Amendments to Public Services Act removes Constitutional protections on public utilities

May 24, 2019

by IBON Foundation

Research group IBON raised the alarm that proposed amendments to the Public Services Act (PSA) removing Constitutional protections on public utilities will undermine national security and consumer welfare. The group argued that foreign control over important sectors should still be minimized and that natural monopolies should if anything be more tightly regulated.

The Senate identified Senate Bill No. 1754 (SB) amending the PSA as one of the priority bills to be tackled by the upper house before session closes on June 30. The amendments ostensibly update the 82-year-old PSA originally known as Commonwealth Act No. 146. Its counterpart measure House Bill (HB) No. 5828 was approved on third and final reading in September 2017.

The amendments to the PSA significantly narrow the definition of public utilities to only cover the distribution of electricity, transmission of electricity, and water distribution and sewerage pipeline systems unless otherwise provided by law. It also defines the rate of return that investments in public utilities are entitled to.

IBON said that the narrow definition of public utilities seeks to bypass the current Constitutional limits on foreign ownership of public utilities and open up significant parts of the economy to foreign investors. The relaxation of nationality restrictions will mean excessive foreign control of critical telecommunications, power and transport utilities. The significant risks to national security and civil defense include digital surveillance and misinformation, denial and sabotage of vital services, and others.

IBON also said that the PSA amendments ensuring ‘a reasonable rate of return’ institutionalizes excessive profit-making at the expense of consumers. Utilities tend to be natural monopolies and the amendments unfortunately distort so-called regulation towards guaranteeing investor profits rather than consumer well-being. IBON said this reinforces profitability as a condition for delivering public services, notwithstanding their nature as very basic necessities.

As it is, privatized utilities have resulted in expensive water and power that is burdensome especially for millions of low-income consumers. Since water in Metro Manila was privatized in 1997, water rates have increased 879% in areas covered by the Manila Water Company and 574% in those of Maynilad Water Systems, while consumers continue to be hounded by prolonged water interruptions. Meanwhile, power rates in the Philippines are the second highest in Asia at Php8.96/kwh in 2018, next only to Japan’s Php12.31/kwh.

Incumbent senators have said that there is not enough time for Charter change within the remaining period of the 17th Congress. IBON said however that the PSA amendments are in effect a surreptitious way to change the Charter’s foreign ownership provisions for public utilities that has been attempted many times before by past administrations.

Should it pass SB1754, the 17th Congress will affirm itself as a champion of pro-foreign and pro-business measures. It will have liberalized a key section of the 1987 Constitution on top of passing the regressive Tax Reform for Acceleration and Inclusion (TRAIN) and liberalizing rice imports through the rice tariffication law, said IBON. The group also said that vigilance will be more important than ever with the new overwhelmingly administration-dominated Senate to come when the 18th Congress opens.###