BRINGING

THE PUBLIC SERVICE ACT INTO

THE 21ST CENTURY

PRESENTATION OUTLINE

1. CURRENT SITUATION

2. ISSUE

3. MAIN REFORM

4. EXPECTED OUTCOMES

5. OTHER REFORMS

6. CALL TO ACTION

1. CURRENT SITUATION

Every Philippine resident uses basic services to live and earn a living.

BASIC SERVICES

These basic services include:

ELECTRICITY

WATER

TRANSPORTATION

TELECOMMUNICATIONS

DISSATISFACTION

There is dissatisfaction with these services which are characterized by:

ELECTRICITY

WATER

TRANSPORTATION

TELECOMMUNICATIONS

POOR

QUALITY

HIGH

PRICES

LACK OF COMPETITION

The main reason behind the dissatisfaction with these services is:

Currently, there are only a few local players

leading to a lack of competition in the market.

LACK OF COMPETITION = LACK OF CHOICE OF CONSUMERS= MARKET POWER BY PROVIDERS = MARKET FAILURE

2. ISSUE

The lack of competition is caused by:

Ambiguity in the definition of public utility that is used

interchangeably with public service under the Public Service Act.

This serves as a major barrier to foreign entry and investment.

AMBIGUITY IN THE DEFINITION

This ambiguity is caused by the following:

1987 Constitution restricts the operation of a public utility to Filipinos only (Sec. 11, Art. XII).

HOWEVER

There is NO STATUTORY DEFINITION of a public utility.

There is the Public Service Act, but it only defines a public service (Section 13 (b),

Commonwealth Act No. 146), and NOT a public utility.

HENCE

Public utilities and public services have often been used interchangeably. This means

that all basic services with the semblance of public utilities or public services are

instinctively subjected to the same restriction in the Constitution.

COMMONWEALTH ACT NO. 146

To this day, public services are still governed by an outdated law.

Many of its sections have been expressly or

impliedly repealed, including the Public Service Commission under Presidential

Decree No. 1 in 1972.

The Public Service Act is a 1936 law

enacted during the Commonwealth

period.

This 80-year old law, Commonwealth Act No. 146, has been amended

several times already.

PROPOSED AMENDMENTS

It is NECESSARY to amend the Public Service Act in order to enable

the law to reflect the current realities in the 21st century by:

1. Recognizing the transfer of functions of the Public Service

Commission to various administrative agencies;

2. Clarifying the definition of public services and public utilities;

3. Instituting an appropriate mechanism for fixing rates; and

4. Increasing the penalties for violations.

3. MAIN REFORM

To develop a clear statutory definition

of a public utility by amending

the Public Service Act to make it

current, responsive, and relevant to

the 21st century

PUBLIC SERVICE DEFINITION

Section 13 (b) of The Public Service Act defines public service as follows:

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 purposes, any common carrier,

railroad, street railway, traction railway, sub-way motor vehicle, either for freight or

passenger, or both with or without fixed route and whether may be its classification, freight

or carrier service of any class, express service, steamboat or steamship line, pontines,

ferries, and water craft, engaged in the transportation of passengers or freight or both,

shipyard, marine railway, marine repair shop, wharf or dock, ice plant, ice-refrigeration

plant, canal, irrigation system, gas, electric light, heat and power, water supply and

power, petroleum, sewerage system, wire or wireless communications system, wire or

wireless broadcasting stations and other similar public services.

““

PUBLIC UTILITY DEFINITION

Due to the absence of a statutory definition for public utilities, the Supreme Court

put forward its own definition in JG Summit Holdings vs. Court of Appeals,

G.R. No. 124293, September 24, 2003, as follows: ““a business or service engaged in

regularly supplying the public with some

commodity or service of public

consequence such as electricity, gas,

water, transportation, telephone or

telegraph service

PROPOSED STATUTORY DEFINITION

““(D) I. PUBLIC UTILITY DEFINITION. – A PUBLIC UTILITY SHALL

EXCLUSIVELY MEAN (1) TRANSMISSION OF ELECTRICITY AS

DEFINED BY SECTION 4 (CCC) OF REPUBLIC ACT NO. 9136, (2)

DISTRIBUTION OF ELECTRICITY AS DEFINED BY SECTION 4 (N) OF

REPUBLIC ACT NO. 9136, AND (3) WATERWORKS AND

SEWERAGE SYSTEMS AS DEFINED BY REPUBLIC ACT NO. 6234,

AS AMENDED, AND PRESIDENTIAL DECREE NO. 198, AS

AMENDED.

PROPOSED STATUTORY DEFINITION

““ II. AMENDMENT OF PUBLIC UTILITY DEFINITION. – NO OTHER

BUSINESS OR SERVICE SHALL BE DEEMED A PUBLIC UTILITY

UNDER SECTION 13 (D) (I) UNLESS OTHERWISE SUBSEQUENTLY

PROVIDED BY LAW UPON RECOMMENDATION BY THE

NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY

(NEDA).

PROPOSED STATUTORY DEFINITION

““ THE NEDA SHALL ONLY RECOMMEND INCLUSION OF THE

BUSINESS OR SERVICE IF: (1) IT IS A PUBLIC SERVICE; (2) THAT

REGULARLY SUPPLIES AND DIRECTLY TRANSMITS AND

DISTRIBUTES TO THE PUBLIC THROUGH A NETWORK; (3) A

COMMODITY OR SERVICE OF PUBLIC CONSEQUENCE; AND (4)

IS A NATURAL MONOPOLY THAT MUST BE RESTRICTED IN ITS

OPERATION WHEN THE PUBLIC INTEREST SO REQUIRES.

4. EXPECTED OUTCOMES

The proposed statutory definition

LIMITS THE SERVICES

that are subjected to

RESTRICTIONS THAT INHIBIT COMPETITION.

RESTRICTED AS PUBLIC UTILITIES

BEFORE THE REFORM

RESTRICTED AS PUBLIC UTILITIES

AFTER THE REFORM

ELECTRICITY

(electric light, heat, and power)

TRANSPORTATION

(any common carrier, etc.)

WATER

(water supply, and power)

TELECOMMUNICATIONS

TRANSMISSION OF ELECTRICITY

DISTRIBUTION OF ELECTRICITY

WATERWORKS AND SEWERAGE

SYSTEMS

5. OTHER REFORMS

• Recognizing the transfer the functions of the Public Service

Commission to various administrative agencies

Recognition of Administrative Agencies. – All references to the Public

Service Commission in Commonwealth Act No. 146, as amended, shall

mean any administrative agencies to which the powers and duties of

the Public Service Commission were transferred in accordance with

their respective charters and related statutes.

“ “

RATE OF RETURN

• Instituting an appropriate mechanism for fixing rates

(c) To fix and determine, OR TO FIX MAXIMUM CEILINGS OF, 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 …

“ “

INCREASING PENALTIES

• Increasing the applicable penalties for violations

From a fine not exceeding P200 per day to

disgorgement of profits,

treble damages,

a fine of up to P5M subject to indexation,

or all or any combination thereof

“ “

6. CALL TO ACTION

The Public Service Act must be amended

to define public utilities

effectively allowing for greater competition

in more areas of basic services

for IMPROVED QUALITY OF SERVICES and LOWER PRICES

to 1) make the Philippine economy competitive; and

2) improve the quality of life in the Philippines.

LEGISLATIVE AGENDA

Philippine Development Plan

Legislative Agenda: Public Service Act Amendments Bill

Chapter 9: Industry

Chapter 15: Sound Macroeconomic Policy

Chapter 19: Infrastructure Development

LEGISLATIVE AGENDA

STATUS IN THE 17TH CONGRESS

Status in the 17th Congress of the Republic of the Philippines

House of Representatives

1. House Bill No. 4389 by Rep. Gloria Macapagal-Arroyo

2. House Bill No. 4468 by Rep. Joey Salceda

3. House Bill No. 4501 by Rep. Arthur Yap

4. House Bill No. 4787 by Rep. Feliciano Belmonte and

Rep. Jose Christopher Belmonte

Senate

1. Senate Bill No. 1261 by Sen. Richard Gordon

2. Senate Bill No. 1291 by Sen. Miguel Zubiri

THANK YOU.