. Regulatory Units shall establish tariffs, rates
and other charges which are fair and reasonable and which provide for the economic
viability of the service and a fair return on their investments considering the
prevailing cost of capital in the domestic and international market.
Such tariffs, rates, and charges shall be based on and consistent with a rate-setting
methodology that the Commission shall, after due consultation, define and publish,
taking into account the following, among others:

(a) reasonable and prudent capital and recurrent costs of providing the
service including a reasonable rate of retum of the capital.

(b) efficiency of the service.

(0) incentives for enhancement of efficiency.

(d) willingness to pay of customers/consumers.

(c) equity considerations,

(f) administrative simplicity.
Section 20. Proceedings Before the Commission. The Commission shall, for the purpose
of any inquiry or proceeding under this Act, exercise quasi-judicial powers and, in this
connection, shall have the requisite power for:

(a) the summoning and enforcing of attendance of any witness and
examination on oath.

(b) the discovery and production of any document or other material object
producible as evidence.

(©) the reception of evidence on affidavits.

(d) the requisition of any public record from any court or office.
(©) the issuance of a commission for examination of witness,

(f) the grant of adjournment at hearings.

(g) compelling of the appearance of parties and the imposition of penalties as
a consequence of non-appearance

16


Section 21. Consolidation of Service Operations and Areas of Piped-Water Supply and/or
Sewerage Systems. The Commission shall promote the consolidation of Piped-Water
Supply and/or Sewerage Services in the same Service Area when it would improve
the efficiency and lower the cost of provision of such services in the area.

Section 22. Orders and Decisions of the Commission. Every order or decision rendered
by the Commission shall be in writing and shall state clearly and distinctly the facts
and law on which it is based. The Commission shall decide each case or application
within thirty (G0) days following its formal submission for resolution. The
Commission shall publish and make available for public inspection all decisions and
final orders in the adjudication of contested cases or applications

Section 23. Appeals Procedure and Prohibition Against Injunction. The orders, rulings,
and decisions of the Commission are final and executory unless appealed to the Court
of Appeals within fifteen (15) days from the receipt of notice of such order, ruling or
decision. All orders, rulings and decisions, of the Commission approving tariffs shall
be immediately executory and enforcement thereof may be suspended only upon
appeal and filing of a bond, in an amount to be fixed by the Commission, to answer
for damages occasioned by the suspension or stay of execution of such orders, rulings
and decisions.

No injunction may be issued by any court or administrative agency to restrain any
proceeding before, or the implementation or execution of any order, ruling or decision
of the Commission, except on the basis of a question of law brought before the
Supreme Court certiorari,

Subject to Sec. 7, paragraph 3 of this Act, an act or decision of the Commission shall
not be invalid merely because of the defect or irregularity in, or in connection with,
the appointment or vacancy in the Office of the Chairperson or any other member of
the Commission,

Section 24. Commission has the Power to Arbitrate Interconnection Disputes. When there
is a dispute between two or more Licensees regarding the terms and conditions,
including price rates, for interconnection between them of Piped-Water Supply
and/or Sewerage Systems, then upon notification of the dispute to the Commission
by two or more Licensees, the Commission may make a binding arbitration of the
terms and conditions on interconnection that are in dispute.

Section 26. Interfice with Other Sector Regulators. The Department of Environment and
Natural Resources (“DENR”) shall continue to have the primary authority and
responsibility for protecting the environment and water resources from waste and
pollution and shall promulgate rules, regulations, and standards in this regard. The
Commission shall coordinate with the DENR regarding this matter.

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The Department of Health (“DOH”) and LGUs shall have the primary authority and
responsibility for determining and enforcing drinking water quality and sanitation
standards.

‘The Commission shall coordinate with the NWRB for water allocation and data
collection, the LGUs under administrative supervision from the Department of the
Interior and Local Government for developing, projects related to water supply and
sanitation, and the Department of Public Works and Highways for flood control and
the harnessing, and impounding of water.

Section 26. Advisory Council. Within six (6) months from its organization, the
Commission shall cause the formation of an Advisory Council which shall include,
but shalll not limited to, representatives from the following sectors: women, academe,
business and industry, local government units, peoples organizations, non-
government associations, professional organizations, consumer groups and
indigenous peoples.

The Advisory Council shall have the following functions, among others:

(a) To help disseminate information to the public relating to the
Commission’s objectives, powers and functions.

(b) To serve as a permanent advisory body to the Commissi
interest to customers/consumers

(3) The Commission shall promulgate rules and regulations defining the
nature, composition, and other functions of the Advisory Council.

Section 27. Transfer of Duties, Powers, Functions, and Assets. The functions, powers, and
assets of the Water Utilities Division of the National Water Resource Board
(“NWRB’), as set forth in Presidential Decree 1206, and other applicable laws are
hereby transferred to the Commission. In the same manner, the pertinent economic
regulation powers of LWUA as set forth under Presidential Decree No. 198, as
amended; MWSS under RA 6234; PEZA under RA 7916; SBMA and under RA 7227;
CDC under RA 7227 and Executive Order 80; and TIEZA under RA 9593 are likewise
hereby transferred to the Commission.

Section 28. Transfer of Rights and Obligations, The Commission shall, by virtue of this
Act, be subrogated to all the rights, and assume all the obligations, of the Water
Utilities Division of the NWRB, and all other government agencies and units whose
powers and functions are hereby transferred to and assumed by the Commission and
shall be acted upon in accordance with the rules and regulations of the Commission
on Audit and other pertinent laws, rules, and regulations.

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Section 29. Separation from Service. Employees separated from government service as
a result of this Act shall be entitled to the benefits which they may receive under
existing laws, rules, and regulations.

Section 30. Penalties for Violations. Subject to Sec. 17, paragraph (0), of this Act, any
person, natural or juridical, found violating the provisions of this Act and its
implementing rules and regulations shall be imprisoned from six (6) months to six (6)
years, or be liable to pay a fine not exceeding Five Hundred Thousand Pesos
(P500,000.00), or both, When the offender is a corporation, association, or partnership,
the penalty shall be imposed on the president, directors, or managing partners, as the
case may be, and the persons charged with the administration thereof, The
corporation shall be subdiarily liable for the pecuniary liability of its aforementioned
officers, president, directors, managing partners or persons charged with the
administration thereof. Further, the Commission may state other penalties and
charges, upon the recommendation of the Commission and approval by the President

Section 31. Appropriations. The sum of Three Hundred Million Philippine Peso
(P300,000,000.00) pesos shall be set aside from any available funds of the National
Treasury, and is hereby appropriated and authorized to be released, for the
organization of the Commission, and in establishing the regional regulatory units and
its initial operations. Thereafter, funds sufficient to fully carry out the objectives,
powers, and functions of the Commission shall be appropriated every fiscal year in
the General Appropriations Act.

Section 32. Separability Clause, In the effect that any provision of this Act is declared
unconstitutional, invalid, or illegal, the constitutionality, validity, or legality of the
remainder of the provisions of this Act shall not affected thereby.

Section 33. Repealing Clause, All laws, decrees, rules and regulations, and executive
orders contrary to or inconsistent with this Act, including but not limited to Section 2
of Presidential Decree (P.D.) No. 1206, are hereby repealed or modified accordingly.
The power of LGUs under Section 154 of the Implementing Rules and Regulations of
Republic Act No, 7160 to fix the rates in connection with the operation of water utilities
owned, operated, and maintained by them within their jurisdiction is hereby repealed.

Further, the provision with respect to fixing of water rates and sanitation service fees
of Section 3 (h) and Section 12, and regulation of waterworks and deep wells of Section.
3 (n), regulation of waterworks and sanitation of systems in privately owned
subdivisions of Section 3 (p) of Republic Act No. 6234, as amended is hereby repealed
or modified, accordingly.

Section 13 (b) on the regulation of enterprises in ECOZONE of Republic Act No. 7916,

as amended, also known as the Special Economic Zone Act of 1995, is hereby repealed
or modified, accordingly.

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Provisions under Section 69 of Republic Act No. 9593 or the Tourism Act of 2009 and
its Implementing Rules and Regulations which mandates the Tourism Infrastructure
Enterprise Zone Authority to grant franchises, supervise the operation of public
utilities, and register, monitor and regulate enterprises within Tourism Enterprise
Zones, are hereby repealed or modified, accordingly.

Commonwealth Act No. 146, as amended otherwise known as the “Public Service
Act,” and all laws, decrees, rules and regulations, or portion thereof, inconsistent with

this Act are hereby repealed or modified, accordingly.

Section 34. Effectivity Clause. This Act shall take effect fifteen (15) days following the
completion of its publication in a national newspaper or general circulation.

Approved,

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