Leaders of the House of Representatives said the passage of the bill providing for the definition of “public utility” is needed to end the unreliable and expensive consumer goods and services in the country, as some quarters warned against the implications of the amendatory legislation for a new Public Service Act.
House Committee on Ways and Means Chairman Joey Sarte Salceda and House Committee on Economic Affairs Chairperson Sharon Garin made the assurance even though some of their peers questioned the legality of House Bill 78, which passed on second reading last Tuesday.
Garin, sponsor of the bill, assured the public that safeguards are well in place under the measure, which allows new players to invest in the Philippines.
“[Important] safeguards [under the bill], the President can intervene in any transaction based on national security, reciprocity clause, strengthening of powers of regulating agencies, restrictions on labor, increased penalties,” said Garin in a text message to BusinessMirror.
For his part, Salceda said PSA amendments will allow full foreign ownership in transport, power and communications, spelling the “beginning of the end” of unreliable and expensive consumer goods and services.
Salceda said the passage of amendments to the Public Service Act, which he principally authored, meant the “beginning of the end for unfair protection” across sectors which will no longer fall under the definition of “public utilities” once House Bill 78 hurdles Congress and is signed by the President.
84-year-old law
The bill, which seeks to amend the 84-year-old Public Service Act, seeks to provide a clear statutory definition of a public utility. This means that a narrower set of services, including electricity distribution, electricity transmission, and water pipeline distribution or sewerage pipeline system, will be subject to foreign equity ownership restrictions imposed on public utilities.
The bill distinguishes “public service,” whose definition under the law is retained, from “public utility.”
Salceda said competition and foreign investment are inhibited because limitations that should only apply to the operation of a public utility are 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.
The lawmaker said the key to fixing this problem is to develop a clear statutory definition of public utility.
“Just to point out how absurd keeping the PSA is, [even an] ice plant [is covered by] foreign ownership restrictions. Our definition of what a public utility is goes back to the Commonwealth Act No. 146, which was passed in 1936. We were not yet independent then. And we are currently letting it govern how we should compete in the current economy. We should have amended the law decades ago, just because of the sheer absurdity of sticking with Commonwealth-era economic restrictions. Now, we are amending it for an even bigger reason: to end unfair protection and to enable economic dynamism,” Salceda said.
Philippine laws, he added, “are riddled with unfair and irrational protection for so many sectors. It’s the consumer who pays the price – bad, expensive, unreliable service. Meanwhile, protected sectors grow complacent and they stagnate. Unfair protectionism brings economic stagnation. In fact, many of our protectionist policies are so irrational that among some 80 countries surveyed by the OECD, we were found to be the most restrictive economy in 2018. How can you bring in investments and create jobs, if your law says you don’t want their investments?”
Public utilities, as stated in Article 12, Section 11 of the 1987 Constitution, must be solely operated by firms that are 60 percent owned by Filipinos.
“However, the charter does not define [public utility]. Currently, our definition of public utiltiy is the PSA and other jurisprudence issued by the Supreme Court,” Garin said.
Violative
However, lawmakers on Thursday said the passage of the “New Public Service Act” is “fatally” violative of the 1987 Constitution.
Albay Rep. Edcel C. Lagman said it allows traditional public utilities like transportation and telecommunication companies to be owned by aliens or corporations wholly owned by foreigners.
Garin insisted these amendments to PSA are within the boundaries of the legislative powers of the Congress.
“This is contrary to Section 11 of Article XII of the Constitution which reserves the ownership, operation, control and management of public utilities to Filipino citizens or to corporations or associations at least 60 per centum of whose capital is owned by Filipinos,” Lagman said.
Under Section 11, Article XII of the Constitution, “No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens x x x The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.”
In Lagman’s view, “the subterfuge offensive to the Constitution is foisted by making a distinction between ‘public utility’ and ‘public service’ where enterprises categorized under the latter are unconstitutionally exempt from the nationality or citizenship requirement of the Constitution.”
According to Lagman, there is no distinction between “public utility” and “public service” as ruled by the Supreme Court in several cases.
Cannot amend
Lagman explained that the proposed “New Public Service Act,” if enacted into law, is a mere statute which cannot amend the fundamental law.
“No statute can amend the Constitution, and the fundamental law can only be amended through a constitutional amendment proposed by a constituent assembly, constitutional convention or by people’s initiative under Article XVII of the Constitution,” he said.
“In fact, there are many pending Resolutions seeking the amendment of the economic provisions of the Constitution, including Section 11 of Article XII, through a constituent assembly,” he added.
He said these resolutions manifest the clear intention of amending the Constitution through a constituent assembly, not through an act of the Congress as a legislative assembly. Gabriela Rep. Arlene Brosas said PSA amendments will set the stage for the total foreign control of several vital sectors and services in the country, including the media industry.
“This measure, if passed, would lead to foreign takeover of public transport systems, internet services, media and other sectors at the expense of ordinary consumers who will pay costlier services,” she added.
Neda’s mandate
The PSA bill, as approved on second reading, also charges the National Economic and Development Authority (Neda) Secretariat, in consultation with the Philippine Competition Commission (PCC), with recommending to Congress the classification of public service as a public utility on the basis of these criteria:
- the person regularly supplies and directly transmits and distributes to the public through a network a commodity or service of public consequence;
- the commodity or service is necessary to the public and a natural monopoly that needs to be regulated when the common good so requires;
- the commodity or service is necessary for the maintenance of life and occupation of residents; and
- the commodity or service is obligated to provide adequate service to the public on demand.
Source: https://businessmirror.com.ph/2020/02/21/public-utility-law-may-spark-legal-challenge/