QuestionsQuestions (IRR of Republic Act No. 11659)
The IRR implements R.A. No. 11659 (amending the Public Service Act). Under Rule I, it sets the title, scope, and definitions of key terms, and provides the framework for jurisdiction, regulation, certification requirements, reclassification, procedures, and penalties.
All references to the Public Service Commission in C.A. No. 146, as amended, are deemed references to the Administrative Agencies to which its powers and duties were transferred, in whole or in part, by later laws.
“Control” is the ability to substantially influence or direct an entity’s actions or decisions by contract, agency, or otherwise. A presumption of control exists when a parent owns, directly or indirectly (including voting and beneficial ownership), more than 50% of the capital or voting rights, unless it can be clearly demonstrated that such ownership does not constitute control. Control can also exist at 50% voting power or less based on specific circumstances (e.g., voting control through agreements, power to appoint/remove majority of board members, decisive influence via rights/contracts).
Critical Infrastructure refers to public service systems/assets (physical or virtual) so vital that their incapacity or destruction would detrimentally impact national security. The text specifically mentions telecommunications and other vital services declared by the President.
The IRR lists: (a) Civil Aeronautics Board; (b) Civil Aviation Authority of the Philippines; (c) Department of Energy; (d) DENR; (e) DICT; (f) Department of Transportation; (g) Energy Regulatory Commission; (h) Land Transportation Franchising and Regulatory Board; (i) Land Transportation Office; (j) Local Water Utilities Administration; (k) Maritime Industry Authority; (l) Metropolitan Waterworks and Sewerage System; (m) National Telecommunications Commission; (n) National Water Resources Board; (o) Philippine National Railways; (p) PPA; (q) Toll Regulatory Board; and (r) other similar agencies authorized by Congress or the responsible authority. This list determines which agency supervises specific public services.
The relevant Administrative Agency has jurisdiction and supervision over the relevant public service/public utility within its mandate, including over franchises, equipment, and properties used for the public service. It may also exercise necessary powers and request the aid of the public force. Importantly, government-owned or controlled services are regulated the same as privately owned ones.
Not necessarily for all. Section 4 states that any franchise or certificate necessary for operation of a public service shall be granted by Congress unless previously delegated by law to the relevant administrative agencies. The IRR preserves Congress’s authority to grant franchises; it does not diminish it.
No public service may operate in the Philippines without a valid certificate or authorization from the relevant Administrative Agency, provided the authorization promotes the public interest properly and suitably. The issuance is subject to conditions such as the possibility of acquiring the service by government upon payment of just compensation (expropriation principles), a definite validity period, and automatic consequences for violation after hearing (immediate cancellation without express action).
The relevant Administrative Agency may fix fair and reasonable rates/tolls/charges/tariffs/schedules, considering efficiency and ensuring recovery of prudent and efficient costs plus a reasonable return so the service remains viable and efficient. It may approve provisional rates without hearing but must hold a hearing within 15 days to ratify or modify. It also states this does not mandate rate regulation nor amend/repeal deregulation policies/laws and related deregulation regulations.
After notice and hearing, it may suspend or revoke a certificate when the holder fails for three consecutive years the annual performance audit conducted by an independent evaluation team, using metrics set by the relevant Administrative Agency.
A public utility is a public service that operates/manages/controls for public use: (a) distribution of electricity; (b) transmission of electricity; (c) petroleum and petroleum products pipeline transmission systems; (d) water pipeline distribution and wastewater pipeline systems including sewerage pipeline systems; (e) seaports; and (f) public utility vehicles. Entities (including concessionaires/joint ventures) that wholly operate/manage/control these sectors for public use are treated as public utilities.
Upon NEDA recommendation, the President may recommend to Congress classification based on: (a) the entity regularly supplies/transmits/distributes a commodity/service of public consequence through a network; (b) it is a natural monopoly needing regulation when common good so requires; (c) it is necessary for maintenance of life and occupation of the public; and (d) the provider is obligated to provide adequate service on demand.
Among others: (i) profiles of entities providing the service including investors/shareholders for the past three years; (ii) General Information Sheets and audited financial statements submitted to SEC and BIR (past three years); (iii) performance audit and rating under Section 48 for past three years; and (iv) a market study proving natural monopoly (not older than two years at submission).
A public service not classified as a public utility is considered a business affected with public interest. The IRR states that Article XII Sections 17 and 18 of the 1987 Constitution apply: (1) temporary takeover or direction of privately owned public utilities/business affected with public interest during national emergency; and (2) transfer to public ownership utilities/other private enterprises in the interest of national welfare or defense.
It is unlawful for any person/entity (including trustees/receivers) and even local government or other agencies to engage in public service business without securing a certificate from the relevant Administrative Agency. Exceptions include grantees of legislative franchises expressly exempting them from needing a certificate and concerns expressly exempted by Section 13 of C.A. No. 146, as amended.
Rule VI, Section 17 lists specific activities that are unlawful without prior approval/authorization (e.g., adopting/fixing rates or itineraries; constructing/extending facilities that form part of the rate base; issuing no-par stock; selling/alienating/mortgaging/encumbering/leasing property/franchises/certificates/privileges/rights; transferring shares to foreigners in a way that reduces Filipino ownership below 60% for public utilities).
Violations are punishable by a fine not lower than P5,000 but not exceeding P2,000,000 per day for each day the default/violation continues (unless lesser penalties exist under the Administrative Agency’s charter or special law, in which case that lower penalty applies). If rates collected exceed authorized rates, the Administrative Agency may order refunds to consumers in lieu of or in addition to fines/penalties; it must provide guidelines for determining excess rates and the prescriptive period to claim refunds.