Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH (18) CONGRESS
First Regular Session

HOUSE BILL No,_9540

Introduced by MAGSASAKA Party-List Representative
ARGEL JOSEPH T. CABATBAT

AN ACT AMENDING COMMONWEALTH ACT NO.146, OTHERWISE
KNOWN AS THE PUBLIC SERVICE ACT, AS AMENDED, AND FOR
OTHER PURPOSES

EXPLANATORY NOTE

The Act amending Commonwealth Act No. 146 or the Public Service Act
has been initially filed in the 17% Congress separately by Hon. Arthur C. Yap,
Hon. Feliciano Belmonte, Jr. and Hon. Jose Christopher Y. Belmonte. It seeks
to amend a law passed in 1936, and to update and enable it to address the
dynamic political, social and economic environment of contemporary times.

The recent century has almost completed the privatization of these
supposedly publicly-owned utilities and services. As effective monopolies
affecting the lives of all citizens, public utilities and services are indefeasibly
imbued with public interest and must be subject to greater and more effective
government regulatory control and supervision. The advent of the recent Metro
Manila water crisis has highlighted this much needed stronger regulatory
oversight power to public utilities, to prevent corporate abuses and negligence.
The public should never be at the mercy of profit-driven private interests.

The proposed amendments also seek to effect necessary and timely
changes to otherwise antiquated provisions of the old Public Service Act to
ensure that the general public will have more choices, enjoy better services and

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lower prices.

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

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Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City

EIGHTEENTH (18) CONGRESS
First Regular Session

House Brut no,_°540

Introduced by MAGSASAKA Party-List Representative
ARGEL JOSEPH T. CABATBAT

AN ACT AMENDING COMMONWEALTH ACT NO.146, OTHERWISE KNOWN
AS THE PUBLIC SERVICE ACT, AS AMENDED, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

Section 1. Short Title - This Act shall be known as "The New Public Service
Law of the Philippines.”

Sec. 2. Declaration of Policy - \t is a Constitutionally enshrined policy of the
State to promote a just and dynamic social order that will free the people from poverty
through measures that promote an improved quality of life for all.

The State recognizes that public utilities are necessary to the public and are
natural monopolies that must be regulated as required by public interest. It is the
policy of the State to ensure that the consuming public's satisfaction and quality of life
shall be the yardsticks for an effective regulation of public utility providers without
compromising the reasonable rate of return of the latter. It is likewise the policy of
the State to encourage private enterprise and provide incentives for needed
investments.

The above policies are fulfilled by ensuring:
(a) effective regulation of public utilities and public services;
(b) a reasonable rate of return to public utilities and public services; and

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(c) the lifting of foreign equity restrictions by clearly defining what are
considered to be public utilities.
Sec. 3. Definition of Terms. — For the purposes of this Act, the terms below

shall be defined as follows:

Cost-of-Living Adjustment - refers to the percentage by which the Philippine
Statistics Authority (PSA) Consumer Price Index for the month of June of the
calendar year preceding the adjustment exceeds the PSA Consumer Price Index
for the month of June of the calendar year in which the maximum amount of the
fine was last set or adjusted pursuant to law;

Disgorgement of Profits - refers to the giving up or recapturing of profits traceable
to a certain transaction or wrongdoing upon demand or by legal compulsion;

Distribution of Electricity - refers to the conveyance of electric power by a
distribution utility through its distribution system pursuant to the provisions
of RA 9136, pursuant to Section 4 (n) of said law;

Transmission of Electricity - refers to the conveyance of electricity through
the high voltage backbone system, pursuant to Section 4 (ccc) of RA 9136;

‘Treble Damages - refers to an additional sum, depending on the discretion of the
agency or court involved, which is thrice the amount of the monetary award
granted; and

Water Works and Sewerage Systems - refers to the entire water systems
to ensure an uninterrupted and adequate supply and distribution of
portable water for domestic and other purposes and the proper operation
and maintenance of Sewerage systems as defined and referred to in RA
6234, as amended, and PD 198, as amended.

Sec. 4. Recognition of Previous Transfer of Jurisdiction to Various
Administrative Agencies. — Since the enactment of Commonwealth Act No. 146,
the jurisdiction over several public services had been transferred to various
administrative agencies such as, but not limited to, the following:

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Department of Transportation (DOTr);

Land Transportation Franchising Regulatory Board (LTFRB);
Land Transportation Office (LTO);

Civil Aeronautics Board (CAB);

Civil Aviation Authority of the Philippines (CAAP);

Philippine Ports Authority (PPA);

Maritime Industry Authority (MARINA);

Philippine Coast Guard;


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Department of Information and Communications Technology (DICT);
National Telecommunications Commission (NTC);

Department of Energy (DOE);

Energy Regulatory Commission (ERC);

Department of Environment and Natural Resources (DENR);

League of Cities;

National Water Resources Board;

Local Water Utilities Administration;

Philippine Competition Commission (PCC).

For purposes of this act, the term “Administrative Agencies “ shall refer to
existing agencies with which the powers and duties of the Public Service Commission
were transferred, are hereby authorized and ordered to charge and collect from any
public service or public utility or applicant, as the case may be, reasonable fees as
reimbursement of its expenses in the exercise of its authorization, supervision, and
regulation duties, and to impose appropriate penalties and fines as provided by law.
These Administrative Agencies are govern by their respective charters and related
statutes.

pporpagrreyr

Sec. 5. Public Utility. — A new Section 13 (d) of Commonwealth Act No. 146,
as amended, is hereby inserted to read as follows:

“(D) PUBLIC UTILITY. — A SUBSET OF PUBLIC SERVICE, IT
REFERS TO THE DIRECT TRANSMISSION DISTRIBUTION, AND
DELIVERING THROUGH A NETWORK, A COMMODITY OR SERVICE OF
PUBLIC CONSEQUENCE AND IS A NATURAL MONOPOLY THE
OPERATION OF WHICH MUST BE RESTRICTED PURSUANT TO
SECTION 11, ARTICLE XII OF THE 1987 CONSTITUTION.

THE FOLLOWING SHALL BE AN EXCLUSIVE LIST OF PUBLIC
UTILITIES:

(1) TRANSMISSION OF ELECTRICITY;

(2) DISTRIBUTION OF ELECTRICITY;

(3) WATER WORKS AND SEWERAGE SYSTEMS; AND
(4) TELECOMMUNICATION SERVICES.

NO OTHER BUSINESS OR SERVICE SHALL BE DEEMED A PUBLIC UTILITY
OTHER THAN THOSE LISTED IN THIS SECTION UNLESS OTHERWISE
SUBSEQUENTLY PROVIDED BY LAW UPON RECOMMENDATION BY THE
NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY (NEDA), THROUGH
ITS BOARD, IN CONSULTATION WITH THE PHILIPPINE COMPETITION

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COMMISSION (PCC) AND THE CONCERNED ADMINISTRATIVE AGENCIES,
TAKING INTO CONSIDERATION SECTIONS 2 AND 4 OF THIS ACT AND THE
FOLLOWING CRITERIA:

1. THE PERSON OR JURIDICAL ENTITY REGULARLY SUPPLIES AND DIRECTLY
TRANSMITS AND DISTRIBUTES TO THE PUBLIC THROUGH A NETWORK A
COMMODITY OR SERVICE OF PUBLIC CONSEQUENCE;

2. THE COMMODITY OR SERVICE IS NECESSARY TO THE PUBLIC AND A NATURAL
MONOPOLY THAT NEEDS TO BE REGULATED WHEN THE COMMON GOOD SO
REQUIRES;

3. THE COMMODITY OR SERVICE IS NECESSARY FOR THE MAINTENANCE OF
LIFE AND OCCUPATION OF RESIDENTS; AND

4. THE COMMODITY OR SERVICE IS OBLIGATED TO PROVIDE ADEQUATE
SERVICE TO THE PUBLIC ON DEMAND.”

THIS SECTION AND THIS ACT DO NOT HAVE ANY EFFECT ON THE
EXISTING REGULATIONS OF PUBLIC SERVICES AND DO NOT, IN ANY WAY,
DIMINISH THE CONSTITUTIONAL RESTRICTIONS PROVIDED UNDER
SECTIONS 11 AND 17, ARTICLE XII AND SECTION 4, ARTICLE IX (PART C)
OF THE CONSTITUTION. NEITHER DOES THIS SECTION NOR THIS ACT
REDEFINE “COMMON CARRIERS” AND ALTER THE EXISTING HIGH
STANDARDS ACCORDED TO IT.”

Sec. 6. Authorization to Operate. — The first paragraph of Section 15 of
Commonwealth Act No. 146, 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
FRANCHISE, certificate, OR ANY OTHER APPROPRIATE FORM OF
AUTHORIZATION FOR THE OPERATION OF A PUBLIC SERVICE (from

“eertificate-of publie- serviee-and necessity“) as the case may be, FROM THE
CONGRESS, THE SECURITIES EXCHANGE COMMISSION (SEC)
AND/OR THE PROPER ADMINISTRATIVE AGENCY 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.”

Sec. 7. Issuance of Authorizations and Fixing of Rates, Tolls and the
like and the Reasonable Rate of Return. — Section 16 (a) and (c) of
Commonwealth Act No. 146, as amended, are hereby amended to read as follows:

a) To issue certificates [Whieh-shalt—be—knewn-as-_certifieates_of-_public
eenvenience] authorizing the operation of public service within the

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Philippines whenever the [Ceramission] 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. [Previded,thatthereaftercertificates-of public

(c) To fix and determine THE MAXIMUM CEILING FOR 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 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]
FIFTEEN days, thereafter, upon publication and notice to the concerns
operating in the territory affected, TO RATIFY ITS PRIOR
PROVISIONAL APPROVAL OR CHANGE, MODIFY OR ALTER THE
APPROVED RATE BASED ON PUBLIC INTEREST: 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 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
MODERN AND UP TO DATE METHODOLOGIES SUCH AS THE
CAPITAL ASSET PRICING MODEL: PROVIDED ALSO, THAT
INCOME TAX BE ALLOWED AS A CASH EXPENDITURE OR
OUTFLOW FOR RATE- DETERMINATION PURPOSES: PROVIDED
FURTHER, THAT THIS PROVISION SHALL NOT BAR THE
APPLICATION OF PERFORMANCE-BASED RATE REGULATION
SHOULD THE ADMINISTRATIVE AGENCY REGULATING SUCH


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PUBLIC SERVICE DEEM IT EFFICIENT AND IN THE PUBLIC
INTEREST; PROVIDED FINALLY, THAT THIS SHALL NOT BE
INTERPRETED AS AMENDING OR REPEALING REGULATIONS
PROMULGATED BY THESE ADMINISTRATIVE AGENCIES TO
DEREGULATE RATES.

Sec. 8. Reasonable Costs. — Section 17 (b) of Commonwealth Act No. 146,
as

amended, is hereby amended to read as follows:

"(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 [net-te-exeeed-twenty-five-peses] with reference to such
investigation.”

Sec. 9. Section 20 (i) of Commonwealth Act No. 146, 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. 10. Section 21 of Commonwealth Act No. 146, 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 [Cormmissien]
ADMINISTRATIVE AGENCY shall be subject to DISGORGEMENT OF PROFITS,
TREBLE DAMAGES, a fine NOT EXCEEDING FIVE MILLION PESOS
(PHP5,000,000.00) OR ALL OR ANY COMBINATION THEREOF [ef—net
exeeeding-twe-hunded-peses] per day for every day during which such default or
violation continues; and the [Cermission] ADMINISTRATIVE AGENCY is hereby
authorized and empowered to impose such PENALTY OR fine, after due notice and
hearing.

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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 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. 11. Section 23 of Commonwealth Act No. 146, as amended, is
hereby amended to read as follows:

“Any public service corporation that shall perform, commit, or do any act or
thing forbidden or prohibited or shall neglect, fail or omit to do or perform any
act or thing herein to be done or performed, shall be punished by a fine not
exceeding [twenty—five—theusand—peses] FIVE MILLION PESOS
(PHP5,000,000.00), or by imprisonment [net-exceeding-five-years] OF NOT
LOWER THAN SIX (6) YEARS AND NOT HIGHER THAN TWELVE (12)
YEARS, or both, in the discretion of the court.”

Sec. 12. Section 24 of Commonwealth Act No. 146, as amended, is
hereby amended to read as follows:

“Any person who shall knowingly and willfully perform, commit, or do, or
Participate in performing, committing, or doing, or who shall knowingly and
willfully cause, participate, or join with others in causing any public service
corporation or company to do, perform or commit, or who shall advice, solicit,
persuade, or knowingly and willfully instruct, direct, or order any officer, agent,
or employee of any public service corporation or company to perform, commit,
or do any act or thing forbidden or prohibited by this Act, shall be punished by
a fine not exceeding [twe—theusand—peses] FIVE MILLION PESOS
(PHP5,000,000.00), or imprisonment [net-exeeedingtwe-years] OF NOT
LOWER THAN SIX (6) YEARS AND NOT HIGHER THAN TWELVE (12)
YEARS, or both, in the discretion of the court. [Previdedhewever,that-for

nine-hundred-and-ninety two. ]”,
Sec. 13. Section 25 of Commonwealth Act No. 146, as amended, is
hereby

amended to read as follows:

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“Any person who shall knowingly and willfully neglect, fail, or omit to do or
perform, or who shall knowingly and willfully cause or join or participate with
others in causing any public service corporation or company to neglect, fail or
omit to do or perform, or who shall advise, solicit, or persuade, or knowingly
and willfully instruct, direct, or order any officer, agent, or employee of any
public service corporation or company to neglect, fail, or omit to do any act or
thing required to be done by this Act, shall be published by a fine not exceeding
[twe-theusand-peses] FIVE MILLION PESOS (PHP5,000,000.00) or by
imprisonment [net-exceedingtwe-years] OF NOT LOWER THAN SIX (6)
YEARS AND NOT HIGHER THAN TWELVE (12) YEARS, or both, in the
discretion of the court.”

Sec. 14. Section 26 of Commonwealth Act No. 146, as amended, is
hereby

amended to read as follows:

“Any person who shall destroy, injure, or interfere with any apparatus Or
appliance owned or operated by to in charge of the [Cemmissien]
ADMINISTRATIVE AGENCIES or its agents, shall be deemed guilty of a
misdemeanor and upon conviction shall be punished by a fine OF THE
AMOUNT EQUIVALENT TO THE ACTUAL MARKET VALUE OF THE
APPARATUS OR APPLIANCE DESTROYED OR INJURED PLUS A FINE
NOT EXCEEDING ONE MILLION PESOS (PHP1,000,000.00) [not
exceeding-onetheusand-peses] or imprisonment [net-exeeeding-six-months]
OF NOT LOWER THAN SIX (6) YEARS AND NOT HIGHER THAN TWELVE
(12) YEARS, or both in the discretion of the court.

Sec. 15. Section 28 of Commonwealth Act No. 146, as amended, is
hereby amended to read as follows:

“Violations of the orders, decisions, and regulations of the [Commission]
ADMINISTRATIVE AGENCIES and of the terms and conditions of any certificate
issued by the [Commission] ADMINISTRATIVE AGENCIES [shall-preseribe-after
‘sixty-days], and violations of the provisions of this Act shall [preseribe-after-one
hundred-and-eighty days] BE IMPRESCRIPTIBLE.”

Sec. 16. Subsequent Adjustment of Fines imposed under this Act- The
maximum amounts of fines imposed under this Act, as well those imposed under
Commonwealth Act No 146, shall be adjusted by the head of each administrative
agency under Section 1 of this Act by a Cost-of-Living Adjustment on January 1 of the
year immediately following the date of enactment of this Act and every fifth calendar
year thereafter. Each head of the administrative agency shall file copies of the


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adjustment with the University of the Philippines Law Center in accordance with
Executive Order No. 292 (1987), as amended.

Any increase shall apply only to fines, including those whose associated
violation predated such increase, which are assessed after the date the increase takes
effect.

Sec. 17. Interpretation. — This Act shall be subject to and consistent with
the regulatory powers of the State to promote public interest in Article IX-C, Section
4 and Article XII, Section 17 of the Constitution.

No franchise, certificate, or authorization granted by the Congress and the
appropriate administrative agencies under Section 3 of this Act shall be (a) exclusive
in character, (b) for a longer period than fifty years, and (c) granted except under the
condition that it shall be subject to amendment, alteration, or repeal by Congress
when the public interest so requires.

The power to grant any franchise, certificate, or any other form of authorization
for the operation of a public service still belongs to the Congress, unless otherwise
provided by law to an administrative agency.

Sec. 18. Non-Impairment of Existing Agreements. — The application and
implementation of the pertinent provisions of this Act shall not impair vested rights or
obligations of contracts. Current and subsisting concession agreements and other
similar contracts of juridical persons with government agencies or government- owned
and —controlled corporations covering activities hereunder classified as public utilities
shall remain valid and in force in accordance with the existing terms and conditions
the parties agreed to thereunder until expiration or termination thereof.

Sec. 19. Suppletory Application of Commonwealth Act No. 146. —
Commonwealth Act No. 146, as amended, shall be construed as a 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,
created by Section 4 of this Act.

Sec. 20. Comprehensive Baseline Survey. — The University of the
Philippines Law Center shall conduct a comprehensive baseline survey of public
services governance within six (6) months from the effectivity of this Act. Copies of
the results of said survey shall be furnished to the Congress, the NEDA and PCC.

The PCC, in coordination with the NEDA, is mandated to conduct regular studies
on whether deregulation is warranted in a sector to improve consumer welfare and to
submit its recommendation to Congress.

Sec. 21. Implementing Rules and Regulations. — A\| administrative
agencies under Section 3 of this Act shall, in coordination with the NEDA, PCC and the

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University of the Philippines Law Center, promulgate rules and regulations to
implement the provisions of this Act within ninety (90) days from the effectivity of this
Act, including the criteria for the determination of imposable fines, as provided for in
this Act, to be based on the capitalization of a public service provider and peculiarities
of the public service concerned.

Sec. 22. Repealing Clause. - A\l laws, including Commonwealth Act No. 146,
as amended, decrees, orders, rules and regulations, or other issuances or parts thereof
inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.

Sec. 23. 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. 24. 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. 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,

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