Section 6Sec./Art. 6

Section 16 of Commonwealth Act No. 146, as amended, is hereby further amended to read as follows:

"Section 16.Proceedings of the Commission, upon notice and hearing. -The Commission shall have the power, upon notice and hearing in accordance with the rules and provisions of this Act:

"(a) To issue certificates authorizing the operation of public service within the Philippines whenever the Commission finds that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner:Provided, That any certificate authorizing the operation, management or control of a public service shall only be issued to corporations, partnerships, associations or joint stock companies that are constituted and organized under the laws of the Philippines.

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"(c) To fix and determine the fair and reasonable individual or joint rates, tolls, charges, classifications, tariffs or schedules thereof, as well as commutation, mileage, kilometrage, and other special rates which shall be imposed, observed, and followed thereafter by any public service when the public interest so requires: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 fifteen (15) days, thereafter, upon publication and notice to the affected parties in the territory affected, to ratify its prior provisional approval or change, modify or later the approved rate based on public interest: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:Provided, finally,That when the public interest requires, the Administrative Agency may establish and enforce a methodology for setting rates, taking into account all relevant considerations, including the efficiency of the regulated public service.

The rates must be such as to allow the recovery of prudent and efficient costs and a reasonable rate of return to enable the public service to operate viably and efficiently. The Administrative Agency may adopt alternative forms consistent with internationally accepted rate-setting methodology. The adopted rate-setting methodology shall ensure a reasonable price of the commodity or service and that the rates prescribed shall not be discriminatory.

"This provision shall not be interpreted as mandating rate regulation nor amending or repealing: (1) laws providing a deregulation policy, such as Republic Act No. 7925, otherwise known as the "Public Telecommunications Policy Act of the Philippines', as amended; Republic Act No. 8479, otherwise known as the 'Downstream Oil Industry Deregulation Act of 1998', as amended; Republic Act No. 9136, otherwise known as the 'Electric Power Industry Reform Act of 2001', as amended; Republic Act No. 9295, otherwise known as the 'Domestic Shipping Development Act of 2004', as amended; and Republic Act No. 6957, otherwise known as the 'BOT law', as amended; and (2) regulations promulgated by these Administrative Agencies to deregulate rates.

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"(l) To fix and determine proper and adequate rates of description of the property of any public service which will be observed in a proper and adequate depreciation account to be carried for the protection of stockholders, bondholders or creditors, in accordance with such rules, regulations, and forms of accounts as the Commission may prescribe. Said rates shall be sufficient to provide the amounts required over and above the expense of maintenance to keep such property in a state of efficiency corresponding to the progress of the industry. Each public service shall conform its depreciation accounts to the rates so determined and fixed, and, as may be required by the proper Administrative Agency, shall set aside the moneys so provided for out of its earnings and carry the same in a depreciation fund.

The income from investments of money in such fund shall likewise be carried in such fund. This fund shall not be expended otherwise than for depreciation, improvements, new constructions, extensions or additions to the property of such public service.

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"(p) To suspend or revoke any certificate issued under the provisions of this Act when the holder thereof has failed for three (3) consecutive years the annual performance audit conducted by an independent evaluation team in accordance with the metrics to be set by the Administrative Agency."