David Celestra Tan, MSK
26 May 2019
Consumers and Cause Oriented Groups were overjoyed when the Supreme Court issued a decision last 17 May 2019 granting the petition of Alyansa Para saBagongPilipinas (ABP)to declare the extension of the CSP policy by ERC from November 7, 2015 to April 30, 2016 to be beyond its authority and therefore illegal and null and void. We all felt it is a major consumer victory and checkmate of the monopolizing Meralco. Alas, Meralco power supply contracts will be subjected to true competitive selection process or bidding.No more negotiated contracts between sister companies! It is going to be a wonderful world for consumers! So we thought!
Sorry Aya, Sorry Noel, Sorry Neri, Sorry Meralco consumers. I think we are wrong! When we read the full SC decision in GR No. 227670, there were odd things about it. Parts of it are out of tune. It is like listening to the victory song in Les Miserables and hearing the enemy marching in the background. Did the Supreme Court make a mistake? We asked a retired Justice. He said we may disagree with the decision, but the SC rarely makes a mistake in writing its decisions. It means whatever they wrote and the words they used are intended to be there. Just to repeat, the SC doesn’t make a mistake in writing decisions. Whatever is there is intended to be there.
Having said that, Lets talk first about the Great Things about the Supreme Court Decision.
1. It reiterated the constitutional obligation of the government agencies, particularly the DOE and ERC in protecting the consumers and promoting true competition.
“Section 19, Article XII of the 1987 Constitution provides: “The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”
The State grants electricity distribution utilities, through legislative franchises, a regulated monopoly within their respective franchise areas. Competitors are legally barred within the franchise areas of distribution utilities. Facing no competition, distribution utilities can easily dictate the price of electricity that they charge consumers. To protect the consuming public from exorbitant or unconscionable charges by distribution utilities, the State regulates the acquisition cost of electricity that distribution utilities can pass on to consumers.
As part of its regulation of this monopoly, the State requires distribution utilities to subject to competitive public bidding their purchases of electricity from power generating companies. Competitive public bidding is essential since the power cost purchased by distribution utilities is entirely passed on to consumers, along with other operating expenses of distribution utilities.
Competitive public bidding is the most efficient, transparent, and effective guarantee that there will be no price gouging by distribution utilities”.
It is a breath of fresh air!
2. It clarified that the function of the ERC is to enforce and implement the policies formulated, as well as the rules and regulations issued by the DOE.
“Thus, the very first mandate of the ERC under its charter, the EPIRA, is to “enforce the implementing rules and regulations” of the EPIRA as formulated and adopted by DOE. Clearly, under the EPIRA, it is the DOE that formulates the policies, and issues the rules and regulations, to implement the EPIRA. The function of the ERC is to enforce and implement the policies formulated, as well as the rules and regulations issued, by the DOE. The ERC has no power whatsoever to amend the implementing rules and regulations of the EPIRA as issued by the DOE. The ERC is further mandated under EPIRA to ensure that the “pass through of bulk purchase cost by distributors is transparent [and] non-discriminatory. ”
“In any event, even in quasi-judicial cases, the ERC is bound to apply the policies, rules, regulations, and circulars issued by the DOE as the ERC has no power to ignore, waive, amend, postpone, or revoke the policies, rules, regulations, and circulars issued by the DOE pursuant to the EPIRA. To repeat, the DOE’s rules, regulations, and circulars issued pursuant to the DOE’s rule-making power under the EPIRA have the force and effect of law which the ERC is legally bound to follow, whether the ERC is exercising executive, quasi-legislative, or quasi-judicial powers.”
This is an important reminder because since the tenure of the 3rd ERC Chair, the ERC has been arrogating its stature as an independent body, creating its kingdom, co-equal even to the courts, and free to write its own guidelines based on its own interpretation of the law. Many of those are contrary to the policies handed down by the DOE.
It is this mind-set that apparently emboldened the ERC to ignore the Supreme Court ruling in 2005 that public service utilities should only be allowed a 12% return on their investment. They still adopted the PBR rate setting methodology that essentially deregulated the profits of distribution utilities which in Meralco’s case has been reaching 25% per year, double what the Supreme Court ruled was the limit. Never mind that the Epira Law of 2001 clearly says the Distribution Sector is regulated.
We hope with this new Supreme Court ruling on the limits of its discretion, the ERC can be more sanguine and usher in an era where both the DOE and ERC are pulling in the same direction.
At the same time we hope it will serve as a reminder to the DOE that they have a big responsibility to see that their own policies are actually implemented.
There are however Curious omissions and additions in the written decision of the Supreme Court
These are the things that are odd and sticking out like sore thumbs in such a wonderful and enlightened interpretation of the law.
Next: The omission and addition to the Supreme Court decision that would stalemate the DOE and the Consumers.
MatuwidnaSingilsaKuryente Consumer Alliance Inc.