Regulations of Shenzhen Municipality on the Operation of Public Utilities under Franchise

· Document Number：Announcement No. 11 of the Standing Committee of the Fourth Shenzhen Municipal People's Congress

· Area of Law： Construction Industry

· Level of Authority： Regulations of Districted Cities

· Date issued：12-29-2005

· Effective Date：03-01-2006

· Status： Effective

· Issuing Authority： Guangdong Province

Announcement of the Standing Committee of the Fourth Shenzhen Municipal People's Congress
(No. 11)
The Regulations of Shenzhen Municipality on the Operation of Public Utilities under Franchise, Adopted at the Second Meeting of the Standing Committee of the 4th Shenzhen Municipal People's Congress on September 27, 2005 AND approved by the Twenty-first Meeting of the Standing Committee of the 10th Guangdong Provincial People's Congress on December 2, 2005, is hereby promulgated and shall come into effect on March 1, 2006.
Standing Committee of Shenzhen Municipal People's Congress
December 29, 2005
Regulations of Shenzhen Municipality on the Operation of Public Utilities under Franchise
（Adopted at the Second Meeting of the Standing Committee of the 4th Shenzhen Municipal People's Congress on September 27, 2005, approved by the Twenty-first Meeting of the Standing Committee of the 10th Guangdong Provincial People's Congress on December 2, 2005）
Chapter I General Provisions
Article 1 In order to regulate the operation of public utilities under franchise in Shenzhen Municipality, safeguard public interests and the legal rights and interests of franchisees of public utilities, and promote the healthy development of public utilities, these regulations are hereby formulated in accordance with the Law of the People's Republic of China on Administrative Permission and the related laws and regulations, and in the light of the practical conditions of Shenzhen Municipality.
Article 2 The term “operation of public utilities under franchise” （hereinafter referred to as the operation under franchise） mentioned in these Regulations refers to the activity of operating certain public utilities within a special scope and period which is conducted by a franchisee of public utilities （hereinafter referred to as the franchisee） designated by Shenzhen Municipal Government （hereinafter referred to as the municipal government） through fair competition.
Article 3 In the jurisdictional area of this municipality, the following industries that involve allocation of public resources or directly relate to public interests may be operated under franchise:
1. the industry of water, gas or heat supply;
2. the industry of disposing sewage or wastes;
3. the industry of public transportation;
4. other industries stipulated by laws and regulations.
Anyone who wants to engage in the operation under franchise shall get the corresponding franchise according to the relevant provisions.
Article 4 Public interests shall be protected from injury in operation of franchise. Every franchisee shall guarantee that he provides constant, safe, convenient, good, high efficient, fair, reasonably-priced and common service, may not take advantage of his superior position to obstruct other persons to carry out lawful operation, and may not infringe upon the legal rights and interests of consumers.
Franchisees shall obtain reasonable profits through lawful operation and bear the corresponding risks.
Article 5 The public has the right to know the truth about the operation under franchise, to bring forward his opinions, and to report and complain about the activities infringing upon his legal rights and interests.
The municipal government and franchisees shall establish a mechanism for public to participate in the operation under franchise, and ensure that the public may carry out effective supervision over the operation under franchise.
Article 6 The trade competent departments of the municipal government on public utilities shall be the supervisory departments of operation under franchise. Other functional departments of the municipal government shall fulfill their respective supervisory functions according to their respective responsibilities.
Chapter II Granting Franchise
Article 7 Franchise may only be granted by the municipal government.
Article 8 The municipal government shall determine which applicant is qualified through fair competition, such as bidding and auction, and grant the franchise of certain public utilities to him by means of issuing a commission of franchise（hereinafter referred to as the commission）， in an open, fair and impartial manner, and according to the provisions of relevant laws and regulations.
Article 9 If the municipal government can not determine a franchisee through bidding or auction, it may determine the franchise through recruitment.
The term of recruitment mentioned above refers to the method by which the municipal government determines a franchise by the following procedures: firstly, the municipal government makes a publication about what public utilities are to be operated under franchise; secondly, the municipal government or his entrusted institution sends invitations to applicants; thirdly, the candidates of franchisees are determined through prudent investigation and negotiation of intent; fourthly, the preferred candidate is determined by an evaluation committee which is established especially; and lastly, a franchise is determined by negotiation.
Article 10 If the municipal government decides to determine a franchise by recruitment, it shall lay down and publicize the requirements and procedures of the recruitment in advance.
Article 11 The franchise of an industry shall be granted to at least two franchisees, except that it is impractical due to the characteristics of the industry or the conditions of the region.
Article 12 Operation under franchise may be carried out by the following forms:
1. allowing a franchisee to construct and operate a project of public utilities under franchise in a certain period, and taking over the project without any payment when the period expires;
2. transferring the operation of public facilities to a franchisee in a certain period, and retrieving the operation without any payment when the term expires;
3. entrusting a franchisee to provide certain public service in a certain period;
4. other forms provided by laws and regulations.
Article 13 Anyone who applies to be a franchisee shall meet the following requirements:
1. being a legal person of enterprise established by law;
2. having corresponding experiences and good reputation in the industry;
3. having a feasible operation plan;
4. meeting relevant requirements stipulated by the documents of bid invitation, auction and recruitment;
5. other requirements stipulated by laws, regulations or rules.
Article 14 The municipal government shall frame authorization schemes according to the characteristics of industries, and hold hearings on relevant contents of the authorization schemes.
An authorization scheme shall include the following contents:
1. basic information about the project;
2. basic requirements to be satisfied by the applicant;
3. way of granting the franchise;
4. form, main contents, scope and term of the franchise;
5. estimation to the income and capital return of the franchisee;
6. fiscal subsidy and other preferential measures;
7. other issues which are considered to be included by the municipal government.
Article 15 The municipal government shall sign a franchise agreement with the selected franchisee pursuant to the relevant documents of bid invitation or auction, and issue him the franchise authorization certificate within thirty days after the procedures of bid invitation or auction are completed.
Article 16 A franchise agreement shall include the following contents:
1. name of the project;
2. way of operation;
3. obligations of the franchisee;
4. default liabilities
5. other issues agreed by the parties.
Article 17 The franchise authorization certificate is the evidence for a franchisee to engage in the operation under franchise, which shall include the following contents:
1. franchisor and franchisee;
2. content, area and term of the franchise;
3. major obligations and responsibilities of the franchisee;
4. cancellation of the franchise;
5. other issues need to be clarified.
Article 18 The term of franchise shall be determined according to the return period of the investment, and may not exceed 30 years.
Article 19 The municipal government shall grant a franchise again according to these regulations when the term of franchise expires and shall finish the re-granting six months before the franchise term expires.
Article 20 The municipal government may charge franchise fees according to the characteristics of public utilities.
Chapter Ⅲ Rights and Obligations of Franchisees
Article 21 Every franchisee has the right to run business independently. No administrative organ, social organization or other organization may illegally intervene in the normal operation of a franchisee.
Article 22 A franchisee may obtain income through the following ways:
1. charging fees for providing public products or services;
2. gaining other franchise income or fiscal subsidy from the municipal government which is promised in the authorization scheme;
3. other ways provided by laws and regulations.
Article 23 Every franchisee shall perform their operation obligations pursuant to the franchise authorization certificate and the franchise agreement, and shall accept the supervision by the supervisory department.
Article 24 No franchisee may conduct any operation activity beyond the business scope provided in the franchise authorization certificate, or transfer, rent out or impawn the franchise without being approved by the municipal government.
Article 25 Every franchisee shall submit the relevant information to the supervisory department for record on time which includes the annual and five-year operation plans, annual operation report, and the changing of enterprise's name, address, the member of the board of directors or other management organ. .
Article 26 Every franchisee shall publicize his audited financial statements of the preceding year before the end of May every year.
Article 27 No franchisee may take the advantage of his dominant position to force, restrict or hinder any user from purchasing a certain product, or commit other activities to infringe upon the legal rights and interests of a consumer.
Article 28 The property rights of public facilities which are constructed with the municipal government's investment shall belong to the municipal government. The municipal government may transfer out the operation rights of public facilities by franchise according to the provisions of Article 12 of these regulations. No franchisee may change the functions of usage of public facilities without permission.
Article 29 Franchisee shall allow other operators to connect with the public facilities which are constructed with his investment or are operated by him according to the city planning.
Article 30 When a franchisee needs to enter into certain land or a building for constructing or maintaining public facilities, he shall consult with the rights holder in advance who shall provide convenience.
Article 31 The construction, reconstruction and maintenance of public facilities, establishment of places and stations, and construction and reconstruction of pipelines shall be subject to the overall arrangement of the municipal department of planning, and shall be consistent with the provisions of laws and regulations on road and afforestation management. If a public facility needs to be repaired immediately under emergency, the franchisee may firstly rush to repair inform the relevant departments at the same time, and then go through the procedures afterwards.
Article 32 Franchisee shall conduct regular inspection, maintenance and reconstruction to public facilities, guarantee the constant supply of public products and services as agreed, and regularly report to the supervisory department of the public facilities' performance.
Article 33 Franchisee shall collect, pack up and file the documents concerning public facilities, such as the blueprints, improve the information management system of public facilities, and connect with the web of the supervisory department.
Article 34 For the purpose of protecting public interests, the municipal government may expropriate public facilities or order a franchisee to provide services for public benefits according to law. The franchisee shall cooperate with the municipal government in the expropriation. The municipal government shall pay reasonable compensation to the franchisee.
Article 35 When the franchise term expires or the franchise is revoked, the original franchisee shall deliver the assets under normal operation and archives necessary for the normal operation under franchise to the unit designated by the supervisory department within the time limit set by the supervisory department.
Article 36 When the franchise term expires or the franchise is revoked, the original franchisee shall continue normal operation until the business is taken over by the unit designated by the supervisory department.
Under the circumstance stipulated in the provisions of second item of the second paragraph of Article 12 of these regulations, the municipal government shall pay reasonable compensation to the original franchisee for the net worth of the fixed assets which are constructed with the franchisee's investment for continuing the operation under franchise.
Article 37 In the franchise term, if a franchisee can not operate business normally due to force majeure, he shall report to the municipal government in time, and may terminate the operation under franchise in advance after being approved by the municipal government.
Chapter IV Price
Article 38 Franchisees shall comply with the provisions on price supervision, and charge fees from users according to the price standards set by the municipal government.
If the municipal government makes an agreement on price with a franchisee, he shall charge fees from users according to the agreed price.
Article 39 The administrative department of price of the municipal government shall frame the scheme of price for public utilities together with the supervisory department, and implement the scheme after getting approval from the municipal government.
Article 40 The price of public utilities shall be set according to the social average cost, reasonable interest of franchisee, the capacity to afford of civilians and other relevant factors.
The reasonable interest of a franchisee shall be checked and ratified through the way of earning rate of net assets, net worth of fixed assets, investment or costs according to the characteristics of each industry.
Article 41 The municipal government shall determine the earning rate of every industry of public utilities according to the social average profit, bank interest rate and price index.
The administrative department of price shall assess the earning rate of every industry of public utilities annually together with the supervisory department, and report to the municipal government for adjustment when necessary.
Article 42 The administrative department of price shall establish a regular reviewing system of prices, establish database of cost materials and form an effective mechanism of cost restriction. When the administrative department of price frames a price scheme, it shall entrust a qualified auditing institution to audit the cost of operation for ensuring the authenticity and accuracy of cost.
Article 43 A franchisee or an organization, such as the public supervisory organization of public utilities, the consumer organization and the supervisory department of industry association may file a written application to the administrative department of price for setting or adjusting the price of public utilities. The administrative department of price or other relevant department may bring forward a scheme of setting or adjusting price directly pursuant to relevant provisions of the price law.
Article 44 The administrative department of price shall examine and verify the application documents it receives, and shall require the applicant to submit omitted documents in a certain time period if the documents are not a complete set. The administrative department of price shall accept the application if the requirements for setting or adjusting price are satisfied.
Article 45 The administrative department of price shall carry out an investigation on the social average costs and the capacity to afford of civilians after accepting an application to set or adjust a price, and shall hold a hearing within 3 months from the date of making the acceptance decision.
The administrative department of price shall serve the materials about the hearing to the representatives 10 days before the hearing date. The hearing shall be held if 2/3 or more representatives present.
Article 46 The administrative department of price shall adequately listen to the opinions for adoption which are brought forward in a hearing when framing a price scheme together with the supervisory department, and shall submit the summaries and notes of the hearing and other relevant materials when submitting the price scheme to the municipal government for approval.
Article 47 The administrative department of price shall publicize the price scheme through news media after it is approved, and organize its implementation.
Article 48 The prices of public utilities shall be kept relatively stable. The municipal government may establish a fund of price adjustment according to the characteristics of each industry of public utilities, which shall be used exclusively for controlling and adjusting the prices and profits of public utilities. Detailed administrative measures on the fund of price adjustment shall be enacted separately by the municipal government.
Chapter V Supervision
Article 49 The supervisory department shall supervise franchisees by performing the following functions and responsibilities:
1. to organize the making of quality standards of public products and services;
2. to supervise and urge franchisees to perform their obligations provided in the commission of authority and the franchise agreement;
3. to accept the public complains to franchisees;
4. to investigate and punish the illegal activities committed by franchisees according to law;
5. to bring forward comments and suggestions to the five-year and annual operation plans made by franchisees, and to supervise their implementation;
6. to supervise and check the quality of public products and services provided by franchisees;
7. to assist the administrative department of price in price making;
8. to examine the annual reports of franchisees;
9. to submit the annual supervision and check report on franchisees to the municipal government;
10. to organize the temporary takeover of the operation of public utilities in time of emergency;
11. other functions and responsibilities provided by laws and regulation.
Article 50 The supervisory department shall make a prepared plan against the emergency when a franchisee suspends or stops business without approval, or the municipal government decides to revoke a franchise to ensure that it can effectively organize a temporary take-over or take other effective measures to guarantee the constant and stable supply of public products or services.
Article 51 The municipal government shall establish different public supervisory commissions for public utilities in different industries to represent the public in supervising the operation under franchise.
Experts from nongovernmental organizations and representatives of the public shall occupy no less than 2/3 positions in the commission.
Franchisees shall report the information of their operation to the public supervisory commissions yearly.
Public supervisory commissions may collect public opinions by holding hearings, seminars or by questionnaires, may raise suggestions concerning legislation, supervision and regulation, and may supervise over the operation under franchise on behalf of the public.
Article 52 When carrying out the functions and duties of supervision and regulation, the supervisory department may not disturb the normal operation of franchisees, ask for or accept the properties franchisees, or figure for other inappropriate interests.
Chapter Ⅵ Legal Liabilities
Article 53 Any franchisee who violates these regulations shall be punished according to relevant laws, regulations or rules.
Article 54 If a franchise is obtained through fraud, bribery or other illegal ways, the municipal government shall cancel the franchise and shall ask the judicial organ for investigating criminal responsibilities according to the law if there is a crime.
Article 55 If a franchisee commits any one of the following activities, the municipal government shall order him to correct within a limited time period, and shall cancel his franchise if no correction is made within the time limit:
1. transferring, leasing or impawning his franchise without the permission of municipal government;
2. losing its qualification for getting his franchise which is required in the franchise agreement because of transferring his equity rights;
3. failing to reach the standards or satisfy the requirements on the public products or services provided by him, and seriously infringing public interests;
4. causing a significant security accident due to his poor management;
5. having serious financial problem due to his poor management and endangering public interests;
6. failing to construct, rebuild or maintain a public facility according the city planning;
7. suspending or stopping operation without approval;
8. failing to perform the obligation provided by laws, regulations, the commission of authority or the franchise agreement;
9. other activities provided by laws and regulations.
Article 56 Before the municipal government makes a decision of cancelling franchise, the supervisory department shall inform the franchisee of his right of being heard, and shall organize a hearing if the franchisee asks for.
No one may apply for another franchise if he has been revoked a franchise before. .
Article 57 If a franchisee, a person under administrative punishment or an interested party disagrees with the punishing decision made by the municipal government or the supervisory department, he may apply for administrative review or initiate administrative litigation according to law.
Article 58 Any member of the working staff of a relevant department of the municipal government who abuses his power, plays irregularities for favoritism, neglects his duty, asks for or accepts bribery shall be imposed administrative punishment according to relevant provisions, and shall be investigated for criminal responsibility according to the law if his act constitutes a crime.
Chapter Ⅶ Supplementary Provisions
Article 59 District people's governments shall take these regulations as reference when administrating the operation under franchise of the public utilities they invest in for construction or take charge of.
Article 60 These regulations shall take effect as of March 1, 2006.
As to a project under franchise established before the implementation of these regulations, the commission of authority or franchise agreement shall apply if there are provisions to regulate it. Otherwise, these regulations shall apply.