SC also nullifies 2014 ERC order voiding Luzon WESM prices
MANILA (2nd UPDATE)— After almost a decade, the Supreme Court has affirmed a 2013 order of the Energy Regulatory Commission (ERC) that approved the Manila Electric Company's (Meralco) request to impose a staggered power rate hike amounting to P22.64 billion.
In a 6-5 vote, SC magistrates junked the separate petitions filed by Bayan Muna and the National Association of Electricity Consumers for Reforms (NASECO) which challenged the supposed lack of due process and the ERC’s alleged grave abuse of discretion in unilaterally approving the increase.
They also want to declare void sections 6 and 29 of the Electric Power Industry Reform Act of 2001 (RA 9136 or the EPIRA Law) and a provision of its implementing rules and regulations.
The request for power rate increase stemmed from the shutdown of the Shell Philippines Exploration B.V. (SPEX)-Malampaya operations and the scheduled maintenance of other power generation plants, which, according to Meralco, would amount to P22.64 billion generation cost that would be passed on to its customers.
This would have meant an additional charge of P9.1070 kWh in the December 2013 billing of its customers and would have been allowed under Guidelines for the Automatic Adjustment of Generation Rate and System Loss Rates by Distribution Utilities (AGRA Rules).
But in a December 2013 letter to the ERC, Meralco asked for a staggered billing.
Instead of an additional P9.1070/kWh for the December 2013 billing, Meralco wanted to impose only a P7.90/kWh increase and collect the remaining P3 billion in its February 2014 billing.
In exchange, Meralco asked ERC that it be allowed to impose a “carrying charge” for deferring the rate hike.
The ERC approved the staggered increase but only at the rate of P7.67/kWh for the December 2013 billing while authorizing an additional P1.00/kWh increase in the February 2014 billing and the balance due on the following month.
It did not however grant the “carrying charge.”
The rate hike was never implemented because the Supreme Court issued several temporary restraining orders until indefinitely halting the increase in April 2014.
In junking the petitions, the high court said the ERC did not commit grave abuse of discretion in approving the staggered increase because it acted within the confines of its authority and it did so “to protect the interests of the consumers.”
Speaking through Associate Justice Jhosep Lopez, the SC said the ERC in fact followed the AGRA Rules and the EPIRA Law.
Petitioners and dissenting opinions questioned the lack of publication and hearing. But the majority opinion said that under the EPIRA Law, certain rate adjustments are exempted from prior notice and hearing, as held in a prior SC case, because it would allegedly take the ERC four and a half years to decide 1,680 cost recovery filings in just a year, even if they rendered rulings on Saturdays and Sundays.
The Supreme Court also said the rate hike was still subject to the ERC’s power to hold “post-verification of the adjusted rates to avoid over-recovery or under-recovery.”
But then-Associate Justices Marvic Leonen and Amy Lazaro-Javier both questioned the ERC approval of the staggered rate hike, saying it should have investigated further and should not have taken Meralco's word for it.
"The sheer speed at which the Energy Regulatory Commission moved in favor of Meralco's plea demonstrates an abject inability to act in keeping with its mandate, the imperative of public interest, and the vast competencies vested in it. The sorely haphazard manner by which it discharged its function-if it can ever truly be spoken of as a ‘discharge’ of its function-indicates ‘evasion of positive duty or ... virtual refusal to perform the duty enjoined by ... law.’ It is this instance of grave abuse of discretion that this Court should invalidate," Leonen said.
"RA 9136 did not create ERC to be a mere wallflower. RA 9136 envisions the ERC as a powerful and discretion-laden administrative decision-maker in a regulatory role. The following notable provisions in RA 9136 show the breadth of ERC's discretionary mandate," Lazaro-Javier added.
Lazaro-Javier pointed out the increase could have resulted in an additional P800 to a 200/kWh electric bill for residents or a 61% increase to their November 2013 bill.
"The increase was not to pay for the household’s additional use of electricity. Rather, it was for just one of the amounts billed and collected by Meralco — here, for purchasing electricity from power generating companies which it then sells to the households in its franchise area. This is referred to in the electric power industry as the generation rates. Under the operational definition of generation rates, consumer would not be paying merely for the generator’s cost of generating electricity, but for add-ons as well, like system loss charge, value-added tax, and local franchise tax, among others," she said.
Acknowledging the criticisms of the dissenting justices, the majority opinion said that while the ERC could have “done better,” such was not a case of grave abuse of discretion.
"Whether the ERC could have ‘done better,’ as what the dissents would have wanted the Court to undertake, is an unwarranted journey into the functions of the administrative body that has the expertise to regulate the power industry. Even if it were conceded that the ERC could have done better, that it did not do so does not mean that the ERC committed grave abuse of discretion - as it was, again, simply following the AGRA Rules," it said.
The ruling no longer touched on the constitutionality of the the EPIRA law and its IRR.
Associate Justices Ramon Paul Hernando, Rosmari Carandang, Henri Jean Paul Inting, Mario Lopez and Samuel Gaerlan voted with Jhosep Lopez in the majority.
Joining Leonen and Lazaro-Javier in the dissent were Chief Justice Alexander Gesmundo, Rodil Zalameda and Ricardo Rosario.
Former Senior Associate Justice Estela Perlas-Bernabe and Associate Justice Alfredo Benjamin Caguioa did not take part.
Bernabe and Carandang have since retired.
If a motion for reconsideration is filed by the petitioners, four new justices could affect the voting — associate justices Japar Dimaampao, Jose Midas Marquez, Antonio Kho, Jr. and Maria Filomena Singh.
Meralco said in a statement that it had yet to received the official copy of the decision.
"Once we receive it though, we will need to study the reported SC decision to understand and see what the actual impact will be," the power company said.
Former Bayan Muna Party-list Rep. Carlos Zarate, meanwhile, slammed the top court's decision to uphold what he called "the highest power rate hike in history" which "could not have come at a worse time."
"With the prices of basic commodities still skyrocketing due to continued big-time oil price hikes and the weakening of the peso, this is another unwanted burden on our people. Financial burden like this once Meralco imposes this new power rate hike - on top of the already high electricity rates - may already break the Filipino consumers' back," he said in a statement.
Zarate insisted energy firms "gamed the electricity stock market that resulted in the highest rate hike at additional P4.15 per kwh."
"Meralco, as a monopoly in its big area of operation, also abused its dominant position to the prejudiced of consumers. With the people's clamor, we will continue to help place safeguards in the electricity market to prevent this kind of rapacious profit-seeking practices," he said.