PART Iv PUBLIC UTILITIES “Bvery public utility has two aspects, its public and, if we may use language liberally, its private. In its public aspects it touches its patrons and its employees. In its private, it touches all other members of the community in which it operates. In the latter aspect it is subject to all those duties and responsibilities under which every citizen lies. It must conduct itself so as not to interfere unduly with the rights of others. It must comply with the laws relating to public health and public safety. It must not commit crimes. It must be a law-abiding member of the community.”! “Public use’ means the same as ‘use by the public.’ The essential feature of the public use is that it is not confined to privilege individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look not only the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law compels the power to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge of the character of the use is whether the public may enjoy it by right or only by permission,”? ., The business and operations of a public utility are imbued with public interest. In a very real sense, a public utility is engaged a 18, i” City of Manila v. Manila Railroad Company, G.R. No. L-11639, January “The United States v. Tan Piaco, et al., G.R. No. L-15122, March 10, 1920. 765 =ymiALs OF TRANSPORTATION AND PUBLIC ia ae UTILITIES LAW ie service — providing basic commodities and se; in pl eis, ea pie For ‘a public utility submits to the rogulation of government authority 2 ale under certain business prerogatives, including the amoun, ane es that may be charged by it. It is the imperative duty of the State t interpose its protective power whenever too much profit, become the priority of public utilities.”* Republic of the Philippines v, Manila Electric Company, G.R. No. 141816 dl 9, 2003 Blectric Company, G. CHAPTER 21 PUBLIC SERVICE REGULATIONS 1. CONCEPT. A “public utility” is a business or service engaged in regularly supplying the public with some commodity Gr service of public consequence such as electricity, gas, water, transportation, telephone, or telegraph service.' The term implies public use and service.* ‘a. In another case, the Supreme Court explained that public utilities are privately owned and operated businesses whose cervices are essential to the general public. They are enterprises that specially cater to the needs of the public and conduce to their comfort and convenience. As such, public utility services are impressed with public interest and concern. The same is true with respect to the business of common carrier which holds such a peculiar relation to the public interest that there is imposed upon it the right of public regulation when private properties are affected with public interest, hence, they cease to be juris privati only. When, therefore, one devotes his property to a use in which the public has ‘an interest, he, in effect grants to the public an interest in that use, and must submit to the control by the public for the common good, to the extent of the interest he has thus created.”* 1.01. MEANING OF PUBLIC SERVICE UNDER PSA. ‘The term “public service” is therefore included in the broad concept of public utilities, Section 13 of Commonwealth Act No. 146, as amended otherwise known as the Public Service Act, provides the definition of public service: National Power Corporation v. Court of Appeals, et al GR. No, 112702, September 26, 1992, 279 SCRA 408, citing 64 AM. JUR. 649 cited as footnote No. Lin Albano v. Reyes, G.R, No. 83551, July 11, 1988, 175 SCRA 264, 270 “Metropolitan Cobu Water District v. Adala, G.R. No, 68194, July 4, 2007, 3Kilusang Mayo Uno Labor Center v. Hon. Jesus B. Garcia, Jr. GR No 115381, December 23, 1984, citing Pantranco v. Public Service Commision, 70 Phil 221 161UBLIC RANSPORTATION AND Pl 168 ESSENTIALS OF ric inips LAW public service” includes every b) The term “publ hilippines, for hire or compensation, Sea fmited ‘clientele, whether permanent, Seeasional or accidental, and done for general business ccnastcen any common carrer, railroad, street rallway, purpeenralway, eubway motor vehicle, efther for freight ‘or passenger, or both with or without fixed route and whether may be its classification, freight or carrier wnece of any class, express service, steamboat or Steamship line, pontines, ferries, and water craft, fengaged in the transportation of passengers or freight or both, shipyard, marine railways, marine repair shop, [warehouse] wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat End power water supply and power, petroleum, sewerage system, wire or wireless communications system, wire or Wireless broadcasting stations and other similar public ‘services: Provided, however, That a person engaged in agriculture, not otherwise a public service, who owns. aemotor vehicle and uses it personally andlor enters into a special contract whereby said motor vehicle is offered for hire or compensation to a third party or third parties engaged in agriculture, not itself or themselves = public service, for operation by the latter for a limited time and for a specific purpose directly connected with the cultivation of his or their farm, the transportation, processing, and marketing of agricultural products of ‘such third party or third parties shall not be considered as operating a public ‘service for the purpose this Act. a. Elements. Based on the above-definitions, the following are required for a person to be considered a public service: (1) ‘The person must own, operate, manage, or control in the Philippines public services which may include distribution of goods or rendering of services to the public (such as “common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, shipyard, marine railways, marine repair shop, [warehouse] wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric ight, heat and power water supply and power, petroleum, seweragesystem, wireor wireless communications system, wire or wireless broadcasting stations”); (2) the ownershiP, PART IV — pr cont AETV = Puntic umes — Public Servier Regulations . sation, management or control must be for hire sen te ir cin service include the following: (1) it is not required that the business sergemanent beeause the operation may be"permasent ocemienal is Pyecidental"; (2) The business may be with general or limited otjentele. With respect to carriers, they are considered public servi GG) they transport either freight or passenger or both; (2) their i evice is with or without fixed route; and (3) their classification may sorreight oF carrier service of any class, express servi br steamship Tine, pontines, ferries, and water craft. a b. General Business Purpose. Public service under the Public Service Act requires that the entity must be engaged in the activity for a general business purpose. The Supreme Court explained the concept of business in Bureau of Telecommunications » The Public Service Commission’ as follows: “Caro vs. Rilloraza, deseribed a ‘business’ as ‘the means by which a party habitually or regularly earns a livelihood of some gain’ whereas in Rollector of Internal Revenue vs. Manila Lodge, we declared that ‘the plain, ordinary meaning of business is restricted to activities or affairs where Grofit is the purpose, or livelihood is the motive’ Substantially to the same Pffect is Collector of Internal Revenue vs. St. Paul's Hospital, in which it was, held that business is ‘that which occupies time, attention, and labor of men jor the purpose of livelihood or proft."* c. Thus, Supreme Court ruled that although the Bureau of Telecommunications (BOT) operated a telephone system, it is neither a “public service” nor engaged in the operation of telephone services for “general business purposes,” as the two terms are used in the Public Service Act.” The BOT was created Executive Order (EO) of the President that was issued according to law. The fact that the EO transferred to the Bureau all the personnel, powers, functions, activities, appropriations, properties, equipment, supplies, records, and documents pertaining to or intended for the electrical communication service under the Bureau of Posts, the duties and “Section 13(b), PSA. *G.R, No. L-27412, October 28, 1969. "Tbid. "Bureau of Telecommunications -y. The Public Service Commission, G:R, No. 1.2412, October 28, 1969.RTATION AND PUBLIC 770 ssENTIALS OF TRANSPORTS sonsot which, as wellas those enumerated therein tothe By tai alto, donot indicate or suggest that the latter at ote for general business purposes.” It was noted that thy been reetes are much lower than those of the existing telephong aon ay and, although 20% to 30% of its telephone subscribers carpe abucrbers the services given thereto are merely incident Prats svernmental function, to meet the telecommunication needy to the'Government and the people. There was no allegation in the cemplaine of the telephone company that the BOT was engaged in ‘Sleshone operation, either for the purpose of gain or profit, or as q tees of livelihood. In fact, the BOT was not even authorized to use sens me, or any part thereof, and its expenses were met through annual appropriations made by Congress. Indeed, the Bureau had ho corporate existence and it was discharging a “governmental or State responsibility” or functions, which, as such, was not business, d. In Cruz De Syquia v. Board of Power and Water Works,* certain tenants filed three separate complaints with the then Board of Power and Waterworks (BPW) charging petitioner as administrator of the South Syquia Apartments at Malate, Manila with the offense of selling electricity without permit or franchise issued by BPW because the petitioner allegedly billed complainants various specified amounts for their electricity consumption at their respective apartments in excess of the Meralco rates authorized by the BPW. The Court ruled that the BPW acquired no jurisdiction over petitioner's contractual relations with respondents-complainants as her tenants, since petitioner is not engaged in a public service nor in the sale of electricity without permit or franchise. Since the petitioner did not operate, manage or control the power plant and furthermore, and since electricity is directly and uninterruptedly supplied to the ‘end-user, it cannot be correctly claimed that the petitioner is selling electricity nor can she be considered a middleman in the electric power business. The question of the proportionate amount that each tenant should bear for the additional electricity cost for common facilities of the apartment building used by the tenants in common is purely civil in character (involving the conditions of lease between landlord and tenant), to be adjudged under the applicable civil Jaws exclusively by the regular courts of general jurisdiction and is beyond the jurisdiction of respondent board. *G.R. No. 1-42789-85, November 29, 1976, Part ty —pusite ur Chapter 31 —PabeSrvi Repone ™ e. _ In Luzon Stevedoring Co., Inc. v. Public Service Com- ission,* the petitioners were engaged in stevedoring or lightera fp interisland service which consists of hauling cargoes such sugar, oil, fertilizer and other commercial commodities which are feuded in their barges and towed by their tugboats from Manila to ‘enrious points in the Visayan Islands, particularly in the Provinces Sf Negros Occidental and Capiz, and from said places to Manila. For this service, respondents charge freightage on a unit price with Fates. The Supreme Court explained that the respondent was a Tublic wility even ift was serving a limited clientele {, Water districts fall under the term “public utility” because jts primary function is to construct, maintain and operate water Weservoirs and waterworks for the purpose of supplying water to the Fphabitants, as well as consolidate and centralize all water supplies ‘and drainage systems in the Philippines.” 1.02, NOT A PUBLIC UTILITY BY LAW. Laws may expressly acknowledge that a particular activity is not a public Quility. For instance, under R.A. 9136 otherwise known as the Electric Power Reform Act of 2001 (or EPIRA law), power generators such as independent power producers are not considered public ‘utilities. Section 29 of EPIRA provides that “any law to the contrary ‘notwithstanding, supply of electricity to the contestable market ‘Shall not be considered a public utility operation.” The Supreme Court En Banc explained in a recent case: “Under the EPIRA, the generation of electric power, a business ‘affected with public interest, was opened to private sector and any new generation company is required to secure a certificate of compliance from the Energy Regulatory Commission (ERC), as well as health, safety and environmental clearances from the concerned government agencies. Power generation shall not be considered a public utility operation, and hence no franchise is necessary. Foreign investors are likewise allowed entry into the electric power industry. xxx With the advent of privatization of the electric power industry which resulted in its segregation into four sectors — generation, transmission, re emission functions distribution and supply — NPC's generation and transmission wwere unbundled. Power generation and transmission were treated x io. ‘September 16, 1953. “ON 8 Sti Maa, GX No, 16884 Say 62007‘spORTATION AND PUBLIC _ ESSENTIALS OF Try rv1BS LAW se by dinine rules under che new crs, goer ed by disth® National Transmission Coreen ‘i vee ‘and operate the transmission me isco) wos crea m ant reviously under NPC. While the yi ean functions P ile the oi nary jectrification Programs throyg NEC canines 2 Undo rete Iiguidate the assets and linbiltiee eas al of SPUG, PS RPC" separate & framework intros an Stevedoring Co. Inc. v. Public S Laepurt observed that “the legislature Cerprise to be a public utility when its ot inherently such ited that the contrary is also uae that is, the legislatw declare a company or enterprise ag than he roa engaged te operation of publi utility ota puorenty sch. It is submitted that the specific provision in law that states that an entity is not a public utility is not bindin, law thet at “Gout, he Supreme Court may declare tht the on the Supreme islature that a business isnot a public ; determination tp the intent of the Constitutional provisions a Bublie Utility. It should be noted that there are certain provisions eae Constitution that expressly apply to public utilities, like the of eho imiting foreign ownership of public utilities under Section, aroale Xt ofthe Constitution. The framers of the Constitution, 21 Atvel he previous Constitutions, had a concept or definition of public utilities in mind when they adopted the provision. Thus, if a Fhecial law will declare that common carriers are not public utilities snefithe result of removing common carriers from the operation woe tuon 1, Article XII of the Constitution, then it is submitted that the Supreme Court may declare that the same provision as caonetitutional because the clear intent of the members of the Constitutional Conve wntion is that common carriers are included the concept of public utilities under the same provision."* . ce eae cot line of reasoning, the re-classification of ear me ser ly regarded as public utility into an entity that in not public wsity ‘through a concession agreement or any ‘2 government instrumentality, is not binding on the initiative for Dialogue ———— ee Legal Ser view, ne, IDEALS, Ine) fav Power Sector Assets and Lisblitios Mane ent poration (PSALM), GR No, 12088, Ostber 8, 2012 Z - GR No. 1-548, September 16,195 J ernay Tis ie i lar from the Records ofthe Constitutional, Convention ‘Constitution Writers, 1995 Ed., pp. 849-863. See eee ” courts and may be declared unconstitutional, Besides the mere Covtfpat service is rendered only under contract does not prevent a fac Cony from being considered a public tility. ""The mere fact that comppncessionaire operates under a contract doesnot remove it from public utility if itis inherently so. It is up to the Court the concept o! o come based on the evidence if the concessioner is inherently such tovablic utility CONSTITUTIONAL PROVISIONS. Article XII of the stitution entitled “National Economy and Patrimony” ‘e following provisions that concern public utilities: 1987 00! includes the Section 1. The goals of the national economy are a more equitable distribution of opportunities, income: 2nd wealth; a sustained increase in the amount of goods and services produced by the nation for the senefit of the people; and an expanding productivity 0s tie Key to raising the quality of life for al, especially the underprivileged. ‘The State shall promote industrialization and full ‘employment based on sound agricultural ‘development cg agrarian reform, through industries that ma full and efficient use of human and natural resource nd aiNich are competitive in both domestic and foreign Warkets. However, the State shall protect Filipino siterprises against unfair foreign competition and trade practices. In the pursuit of these goals, all sectors of the economy and all regions of the country shall be ven optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective: organizations, shall be encouraged to broaden the base of their ownership. Section 6. The use of property bears a social func- tion, and all economic agents shall contribute to the common good. Individuals and private groups, includ- ing corporations, cooperatives, ‘and similar collective organizations, ‘shall have the right to own: establish, and Taam Siwvedoring Co, ne. v.Publie Service Commission, G.R, No. l-5459, September 16, 1958 citing 43 Am. Jur. 578.—————_—S—s sts eee Jp-TRANSPORTATION AND PUBLIC m ESSENTIALS OF Tes LAW « ic enterprises, subject to the duty of the porate econ aistributve justice and to intervene Stale jhe common good so demands: ‘section 11. No franchise, certificate, or any other form af authorization for the operation of a public utility torr ore granted except to citizens of the Philippines sae e sporations of associations organized under or iene of the Philippines at least sixty per centum of areas capital is owned by such citizens, nor shall such Taesnise, certificate, or authorization be exclusive in vaneter or for a longer period than fifty years. Neither Shatrany such franchise or rightbe granted except under the condition that it shall be subject to amendment, sNeration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. ‘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. Section 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest. Section 18. The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government. Section 19. The State shall regulate or prohibit ocoratiey when the public interest so requires. No inations in restraint of t i i combination ay rade or unfair competition Section 22. Acts which circumvent o1 r negate any of the provisions of this Article shall be considered inimical to the national interest and subject to criminal and civil sanctions, as may be provided by law. PART IV —PUBL Chapter 21 Pale Sec equations 7 2.01. CONSTITUTIONAL LIMITATIONS. Based on the oted Constitutional above quoted ( Provisions, the limitations imposed by ape Constitution on public utilities include the following: a se franchise, cortifesta, or any other form of authorization for the operation of'« public tity shall be gzanted except to citizens of the Philippines or to corporations br associations organized under the laws of the Philippines fat least sixty per centum of whose capital is owned by such citizens; (2) No franchise, certificate, or authorization shall be exclusive in character; (8) No franchise, certificate, or authorization shall be for a longer period than fifty years; (4 _ A franchise or right shall be granted only under the condition that it shall be subject to amendment, alteration, or cepeal by the Congress when the common good so requires; (5) The State shall encourage equity participation in public utilities by the general public; (© The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital; (All the executive and managing officers of such corporation or association must be citizens of the Philippines; (®) In times of national emergency, when the public interest so requires, the State may, during the emergency and ‘Uunder reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or ‘business affected with public interest. (®) The State may, in the interest of national welfare or defense, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government; (10) The State shall regu when the public interest so requires; and (11) Combinations in restraint of trade oF w tition are not allowed. gulate or prohibit monopolies infair compe-ALS OF TRANSPORTATION AND PUBLIC ie ESSENTIALS ON UTILITIES LAW REGULATORY AGENCIES. The basic law the governs public service is the Public Service Act, Commonwealth Aer No. 146 as amended otherwise known as the Public Service Act, The No. t tutionality of the Public Service Act was upheld in Pangasinay Transportation Company v. Public Service Commission"* and jn caer levedoring Co, Inc. v. Public Service Commission,"* where jt was explained: 3. sere there serious doubts, the courts should still be reluctant tp invalidace the Public Service Lavr or any provision thereof. Although the eaeleture cannot, by its mere declaration, make something a public utili serena in face such, the public policy ofthe state as announced by the Weistature will be given due weight, and the determination ofthe legislature tice particular business is subject to the regulatory power, because the public welfare is dependent upon its proper conduct and regulation, will nt Lightly be disregarded by the courts. (61 C. J.5.)"” a. However, many of its provisions specifically those concerning the organization and administration of the Public Service Commission (PSC for short) have been repealed by subsequent issuances. The powers of the PSC are now distributed among the different government agencies. These include the following: (2) Department of Transportation — regulation of national railroad carriers and other carriers through its attached government agencies; (2) Land Transportation Franchising Regulatory Board (LTFRB) — land transportation; nae (3) The Land Transportation Office — i drivers and motor vehicles; aac (4) Maritime Industry Auth = ane try Authority (MARINA) — water (5) Philippine Coast Guard — concerned wit i water transportation. amet : (6) National Telecommunications Commission — communication utilities and services, radio communications rystems, wire or wireless telephone and telegraph systems, "70 Phil, 221 “G.R. No. L-5458, September 16, 1 won, i 16, 1953, PART IV — PUBLIC UTILITIES Chapter 21 — Public Service Regulations a radio and television broadcasting syste ie public utilities. systems and other similar (1) _ Energy Regulatory Commission — electri distribution companies. sion — electric or power (8) National Water Resources Council — water resources. (® Civil Aeronautics Board — air transportation particularly its economic aspects. (10) Civil Aviation Authority of the Philippines — undertakes the maintenance and operation of airports and other similar facilities; registers aircrafts and other incidents concerning the same and provides safety regulations in air transportation. (11) Philippine Ports Authority — wharves and ports. (12) Local Water Utilities Administration — water districts. (18) Toll Regulatory Board — toll operators. b. There are also specific laws that apply to the different agencies and the different public utilities that they operate. These Mull be cited and discussed in the next Chapter; some of these laws gre part of the Appendices of this work. It is well to point out in this Gonnection that the authors tried to limit, as much as possible, the discussion in this Chapter to rules and doctrines that are of general application. There are many cases that are cited below that involved the Public Service Commission (PSC) but the general rules in those cases apply to the agencies that succeeded the PSC unless their specific governing law provide otherwise. 4. BASES OF REGULATION OF PUBLIC UTILITIES. The police power of the State justifies the regulation of public utilities, In other words, regulation of publie utilities is founded upon the police powers of the State and statutes prescribing rules for the control and regulation of public utilities are ‘considered valid exercise thereof. a. The exercise of police power is justified because whenever private property is used for a public purpose and is affected with Public interest, it ceases to be juris privati only and becomes Subject to regulation. The regulation is to promote the commonALS OF TRANSPORTATION AND PUBLIC 78 ESSENT! {UTILITIES LAW good. Submission to regulation may be withdrawn by the owner Good Kinuing use; but as long as tse of the property in feoae the same is subject to public regulation." bb, ‘The regulation of the use and ownership of public utilities is in the exercise of the plenary police power of the State for the ie umotion of the general welfare.” Section 6 of Article XII of the 1987 Constitution recognizes the existence of that power when it provides: ‘SEC. 6. The use of property bears a social function, and all economic agents shall contribute to the common ‘good. Individuals and private groups, including corpo- ations, cooperatives, and similar collective organiza- tions, shall have the right to own, establish, and operate ‘economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the ‘common good so demands. OWNERSHIP OF PUBLIC UTILITIES. Ownership seen is subject to regulation by the State. Concerned rere rent agencies may impose certain requirements to persons fies who wish to operate as public utilities. This may include capitalization requirement and other similar impositions. ~~. In this jurisdiction, ownership of public utilities is even je to the limitation under Section 11 of Article XII of the Constitution. The Constitutional provision states that “no francl certificate or any other form of authorization for the operation ofa 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 (60%) of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character for a longer period than fifty years.” 6.01. ‘TIME WHEN OWNERSHIP MUST COMMENCE. It was explained in Tatad v. Garcia, Jr,” that “even the mere formation of a public utility corporation does not ipso facto Republic of the Philippines v. Manil . eis ot pei la Electric Company, G.R. No. 14181 **Philippine Long Distance Telephone Comy {tional Telecommunica- POA oermltcin sn hn tessa tier se aasa” "ent om 248 SCRA 436 (199). PART IV —PUBLI nA Suse umes ™ characterize the corporation as one operating a public utility. The cement for determining the requisite Filipino nationality in when the entity applies for a franchise, certificate or any other form of “Mhorization for that purpose."* This issue was previously resolved an'people v. Quasha™ where the Supreme Court ruled: Plausible though it may appear at fist glance, this opinion loses atid once itn noted that itis predated onthe eroncoun assumption vale constitutional provision just quoted was meant o prohibit the mere rpatation of publie wtlity corporation without 60 percent of it capital ‘igmned by the Filipinos, a mistaken belief which has induced the lower bein tp Uhat the accused was under obligation to disclose the whole truth cou the nationality of the subscribed capital stock of the corporation by about ing Uhat Baylon was a mere trustee or dummy of his American co- revealrators, and that in not making such disclosure defendant’ intention incorPrrarcumvent the Constitution to the detriment ofthe public interests wi teary tothe lower court's assumption, the Constitution does not prohibit Certrere formation of a public utility corporation without the required formation of Filipino capital. What it does prohibit is the granting of a form tice or other form of authorization forthe operation of « public utility franchvsoration already in existence but without the requisite propartion of Filipino capital. This is ‘obvious from the context, for the constitutional provision in question qualifies the terms ‘franchise’, ‘certificate’, or ‘any Prove iopm of authorization’ with the phrase ‘forthe operation of a public arco thereby making it clear thatthe franchise meant ie notthe“primary franchise’ that invest a body of men with corporate existence but the ‘secondary franchise’ or the privilege to operate as a public utility: after the corporation has already come into being. If the Constitution does not prohibit the mere formation of a public utility corporation with the alien capital, then how can the accused bs charged with having wrongfully ‘intended to circumvent that fundamental ea gs not revealing in the articles of incorporation that, Baylon was, mere trustee of his American eo-incorporation and that fo subscribed eapital stock of the corporation was ¥ ¥ aes Temation of the corporation such revelation was not essential, and ‘the Corporation Law does not require it. Defendant was, ‘therefore, under no obligation to male it. In the absence of such obligation and ofthe ‘alleged wrongful intent, defendant cannot ‘be legally convicted which he is charged. that reason the s wholly American? For the ‘of the crime with corporation with 60 per tis urged, however, that the formation ofthe corporation cent of its subscribed capital stock appearing in ‘the name of Bae a) ‘an indispensable preparatory step to the subversion of the constitution: [People Quasha, G.R. No. 1-6065, June 12 1988, 98 Pit 338, G,R. No. L-6055, June 12, 1988.oF TRANSPORTATION AND PUBLIC ~ pela UTILITIES LAW bition and the laws implementing the policy expressed therein, 1, prohibition and ct. For a corporation to be entitled to operate ie vie no er pecesery that be organized with 60 percent of seas tii lpnoe fom the start, A corporation formed with capital hy, ntirely alien may subsequently change the nationality ofits capital throug, say af hares to Filipino citizens, Conversely, a corporation original, Hae vith Pilipino capital may subsequently change the national stay, sorte cial through transfer of shares to foreigners. What need is thy Shaatac a eorporation that intends to operate a public utility to have, at the aren rss formation, 60 per cent of its capital owned by Filipinos alone? That condition may anytime be attained thru the necessary transfer of Seeks. The moment for determining whether a corporation is entitled tg operate as a publi utility is when it applies for a franchise, certificate, o any other form of authorization for that purpose. And that can be done after the corporation has already come into being and not while it is still being formed. And at that moment, the corporation must show that it has complied rot only with the requirement of the Constitution as to the nationality of its capital, but also with the requirements of the Civil Aviation Law if ti fcummon arin bya, the Revised Administrative Coe fits a common carrier by water, and the Public Service Law if it is a common ca Jand or other kind of publi service.” Ce tied 5.02. VOTING CONTROL TEST AND BENEFI( OWNERSHIP TEST. The Supreme Court ruled in Gams v. Tevez," that “both the Voting Control Test and the Beneficial Ounership Test mustbe applied to determine whether the corporation 3s, Philippine Nationa.” In other words, full bonefiial ownership f the stocks, coupled with voting rights is essential.’* Ownership of at least sixty percent (60%) of the shares with voting rights must pertain to Filipinos, If the requirement will not be imposed, the corporation will not be “effectively controlled” by Filipinos in accordance with the mandate of Section 11, Article XII of the stitution. The Supreme Court gave the following explanation: uote NS thal ase the glaring noma in giving abroad definition 0 ‘he term capital’ Lat us ascuine that a corporation has 100 commen shares guped by foreigners and 1,000,000 non-voting preferred shares owned Dy Pilojees, witb th aio ane having a par value of one peso (PI 00) per ahare, Und lefnition ofthe term ‘capital,’ such corporation rould be considered compliant with the 40 pereent constitutional init econ Se SESE No. 178579, October 9, 2012 (Resolution on Motion or Semis enn Seg SEC Memorandum Ccalar No 8, Serie of 2019 ated MA? Philnine Cons in Cpe Se csh linginthn cae Se Aos ‘Gamboa v. Teves, ibd > a PART —pusLic un Chaper 21 Pale Sere bee one . foreign equity of public utilities since the over whel a elming majority, oF ‘han 99.999 per cent, of the total outstanding capital s ii Sr ce capital stock is Filipino Jn the example given, only the foreigners holding the common shares pave voting rights in the election of dreetor, even if they hold only 100 havees The foreigners, with a minuscule eqity af less than 0.001 percent, shattise control over the public utility. On the other hand, the Filipinos, exthing more than 98.999 percent of the equity, cannot vote in the election hot reevrs and hence, have no control over the pubic utility. This starkly f-eumvents the intent ofthe framers ofthe Constitution, as well as the crettanguage of the Constitution, to place the control of public utilities Clothe hands of Filipinos It also renders illusory the State policy of am ia pendent national economy effectively controlled by Filipinos." ‘a. In Roy III v. Chairperson Teresita Herbosa, et al.,® the Supreme Court sustained the validity of SEC Memorandum Circular No. 8 Series of 2013 which provides in part: gection 1, This Circular shall apply to all corporations Ceovered cmations) engaged in identified areas of activities or enterprises crap eservely wholly or party, to Phiipine Natienals by the ‘peifation, the FIA and other existing laws, amendments thereto and IRR of said laws except as may be provided therein. Ce enim ne, ere semper number of outstanding shares of stock, whether or not entitled to vote in the 5.03, OWNERSHIP OF FACILITIES. The Supreme Court clarifed in Totad v. Garcia, Jr." that the limit imposed by the Conetitution on foreign equity applies only to the operation of = publ utility and not to ownership of the facilities. The Supreme Court explained: «inlaw, thore is a clear distinetion between the ‘operation’ of a pubic a ee 2 ip of the facilites and equipment used to serve the public. ™ Gamboa v. Teves, GR, No. 176579, June 28,2011 GR, No, 207248, November 22,2016, 243 SCRA 436 (1995).: ssPORTATION AND PUBLIC 782 ESSENTIALS OF TTLITIESLAW in law by virtue of which, ership is defined as a relation on Onerahip a ompleey abet i win eer gag ining 00 PTS arenes wilh te eho mates (Teen Brcibited o pradenc onthe Ci Cade ofthe Philippine, (1992). ‘The exercise of the Ti ines, 45 ignts encompassed in ownership is limited by lay to that's grapertyeannt be operated and used to serve the Public so ct fi umes the operator has franchise. The operation of «rj abl tara public uty includes the transportation of Passengers are co another pint, thei loading and unloading a designated ply, one in vement ofthe trains at pre-scheduled times ( Arizona Easter, aoe TA Matthews, 20 Ariz 282, 180 P.159, 7 ALR. 1149 (1919, Bex States Fire Ins. Co. v. Northern P.R. Co. 20 Wash 2. 722, 199 P94 868, 2A.LR. 2d 1065 (1948). ‘The right to operate a public utility may exist independently ang separately from the ownership of the facilities thereof. One ean own said ‘euiities without operating them as a public utility, or conversely, one may gperatea publi utility without owning the facilities used to serve the public Je devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof ‘This dichotomy between the operation of a public utility and the ownership of the facilities used to serve the public can be very well appreciated when we consider the transportation industry. Enfranchised airline and shipping companies may lease their aircraft and vessels instead of owning them themselves. Indeed, a mere owner and lessor of the facilities used by public utility is not a public utility (Providence and W.R. Co. v. United States, 46 F. 24 149, 152 [1930]; Chippewa Power Co. v. Railroad Commission of Wisconsin, 205 N.W. 900, 903, 188 Wis. 246 [1925]; Ellis v. Interstate Commerce Commission, Il 35 S. Ct. 645, 646, 237 U.S. 434, 59 L. Ed. 1036 (1914). Neither are owners of tank, refrigerator, wine, poultry and beer ‘cars who supply cars under contract to railroad companies considered as public utilities (Crystal Car Line v. State Tax Commission, 174 p. 2d 984, 987 [1946)." a. Consequently, a corporation is not subject to the sixty percent (60%) Filipino equity requirement under Section 11 of Article XII of the Constitution if it will just own the equipment or properties that will be used by another entity which shall operate as public utility. PARI — Chapter 21 Pate eee TS a ce Repltona [EMS AND CASES; ly converting itself into a full this objective, the company has ‘communications businesses and i wergence organization. Toward fen, asresivly acquiring tl proadcast media enterprises, and consolida wena, gei ner, od ung hoo to own the facilities of the combined businesses and to develos and tou 2h st ti eas dw Frovide mass media and commercial telecommunications services ‘Communications will be the flagship entity which will own the facilities of the conglomerate and provide content to the other new ‘corporation which, in turn, will operate those facilities and provide the Services. WWW Communications secks your professional advice on ‘Ghether or not its reorganized business activity would be considered @ publi utility requiring a franchise. What willbe your advice? Explain ‘Ay No. The reorganized business activity of WWW Communications Inc. would not be considered a public utility. Hence, WWW Communications Ine. does not require a franchise or certificate or any other form of authorization before it can operate. Although the company acquired telecommunications businesses and broadcast media enterprises, this may mean that itis a shareholder in the corporations conducting the Susiness. On the other hand, the plan to own the facilities does not convert the company into a public utility. It is only when the company will operate the business that a franchise is necessary. (2000) ‘The private respondent is the owner of the facilities necessary to ‘operate the EDSA LRT III butt is not enfranchised to operate a public utility. In view of this incapacity, private respondent and DOTC agreed that on completion date, private respondent will immediately deliver possession of the LRT system by way of lease for 25 years, during ‘which period DOTC shall operate the same as « common carrier and private respondent shall provide technical maintenance and repair Zervices to DOTC. Technical maintenance consists of providing: (1) repair and maintenance facilities for the depot and rai lines, services for routine clearing, and security; and (2) producing and distributing maintenance manuals and drawings for the entire system. Private respondent shall also train DOTC personnel for familiariza ‘with the operation, use, maintenance and repair of the rolling stock, power plant, substations, electrical, signaling, communications, and all other equipment as supplied in the agreement. By the end of the three-year construction period and upon commencement of normal revenule eperation, DOTC shall be able to operate the EDSA LRT II on ite own and train all new personnel by itself. Fees for private respondent's services shall be included in the rent, which likewise134 ESSENTIALS OF cxst ot elaement of lant cainen ay projet Cent and financing cost, plus a reasona spare pare oom, Since DOTC shall operate the EDSA Tera reon, Sintrigations and liabilities of a common carrey ear indemnify and hold harmless pricy pe om any loses, damages, injuries, death whi ToBmed in the operation ‘or implementation of the — may be clainamages, injury, or death due to defects in the EDSA Tat loses, amma gf the defective condition of equipment or facilites Ton econ maintenance of such equipment facilities Is it o the detrivate respondent to meet the minimum 60% epee requirements under the ‘Constitution? ization ‘Az No, The nationalization requirement applies only if the private te the public utility. In this case, private respondent will operat respondent will not run the light rail vehicles and collect fees from the Tiling public. It will have no dealings with the public and the public viae re no right to demand any services from it. (Tatad v. Garcia, Sr., 243 SCRA 436 [1995}) 3. Philippine Gaming Management Corporation (PGMC) entered into t Contract of Lease with Philippine Charity Sweepstakes Office (PCSO) prescribed under the charter of the PCSO. In the Contract af Lease, PGMC, the lessor obligated itself to build, at its own expense, ail the facilities necessary to operate and maintain « nationwide on Tine lottery system from whom PCSO was to lease the facilities and ‘operate the same. Upon due examination of the contract, the Court found that PGMC's participation was not confined to the construction and setting up of the online lottery system. I spilled over to the actual ‘operation thereof, becoming indispensable to the pursuit, conduct, ‘administration, and control of the highly technical and sophisticated lottery system. Assuming for the sake of argument that the activity is ‘a nationalized activity, is it required for PGMC to meet the minimum Filipino capitalization requirement? ‘A; Yes, this case involves not only ownership of the facilities that will be used in the operation. In effect, the PCSO leased out its franchise to PGMC that actually operated and managed the same. What wat entered into was actually a collaboration or joint venture agreement ‘whereby the operation of the business will be undertaken by PGMC. (Kilosbayan, Inc. v. Guingona, 232 SCRA 110 (1994)) _ 6 DEFINITE TERM. The term of the franchise to te given to public utilities is fifty years at any given time. However, the appropriate government body may extend the franchise. The Supreme Court explained: “As there is a relation between the firs i weasel . 1. and second paragraphs i Section 15, the two provisions must be read and interpreted tometer PART IV — PUBLIC UTILITIES Chapter 21 — Public Service Regulations. > avis to say, in issuing a certificate, the Commission m rani ant a mney meee sail od fed therein wl proto the pie ners ina prep ef suitable manner.’ Under Section 16(a) of Commonwealth Act No. 146 and jyig a complement of Section 16, the Commission is empowered to issue wi featesof public convenience wheneveritinds tha the operation of the cage eevice proposed and the authorization todo busines wil promote publ jolie interests in a proper and suitable manner’ Inasmuch aa the the 3 to be fixed by the Commision under Section 15 i inseparable from eri itiente itself, atid period cannot be disregarded bythe Commission the Sformining the question whether the issuance ofthe certificate will in Seat ehe public interest in a proper and suitable manner. Convery promfermining ‘a definite period of time, the Commission will be guided ss depic interests, the only limitation to its power being that said all not exceed fifty years (Section 16[a], Commonwealth Act erie’ gr Constitution, Art. XIT, Section &) We have already ruled that Noe interest’ furnishes sufficient standard. (People . Fernandes and ‘Pan Gad, G.R. No. 45655, promulgated June 15, 1998; People vs, Rosen hot Trin cme, G.R. Nos. 46076 and 46077, promulgated June 12, 1998 ing and Qrmnk Central Securities Corporation v. U.S.Au 267 US. 12 24,26. 7 we ve 1398, 145, 146; Schenchler Poultry Corporation v. LS. 296, $40, 79 Law 7. 1870, 1585; Ferrazziniv. Onell, 34 Phil, 697, 711-712) Section 8 of Article XITI of the Constitution provides, among other things: that no franchise, certificate, or any other form of euthorization things, (eration of & public utility shall be for a longer period than, $9 fer te? and when it was ordained, in Section 15 of Commonvrostts No. years) ane ended by Commonwealth Act No, 454, that the Public Service 146, 95 Sion may prescribed as a condition for the issuance of a cereiicate comeehall be valid only for a definite period of time’ and. in Secvion Auth) that mo such certificates shall be isued for a period of more hee fits years,’ the National Assembly meant to give effect to the aforesaid Sity years al mandate. More than this, it has thereby also declared it sane the period to be fixed by the Publie Service Commission shall not sa tat Nihon fifty years. All that has been delegated to the Commission, Hae the administrative function, involving the use discretion, °® terfor® che will ofthe National Assembly having in view, in addition, the cry oot tne public interests in a proper and suitable manner” The foes aero cticnal Assembly may itself exercise the function and authon ty Pane ae ratte upon the Public Service Commission dovs not make the provision in question constitutionally objectionable.” 7. NON-EXCLUSIVITY. ‘The Constitution likewise provides that the franchise cannot be exclusive. For example, the Supreme Court declared null and void Section 47 of P.D. 198, as aarcjed which made the franchise of water districts as exclusive, Section 47 states that “no franchise shall be granted to any other[ESSENTIALS OF TRANSPORTATION AND PUBLIC 7 ‘UTILITIES LAW person of agency for domestic, industrial oF commercial wat Perviee within the district or any portion thereof unless and excppy to the extent that the board of directors of said district consent, thereto by resolution duly adopted, such resolution, however, shat be subject to review by the Administration.” The Supreme Coun, ruled: “plain words do not require explanation, The 1935, 1973 and 19g Constitutions are clear — franchises for the operation of a public uit, sane pe exdlusive in character. The 1995, 1973 and 1987 Constituting ‘expressly and clearly state that, ‘nor shall such franchise x x x by exclusive in character.” In Republic v. Express Telecommunications Co., Inc., the Court held that, “The Constitution is quite emphatic that the operation of a public utility shall not be exclusive. In Pilipino Telephone Corporation v. National Telecommunications Commission, the Court held that, ‘Neither Congress nor the NTC can grant an exclusive “franchise, certificate, or any other form of authorization” to operate a public utility.’ In National Power Corp. v, Court of Appeals, the Court held that, ‘Exclusivity of any public franchise hhas not been favored by this Court such that in most, if not al, grants by the government to private corporations, the interpretation of rights, privileges ot franchises is taken against the grantee.’ In Radio Communications ofthe Philippines, Inc. v. National Telecommunications Commission, the Court held that, ‘The Constitaton mandates that a franchise cannot be exclave in nature’ Indeed, the President, Congress and the Court cannot create directly franchises that are exclusive in character. What the President, Congress and the Court cannot legally do directly they cannot do indirectly. Thus, the President, Congress and the Court cannot create indirectly franchises that are exclusive in character. Police power does not include the power to violate the Constitution. Police power is the plenary power vested in Congress to make laws not repugnant to the Constitution. This rule is basic. __ In Metropolitan Manila Development Authority v. Viron Transpo". tation Co, Inc. the Court held that, ‘Police power is the plenary power vested in the legislature to make, ordain, and establish wholesome and reasonable law sates and ordinances, nt repugnant to the Constitution Carlee Superdrug Corp. v. Department of Social Welfare and Dewlopmey e Court held that, police power ‘is “the power vested in the legislature bY the constitution to make, ordain, and establish alll manner of wholesome and reasonable laws, statutes, and ordinances x x x not repugnant to the constitution.” ’ In Metropolitan Manila Development Authority v. Gari™ the Court held that, ‘police power, as an inherent attribute of sovereign PART IV —pupi Chapter 21 — Pane e UTMLATIES Pill erie ene 787 : jer vested by the Co i the pow stitution inthe legal is tPestablish all manner of wholesome and recent hee rea arjinances XXX NOt repugnant to the Constitution’ es me ‘There is no question that the effect of Section 47 is the creation of franchises that are exclusive in character. Secto La ce mt Sati 1 ey ows 8, SUBJECT TO MODIFICATION OR AMENDMENT. ‘The Constitution provides that a franchise or right be granted only iunder the condition that it shall be subject to amendment, alteration, repeal by the Congress when the common good so requires. ‘a, In ABS-CBN Broadcasting Corporation v. Philippine Multi-Media System Inc. et al.” the Supreme Court sustained the validity of the “Must Carry Rule” imposed on operators of cable and atellite television by the National Telecommunications Commis- ‘sions under which these operatorsarerequired tocarrylocal channels. ‘The Court ruled that there is no infringement of the intellectual property rights of the petitioner and other local channels because What happens is retransmission and not rebroadcasting of shows. ‘ABS-CBN creates and transmits its own signals; respondent PMSI ‘merely carries such signals that the viewers receive in its unaltered form. PMSI does not produce, select, or determine the programs to be shown in petitioner's channels. PMSI does not pass itself off as the origin or author of such programs. PMSI merely retransmits the same in accordance with Memorandum Circular of the NTC. Thus, it cannot be said that it is engaged in rebroadcasting. It was explained that, the must-carry rule as well asthe legislative franchises granted to both ABS-CBN and PMSI are in consonance with state policies enshrined in the Constitution, specifically Sections 9, 17, and 24 of Article II on the Declaration of Principles and State Policies. The Court likewise invoked the rule that the Constitution authorizes the amendment of franchises for “the common good.” b. In Telecom. & Broadcast Attys. of the Phils., Inc. v. COMELEC,” the Court held that a franchise is a mere privilege TTawang Multi-Purpose Cooperative v. La Trinidad Water District, GR. No. 166471, March 22, 2011; Metropolitan Cebu Water District v. Adala, G.R- No 168914, July 4, 2007, 526 SCRA 465 G.R, Nos, 175769-70, January 19, 2008 352 Phil. 153 (1998); See Hontiveros-Baraquel, et a Board, GR, No, 181098, February 23, 2015. J. ¥. Toll RegulatoryRANSPORTATION AND PUBLIC 788 ESSENTIALS OF TRAN that may be reasonably burdened with some form of Public sryig ‘Thus: ting, whether by radio or by television stations, ; nae steppes “Airwave frequencies have to be allocated a Teensed oye indviduals who want tobroadcast than there are frequening to assign, A franchise is thus a privilege subject, among other things, ts « aesrereat by Cangress in accordance with the constitutional provision, that ‘any such franchise or right granted ... shall be subject to amendment iteration or repeal by the Congress when the common good 80 requires” ” xxx Indeed, provisions for COMELEC Time have been made by ‘amendment of the franchises of radio and television broadcast stations ‘and, until the present case was brought, such provisions had not been thought of as taking property without just compensation. Art. XII, §11 of the Constitution authorizes the amendment of franchises for ‘the common good.’ What better measure can be conceived for the common good than ne for free airtime for the benefit not only of candidates but even more of the public, particularly the voters, so that they will be fully informed ofthe jsgues in an election? “(I]t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount.” Nor indeed can there be any constitutional objection to the requirement that broadcast stations give free air time. Even in the United ‘States, there are responsible scholars who believe that government controls ‘on broadcast media can constitutionally be instituted to ensure diversity of views and attention to public affairs to further the system of free expression. For this purpose, broadcast stations may be required to give {free air time to candidates in an election. Thus, Professor Cass R. Sunstein of the University of Chicago Law School, in urging reforms in regulations affecting the broadcast industry, writes: xxx In truth, radio and television broadcasting companies, which ar® given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images. They are merely given the ‘temporary privilege of using them. Since a franchise is a mere privilege, the exercise ofthe privilege may reasonably be burdened with the performance by the grantee of some form of public service. x xx" 9. ‘TAKE-OVER OF PUBLIC UTILITIES. The take-over of public utilities by the State may be temporary or permanent Permanent take-over involves cases when the public utilities are expropriated subject to payment of just compensation. The Constitution provides that the State may, in the interest of nati PART IV— PUBLIC UTILITIES ‘Chapter 21 — Public Service Regulations [ defense, upon i altar ot Upon payment of just compensation, trans public ownership utilities and other private enterprises to be we grated by the Government, a, Temporary take-over happens in times of national emergency. In such cases, “when the public interest so requires, {he State may, during the emergency and under reasonable terms scribed by it, temporarily take over or direct the operation of iy privately owned public utility or business affected with public interest.” The Supreme explained the Constitutional precepts in Prof, Randolf S. David, et al. v. Gloria Macapagal-Arroyo” in this wise: Considering that Section 17 of Article XIT and Section 23 of Article vi proviously quoted, relate to national emergencies, they must be read ie her to determine the limitation ofthe exercise of emergency powers. ‘Congress is the repository of emergency powers. This is erent in the tenor of Section 28(2), Article V1 authorizing itt delegate such Somers to the President, Certainly, a body cannot delegate a pow pot reposed upon it. However, knowing that during grave emergencies, ov ay not be possible or practicable for Congress to meet and exercise its ‘rowers the Framers of our Constitution deemed it wise to allow Congress Pegrant emergency powers tothe President, subject to certain conditions, thus: (a) ‘There must be a war or other emergency. (@) The delegation must be fora limited period only. (@) ‘The delegation must be subject to auch restrictions asthe Congress may prescribe. (a) The emergency powers mut be exercised to carry out 8 ational policy declared by Congres. Section 17, Article XIL must be understood as an aspect of the emer sues cause, The taking over of private business affected aa ee ctjut another facto the emergoncy powers generally Fepoted upon Congres. axe Petitioner Cacho-Oliares, tal. contends that che term ‘emergency naa athe KI eer to taunaml: typhoon, ‘hurricane saaetiettan pecarvences' This isa limited view of emergency ace of conditions Emergency, as generic term, connotes the exit 2 suddenly reewciving the degree of existing danger to life or wellbeing G.R. No, 171896, May 3, 2008.eNTIALS OF TRANSPORTATION AND PUBLIC ay Bs ‘UTILITIES LAW beyond that which i accepted as normal. Implicit in this definition beyond that which eerety and perception. Emergencies, as perceived te dante eeacuvein the United States since 1993, have been cerasion eee a cngeoteicutions cassifable under thre () principal heady 2 economic, b) natural disaster, and c) national security. sa) ‘Bmergency,’ as contemplated in our Constitution, is of the sa breadth. It may include rebellion, economic crisis, pestilence or epide oe typhoon, flood, or other similar catastrophe of nationwide proportions ‘tfect. This is evident in the Records of the Constitutional Commission, thus: xxx It may be argued that when there is national emergency, Coi ray not be able to convene and, therefore, unable to delegate te the President the power to take over privately-owned public utility or business affected with public interest. Following our interpretation of Section 17, Article XII, inv President Aneyoiniasung PP 1017, this Cour rule that such Procatation does not authorize her during the emergency to temporarily take over or direct the operation of any privately owned public utility or business affected with publi interest without authority from Congress. Let it be emphasized that while the President alone can declare a state of national emergency, however, without legislation, he has no power to take over privately-owned public utility or business affected with public interest. The President cannot decide whether exceptional circumstances exist warranting the take over of privately-owned public utility or business affected with public interest. Nor can he determine when such exceptional ‘lreumstances have ceased. Likewise, without legislation, the President has no power to point out the types of businesses affected with public interest that shouldbe taken over. In short, the President has no absdite authority to exercise all the powers ofthe State under Section 17, Article absence of an emergency powers act passed by Congress.” Conse MONOPOLIES AND UNFAIR COMPETITION. The Constitution provides that State shall regulate or prohibit mont 1¢ public interest so requires. In addition, combinations in restraint of ‘a restraint of trade or unfair competition are not allowed under the a. law Seance Ease, however, the Supreme Court ruled that the law authorizing Philippine Ports Authority “to take over arrast’ permits issue at services in government-owned ports and cancel to private operators is a valid exercise of pole? vane rome curar peume Unum m power; it does not violate due process of law as police power is paramount over the right against tad Bf contracts. Moreover, a regulated monopoly is not proscribed in {ndustries affected with public interest such as in port rendition Xf arrastrelstevedoring services in Philippine ports.” In the same fase, the Supreme Court rejected the petitioner's allegation of ‘unfair competition because private monopolies are not necessarily probibited by the Constitution. Certain public utilities must be given franchises for public interest and these franchises do not violate the law against monopolies. There is no unfair competition as the entity ruthorized by PPA (1) was not a competitor of the oppositor; (2) imposes the same tariff rates as the oppositor; and (3) is operating jn an entirely separate and distinct port. b, Consistently, the interconnection that was required of a telephone company was considered valid as a form of “intervention” with property rights dictated by the objective of government to promote the rapid expansion of telecommunications services in all Breas of the Philippines, to maximize the use of telecommunications facilities available, in recognition of the vital role of communications in nation building and to ensure that all users of the public telecommunications service have access to all other users of the service wherever they may be within the Philippines at on acceptable standard of service and at reasonable cost." Undoubtedly, the encompassing objective is the common good. The NTC, as the regulatory agency of the State, merely exercised its delegated authority to regulate the use of telecommunications networks when it decreed interconnection. It was further explained: “The decisive consideration are public need, public interest, and the common good. Those were the overriding factors which motivated NTC in granting provisional authority to TCI. Article Il, Section 24 of the 1987 Constitution, recognizes the vital role of communication and information in nation building. It is ikewiae a State policy to provide the environment for the emergence of communications structures suitable to the balanced flow of information into, out of, and across the country (Article XVZ, Section 10, Ibid), A modern and dependable communications network rendering "Oroport Gargohandling Service, ividee Industrial Authority, Gargohandling Services, Inc v. Phividec Ind ere rn gous, Philippine Ports Authority v. Pier @ Areas Sere ei eM sor GR. Nos. 14786 and 188262, November 16,2008, «75 SCRA 425, 495-496, : Se ae 895 ng Distance Telephone Company v. National Telecommanise tions Gartlippine Long Miso, October 18, 1990 citing DOTC Cireslar No- 90+ 248 aseriaus oF TRANSPORTATION AND PUBLIC mm aa OF OTILITIES LAW srvicesis also indispensable for accelerate any prec ea nl st bow and yield. ‘efficient and reason! ‘economic recovery and dé public utility companies must — sto dhe fact that there is @ virtual monopoly of the telephone den fixed or mobile. There is a unanimous demands are hardly met, whether : demande Gren the development of a. modern, efficient, satisfactory ang hasten, Wenmunietions service not only in Metro Manila bu, conta the archipelago. The need therefor was dramatically emphasized areaeeatructive earthquake of July 16, 1990. It may be that users of the ty ent vobile telephone would initially be limited to a fow and to cellular Tulized areas. However, itis a step in the right direction towards som rencement of the telecommunications infrastructure, the expansion ane setcmmunications services in, hopefully, all areas of the country, with Shamces of complete disruption of communications minimized. Tt will thus crane on, the total development of the country’s telecommunicatios atoms and redound to the benefit of even those who may not be able ta subscribe to ETCI. Free competition in the industry may also provide the answer to much-desired improvement in the quality and delivery of this type of public Utility, to improved technology, fast and handy mobile service, and reduced user dissatisfaction. After all, neither PLDT nor any other public utility has tt constitutional right to a monopoly position in view of the Constitutional proseription that no franchise certificate or authorization shall be exclus In character or shall last longer than fifty (50) years (Tbid., Section 11; Article XIV, Section 5, 1973 Constitution; Article XIV, Section 8, 1935 Constitution) ‘Additionally, the State is empowered to decide whether public interest demands that monopolies be regulated or prohibited (1987 Constitution, Article XI, Section 19)" 11, REGULATIONS OF RATES. The regulation of public utilities includes the regulation of the rates that they are charging the public. This aspect of regulation is in line with the policy of the State to protect the public against arbitrary and excessive rates while maintaining the ficiency and quality of services rendered” n 16, paragra| of i it the Setion 16, paragraph (0 of the Publie Service Act provides tha {c)_ To fix and determine individual or joint rates, can charges, classifications, or schedules thereof, a5 well as commutation, mileage, kilometrage, and other Philippine Long Distance Tel a = stance Telephone Company v. National Telecom! Mone Commiien, Git Na B6408 Otter Ih eee "Republic ofthe Philippines v. Manila Electric Co,, 440 Phil. 389, 997. PART IV —Pupuic umn Chapter 21 Pale Sore Ropltos _ special rates which shall be imposed obser flowed thereatterby any public serice: Provided, That the Commission may, in its discretion, approve rates proposed by public services provisionally and without necessity of any hearing; but it shall call a hearing thereon within thirty days, thereafter, upon publication and notice to the concerns operating in the territory affected: Provided, further, That in case the public service equipment of an operator is used principally or secondarily for the promotion of a private business, the net profits of said private business shall be considered in relation with the public service of such operator for the purpose of fixing the rates. a. Public Interest v. Return of Investment. However, the power to regulate rates does not give the State the right to prescribe rates that are so low as to deprive the public utility of | reasonable return on investment. Thus, the rates prescribed by the State must be one that yields a fair return on the public utility upon the value of the property performing the service and one that js reasonable to the public for the services rendered. The fixing of just and reasonable rates involves a balancing of the investor and the consumer interests. The Supreme Court explained: “In his famous dissenting opinion in the 1923 case of Southwestern Bell Tel. Co. v. Publie Service Commission, Mr. Justice Brandeis wrote: “The thing devoted by the investor to the public use is not specific property, tangible and intangible, but capital embarked in an enterprise. Upon the capital so invested, the Federal Constitution guarantees to the utility the opportunity to earn a fair return... The Constitution does not guarantee to the utility the opportunity to earn a return on the value ofall items of property used by the utility, oF of any of them. , by embarking capital in a utility, that ‘shall be reasonable. His company is the substitute for the State in the performance of the public service, thus ‘becoming a public servant, The compensation which the Constitution guarantees an opportunity to earn is the reasonable cost of conducting, the business.” its charges to the public Republic of the Philippines v. Manila Electric Co. supra. a