Bill opening public utilities to competition, foreign ownership hurdles House

The House of Representatives on Friday approved on third and final reading a bill that will clarify the definition of public utilities paving the way for the opening of certain industries to more competition.

With 135 affirmative and eight negative votes, House Bill (HB) 5828 won third reading approval despite warnings issued by oppositors that its

enactment and implementation will be challenged in court for being unconstitutional.

Albay Rep. Edcel Lagman decried the measure for ostensibly providing “a statutory definition of a public utility but which is actually a subterfuge to allow foreigners to own public utility enterprises without complying with the citizenship requirement imposed by the Constitution.”

HB 5828 authored by Reps. Gloria Macapagal Arroyo (Lakas-CMD, Pampanga); Joey Sarte Salceda (PDP Laban, Albay); Arthur C. Yap (Lakas CMD, Bohol); Feliciano Belmonte Jr (LP, Quezon City); and Manuel Monsour del Rosario (PDP-Laban, Manila) consolidated five measures that seek to amend Commonwealth Act No. 146 (Public Service Act).

Under the bill, public utility refers to a “person that operates, manages and controls for public use” any of the following: distribution and transmission of electricity as defined under the Electric Power Industry Reform Act (EPIRA) of 2001 and water pipeline distribution or sewerage pipeline systems as defined by the law creating the Metropolitan Waterworks and Sewerage System.

Foreign ownership HB 5828 also provides a mechanism for rate fixing that allows a reasonable rate of return to attract investments into public utilities.

It provides that the maximum rate of return shall be “equal to the post-tax weighted average cost of capital for the same or comparable business computed using established methodologies such as the capital asset pricing model.”

The bill also mandates that income tax shall be allowed as a cash outflow for “rate determination purposes.” However, the provision will not “bar the application of performance-based rate regulation if government deem it more efficient and considered to protect public interest.”

The Philippine Competition Commission, under the bill, is mandated to “conduct regular studies on whether regulation is warranted in a sector and submit its recommendation to Congress.”

Reps. Antonio Tinio (ACT Teachers Partylist); Emmi de Jesus (Gabriela Partylist) and Arlene Brosas (Gabriela Partylist) agreed that the bill violates the limitations set by the Constitution on foreign ownership of businesses in the country.

Brosas said supporters of the bill preferred the easier way to get around the Constitution, knowing that Charter change would be more difficult to pursue.

Lagman said that Yap, principal author and sponsor, has admitted repeatedly during the deliberations that once House Bill No. 5828 is enacted into law foreigners will be allowed to own public utilities.

“In fact, House Bill No. 5828 has deleted the requisite Filipino ownership requirement of public utilities under the Public Service Act, which is identical with Section 11 of Article XII of the Constitution,” the opposition solon said.

He pointed out the concept of ownership “was deliberately deleted” while it limited the definition “to the operation, management and control of public utilities even as there can be no operation, management or control without a qualified owner.”

“The bill also deletes from the enumeration of public utilities traditional public utilities like common carriers and telecommunications companies which are presently operating with controlling Filipino ownership,” Lagman stressed.

The Albay lawmaker lamented that he presented amendments that could “assure compliance with the citizenship requirement of the Constitution” but all were voted down.