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Government loses appeal vs. 2013 power rate hikes

The Energy Regulatory Commission has lost its bid in the Court of Appeals to disallow the increase in power prices in the Wholesale Electricity Spot Market during the shutdown of the Malampaya gas facility in 2013.

In a 20-page resolution dated March 29, the CA’s 15th Division through Associate Justice Marlene Gonzales—Sison dismissed the appeal of the ERC on its earlier decision that affirmed the power price increase in WESM, the country’s trading floor for electricity.

The appellate court instead affirmed its November 2017 decision that nullified four assailed orders of ERC which voided the power price hike.

This ruling leaves to the Manila Electric Co. the burden of shouldering the increase in power generation costs, which the power distributor was supposed to pass to consumers through its record rate hike of P4.15 per kilowatt-hour (kWh) that was stopped by the Supreme Court through a temporary restraining order issued in December 2013.

The CA also denied the separate motions for reconsideration filed by Meralco in this case.

It sustained its ruling that the ERC had no authority to control the market prices through its orders dated March 3, March 27, May 4 and Oct. 15, 2014 under both the Constitution and the Electric Power Industry Reform Act.

“The absence of delegated authority empowering the ERC to impose agency rates as an exercise of police power ordinarily moots any need to determine the concurrence of a lawful subject and lawful means to justify the power’s exercise. It also reveals that when the ERC issued the nullified Orders, believing that it had been empowered by the EPIRA, it had performed quasi-judicial functions,” the CA said.

The appellate court explained that the ERC’s rate-fixing authority was limited to specific situations that do not include WESM prices.

The CA said the ERC orders were an “invalid exercise of police power” and also invalid performance of its quasi-judicial functions.

“An administrative agency’s discharge of quasi-judicial functions must be coupled with notice and hearing on the parties affected. This necessarily requires a finding that after such notice and hearing, there is factual basis for the exercise of the power. However, no such basis appears here, as the ERC’s investigations were still ongoing when the ERC issued the challenged Orders. The inevitable conclusion is that the parties were not heard,” it stressed.

With this, the court bought the argument of power producers in their petitions that their right to due process was violated because the investigation was still ongoing when the ERC voided the November-December 2013 market prices.

The CA added that ERC’s “intervention” into the market operations violated he WESM Rules, which require existence of emergency, threat to the system or a force majeure event for the regulator’s intervention on market prices.

Associate Justices Mariflor Punzalan - Castillo and Rafael Antonio Santos concurred in this ruling.

The CA issued the ruling upon petitions by generating companies and power suppliers San Miguel Energy Corporation, South Premiere Power Corporation, Strategic Power Development Corporation, SMC Powergen, Inc., Petron Corporation, SN Aboitiz Power-Magat, Inc. and SN Aboitiz Power-Benguet, Inc., while eight other petitions were separately filed by 1590 Energy Corporation, AP Renewables, Inc., Team (Phils.) Energy Corp., SEM-Calaca Power Corp., Masinloc Power Partners Company, Ltd., Therma Luzon, Inc., Therma Mobile Inc., and Northwind Power Development Corp.

Topics: Energy Regulatory Commission , Court of Appeals , Wholesale Electricity Spot Market , Marlene Gonzales
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