Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

1781

House Bill No.

Introduced by Representatives Ron P. Salo

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.

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 concems, 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.

In view of the foregoing, the approval of this bill is urgently sought.

RON P. SALO
KABAYAN Partylist

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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

1781

House Bill No.

Introduced by Representatives Ron P. Salo

AN ACT
PROVIDING FOR THE DEFINITION OF PUBLIC UIILITY,
FURTHER AMENDING FOR PURPOSE COMMONWEALTH
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. x xx

“(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 purpose, x x x canal, PUBLIC MARKET, irrigation system x x x

Bees

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

“(l) 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;

“(Il) TRANSMISSION OF ELECTRICTY (AS DEFINED BY SECTION
(CCC) OF REPUBLIC ACT NO. 9136) SYSTEM; AND

“(Il) WATER PIPELINE DISTRIBUTION SYSTEM OR SEWERAGE
PIPELINE SYSTEM (AS DEFINED BY REPUBLIC ACT NO. 6234, ENTITLED ‘AN
ACT CREATING THE METROPOLITAN WATERWORKS AND SEWERAGE
‘SYSTEM AND DISSOLVING THE NATIONAL WATERWORKS AND SEWERAGE

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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) SECRETARIAT, 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:

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

“(l) 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 OF
AUTHORIZATION FOR THE OPERATION OF A PUBLIC SERVICE [fromthe Public
Service Commission known-as “certificate of — public. convenience," oF “certificate-of

nience-and-necessity,"] as the case may be, to the effect that the
operation of said service and the authorization to do business will promote the public
interests in a proper and suitable manner.

The [Commission] ADMINISTRATIVE AGENCY may prescribe as a condition for
the issuance of the certificate provided in the preceding paragraph that the service can
be acquired by the Republic of the Philippines or any instrumentality thereof upon
payment of the cost price of its CAPITAL STOCK, OR useful equipment, less
reasonable depreciation; and likewise, that __ the certificate shall be valid only for a
definite period of time; and that the violation of any of these conditions shall produce
the immediate cancellation of the certificate without the necessity of any express
action on the part of the [Commission] ADMINISTRATIVE AGENCY.

“xxx.”
Page 3 of 8


SEC. 3. Proceedings Upon Notice and Hearing. — Section 16 of
Commonwealth Act No. 146, as amended, is hereby further amended to read as
follows

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

(a) To issue certificates which shall be known as certificates of public
convenience, authorizing the operation of public service within the Philippines
whenever the [Commission] ADMINISTRATIVE AGENCY finds that the operation of
the public service proposed and the authorization to do business will promote the
public interest in a proper and suitable manner. (Provided, That thereafter, certificates

publ -cerlificates-of_public-convenience-and ty-will-be

Provided, further,That-no-such certificates-shall-b dK

fifty years]
“XK”

(0) 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 concems 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

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APPLIED MUST ENSURE A REASONABLE PRICE OF 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 MANDATED TO CONDUCT REGULAR STUDIES
ON WHETHER DEREGULATION IS WARRANTED IN A SECTOR AND SUBMIT
ITS RECOMMENDATION TO CONGRESS.

XX

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 without previous hearing. - The
Commission shall have power without previous hearing, subject to established
limitations and exception and saving provisions to the contrary:

"XX,

“(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, tool, 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

xx."

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

Page 5 of 8


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 and shall be sufficient cause
for ordering the cancellation of the certificate.

KK!

SEC. 6. Penalities 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 order(s}, 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 YEARS UPON
CERTIFICATION BY THE NEDA ON THE COMPUTATION OF THE COST OF
MONEY BASED ON THE CUMULATIVE THREE HUNDRED SIXTY DAY
TREASURY BILL RATE.

“The PENALITIES 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
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. 7. Administrative Costs 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.”

[apron
KKK
(Oe

This-section-shall-not- be applicable to the Republic of the Philippines, nor toits:
insirumentalities.

Page 6 of 8


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—vehicies —furiture—and_equipment,

quate reference library, acq Jot-and-building forthe
Commission,-and-other expenses-necessary-for-efficient administration and effective
supervision-and regulation of public-servi \ded-by C tNo-454.and

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 subjected 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 qualified 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 appropriate administrative
agencies shall be (1) exclusive in character, (2) for 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 general law that shall apply suppletorily to special laws or existing
sector-specific laws governing public services, except for Section 13(d) of
Commonwealth Act No. 146, as amended, as further amended by Section 1 of this
Act.

SEC. 11. Comprehensive Baseline Policy. - 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 servicés 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.

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SEC. 13. Rules and Regulations. - Administrative agencies under Section 8
of this Act shall, in coordination with the UPLC, promulgate rules and regulations to
implement this Act within Ninety (90) days from the effectivity of this Act

SEC. 14. Separability Clause. - If any section or provision of this Act shall be
declared unconstitutional or invalid, other sections or provisions not affected thereby
shall continue to be in full force and effect.

SEC. 15. Repealing Clause. — All acts, executive orders, administrative
orders, proclamations, rules and regulations or parts thereof inconsistent with any of
the provisions of this Act are hereby repealed or modified accordingly

SEC. 16. Effectivity. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in two (2) newspapers of general circulation

Approved.

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