oo sernesEy
Republic of the Philippines ye Nn
HOUSE OF REPRESENTATIVES ; oN
Quezon City RECEIVED

_, FEB 08 2017
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SEVENTEENTH (17") CONGRESS.
First Regular Session

HOUSE BILL NO. 4996

Introduced by Representative Manuel Monsour T. Del Rosario III

EXPLANATORY NOTE

Consumers often experience high prices and poor quality of basic services in the
Philippines, because only a few local players or oligarchs effectively control the market.
Competition and foreign investment are inhibited, because limitations that should only apply to
the operation of a public utility are usually also applied to all public services. This situation is
caused by the ambiguity in the definition of public utility that is often used interchangeably with
public service under Commonwealth Act No. 146 or the Public Service Act. The key to fixing this
problem is to develop a clear statutory definition of a public utility by amending the Public Service
Act.

The Public Service Act is a law that was crafted in 1936 to govern public services in the
Philippines. Understandably, it no longer sufficiently addresses the changes in the economic
framework brought about by globalization and rapid technological innovation. Hence, there is a
need to adjust the provisions of the law to bring it to the 21* century and enable it to fulfil its
purpose of truly serving the public.

Notwithstanding numerous amendments, this 80-year old law is still a good law in terms
of protecting the public interest, albeit outdated in certain aspects, particularly: 1) the transfer of
the functions of the Public Service Commission to various administrative agencies; 2) the
definition of public service, which is often used as a proxy for public utility in reference to the
1987 Constitution; 3) the appropriate mechanism for fixing rates based on reasonable rate of
return; and 4) the applicable penalties and fees for public services.

This bill proposes to further amend the Public Service Act to effect the necessary changes
in the antiquated provisions of the law to increase its relevance to contemporary concerns, in the
interest of providing the general public with more choices, better services, and lower prices.

This legislative reform will significantly contribute to increasing competition, as well as
protecting the public interest. More competition among providers would result in lower prices and
improved quality of basic services in the Philippines creating a more competitive economy towards
a better quality of life for all.

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

{LL MONSOUR T. DEL ROSARIO III


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH (17™) CONGRESS
First Regular Session

4996

HOUSE BILL NO.

Introduced by Representative Manuel Monsour T. Del Rosario III

AN ACT FURTHER AMENDING COMMONWEALTH ACT NO. 146
OR THE PUBLIC SERVICE ACT, AS AMENDED

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

Section 1. Transfer of Functions of the Public Service Commission. — The relevant
provisions of Commonwealth Act No. 146 or the Public Service Act, as amended, referring to the
Public Service Commission, its powers and duties, are hereby transferred to the various
administrative agencies of the government according to their respective jurisdictions, such as:

(a) Department of Transportation;

(b) Land Transportation Franchising and Regulatory Board;
(©) Land Transportation Office;

(d) Civil Aeronautics Board;

(e) Civil Aviation Authority of the Philippines;

(O Philippine Ports Authority;
(g) Maritime Industry Authori
(h) Philippine Coast Guard;
(i) Department of Information and Communications Technology;
(j) National Telecommunications Commission;

(k) Department of Energy;

(l) Energy Regulatory Commission;

(m) Department of Environment and Natural Resources;

(n) National Water Resources Board;

(0) Local Water Utilities Administration;

(p) Philippine Competition Commission; and

(q) Others.

All references to the Public Service Commission in Commonwealth Act No. 146 or the
Public Service Act, as amended, shall mean any such administrative agencies concemed in
accordance with their respective charters.

All administrative agencies to which the powers and duties of the Public Service
‘Commission have been transferred are hereby authorized and ordered to charge and collect from
any public service or applicant, as the case may be, reasonable fees as reimbursement of its
expenses in the authorization, supervision, and regulation of public services, and to impose
appropriate penalties as provided by law.


Section 2. Public Utility. - A new Section 13(d) of Commonwealth Act No. 146 or the
Public Service Act, as amended, is hereby inserted to read as follows:

“(D) I. PUBLIC UTILITY DEFINITION. - THE TERM "PUBLIC
UTILITY" REFERS TO A PUBLIC SERVICE THAT REGULARLY SUPPLIES
THE PUBLIC AND DIRECTLY TRANSMITS AND DISTRIBUTES TO THE
PUBLIC THROUGH A NETWORK ITS COMMODITY OR SERVICE OF
PUBLIC CONSEQUENCE. A PUBLIC UTILITY IS NECESSARY TO THE
PUBLIC AND A NATURAL MONOPOLY THAT NEEDS TO BE REGULATED
WHEN THE PUBLIC INTEREST SO REQUIRES AS DETERMINED BY
CONGRESS.

Il, PUBLIC UTILITY ENUMERATION. — A PUBLIC UTILITY SHALL
MEAN ELECTRIC POWER TRANSMISSION, ELECTRIC POWER
DISTRIBUTION, WATER PIPELINE DISTRIBUTION, AND SEWERAGE
PIPELINE SYSTEM, UNLESS OTHERWISE SUBSEQUENTLY PROVIDED BY
LAW. ANY EXISTING LAW TO THE CONTRARY NOTWITHSTANDING, NO
OTHER BUSINESS OR SERVICE SHALL BE DEEMED A PUBLIC UTILITY,
UNLESS OTHERWISE SUBSEQUENTLY PROVIDED BY LAW UPON
RECOMMENDATION BY THE NATIONAL ECONOMIC AND DEVELOPMENT
AUTHORITY (NEDA).

Ill, PUBLIC UTILITY EXEMPTIONS. - ANY EXISTING LAW TO THE
CONTRARY NOTWITHSTANDING, THE FOLLOWING SHALL NOT BE
CONSIDERED A PUBLIC UTILITY OPERATION:

(1) ELECTRIC POWER GENERATION IN SECTION 6 OF REPUBLIC
ACT NO. 9136 OR THE ELECTRIC POWER INDUSTRY REFORM ACT OF 2001;

(2) ELECTRIC POWER SUPPLY IN SECTION 29 OF REPUBLIC ACT NO.
9136 OR THE ELECTRIC POWER INDUSTRY REFORM ACT OF 2001;

(3) CRUDE OIL AND PETROLEUM PRODUCTS UNDER REPUBLIC ACT
NO. 8479 OR THE DOWNSTREAM OIL INDUSTRY DEREGULATION ACT OF
1998;

(4) TRANSPORTATION IN THIS ACT, EXECUTIVE ORDER NO. 202
(1987), PRESIDENTIAL DECREE NO. 474 (1974) AS AMENDED, AND
REPUBLIC ACT NO. 776 (1951) AS AMENDED;

(5) BROADCASTING, TELECOMMUNICATIONS, AND VALUE-ADDED
SERVICES IN REPUBLIC ACT NO. 7925 OR THE PUBLIC
TELECOMMUNICATIONS POLICY ACT OF THE PHILIPPINES; AND

(6) OTHER PUBLIC SERVICES IN THIS ACT.”

Section 3. Certificate of Authority. — The first paragraph of Section 15 of Commonwealth
Act No. 146 or the Public Service Act, as amended, is hereby amended to read as follows:

“With the exception of those enumerated in the preceding section, no public service
shall operate in the Philippines without possessing a valid and subsisting certificate OF
AUTHORIZATION OBTAINED APPROPRIATELY from—the—Publie—Service

eonvenience-and-necessity,” as the case may be, to the effect that the operation of sai


service and the authorization to do business will promote the public interest in a proper and
suitable manner.”

Alll references to a certificate of public convenience or a certificate of public convenience
and necessity in Commonwealth Act No. 146 or the Public Service Act, as amended, shall mean
any authorization obtained appropriately as the case may be.

Section 4. Proceedings Upon Notice and Hearing. ~ Section 16(a) and (c) of
‘Commonwealth Act No. 146 or the Public Service Act, as amended, are hereby amended to read
as follows:

“(a) To issue certificates

eonvenienee, authorizing the operation of public service within the Philippines whenever
the Commission finds that the operation of the public service proposed and the
authorization to do business will promote the public interest in a proper and suitable

manner. Provided, ‘That i ee re wrucntratt canter aman ticvsdpemone

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

(©) To fix and determine individual or joint rates, tolls, charges, classifications, or
schedules thereof, as well as commutation, mileage, kilometrage, and other special rates
which shall be imposed, observed, and followed thereafter by any public service: Provided,
That the Commission may, in its discretion, approve rates proposed by public services
provisionally and without necessity of any hearing; but it shall call a hearing thereon within
thirty days, thereafter, upon publication and notice to the 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: PROVIDED FURTHERMORE, THAT THE
MAXIMUM RATE OF RETURN SHALL BE EQUAL TO THE POST-TAX
WEIGHTED AVERAGE COST OF CAPITAL FOR THE SAME OR
COMPARABLE BUSINESSES COMPUTED USING ESTABLISHED
METHODOLOGIES SUCH AS THE CAPITAL ASSET PRICING MODEL:
PROVIDED ALSO, THAT INCOME TAX SHALL BE ALLOWED AS A CASH
OUTFLOW FOR RATE-DETERMINATION PURPOSES: PROVIDED FINALLY,
THAT THIS PROVISION SHALL NOT BAR THE APPLICATION OF
PERFORMANCE-BASED RATE REGULATION SHOULD THE
ADMINISTRATIVE AGENCY REGULATING SUCH PUBLIC SERVICE DEEM
IT EFFICIENT AND IN THE PUBLIC INTEREST.”

Section 5. Proceedings Without Hearing. — Section 17(b) of Commonwealth Act No. 146
or the Public Service Act, as amended, is hereby amended to read as follows:


“(b) To require any public service to pay the actual expenses incurred by the
Commission in any investigation if it shall be found in the same that any rate, toll, charge,
schedule, regulation, practice, act or service thereof is in violation of any provision of this
Act or any certificate, order, rule, regulation or requirement issued or established by the
Commission. The Commission may also assess against any public service
REASONABLE costs net—te—exeeed—twenty-five—pesos with reference to such
investigation.”

Section 6. Acts Requiring Approval. ~ Section 20(j) of Commonwealth Act No. 146 or the
Public Service Act, as amended, is hereby amended to read as follows:

“(i) To sell, alienate or in any manner transfer shares of its capital stock to any alien
if the result of that sale, alienation, or transfer in itself or in connection with another
previous sale shall be the reduction to less than sixty per centum of the capital stock
belonging to Philippine citizens IN THE OPERATION OF A PUBLIC UTILITY AS
REQUIRED BY THE CONSTITUTION. Such sale, alienation or transfer shall be void
and of no effect and shall be sufficient cause for ordering the cancellation of the certificate.”

Section 7, Penalties for Violations. ~ Section 21 of Commonwealth Act No. 146 or the
Public Service Act, as amended, is hereby amended to read as follows:

“Every public service violating or failing to comply with the terms and conditions,
of any certificate or any orders, decisions or regulations of the Commission shall be subject
to DISGORGEMENT OF PROFITS, TREBLE DAMAGES, a fine OF UP TO FIVE
MILLION PESOS, OR ALL OR ANY COMBINATION THEREOF of not exeeeding
two-hundved-pesos per day for every day during which such default or violation continues;
and the Commission is hereby authorized and empowered to impose such fine, after due
notice and hearing. THE FINE OF UP TO FIVE MILLION PESOS SHALL BE
INCREASED EVERY FIVE () YEARS UPON CERTIFICATION BY NEDA ON
THE COMPUTATION OF THE COST OF MONEY BASED ON THE CURRENT
CONSUMER PRICE INDEX.

The PENALTIES AND fines so imposed shall be paid to the Government of the
Philippines through the Commission, and failure to pay the b fine in any case within the
same specified in the order or decision of the Commission shall be deemed good and
sufficient reason for the suspension of the certificate of said public service until payment
shall be made. Payment may also be enforced by appropriate action brought in a court of
competent jurisdiction. The remedy provided in this section shall not be a bar to, or affect
any other remedy provided in this Act but shall be cumulative and additional to such
remedy or remedies.”

Section 8, Interpretation. ~ Commonwealth Act No. 146 or the Public Service Act, as
amended, shall be interpreted to apply suppletorily to existing sector-specific laws governing
public services and public utilities, unless otherwise expressly provided.

Section 9. Comprehensive Baseline Survey. ~ The University of the Philippines Law
Center shall conduct a comprehensive baseline survey of public services and public utilities
governance within six (6) months from the effectivity of this Act.


Section 10. 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.

Section 11. Rules and Regulations. — All administrative agencies to which the powers and
duties of the Public Service Commission have been transferred shall, in coordination with the
University of the Philippines Law Center, promulgate rules and regulations to implement the
provisions of this Act within ninety (90) days from the approval thereof.

Section 12. Separability Clause. — If any provision or part of this Act, or the application
thereof to any person or circumstances, is held invalid or unconstitutional, the remaining sections
of this Act or the application of such provision or part hereof to other persons or circumstance shall
remain in full force and effect.

Section 13. Repealing Clause, ~ All laws, decrees, orders, issuances, rules and regulations
or parts thereof inconsistent with the provisions of this Act are hereby repealed, amended or
modified accordingly.

Section 14, Efectivity. — This Act shall take effect fifteen (15) days after its publication in
the Official Gazette or in a newspaper of general circulation.

Approved,