The Supreme Court (SC) on Thursday said electric cooperatives do not have the constitutional right to an exclusive franchise within their coverage areas.
“A franchise, as a privilege granted by the state, is not the exclusive private property of the franchisee. Thus, it must yield to serve the common good, as determined by Congress,” the SC said in a news release.
In a decision dated July 30, 2024, the SC dismissed the petition of Iloilo Electric Cooperative, Inc. I, II, and III (ILECOs) which challenged the validity of Republic Act No. 11918.
In dismissing the petition, the Court cited the prohibition of exclusive franchises provided under Section 11, Article XII of the Constitution.
Meanwhile, the said law expanded the franchise of MORE Electric and Power Corporation, another electric distribution utility in Iloilo City, to areas within ILECOs’ franchise.
ILECOs hold franchise certificates to operate electric light and power services in various municipalities in the province of Iloilo and in Passi City while MORE initially held a franchise to operate the same in Iloilo City until RA 11918 expanded its franchise to include 15 municipalities and one city previously within ILECO’s exclusive franchise area.
As a result, ILECOs filed before the High Tribunal a petition for certiorari and prohibition, with prayer for the issuance of a temporary restraining order and writ of preliminary injunction, to invalidate Section 1 of RA 11918 for violating their rights to exclusive franchises, due process, non-impairment of contracts, and equal protection.
With the aim of making electricity more affordable to Ilonggos, Congress determined that expanding MORE’s franchise would promote healthy competition since MORE was capable of offering lower energy rates.
The SC underscored that “without competition, ILECOs can easily dictate the price of electricity.
Allowing the entry of another player thus benefits consumers, who no longer have to wait until ILECOs’ franchises expire in 2029, 2039, and 2053.”
This is in accordance with the Electric Power Industry Reform Act (EPIRA), which encourages competition in the electricity industry.
SC added that contract rights must give way to the broader authority of the State’s police power when exercised for the general welfare, as in this case, but ILECOs failed to prove that RA 11918 has affected their contracts with their suppliers.
As a new franchise holder, MORE is not similarly situated with other utilities which already have existing and functioning distribution systems. Thus, the added powers granted to MORE are needed to ensure it is able to provide uninterrupted supply of electricity to its covered areas.
