CA affirms 2017 ruling vs ERC on power prices

Published April 3, 2019, 8:45 PM

by Ellalyn De Vera & Richa Noriega

By Rey Panaligan

The Court of Appeals (CA) has affirmed its 2017 decision that voided the 2014 rulings of the Energy Regulatory Commission (ERC) which nullified the increase in the prices at the Wholesale Electricity Spot Market (WESM) imposed by several power producers during the shutdown of the Malampaya gas facility in 2013.

Court of Appeals (Manila Bulletin)
Court of Appeals (Manila Bulletin)

In a resolution written by Associate Justice Marlene Gonzales Sison, the CA denied the motions for reconsideration filed by ERC and the Manila Electric Company (Meralco).

Also denied were the motions for reconsideration and to intervene filed by PRHC Property Managers, Inc. and Philippine Stock Exchange Centre Condominium Corporation, and Glasstemp Industries Corporation, Steel Angles Shapes and Section, Riverbanks Development Corporation, Federation of Philippine Industries, Ateneo de Manila University, AGHAM, CALCO, Paperland, Philippine Steelmakers Association, and Citizenwatch.

ERC had earlier declared uncompetitive and unreasonable the WESM imposed prices during the shutdown of Malampaya in 2013.

It suspected that several power producers — 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., 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. – may have colluded to manipulate prices of electricity in the spot market during the Malampaya’s scheduled maintenance.

In nullifying the ERC orders, the CA said that the agency has no police power under the Electric Power Industry Reform Act (EPIRA) or even under the Constitution to intervene in the WESM and impose its own prices.

“It bears stressing that had the legislature intended the ERC to have such power, Congress would have expressly included the same in the plethora of prerogatives the EPIRA granted the ERC. However, the EPIRA is plainly silent on the matter,” the CA stressed in its decision.

In the case of Meralco’s motion that “millions of consumers would suffer” as a result of the “exorbitant” rates imposed by WESM, the CA said:

“The intervenor (Meralco) would have us substantially infuse our decision with strands of concern for the populace. But these are simply matter invisible to the judicial eye. Contemplating further, we find that the urged consumers’ welfare, along the spectrum of State prerogatives, instead belongs to the range exclusively recognizable by the legislature. This reveals the argument to be one advocating the validity of the power by urging its practical wisdom, rather than its legal existence.”
In 2013, the Supreme Court (SC) issued a temporary restraining order (TRO) that stopped Meralco from imposing a P4.15 per kilowatt-hour electricity rate increase based on WESM prices.

Meralco attributed the increase in its generation cost to the shutdown of Malampaya gas facility that supplies natural gas to three power plants – Ilijan, San Lorenzo and Sta. Rita.

It also said the Malampaya shutdown coincided with the maintenance services of its Pagbilao 2 and Sual 1 power plants that forced it to buy expensive power from WESM.

In 2016, the CA affirmed a trial court ruling that stopped the Philippine Electricity Market Corporation (PEMC), operator of WESM, from collecting P234.9 million from a power generation company for alleged involvement to manipulate the price of electricity during the Malampaya shutdown in 2013.

In a decision written by Associate Justice Stephen Cruz, the CA affirmed the April 1, 2015 injunction issued by the Pasig City regional trial court (RTC) in favor of Thermal Mobile, Inc. against the demand of PEMC to pay P234.9 million in penalties for violation of the Must Offer Rule (MOR).

Under the MOR, generation companies are required to offer all their registered capacity to WESM in a move to avoid market manipulation through the artificial withholding of capacity or offering at a very high price to prevent the dispatch of the withheld electricity.

PEMC claimed that Thermal Mobile was one of the biggest violators of MOR with alleged 3,578 counts of breach and was fined P243.9 million.

When PEMC demanded the payment of the fine, Thermal Mobile filed a case with the Pasig City RTC and was able to secure an injunction.

In affirming the trial court’s injunction, the CA gave weight to Thermal Mobile’s claim that the huge amount of fine would jeopardize its operations and its financial capability.

“In the instant case, Thermal Mobile sufficiently established the importance of the issuance of the writ of preliminary injunction. Thermal Mobile, in its comment to PEMC’s petition for review, mentioned that it is not financially capable to settle the financial penalty. As such payment of the enormous penalty amounting to P234,900,000 would be a threat to its very existence,” it ruled.

“Simply stated, what is involved herein is not just money but Thermal Mobile’s very own existence, which obviously is not susceptible of any mathematical computation and cannot be adequately compensated in damages,” the CA said.