What You Need to Know About the Latest Amendments to the Public Service Act

What’s New under the Public Service Act?

Amendments to Commonwealth Act No. 146

On March 21, 2022, Republic Act No. 11659 was signed into law. It effectively amended Commonwealth Act No. 146 or the Public Service Act (PSA), which was enacted in 1936. Below are the highlights of the Public Service Act, as amended:

The PSA defined the term ‘public utilities.’

Under the old PSA, the term ‘public utilities’ did not have a clear definition. With the amendments brought by Republic Act No. 11659, public utilities are now defined clearly as a public service that operates, manages, or controls for public use any of the following:

1. Distribution of electricity;
2. Transmission of electricity;
3. Petroleum and petroleum products pipeline transmission systems;
4. Water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems;
5. Seaports; and
6. Public utility vehicles (PUVs).

Public utilities also include concessionaires, joint ventures, and other similar entities that wholly operate, manage, or control for public use the sectors above.

The new law liberalized foreign equity restrictions on public utilities.

Prior to the enactment of Republic Act No. 11659, the franchise, certificate, or authorization for the operation of a public utility was restricted to Filipino citizens or to corporations/associations organized under Philippine law that are at least 60% owned by Filipino citizens. In other words, public utilities were subject to a 40% foreign equity ownership limit.

As public utilities are now defined clearly, public services not otherwise classified as public utility and/or critical infrastructure are no longer covered by said foreign equity restriction.

The President may recommend to the Congress the classification of a public service as a public utility.

Upon the recommendation of the National Economic and Development Authority (NEDA), the President now has the power to recommend to Congress what public service classifies as a public utility.

The PSA enumerates the following criteria that shall be the basis for said classification:

1. The person or juridical entity regularly supplies, transmits, and distributes to the public through a network a commodity or service of public consequence;
2. The commodity or service is a natural monopoly that needs to be regulated when the common good so requires;
3. The commodity or service is necessary for the maintenance of life and occupation of the public; and
4. The commodity or service is obligated to provide adequate service to the public on demand.

The PSA prohibits foreign state-owned enterprises from investing in ‘critical infrastructures.’

The new law prohibits foreign state-owned enterprises from owning capital in any public service classified as public utility or critical infrastructure. This prohibition, however, applies only to investments made after the effectivity of Republic Act No. 11659.?

The law defines ‘critical infrastructure’ as any public service which owns, uses, or operates systems and assets so vital to the Philippines that the incapacity or destruction of such systems or assets would have a detrimental impact on national security.