Republic of the Philippines
House of Representatives
Quezon City

Eighteenth Congress
First Regular Session

4167

Introduced by Representatives
ESTRELLITA B. SUANSING and HORACIO P. SUANSING, JR.

EXPLANATORY NOTE

This bill seeks to further amend Commonwealth Act No. 146 or the
Public Service Act, clarifying the definition of public utilities in order to open
up certain industries to more competition and providing a mechanism for rate
fixing that allows a reasonable rate of return to attract investments into public
utilities.

The Public Service Act, an 80-year old law governing public services in
the Philippines, needs to be further amended in order to bring its provisions
to reflect the current era in order to enable its purpose of truly serving the
public.

The proposed bill now provides for a clear definition of ‘pubic utility’,
which is often interchanged with ‘public service’, limiting it to 3 sectors: (a)
distribution of electricity system, (b) transmission of electricity system, and
(c) water pipeline distribution system and sewerage pipeline system. The new
definition would pave the way for more competition in other industries not
listed as public utilities.

Other salient features of the bill include the retainment of the National
Economic and Development Authority (NEDA), in consultation with the
Philippine Competition Commission (PCC), as the recommendatory authority
to Congress in the classification of a person, business or service as a public
utility; recognizes the administrative agencies to which the powers and duties
of the Public Service Commission were transferred in accordance with their
respective charters and related statutes; provides an appropriate mechanism
for fixing rates based on reasonable rate of return; and strengthens the
enforcement remedies of administrative agencies.

The bill envisions the entry of more players competing to provide the
general public with more choices, improved quality of basic services, and


lower prices, resulting in a more competitive economy towards a better quality
of life for all.

This bill has been previously approved on third and final reading during
the 17% Congress. In view of the foregoing, the immediate passage of this bill
is earnestly sought.

REP. LITA B. SUANSING REP. HORA‘

1* District, Nueva Ecij

SUANSING, JR.
2nd District, Sultan Kudarat


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Republic of the Philippines
House of Representatives
Quezon City

Eighteenth Congress
First Regular Session

House Bill No. 4167

Introduced by Representative:
ESTRELLITA B. SUANSING and HORACIO P. SUANSING, JR.

AN ACT
PROVIDING FOR THE DEFINITION OF PUBLIC UTILITY, FURTHER
AMENDING FOR THE PURPOSE COMMONWEALTH ACT NO. 146,
OTHERWISE KNOWN AS 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. Public Utility. - Section 13 of Commonwealth Act No. 146, as
amended, is hereby further amended to read as follows:

“Section 13.-xxx

“(b) The term ‘public service’ includes every person that now or
hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business
purpose, x x x canal, PUBLIC MARKET, irrigation system x x x.

rx,

“(D) (1) PUBLIC UTILITY DEFINITION - ‘PUBLIC UTILITY’
REFERS TO A PERSON THAT OPERATES, MANAGES, AND
CONTROLS FOR PUBLIC USE ANY OF THE FOLLOWING:

“() DISTRIBUTION OF ELECTRICITY (AS DEFINED BY
SECTION (4)(N) OF REPUBLIC ACT NO. 9136, OTHERWISE KNOWN
AS THE ‘ELECTRIC POWER INDUSTRY REFORM ACT OF 2001’)
SYSTEM;

“(l) TRANSMISSION OF ELECTRICITY (AS DEFINED BY
SECTION 4(CCC) OF REPUBLIC ACT NO. 9136) SYSTEM; AND


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“(l) WATER PIPELINE DISTRIBUTION SYSTEM OR
SEWERAGE PIPELINE SYSTEM (AS DEFINED BY REPUBLIC ACT
NO. 6234, ENTITLED ‘AN ACT CREATING THE METROPOLITAN
WATERWORKS AND SEWERAGE AUTHORITY; AND FOR OTHER
PURPOSES’, AS AMENDED, AND PRESIDENTIAL DECREE NO. 198,
KNOWN AND REFERRED TO AS THE ‘PROVINCIAL WATER
UTILITIES ACT OF 1973’, AS AMENDED).

“(2) AMENDMENT OF PUBLIC UTILITY DEFINITION. - NO
OTHER PERSON SHALL BE DEEMED A PUBLIC UTILITY UNDER
SECTION 13(D)(1) UNLESS OTHERWISE SUBSEQUENTLY
PROVIDED BY LAW.

“THE NATIONAL ECONOMIC AND DEVELOPMENT
AUTHORITY (NEDA), IN CONSULTATION WITH THE PHILIPPINE
COMPETITION COMMISSION (PCC), SHALL RECOMMEND TO
CONGRESS THE CLASSIFICATION OF A PUBLIC SERVICE AS A
PUBLIC UTILITY ON THE BASIS OF THE FOLLOWING CRITERIA:

“(I) THE PERSON REGULARLY SUPPLIES AND DIRECTLY
TRANSMITS AND DISTRIBUTES TO THE PUBLIC THROUGH A
NETWORK A COMMODITY OR SERVICE OF PUBLIC
CONSEQUENCE;

“(II) THE COMMODITY OR SERVICE IS NECESSARY TO THE
PUBLIC AND A NATURAL MONOPOLY THAT NEEDS TO BE
REGULATED WHEN THE COMMON GOOD SO REQUIRES;

“(IIl) THE COMMODITY OR SERVICE IS NECESSARY FOR
THE MAINTENANCE OF LIFE AND OCCUPATION OF RESIDENTS;
AND

“(IV) THE COMMODITY OR SERVICE IS OBLIGATED TO
PROVIDE ADEQUATE SERVICE TO THE PUBLIC ON DEMAND.”

SEC. 2. Certificate of Authority. - Section 15 of Commonwealth Act No.
146, as amended, is hereby further amended to read as follows:

“Section 15. 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 PUBLIC SERVICE [from the Public Service
Commission known as “certificate of public convenience,” or “certificate
of public convenience and necessity,”] as the case may be, to the effect


1 that the operation of said service and the authorization to do business
2 will promote the public interest in a proper and suitable manner.”

3 “The [Commission] ADMINISTRATIVE AGENCY may prescribe
4 as a condition for the issuance of the certificate provided in the
5 preceding paragraph that the service can be acquired by the Republic
6 of the Philippines or any instrumentality thereof upon payment of the
7 cost price of its CAPITAL STOCK, OR useful equipment, less
8 reasonable depreciation; and likewise, that the certificate shall be valid
9 only for a definite period of time; and that the violation of any of these

10 conditions shall produce the immediate cancellation of the certificate
1 without the necessity of any express action on the part of the
12 [Commission] ADMINISTRATIVE AGENCY.

13 te Ag

14 SEC. 3. Proceedings Upon Notice and Hearing. - Section 16 of
15 Commonwealth Act No. 146, as amended, are hereby further amended to read
16 as follows:

7 “Section 16. Proceedings of the [Commission] ADMINISTRATIVE
18 AGENCY, upon notice and hearing. - The [Commission]
19 ADMINISTRATIVE AGENCY shall have power, upon proper notice and
20 hearing in accordance with the rules and provisions of this Act, subject
2 to the limitations and exceptions mentioned and saving provisions to
22 the contrary:

23 *(a) To issue certificates [which shall be known as certificates of
24 public convenience,] authorizing the operation of public service within
25 the Philippines whenever the [Commission] ADMINISTRATIVE
26 AGENCY finds that the operation of the public service proposed and the
27 authorization to do business will promote the public interest in a proper
28 and sustainable manner. [Provided, That thereafter, certificates of
29 public convenience and certificates of public convenience and necessity
30 will be granted only to citizens of the Philippines or of the United States
31 or to corporations, co-partnerships, associations or joint stock
32 companies constituted and organized under the laws of the Philippines:
33 Provided, That sixty per centum of the stock or paid up capital of any
34 such corporations, co-partnerships, association or joint stock company
35 must belong entirely to citizens of the Philippines or of the United
36 States: Provided, further, That no such certificates shall be issued for a
37 period of more than fifty years.]

38 “xxx


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“(c) To fix and determine MAXIMUM individual or joint rates,
tolls, charges, classifications, REVENUES, 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
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.

“IN THE PUBLIC INTEREST, THE ADMINISTRATIVE AGENCY
MAY ESTABLISH AND ENFORCE A METHODOLOGY FOR SETTING
RATES, ‘TAKING INTO ACCOUNT ALL RELEVANT
CONSIDERATIONS, INCLUDING THE EFFICIENCY OF THE
REGULATED PUBLIC SERVICE. THE RATES MUST BE SUCH AS TO
ALLOW THE RECOVERY OF JUST AND REASONABLE COSTS AND
A REASONABLE RATE OF RETURN TO ENABLE THE PUBLIC
SERVICE TO OPERATE VIABLY. THE ADMINISTRATIVE AGENCY
MAY ADOPT ALTERNATIVE FORMS OF INTERNATIONALLY
ACCEPTED RATE-SETTING METHODOLOGY AS IT MAY DEEM
APPROPRIATE AND WILL PROMOTE EFFICIENCY. THE RATE-
SETTING METHODOLOGY SO ADOPTED AND APPLIED MUST
ENSURE A REASONABLE PRICE OF THE COMMODITY OR
SERVICE. THE RATES PRESCRIBED SHALL BE
NONDISCRIMINATORY.

“THIS PROVISION SHALL NOT BE INTERPRETED AS
MANDATING RATE REGULATION AND AMENDING OR REPEALING
(1) LAWS PROVIDING A DEREGULATION POLICY, SUCH AS
REPUBLIC ACT NOS. 7925, 8479, 9136, AND 9295 AND (2)
REGULATIONS PROMULGATED BY THESE ADMINISTRATIVE
AGENCIES TO DEREGULATE RATES.

“THE PCC IS HEREBY MANDATE TO CONDUCT REGULAR
STUDIES ON WHETHER DEREGULATION IS WARRANTED IN A
SECTOR AND SUBMIT ITS RECOMMENDATION TO CONGRESS.

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SEC. 4. Proceedings Without Hearing. — Section 17 of Commonwealth Act
No. 146, as amended, is hereby further amended to read as follows”

“Section 17. Proceedings of [Commission] ADMINISTRATIVE
AGENCY without previous hearing - The [Commission]
ADMINISTRATIVE AGENCY shall have power without previous
hearing, subject to established limitations and exception and saving
provisions to the contrary:

xxix

“(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 by the [Commission]
ADMINISTRATIVE AGENCY. The [Commission] ADMINISTRATIVE
AGENCY may also assess against any public service REASONABLE
costs [not to exceed twenty-five pesos] with reference to such
investigation.”

oor!

SEC. 5. Acts Requiring Approval. - Section 20 of Commonwealth Act No.
146, as amended, is hereby further amended to read as follows:

“Section 20. Acts requiring the approval of the [Commission]
ADMINISTRATIVE AGENCY. ~ Subject to established limitations and
exceptions and saving provisions to the contrary, it shall be unlawful
for any public service or for the owner, lessee or operator thereof,
without the approval and authorization of the [Commission]
ADMINISTRATIVE AGENCY previously had ~

(xxx

(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, MANAGEMENT AND CONTROL OF A
PUBLIC UTILITY AS REQUIRED BY THE CONSTITUTION. Such sale,
alienation or transfer shall be void and of no effect shall be sufficient
cause for ordering the cancellation of the certificate.”

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SEC. 6. Penalties for Violations. - Section 21 of Commonwealth Act No.
146, as amended, is hereby further amended to read as follows:

“Section 21. Every public service violating or failing to comply
with the terms and conditions of any certificate or any orderfs},
decision[s] or regulation[s] of the [Commission] ADMINISTRATIVE
AGENCY shall be subject to DISGORGEMENT OF PROFITS, TREBLE
DAMAGES, a fine [of not exceeding two hundred pesos] OF UP TO FIVE
MILLION PESOS per day for every day during which such default or
violation continues[;], DIVESTMENT, OR ALL OR ANY COMBINATION
THEREOF; and the [Commission] ADMINISTRATIVE AGENCY is
hereby authorized and empowered to impose such fine, after due notice
and hearing. THE MAXIMUM DAILY FINE OF FIVE MILLION PESOS
SHALL BE INCREASED EVERY FIVE (5) YEARS UPON
CERTIFICATION BY THE NEDA ON THE COMPUTATION OF THE
COST OF MONEY BASED ON THE CUMULATIVE THREE HUNDRED
SIXTY (360)-DAY TREASURY BILL DATE.

“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 certificate of said public
service until payment [shall be] IS made. Payment may also be enforced
by appropriate action brought in a court of competent jurisdiction. The
remedy provided in this section shall bot 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. 7. Administrative Cost Recovery Mechanism. - Section 40 of
Commonwealth Act No. 146, as amended, is hereby further amended to read
as follows:

“Section 40. The [Commission] ADMINISTRATIVE AGENCY is
authorized and ordered to charge and collect from any public service or
applicant, as the case may be, [the following] REASONABLE fees as
reimbursement of its expenses in the authorization, supervision and/or
regulation of public services[:], AND TO IMPOSE APPROPRIATE
PENALTIES AND FINES AS PROVIDED BY LAW.”

[la) xxx

Xxx


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() xxx

This section shall not be applicable to the Republic of the
Philippines, nor to its instrumentalities,

Aside from the appropriations for the Commission under the
annual General Appropriations Act, any unexpended balance of the fees
collected by the Commission under this section shall be constituted
receipts automatically appropriated each year, and together with any
surplus in the standardizing meter laboratory revolving fund under
Commonwealth Act Numbered Three hundred forty-nine, shall be
disbursed by the Public Service Commissioner in accordance with
special budgets to be approved by the Department of Justice, the
Budget Commission and the Office of the President of the Philippines
for additional needed personal services, maintenance and operating
expenses, acquisition of urgently needed vehicles, furniture and
equipment, maintenance of an adequate reference library, acquisition
of a lot and building for the Commission, and other expenses necessary
for efficient administration and effective supervision and regulation of
public services. (As amended by Com. Act. No. 454 and RA No. 3792,
approved June 22, 1963.)]

SEC. 8. Recognition of Administrative Agencies. — All references to the
Public Service Commission in Commonwealth Act No. 146, as amended, shall
mean any administrative agency to which the powers and duties of the Public
Service Commission were transferred in accordance with their respective
charters and related statutes.

SEC. 9. Interpretation. - This Act shall be subject to the regulatory powers
of the State to promote public interest in Article IX-C, Section 4 and Article
XII, Section 17 of the Constitution. A person classified as a public utility prior
to the effectivity of this Act and declassified as such under this Act shall be
considered a public service and a business affected with public interest for
the purpose of Article XII, Section 17 of the Constitution. Such person shall
continue to be subject to regulation by relevant administrative agencies under
existing laws.

No franchise, certificate, or authorization granted by the appropriate
administrative agencies shall be (1) exclusive in character, (2) for a longer
period than fifty years, and (3) granted except under the condition that it shall
be subject to amendment, alteration, or repeal by Congress when the common
good so requires.

SEC. 10. General Law. - Commonwealth Act No. 146, as amended, shall be
construed as a general law that shall apply suppletorily to special laws or

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existing sector-specific laws governing public services, except for Section 13(d)
of Commonwealth Act No. 146, as amended, as further amended by Section
1 of this Act.

SEC. 11. Comprehensive Baseline Survey. ~The PCC shall commission the
University of the Philippines Law Center (UPLC) or such other institutions to
conduct a comprehensive baseline survey of the regulatory governance and
regulatory substance of public services within six (6) months from the
effectivity of this Act.

SEC. 12. Performance Audit. - Administrative agencies must ensure the
annual conduct of performance audit by an independent evaluation team to
ensure cost-norms and the quality of services provided to the public and the
ability of manpower and system resources of the public service provider to
immediately respond to emergency cases. Metrics for various types of services
must be established to sustain reliability, security, and safety of the public.

SEC. 13. Rules and Regulations. - Administrative agencies under Section
of this Act shall, in coordination with the UPLC, promulgate rules and
regulations to implement the provisions of this Act within ninety (90) days
from the effectivity of this Act.

SEC. 14. 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. 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. 26. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,