G.R. No. 161113             June 15, 2004
FREEDOM FROM DEBT COALITION, ANA MARIA NEMENZO, as President of FREEDOM FROM DEBT COALITION, MA. TERESA I. DIOKNO-PASCUAL, REP. LORETTA ANN ROSALES (Party-List Akbayan), REP. JOSE VIRGILIO BAUTISTA (Party-List Sanlakas), REP. RENATO MAGTUBO (Party-List Partido Manggagawa), petitioners,
ENERGY REGULATORY COMMISSION, MANILA ELECTRIC COMPANY (MERALCO), respondents.
D E C I S I O N
The privately-owned public utility "is the substitute for the State in the performance of . . . (a) public service, thus becoming a public servant,"1 so wrote Justice Louis Brandeis more than eighty years ago. As in the United States, the provision of public utility services in the Philippine setting is a combination of private ownership and public control. Such an amalgam of clashing interests is a formula for inevitable conflicts. At bar here is one such conflict, in fact the current high point of a raging controversy where the public, on one side, is pitted against the regulatory body and the country’s leading power utility, on the other.
Before the Court is a Petition for Certiorari, Prohibition and Injunction with Prayer for the Issuance of a Temporary Restraining Order or a Status Quo Order. The Petition assails the Order dated November 27, 2003 of respondent Energy Regulatory Commission (ERC), provisionally authorizing respondent Manila Electric Company (MERALCO) to increase its rates by an average amount of twelve centavos (P0.12) per kilowatt hour.
On October 10, 2003, MERALCO filed with the ERC an Application for an increase in rates. MERALCO also prayed ex parte for the grant of a provisional authority to implement the increase according to the schedule attached to its Application. The case was docketed as ERC Case No. 2003-480.2
On October 14, 2003, the National Association of Electricity Consumers for Reforms, Inc. (NASECORE), in a Letter addressed to then ERC Chairman Manuel R. Sanchez (Sanchez), informed him of its intention to file an Opposition to MERALCO’s Application.3
On October 24, 2003, Mr. Genaro Lualhati (Lualhati) sent a Letter to Sanchez seeking the dismissal of MERALCO’s Application.4
On October 29, 2003, petitioner Freedom from Debt Coalition (FDC) also expressed its intention to file an opposition to MERALCO’s Application.5
On November 3, 2003, the ERC directed FDC, NASECORE and Lualhati to file their respective comments on the Application within fifteen (15) days from their receipt thereof.6
On November 11, 2003, NASECORE filed a Motion for Production of Documents to enable it to evaluate MERALCO’s Application.7
In an Order dated November 13, 2003, the ERC directed MERALCO to file its comment on NASECORE’s Motion for Production of Documents.8
On November 19, 2003, the ERC issued an Order directing MERALCO to submit certain documents in connection with the evaluation of its Application.9
On November 21, Lualhati filed his Opposition10 to MERALCO’s Application.
The FDC likewise filed a Motion for Production of Documents on November 27, 2003, adopting NASECORE’s list in its Motion, and requesting for other documents in addition thereto.11
However, on November 27, 2003, the ERC, without first resolving the Motions for Production of Documents of NASECORE and FDC and apparently without considering Lualhati’s Opposition, issued an Order provisionally approving MERALCO’s ex parte application for rate increases. The dispositive portion of the Order states:
WHEREFORE, considering all the foregoing, this Commission, pursuant to Section 8 of Executive Order No. 172 and Section 4 (e) of the Implementing Rules and Regulations of the EPIRA (R.A. 9136), hereby provisionally authorizes applicant Manila Electric Company (MERALCO) to adopt and implement the attached rate schedules embodying a rate adjustment in the average amount of TWELVE (12) CENTAVOS per kwh, effective with respect to its billing cycles beginning January 2004. The impact of this approved rate adjustment will vary from one customer class to another depending on the load cycles.
The rate adjustment authorized herein shall be subject to refund in the event that this Commission finds, after completion of the hearings of this case, that the same is unjust and unreasonable.
The hearing of this case is hereby set on December 22, 2003 at nine o’ clock in the morning (9:00 A.M.) at the ERC Hearing Room, 15th Floor, Pacific Center Building, San Miguel Avenue, Ortigas Center, Pasig City. In this connection, MERALCO is hereby directed to publish, at its own expenses, the attached Notice of Public Hearing at least twice (2) for two (2) successive weeks in two (2) newspapers of nationwide circulation in the country, the last date of publication to be made not later than two (2) weeks before the scheduled date of initial hearing.
Let copies of this Order and the attached Notice of Public Hearing be furnished all the Municipal/City mayors within the MERALCO’s franchise area for appropriate posting thereof on their respective bulletin boards….12
Thereafter, the following were filed with the ERC after its issuance of the November 27, 2003 Order:
(1) Urgent Motion to Resolve Motion for Production of Documents & Opposition to the Provisional Authority filed by NASECORE on December 8, 2003;
(2) Manifestation Joining the National Association of Electricity Consumers for Reforms, Inc. in its Opposition to the Provisional Authority and Motion for Production of Documents filed by the Philippine Consumers Watch on December 11, 2003;
(3) Opposition filed by the Philippine Consumers Welfare Union (PCWU) on December 15, 2003;
(4) Urgent Motion to Suspend Implementation and Motion for Reconsideration filed by the Napocor Industrial Consumers Association, Inc. (NICAI) on December 12, 2003;
(5) Letter requesting for reconsideration of the November 27, 2003 Order of the ERC, sent by the National Consumer Affairs Council on December 9, 2003;
(6) Letter objecting to the November 27, 2003 Order of the ERC, sent by the Federation of Philippine Industries, Inc. on December 11, 2003; and
(7) Motion for Production of Documents and Motion for Production of Documents (Supplemental) filed by Atty. Ruperto J. Estrada on December 15, 2003 and December 16, 2003, respectively.
On December 19, 2003, MERALCO filed its Comment.13 It refused to produce the documents requested by the oppositors on the ground that such documents are immaterial and irrelevant to its application.
On December 22, 2003, the scheduled date of hearing, the ERC did not revoke the provisional authority granted to MERALCO per its November 27, 2003 Order.
FDC did not move for reconsideration of the Order but on December 23, 2003, it filed the instant Petition.
FDC argues that the November 27, 2003 Order of the ERC is void for having been issued without legal or statutory authority. It also contends that Rule 3, Section 4(e) of the Implementing Rules of the EPIRA is unconstitutional for being an undue delegation of legislative power. FDC further asserts that the November 27, 2003 Order is void for having been issued by the ERC with grave abuse of discretion and manifest bias. In support of its prayer for the issuance of injunctive relief, FDC claims that the implementation by MERALCO of the provisional rate increase will result in irreparable prejudice to FDC and others similarly situated unless the Court restrains such implementation.14
On December 29, 2003, FDC filed with the Court an Urgent Motion to Grant Restraining or Status Quo Order.
On January 9, 2004, The ERC issued an Order clarifying that the provisional rate increase granted to MERALCO in its November 27, 2003 Order should be applied beginning January 1, 2004.
The Court En Banc issued on January 13, 2004, a R E S O L U T I O N ordering ERC and MERALCO to file their respective Comments on the Petition. The Court also enjoined ERC and MERALCO to observe the status quo prevailing before the filing of the Petition and set the case for oral arguments on January 27, 2004.
On January 26, 2004, ERC, MERALCO and the Office of the Solicitor General (OSG) filed their respective Comments on the Petition.
In its Comment, the ERC concurred with the arguments of the OSG and insists that it is authorized to issue provisional orders under the law. ERC argues that it must not have been the intention of Congress to expand the functions of the ERC, as the successor of the Energy Regulatory Board (ERB), and clip its powers at the same time.15
The ERC further asserts that it is authorized to issue provisional rate increases ex parte, and that it may base its provisional order on the verified application and supporting documents submitted by the application, and it is not required to wait for the comments of consumers or local government units (LGUs) concerned before issuing a provisional order.16
The ERC likewise denies that the November 27, 2003 Order was issued with grave abuse of discretion. On the contrary, it claims that the Order is supported by substantial evidence.17
Finally, ERC asseverates that the filing of the instant Petition is premature because it was denied the opportunity to have a full determination of the Application after trial on the merits, and is violative of the doctrine of primary jurisdiction.18
For its part, MERALCO asserts that the November 27, 2003 Order is valid, because it was issued by the ERC pursuant to Section 44 of the EPIRA which allows the transfer of powers (not inconsistent with the EPIRA) of the old ERB to the ERC.19 It also denies that the assailed Order was issued by the ERC with grave abuse of discretion, asserting that on the contrary, the issuance thereof was based on the Application, affidavits and other supporting documents which it submitted earlier.20
Bayan Muna, Bayan, KMU, Gabriela, Kadamay, Agham, Gabriela Women’s Party and the Anak Pawis (petitioners-in-intervention) filed their Motion to Intervene, and attached thereto their Petition-in-Intervention. The Court granted the Motion and admitted the Petition-in- Intervention in its R E S O L U T I O N dated January 27, 2004.21
In their Petition-in-Intervention, petitioners-in-intervention argue that the November 27, 2003 Order is void for having been issued by ERC with manifest bias in favor of MERALCO and without due regard for the rights of consumers. They assert further that the ERC committed grave abuse of discretion in considering the appraisal of MERALCO’s assets as of the year 2002, in violation of Section 43(f)(i) of the EPIRA. Lastly, they claim that the assailed Order is void for unjustifiably imposing upon the consumers increased rates to fund the 42 major capital projects of MERALCO for the year 2004.22
During the oral arguments, the Court defined the issues as follows:
(1) Whether the ERC has legal authority to grant provisional rate adjustments under Republic Act (R.A.) No. 9136, otherwise known as the "Electric Power Industry Reform Act of 2001" (EPIRA); and
(2) Assuming that the ERC has the authority to grant provisional orders, whether the grant by the ERC of the provisional rate adjustment in question was committed with grave abuse of discretion amounting to lack or excess of jurisdiction.23
The Court thereafter required the parties to submit their respective Memoranda within a non-extendible period of twenty days from January 27, 2004. The ERC was likewise ordered to produce certain documents pertinent to the resolution of the case.24
We rule in the affirmative on both issues.
Overview of the EPIRA
One of the landmark pieces of legislation enacted by Congress in recent years is the EPIRA.25 It established a new policy, legal structure and regulatory framework for the electric power industry.
The new thrust is to tap private capital for the expansion and improvement of the industry as the large government debt and the highly capital-intensive character of the industry itself have long been acknowledged as the critical constraints to the program. To attract private investment, largely foreign, the jaded structure of the industry had to be addressed. While the generation and transmission sectors were centralized and monopolistic, the distribution side was fragmented with over 130 utilities, mostly small and uneconomic. The pervasive flaws have caused a low utilization of existing generation capacity; extremely high and uncompetitive power rates; poor quality of service to consumers; dismal to forgettable performance of the government power sector; high system losses; and an inability to develop a clear strategy for overcoming these shortcomings.
Thus, the EPIRA provides a framework for the restructuring of the industry, including the privatization of the assets of the National Power Corporation (NPC), the transition to a competitive structure, and the delineation of the roles of various government agencies and the private entities.26 The law ordains the division of the industry into four (4) distinct sectors, namely: generation, transmission, distribution and supply.27 Corollarily, the NPC generating plants have to privatized28 and its transmission business spun off and privatized thereafter.29
In tandem with the restructuring of the industry is the establishment of "a strong and purely independent regulatory body."30 Thus, the law created the ERC in place of the Energy Regulatory Board (ERB).31
To achieve its aforestated goal, the law has reconfigured the organization of the regulatory body. It requires the Chairman and four (4) members of the ERC to be equipped with "at least three (3) years of active and distinguished experience" in the fields of energy, law, economics, finance, commerce or engineering, and at least one of them with ten (10) years or more of experience in the active practice of law and another one with similar experience as a certified public accountant.32 Their terms of office were increased to seven (7) years from the four (4) provided in Executive Order No. 172 (E.O. No. 172) and their security of tenure assured.33 The Chairman and members were given the same salaries, allowances, benefits and retirement pay as the Chief Justice and Associate Justices of the Supreme Court,34 a lot higher than the salary and benefits accorded the Chairman and members of the ERB which were equivalent only to those of a Department Undersecretary and the official next in rank, and those of the Chairman and members of the Commission on Elections, respectively.35
Statutory Authority To
Grant Provisional Increase
FDC posits that the ERC has no power to issue provisional orders because the EPIRA repealed Commonwealth Act No. 146 (The Public Service Act) and E.O. No. 172 (creating the ERB), which laws expressly conferred upon the precursors of ERC the power to grant provisional orders. It argues further that while Section 44 of the EPIRA provides for the transfer of the powers and functions of the ERB to the ERC, such transfer cannot be deemed to include the power to issue provisional orders because such power is inconsistent with the policies ordained in Section 2 of the EPIRA to protect the public interest insofar as it is affected by the rates and services of electric utilities and other providers of electric power and to ensure transparency and full accountability in rate-fixing.36 Considering that the EPIRA itself does not confer upon the ERC the power to issue provisional orders, Section 4(e), Rule 3 of the law’s Implementing Rules, which refers to the grant of provisional authority by the ERC, constitutes an undue delegation of legislative power.37
The petitioners-in-intervention agree with and adopt the aforementioned arguments of FDC.38
MERALCO, on the other hand, claims that the power of the ERB to issue provisional orders under Section 16(c) of the Public Service Act and Section 8 of E.O. No. 172 was not repealed by the EPIRA. On the contrary, Section 80 of the EPIRA expressly mentions that the applicable provisions of the Public Service Act and E.O. No. 172 that are not inconsistent therewith shall continue to have full force and effect.39 It adds that the power of the ERC to approve reasonable rates would be rendered meaningless if it can only do so after a full hearing, and in the meantime the insufficiency of the applicant’s rates would result in its inability to supply quality, reliable and secure electric power.40
The OSG contends that ERC has statutory authority to issue provisional orders, including provisional rate increases. It points out that the EPIRA expressly states that the powers of the Energy Regulatory Board (ERB) under E.O. No. 172 shall be exercised by the ERC.41
For its part, the ERC maintains that it possesses the authority to grant provisional orders under Section 16 (c) of the Public Service Act and Section 8 of E.O. No. 172 in relation to Sections 44 and 80 of the EPIRA.42 Thus, it claims that Section 4(e), Rule 3 of the Rules and Regulations To Implement Republic Act No. 9031, Entitled "Electric Power Industry Reform Act of 2001" (IRR) is valid. It further argues that its duty to protect the public interest necessarily requires it to balance the interests of the consumers and the utilities — that is, to maintain reasonable rates while ensuring that the utilities will be able to remain financially sound and operationally viable.43
The Court agrees with the respondents and the OSG.
ERC authority is found in
Secs. 44 and 80 of the EPIRA
The ERC is endowed with the statutory authority to approve provisional rate adjustments under the aegis of Sections 44 and 80 of the EPIRA. The sections read, thus:
SEC. 44. Transfer of Powers and Functions. — The powers and functions of the Energy Regulatory Board not inconsistent with the provisions of this Act are hereby transferred to the ERC. The foregoing transfer of powers and functions shall include all applicable funds and appropriations, records, equipment, property and personnel as may be necessary.
Sec. 80. Applicability and Repealing Clause. — The applicability provisions of Commonwealth Act No. 146, as amended, otherwise known as the "Public Services Act;" Republic Act 6395, as amended, revising the charter of NPC; Presidential Decree 269, as amended, referred to as the National Electrification Decree; Republic Act 7638, otherwise known as the "Department of Energy Act of 1992;" Executive Order 172, as amended, creating the ERB; Republic 7832 otherwise known as the "Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994;" shall continue to have full force and effect except insofar as they are inconsistent with this Act.
The provisions with respect to electric power of Section 11(c) of Republic Act 7916, as amended, and Section5(f) of Republic Act 7227 are hereby repealed or modified accordingly.
Presidential Decree No. 40 and all laws, decrees, rules and regulations, or portions thereof, inconsistent with this Act are hereby repealed or modified accordingly. (Emphasis supplied)
The principal powers of the ERB relative to electric public utilities transferred to the ERC are the following:
1. To regulate and fix the power rates to be charged by elective companies;44
2. To issue certificates of public convenience for the operation of electric power utilities;45
3. To grant or approve provisional electric rates.46
It bears stressing that the conferment upon the ERC of the power to grant provisional rate adjustments is not inconsistent with any provision of the EPIRA. The powers of the ERB transferred to the ERC under Section 44 are in addition to the new powers conferred upon the ERC under Section 43.
Section 80 of the EPIRA complements Section 44, as it mandates the continued efficacy of the applicable provisions of the laws referred to therein. The material provisions of the Public Service Act which continue to be in full force and effect are contained in Section 16(c), which states thus:
Section 16. Proceedings of the Commission, upon notice and hearing. — The Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary:
(c) To fix and determine individual or joint rates, toll, charges, classifications, 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: 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 thirty days thereafter, upon publication and notice to the concerned parties operating in the territory affected: 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 purposes of fixing the rates.
Similarly, Sections 8 and 14 of E.O. No. 172 or the ERB Charter continue to be in full force by virtue of Sections 44 and 80 of the EPIRA. Said provisions of the ERB charter read:
SEC. 8. Authority to Grant Provisional Relief. -- The Board may, upon the filing of an application, petition or complaint or at any stage thereafter and without prior hearing, on the basis of the supporting papers duly verified or authenticated, grant provisional relief on motion of a party in the case or on its own initiative, without prejudice to a final decision after hearing, should the Board find that the pleadings, together with such affidavits, documents and other evidence which may be submitted in support of the motion, substantially support of the provisional order; Provided, That the Board shall immediately schedule and conduct a hearing thereon within thirty (30) days thereafter, upon publication and notice to all affected parties.
SEC. 14. Applicability Clause.— The applicability (applicable) provisions of Commonwealth Act No. 146, as amended, otherwise known as the "Public Service Act;" Republic Act No. 6173, as amended, otherwise known as the "Oil Industry Commission Act;" Republic Act No. 6395, as amended, revising the charter of the National Power Corporation under C.A. 120; Presidential Decree No. 269, as amended, also referred to as the "National Electrification Administration Decree;" and Presidential Decree No. 1206, as amended, creating the Department of Energy, shall continue to have full force and effect, except insofar as inconsistent with this Order. (Word in parenthesis supplied)
The above-quoted applicability clause is quite clear. It cannot be argued that the clause could not have referred to the provisions of the prior laws empowering the Public Service Commission (PSC) and the ERB to grant provisional rate adjustments on the premise that the lawmakers deliberately deleted the provisions in the crafting of the EPIRA. Such an argument begs the question. What is clear from Sections 80 and 44 is that the legislators saw the superfluity or needlessness of carrying over in the EPIRA the same provision found in the previous laws. The power to approve provisional rate increases is included among the powers transferred to the ERC by virtue of Section 44 since the grant of that authority is not inconsistent with the EPIRA; rather, it is in full harmony with the thrust of the law which is to strengthen the ERC as the new regulatory body.
Furthermore, under Section 80, only three (3) specific laws were expressly repealed or modified. These are Section 11(c) of Republic Act No. 7916,47 as amended, Section 5(f) of Republic Act No. 722748 and Presidential Decree No. 40.49 Section 8 of E.O. No. 172 and Section 16(c) of C.A. No. 146 which both grant the regulatory body concerned the authority to approve provisional rate increases are not among the provisions expressly repealed or modified. This clearly indicates the law’s intent to transfer the power to the ERC.
Indeed, nary a hint in the EPIRA intimates that the powers of ERC’s predecessors not mentioned therein are revoked or repealed. Be it noted that implied repeals are not favored in our jurisdiction.50 The legislature is presumed to know the existing laws; if it intended a repeal of the earlier law, it should have so expressed that intention in the subsequent statute.51
Thus, a statute will not be deemed to have been impliedly repealed by another enacted subsequent thereto unless there is a showing that a plain, unavoidable and irreconcilable repugnancy exists between the two.52
Likewise, it may not be asserted with success that the power to grant provisional rate adjustments runs counter to the statutory construction guide provided in Section 7553 of the law. The section ordains that the EPIRA shall be construed in favor of market competition and people power empowerment, thereby ensuring the widest participation of the people.
To the Court, the goals of market competition and people empowerment are not negated by the ERC’s exercise of the authority to approve provisional rate adjustments. The concerns are taken care of by Section 43 of the EPIRA and its IRR. While Section 43 lays down the publication requirement as regards the rate application, Section 4(e), Rule 3 of the IRR fleshes out the requirement.54
Neither is the notion of provisional rate adjustment incompatible with the policy to protect public interest, as enunciated in Section 2(f)55 of the law. The common weal is not relegated to the back-burner simply by upholding the grant to the ERC of the authority to approve provisional rate adjustments. Again for one, even if there is a ground to grant the provisional rate increase, the ERC may do so only after the publication requirement is met and the consumers affected are given the opportunity to present their side. For another, the rate increase is provisional in character and therefore may be modified or even recalled anytime. Still for another, the ERC is mandated to prescribe a rate-setting methodology "in the public interest"56 and "to promote efficiency."57
For that matter, there is a plethora of provisions in Section 43 and related sections which seek to promote public interest, market competition and consumer protection.58
Sec. 43 of the EPIRA, being a list of ERC’s new powers, is not inconsistent with Sec. 44
Although the power to grant provisional rate adjustments is not one of the powers mentioned in Section 43, this provision itself characterizes the listed powers as the "key functions in the restructured industry." They are not the typical or traditional prerogatives or functions of regulatory bodies. Reproducing the initial paragraph of the section is illuminating, viz:
The ERC shall promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the restructured electricity industry. In appropriate cases, the ERC is authorized to issue cease and desist order after due notice and hearing. Towards this end, it shall be responsible for the following key functions in the restructured industry: (Emphasis supplied).
Significantly, the fundamental power to fix rates is also not one of the functions enumerated under Section 43. Thus, to deny the power to grant provisional rate increase to ERC simply because it is not mentioned in Section 43 is also to deny the power to fix rates to the Commission by the same token. Clearly, the proposition is absurd.
Moreover, as the OSG correctly pointed out, to interpret the EPIRA as not retaining the ERC’s power to issue provisional orders will wreak havoc on the regulatory environment, which has been painstakingly built and enhanced since the enactment of the EPIRA.59
To repeat, the EPIRA grants unto the ERC both old and new powers. The old powers are referred to in Section 44 while the new ones are listed in Section 43 of the law.
The powers enumerated in Section 43 have a common thread. Characterized as the "key functions," they are the new powers granted to the ERC in relation to the reform and modernization of the electric power industry sought to be achieved by the law. They are also invariably mentioned with particularity in other provisions of the law. In other words, Section 43 merely repeats what is found in the other sections. It is a compendium of powers provided in other provisions of the same law but were not enjoyed by the previous regulatory bodies. It is a statutory tool to achieve clarity and convenience, at least with respect to the new powers.
The powers provided in Section 43 and the corresponding related provisions in the EPIRA are:
1. Section 43(a) on the power to implement the rules and regulations of the Act, also provided in Section 177;
2. Section 43(b) on the power to promulgate and enforce the National Grid Code and Distribution Code, also provided in Sections 9, 11, 19, 20, 21, 22, 23 and 24.
3. Section 43(c) on the power to enforce the rules and regulations on the operation of the electricity spot market and on the participants in the spot market, also provided in Sections 30 and 31.
4. Section 43(d) on the power to determine the level of cross-subsidies in the retail rate until its removal, also provided in Section 74;
5. Section 43(e) on the power to amend or revoke the authority to operate of any person or entity for failure to comply with the IRR or an order or resolution of the ERC, also provided in Sections 6, 7, 20, 22, 26, 28, 29 and 30;
6. Section 43(g) on the power to ensure that the charges of the TRANSCO and distribution utilities do not bear cross-subsidies, also provided in Section 74;
7. Section 43(l) on the power to review and approve changes on the terms and conditions of service of the TRANSCO and any distribution utility, also provided in Sections 9, 22 and 23;
8. Section 43(h) on the power to allow the TRANSCO to charge user fees, also provided in Section 9 (b);
9. Section 43(j) on the power to set a lifeline rate for marginalized end-users, also provided in Section 73;
10. Section 43(k) on the power to penalize abuse of market power, cartelization and anti-competitive or discriminatory behavior, also provided in Section 45.
11. Section 43(l) on the power to impose fines and penalties, also provided in Section 46.
12. Section 43(o) on the power to monitor activities in the generation and supply of the electric power industry, also provided in Sections 6 and 29;
13. Section 43(p) on the power to act on application for/or modifications of certificates of public convenience and/or necessity, etc., also provided in Sections 22 and 23;
14. Section 43(r) on the power to act against any participant or player in the energy sector for violations of law, rule or regulation, also provided in Sections 46 and 74.
Notably, under Section 43(u) the ERC is granted "original and exclusive jurisdiction over all cases contesting rates, fees, fines and penalties" imposed thereby in the exercise of its functions and responsibilities in Section 43.
In determining the extent of powers possessed by the ERC, the provisions of the EPIRA must not be read in separate parts. Rather, the law must be read in its entirety, because a statute is passed as a whole, and is animated by one general purpose and intent. Its meaning cannot to be extracted from any single part thereof but from a general consideration of the statute as a whole.60
Considering the intent of Congress in enacting the EPIRA and reading the statute in its entirety, it is plain to see that the law has expanded the jurisdiction of the regulatory body, the ERC in this case, to enable the latter to implement the reforms sought to be accomplished by the EPIRA. When the legislators decided to broaden the jurisdiction of the ERC, they did not intend to abolish or reduce the powers already conferred upon ERC’s predecessors. To sustain the view that the ERC possesses only the powers and functions listed under Section 43 of the EPIRA is to frustrate the objectives of the law.
All the foregoing undeniably lead to the conclusion that the ERC, under Sections 43(u), 44 and 80 of the EPIRA, in relation to Section 16 (c) of the Public Service Act and Section 8 of E.O. No. 172, possesses the power to grant provisional rate adjustments subject to the procedure laid down in these laws as well as in the IRR.
Legislative history supports ERC’s power to grant provisional rate adjustments
A brief review of the legislative history of the regulatory bodies which preceded the ERC is instructive.
The first regulatory body was the Board of Rate Regulation (BRR) which came into existence in 1907.61 It had the power, after a full hearing, to fix, revise, regulate, reduce or increase the rates charged by public service corporations from time to time.62 In 1913, the Board of Public Utility Commissioners (BPUC) was created to take over the functions of the BRR.63 The BPUC was empowered, after conducting a hearing, to fix rates imposed by any public utility.64 In addition, it had the power to hear and determine, upon a written complaint or motu proprio, whether any increase or changes in classification of rates proposed by a public utility is just and reasonable. Pending such hearing and determination, the BPUC had the power to order the suspension of the increase or change in classification for a period not exceeding three (3) months.65
The BPUC was shortly replaced by the PSC. Under its Charter,66 the PSC was authorized to fix rates and approve provisional rate adjustments.67
With the advent of Martial Law, on September 24, 1972, then President Marcos through Presidential Decree No. 1 reorganized the executive branch of the National Government and implemented the Integrated Reorganization Plan. Under the Plan, the Board of Power and Waterworks (BOPW) was created in place of the PSC, taking over the "pertinent regulatory and adjudicatory functions" of the latter.68
Later, President Marcos created the Board of Energy (BOE) through Presidential Decree No. 1206, transferring to it the powers and functions of the BOPW relative to power utilities.69
The Board of Energy had the authority to grant provisional rate adjustments on the basis of the last paragraph of Section 11 of P.D. No. 1206, which reads:
Likewise, the foregoing transfers of powers and functions of the abolished agencies shall be to the extent that they are not modified by any specific provision of this Decree.
This Court, in Bautista v. Board of Energy,70 held that the Board of Energy derived its prerogative to grant provisional relief not only from Section 11 of P.D. No. 1128, amending Section 12 of R.A. No. 6173, but also from Section 16(c) of the Public Service Act.71
The BOE in turn was replaced by the ERB pursuant to E.O. No. 172. Sections 872 and 1473 of the E.O. empowered the ERB to grant provisional rate adjustments.
Historically, therefore, in this jurisdiction, at least beginning with the Public Service Act in 1936, the regulatory bodies concerned have exercised the power to grant provisional rate adjustments only because there was a statutory grant of such power.
The foregoing recital establishes the following salient points: (1) Section 16(c) of the Public Service Act authorizing the approval of provisional rate increases has never been repealed and as such continues to be in full force and effect up to the present; (2) The BOPW had the power to grant provisional rate increases on the basis of the provision of the Integrated Reorganization Plan that the pertinent powers of the PSC were transferred to it; (3) The applicability clause found in Section 44 of the EPIRA is the same as or similar to the applicability clauses contained in Sections 11 and 21 of P.D. No. 1206 and Section 14 of E.O. No. 172; and, (4) The applicability clause or transfer of power provision is sufficient to effect the transfer of powers from a regulatory agency to its successor.
All told, the provisions of the Public Service Act74 and E.O. No. 17275 which relate to the power of the regulatory body to approve provisional rates continue to have full force and effect, and the power was transferred to the ERC by virtue of Section 80 in relation to Section 44 of the EPIRA. Said provisions are not inconsistent with the EPIRA except the directives therein dispensing with the need for prior hearing. They are deemed modified to the extent that the EPIRA imposes a publication requirement76 and, through the IRR, assures the customers affected the opportunity to oppose or comment on the application for provisional rate adjustment before it is acted upon by the ERC.77
Indeed, both the letter and spirit of the law require that the authority of the ERC to grant provisional power rate adjustments should be upheld. The law is so clear that it cannot be misread.
Grave Abuse of Discretion
The FDC contends that the issuance of the November 27, 2003 Order provisionally approving MERALCO’s application for rate increase is void because, among others, the affected sectors were not afforded the opportunity to be heard. Since the issuance of provisional orders is quasi-judicial in character, the ERC cannot dispense with the requirements of notice and hearing.78 It likewise claims that the ERC based the provisional increase only on MERALCO’s bare allegation that it was in dire financial straits, as there was no proof of MERALCO’s actual financial condition.79
Petitioners-in-intervention, for their part, argue that the ERC issued the assailed Order in haste, thereby virtually ignoring the opposition expressed by the oppositors in their pleadings submitted to the Commission. They point out that the issuance by the ERC of the Order notwithstanding the failure of MERALCO to comply with the publication requirement under Section 4(e), Rule 3 of the IRR manifests the Commission’s partiality for MERALCO.80
Significantly, the OSG is also of the view that the proceedings before the ERC relative to MERALCO’s Application is defective. Among the defects, according to the OSG, are MERALCO’s failure to publish its Application or at least a summary of the reasons for its application, as required by Section 4(e), Rule 3 of the IRR; the ERC’s failure to consider the serious objections raised by the oppositors to the application and the ERC’s failure to resolve the motions for production of documents filed by several oppositors.81
Maintaining that FDC and the petitioners-in-intervention have failed to show any grave abuse of discretion on its part, the ERC stresses that it is authorized under the law to issue provisional rate adjustments without conducting a prior hearing and that such issuance may be made permanent, modified or denied in the course of the main proceeding.82
The ERC also argues that Section 4(e) of the IRR does not require the publication of the Application itself, citing in support of its contention the ruling of the Court in Beautifont, Inc. v. Court of Appeals83 that Section 7 of the Permissible Investments Law requires the publication of the summary or abstract of the application, not the application itself.84 The ERC further asserts that it is premature for the Court to rule on the issue of whether it acted with grave abuse of discretion in issuing the November 27, 2003 Order considering that MERALCO’s main petition is pending hearing before it.85
In its Memorandum, MERALCO maintains that the ERC acted not with grave abuse of discretion but rather in accordance with its duty under Section 43(f) of the EPIRA to fix rates that will allow the recovery of just and reasonable costs and a reasonable return on rate base (RORB) to operate viably. MERALCO insists that the ERC had substantial basis for issuing the assailed Order.86
The Court is convinced of the meritoriousness of FDC’s position which is the same stance taken by the petitioners-in-intervention and the OSG.
Under Section 16(c), C.A. No. 146 and Section 8, E.O. No. 172 in relation to Sections 43 and 80 of the EPIRA, the ERC may grant provisional rate adjustments without first conducting a hearing prior to such grant. However, it is required to conduct a hearing on the propriety of the grant of provisional rate adjustments within 30 days from the issuance of the provisional order.87
Section 4(e), Rule 3 of the IRR requires the ERC to resolve the motion for issuance of a provisional order within seventy five (75) calendar days from the filing of the application or petition. If, within 30 days from the publication of the application or receipt of a copy thereof, an affected consumer or the Local Government Unit (LGU) concerned files with the ERC a comment on the prayed for provisional rate adjustment and/or the application itself, the ERC is mandated to consider such comment in its action on the prayer for provisional rate adjustment. Section 4(e), Rule 3 reads in full:
Any application or petition for rate adjustment or for any relief affecting the consumers must be verified and accompanied with an acknowledgement of receipt of a copy thereof by the LGU Legislative body of the locality where the applicant or petitioner principally operates together with the certification of the notice of publication thereof in a newspaper of general circulation in the same locality.
The ERC may grant provisionally or deny the relief prayed for not later than seventy five (75) calendar days from the filing of the application or petition, based on the same or supporting documents attached thereto and such comments or pleadings the customers or the LGU concerned may have filed within thirty (30) calendar days from receipt of a copy of the application or petition or from the publication thereof as the case may be.
Thereafter, the ERC shall conduct a formal hearing on the application or petition, giving proper notices to all parties concerned, with at least one public hearing in the affected locality, and shall decide the matter on the merits not later than twelve (12) months from the issuance of the aforementioned provisional order.
… (Emphasis supplied)
Two postulates evidently flow from a reading of Section 4(e), Rule 3. First, the publication of the application itself is required, not merely the notice of hearing issued by the ERC. Second, in granting a provisional authority, the ERC must consider not only the evidence submitted by the applicant in support thereof, but also the comments of the consumers and the Local Government Units (LGUs) concerned.
It is suggested that the IRR provision in point should be construed as granting the ERC the power to issue provisional rate adjustments ex parte.88 Such power, partaking as it does the nature of the police power of the State, is conferred on administrative agencies like the ERC to enable them to pursue temporary measures to address problems that cannot wait until the completion of formal proceedings. Thus, the ERC may grant provisional rate adjustments on the basis of the public utility’s application and supporting documents, and the pleadings submitted by other parties may have filed at that time. Thereafter, it is mandated to hold a full-blown hearing to resolve the case on the merits.89
Concededly, like Section 16(c), C.A. No. 146 and Section 8, E.O. No. 172, Section 4(e), Rule 3 of the IRR does not require the conduct of a hearing prior to the issuance of a provisional order. However, reading the aforementioned provisions of the Public Service Act, the ERB Charter and the IRR in relation to one another, as they should be read, the inexorable conclusion is that the provisional order cannot be issued under the circumstances based exclusively on the application and supporting documents thereof. The IRR explicitly requires, as a prerequisite to such issuance, that the ERC consider also the comments of the consumers and the LGUs concerned on the application which were filed within thirty (30) days from their receipt of a copy of the application or the publication thereof.
In other words, the ERC must wait for thirty (30) days from service of copies of the application for rate adjustments on interested parties or from the publication of such application before it can issue a provisional order. If after the 30th day, no comments are filed by concerned parties, then and only then may the ERC, if it deems proper under the circumstances, issue a provisional order on the basis of the application and its supporting documents.
To synthesize, the new order on rate adjustments is as follows:
(1) The applicant must file with the ERC a verified application/petition for rate adjustment. It must indicate that a copy thereof was received by the legislative body of the LGU concerned. It must also include a certification of the notice of publication thereof in a newspaper of general circulation in the same locality.
(2) Within 30 days from receipt of the application/petition or the publication thereof, any consumer affected by the proposed rate adjustment or the LGU concerned may file its comment on the application/petition, as well as on the motion for provisional rate adjustment.
(3) If such comment is filed, the ERC must consider it in its action on the motion for provisional rate adjustment, together with the documents submitted by the applicant in support of its application/petition. If no such comment is filed within the 30-day period, then and only then may the ERC resolve the motion for provisional rate adjustment on the basis of the documents submitted by the applicant.
(4) However, the ERC need not conduct a hearing on the motion for provisional rate adjustment. It is sufficient that it consider the written comment, if there is any.
(5) The ERC must resolve the motion for provisional rate adjustment within 75 days from the filing of the application/petition.
(6) Thereafter, the ERC must conduct a full-blown hearing on the application/petition not later than 30 days from the date of issuance of the provisional order and must resolve the application/petition not later than 12 months from the issuance of the provisional order.90 Effectively, this provision limits the lifetime of the provisional order to only 12 months.
Section 4(e), Rule 3 of the IRR, outlining as it does the approval process for an application or petition for provisional rate adjustment, enforces not only Section 43(u) thereof but also Sections 44 and 80 which, as earlier stated, refer to the powers of the ERB passed on to the ERC and found in other prevailing laws, such as Section 16(c) of the Public Service Act.
The validity of the IRR, including Section 4(e) under Rule 3 thereof, is not in dispute.
The IRR was crafted by the Department of Energy (DOE) in consultation with relevant government agencies in accordance with its mandate under the EPIRA.91 It was promulgated on the same day that it was approved by the Joint Congressional Power Commission on February 27, 2002.92 This Commission is composed of fourteen (14) members of the Senate and the House.93
It is settled that an administrative agency possesses the power to issue rules and regulations to implement the statute which it is tasked to enforce, unless another agency is the one so authorized by the law as in the case of the EPIRA. This is so because it is impracticable, if not impossible, for the legislature to anticipate and provide for the multifarious and complex situations that may be encountered in enforcing the law. So long as the rules and regulations are germane to the objects and purposes of the law and conforms to the standards prescribed thereby, they are deemed to have the force and effect of law.94
In Victoria’s Milling Co., Inc. v. Social Security Commission,95 the Court explained:
When an administrative agency promulgates rules and regulations, it "makes" a new law with the force and effect of a valid law, …Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a statute …This is so because statutes are usually couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the legislature. The details and the manner of carrying out the law are often times (sic) left to the administrative agency entrusted with its enforcement. In this sense, it has been said that rules and regulations are the product of a delegated power to create new or additional legal provisions that have the effect of law….96
The challenged provisional rate increase transgresses Section 4(e), Rule 3 of the IRR in two major respects. The violations involve a couple of new requirements prescribed by the IRR. These are, first, the need to publish the application in a newspaper of general circulation in the locality where the applicant operates; and second, the need for ERC to consider the comments or pleadings of the customers and LGU concerned in its action on the application or motion for provisional rate adjustment.
Obviously, the new requirements are aimed at protecting the consumers and diminishing the disparity or imbalance between the utility and the consumers. The publication requirement gives them enhanced opportunity to consciously weigh the application in terms of the additional financial burden which the proposed rate increase entails and the basis for the application. With the publication of the application itself, the consumers would right from the start be equipped with the needed information to determine for themselves whether to contest the application or not and if they so decide, to take the needed further steps to repulse the application. On the other hand, the imposition on the ERC to consider the comments of the customers and the LGUs concerned extends the comforting assurance that their interest will be taken into account. Indeed, the requirements address the right of the consuming public to due process and at the same advance the cause of people empowerment which is also a policy goal of the EPIRA along with consumer protection.
Corollarily, the requirements seek to temper the lack of fairness implicit in the kind of ex parte modality theretofore followed in regard to applications for provisional rate increases. Before the adoption of the IRR provision, to secure a provisional rate adjustment all that a public utility needed to do was to file the corresponding application with the supporting documents. Without the burden of a hearing and in total disregard of the opposition, the applicant could press the regulatory body to grant the application. With the new protocol under the IRR, the ERC is tasked to pass upon the comments or opposition of the consumers and the LGUs in its resolution of the application for provisional rate adjustment. Consequently, for the ERC to be true to its mission and to prevent evisceration of the new requirements, it should mention in the provisional order the points and arguments of the oppositors which it adopts or give its reasons if it does not uphold them. In other words, the proof of its compliance with the requirements should appear in the provisional order itself.
While the system of interim rates cannot be dispensed with since it helps ensure the financial viability of a public utility which it needs to be able to deliver adequate service to the consumers, the system may be abused to the detriment of the consumers if not enough safeguards are put in place. It happened many times before that after the provisional rate increase had been granted, no action on the main petition was taken, or if one was taken it was made only after the lapse of a considerable period of time. The ultimate effect of the inaction or delay was virtually to make the provisional rate permanent. Thus, the consumers were made to pay what effectively evolved to be the permanent rate without the benefit of a hearing. In the meantime, the collections on the provisional rate were spent by the utility.
In a recent decision,97 this Court ordered MERALCO to make a refund which remains uncomplied with up to the present, to the prejudice of the consumers. The consumers will similarly suffer if MERALCO, or any power utility for that matter, is allowed to collect on a provisional rate increase, the application for which they effectively have no knowledge of.
The new requirements address the dismal scenario by ensuring dissemination of information on the application for rate increase and consideration by the ERC of the written position taken by consumers in its action on the motion for provisional rate increase.
The publication and comment requirements, like the 30-day period also imposed in Section 4(e), Rule 3 of the IRR, are in keeping with some of the avowed policies of the EPIRA. These are to protect the public interest vis-à-vis the rates and services of electric utilities and other providers of electric power,98 to ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability for greater operational and economic efficiency, to enhance the competitiveness of Philippine products in the global market,99 and to balance the interests of the consumers and the public utilities providing electric power through the fair and non-discriminatory treatment of the two sectors.100
Clearly, therefore, although the new requirements are procedural in character, they represent significant reforms in public utility regulation as they engender substantial benefits to the consumers. It is in this light that the new requirements should be appreciated and their observance enforced.
The record shows that MERALCO failed to comply with the publication requirement prescribed by the IRR. What the IRR requires to be published is the application itself. In fact, it even requires the applicant to submit the "certification of the notice of publication" of the "application or petition for rate adjustment"101 together with the application/petition to the ERC. The Notice, quoted in full hereunder, which MERALCO caused to be published on October 10, 2003 in the Manila Times, does not comply with the requirement, thus:
MANILA ELECTRIC COMPANY
NOTICE OF APPLICATION
Pursuant to paragraph (e), Section 4, Rule 3 of the Implementing Rules and Regulations of R.A. 9136, notice is hereby given that an Application dated October 8, 2003, for the approval of revised rate schedules and provisional authority, will be filed by the MANILA ELECTRIC COMPANY with address at Meralco Center, Ortigas Avenue, Pasig City, before the Energy Regulatory Commission.
Issued this 9th day of October 2003.
(Sgd). GIL S. SAN DIEGO
Vice President and Head
Legal Services102 (Emphasis supplied)
ERC invokes the case of Beautifont, Inc. v. Court of Appeals,103 involving the deciphering of the publication requirement in the Permissible Investments Law, R.A. No. 5455, where this Court held that the law did not require the publication of the subject application itself with the Board of Investments.104 The case, however, is not apropos. For one thing, despite some imprecision in a segment of the provision involved, other parts thereof clearly signify that only the notice of the application is meant to be published. Here, the IRR provision clearly refers to the application itself which is required to be published. For another, in Beautifont the Court was quite explicit that under the provision involved not just the notice of application "but an abstract or summary thereof, comprehending the items mentioned"105 had to be published and it intimated that the item actually published complied with the law. Here, what was actually published is a mere notice of the intent to file an application. Nothing more, nothing less.
For its part, MERALCO alleges that it relied on the ERC’s interpretation that what had to be published "is simply a notice of the intent to file an application"106 So, it "caused the publication of such notice before it filed the application."107 As it is feeble and self-defeating, the claim is also incongruent with the position actually presented by the ERC in this case.108
In this regard, the stance taken by the OSG as the People’s Tribune deserves to be quoted, thus:
The first paragraph of Section 4(e) of Rule 3 of the EPIRA IRR provides that a "petition for rate adjustment x x x must be x x x accompanied with x x x the certification of the notice of publication thereof in a newspaper of general circulation in the x x x locality." It is very clear from the above-cited rule that the application for rate adjustment must be published in a newspaper of general circulation.
In the case of MERALCO in ERC Case No. 2003-480, it appears that only a notice of hearing has been published. The notice that was published did not cite the essential allegations or contain a summary of the reasons in support of the application for rate increase.
The purpose of the publication of the application or the essential allegations or summary of the reasons given for the relief sought in the application for rate adjustment contained in the notice of hearing in a newspaper of general circulation is to inform and enable the consumers in the applicant’s franchise area to understand as much as possible the application as well as the reasons therefore. This is more so because the relief sought will have an immediate and great impact on the consumers.109
The November 27, 2003 Order reveals that the ERC did not consider the opposition to MERALCO’s Application and other pleadings filed by several concerned parties in determining whether the rate increase applied for by MERALCO should be approved provisionally.
The ERC’s provisional approval of MERALCO’s application for rate increase was based on MERALCO’s say-so alone, including the purported value of its assets as of the year 2002 and its claimed financial difficulties, resulting according to it in its deferral of forty-two (42) major capital projects and failure to meet its maturing debt obligations. In the assailed Order, the Commission held that MERALCO’s inability to construct its capital projects to meet the growing demand of its customers and to ensure the reliability and efficiency of its existing system would ultimately be to the prejudice of the consumers.110
The provisional authority to impose increased rates was approved notwithstanding the fact that soon after MERALCO filed its Application on October 10, 2003, FDC and NASECORE expressed their intention to file their respective oppositions to the Application,111 and later their respective Motions for Production of Documents.112 Neither did the ERC consider the Letter dated October 24, 2003 of Lualhati (a consumer), seeking the dismissal of the Application.
Although on November 13, 2003, the ERC issued an Order requiring MERALCO to comment on NASECORE’s Motion for Production of Documents,113 it failed to resolve the same, as well as FDC’s similar Motion, before issuing its November 27, 2003 Order. The motions filed by NASECORE and FDC should have been acted upon by the ERC prior to resolving MERALCO’s prayer for provisional rate increase, because NASECORE and FDC would be able to express their agreement or opposition to MERALCO’s Application only after perusing the documents presented, if their Motions were granted; or in case the Motions were denied, they could at least make known their respective positions on the Application on the basis of the documents submitted by MERALCO. Certainly, the spirit if not the language of the IRR provision should have led ERC to treat the motions which are preludes to active opposition to the application in a more favorable light and in a less cavalier fashion. Without even mentioning the motions in its Order, ERC granted the motion for provisional rate increase.
The foregoing clearly establish that ERC failed to comply with the requirements of Rule 4(e), Rule 3 of the IRR publication and comment requirements of Rule 4(e), Rule 3 of the IRR.
In Benito v. Commission on Elections,114 we held that:
Grave abuse of discretion means "such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, in other words where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law." It is not sufficient that a tribunal, in the exercise of its power, abused its discretion; such abuse must be grave. (Citations omitted)115
It is settled that there is grave abuse of discretion when an act is done contrary to the Constitution, the law or jurisprudence,116 or when executed whimsically, capriciously or arbitrarily out of malice, ill will or personal bias.117
What makes the challenged Order particularly repugnant is that it involves a blatant and inexcusable breach of the very rules which the ERC is mandated to observe and implement. The violated provision which is Section 4(e), Rule 3 of the IRR specifies how the ERC should exercise its power to issue provisional orders pursuant to Section 44 in relation to Section 80 of the EPIRA. Since the IRR was issued pursuant to the EPIRA, Section 4(e) of Rule 3 as part of the IRR has the force and effect of law118 and thus should have been complied with.
In view of the infirmities which attended the issuance of the November 27, 2003 Order, particularly: (1) the failure of MERALCO to publish its Application or at least a summary thereof; (2) the failure of the ERC to resolve the Motions for Production of Documents filed by the oppositors to MERALCO’s Application before acting on the motion for provisional rate adjustment; and (3) the failure of the ERC to consider the arguments raised by the oppositors in their respective pleadings prior to the issuance of the assailed Order; the Court declares void the November 27, 2003 Order of the ERC for having been issued with grave abuse of discretion.
One final word. The character of the infirmities which taint the challenged Order is such that it precludes the remand of the case to the ERC without invalidating the Order. The defect of the notice as published is deemed of so serious a nature as to negate the notice altogether and forestall the ERC’s assumption of jurisdiction over MERALCO’s Application and its prayer
for provisional rate increase. Similarly, the ERC’s failure to consider the oppositions and motions already on record in issuing the challenged Order and to act upon other relevant motions has such grave due process implications that render the Order void, independently of its breach of its own rules. Thus, should the case be simply remanded to the ERC without further action by the Court, the defects would not be cleansed and they would retain their potency and still serve as solid basis to nullify the challenged Order and all other issuances of the ERC which would be infected by the infirmities. Indeed, such a denouement would be inescapable once the application is elevated again to this Court in connection with the infirm issuances. Clearly then, a remand is not in the best interest of MERALCO and the ERC. Rather, it is to their advantage, same as with the consumers, that they begin again on a clean slate.
WHEREFORE, the Petition and the Petition-in- Intervention are GRANTED, and the November 27, 2003 Order of the respondent Energy Regulatory Commission in ERC Case No. 2003-480, granting provisional rate increases to the respondent MERALCO, is DECLARED VOID and accordingly SET ASIDE.
Respondent Commission is DIRECTED to comply with Section 4(e), Rule 3 of the Implementing Rules and Regulations of Republic Act No. 9136, particularly the publication and comment requirements therein, in conformity with this D E C I S I O N, in acting upon and resolving respondent MERALCO’s prayer for provisional rate increase in its Application dated October 8, 2003 in ERC Case No. 2003-480.
Davide, Jr., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., and Azcuna, JJ., concur.
1 Southwestern Bell Tel. Co. v. Public Service Commission, 262 U.S. 291 (1923).
2 Application, Rollo, pp. 131-150.
3 See Ibid. at 693.
7 Id. at 444-447.
NASECORE prayed for the production by MERALCO of the following:
A. Relative to Personal Services
i. Alphabetical list of Salaries and Wages of all Directors, Officers, Staffs and Employees of Meralco;
ii. Fees of its Consultants and Retainers;
iii. Alphabetical list of all contractual workers with expanded withholding tax;
iv. Total compensation and benefit packages of key officers and senior management, from Assistant Vice Presidents to the Chief Executive Officer, including members of the Board of Directors.
B. Relative to Operating Expenses
i. Alphabetical list of all purchases subject to expanded withholding tax;
ii. List of all Meralco imported equipment, machineries, and materials purchased from 1994-2002 and the copies of the corresponding official receipts of purchases, including all motor vehicles acquired.
C. Relative to Recovery on Investments
i. Meralco’s computation of its Rate of Return on Rate Base from 1994-2002;
D. Relative to Related Investments
i. Total amount of Meralco’s investment in each of its subsidiaries and other companies, including but not limited to generation and real estate;
ii. The individual yearly return on Meralco’s investments on these subsidiaries and other companies;
E. Relative [to] Loans
i. List of Meralco’s outstanding loans from both local and foreign banks, as well as from multilateral funding agencies (Id. at 445-446).
8 Id. at 694.
9 Id. at 448.
10 In his Opposition, Lualhati stated his reasons for opposing the Application, to wit:
There is no doubt that this application is prejudicial to Court of Appeals Case No. 77559. Whereas, in Case No. 77559 Meralco’s excessively inflated distribution and Delivery rates after unbundling that increased to 49% compared to its Operations and Maintenance Expenses, this instant application still prays for additional rate increase of P0.1358/kwh allegedly to recover underrecoveries from 2000 to 2002.
Moreover, this application will prejudice the review and correction of the baseless and unreasonable increase of rate base from P30.1 billion in 1994 per COA audit to P76.8 billion in 2000…
The application is prejudicial as it is intended to contradict and pre-empt the exposure of the approved rates that exceed Revenue Requirements including its newly inflated RORB of 15.5%
…. (Id. at 84-87.)
11 FDC also asked for the production of the following:
4.1 Financial status
4.1.1 Updated Financial Statement as of 31 December 2002, taking into account the Supreme Court decision disallowing income tax as deductible operating expense
4.2 Rate Base
All assets that Meralco acquired as of 31 December 2002, broken down to costs of each asset and their respective appraised market value as of 31 December 2002.
Such other documents as may be added in the abovementioned list (Id. at 54-55).
12 Id. at 25-27.
13 Id. at 503-511.
14 Id. at 7-14.
15 ERC’s Comment, Id. at 368-370.
16 Id. at 370-373.
17 Id. at 373-374.
18 Id. at 376-378.
19 MERALCO’s Comment, Id. at 107-118.
20 Id. at 118-125.
21 Id. at 621-622.
22 Id. at 69-78.
23 TSN, Oral Arguments, January 27, 2004, p. 3.
24 Id. at 365.
25 This writer, as Chairman of the House Energy Committee in the 10th Congress, made the studies for the restructuring of the electric power industry which culminated in his introduction of House Bill No. 1991. He was greatly assisted in the project by Engr. Dennis Carpio who was connected then with the World Bank. The bill served as the model for House Bill No. 8457 and the 4 Senate Bills introduced, consolidated and enacted into law in the 11th Congress as R.A. No. 9136. Although many of the provisions on consumer protection and transparency in rate-fixing, and anti-trust safeguards in House Bill No. 1991 were not carried over in R.A. No. 9136, still said law deserves praise and support for being the first and most significant enactment passed to address the problems of high electricity prices, consumer protection and inadequate power supply.
26 Sec. 3, R.A. No. 9136.
27 Sec. 5, R.A. No. 9136.
28 Sec. 47, R.A. No. 9136.
29 Secs. 3 and 21, R.A. No. 9136.
30 Sec. 2(j), R.A. No. 9136.
31 Sec. 38, R.A. No. 9136.
34 Sec. 39, R.A. No. 9136.
35 Sec. 1, E.O. No. 172.
36 Memorandum for FDC, Rollo, pp. 964-965.
37 Id. at 965-967.
38 Memorandum for Petitioners-in-Intervention, Id. at 628-629.
39 Memorandum for MERALCO, Id. at 658-667.
40 Id. at 666.
41 Memorandum of the OSG, Id. at 893-913.
42 Memorandum of the ERC, Id. at 701-714.
43 Id. at 718.
44 Sec. 9(c), P.D. No. 1206. See also Sec. 16(c), Commonwealth Act (C.A.) No. 146.
45 Sec. 9(e), P.D. No. 1206. See also Sec. 15(a), C.A. No. 146.
46 Sec. 8, E.O. No. 172; Sec. 16(c), C.A. No. 146.
47 An Act Creating the Philippine Economic Zone Authority (PEZA).
48 An Act Creating the Bases Conversion and Development Authority (BCDA).
49 Establishing Basic Policies for the Electric Power Industry, including making NPC a monopoly and monopsony by vesting it with sole authority to generate and sell electricity.
50 Jalandoni v. Endaya, G.R. No. L-23894, 24 January 1974, 55 SCRA 262; Villegas v. Subido, G.R. No. L-31711, 30 September 1971, 41 SCRA 190; Iloilo Palay and Corn Planters Association, Inc. v. Feliciano, G.R. No. L-24022, 03 March 1965, 13 SCRA 377; United States v. Reyes, 10 Phil. 423 (1908).
51 Iloilo Palay and Corn Planters Association, Inc. v. Feliciano, supra at 381.
52 Villegas v. Subido, supra note 50; Lichauco & Co. v. Apostol and Corpus, 44 Phil 138 (1922).
53 SEC. 75. Statutory Construction. — This Act shall, unless the context indicates otherwise, be construed in favor of the establishment, promotion, preservation of competition and people empowerment so that the widest participation of the people, whether directly or indirectly, is ensured. With respect to NPC’s debts and IPP and related contracts, nothing in this Act shall be construed as: (1) an implied waiver of any right, action or claim, against any person or entity, of NPC or the Philippine Government arising from or relating to any such contracts; (2) a conferment of new or better rights to creditors and IPP contractors in addition to subsisting rights granted by the NPC or the Philippine Government under existing contracts.
54 The IRR requires that the petition for rate adjustment or for any relief must be accompanied by an acknowledgment of receipt of a copy by the legislative bodies of the Local Government Units (LGUs) concerned, together with a certification of the publication of the notice of hearing as required by law. It also provides that the ERC may provisionally grant or deny the relief sought not later than 75 calendar days from the filing of the petition, based thereon and the documents attached thereto, as well as the comments or pleadings of the consumers affected that may have been filed within 30 calendar days from receipt of a copy of the petition or the publication thereof, as the case may be.
55 Sec. 2. It is hereby declared the policy of the State.
. . . .
(b) To protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power.
56 Sec. 43(f), R.A. No. 9136.
58 The National Grid Code and the Distribution Code are required to include performance and financial capability standards for the players in all the sectors of the industry "to protect the public interest." (Sec. 43(f)). The ERC is tasked to enforce the rules and regulations for the operation of the electricity spot market and the activities of the participants therein to ensure "a greater supply and rational pricing of electricity." (Sec. 43 (i)). In order that the ERC may retain the Return-on-Rate Basis (RORB) as the rate-setting methodology, it is required to observe certain guidelines "to protect the public interest." (Sec. 43(k)). See also Sec. 43 (o), (r), (s) and (t)).
The ERC may allow the TRANSCO to charge user fees only "after due notice and hearing." (Sec. 43(n)).
The ERC is empowered to punish abuse of market power, cartelization and anti-competitive behavior. (Sec. 43(o)).
It is required to publish all its decisions involving rates and anti-competitive cases "to ensure fair and unpartial treatment." (Sec. 43(q)).
The promotion of "free market competition" is at the core of the ERC’s task to monitor activities in the generation and supply sub-sectors. (Sec. 43(u)). The ERC is commanded to act on applications for cost recovery and return on demand side information projects, (Sec. 73) obviously to spur energy savings and reduction of power rates. The ERC is given original and exclusive jurisdiction over all cases contesting power rates and fees or involving intra-industry disputes. (Sec. 69).
It is the ERC’s task to set up a socialized pricing mechanism called a lifeline rate for the marginalized end-users. (Sec. 69). It may extend the cross-subsidies for one (1) year upon a finding that its removal would have "a material adverse effect upon the public interest." In reviewing power purchase and energy conversion agreements between the Philippine National Oil Company-Energy Development Corporation (PNOC-EDC) and the NPC concerning geothermal power plants for the purpose of removing hidden costs or extraordinary mark-ups in the cost of power or steam above their true costs, the ERC shall ensure that all savings realized from the reduction of the mark-ups shall be shared by all end-users. (Sec. 69).
59 Memorandum for the OSG, Rollo, p. 906.
60 Aisporna v. Court of Appeals, G.R. No. L-39419, April 12, 1982, 113 SCRA 459.
61 Act No. 1779 (1907).
62 Section 5 in relation to Section 16, Id. The provisions read:
Sec. 5. The said Board shall exercise a watchful and careful supervision over the rates of every public service corporation, and the said Board shall have the power and it shall be its duty to fix, revise, regulate, reduce, or increase the said rates from time to time as justice to the public and the corporation may require. The Board shall have the power, and it shall be its duty to examine into and keep informed as to the compliance of public service corporations with the orders of the Board and with all provisions of law and their charters and franchises as to rates.
Sec. 16. The said Board is authorized and empowered and it shall be its duty whenever, after full hearing, it shall be of the opinion that any of the rates charged by any public-service corporation subject to the provisions of this Act for any service rendered or to be rendered, or that any regulations or practices whatever of such public-service corporation affecting such rates, are unjust or unreasonable or unduly discriminative, or unduly preferential or prejudicial, or otherwise in violation of any of the provisions of this Act, the Board shall determine what should be the just and reasonable rate or rates to be thereafter observed in such case, and what regulations or practices in respect to such service are just, fair, and reasonable to be thereafter followed; and to make an order that the said public-service corporation shall cease and desist from such violation, to the extent to which the Board finds the same to exist, and shall not thereafter publish, demand, or collect any rate for such service rendered or to be rendered in excess of the rate so prescribed and shall conform to the regulation or practice so prescribed. (Emphasis supplied)
63 SEC. 42 of Act No. 2307 provides:
All the powers and duties of the Board of Rate Regulation created by Act Numbered Seventeen Hundred and Seventy-Nine, and all subsequent amendments and additions thereto are hereby transferred to, and become a part of the duties and powers of, the Board of Public Utility Commissioners, who shall hereafter discharge all the duties that have heretofore been required of the Board of Rate Regulation; and any Act or part of Act inconsistent with the provisions of such transfer and the provisions of this Act is hereby repealed.
64 Section 15(c), Act 2307 provides:
The Board shall have the power:
(c) After hearing, upon notice by order in writing, to fix just and reasonable individual rates, joint rates, tolls, charges, or schedules thereof, as well as commutation, mileage, and other special rates which shall be imposed, observed and followed thereafter by any public utility as herein defined, whenever the Board shall determine any existing individual rate, joint rate, toll, charge or schedule thereof or commutation, mileage, or other special rate to be unjust, unreasonable, insufficient, or unjustly discriminatory or preferential. (Emphasis supplied)
65 Section 16(h), Act No. 2307 provides:
When any public utility as herein defined shall increase any existing individual rates, joint rates, tolls, charges, or schedules thereof, as well as commutation, mileage, and other special rates, or change or alter any existing classification, the Board shall have the power, either upon written complaint or upon its own initiative to hear and determine whether the said increase, change or alteration is just and reasonable. The burden of proof to show that the said increase, change, or alteration is just and reasonable shall be upon the public utility making the same. The Board shall have the power pending such hearing and determination to order the suspension of the said increase, change, or alteration, not exceeding three months. It shall be the duty of the said Board to approve any such increase, change, or alteration upon being satisfied that the same is just and reasonable. (Emphasis supplied)
66 C.A. No. 146 (1936).
67 See p. 21, supra..
68 Integrated Reorganization Plan, Art. III, pars. 1 and 6.
69 Sec. 11(e), P.D. No. 1206. "The Board of Power and Waterworks is abolished and its powers and functions are transferred to the Board of Energy, while its powers and functions relative to waterworks are transferred to the National Water Resources Council." Sec. 9 provides in part:
"The Board shall, after due notice and hearing, exercise the following powers and functions, among others:
. . . .
c. Regulate and fix the power rates to be charged by electric companies except (1) electric cooperatives which shall continue to be governed by Presidential Decree No. 269, as amended, and (2) the National Power Corporation which shall continue to be governed by Republic Act No. 6395,as amended.
. . . .
70 G.R. No. 75016, January 13, 1989, 169 SCRA 167.
71 Id. at 172-173.
72 Supra, pp. 21-22.
73 Supra, p. 22.
74 Supra, p. 21.
75 Supra, pp. 21-22.
76 Sec. 43, R.A. No. 9136.
77 Sec. 4(e), Rule 3, IRR.
78 Memorandum for the FDC, Rollo, pp. 967-970.
79 Id. at 970-972.
80 Memorandum for Petitioners-in-Intervention, Id. at 629-633.
81 Memorandum for the OSG, Id. at 1015-1027.
82 Memorandum for the ERC, Id. at 724-732.
83 G.R. No. L-50141, January 29, 1988, 157 SCRA 481.
84 Memorandum for the ERC, Rollo, pp. 738-740.
85 Id. at 748-750.
86 Memorandum for MERALCO, Id. at 669-675.
87 Sec. 4(e), Rule 3, IRR.
88 Dissenting Opinion of J. Puno, p. 39.
89 Id. at 39-48.
90 Section 4(e), Rule 3, IRR.
91 The Department of Energy is tasked with the duty of formulating the implementing rules of the EPIRA under Section 37(p) in relation to Section 77 of the law. Sections 37(p) and 77 read:
Section 37. Powers and Functions of the DOE.—In addition to its existing powers and functions, the DOE is hereby mandated to supervise the restructuring of the electricity industry, In pursuance thereof, Section 5 of RA 7638 otherwise known as "The Department of Energy Act of 1992" is hereby amended to read as follows:
(p) formulate such rules and regulations as may be necessary to implement the objectives of this Act;
Section 77. Implementing Rules and Regulations. –The DOE shall, in consultation with relevant government agencies, the electric power participants, non-government organizations and end-users, promulgate the Implementing Rules and Regulations (IRR) of this Act within six months from the effectivity of this Act subject to the approval by the [Joint Congressional] Power Commission.
92 See Sec. 77, R.A. No. 9136; supra note 91.
93 See Sec. 62, R.A. No. 9136.
94 People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450, citing People v. Exconde, 101 Phil 1125; Director of Forestry v. Muñoz, G.R. No. L-24786, June 28, 1966, 23 SCRA 1183; and Geukeko v. Araneta, 102 Phil. 706; Rizal Empire Insurance Group, et al. v. National Labor Relations Commission, G.R. No. L-73140, May 29, 1987, 150 SCRA 565; Español v. Chairman, Philippine Veterans Association, G.R. No. L-44616, June 28, 1985, 137 SCRA 314; Antique Sawmill, Inc. v. Zayco, et al., G.R. No. L-250051, May 30, 1966, 17 SCRA 316; Valerio v. Secretary of Agriculture and Natural Resources, G.R. No. L-18587, April 23, 1963, 7 SCRA 719; Pascual v. Commissioner of Customs, G.R. No. L-12219, April 25, 1962, 4 SCRA 1020.
95 114 Phil. 555 (1962).
96 Ibid at 558.
97 Republic of the Philippines, represented by Energy Regulatory Board v. Manila Electric Company, G.R. No. 141369, November 15, 2000; 391 SCRA 700. In ruling that income tax as operating expense cannot be allowed for rate-determination purposes which MERALCO did, this Court opened its decision with a memorable pro-people statement: "In third world countries like the Philippines, equal justice will have a synthetic ring unless the economic rights of the people, especially the poor, are protected with the same resoluteness as their right to liberty. The cases at bar are of utmost significance for they concern the right of our people to electricity and to be reasonably charged for their consumption." Ibid., at 704.
98 Sec. 2(f), R.A. No. 9136.
99 Sec. 2(c), R.A. No. 9136.
100 Sec. 2(e), R.A. No. 9136.
101 Sec. 4(e), Rule 3, IRR.
102 Rollo, pp. 753-754.
103 Supra, note 83.
104 Rollo, pp. 738-739.
106 Memorandum for MERALCO, Id. at 680.
108 See Memorandum for the ERC, Id. at 734-740.
109 Id. at 914-915.
110 Order, Ibid at 23-25.
111 NASECORE sent its letter to the ERC expressing its intention on October 14, 2003. FDC expressed the same intention it its October 29, 2003 letter to the ERC. See Memorandum for the ERC, Id. at 693.
112 Id. at 444-447, 54-55.
113 Id. at 450.
114 G.R. No. 134913, January 19, 2001, 349 SCRA 705.
115 Id. at 713-714.
116 Republic v. Cocofed, G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462.
117 Tañada v. Angara, G.R. No. 118295, May 2, 1997, 272 SCRA 18.
118 Rizal Empire Insurance Group, et al. v. National Labor Relations Commission, supra, note 94; Español v. Chairman, Philippine Veterans Association, supra, note 94; Antique Sawmill, Inc. v. Zayco, et al., supra, note 94; Valerio v. Secretary of Agriculture and Natural Resources, supra, note 94; Pascual v. Commissioner of Customs, supra, note 94.
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