Salceda: PSA Law, 100% foreign ownership in power, telecoms, transport to play vital role in PH post pandemic recovery

Albay Rep. Joey Sarte Salceda, chair of the House Ways and Means committee said foreign competition will play a vital role in the country’s post pandemic recovery, and in ending consumers woes on poor but costly services of the three vital industries; power, telecoms and transport.

Salceda said HB 78 or the Public Service Act (PSA) which was passed by the lower house in March, seeks to open up competitions in these industries, which will lower their costs, improve quality of services and in addition, create the urgently needed jobs in a post Covid-19 economy.

The proposal which Salceda brafted, seeks to amend Commonwealth Act No. 46 by clearly defining “public services,” which is currently often interpreted to include “public utilities.”

The lawmaker said consumers’ woes stem from the “ambiguity in the definition of public utility that is used interchangeably with public service under the Public Service Act,” which has allowed monopolies in the sector for decades to the detriment of consumers and natiomal progress.

The proposal gets a strong push from, among others, Socio-economic planning Secretary Karl Kendrick T. Chua, who said the PSA Law “will be a key milestone in capturing more foreign investments in the post-pandemic era.”

HB 78 seeks to amend the 84-year old Public Service Act and provide a clear statutory definition of a public utility. At present, public utilities are subject to a foreign equity cap of 40% as provided for under the 1987 Constitution.

Salceda said electricity, power, telecommunications, and water, being capital intensive but subject to foreign ownership restrictions “lack competition and therefore, a lack of choice for consumers, with excessively strong market power for the few players, and ultimately market failure.”

“The 1987 Constitution restricts the operation of a public utility to Filipinos only (Sec. 11, Art. XII). However, there is no definition of  public utility in our statutes. There is the Public Service Act, but it only defines public service (Section 13 (b), Commonwealth Act No. 146), and not public utility, hence the ambiguity,” said Salceda in the aide memoire.

The lawmaker said public utilities are “clearly not the equivalent of  ‘public service,’ but are more plausibly just a subset of the latter.”

The Public Service Act defines a “public service very broadly to include even such sectors as ice plants and ship repair shops, sectors we would clearly not be suspicious of allowing foreign ownership into. Alas, even these sectors are currently subject to the limits brought about by the ambiguity,” he added.

Salceda noted that the Supreme Court, in one of its recent rulings, had offered the key elements of a public utility as “a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service.”

The provisions of HB 78 are clearly consistent with these ‘elements.’ It proposes to limit public utilities to: (1) transmission of electricity; (2) distribution of electricity; and (3) waterworks and sewerage systems. The amendments also propose that no other business or service shall be deemed a public utility upon recommendation by the National Economic and Development Authority.

To protect the national interest, the bill alsu provides that: 1) The President can suspend or prohibit any merger, acquisition or investment in a public service in the interest of national security; 2) Foreign nationals can only invest if there is reciprocity with Philippine nationals; 3) Fines for substantially increased and indexed to inflation, thereby strengthening regulatory powers of admin agencies;

4) Regulatory powers shall be retained where relevant (e.g. Rate-setting, franchise/authority to operate requirement); 5) Restrictions on hiring of foreign labor if there are Philippine nationals who are competent, willing and able to perform the services; 6) Retention of takeover power, etc. for sectors formerly classified as public utilities because they are “businesses affected with public interest.”

Salceda assured the PSA amendments are constitutional. The Supreme Court has upheld the removal of sectors previously considered public utilities, in the case of JG Summit Holdings, Inc. v. Court of Appeals, where the SC upheld the removal of shipyards from the defined categories of “public utility.”  In the case of the National Power Corporation vs. Provincial Government of Bataan,  the Court also noted that “Power generation is no longer considered a public utility operation.”

It should be further emphasized, said Salceda, that the PSA Bill is entitled to the presumption of constitutionality which every treaty, executive agreement, and statute enjoys. “The burden of proof is on the petitioner to clearly demonstrate that the assailed statute is unconstitutional. This is particularly so regarding economic regulations as opposed to statutes which infringe upon fundamental rights,” he added.

“This strong predilection for constitutionality is based on the deference the judicial branch accords to the legislature as a coordinate branch. It is self-evident that the PSA Bill is an economic regulation,” Salceda said.

Also notable, he added, is that legislative power is plenary unless clearly limited. As the High Court has stated, “… Legislative power is the authority, under the Constitution, to make laws, and to alter and repeal them.” The grant of legislative power to Congress is broad, general and comprehensive.

The lawmaker explained that the “legislature possesses plenary powers for all purposes of civil government … In fine, except as limited by the Constitution, either expressly or impliedly, legislative power embraces all subjects and extends to matters of general concern or common interest.”

There is no unequivocal statement in the text of the Constitution itself, nor the jurisprudence interpreting it, defining “public utility” and stating that it is immutable. As such, it is within the plenary and comprehensive power of Congress to legislate a definition, as in fact, the Supreme Court has upheld such laws, he added.

In economic terms, Salceda said the PSA amendments would create jobs, lay the foundation for stronger economic growth, attract more capital and know-how especially in areas that require innovation currently not present in the domestic scene, and help transfer technologies developed in other countries.

Following a dynamic-stochastic general equilibrium (DSGE) analysis of the PSA, its economic impact ard benefits are seen to be most significant over the next five years. The amendments are expected to yield up to 0.22 percent higher GDP growth compared to baseline. Real wages are also expected to go up, by 0.14 percent higher than baseline, following more investments in the country. 

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