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, vs. 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 countrys 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 MERALCOs Application.3
On October 24, 2003, Mr. Genaro Lualhati (Lualhati) sent a Letter to Sanchez seeking the dismissal of MERALCOs Application.4
On October 29, 2003, petitioner Freedom from Debt Coalition (FDC) also expressed its intention to file an opposition to MERALCOs 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 MERALCOs Application.7
In an Order dated November 13, 2003, the ERC directed MERALCO to file its comment on NASECOREs 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 MERALCOs Application.
The FDC likewise filed a Motion for Production of Documents on November 27, 2003, adopting NASECOREs 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 Lualhatis Opposition, issued an Order provisionally approving MERALCOs ex parte application for rate increases. The dispositive portion of the Order states:
Thereafter, the following were filed with the ERC after its issuance of the November 27, 2003 Order:
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 Womens 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 MERALCOs 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:
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 laws 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 applicants 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:
The principal powers of the ERB relative to electric public utilities transferred to the ERC are the following:
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:
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:
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 laws intent to transfer the power to the ERC.
Indeed, nary a hint in the EPIRA intimates that the powers of ERCs 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 ERCs 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 ERCs 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:
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 ERCs 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:
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 ERCs 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 ERCs 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:
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 MERALCOs 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 MERALCOs bare allegation that it was in dire financial straits, as there was no proof of MERALCOs 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 Commissions partiality for MERALCO.80
Significantly, the OSG is also of the view that the proceedings before the ERC relative to MERALCOs Application is defective. Among the defects, according to the OSG, are MERALCOs 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 ERCs failure to consider the serious objections raised by the oppositors to the application and the ERCs 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 MERALCOs 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 FDCs 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:
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 utilitys 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:
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 Victorias Milling Co., Inc. v. Social Security Commission,95 the Court explained:
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:
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 ERCs 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 Peoples Tribune deserves to be quoted, thus:
The November 27, 2003 Order reveals that the ERC did not consider the opposition to MERALCOs Application and other pleadings filed by several concerned parties in determining whether the rate increase applied for by MERALCO should be approved provisionally.
The ERCs provisional approval of MERALCOs application for rate increase was based on MERALCOs 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 MERALCOs 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 NASECOREs Motion for Production of Documents,113 it failed to resolve the same, as well as FDCs 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 MERALCOs prayer for provisional rate increase, because NASECORE and FDC would be able to express their agreement or opposition to MERALCOs 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:
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 MERALCOs 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 ERCs assumption of jurisdiction over MERALCOs Application and its prayer
for provisional rate increase. Similarly, the ERCs 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 MERALCOs 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.
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