Under Republic Act No. 11966, or the Public-Private Partnership (PPP) Code of the Philippines, public utilities may be undertaken through PPP arrangements, subject to constitutional, statutory, and regulatory requirements.
Public utilities involve services imbued with public interest, such as water supply, power distribution, transport systems, telecommunications, and other essential services.
Because these services directly affect the public, the state retains regulatory supervision and control even when the private sector participates in financing, construction, operation, maintenance, or management.
Rate regulation
One important feature of PPPs involving public utilities is the regulation of rates and charges. Rates, fees, tolls, tariffs, and charges imposed on users are not purely contractual matters between the government and the private partner.
These rates remain subject to regulation, approval, and supervision by the appropriate regulatory bodies or agencies, consistent with law and public welfare. Thus, even under a PPP arrangement, the protection of consumers and the public interest remains paramount.
The PPP Code also recognizes the role of regulatory bodies in PPP projects. A regulatory agency may itself enter into a PPP arrangement, provided that appropriate safeguards are observed. In particular, the regulatory body must adopt and implement a conflict mitigation plan.
Moreover, pursuant to the PPP Code and its Implementing Rules and Regulations (IRR), a regulatory body should not exercise quasi-judicial powers over the same PPP project if doing so would create a conflict of interest. Such authority may only be exercised if no alternative implementing agency has the capacity to undertake the project.
Project bundling
Government agencies may undertake PPPs for public utilities only if such projects fall within their legal mandate, powers, and functions under existing laws.
Likewise, local government units (LGUs) may enter into PPPs involving public utilities pursuant to their powers under the 1987 Constitution, the Local Government Code of 1991, and other applicable laws, particularly in relation to basic services and local infrastructure.
Public utility PPPs may also be bundled with other components or projects. For example, a transport PPP may include commercial development, terminal operations, parking facilities, retail spaces, utilities, digital infrastructure, or transit-oriented development components.
Bundling allows the government to improve project viability, encourage investment, and cross-subsidize non-revenue or socially desirable components.
Public interest
Because public utilities are imbued with public interest, many projects require a legislative or administrative franchise before operations may legally commence. Compliance with constitutional limitations, nationality requirements, and sector-specific laws remains necessary notwithstanding the PPP structure.
Notably, the traditional 12-percent rate-of-return limitation previously associated with the Build-Operate-Transfer (BOT) Law is no longer expressly found in the PPP Code.
Since Republic Act No. 11966 does not adopt such limitation, PPP projects are now governed primarily by negotiated contractual arrangements, applicable regulatory standards, market realities, and the overarching requirement that PPPs serve public interest and deliver value for money. —Ed: Corrie S. Narisma
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