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Republic of the Philippines
House of Representatives
Quezon City

Seventeenth Congress
1* Regular Session

4787

House Bill No.

Introduced by Rep. Feliciano Belmonte, Jr. and Rep. Jose Christopher Y. Belmonte

EXPLANATORY NOTE

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in terms of protecting the public interest, albeit outdated in certain aspects, particularly: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.

a Se

JOSE LGbd Y. BELMONTE FELICIANO BELMONTE, JR.


Republic of the Philippines
House of Representatives
Quezon City

Seventeenth Congress
1 Regular Session

u 4787

House Bill No.

Introduced by Rep. Feliciano Belmonte, Jr. and Rep. Jose Christopher Y. Belmonte

AN ACT FURTHER AMENDING COMMONWEALTH ACT NO. 146

OR 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. 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)
(b)

Department of Transportation;

Land Transportation Franchising and Regulatory Board;
Land Transportation Office;

Civil Aeronautics Board;

Civil Aviation Authority of the Philippines;

Philippine Ports Authority;

Maritime Industry Authority;

Philippine Coast Guard;

Department of Information and Communications Technology;
National Telecommunications Commission;

Department of Energy;


() 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 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
concerned 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.

Sec. 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).

II. 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.”

Sec. 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—Commission—known—as

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 interest in a
proper and suitable manner.”

All 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.

Sec. 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 which-shall_be-known-as-certifieates-of
public convenience-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

of the United States: Provided; further-That-no such certificates shall
issued for a period of more than fifty years.
XXX

(©) 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 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:
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.”

Sec. 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-peses-with reference to

such investigation.”

Sec. 6. Acts Requiring Approval. - Section 20 (i) 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.”

Sec. 7. Penalties for Violations. - Section 21 of Commonwealth Act No. 146

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 ef net exceeding twe hundred 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 (5) 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 PENALTY OR 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.”

Sec. 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.

Sec. 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.

Sec. 10. 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.

Sec. 11. 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. 12. 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. 13. 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. 14. 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,