IRR of Republic Act No. 11659 Public Service Act

Key definitions the IRR establishes

“Act” means R.A. No. 11659, titled as “An Act Amending Commonwealth Act (C.A.) No. 146, otherwise known as the Public Service Act, as amended.”
“Administrative Agency” refers to the relevant government agencies under Section 3 of these rules to which the powers and duties of the Public Service Commission were transferred, and all mentions of “Commission” in the Act and these rules refer to that term.
“Certificate” means any franchise, certificate of public convenience, certificate of public convenience and necessity, concession, or other authorization for operating a public service or public utility, as applicable.
“Concession” means a contract granting a private concessionaire the privilege to finance, construct, manage, operate and/or maintain concession assets.
“Concessionaire” means the person or entity awarded a concession.
“Control” exists when an entity can substantially influence or direct actions or decisions of another entity, including when the parent owns more than fifty percent (50%) of capital (considering voting power and beneficial ownership) or has similar decisive influence; control may also exist at fifty percent (50%) or less of voting power through specified mechanisms (e.g., ability to direct financial and operating policies, appoint or remove majority of board members, cast majority board votes, ownership/right to use significant assets, decisive influence rights/contracts, or ability to interfere in management and control).
“Critical Infrastructure” refers to public service systems and assets—physical or virtual—so vital that incapacity or destruction would have a detrimental impact on national security, including telecommunications and other vital services declared by the President.
“Distribution of Electricity” means conveyance of electric power by a distribution utility through its distribution system under Section 4(n) of R.A. No. 9136.
“Foreign State-owned Enterprise” means an entity where a foreign state (including through subsidiaries) meets any of the specified thresholds for ownership/control/board appointment.
“Foreign government or Foreign state” includes any government/body exercising government functions other than the Government of the Republic of the Philippines, and their agencies, instrumentalities, or local government units, including entities with separate customs territories with full autonomy in external commercial relations.
“Geographical area critical to national security” means a jurisdiction where alienation, privatization, or foreign control/ presence could erode geostrategic advantage and increase vulnerability to foreign intrusion undermining national security.
“Independent Pension Fund” covers a foreign-state enterprise engaged exclusively in administering/providing pension and related benefit plans and investing plan assets, with fiduciary duty to natural person contributors/beneficiaries and free from investment direction from the foreign state, subject to specified conditions on general guidance and board presence.
“Investment” refers to investments defined under Section 2 of R.A. No. 11647.
“National Security” means requirements to ensure territorial integrity and the safety, security, and well-being of Filipino citizens.
“Natural Monopoly” exists when market demand can be supplied by a single entity at lower cost than by two or more entities.
“NEDA” refers to the NEDA Secretariat created under Executive Order No. 230, serving as research/technical support arm and secretariat of the NEDA Board.
“Person” includes natural and juridical persons, including corporations, partnerships, associations, their lessees/trustees/receivers, and local and government-owned or controlled corporations or agencies that own/operate public services.
“Personal Information” refers to personal information defined under R.A. No. 10173.
“Petroleum and Petroleum Products Pipeline Transmission System” covers pipeline transmission operations ensuring uninterrupted and adequate supply of petroleum/products to the public, excluding systems operated exclusively for private/own use or incidental to a distinct business.
“Philippine National” refers to citizens/partnerships/associations/corporations defined under Section 3(a) of R.A. No. 7042.
“Public Service” refers to persons defined as such under Section 13(b) of C.A. No. 146, as amended by laws and jurisprudence.
“Public Utility Vehicles (PUVs)” are internal combustion engine passenger/cargo vehicles for a fee, offering services to the public (including trucks-for-hire, UV express, PUBs, PUJs, tricycles, filcabs, taxis), but vehicles accredited/operating through transport network corporations are not considered PUVs.
“Seaport” means a place where ships anchor/tie up for shelter/repair/loading/discharge or related water-borne commerce activities, including land/functions defined in relevant authorities’ charters (e.g., PPA, SBMA, PHIVIDEC, Cebu Port Authority), local government units, and similar agencies.
“Sewerage Pipeline Systems” refers to operation/maintenance of sewerage pipeline systems for public health and safety as regulated by R.A. No. 6234 (as amended) and P.D. No. 198 (as amended).
“Sovereign Wealth Fund” means a juridical entity owned/controlled through ownership interests by a foreign state serving solely as a special purpose investment fund/arrangement for asset management and related activities using financial assets of a foreign state.
“Telecommunications” covers relaying/receiving voice, data, electronic messages, signals and similar communications by wire/radio/electromagnetic/spectral/optical/technological means under Section 3(a) of R.A. No. 7925, except passive tower infrastructure/components and value-added services as defined under R.A. No. 7925.
“Transmission of Electricity” means conveyance through the high voltage backbone system under Section 4(ccc) of R.A. No. 9136.
“Water Pipeline Distribution System and Wastewater Pipeline System” cover water distribution and wastewater pipelines (except desludging companies and septic tanks) for public health and safety regulated under R.A. No. 6234 and P.D. No. 198.

Administrative agencies: jurisdiction and functions

All references to the Public Service Commission in C.A. No. 146, as amended pertain to the administrative agencies to which its powers and duties were subsequently transferred and amended.
The recognized administrative agencies include Civil Aeronautics Board, Civil Aviation Authority of the Philippines, Department of Energy, DENR, DICT, Department of Transportation, Energy Regulatory Commission, Land Transportation Franchising and Regulatory Board, Land Transportation Office, Local Water Utilities Administration, Maritime Industry Authority, Metropolitan Waterworks and Sewerage System, National Telecommunications Commission, National Water Resources Board, Philippine National Railways, PPA, Toll Regulatory Board, and other congressionally or law-authorized agencies with similar functions.
The relevant administrative agency has jurisdiction and supervision over the relevant public service/public utility in accordance with its mandate, including supervision over franchise, equipment, and other properties, and it may use the public force as needed.
Government-owned or government-controlled entities that own or operate public services are regulated by the appropriate administrative agency the same way as privately owned services.
Any franchise or certificate necessary for operation of a public service is granted by Congress unless otherwise delegated by law to the relevant administrative agencies.
The relevant administrative agency regulates and supervises all public services under existing laws.
The relevant administrative agency must not impose nationality requirements on public services not classified as public utilities under its jurisdiction.

Certificates, rates, audits, compliance powers

A public service cannot operate in the Philippines without a valid certificate or authorization from the relevant administrative agency certifying that operation and authorization to do business promote the public interest in a proper and suitable manner.
Certification requires conditions that the services can be acquired by the Republic of the Philippines or an instrumentality, or the issuing local government unit, upon payment of just compensation under expropriation laws and rules.
The certificate or authorization is valid only for a definite period of time, and violation of the conditions results in immediate cancellation after hearing, without needing an express action by the issuing authority.
Extensions or amendments of certificates, including those to modify itineraries/time schedules, and authorizations to renew/increase equipment and properties, are subject to the same framework.
The rules do not require a new certificate where none existed prior to the effectivity of these rules.
The relevant administrative agency, after proper notice and hearing, may issue certificates and authorize operation within the Philippines.
Any certificate authorizing operation, management, or control of a public service is issued only to corporations, partnerships, associations, or joint stock companies constituted and organized under the laws of the Philippines, consistent with the eligibility requirement in these rules.
The relevant administrative agency may fix fair and reasonable individual or joint rates, tolls, charges, classifications, tariffs, or schedules, including commutation, mileage, kilometrage, and other special rates when public interest so requires.
The relevant administrative agency may approve proposed rates provisionally without hearing, but must hold a hearing within fifteen (15) days after provisional approval upon publication and notice to affected parties to ratify, change, modify, or alter the approved rates.
In cases where an operator’s equipment is used principally or secondarily to promote a private business, the net profits of the private business are considered in relation to the public service for purposes of fixing rates.
When public interest requires, the administrative agency may establish and enforce a rates-setting methodology using all relevant considerations, including efficiency, ensuring recovery of prudent and efficient costs and a reasonable rate of return for viable and efficient operation.
The relevant administrative agency may adopt alternative forms consistent with internationally accepted rate-setting methodology, must prescribe nondiscriminatory rates, and must ensure a reasonable price of the commodity or service.
Rate regulation is not mandated, and the framework does not amend or repeal deregulation policies under laws such as R.A. No. 7925, R.A. No. 8479, R.A. No. 9136, R.A. No. 9295, and R.A. No. 6957 (BOT Law), and does not affect regulations by the administrative agencies to deregulate rates.
The relevant administrative agency may fix and determine proper and adequate depreciation rates, requiring conformity with depreciation accounts and, when required, setting aside money in a depreciation fund.
The depreciation fund income is carried in the same fund, and the fund may not be expended except for depreciation, improvements, new constructions, extensions, or additions.
After notice and hearing, the relevant administrative agency may suspend or revoke a certificate if the holder fails for three (3) consecutive years the annual performance audit conducted by an independent evaluation team under agency metrics.

Unhearing investigations and records powers

The relevant administrative agency may investigate on its own initiative or upon written complaint and may require safe, adequate, and proper service.
The relevant administrative agency may enforce compliance with standards, rules, regulations, orders, and other requirements, and may prohibit or prevent a public service from operating without first securing the certificate.
The relevant administrative agency may require existing public services to pay certificate issuance fees under C.A. No. 146, as amended, and the Act, subject to revocation/cancellation of acquired rights after notice and hearing.
If the investigation finds violations of rates/tolls/charges/schedules/regulations/practices/acts/service, the relevant administrative agency may require the public service to pay the actual investigation expenses incurred.
The relevant administrative agency may assess reasonable costs in reference to the investigation.
The relevant administrative agency may require public services to keep books, records, and accounts sufficient to understand their business conduct and may require uniform accounting systems that conform to systems approved by the Commission on Audit.

Public utilities, reclassification, public interest business

A public utility is a public service that operates, manages, or controls for public use: (a) Distribution of Electricity; (b) Transmission of Electricity; (c) Petroleum and Petroleum Products Pipeline Transmission Systems; (d) Water Pipeline Distribution Systems and Wastewater Pipeline Systems including sewerage pipeline systems; (e) Seaports; and (f) Public Utility Vehicles.
Concessionaires, joint ventures, and similar entities that wholly operate, manage, or control for public use the enumerated sectors are public utilities.
No law-imposed legislative franchise requirement exists where the law does not require it.
No other person is deemed a public utility unless later provided by law.
Reclassification of a public service as a public utility may be recommended by the President to Congress upon recommendation of NEDA based on criteria: (a) regularly supplies/transmits/distributes through a network; (b) natural monopoly needing regulation when common good requires (with natural monopoly defined by lower single-entity cost); (c) necessary for maintenance of life and occupation of the public; and (d) obligated to provide adequate service on demand.
For review of reclassification upon request by the administrative agency, NEDA receives a written letter request and requires specified documents: profile of entities including investors/shareholders for three (3) years; General Information Sheet and audited financial statements for three (3) years filed with SEC and BIR among others; performance audit and rating for three (3) years; and a market study proving natural monopoly that is not older than two (2) years as of submission date.
NEDA may periodically issue lists of documentary requirements for review.
NEDA must provide feedback on document completeness within ten (10) calendar days, return incomplete documents without prejudice to resubmission, and commence review only upon complete documents.
After receipt of complete documents, NEDA must provide feedback on review to the requesting administrative agency within ninety (90) calendar days, after consultation with administrative agencies and the Philippine Competition Commission (PCC) or other relevant agencies.
NEDA may initiate review motu propio and recommend classification as public utility, coordinating with administrative agencies and requesting documents as necessary.
NEDA must consult relevant stakeholders as part of the review process.
NEDA submits findings and recommendation to the Office of the President.
NEDA considers factors including whether supply requires an infrastructure network of nodes and links; natural monopoly characteristics (economies of scale with declining average cost; high fixed cost; insufficient demand to support two or more firms; monopoly power not due solely to regulatory/legal restrictions); necessity for life/livelihood/employment; and requirement of uninterrupted supply to meet actual or potential demand.
A public service not classified as a public utility is treated as a business affected with public interest, so Article XII, Sections 17 and 18 of the 1987 Constitution apply to temporary takeover/direction in national emergency and to transfer to public ownership for national welfare or defense.

Unlawful acts and approvals for public service

It is unlawful for any individual, partnership, association, corporation or joint-stock company (including lessees, trustees, receivers appointed by court), or municipalities/provinces/other government department entities, to engage in public service business without first securing a certificate from the relevant administrative agency, except grantees of legislative franchises expressly exempting them from the certificate requirement and existing concerns expressly exempted by Section 13 of C.A. No. 146, as amended, either totally or in part.
A public service is prohibited from refusing or neglecting, when requested by the Postmaster General or authorized representative, to carry public mail on regular trips of any public land transportation service on agreed terms, or where no agreement exists, the Postmaster General requests the relevant administrative agency to fix a just and reasonable compensation, promptly fixed according to applicable Section 16 of C.A. No. 146, as amended.
A public service is prohibited from refusing or neglecting, when requested by the administrative agency to urgently use, deliver, or render the public service to avoid further loss on human/material/economic/environment during a state of calamity.
Without prior approval and authorization of the relevant administrative agency, a public service is unlawful to adopt, establish, fix, impose, maintain, collect, or carry into effect any individual or joint rates, commutation/mileage/other special rate, toll, fare, charge, classification, or itinerary, and the administrative agency approves only prudent and efficient rates that are not unjustly discriminatory or unduly preferential; approval requires reasonable notice to affected parties and a reasonable opportunity to be heard, with the public service bearing the burden of proof of prudence/efficiency.
Without approval, a public service is unlawful to establish or operate new units or extend facilities or make additions/general extensions, except that only assets useful and necessary for the public service provision form part of the rate base as determined and approved by the administrative agency; emergency and extraordinary cases may allow construction/implementation; the operator must file for approval within sixty (60) days from project implementation (without prejudice to final inclusion determination in the rate base); and the administrative agency may shorten the period in emergency cases certified by the administrative agency.
Without approval, a public service is unlawful to issue any share of stock without par value, but the relevant administrative agency must approve after hearing if satisfied it is made in accordance with law.
Without approval, a public service is unlawful to sell, alienate, mortgage, encumber, lease property/franchises/certificates/privileges/rights (or parts thereof), or to merge or consolidate property/franchises/privileges/rights (or parts), and approval is granted after notice to the public and hearing of interested persons when there are just and reasonable grounds (including for liabilities with more than one year maturity) and when not detrimental to public interest; when sale is approved, the consummation date is fixed in the approval order.
Approval is not required to prevent negotiation or completion before approval, and it does not prevent an ordinary-course sale/alienation/lease of public service property.
Approval for sale/alienation/mortgage/encumbrance/lease is required only for properties used and useful in delivering the required public service.
Without approval, a public service is unlawful to sell, alienate, or transfer shares of its capital stock to an alien if the result reduces Philippine nationals’ capital stock ownership in operation of a public utility to less than sixty percent (60%); such sale/alienation/transfer is void and provides sufficient cause for cancellation of the certificate.

Penalties for violations and defaults

When there is no specific fine or penalty in the administrative agency charter or special law for the particular public service, a public service that violates certificate terms or fails to comply with orders/decisions/regulations is subject to a fine of not lower than PHP 5,000 but not exceeding PHP 2,000,000 per day for every day the default/violation continues.
The relevant administrative agency may impose such fine after due notice and hearing.
If a lesser fine/penalty exists under the administrative agency charter or special law, the PHP 5,000 to PHP 2,000,000 per day range applies.
If collected rates exceed authorized rates, the relevant administrative agency may order a consumer refund in lieu of or in addition to fines/penalties under the Act or special law.
Administrative agencies must issue guidelines or incorporate them to determine excess rates and the prescriptive period to claim the refund.
Imposed fines are paid by the Government of the Philippines through the relevant administrative agency.
Failure to pay the fine or comply with an order to refund within the time specified in the administrative order is a sufficient reason to suspend the certificate until payment or compliance.
Payment may be enforced through appropriate court action in a court of competent jurisdiction.
The penalty remedy is cumulative and does not bar other remedies under C.A. No. 146, as amended, and the Act.
A public service corporation that performs prohibited acts, commits forbidden acts, or neglects/fails to do required acts is punished after notice and hearing by a fine not exceeding PHP 2,000,000, or imprisonment of not lower than six (6) years and one (1) day and not higher than twelve (12) years, or both, at court discretion.
For entities engaged in operating and managing critical infrastructure, service interruptions trigger duties to act on customer complaints within ten (10) calendar days from receipt of complaint or provide an action plan within a reasonable period; such entities must file monthly reports detailing service interruptions, complaints received, and actions taken on each complaint.
When entities involved are juridical persons, imprisonment is imposed on officers/directors/employees in managerial positions who are knowingly and willfully responsible.
Any person—including juridical persons, whether foreign or domestic—who knowingly and willfully causes public service corporations to do prohibited acts, participates in causing prohibited acts, or knowingly and willfully instructs/advises directs officers/agents/employees is punished after notice and hearing by a fine not exceeding PHP 2,000,000, or imprisonment of not lower than six (6) years and one (1) day and not higher than twelve (12) years, or both, at court discretion.
For juridical persons, imprisonment is imposed on knowingly and willfully responsible managerial officers/directors/employees.
Any person—including juridical persons—who knowingly and willfully neglects/fails to do required acts (or causes or joins others in such neglect/failure, or knowingly and willfully instructs/ directs officers/agents/employees) is punished after notice and hearing by a fine not exceeding PHP 2,000,000 or imprisonment of not lower than six (6) years and one (1) day and not higher than twelve (12) years, or both, at court discretion.
For juridical persons, imprisonment is imposed on knowingly and willfully responsible managerial officers/directors/employees.
Any person who destroys, injures, or interferes with apparatus or appliances owned/operated by or in charge of the relevant administrative agency or its agents is guilty of a misdemeanor and upon conviction is punished by a fine equal to the actual market value of the apparatus or appliance destroyed or injured plus a fine not exceeding PHP 2,000,000, or imprisonment of not lower than six (6) years and one (1) day and not higher than twelve (12) years, or both, at court discretion.
For computing actual market value, the relevant administrative agency considers value at the time of destruction or injury, subject to its rules and regulations.
Administrative agencies with quasi-judicial functions must incorporate the Act and these rules on fines and penalties into their existing guidelines for imposing violations.
Offenses under the Act and violations of administrative agency orders/decisions/regulations and certificate terms prescribe under Act No. 3326.

Hearings, contempt, subpoenas, evidence

Hearings and investigations before the relevant administrative agency are governed by rules adopted by that agency.
The relevant administrative agency is not bound by technical rules of legal evidence in its hearings and investigations.
The hearing officer may summarily punish contempt by a fine not exceeding PHP 2,000 or imprisonment not exceeding ten (10) days, or both, for misconduct interrupting proceedings, including refusing to be sworn or answer as witness when lawfully required.
The relevant administrative agency may request assistance of municipal or city police to enforce orders when necessary.
The relevant administrative agency may issue subpoenas and subpoenas duces tecum requiring witnesses and production of books, papers, tariffs, contracts, agreements, and other documents deemed necessary.
Subpoenas must be issued under the seal of the administrative agency, signed by one of the hearing officers, and may be served by any person of full age or by registered mail.
Disobedience to subpoenas constitutes indirect contempt and may be instituted according to the Rules of Court.
A person who neglects or refuses to answer lawful inquiry or to produce documents/things called for under subpoena commits an offense punishable, upon conviction by a competent court, by a fine not exceeding PHP 30,000 or imprisonment not exceeding six (6) months, or both.
Administrative agency officials and hearing officers may administer oaths in matters under the agency’s jurisdiction.
Witnesses complying with subpoenas are entitled to the same allowances for witness fees and mileage as witnesses attending regional trial courts in civil cases.
Obstructing the administrative agency or hearing officers, or behaving in a rude/disrespectful/disorderly manner, or orally or in writing being disrespectful/offending/insulting hearing officers during their official duties is punishable, upon conviction, by a fine not exceeding PHP 30,000 or imprisonment not exceeding six (6) months, or both, per offense.
In investigations or hearings, the relevant administrative agency may order depositions of witnesses residing within or without the Philippines using the Rules of Court conditions.
The agency may commission a clerk of the Regional Trial Court to take depositions when personal appearance is inconvenient/expensive; that clerk must designate deposition dates, reduce deposition to writing, certify and forward depositions to the administrative agency.
Parties must furnish stenographers for taking and transcribing testimony.
The relevant administrative agency may authorize attorneys/legal division chiefs (if lawyers) to hear/investigate and receive evidence; authorized officers must submit evidence received to the agency to enable it to render decisions.
Any order/ruling/decision may be appealed in the manner and within the period prescribed by the Rules of Court and pertinent laws.
The chief of the legal division or other attorneys represent the administrative agency in judicial proceedings; the Solicitor General represents the administrative agency when the hearing officer requests intervention for special reasons.
Sections 30, 31, 33, 34, 36, 37, and 39 of C.A. No. 146, as amended remain applicable to all relevant administrative agencies with quasi-judicial functions.

Fees, charges, and fee adjustments

Administrative agencies may collect from any public service (including public utilities) reasonable fees and charges and impose appropriate penalties and fines as provided by law.
Fees, charges, penalties, and fines may be adjusted to present value every five (5) years using the Consumer Price Index published by the Philippine Statistics Authority.
Adjustments/revisions must be consistent with existing rules and regulations, including Administrative Order No. 31, s. 2012 (“Directing and Authorizing All Heads of Departments, Bureaus, Commissions, Agencies, Offices and Instrumentalities of the National Government, Including Government-Owned and/or -Controlled Corporations, to Rationalize the Rates of their Fees and Charges, Increase their Existing Rates and Impose New Fees and Charges”) and later issued rules/regulations.
Recommendations by relevant agencies such as the Task Force on Fees and Charges under the National Tax Research Center may be considered in determining appropriate administrative fees and charges.

Critical infrastructure: telecom and declaration

A public service engaged in providing telecommunications services is critical infrastructure under the Act.
The President may declare a public service as critical infrastructure through an executive order as deemed necessary.
Once declared, provisions applicable to critical infrastructure apply prospectively to the public service.
NEDA may recommend to the President, motu propio or upon request of the relevant administrative agency, classification of a public service as critical infrastructure.
Administrative agencies must submit to NEDA a written letter requesting review, stating grounds and providing necessary data/documents, including information on the good/service, coverage, and possible impact on national security in case of discontinuance/incapacity.
Upon