SECOND DIVISION
[ G.R. No. 268094, October 30, 2024 ]
PEAKPOWER SAN FRANCISCO, INC., PETITIONER, VS. ENERGY REGULATORY COMMISSION, RESPONDENT.
DISSENTING OPINION
LEONEN, SAJ.:
I cannot join my colleague's act of granting the Petition for Certiorari considering the glaring procedural and substantive missteps which merit its dismissal.
It is puzzling why petitioner Peak Power San Francisco, Inc. did not implead Agusan Del Sur Electric Cooperative, Inc. (ASELCO). Being the power supplier to a distribution utility like ASELCO, they are both directly affected with respondent Energy Regulatory Commission's termination of the provisional authority given to their second Power and Purchase Transfer Agreement. As the ponencia sensibly observed: "[I]t is ASELCO that would be deprived of the eventual ownership of the unit if the PPTA implementation is terminated. Consequently, the failure to implead them as indispensable party is fatal to petitioner's cause."1
It is hornbook principle that all indispensable parties must be joined in an action since it is an essential ingredient for the exercise of judicial power. Further, "the absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present."2 Sepulveda, Sr. v. Atty. Pelaez3 underscores the necessity of joining all indispensable parties as follows:
Indeed, the presence of all indispensable parties is a condition sine qua non for the exercise of judicial power. It is precisely when an indispensable party is not before the court that the action should be dismissed. Thus, the plaintiff is mandated to implead all the indispensable parties, considering that the absence of one such party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. One who is a party to a case is not bound by any decision of the court, otherwise, he will be deprived of his right to due process. Without the presence of all the other heirs as plaintiffs, the trial court could not validly render judgment and grant relief in favor of the private respondent. The failure of the private respondent to implead the other heirs as parties-plaintiffs constituted a legal obstacle to the trial court and the appellate court's exercise of judicial power over the said case, and rendered any orders or judgments rendered therein a nullity.4
On the substantive aspect, the Petition should also be denied for failing to prove compliance with the competitive selection process mandated by the Department of Energy (DOE).
Electricity is a basic necessity "whose generation and distribution is imbued with public interest."5 The distribution of electricity within the various provinces in our country is dominated by local monopolies within their franchise areas, which the government regulates pursuant to its constitutional mandate.6
Electricity franchise holders face no competition within their areas of operation; hence, to protect the consuming public from price gouging practices and to ensure fair pricing, the State regulates these monopolies by requiring the distribution utilities to resort to competitive public bidding when purchasing its supply of electricity from power generating companies. Alyansa para sa Bagong Pilipinas, Inc. v. Energy Regulatory Commission7 explains:
The State grants electricity distribution utilities, through legislative franchises, a regulated monopoly within their respective franchise areas. Competitors are legally barred within the franchise areas of distribution utilities. Facing no competition, distribution utilities can easily dictate the price of electricity that they charge consumers. To protect the consuming public from exorbitant or unconscionable charges by distribution utilities, the State regulates the acquisition cost of electricity that distribution utilities can pass on to consumers.
As part of its regulation of this monopoly, the State requires distribution utilities to subject to competitive public bidding their purchases of electricity from power generating companies. Competitive public bidding is essential since the power cost purchased by distribution utilities is entirely passed on to consumers, along with other operating expenses of distribution utilities. Competitive public bidding is the most efficient, transparent, and effective guarantee that there will be no price gouging by distribution utilities.
Indeed, the requirement of competitive public bidding for power purchases of distribution utilities has been adopted in the United States, Europe, Latin America, India, and many developing countries. This requirement is primarily aimed at ensuring a fair, reasonable, and least-cost generation charge to consumers, under a transparent power sale mechanism between the generation companies and the distribution utilities.8 (Emphasis in the original)
Hence, being imbued with public interest, electricity franchise holders are subject to State regulation because "in the absence of [competitive selection process], there is no transparency in the purchase by [distribution utilities] of electric power, and thus there is no assurance of the reasonableness of the power rates charged to consumers."9
It is of no moment that the second Power Purchase and Transfer Agreement between petitioner and ASELCO was provisionally granted by respondent. The approval was done within the second postponement of the mandatory competitive selection process for the purchase of electricity. To recall, Alyansa struck down both instances of respondent's postponement of the mandatory competitive selection process for being done without coordination with the DOE and for being a grave abuse of its authority as an implementing agency:
Lest we forget, the ERC is expressly mandated in Section 43(o) of the EPIRA of "ensuring that the xxx pass through of bulk purchase cost by distributors is transparent." The ERC's postponement of CSP twice, totaling 305 days and enabling 90 PSAs in various areas of the country to avoid CSP for at least 20 years, directly and glaringly violates this express mandate of the ERC, resulting in the non-transparent, secretive fixing of prices for bulk purchases of electricity, to the great prejudice of the 95 million Filipinos living in this country as well as the millions of business enterprises operating in this country. This ERC action is a most extreme instance of grave abuse of discretion, amounting to lack or excess of jurisdiction, warranting the strong condemnation by this Court and the annulment of the ERC's action.
Absent compliance with CSP in accordance with the 2015 DOE Circular, the PSAs shall be valid only as between the Dus and the power generation suppliers, and shall not bind the DOE, the ERC, and the public for purposes of determining the transparent and reasonable power purchase cost to be passed on to consumers.10 (Emphasis in the original)
As players in an industry "imbued with public interest" and being the recipient of State sanctioned monopoly, petitioner and ASELCO's contracts are rightly subject to State supervision, particularly since they will merely pass-on the expenses to their captive market.
While the Constitution prohibits the impairment of contracts,11 this is a safeguard only against unwarranted State interference. Here, petitioner and ASELCO provide a basic need but do so in a monopoly. It is thus incumbent on the State to protect the public interest against potential abuses of the power and privilege exercised by those running a monopoly.
The freedom to contract is not meant to be absolute.(awÞhi( In fact, for a contract to be valid there must be the implied guarantee that it must not be "contrary to law, morals, good customs, public order, or public policy."12 Further, the non-impairment clause, which is meant to shield purely private agreements from State interference,13 necessarily yields to the State's police power.14 Provincial Bus Operators Association of the Philippines v. Department of Labor and Employment15 provides:
Not all contracts, however, are protected under the non-impairment clause. Contracts whose subject matters are so related to the public welfare are subject to the police power of the State and, therefore, some of its terms may be changed or the whole contract even set aside without offending the Constitution; otherwise, 'important and valuable reforms may be precluded by the simple device of entering into contracts for the purpose of doing that which otherwise may be prohibited.'
Likewise, contracts which relate to rights not considered property, such as a franchise or permit, are also not protected by the non-impairment clause. The reason is that the public right or franchise is always subject to amendment or repeal by the State, the grant being a mere privilege. In other words, there can be no vested right in the continued grant of a franchise. Additional conditions for the grant of the franchise may be made and the grantee cannot claim impairment.16
ACCORDINGLY, I vote for the DISMISSAL of the Petition for Certiorari.
Footnotes
1 Ponencia at 12.
2 Dr. Orbeta v. Sendiong, 501 Phil 482, 490 (2005) [Per J. Tinga, Second Division]. (Citations omitted)
3 490 Phil. 713 (2005) [Per J. Callejo, Sr., Second Division].
4 Sepulveda, Sr. v. Pelaez, 490 Phil. 713, 722-723 (2005) [Per J. Callejo, Sr., Second Division]. (Citations omitted)
5 Manila Electric Co. v. Spouses Chua, 637 Phil. 89, 101 (2010) [Per J. Brion, Third Division].
6 CONST., art. XII, sec. 19 provides: The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.
7 G.R. No. 227670, May 3, 2019 [Per J. Carpio, En Banc].
8 Alyansa para sa Bagong Pilipinas, Inc. v. Energy Regulatory Commission, G.R. No. 227670, May 3, 2019 [Per J. Carpio, En Banc].
9 Id.
10 Id.
11 CONST., art. III, sec. 10 states: No law impairing the obligation of contracts shall be passed.
12 CIVIL CODE, art. 1306 provides: The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
13 National Development Company v. Philippine Veterans Bank, 270 Phil. 352, 359 (1990) [Per J. Cruz, En Banc].
14 The Provincial Bus Operators Association of the Philippines v. Department of Labor and Employment, 836 Phil. 214, 273 (2018) [Per J. Leonen, En Banc].
15 Id. at 214.
16 Id. at 272-273.
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