G.R. No. 190199, March 11, 2020
SECOND DIVISION
[ G.R. No. 190199, March 11, 2020 ]
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION V. PHILIPPINE ELECTRICITY MARKET CORP. AND MANILA ELECTRIC COMPANY
Sirs and Mesdames:
Please take notice that the Court, Second Division, issued a Resolution
dated 11 March 2020 which reads as follows:
"G.R. No. 190199 (Power Sector Assets and Liabilities Management Corporation v. Philippine Electricity Market Corp. and Manila Electric Company). - Before the Court is a petition for review on certiorari[1] under Rule 45 of the Rules of Court, as amended, assailing the Decision[2] dated August 28, 2009 and Resolution[3] dated November 6, 2009 that was rendered by the Court of Appeals (CA) in CA-G.R. SP No. 106322. The said Decision and Resolution affirmed the Orders dated January 30, 2008[4] and October 20, 2008,[5] respectively, issued by the Energy Regulatory Commission (ERC).
The Facts
On June 8, 2001, Congress enacted Republic Act (RA) No. 9136, known as the Electric Power Industry Reform Act of 2001 (EPIRA), a landmark legislation which governs the energy industry.[6] Section 2 of the EPIRA provides:
Petitioner, Power Sector Assets and Liabilities Management Corporation (PSALM) is a government owned and controlled corporation created by virtue of the EPIRA.[8] The principal purpose of petitioner is to manage the orderly sale, disposition and privatization of the National Power Corporation (NPC) generation assets, real estate and other disposable assets, as well as Independent Power Producer (IPP) contracts with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner.[9]
Respondent Philippine Electricity Market Corporation (PEMC) is a private corporation organized and existing under and by virtue of Philippine laws and is the transitional Autonomous Group Market Operator (AGMO) created under Section 30 of the EPIRA and its Implementing Rules and Regulations.[10]
Respondent Manila Electric Company (MERALCO) is a private corporation organized and existing under and by virtue of Philippine laws. It is a distribution utility of electricity within designated areas including Metro Manila, Bulacan. Cavite, Rizal and Batangas.[11]
As mandated by the EPIRA, the Department of Energy established the Wholesale Electricity Spot Market (WESM), a market for sellers and purchasers of electricity consisting of generators, distribution utilities, suppliers and bulk consumers wherein the trading participants submit their respective market offers or prices to the market operator.[12] Respondent PEMC was established as the temporary and transitional AGMO for the WESM pending the formation of an Independent Market Operator.[13]
The instant case stemmed from an Investigation Report issued by the Enforcement and Compliance Office (ECO) of PEMC after it investigated the increase in the load weighted average price in the WESM in the third month of operations and the bidding behavior of PSALM's trading teams during the third billing period, which was observed to be the cause of such increase. As a result of the inquiry, the ECO issued its Investigation Report finding that PSALM behaved anti-competitively and abused its market power.[14]
The said ECO Investigation Report was reviewed and the findings therein confirmed by the Market Surveillance Committee (MSC) of the PEMC. In a Memorandum addressed to the PEM Board, the MSC reported on the findings of the ECO and verified that PSALM behaved anti-competitively and abused its market power during the third billing period of WESM commercial operations.[15]
After it affirmed the findings of the ECO and MSC, PEMC publicized the same and on the basis thereof, ordered adjustment in the WESM settlement prices for the third and fourth billing periods.[16]
The NPC sought clarification from the ERC on the said price adjustments ordered by the PEM Board. On December 6, 2006, the ERC directed PEMC to submit the Resolution adverted to by NPC and thereafter initiated an inquiry into the said PEM Board Resolution and the latter's action in adjusting the WESM prices.[17]
In an Order[18] dated December 13, 2006, the ERC invoked its mandate under RA No. 9136 or the EPIRA and provisionally declared the action of the PEM Board to be invalid for having been carried out beyond the scope of its authority and in violation of the EPIRA and the WESM Rules. The decretal portion of the Order reads:
On August 14, 2007, the ERC issued a Decision21 confirming its earlier Order dated December 13, 2006. It likewise directed the adjustment of the WESM settlement prices for the third and fourth billing months to be the resulting settlement prices. The decretal portion of the Decision reads:
MERALCO also emphasized that the additional imposition of P6.00 per kwh would translate to an increase in the generation charge of its consumers of about 90 centavos and P2.05 per kwh for the supply months of September 2006 and October 2006, respectively.[25]
On January 30, 2008, the ERC rendered the first assailed Order,26 the dispositive portion of which reads:
Hence, this petition.[32]
The Issue
Essentially, petitioner claims that the ERC committed an illegal, arbitrary and ultra vires act when it imposed price controls for the third and fourth billing months in the WESM for the year 2006, contrary to the explicit and unambiguous requirements of the EPIRA. According to petitioner, such act would cause unnecessary distortions in the market which would adversely affect both the consumers and the market participants.[33]
The Court's Ruling
The petition is devoid of merit.
The ERC has been vested delegated police power under the EPIRA. Section 43 of the EPIRA expressly provides that in the exercise of its investigative and quasi-judicial powers, the ERC may act against any participant or player in the energy sector for violations of any law, rule or regulation and penalize abuse of market power. The same section also provides that the ERC is authorized to perform such other regulatory functions as are appropriate and necessary in order to ensure the successful restructuring of the electric power industry, viz:
SECTION 43. Functions of the ERC. - The ERC shall promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the restructured electricity industry, x x x:
x x x x
(r) In the exercise of its investigative and quasi-judicial powers, act against any participant or player in the energy sector for violations of any law, rule and regulation governing the same, including the rules on cross ownership, anti-competitive practices, abuse of market positions and similar or related acts by any participant in the energy sector or by any person, as may be provided by law and require any person or entity to submit any report or data relative to any investigation or hearing conducted pursuant to this Act;
x x x x
(f) Perform such other regulatory functions as are appropriate and necessary in order to ensure the successful restructuring and modernization of the electric power industry, x x x.
Originally, the power to fix rates and impose price controls was conferred upon the ERB. This was expressly provided under Section 9(c) of Presidential Decree (PD) No. 1206 which states:
Petitioner maintains that the ERC acted beyond the scope of its authority when it imposed the National Power Corporation-Time of Use (NPC-TOU) rates as a form of price adjustment and/or price control for the third and fourth billing periods in the WESM for the year 2006. According to petitioner, the imposition of these rates is not only an ultra vires act, but also in the nature of an imposition of a financial penalty against the petitioner without legal basis.[34]
The Court disagrees.
It should be noted that while it is true that the PEM Board is not vested with authority to adjust or fix the prices in the WESM, the same cannot be said of the ERC. The ERC is granted the power to fix the prices in the market under the WESM Rules and Section 44[35] in relation to Section 45[36] of the EPIRA. Moreover, Section 43(f) provides that the ERC may impose price adjustments provided that the rate-setting methodology adopted and applied is reasonable, viz:
The NPC-TOU rates is a pricing mechanism designed to reflect the cost of electricity at any particular time of the day. The cost of producing electricity differs between different hours of the day, i.e., the cost of power is lowest during off-peak periods and highest during peak periods.[38]
As discussed by the ERC in its Order[39] dated December 13, 2006, any necessary and justified adjustment on the prices should be made using the regulator-approved TOU (NPC-TOU) rates as benchmark for these rates have passed the "reasonableness" test, viz:
It is the avowed policy of the EPIRA to balance the interests of generators and suppliers on one hand and the public, on the other hand. In line with this, Section 2 provides the basis for the grant and the lawful exercise of police power by the ERC, viz:
For police power to be deemed as to have been validly exercised, it must have been necessitated and required by the interests of the consumers generally as this concept is primarily exerted to further the public welfare. The State thru the ERC should be able to exercise its police power with great flexibility when the need arises.[45]
Here, the unusually high and unreasonable market prices for the subject billing periods which necessitated the ERC to step in and exercise its police power as mandated by the EPIRA, cannot be overemphasized.
As pointed out by PEMC, the impact of the adjustment in the WESM prices based on the first Order of the ERC dated August 14, 2007, which was estimated to be an additional imposition of P6.00 per kwh, inclusive of VAT and interest charges would have translated to an increase to the generation charge of its consumers of about 90 centavos and P2.05 per kwh for the supply months of September and October 2006, respectively.[46]
It also bears stressing that although it exceeded its authority when it unilaterally adjusted the WESM prices, the PEMC, as the market operator, was in the best position to confirm any and all information related to the WESM. The following excerpts from the Report submitted by the ECO support the contention of respondents that price adjustments were necessary:
As to what constitutes a reasonable price in terms of rate-fixing, the Court, in Republic v. MERALCO,[48] held that:
WHEREFORE, premises considered, the assailed Decision dated August 28, 2009 of the Court of Appeals in CA-G.R. SP No. 106322 which affirmed the Order dated January 30, 2008 of the Energy Regulatory Commission and its Order dated October 20, 2008 denying petitioner's Motion for Reconsideration, is hereby AFFIRMED."
[1]Rollo, pp. 3-48.
[2]Penned by Associate Justice Myrna Dimaranan Vidal with the concurrence of Associate Justices Isaias P. Dicdican and Jane Aurora C. Lantion; id. at 54-68.
[3]Penned by Associate Justice Myrna Dimaranan Vidal with the concurrence of Associate Justices Isaias P. Dicdican and Jane Aurora C. Lantion; id. at 69.
[4]Id. at 526-532.
[5]Id. at 560-568.
[6]Id. at 3.
[7]Id. at 4.
[8]Sec. 49, Republic Act (R.A.) No. 9136
[9]Id. at Sec. 50; Rollo, pp. 6-7.
[10]Rollo, p. 7.
[11]Id.
[12]Rollo, p. 8.
[13]Id. at 10.
[14]Id. at 443.
[15]Id. at 424.
[16]Id. at 461-462.
[17]Id. at 462.
[18]Id. at 453-459.
[19]Id. at 458-459.
[20]Id. at 462.
[21]Id. at 461-467.
[22]Id. at 467.
[23]Id. at 627, 725.
[24]Id. at 527.
[25]Id. at 725-726.
[26]Id. at 526-534.
[27]Id. at 531-532.
[28]Id. at 553-542.
[29]Id. at 560-569.
[30]Id. at 570-594.
[31]Id. at 54-60.
[32]Id. at 3-48.
[33]Id. at 5.
[34]Id. at 25.
[35]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.
[36]Sec. 45. Cross Ownership, Market Power Abuse and Anti-Competitive Behavior. - No participant in the electricity industry or any other person may engage in any anti-competitive behavior including, but not limited to, cross-subsidization, price or market manipulation, or other unfair trade practices detrimental to the encouragement and protection of contestable markets.
No generation company, distribution utility, or its respective subsidiary or affiliate or stockholder or official of a generation company or distribution utility, or other entity engaged in generating and supplying electricity specified by ERC within the fourth civil degree of consanguinity or affinity, shall be allowed to hold any interest, directly or indirectly, in TRANSCO or its concessionaire. Likewise, the TRANSCO, or its concessionaire or any of its stockholders or officials or any of their relatives within the fourth civil degree of consanguinity or affinity, shall not hold any interest, whether directly or indirectly, in any generation company or distribution utility. Except for ex officio government-appointed representatives, no person who is an officer or director of the TRANSCO or its concessionaire shall be an officer or director of any generation company, distribution utility or supplier.
An "affiliate" means any person which, alone or together with any other person, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person. As used herein, "control" shall mean the power to direct or cause the direction of the management policies of a person by contract, agency or otherwise.
To promote true market competition and prevent harmful monopoly and market power abuse, the ERC shall enforce the following safeguards:
(a) No company or related group can own, operate or control more than thirty percent (30%) of the installed generating capacity of a grid and/or twenty-five percent (25%) of the national installed generating capacity. "Related group" includes a person's business interests, including its subsidiaries, affiliates, directors or officers or any of their relatives by consanguinity or affinity, legitimate or common law, within the fourth civil degree;
(b) Distribution utilities may enter into bilateral power supply contracts subject to review by the ERC: Provided, that such review shall only be required for distribution utilities whose markets have not reached household demand level. For the purpose of preventing market power abuse between associated firms engaged in generation and distribution, no distribution utility shall be allowed to source from bilateral power supply contracts more than fifty percent (50%) of its total demand from an associated firm engaged in generation but such limitation, however, shall not prejudice contracts entered into prior to the effectivity of this Act. An associated firm with respect to another entity refers to any person which, alone or together with any other person, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such entity; and
(c) For the first five (5) years from the establishment of the wholesale electricity spot market, no distribution utility shall source more than ninety percent (90%) of its total demand from bilateral power supply contracts.
For purposes of this Section, the grid basis shall consist of three (3) separate grids, namely Luzon, Visayas and Mindanao. The ERC shall have the authority to modify or amend this definition of a grid when two or more of the three separate grids become sufficiently interconnected to constitute a single grid or as conditions may otherwise permit.
Exceptions from these limitations shall be allowed for isolated grids that are not connected to the high voltage transmission system. Except as otherwise provided for in this Section, any restriction on ownership and/or control between or within sectors of the electricity industry may be imposed by ERC only insofar as the enforcement of the provisions of this Section is concerned.
The ERC shall, within one (1) year from the effectivity of this Act, promulgate rules and regulations to ensure and promote competition, encourage market development and customer choice and discourage/penalize abuse of market power, cartelization and any anti-competitive or discriminatory
behavior, in order to further the intent of this Act and protect the public interest. Such rules and regulations shall define the following:
(a) the relevant markets for purposes of establishing abuse or misuse of monopoly or market position;
(b) areas of isolated grids; and
(c) the periodic reportorial requirements of electric power industry participants as may be necessary to enforce the provisions of this Section.
The ERC shall, motu proprio, monitor and penalize any market power abuse or anti-competitive or discriminatory act or behavior by any participant in the electric power industry. Upon finding that a market participant has engaged in such act or behavior, the ERC shall stop and redress the same. Such remedies shall, without limitation, include the imposition of price controls, issuance of injunctions, requirement of divestment or disgorgement of excess profits and imposition of fines and penalties pursuant to this Act.
The ERC shall, within one (1) year from the effectivity of this Act, promulgate rules and regulations providing for a complaint procedure that, without limitation, provides the accused party with notice and an opportunity to be heard.
[37]Rollo, p. 531.
[38]Time of Use Pricing (visited March 13, 2020).
[39]Rollo, pp. 453-459.
[40]Id. at 458.
[41]Id. at 526-532.
[42]Id. at 531.
[43]449 Phil. 118(2003).
[44]Id. at 135.
[45]Concurring and Dissenting Opinion of Chief Justice Reynato S. Puno in Freedom from Debt Coalition v. Energy Regulatory Commission, 476 Phil. 134, 239 (2004).
[46]Rollo, p. 509.
[47]Id. at 434-435.
[48]440 Phil. 389 (2002).
[49]Id. at 398-399.
[50]257 Phil. 914(1989)
[51]Id. at 921.
[52]Galindez v. Firmalan, et al., G.R. No. 187186, June 6, 2018, 864 SCRA 282, 299 citing JMM Promotions and Management v. Court of Appeals, 439 Phil. 1, 10-11 (2002).
"G.R. No. 190199 (Power Sector Assets and Liabilities Management Corporation v. Philippine Electricity Market Corp. and Manila Electric Company). - Before the Court is a petition for review on certiorari[1] under Rule 45 of the Rules of Court, as amended, assailing the Decision[2] dated August 28, 2009 and Resolution[3] dated November 6, 2009 that was rendered by the Court of Appeals (CA) in CA-G.R. SP No. 106322. The said Decision and Resolution affirmed the Orders dated January 30, 2008[4] and October 20, 2008,[5] respectively, issued by the Energy Regulatory Commission (ERC).
On June 8, 2001, Congress enacted Republic Act (RA) No. 9136, known as the Electric Power Industry Reform Act of 2001 (EPIRA), a landmark legislation which governs the energy industry.[6] Section 2 of the EPIRA provides:
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State:The EPIRA created the ERC as an independent, quasi-judicial regulatory body. This replaced and abolished the Energy Regulatory Board (ERB)[7] which was created under Executive Order No. 172, as amended.
x x x x
(b) To ensure the quality, reliability, security and affordability of the supply of electric power;
(c To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to
achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market;
x x x x
(j) To establish a strong and purely independent regulatory body and system to ensure consumer protection and enhance the competitive operation of the electricity market; (Emphasis supplied.)
Petitioner, Power Sector Assets and Liabilities Management Corporation (PSALM) is a government owned and controlled corporation created by virtue of the EPIRA.[8] The principal purpose of petitioner is to manage the orderly sale, disposition and privatization of the National Power Corporation (NPC) generation assets, real estate and other disposable assets, as well as Independent Power Producer (IPP) contracts with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner.[9]
Respondent Philippine Electricity Market Corporation (PEMC) is a private corporation organized and existing under and by virtue of Philippine laws and is the transitional Autonomous Group Market Operator (AGMO) created under Section 30 of the EPIRA and its Implementing Rules and Regulations.[10]
Respondent Manila Electric Company (MERALCO) is a private corporation organized and existing under and by virtue of Philippine laws. It is a distribution utility of electricity within designated areas including Metro Manila, Bulacan. Cavite, Rizal and Batangas.[11]
As mandated by the EPIRA, the Department of Energy established the Wholesale Electricity Spot Market (WESM), a market for sellers and purchasers of electricity consisting of generators, distribution utilities, suppliers and bulk consumers wherein the trading participants submit their respective market offers or prices to the market operator.[12] Respondent PEMC was established as the temporary and transitional AGMO for the WESM pending the formation of an Independent Market Operator.[13]
The instant case stemmed from an Investigation Report issued by the Enforcement and Compliance Office (ECO) of PEMC after it investigated the increase in the load weighted average price in the WESM in the third month of operations and the bidding behavior of PSALM's trading teams during the third billing period, which was observed to be the cause of such increase. As a result of the inquiry, the ECO issued its Investigation Report finding that PSALM behaved anti-competitively and abused its market power.[14]
The said ECO Investigation Report was reviewed and the findings therein confirmed by the Market Surveillance Committee (MSC) of the PEMC. In a Memorandum addressed to the PEM Board, the MSC reported on the findings of the ECO and verified that PSALM behaved anti-competitively and abused its market power during the third billing period of WESM commercial operations.[15]
After it affirmed the findings of the ECO and MSC, PEMC publicized the same and on the basis thereof, ordered adjustment in the WESM settlement prices for the third and fourth billing periods.[16]
The NPC sought clarification from the ERC on the said price adjustments ordered by the PEM Board. On December 6, 2006, the ERC directed PEMC to submit the Resolution adverted to by NPC and thereafter initiated an inquiry into the said PEM Board Resolution and the latter's action in adjusting the WESM prices.[17]
In an Order[18] dated December 13, 2006, the ERC invoked its mandate under RA No. 9136 or the EPIRA and provisionally declared the action of the PEM Board to be invalid for having been carried out beyond the scope of its authority and in violation of the EPIRA and the WESM Rules. The decretal portion of the Order reads:
WHEREFORE, PREMISES CONSIDERED, the Commission hereby provisionally declares the action of the PEM Board of adjusting the WESM settlement prices in its 22 November 2006 meeting and the Resolution embodying the same, to be invalid and therefore, null and void. This provisional Order notwithstanding, and without prejudice to any action that the Commission will take on the issue of price adjustments based on the final outcome of its investigation on the market power abuse allegation, the PEMC is hereby ordered to provisionally adjust the WESM settlement prices for the third and fourth billing months involving all transactions, using the Commission-approved NPC TOU rates to take effect and to be fully implemented within five (5) days from the receipt of this Order. The PEMC and/or PEM Board are likewise directed to file their comment within ten (10) days from the receipt hereof containing their explanation/justifications why the provisional Order declaring as invalid the action of the PEM Board should not be made final and why they should not be penalized for violation of the EPIRA and the WESM Rules for issuing such Resolution and ordering the adjustment in the WESM settlement prices.On June 6, 2007, the ERC adopted the findings of its Investigatory Unit (IU) and terminated the investigation of PSALM. In its report dated June 4, 2007, the IU found no prima facie case against PSALM for anti-competitive behavior or market power abuse.[20]
SO ORDERED.[19]
On August 14, 2007, the ERC issued a Decision21 confirming its earlier Order dated December 13, 2006. It likewise directed the adjustment of the WESM settlement prices for the third and fourth billing months to be the resulting settlement prices. The decretal portion of the Decision reads:
WHEREFORE, PREMISES CONSIDERED, and in the exercise of its mandate under the EPIRA, the Commission confirms its Order dated 13 December 2006 and declares as invalid the action of the PEM Board in adjusting the WESM settlement prices for having been carried out beyond the scope of its authority and in violation of the EPIRA and the WESM Rules.On August 16, 2007, PEMC filed a Manifestation stating, among others, that it received a letter from PSALM demanding payment of the total unpaid amount from the third and fourth billing months which the latter claims to have accumulated to P8,966,442,270.23, viz:
In order to put to rest issues on delineation of functions exercised by entities within the industry, PEMC is hereby directed to formulate market protocols to fully address said issues and the relevant entities within the industry are hereby directed to extend their full cooperation to facilitate realization of the said objective.
Further, the Commission hereby directs the implementation and adjustment of the WESM settlement prices for the third and fourth billing periods. PEMC is hereby allowed to institute adjustments in its billing and settlement processes to mitigate the impact of the instant Decision upon the WESM members.
SO ORDERED.[22]
"6. PEMC also manifests that on 8 August 2007, it received a letter from PSALM demanding payment of the total unpaid amount from the third and fourth billing months which it claims to have accumulated to Pesos: Eight Billion Nine Hundred Sixty-Six Million Four Hundred Forty-Two Thousand Two Hundred Seventy and 23.100 (Php8,966,442,270.23) representing: (1) the peso difference between actual payments for the energy traded amounts for the third and fourth billing periods (Php6,655,145,795.35) and the amount actually due to PSALM for those periods based on market clearing prices (Phpl3,817,112,367.60), plus the corresponding value added tax (VAT) thereon (Phpl, 198,069,151.59); and (2) the amount of interest that such peso difference has so far earned from 28 November 2006 (the date on which the amount was deducted and withheld from PSALM) up to 31 July 2007 (Php606,406,546.39) based on National Power Corporation's non-prime lending rate.xxx"On September 17, 2007, MERALCO, as intervenor, moved for reconsideration of the ERC Decision praying that the action of the PEM Board in adjusting the WESM settlement prices for the September and October 2006 WESM supply months be declared valid. MERALCO alleged, among others, that "the WESM Rules lay the basis for the exercise of the PEM Board of its authority to impose the appropriate penalties for acts and omissions constituting a breach, abuse of market powers or [a]nti-competitive behavior and thereupon implement corrective measures such as the adjustments in the WESM prices, to protect the interest of the industry and the public."[24]
7. PEMC further respectfully manifests to this Honorable Commission that the impact to the consumers of these adjustments claimed by PSALM, if applied, together with the adjustments of ail generation prices, would result to an additional imposition of P6.00 kwh xxx"[23]
MERALCO also emphasized that the additional imposition of P6.00 per kwh would translate to an increase in the generation charge of its consumers of about 90 centavos and P2.05 per kwh for the supply months of September 2006 and October 2006, respectively.[25]
On January 30, 2008, the ERC rendered the first assailed Order,26 the dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, the Commission hereby denies the respective Motions for Reconsideration filed by PEMC and Representative Teofisto Guingona III. On the other hand, MERALCO's Motion for Reconsideration insofar as it prays for the adjustment for the WESM settlement prices, is hereby granted. Accordingly, consistent with the policy of the State to afford adequate and appropriate consumer protection, the Commission hereby sets the WESM settlement prices for the third and fourth billing periods at the Commission-approved NPC-TOU rates.On July 11, 2008, PSALM filed a motion for partial reconsideration[28] but the ERC denied the same in its Order[29] dated October 20, 2008, the dispositive portion of which reads:
PEMC is hereby directed to implement corresponding adjustments in its settlement arrangements if necessary.
SO ORDERED.[27](Emphasis supplied.)
WHEREFORE, premises considered, the Commission hereby DENIES the "Motion for Partial Reconsideration" filed by PSALM and hereby AFFIRMS its Order dated 30 January 2008.Undeterred, PSALM filed a petition for review[30] with the CA but the CA dismissed it and affirmed the Orders of the ERC.[31]
SO ORDERED.
Hence, this petition.[32]
Essentially, petitioner claims that the ERC committed an illegal, arbitrary and ultra vires act when it imposed price controls for the third and fourth billing months in the WESM for the year 2006, contrary to the explicit and unambiguous requirements of the EPIRA. According to petitioner, such act would cause unnecessary distortions in the market which would adversely affect both the consumers and the market participants.[33]
The petition is devoid of merit.
The ERC has been vested delegated police power under the EPIRA. Section 43 of the EPIRA expressly provides that in the exercise of its investigative and quasi-judicial powers, the ERC may act against any participant or player in the energy sector for violations of any law, rule or regulation and penalize abuse of market power. The same section also provides that the ERC is authorized to perform such other regulatory functions as are appropriate and necessary in order to ensure the successful restructuring of the electric power industry, viz:
SECTION 43. Functions of the ERC. - The ERC shall promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the restructured electricity industry, x x x:
(r) In the exercise of its investigative and quasi-judicial powers, act against any participant or player in the energy sector for violations of any law, rule and regulation governing the same, including the rules on cross ownership, anti-competitive practices, abuse of market positions and similar or related acts by any participant in the energy sector or by any person, as may be provided by law and require any person or entity to submit any report or data relative to any investigation or hearing conducted pursuant to this Act;
(f) Perform such other regulatory functions as are appropriate and necessary in order to ensure the successful restructuring and modernization of the electric power industry, x x x.
Originally, the power to fix rates and impose price controls was conferred upon the ERB. This was expressly provided under Section 9(c) of Presidential Decree (PD) No. 1206 which states:
SECTION 9. Board of Energy. - x x x.The enactment of EPIRA, abolished the ERB and created in its place the ERC, a purely independent regulatory body tasked with performing quasi-judicial, quasi-legislative and administrative functions in the electric industry. Accordingly, the power to regulate and fix the power rates to be charged by electric companies was likewise transferred to the ERC.
x x x x
The Board shall, after due notice and hearing, exercise the following powers and functions, among others:
x x x x
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;
Petitioner maintains that the ERC acted beyond the scope of its authority when it imposed the National Power Corporation-Time of Use (NPC-TOU) rates as a form of price adjustment and/or price control for the third and fourth billing periods in the WESM for the year 2006. According to petitioner, the imposition of these rates is not only an ultra vires act, but also in the nature of an imposition of a financial penalty against the petitioner without legal basis.[34]
The Court disagrees.
It should be noted that while it is true that the PEM Board is not vested with authority to adjust or fix the prices in the WESM, the same cannot be said of the ERC. The ERC is granted the power to fix the prices in the market under the WESM Rules and Section 44[35] in relation to Section 45[36] of the EPIRA. Moreover, Section 43(f) provides that the ERC may impose price adjustments provided that the rate-setting methodology adopted and applied is reasonable, viz:
(g) In the public interest, establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for the captive market of a distribution utility, taking into account all relevant considerations, including the efficiency or inefficiency of the regulated entities. The rates must be such as to allow the recovery of just and reasonable costs and a reasonable return on rate base (RORB) to enable the entity to operate viably. The rate-setting methodology so adopted and applied must ensure a reasonable price of electricity, x x x (Emphasis supplied.)In deciding to adopt the NPC Time-of-Use (TOU) rates as substitute prices, instead of the actual market prices for the relevant periods as expressly stated in its Order dated January 30, 2008, the ERC ratiocinated that the historical data were not reflective of the market conditions prevailing during the relevant period, while the NPC TOU rates have passed the test of reasonableness.[37]
The NPC-TOU rates is a pricing mechanism designed to reflect the cost of electricity at any particular time of the day. The cost of producing electricity differs between different hours of the day, i.e., the cost of power is lowest during off-peak periods and highest during peak periods.[38]
As discussed by the ERC in its Order[39] dated December 13, 2006, any necessary and justified adjustment on the prices should be made using the regulator-approved TOU (NPC-TOU) rates as benchmark for these rates have passed the "reasonableness" test, viz:
The Commission finds merit in the statements of NPC on the imposition of the administered prices with only the prices during the second month of the WESM as basis. Barely two (2) months into the WESM, the prices therein cannot be categorically stated as truly reflective of market conditions. If at all, any adjustment on the prices should be made using the regulator-approved TOU generation rates as benchmark. Having passed the "reasonableness" test, these rates have been subjected to the usual hearing, evaluation and deliberation by the Commission where the NPC's revenue requirement, return on rate base, and TOU rate design, have been thoroughly evaluated.Similarly, in its Decision[41] dated January 30, 2008, the ERC once more emphasized on the reasonableness of the NPC-TOU rates, viz.:
Given the foregoing considerations and in the exercise of its clear mandate under the EPIRA, the Commission is thus constrained to issue this provisional Order declaring the action of the PEM Board, in correcting the WESM settlement prices and in imposing the administered prices, to be invalid for having been carried out beyond the scope of its authority and in violation of the EPIRA and the WESM Rules. Consistent with its mandate, the Commission nevertheless cannot ignore the plight of the customers who will eventually be burdened by the prices in the WESM for the months covered by the third and fourth billing period. Considering the pendency of the Commission's investigation on the same market abuse on which the PEM Board based its Resolution and without prejudice in the outcome thereof, the Commission deems it prudent that until the termination thereof, a provisional adjustment in the WESM settlement prices should be made for the third and fourth billing month using the Commission-approved TOU rates.[40]
Any adjustment on the prices, therefore, should be made using the regulator-approved TOU generation rates as benchmark. Having passed the "reasonableness" test, these rates have been subjected to the usual hearing, evaluation and deliberation by the Commission where the NPC's revenue requirement, return on rate base, and TOU rate design have been thoroughly evaluated.[42]The objective, in applying the NPC-TOU rates, was not limited to merely protecting the consumers but also to set the WESM settlement prices at reasonable levels especially since there was clear evidence of unusually high WESM prices during the subject periods. To the Court's mind, the ERC did not hastily nor thoughtlessly impose the aforementioned rates. As a matter of fact, the ERC ruled in favor of petitioner when it held that no prima facie case for anti-competitive behavior or market power abuse was established against it. Nevertheless, the fact that the WESM prices were unreasonably high during the said period should not be overlooked.
It is the avowed policy of the EPIRA to balance the interests of generators and suppliers on one hand and the public, on the other hand. In line with this, Section 2 provides the basis for the grant and the lawful exercise of police power by the ERC, viz:
SECTION 2. Declaration of Policy. - It is hereby declared the policy of the State:Here, perusal of the records show that the ERC complied with the twin requisites of valid exercise of police power when it issued the assailed Orders, i.e., the interests of the public require its exercise and lawful means were employed to accomplish the purpose of rationalizing and normalizing prices in the market during the third and fourth billing periods. Sections 41, 43 and 45 likewise provide the ERC with sufficient legal authority to issue the January 30, 2008 Order with the end in view of promoting competition in the electricity market while affording adequate and appropriate consumer protection, viz:
(a) To ensure and accelerate the total electrification of the country;
(b) To ensure the quality, reliability, security and affordability of the supply of electric power;
(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market;
(d) To enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors;
(e) To ensure fair and non-discriminatory treatment of public and private sector entities in the process of restructuring the electric power industry;
(f) To protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power;
(g) To assure socially and environmentally compatible energy sources and infrastructure;
(h) To promote the utilization of indigenous and new and renewable energy resources in power generation in order to reduce dependence on imported energy;
(i) To provide for an orderly and transparent privatization of the assets and liabilities of the National Power Corporation (NPC);
(j) To establish a strong and purely independent regulatory body and system to ensure consumer protection and enhance the competitive operation of the electricity market; and
(k) To encourage the efficient use of energy and other modalities of demand side management.
SECTION 41. Promotion of Consumer Interests. - The ERC shall handle consumer complaints and ensure the adequate promotion of consumer interests.In Republic v. MERALCO,[43] the Court held that rate fixing calls for a technical examination and a specialized review of specific details which the courts are ill-equipped to enter, hence, such matters are primarily entrusted to the administrative or regulating authority.[44] It is undisputed that The ERC has been designated under the EPIRA as the administrative body bestowed with broad regulatory powers and monitoring functions to ensure the successful restructuring and modernization of the Philippine electricity industry.
SECTION 43. Functions of the ERC. - The ERC shall promote competition, encourage market development, ensure customer choice and discourage/penalize abuse of market power in the restructured electricity industry. Towards this end, it shall be responsible for the following key functions in the restructured industry:
x x x x
(c) Enforce the rules and regulations governing the operations of the electricity spot market and the activities of the spot market operator and other participants in the spot market, for the purpose of ensuring a greater supply and rational pricing of electricity;
x x x x
(k) Monitor and take measures in accordance with this Act to penalize abuse of market power, cartelization, and anti-competitive or discriminatory behavior by any electric power industry participant;
(o) Monitor the activities in the generation and supply of the electric power industry with the end in view of promoting free market competition and ensuring that the allocation or pass through of bulk purchase cost by distributors is transparent, non-discriminatory and that any existing subsidies shall be divided pro-rata among all retail suppliers;
(t) Perform such other regulatory functions as are appropriate in order to ensure the successful restructuring and modernization of the electric power industry x x x. .
x x x x
SECTION 45. Cross Ownership, Market Power Abuse and Anti-competitive Behavior. - No participant in the electricity industry or any other person may engage in any anti-competitive behavior including, but not limited to, cross-subsidization, price or market manipulation, or other unfair trade practices detrimental to the encouragement and protection of contestable markets.
x x x x
The ERC shall, within one (1) year from the effectivity of this Act, promulgate rules and regulations to ensure and promote competition, encourage market development and customer choice and discourage/penalize abuse of market power, cartelization and any anti-competitive or discriminatory behavior, in order to further the intent of this Act and protect the public interest. Such rules and regulations shall define the following:
(a) the relevant markets for purposes of establishing abuse or misuse of monopoly or market position;
(b) areas of isolated grids; and
(c) the periodic reportorial requirements of electric power industry participants as may be necessary to enforce the provisions of this Section.
The ERC shall, motu proprio, monitor and penalize any market power abuse or anti-competitive or discriminatory act or behavior by any participant in the electric power industry. Upon finding that a market participant has engaged in such act or behavior, the ERC shall stop and redress the same. Such remedies shall, without limitation, include the imposition of price controls, issuance of injunctions, requirement of divestment or disgorgement of excess profits and imposition of fines and penalties pursuant to this Act.
The ERC shall, within one (1) year from the effectivity of this Act, promulgate rules and regulations providing for a complaint procedure that, without limitation, provides the accused party with notice and an opportunity to be heard.
For police power to be deemed as to have been validly exercised, it must have been necessitated and required by the interests of the consumers generally as this concept is primarily exerted to further the public welfare. The State thru the ERC should be able to exercise its police power with great flexibility when the need arises.[45]
Here, the unusually high and unreasonable market prices for the subject billing periods which necessitated the ERC to step in and exercise its police power as mandated by the EPIRA, cannot be overemphasized.
As pointed out by PEMC, the impact of the adjustment in the WESM prices based on the first Order of the ERC dated August 14, 2007, which was estimated to be an additional imposition of P6.00 per kwh, inclusive of VAT and interest charges would have translated to an increase to the generation charge of its consumers of about 90 centavos and P2.05 per kwh for the supply months of September and October 2006, respectively.[46]
It also bears stressing that although it exceeded its authority when it unilaterally adjusted the WESM prices, the PEMC, as the market operator, was in the best position to confirm any and all information related to the WESM. The following excerpts from the Report submitted by the ECO support the contention of respondents that price adjustments were necessary:
Based on the events that had occurred prior to and on August 30, the investigating team concludes that the submission of increased bids to at least PI0,000 during the peak hours by the three (3) different PSALM trading teams occurring at the same time and at the same date, while in the realm of possibility, is not coincidental. The investigation team therefore looks at it with guarded caution, especially if the meetings with PSALM management and the NPC letters are taken into account. There was uniformity in bidding levels from a previously dissimilar level. (Excerpts from the ECO Report[.])On the basis of the foregoing, the Court absolutely agrees with the CA that although the ERC adopted the findings of its IU and terminated the investigation against PSALM for alleged anti-competitive behavior and abuse of market power, the same did not necessarily preclude the existence of irregular behavior or circumstances which would have contributed to the high prices in the WESM during the subject periods. The ERC validly exercised its regulatory power pursuant to the police power of the State when it imposed the Commission-approved NPC-TOU rates as a form of price adjustment or price control.
While the traders said they were acting independently of the other teams, it is very unnatural for a trader to suddenly bid based on its production cost which would create a swift substantial increase in its bid offer because of the possible consequence of not being dispatched. Moreover, this offer price increase happened just after the 25 August 2006 meeting where the first NPC letter (Annex K) alleging losses, was discussed. Even assuming that PSALM management met with the traders individually, and therefore no strategy was planned or shared by each trading team as a group, the uniformity of their acts undoubtedly reveal that an authority higher and outside the trading teams has made and caused the individual traders to act and trade as one.[47]
As to what constitutes a reasonable price in terms of rate-fixing, the Court, in Republic v. MERALCO,[48] held that:
x x x In the fixing of rates, the only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. It has been held that even in the absence of an express requirement as to reasonableness, this standard may be implied. What is a just and reasonable rate is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent judgment. The requirement of reasonableness comprehends such rates which must not be so low as to be confiscatory, or too high as to be oppressive. In determining whether a rate is confiscatory, it is essential also to consider the given situation, requirements and opportunities of the utility.[49] (Emphasis supplied.)In Solid Homes Inc. v. Payawal,[50] this Court explained that administrative agencies are considered specialists in the fields assigned to them; hence, they can resolve problems in their respective fields "with more expertise and dispatch than can be expected from the legislature or the courts of justice."[51] Thus, this Court has consistently accorded respect and even finality to the findings of fact of administrative bodies, in recognition of their expertise and technical knowledge over matters falling within their jurisdiction.[52]
WHEREFORE, premises considered, the assailed Decision dated August 28, 2009 of the Court of Appeals in CA-G.R. SP No. 106322 which affirmed the Order dated January 30, 2008 of the Energy Regulatory Commission and its Order dated October 20, 2008 denying petitioner's Motion for Reconsideration, is hereby AFFIRMED."
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Very truly yours,
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(Sgd.)TERESITA AQUINO TUAZON
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Deputy Division Clerk of Court
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[1]Rollo, pp. 3-48.
[2]Penned by Associate Justice Myrna Dimaranan Vidal with the concurrence of Associate Justices Isaias P. Dicdican and Jane Aurora C. Lantion; id. at 54-68.
[3]Penned by Associate Justice Myrna Dimaranan Vidal with the concurrence of Associate Justices Isaias P. Dicdican and Jane Aurora C. Lantion; id. at 69.
[4]Id. at 526-532.
[5]Id. at 560-568.
[6]Id. at 3.
[7]Id. at 4.
[8]Sec. 49, Republic Act (R.A.) No. 9136
[9]Id. at Sec. 50; Rollo, pp. 6-7.
[10]Rollo, p. 7.
[11]Id.
[12]Rollo, p. 8.
[13]Id. at 10.
[14]Id. at 443.
[15]Id. at 424.
[16]Id. at 461-462.
[17]Id. at 462.
[18]Id. at 453-459.
[19]Id. at 458-459.
[20]Id. at 462.
[21]Id. at 461-467.
[22]Id. at 467.
[23]Id. at 627, 725.
[24]Id. at 527.
[25]Id. at 725-726.
[26]Id. at 526-534.
[27]Id. at 531-532.
[28]Id. at 553-542.
[29]Id. at 560-569.
[30]Id. at 570-594.
[31]Id. at 54-60.
[32]Id. at 3-48.
[33]Id. at 5.
[34]Id. at 25.
[35]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.
[36]Sec. 45. Cross Ownership, Market Power Abuse and Anti-Competitive Behavior. - No participant in the electricity industry or any other person may engage in any anti-competitive behavior including, but not limited to, cross-subsidization, price or market manipulation, or other unfair trade practices detrimental to the encouragement and protection of contestable markets.
No generation company, distribution utility, or its respective subsidiary or affiliate or stockholder or official of a generation company or distribution utility, or other entity engaged in generating and supplying electricity specified by ERC within the fourth civil degree of consanguinity or affinity, shall be allowed to hold any interest, directly or indirectly, in TRANSCO or its concessionaire. Likewise, the TRANSCO, or its concessionaire or any of its stockholders or officials or any of their relatives within the fourth civil degree of consanguinity or affinity, shall not hold any interest, whether directly or indirectly, in any generation company or distribution utility. Except for ex officio government-appointed representatives, no person who is an officer or director of the TRANSCO or its concessionaire shall be an officer or director of any generation company, distribution utility or supplier.
An "affiliate" means any person which, alone or together with any other person, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person. As used herein, "control" shall mean the power to direct or cause the direction of the management policies of a person by contract, agency or otherwise.
To promote true market competition and prevent harmful monopoly and market power abuse, the ERC shall enforce the following safeguards:
(a) No company or related group can own, operate or control more than thirty percent (30%) of the installed generating capacity of a grid and/or twenty-five percent (25%) of the national installed generating capacity. "Related group" includes a person's business interests, including its subsidiaries, affiliates, directors or officers or any of their relatives by consanguinity or affinity, legitimate or common law, within the fourth civil degree;
(b) Distribution utilities may enter into bilateral power supply contracts subject to review by the ERC: Provided, that such review shall only be required for distribution utilities whose markets have not reached household demand level. For the purpose of preventing market power abuse between associated firms engaged in generation and distribution, no distribution utility shall be allowed to source from bilateral power supply contracts more than fifty percent (50%) of its total demand from an associated firm engaged in generation but such limitation, however, shall not prejudice contracts entered into prior to the effectivity of this Act. An associated firm with respect to another entity refers to any person which, alone or together with any other person, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such entity; and
(c) For the first five (5) years from the establishment of the wholesale electricity spot market, no distribution utility shall source more than ninety percent (90%) of its total demand from bilateral power supply contracts.
For purposes of this Section, the grid basis shall consist of three (3) separate grids, namely Luzon, Visayas and Mindanao. The ERC shall have the authority to modify or amend this definition of a grid when two or more of the three separate grids become sufficiently interconnected to constitute a single grid or as conditions may otherwise permit.
Exceptions from these limitations shall be allowed for isolated grids that are not connected to the high voltage transmission system. Except as otherwise provided for in this Section, any restriction on ownership and/or control between or within sectors of the electricity industry may be imposed by ERC only insofar as the enforcement of the provisions of this Section is concerned.
The ERC shall, within one (1) year from the effectivity of this Act, promulgate rules and regulations to ensure and promote competition, encourage market development and customer choice and discourage/penalize abuse of market power, cartelization and any anti-competitive or discriminatory
behavior, in order to further the intent of this Act and protect the public interest. Such rules and regulations shall define the following:
(a) the relevant markets for purposes of establishing abuse or misuse of monopoly or market position;
(b) areas of isolated grids; and
(c) the periodic reportorial requirements of electric power industry participants as may be necessary to enforce the provisions of this Section.
The ERC shall, motu proprio, monitor and penalize any market power abuse or anti-competitive or discriminatory act or behavior by any participant in the electric power industry. Upon finding that a market participant has engaged in such act or behavior, the ERC shall stop and redress the same. Such remedies shall, without limitation, include the imposition of price controls, issuance of injunctions, requirement of divestment or disgorgement of excess profits and imposition of fines and penalties pursuant to this Act.
The ERC shall, within one (1) year from the effectivity of this Act, promulgate rules and regulations providing for a complaint procedure that, without limitation, provides the accused party with notice and an opportunity to be heard.
[37]Rollo, p. 531.
[38]Time of Use Pricing (visited March 13, 2020).
[39]Rollo, pp. 453-459.
[40]Id. at 458.
[41]Id. at 526-532.
[42]Id. at 531.
[43]449 Phil. 118(2003).
[44]Id. at 135.
[45]Concurring and Dissenting Opinion of Chief Justice Reynato S. Puno in Freedom from Debt Coalition v. Energy Regulatory Commission, 476 Phil. 134, 239 (2004).
[46]Rollo, p. 509.
[47]Id. at 434-435.
[48]440 Phil. 389 (2002).
[49]Id. at 398-399.
[50]257 Phil. 914(1989)
[51]Id. at 921.
[52]Galindez v. Firmalan, et al., G.R. No. 187186, June 6, 2018, 864 SCRA 282, 299 citing JMM Promotions and Management v. Court of Appeals, 439 Phil. 1, 10-11 (2002).
G.R. No. 190199 - POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION (PSALM), Petitioner, v. PHILIPPINE ELECTRICITY MARKET CORPORATION and MANILA ELECTRIC COMPANY, Respondents.
CONCURRING OPINION
PERLAS-BERNABE, J.:
I fully concur with the conclusion of the Resolution in affirming the Decision[1] dated August 28, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 106322, which, in turn, upheld the assailed Orders dated January 30, 2008[2] and October 20, 2008[3] of the Energy Regulatory Commission (ERC) in ERC Case No. 2006-080 RC. However, I would like to offer some further elucidation with respect to the ERC's power to adjust the pertinent rates in the present case.
To recall, this case originated from reports that petitioner Power Sector Assets and Liabilities Management Corporation (PSALM) behaved anti-competitively and abused its market power during the third billing period of the Wholesale Electricity Spot Market (WESM) operations for 2006. In response thereto, the Board of Directors of respondent Philippine Electricity Market Corporation (PEMC) ordered adjustments for the WESM settlement prices for the third and fourth billing periods which were allegedly affected by PSALM's actions.[4] Accordingly, this brought to the fore two (2) distinct issues for the ERC to resolve. The first issue was whether or not PSALM acted anti-competitively. In ERC Case No. 2007-421 MC, it was resolved that there existed no prima facie case of anti-competitive behavior on the part of PSALM.[5] The second issue was whether or not PEMC had authority to adjust the rates for the above-mentioned billing periods. In ERC Case No. 2006-080 RC, it was resolved that PEMC had no authority to adjust the rates, given that such power is vested in the ERC alone. Nevertheless, owing to the abnormally high rates for the third and fourth billing period, the ERC itself ordered an adjustment of the prices for the relevant period by applying the National Power Corporation - Time of Use (NPC-TOU) rates. It is this particular aspect of the ERC's Orders which were raised as an issue before the CA and now before this Court.
Thus, with respect to the ERC's ruling in ERC Case No. 2006-080 RC, petitioner PSALM asserted that the ERC had no authority to impose price controls for the third and fourth billing months in the WESM for the year 2006 considering that such power must be premised on a prior fmding of "market power abuse" or "anti-competitive or discriminatory act", which is absent in the present case. ERC, on the other hand, maintained that its power to impose price controls stems from its "original and exclusive jurisdiction over all cases contesting rates, fees, fines and penalties x x x."[6]
The ERC's position is well-taken. Contrary to petitioner PSALM's assertion, the ERC's power to set and adjust rates exists apart from and independent with its regulatory power to impose price controls in order to stop and redress any act or behavior which it perceives as anti-competitive or discriminatory. Hence, it may properly order an adjustment of rates regardless of whether or not there is a prior finding of anti-competitive behavior in order to ultimately protect the rights of end-consumers.
As correctly pointed out in the Resolution, the power to fix rates was originally conferred upon the Energy Regulatory Board (ERB). Upon the enactment of Republic Act No. 9136,[7] otherwise known as the Electric Power Industry Reform Act (EPIRA) of 2001, this power was transferred to the ERC. Although this general rate-fixing power was not expressly enumerated under the ERC's powers and functions under Section 43 of the EPIRA, this Court in Freedom From Debt Coalition v. Energy Regulatory Commission,[8] held that:
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.On the other hand Section 45 of the EPIRA grants the ERC a separate regulatory power to address particular situations of market power abuse and anti-competitive behavior:
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.
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.
x x x x
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.
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.[10] (Emphases supplied)
Section 45. Cross Ownership, Market Power Abuse and Anti-Competitive Behavior. - No participant in the electricity industry or any other person may engage in any anti-competitive behavior including, but not limited to, cross-subsidization, price or market manipulation, or other unfair trade practices detrimental to the encouragement and protection of contestable markets.The two powers, founded on separate provisions, do not operate mutually exclusive to one another, as PSALM appears to suggest. Its powers under Section 45 are meant to redress very serious detrimental behavior on the part of Electric Power Industry Participants. In fact, price controls are only one of several remedies it may pursue in relation thereto. However, nothing in the said provision can be construed to have deprived ERC from exercising its broader rate-fixing powers. Clearly, it is beyond cavil that even outside of the ERC's power to penalize anti-competitive behavior and order price controls in relation thereto under Section 45 of the EPIRA, the ERC is empowered to order price adjustments whenever it becomes necessary to shield end-consumers from any irregularity in the prices of the electric industry. Such authority is based on its quasi-judicial and regulatory functions which may partake the nature of police power, as pointed out in the Resolution.
x x x x
The ERC shall, motu proprio, monitor and penalize any market power abuse or anti-competitive or discriminatory act or behavior by any participant in the electric power industry. Upon finding that a market participant has engaged in such act or behavior, the ERC shall stop and redress the same. Such remedies shall, without limitation, include the imposition of price controls, issuance of injunctions, requirement of divestment or disgorgement of excess profits and imposition of fines and penalties pursuant to this Act.
x x x x (Emphases supplied)
Given the foregoing, I vote to deny the instant Petition and affirm the assailed CA rulings.
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Very truly yours,
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(Sgd.)ESTELA M. PERLAS-BERNABE
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Senior Associate Justice
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[1]Rollo, pp. 54-68. Penned by Associate Justice Myrna Dimaranan Vidal with Associate Justices Isaias P. Dicdican and Jane Aurora C. Lantion, concurring.
[2]Id. at 526-534.
[3]Id. at 560-569.
[4]See id. at 55.
[5]See id.
[6]Id. at 566.
[7]Entittled "AN ACT ORDAINING REFORMS IN THE ELECTRIC POWER INDUSTRY, AMENDING FOR THE PURPOSE CERTAIN LAWS AND FOR OTHER PURPOSES," approved on June 8, 2001.
[8]476 Phil. 134(2004).
[10]Id. at 194-197; citations omitted.
