NATIONAL ASSOCIATION OF ELECTRICITY CONSUMERS FOR REFORMS (NASECORE), REPRESENTED BY PETRONILO ILAGAN, FEDERATION OF VILLAGE ASSOCIATIONS (FOVA), REPRESENTED BY SIEGFRIEDO VELOS…

National Association of Electricity Consumers for Reforms versus Meralco

The Case

This is a petition for review on certiorari brought by the National Association of Electricity Consumers for Reforms, the Federation of Village Associations, and other consumer groups against the Energy Regulatory Commission and the Manila Electric Company. The consumers challenge the order of the Energy Regulatory Commission approving an increase in Meralco's generation charge, and they ask the Supreme Court to declare that order void for having been issued without the publication and notice that the law requires. The case matters because it fixes the rule that no rate adjustment, even one made under an automatic adjustment clause, may take effect unless the application is published and the consumers are given their day before the Commission.

Procedural History

The consumers filed the petition directly with the Supreme Court, impleading the Energy Regulatory Commission and Meralco as respondents. On February 2, 2006, the Court rendered its Decision declaring void the Commission's Order dated June 2, 2004, which had approved the increase of Meralco's generation charge from 3.1886 pesos per kilowatt hour to 3.3213 pesos per kilowatt hour. The Court held that the Commission had committed grave abuse of discretion. The Commission and Meralco each filed a motion for reconsideration of that Decision. The Private Electric Power Operators Association filed a motion for leave to intervene, and the Philippine Independent Power Producers Association filed an intervention without leave. The Court resolved the motions for reconsideration in the present resolution.

Facts

Meralco filed with the Energy Regulatory Commission an amended application seeking to increase its generation charge. The Commission approved the increase in its Order dated June 2, 2004. The consumers then came to the Supreme Court, contending that the amended application had never been published in a newspaper of general circulation, as required by the implementing rules of the Electric Power Industry Reform Act of 2001.

The Commission and Meralco defended the order by pointing to the Generation Rate Adjustment Mechanism, whose implementing rules the Commission had promulgated on February 24, 2003. Those rules do not require publication of an application filed under them. The consumers answered that those very rules had never been published in the Official Gazette or in a newspaper of general circulation, and had never been filed with the Office of the National Administrative Register.

In its February 2, 2006 Decision, the Court agreed with the consumers on both points. It held that the amended application fell within the coverage of the implementing rules of the reform law, which speak of any application or petition for rate adjustment or for any relief affecting the consumers, without distinction. It further held that the Generation Rate Adjustment Mechanism rules, being unpublished, had no force and effect. The Commission and Meralco moved for reconsideration, insisting that the adjustment mechanism was a summary, mechanical proceeding outside the publication requirement, and that in any event the nullification should apply only prospectively so as not to prejudice the utilities.

Issues

• Whether or not the amended application of Meralco for an increase in its generation charge is covered by the publication requirement of Section 4, paragraph e, Rule 3 of the Implementing Rules and Regulations of the Electric Power Industry Reform Act of 2001.
• Whether or not the Generation Rate Adjustment Mechanism Implementing Rules, having been unpublished and unfiled with the Office of the National Administrative Register, may serve as a valid basis for the approval of the rate increase.
• Whether or not the nullification of the Commission's order and of the adjustment mechanism rules should be applied prospectively so as to spare the utilities from prejudice.

Applicable Provisions

Section 4, paragraph e, Rule 3 of the Implementing Rules and Regulations of the Electric Power Industry Reform Act of 2001 provides:

(e) Any application or petition for rate adjustment or for any relief affecting the consumers must be verified, and accompanied with an acknowledgement receipt of a copy thereof by the LGU Legislative Body of the locality where the applicant or petitioner principally operates together with the certification of the notice of publication thereof in a newspaper of general circulation in the same locality.

This is the provision whose scope the Court construes, and its lack of distinction is the textual anchor of the ruling that every rate adjustment application, whatever its kind, must be published.

The same Section 4, paragraph e, Rule 3 continues:

The ERC may grant provisionally or deny the relief prayed for not later than seventy-five (75) calendar days from the filing of the application or petition, based on the same and the supporting documents attached thereto and such comments or pleadings the consumers or the LGU concerned may have filed within thirty (30) calendar days from receipt of a copy of the application or petition or from the publication thereof as the case may be.

This fixes the period within which consumers may comment, and it presupposes that publication has already been made so that the period may begin to run.

The same Section 4, paragraph e, Rule 3 further provides:

Thereafter, the ERC shall conduct a formal hearing on the application or petition, giving proper notices to all parties concerned, with at least one public hearing in the affected locality, and shall decide the matter on the merits not later than twelve (12) months from the issuance of the aforementioned provisional order.

This guarantees the formal hearing and the public hearing in the affected locality that the adjustment mechanism sought to dispense with.

Ruling

On the first issue, the Court denied reconsideration and held that the amended application is covered by Section 4, paragraph e, Rule 3. The provision speaks of any application or petition for rate adjustment or for any relief affecting the consumers, and it makes no distinction. Any application that would result in an adjustment of the retail rate or total price paid by end users, whether occasioned by a change in generation, transmission, distribution, or supply charges, falls within its contemplation. The lack of publication of Meralco's amended application was therefore fatal.

On the second issue, the Court held that the reliance on the Generation Rate Adjustment Mechanism rules is unavailing. Those rules were never published in the Official Gazette or in a newspaper of general circulation, and were never filed with the Office of the National Administrative Register. Publication is a condition sine qua non, that is, an indispensable condition, before statutes, rules, or regulations can take effect. The unpublished rules therefore have no force and effect, and they cannot supply the authority that the published rules withhold.

On the third issue, the Court rejected the plea for prospective application. The order of the Commission was void from the start, and a void order confers no rights and affords no protection to those who rely upon it. Good faith in relying on the rules of the Commission cannot validate what the law itself never brought into effect.

Doctrine

First, the publication requirement in Section 4, paragraph e, Rule 3 of the Implementing Rules and Regulations of the Electric Power Industry Reform Act of 2001 applies to every application or petition for rate adjustment or for any relief affecting consumers, without distinction. It covers applications made under automatic adjustment or escalator clauses, and not only general rate proceedings.

Second, administrative rules and regulations take effect only after publication in the Official Gazette or in a newspaper of general circulation and filing with the Office of the National Administrative Register. Publication is a condition sine qua non, an indispensable condition, and an unpublished rule has no force and effect.

Third, an order issued in violation of these requirements is void and confers no rights, so the plea for prospective application must fail.

Disposition

The Court denied the motions for reconsideration of the Energy Regulatory Commission and Meralco, and affirmed its Decision declaring void the Commission's Order dated June 2, 2004 approving the increase in Meralco's generation charge.

Remember This

Memorize this line: any application for rate adjustment or for any relief affecting consumers must be published, and an unpublished administrative rule has no force and effect. Examiners use this case to test the publication requirement for administrative rules under the Tañada doctrine and the scope of the rate adjustment provision in the implementing rules of the Electric Power Industry Reform Act.