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Public Utilities

• 2 Aspects of Public Utilities


a. Public -touches its customers &
employees
b. Private- touches all other members of
the community in which it operates
•Public Use-it is not confined to privilege
individuals but is open to the indefinite
public. The true criterion to determine
character of use is whether the public
may enjoy it by right or only by
permission.
Transfer of CPC
• The PSC has the authority to approve the sale of
CPCs if (1) there are just & reasonable ground
for making the transfer (2) sale is not detrimental
to public interest
• Approval of PSC is required to protect public
interest but sale is valid & binding between the
parties. Transferree cannot operate without the
approval of the transfer.
• Registered owner rule applies if transfer is not
approved where registered owner continues to
be liable to 3rd parties for vehicles registered
under his name
Public Service
• A public utility is engaged in public service -
providing basic commodities and services
indispensable to the interest of the general
public.
• A public utility must submit to the regulation of
government authorities & surrenders certain
business prerogatives, including the amount of
rates that may be charged by it. It is the duty of
the State to use its protective power whenever
too much profits become the priority of public
utilities
Public Service Regulations
• A public utility is a business or service
engaged in regularly supplying the public
with some commodity or service of public
consequence such as electricity, gas,
water, transportation etc. The term implies
public use & service.
• Public utillities are privately owned &
operated businesses whose services are
essential to the general public. They are
impressed with public interest & concern.
General Business Purpose
• Business as the means by which a party
habitually or regularly earns a livelihood of
some gain.
• Activities or affairs where profit is the
purpose or livelihood is the motive
• Supply of electricity to the contestable
market shall not be considered a public
utility operation
Basis of Regulation of Public
Utilities
• Regulation of PUs is founded on the
State's police power. When private
property is affected with public interest, it
ceases to be private and becomes subject
to regulation to promote the common good
• Only Filipino citizens or domestic
corporations 60% of capital is owned by
Ph citizens can own a franchise for
operation of PUs which will be determined
at the time of franchise application
Ownership of PUs
• 60% Filipino ownership applies not only to
voting control of corporation but also to
beneficial ownership
• 60% Filipino ownership must apply
separately to each class of shares whether
common, preferred non-voting, preferred
voting etc
• Limit imposed by Constitution on
ownership applies only to operation of PU
and not to ownership of facilities
Elements of Public Service
1. The person must own, operate,manage or
control in the Ph public services which
may include distribution of goods or
rendering of services to the public
2. The ownership, operation, management
or control must be for hire;
3. The ownership, operation, management
or control must be done for general
business purposes
Term & Exclusivity of Franchise
• The term of PUs franchise is 50 years at any
given time. However, the appropriate
government body may extend the franchise
• Constitution provides that franchise cannot be
exclusive.
• Franchise is subject to amendment, alteration or
repeal by Congress when the common good so
requires
• Franchise is a mere privilege that may be
reasonably burdened with some form of public
service
Take Over of PUs
• Permanent -involves expropriation of PUs
subject to payment of just compensation in
the interest of national welfare or defense
• Temporary -in times of national emergency
when the public interest so requires such
as typhoon, tsunami, national security
Regulation of Rates
• Regulation of PUs include the regulation of rates
that they are charging the public
• The power to regulate rate does not give State
the right to prescribe rates that are so low as to
deprive PU of reasonable return of investment
• Fixing of just & reasonable rates involve a
balancing of investor and consumer interests
• Discrimination in charging of rates is not allowed
Monopolies & Unfair Competition
• The State shall regulate or prohibit
monopolies when the public interest
requires. Combinations in restraint of trade
& unfair competition are not allowed
• Interconnection of telephone companies
was a valid form of intervention to promote
the expansion of telecom services
Reasonable & Just Rates
• The only standard required to guide administrative
agencies in rate fixing is that the rate must be
reasonable & just.
• What is just & reasonable is a question of fact calling for
the exercise of disretion, good sense & a fair
enlightened, judgment taking into account the fair return
of property to PU & includes operating expenses
• There is no fixed formula or method to determine
reasonable & just rate
• The burden is on person questoning rates fixed by
administrative agency that the standards are not
complied
LTFRB
• Rates are regulated by LTFRB to avoid cut
throat competition & ensure that public safety &
comfort are not sacrificed
• In setting rates, factors like price of gasoline,
spare parts, boundary & other operating
expenses are considered
• 2 Methods: Add-on adding the established
minimum fare to fare per succeeding kilometer
multiplied by distance in excess of 4 & 5 km;
Straight actual distance travelled is multiplied by
auhorized fare per succeeding kilometer of 0.25
centavos
Provisional Increase
• LTFRB may approve provisional increase
wihout a hearing when demanded by
public need
• Provisional rates are merely temporary
and subject to adjustment in conformity
with definite rates approved after final
hearing
Certificate of Public Convenience
Requirements
1. Applicant must be a citizen of Ph or domestic
corporation, partnership or association 60% of
stock or paid up capital belong to Ph citizens
2. Applicant must be financially capable of
undertaking the proposed service and meeting
responsibilities incident to operations
3. Applicant must prove that the operation of public
service and authorization to do business will
promote the public interest in a proper & suitable
manner
Public Convenience or Necessity
• generally means something fitting or
suited to public need.
• Public convenience & necessity exists
when the proposed facility or service
meets a reasonable want of the public and
supply a need that the existing facilities do
not adequately supply.
• Existence of PCN is a question of fact that
must be established by evidence in a
public hearing conducted for the purpose
Other Rules & Policies to
Determine Entitlement to PCN
• Prior Operator Rule-CPC will not be issued to
2nd operator if 1st operator is rendering
sufficient & satisfactory service
• Third Operator-variation of prior operator, there
are 2 prior operators rendering sufficient service
• Protection of Investment-duty of State to protect
operators from unfair & ruinous competition
• Prior applicant rule-priority in filing applications
is an important factor in determining rights of
public service companies
Free Competition
• The aim to promote competition may work
against the application of different policies
like the prior operator rule and other
related policies.
• Monopoly is eschewed and the aim to
deliver adequate service to the public
takes precedence.
Nature of CPC
• CPC is a mere privilege that is always
subject to regulation by the State
• CC does not acquire property right to route
covered by CPC
• CPC may also be considered as property
because it can be sold by the holder and is
considered a valuable asset
Provisional Authority
• PA refers to an authority given to an entity
qualified to operate a public utility for a
limited period during the pendency of its
application or before issuance of CPC
• Public utility granted PA is allowed to
operate, however the same may be
revoked at any time and subject to final
action on main application
Revocation of CPC
• Since CPC is a mere privilege, it may be
revoked by the concerned agency anytime
• Privilege is forfeited when the grantee fails
to comply with his commitment for public
necessity cannot be made to wait
• If PU refused to comply with directives,
rules & regulations of the concerned
agency, CPC can be revoked
Due Process
• Regulatory agency cannot make ex parte
revocation of CPC without giving operators
previous notice & opportunity to explain
• Due process does not mean that there
should be prior notice & hearing in all
actions undertaken by administrative
agency

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