DIADEM PEARL R.

MANSAYON

PUBLIC SERVICE LAW, CA 145, AS

AMENDED
The Public Service Law, Commonwealth Act 146, as amended
Under Sec. 13 (b) defines Public Service
A person who owns, operates, manages or controls in the Philippines for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental,
and done for general business purposes, any common carrier or public utility, ice plants, power
and water supplies, communication and similar public services.
A casual or incidental service devoid of public character and interest is not brought
within the category. The question depends on such factors as the extent of services; whether
such person or company has held himself or itself out as ready to serve the public or a portion of
the public generally. (Luzon Stevedoring vs. PSC)
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,
telephone or telegraph service. The term implies public use and service.
When 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.
The difference between an ordinary business and a public utility is that the latter, being
impressed with public interest, is subjected to greater regulation/monitoring by the State.
However, both are not prescribed from earning profits from the public.
The limit imposed by the constitution on foreign equity applies only to the operation of a
public utility and not to ownership of the facilities. The Constitution requires a franchise for
the operation of a public utility but it does not require the franchise before one can own
the facilities needed to operate a public utility.
NOTE: The Public Service Commission created under the Public Service Law has already
been abolished under P.D. No. 1 and other issuances. It has been replaced by the following
government agencies:
1. Department of transportation and communication other agencies are under this
department and it is the agency that issues the certificate of public convenience for
operation of national railroad carriers;
2. Land Transportation Office(LTO) registration of drivers and motor vehicles;
3. Land Transportation Franchising Regulatory Board (LTFRB) land transportation;
4. Air Transportation Office undertakes the maintenance and operations of airports and
other similar facilities; registers aircrafts and other incidents concerning the same and
provides safety regulations in air transportation;
5. Maritime Industry Authority (MARINA) water transportation
6. Philippine Coast Guard - concerned in safety of water transportation
7. National Telecommunications Commission communication utilities and services,
radio communication systems, wire or wireless telephone and telegraph systems, radio
and television broadcasting systems and other similar public utilities;
8. Energy Regulatory Board (ERB) electric or power companies
9. National Water Resources Council water resources
10.
Civil Aeronautics Board air transportation, particularly its economic aspects
11.
Philippine Ports Authority wharves and ports
PURPOSES public service:
1. To secure adequate, sustained service for the public at the least possible cost;
2. To protect the public against unreasonable charges and poor, inefficient service;

DIADEM PEARL R. MANSAYON

PUBLIC SERVICE LAW, CA 145, AS

AMENDED
3. To protect and secure investments in public services;
4. To prevent ruinous competition.
What is the difference between a Public Utility and a Public Service?
For all intents and purposes, they are the same and are used interchangeably.
However, public utility is a broader concept that embraces public service. A public service
is necessarily a public utility, but not all public utilities are public service.
AUTHORITY TO OPERATE PUBLIC SERVICES
GENERAL RULE: No public service shall operate without having been issued a certificate of
public convenience or a certificate of public convenience and necessity.

PUBLIC UTILITIES EXEMPTED FROM GETTING CPC:

1. Warehouses;
2. Animal drawn vehicles and bancas moved by oar or sail;
3. Airships, except for the fixing of maximum rates for fare and freight;
4. Radio companies, except for rates fixing;
5. Public services owned or operated by the government, except as to rates fixing;
6. Ice plants; and
7. Public markets.
Certification of Public Convenience (CPC) An authorization issued by the DOTC for the
operation of public services for which no franchise, either municipal or legislative, is required by
law, e.g., common carriers.
CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY (CPCN) it is the certificate issued
by the PSC to a public service to which any political subdivision has granted a franchise
under RA 667 after the PSC has approved the same under Sec. 16 (b). It is an
authorization issued by the PSC for the operation of public services for which a franchise is
required by law. E.g electric, telephone.
A CPC or a CPCN constitutes neither a franchise nor a contract, confers no property right, and
is a mere license or a privilege. The holder of said certificate does not acquire a property right in
the route covered thereby. Nor does it confer upon the holder any proprietary right or interest or
franchise in the public highways. Revocation of this certificate deprives him of no vested right.
New and additional burdens, alteration of the certificate, or even revocation or annulment
thereof is reserved to the State.
It is a property and has a considerable value and can be the subject of sale or attachment.
REQUREMENTS FOR GRANTING CPC OR CPCN
1. Applicant must be a citizen of the Philippines or a corporation or entity 60% of the capital of
which is owned by such citizens;
2. Applicant must prove public necessity;
3. Applicant must prove that the operation of the public service proposed and the authorization
to do business will promote the public interest on a proper and suitable manner;
4. Applicant must have sufficient financial capability to undertake the proposed services and
meeting the responsibilities incident to its operation.
UNLAWFUL ACTS OF PUBLIC UTILITY COMPANIES
1. Engagement in public service business without first securing the proper certificate;

DIADEM PEARL R. MANSAYON

PUBLIC SERVICE LAW, CA 145, AS

AMENDED
2. Providing or maintaining unsafe, improper or inadequate service as determined by the proper
authority;
3. Committing any act of unreasonable and unjust preferential treatment to any particular
person, corporation or entity as determined by the proper authority;
4. Refusing or neglecting to carry public mail upon request. (Secs. 18 and 19)
What is a Franchise?
It is a legislative grant from Congress or a local legislative body. If it is of nationwide
application (e.g Philippines Air Lines), then it must take the form of a Republic Act.
Requisites to get a franchise:
The applicant must:
1. Prove that he or she is a Filipino Citizen
2. Demonstrate financial capacity
3. Must show that he or she is applying for a business of public convenience that the public
shall benefit from the grant of the franchise.
NOTE: All public utilities require either a CPC or CPCN to operate. Those public utilities for which
franchise have been granted still require a CPCN in order to operate. Those public utilities that
did not require a franchise for there creation still require a CPC in order to operate.
ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint rates;
2. Establish and operate new units;
3. Issue free tickets;
4. Issue any stock or stock certificates representing an increase of capital;
5. Capitalize any franchise in excess of the amount actually paid to the Government;
6. Sell, alienate, mortgage or lease property, certificates or franchise.
Under Sec. 20(g) of C.A. No. 146, the sale, etc. may be negotiated and completed before the
approval by the proper authority. Its approval is not a condition precedent to the validity of the
contract. The approval is necessary only to protect public interest.
PRIOR OPERATOR/OLD OPERATOR RULE
The rule allowing an existing franchised operator to invoke a preferential right within the
authorized territory as long as he renders satisfactory and economical service.
The policy is not to issue a certificate to a second operator to cover the same field and in
competition with a first operator who is rendering sufficient, adequate and satisfactory service.
The prior operator must first be given an opportunity to improve its service, if inadequate or
deficient.
Purpose: To prevent ruinous and wasteful competition in order that the interests of the public
would be conserved and preserved.
It subordinates the prior applicant rule which gives the first applicant priority only if things and
circumstances are equal.
Where the operator either fails or neglects to make the improvement or effect the increase in
services, especially when given the opportunity, new operators should be given the chance to
give the services needed by the public.

DIADEM PEARL R. MANSAYON

PUBLIC SERVICE LAW, CA 145, AS

AMENDED
PRIOR APPLICANT RULE
Presupposes a situation when two interested persons apply for a certificate to operate a public
utility in the same community over which no person has as yet granted any certificate. If it turns
out, after the hearing, that the circumstances between the two applicants are more or less equal,
then the applicant who applied ahead of the other, will be granted the certificate.
RATE-FIXING POWER
The rate to be fixed must be just, founded upon conditions which are fair and reasonable to
both the owner and the public.
A rate is just and reasonable if it conforms to the following requirements:
1. One which yields to the carrier a fair return upon the value of the property employed in
performing the service; and
2. One which is fair to the public for the service rendered.
REGISTERED OWNER RULE
The registered owner of a certificate of public convenience is liable to the public for the injuries
or damages suffered by third persons caused by the operation of said vehicle, even though the
same had been transferred to a third person.
The registered owner is not allowed to escape responsibility by proving that a third person is
the actual and real owner Reason: It would be easy for him, by collusion with others or otherwise,
to transfer the responsibility to an indefinite person, or to one who possesses no property with
which to respond financially for the damage or injury done.
KABIT SYSTEM
A system whereby a person who has been granted a certificate of public convenience allows
other persons who own motor vehicles to operate under such license, for a fee or percentage of
such earnings. It is void and inexistent under Art. 1409, Civil Code.
Effects:
1. The transfer, sale, lease or assignment of the privilege granted is valid between the
contracting parties but not upon the public or third persons.
2. The registered owner is primarily liable for all the consequences flowing from the operations
of the carrier.
The public has the right to assume that the registered owner is the actual or lawful owner
thereof. It would be very difficult and often impossible, as a practical matter, for the public to
enforce their rights of action that they may have for injuries inflicted by the vehicle if they
should be required to prove who the actual owner is.
3. The thrust of the law in enjoining the kabit system is to identify the person upon whom
responsibility may be fixed with the end in view of protecting the riding public The registered
owner cannot recover from the actual owner and the latter cannot obtain transfer of the
vehicle to himself, both being in pari delicto.
4. For the better protection of the public, both the registered owner and the actual owner are
jointly and severally liable with the driver.