The Supreme Court has sustained the ruling issued by the Court of Appeals which declared valid the memorandum of agreement (MOA) between the Energy Regulatory Commission (ERC) and the Philippine Electricity Market Corporation (PEMC) allowing the latter to investigate energy sector participants for possible breaches of the Wholesale Electricity Spot Market (WESM) rules and manuals.
In a 12-page decision written by Associate Justice Marvic Leonen, the SC’s Second Division denied the petition filed by the Power Sector Assets and Liabilities Management Corporation (PSALM) seeking the nullification of the agreement as well as its accompanying protocol.
The high court’s ruling affirmed the 2009 findings of the appellate court which held that the PEMC has the power to investigate possible breaches of the rules governing WESM.
The CA also ruled that the ERC did not unduly delegate its powers in the assailed memorandum and protocol with PEMC.
The CA noted that under the rules and regulations of the Electric Power Industry Reform Act (EPIRA), the Department of Energy together with the industry players were mandated to formulate rules for WESM.
Citing the rules promulgated for WESM, the CA found out that PEMC’s investigative powers came from its designation under EPIRA as the autonomous group tasked to implement the electricity spot market and formulate rules.
It further noted that this was also made clear in the assailed protocol, which delineates the actions that the ERC and the PEMC may take.
“With the statutory basis for respondent Philippine Electricity Market Corporation’s power to investigate and sanction breaches of the Rules outlined and considering that petitioner failed to show how these acts encroach on the exclusive and original jurisdiction of respondent Energy Regulatory Commission, we deny the Petition,” the SC declared.
In affirming the CA decision, the SC stressed that the power to investigate violations of the Rules is concurrently exercised by the ERC and EPMC.
The Court also explained that EPIRA provides for the establishment of a spot market, whose rules are to be formulated by the DOE jointly with industry participants.
The spot market would also be implemented by a group to be constituted by the DOE with representation from industry players.
“Thus, EPIRA empowered the Department of Energy, together with the industry participants, to develop the governance structure of the Wholesale Electricity Spot Market. This structure, as laid down in the Rules, empowered the Philippine Electricity Market Corporation to investigate breaches of the Rules and act accordingly to ensure the members comply with them,” the SC held.
“The Philippine Electricity Market Corporation is likewise vested with the power to resolve disputes between market participants and the market operator and provide adequate sanctions in case of breaches of the Rules,” it added.
The case stemmed from the request of PEMC to then Energy Secretary Angelo Reyes to approve the conduct of a formal investigation by its Enforcement and Compliance Office (ECO) against the petitioner for a possible breach of WESM rules with respect to six power generating plants whose electricity output is being traded in the WESM.
PSALM argued that the agreement signed on January 31, 2008 and its protocol constituted undue delegation of authority by the ERC of its exclusive powers under EPIRA to enforce the rules and regulations of the electricity spot market, investigate and act against any participant or player in the industry for violation of any law, rule or regulation governing the same, including rules on cross-ownerships, anti-competitive behavior, abuse of market, positions and other similar acts.
It further contended that the procedure adopted for investigation of breaches of the WESM rules under the protocol is violative of due process.
However, the ERC posed no objection to PEMC’s conduct of the investigation. This prompted PSALM to file a suit for prohibition before the CA on May 5, 2008 seeking to enjoin PEMC from performing such function. But the appellate court junked denied PSALM’s urgent motion for the issuance of a temporary restraining order and/or writ of preliminary injunction and subsequently junked the main petition.
