"If a public utility is clearly shown to be violating the terms of its franchise, the proper government action is to make it stop operating"
"If a public utility is clearly shown to be violating the terms of its franchise, the proper government action is to make it stop operating"A law approved this year that was intended to make life easier for organizers of corporations has ended up drawing attention to the limitations imposed by law on franchises for the operation of public-utility enterprises. One of the Corporation Code of the Philippines amendments signed into law by President Rodrigo Duterte scrapped the longstanding 50-years limit on the life of corporation established in this country.
Because of their special economic character—they often have little competition due to the large scale of their operations and the big amounts of capital that they require—public utilities are required by the Public Service Act to obtain franchises for their operations. The duration of the franchises differs according to the nature of the public utility: a power company will require and be granted a franchise valid for 50 years, whereas a land transportation company may require and be granted a franchise of 10 years’ duration. No investor will want to put up a public utility necessitating a huge amount of money if the government will give his company a franchise of short duration. A short-duration franchise almost certainly will not allow his company to recover its investment during the lifetime of the franchise.
In the explanatory note to the bill seeking the amendment of the Corporation Code, the bill’s authors explained that they saw no acceptable reason why a corporation’s life should be limited to 50 years. They said that a corporation can operate in only one of two ways: like a good citizen or like a bad citizen. If a corporation behaves like a good citizen—paying its taxes honestly, treating its employees and other stakeholders fairly and obeying faithfully all laws and government regulations—why should its life be arbitrarily ended at the end of 50 years? On the other hand, if a corporation behaves like a bad citizen, doing the opposite of what a good citizen does, the government does not need to wait for the end of the corporation’s legal life to put an end to a bad situation? The various government departments and agencies closely involved in most public-utility operations, especially BIR (Bureau of Internal Revenue), DOE (Department of Energy) and DOTr (Department of Transportation), can, upon strong indications of unlawful conduct, issue show-cause orders compelling the managements of bad-citizen corporations to prove to the government that they deserve to be allowed to continue doing business. The government has all the power to act swiftly and effectively against erring corporations; it does not have to wait for the end of the 50-year period indicated in the corporation’s certificate of authority (CA).
This brings me to the matter of government limitation of the existence of franchises valid for a certain number of years. The argument that the government can punish an erring corporation at any time during a corporate CA’s life and does not have to wait for the end of that life applies with equal force to government treatment of an erring public utility. If a public utility is clearly shown to be violating the terms of its franchise, the proper government action is to make it stop operating forthwith; the government should not wait until the end of the franchise period, when it can take the punitive action of non-renewal of franchise.
A government’s allowing a public utility to utilize its franchise up to the end of the franchise period can only mean that a corporation has been operating like a good citizen, obeying all laws, treating all its stakeholders fairly and promoting the public good. Had it been otherwise, the government surely would have taken disciplinary action against it.
Two current cases come to mind in this regard. I am referring to the cases of the nation’s largest broadcast network, ABS-CBN, and PECO’s largest electricity utility on the island of Panay. ABS-CBN has already been told that President Duterte will not approve a Congressional measure extending ABS-CBN’s franchise beyond March 20, 2020; Congress granted a franchise to another company when PECO’s franchise expired last year. If PECO had been supplying electricity to the Iloilo City area for 95 years, why was its franchise not renewed? And if ABS-CBN has been able to rise to the position of No. 1 broadcast network (or No. 2, if rival network GMA is to be believed), why should its franchise not be renewed when that document expires next year? Politics should have no place in the grant and renewal of public-utility franchises; considerations of economics and efficiency alone should matter.
Congress was sufficiently enlightened to discern the merit in removing the 50-year duration from the CAs of corporations. It should now display the same measure of enlightenment with regard to public-utility franchises and approve a bill making franchises durationless.
