By Francis Allan L. Angelo
The Supreme Court of the Philippines has dismissed a petition filed by three Iloilo electric cooperatives seeking to nullify the expansion of MORE Electric Power Corporation’s (MOREPower) franchise area.
The decision, promulgated on July 30, 2024, effectively allows MORE Power to compete in areas previously served exclusively by the cooperatives.
The dispute stemmed from the passage of Republic Act No. 11212 in 2019, which amended MORE Power’s franchise area to include 15 municipalities and one city in Iloilo province. This expansion overlapped with the existing franchise areas of Iloilo I Electric Cooperative, Inc. (ILECO I), Iloilo II Electric Cooperative, Inc. (ILECO II), and Iloilo III Electric Cooperative, Inc. (ILECO III).
The cooperatives, arguing that the law infringed on their vested rights and violated the Constitution, filed a petition for certiorari and prohibition. They raised several key arguments:
- Violation of Section 11, Article XII of the Constitution (Non-Impairment of Contracts): ILECOs argued that the expansion law impaired their existing contracts with generation companies and consumers within their previously exclusive franchise areas.
- Violation of Section 1, Article III of the Constitution (Due Process): ILECOs claimed that the law was enacted without affording them due process, impacting their vested rights to operate within their designated areas.
- Violation of Section 1, Article III of the Constitution (Equal Protection): The petitioners contended that the law unfairly favored MORE Power by granting them access to areas already served by the cooperatives.
- Infringement on Rights under the National Electrification Administration (NEA) Decree and the Electric Power Industry Reform Act of 2001 (EPIRA): ILECOs argued that the expansion violated provisions within these laws that protected their exclusive franchise rights.
However, the Supreme Court, under the ponencia of Associate Justice Rodil V. Zalameda, rejected these arguments. The Court’s decision leaned heavily on the principle that exclusive franchises are not constitutionally protected.
The Court cited several instances from the 1935, 1973, and 1987 Philippine Constitutions where the framers explicitly rejected the concept of exclusive franchises, particularly in the context of public utilities.
The Court highlighted the deliberations of Congress during the passage of Republic Act No. 11918, noting that lawmakers recognized the potential benefits of competition in the electric power sector.
Senators expressed concerns about the high electricity rates in Iloilo and saw MORE Power’s entry as a potential solution.
Then-Senator, now Finance Secretary Ralph Recto, in particular, emphasized the need for competition to potentially lower electricity costs for consumers.
In addressing the cooperatives’ concerns about the non-impairment clause, the Supreme Court asserted the supremacy of police power over contractual obligations when the public good is at stake.
The Court stated that police power is “superior to property rights, including non-impairment of contracts.” This means that while contracts are generally protected, the government can enact laws that modify or even nullify those contracts if it is necessary to promote public welfare.
To support this principle, the Court cited its decision in Carlos Superdrug Corp. v. Department of Social Welfare and Development, where it ruled that even constitutionally protected rights can be regulated when necessary to serve the common good.
In essence, the Court highlighted that the government’s duty to protect the general welfare outweighs the strict adherence to contractual obligations when those obligations clash with the broader public interest.
The decision also pointed out that ILECOs remain obligated to supply electricity to their existing consumers under Republic Act No. 9136 (the EPIRA) and must prioritize serving captive markets within their franchise areas.
Adding another layer to the case, the Philippine Rural Electric Cooperatives Association (PHILRECA) attempted to intervene, arguing that the expansion law would harm the exclusive rights of all electric cooperatives and undermine the mandate of the National Electrification Administration (NEA).
However, the Court denied PHILRECA’s motion, stating that their interest in the case was not sufficiently direct and immediate.
The Supreme Court’s decision serves as a significant legal precedent as it clarifies the limitations on exclusive franchises and emphasizes the government’s authority to foster competition in public utilities for the benefit of consumers.
While the cooperatives expressed concerns about the potential negative impacts of MORE Power’s expansion, the Court ultimately prioritized the potential for improved services and lower electricity rates that competition could bring to the province of #Iloilo.
The impact of this decision on the electricity landscape in Iloilo remains to be seen, but it marks a clear shift towards a more competitive environment in the province’s power sector.
