Grant of Electric Light, Heat and Power System Franchise to Malitbog, Leyte

June 17, 1961

REPUBLIC ACT NO. 3187

AN ACT GRANTING THE MUNICIPALITY OF MALITBOG, PROVINCE OF LEYTE, A FRANCHISE FOR AN ELECTRIC LIGHT, HEAT AND POWER SYSTEM

SECTION 1. Subject to the terms and conditions established in Act Numbered Thirty-six hundred and thirty-six, as amended by Commonwealth Act Numbered One hundred thirty-two, and to the provisions of the Constitution, there is granted to the Municipality of Malitbog, Province of Leyte, for a period of fifty years from the approval of this Act, the right, privilege and authority to construct, maintain, and operate an electric light, heat and power system for the purpose of generating and distributing electric light, heat and/or power for sale within the Municipality of Malitbog, Province of Leyte. cd i

SECTION 2. Rates for Electricity — Limit of Net Profit. — The rates of electricity shall be fixed so that the grantee obtains a net profit of not more than six per centum per annum of the rate base as defined herein: Provided, That the grantee shall not start operation unless the original rate shall have been previously approved by the Public Service Commission: Provided, further, That if the grantee shall have reported profits in excess of six per centum per annum for the first year of its operation, it shall effect immediate reduction in its existing rates by a percentage which the reported profits in excess of six per centum per annum bear to the reported revenue in that year: Provided, further, That during each succeeding years, if the grantee is reporting profits still in excess of six per centum per annum, notwithstanding the rate reduction of the immediately preceding years, it shall effect reduction in rates by a percentage which the reported profits in excess of six per centum per annum during the preceding year bear to the reported revenue of the same year, such reduction to be made not later than April first of each year retroactive to January first of the same year: Provided, further, That where the applicable reduction to customers will mean less than one per centum reduction in the prevailing rates or will include such a fraction, no reduction in rates shall be made to the extent of such fraction but such amount shall be placed in a special fund of the grantee available only for the improvement and expansion of the system: Provided, further, That the reduction to be effected by the grantee in accordance with the next preceding proviso shall not be conclusive but may be further increased at such rates as shall be found justifiable in the verification that shall be undertaken by the Public Service Commission, with the cooperation of the General Auditing Office and such other agencies of the Government as the President may designate, of the rate base of the revenue, and of the operating expenses: Provided, further, That any violation of any provision of this section, including inflation of the rate base, padding of operating expenses, and understatement of revenues, shall be penalized with dismissal from the service, and by imprisonment for not less than one year and not more than five years, of the public officers and employees responsible for the violation, without prejudice to the civil liability of the grantee concerned to the consumers in double the amount of the overcharge plus attorneys fees and costs of litigation, which liability may be enforced independently of criminal action arising from the same act. acd

The net profit obtained by the grantee shall not be used for any purpose other than the improvement and expansion of the system.

SECTION 3. Records of Assets, Liabilities, Capital, Income, etc. — The grantee shall make and keep complete records of its assets, liabilities, capital, revenues, expenses, income, and operations in accordance with a detailed system of accounts which shall embody the cost principle as defined in Section five hereof, and which shall be prescribed by the Public Service Commission or its legal successor, and such accounting system shall conform to the system approved by the Auditor General. The grantee shall account for retirement or replacements of, or additions to, its property according to a classified list of units of property which the Public Service Commission or its legal successor shall prescribe. Until the Public Service Commission or its legal successors prescribes the aforementioned list of units of property, the grantee may adopt its own list of property which it shall submit to the Public Service Commission or its legal successor for approval.

SECTION 4. Record of Amount of Depreciation of Depreciable Property. — The grantee shall record in its account at the end of each month estimated amount of depreciation of every depreciable property for that month computed according to the straight-line method, as defined in Section five hereof. In estimating such accrued depreciation the grantee shall use its own judgment as to the estimated service lives and depreciation rates of its depreciable property which it shall submit to the Public Service Commission or its legal successor for approval, until such time as the Public Service Commission or its legal successor fixes the service lives and depreciation rates which the grantee shall be required to use thereafter.

SECTION 5. Definition of Terms. — For purposes of this Act, the following terms are defined as follows:

"Cost" means the amount of money actually paid for property or services or their cash value at the time of the transaction.

"Units of property" means those items of property which when retired, with or without replacement, are accounted for by crediting the book cost thereof to the property account in which included.

"Straight-line method" of depreciation means the recording of depreciation of depreciable property in equal amounts monthly over its estimated service life.

"Rate base" means the money honestly and prudently invested in the used and useful property and equipment less accrued depreciation plus one-twelfth of the annual cash operating expenses as working capital.

SECTION 6. Limit of Operating Expenses, Quality of Service. — The grantee shall abide by the limit of operating expenses that the Public Service Commission or its legal successor may impose and shall comply with the safety rules and render the quality of service which said Commission may provide.

SECTION 7. Power to Borrow from Government Banking Institutions. — In order to finance its projects, the grantee is empowered to borrow from any financial institution or incur indebtedness in excess of its borrowing capacity, notwithstanding any provision of law to the contrary.

SECTION 8. Administration of Franchise on Non-Partisan Basis. — The franchise granted herein shall be administered entirely on a non-partisan basis, and in the appointment of officials, selection of employees and promotion of any such officials or employees, no political test or qualification shall be permitted or given consideration, but all such appointments and promotions shall be given and made on the basis of merit and efficiency. The benefits of this franchise shall be made available without discrimination to any person, group or association, irrespective of color, race, creed, religion or political party.

SECTION 9. Right of National Government to Acquire Grantee's Property. — It is expressly provided that, in the event the National Government should desire to maintain and operate for itself the system and enterprise herein authorized, the grantee shall surrender its franchise and turn over to the National Government all serviceable equipments therein, and the National Government shall pay the grantee its original investment and/or assume all the obligations of the grantee to finance the system.

SECTION 10. Penal Provisions. — Any public officer or employee found directly or indirectly responsible for the use of the net profit of the grantee for any purpose other than the improvement and expansion of the system shall be punished by a fine of not more than five thousand pesos or imprisonment for not more than two years, or both.

Any public officer or employee found directly or indirectly responsible for the violation of this section or any such officer or employee who, having known such violation, fails to report the same to the justice of the peace, shall be punished with dismissal from the service and by imprisonment of not less than one year nor more than five years.

Nothing in this section shall be construed to relieve or exempt the grantee from complying with the provisions of other laws relative to franchises. cd

SECTION 11. Repeal or Modification of Other Laws, Executive Orders, etc. — All laws or parts of laws and all executive orders, rules and regulations or parts thereof inconsistent with the provisions of this Act are repealed or modified accordingly.

SECTION 12. Separability Clause. — If any provision of this Act or the application of such provisions to any person or circumstance is declared invalid, the remainder of the Act or the application of such provision to other persons or circumstances shall not be affected by such declaration.

SECTION 13. Effectivity Clause. — This Act shall take effect upon its approval.

Approved: June 17, 1961

Published in the Official Gazette, Vol. 58, No. 5, p. 858 on January 29, 1962