G.R. No. 190795 - National Association of Electricity Consumers for Reforms, Inc. vs. Energy Regulatory Commission

Case Summary (G.R. No. 190795)

Procedural Antecedents and ERC Proceedings in ERC Case No. 2009-057 RC

MERALCO filed its application for increased distribution rates under the PBR scheme on 7 August 2009. Petitioners filed separate Petitions for Intervention to oppose the application. At the initial hearing scheduled on 6 October 2009, appearances were entered by MERALCO, Mallillin, and FOVA. NASECORE and FOLVA failed to appear despite due notice. MERALCO presented its first witness on 13 November 2009.

When the proceedings continued on 19 November 2009, petitioners NASECORE, FOVA, and FOLVA failed to appear despite due notice. NASECORE had previously sent a letter requesting that it be excused from the hearing but reserved the right to cross-examine MERALCO’s witness. The ERC rejected the request based on its procedural rules, and ruled that the absence of NASECORE and FOLVA was deemed a waiver of their right to cross-examine MERALCO’s first witness.

On the hearings scheduled on 26 November 2009, NASECORE and FOLVA again failed to attend despite due notice. On MERALCO’s motion, the ERC ruled that NASECORE waived its right to cross-examine MERALCO’s second witness for failure to attend. The ERC then required MERALCO to file a Formal Offer of Evidence within five (5) days, and directed FOVA and all other intervenors to file comments and memoranda within specified periods.

The December 2009 Formal Offer of Evidence and Petitioners’ Claimed Lack of Time

On 1 December 2009, MERALCO filed its Formal Offer of Evidence. On 7 December 2009, the ERC directed MERALCO to submit additional documents to facilitate evaluation of the application. NASECORE claimed that it received MERALCO’s Formal Offer of Evidence and the ERC’s 7 December 2009 order only on 8 December 2009, and therefore believed it had until 18 December 2009 to file its comment.

On 10 December 2009, NASECORE filed with the ERC a Manifestation with Motion dated 9 December 2009. It requested that the ERC direct MERALCO to furnish NASECORE with all items required by the 7 December order; to furnish NASECORE with copies of the records of the proceedings of the hearings held on 19 and 26 November 2009; and to grant NASECORE fifteen (15) days from compliance within which to file its comment to the Formal Offer of Evidence.

On 14 December 2009, while NASECORE protested that it still had four days before the expiration of the period it believed it retained, the ERC approved MERALCO’s application in the MAP 2010 case. NASECORE alleged that it received the additional documents submitted by MERALCO in compliance with the ERC’s 7 December order only on 15 December 2009, a day after the decision was rendered.

Post-Decision Remedies and the Filing of the Supreme Court Petition

After the ERC approval, Mallillin filed a Motion for Reconsideration (MR) before the ERC. Instead of filing their own motions for reconsideration, petitioners went directly to the Supreme Court via a Petition for Certiorari under Rule 65, with an urgent prayer for the issuance of a TRO or Status Quo Order. They alleged that the ERC decision was void for violation of their right to due process of law, and they sought to stay the execution of the ERC decision on the theory that a void decision could not be the basis for MERALCO to collect additional charges from customers.

MERALCO countered that the petition should be denied due course or dismissed for, among others, improper remedy and failure to observe the hierarchy of courts, contending that petitioners were afforded sufficient opportunity to participate and that it had voluntarily suspended implementation of the MAP 2010 rates. MERalco also opposed the prayer for a TRO or status quo order, arguing that petitioners failed to show the required urgent and paramount necessity, particularly because MERALCO had suspended implementation pending Mallillin’s MR.

The ERC, in its comment, maintained that Rule 65 certiorari was not a proper remedy, denied denial of procedural due process, and asserted that its subsequent actions rendered the petition moot. Specifically, on 10 March 2010, the ERC granted Mallillin’s MR and directed the implementation of revised distribution rates, while also lifting the 1 February 2010 deferment of the December 14, 2009 decision.

ERC’s Resolution of the MR and the Effect on Petitioners’ Participation

On 25 January 2010, the ERC directed petitioners (NASECORE, FOLVA, and FOVA) to file their respective comments to Mallillin’s MR and gave them ten days from receipt of the order to do so. The ERC also scheduled a hearing on Mallillin’s MR on 5 February 2010. On 26 January 2010, MERALCO filed a manifestation and motion expressing its voluntary suspension of implementation of the December 14, 2009 decision pending resolution of Mallillin’s MR.

Despite this, petitioners sought to excuse themselves from participating in the MR proceedings through separate letters dated 28 January 2010 (for NASECORE) and 31 January 2010 (for FOVA), based on the pendency of their petition before the Supreme Court. On 1 February 2010, the ERC issued an order suspending implementation of the questioned decision pending Mallillin’s MR. At the 5 February 2010 hearing, only MERALCO appeared; petitioners and Mallillin did not participate. On 10 March 2010, the ERC granted Mallillin’s MR with modification and ordered MERALCO to implement revised distribution rates, excluding rate distortions, as shown in the table referenced in its dispositive portion.

Petitioners’ Reply: New Arguments on Unreasonableness and Methodology

On 8 April 2010, petitioners filed their reply. For the first time, they advanced arguments challenging (i) whether MERALCO’s rates from 2003 to 2008 had exceeded what they asserted to be a lawful twelve percent rate of return, including reliance on a Commission on Audit (COA) audit report; and (ii) the validity of the PBR methodology, asserting that the ERC should adopt an “end result” approach rather than rigidly apply PBR if it led to unreasonable rates. Petitioners requested that the Court effectively treat reasonableness of outcomes as controlling regardless of methodology, invoking U.S. jurisprudence and a discussion appearing in a concurring opinion in Republic v. Medina.

The Court treated these newly raised matters as procedurally improper because they were not squarely raised in the original petition, and it held that issues not previously ventilated could not be raised for the first time in the reply.

The Sole Issue Framed by the Court

The Supreme Court ruled that the sole issue for its resolution was whether petitioners’ right to due process was violated when the ERC issued its order before the expiration of the period they believed was still available for them to file their comment on MERalco’s Formal Offer of Evidence. The Court declined to rule on the merits of their newly introduced issues regarding reasonableness of rates or the validity of the PBR method because those issues were raised for the first time only in the reply, thereby implicating MERALCO’s due process rights.

No Denial of Due Process; At Most an Irregularity Cured by Subsequent ERC Action

The Court acknowledged the procedural grievance. It noted petitioners’ claim that they were deprived of a reasonable opportunity to oppose MERALCO’s application because the ERC decided the case before the period to comment had allegedly lapsed. While it observed that the ERC prematurely issued its decision, the Court found that petitioners were not deprived of their right to be heard under the circumstances.

The Court emphasized that petitioners had been given notice of ERC hearings but had repeatedly failed to appear. It further noted that, after the December 14, 2009 decision, Mallillin filed his MR. The ERC issued an order requiring petitioners to file comments on the MR and granted them a hearing date, but petitioners again chose not to participate. The Court found that petitioners could not invoke due process to excuse their non-participation.

The Court applied the principle that when a defect in the observance of due process occurs, it may be cured by later proceedings, including the filing and resolution of an MR. It cited the doctrine that any due process defect is cured by the opportunity afforded through the MR process and that denial of due process cannot be invoked by a party who had an opportunity to be heard on the MR. Even though petitioners never filed a MR, the Court found them to have been notified of the MR and given the chance to file comments thereto in the ERC proceedings.

Accordingly, the Court held that although the ERC erred in issuing its decision prematurely, the procedural irregularity was remedied by the ERC when it proceeded on Mallillin’s MR and gave petitioners the opportunity to participate therein. The Court also held that petitioners’ allegations, if meritorious, could have been raised effectively in the comment they could have filed in the MR proceedings.

Petitioners’ Resort to Rule 65 Was Improper; Motion for Reconsideration Was a Condition Sine Qua Non

The Court further ruled that petitioners had chosen the wrong remedy and wrong forum. Under Section 1, Rule 23 of the ERC’s Rules of Procedure, an adversely affected party from a final order, resolution, or decision rendered in an adjudicative proceeding may file a motion for reconsideration within fifteen days, with a possible request to reopen the proceeding for additional evidence. The Court linked this to Rule 65 of the Rules of Civil Procedure, which allows certiorari only when there is no appeal and no plain, speedy, and adequate remedy in the ordinary course of law. The Court reiterated the doctrinal rule that the “plain and adequate remedy” contemplated in Rule 65 is the MR; thus, filing a motion for reconsideration is a condition sine qua non before filing certiorari.

While the Court recognized that the MR requirement may be dispensed with in exceptional cases—such as when public welfare demands it, when orders a

Case Syllabus (G.R. No. 190795)

Petitioners National Association of Electricity Consumers for Reforms, Inc. (NASECORE), the Federation of Village Associations (FOVA), and the Federation of Las Pinas Village (FOLVA) questioned the Energy Regulatory Commission (ERC) approval of MERALCO’s MAP 2010 distribution rates under the Performance-Based Regulation (PBR) method.
Petitioners invoked Rule 65 of the Rules of Court and sought a Temporary Restraining Order (TRO) or Status Quo Order.
Respondents were the ERC and Manila Electric Company, Inc. (MERALCO).
The Court dismissed the petition.

Parties and Procedural Posture

Petitioners included NASECORE, FOVA, and FOLVA, each represented as stated in the record, and they sought to intervene in the ERC proceeding opposing MERALCO’s rate increase.
Petitioners also included Engineer Robert F. Mallillin, who filed a Motion for Reconsideration (MR) before the ERC.
Petitioners did not file their own MR and instead filed a Petition for Certiorari under Rule 65 with an urgent prayer for a TRO or Status Quo Order.
The petition assailed the ERC’s approval of MERALCO’s MAP 2010 distribution rates as a violation of procedural due process.
The Court treated the case as a direct challenge to an ERC order that had been subject to subsequent ERC action on Mallillin’s MR.

Regulatory Context and Rate Method

The Court described the Electric Power Industry Reform Act of 2001 (EPIRA) as creating the ERC and as empowering it to shift from the Return on Rate Base (RORB) method to alternative internationally accepted rate-setting methodology.
The Court cited Section 43(f) of the EPIRA as authorizing ERC to adopt alternative forms of rate-setting methodology, subject to conditions that the rates allow recovery of just and reasonable costs and a reasonable return on rate base and ensure a reasonable price of electricity.
The Court explained that the ERC adopted the Performance-Based Regulation (PBR) method through a series of resolutions.
The Court noted that, under the ERC’s practice, petitions for rate changes by distribution utilities were docketed within specific case numbers, including ERC Case No. 2009-057 RC referred to as the “MAP 2010 case.”

Key Factual Allegations

MERALCO, as a distribution utility, applied for an increase of its distribution rate under the PBR scheme, docketed as ERC Case No. 2009-057 RC (MAP 2010 case).
MERALCO filed the application on 7 August 2009.
Petitioners NASECORE, FOLVA, and FOVA and Engineer Robert F. Mallillin filed their own Petitions for Intervention to oppose the application.
At the initial hearing on 6 October 2009, the appearances showed MERALCO, Mallillin, and FOVA, while NASECORE and FOLVA failed to appear despite due notice.
MERALCO presented its first witness on 13 November 2009, and FOLVA failed to appear despite due notice.
On 19 November 2009, during continuation of MERALCO’s presentation, NASECORE, FOVA, and FOLVA failed to appear despite due notice.
NASECORE sent a letter requesting to be excused from a hearing while reserving the right to cross-examine MERALCO’s witness, and ERC ruled that absence was deemed waiver of the right to cross-examine the first witness.
At the 26 November 2009 hearing, petitioners again failed to attend despite due notice, and upon MERALCO’s motion, ERC declared NASECORE to have waived its right to cross-examine MERALCO’s second witness.
After that declaration, ERC gave MERALCO five (5) days to file a Formal Offer of Evidence and gave the other intervenors ten (10) days from receipt to comment and fifteen (15) days from the hearing date to file position papers or memoranda.
On 1 December 2009, MERALCO filed its Formal Offer of Evidence, and on 7 December 2009 ERC directed MERALCO to submit additional documents for evaluation of the application.
Petitioners claimed that they received the 7 December 2009 ERC order and the Formal Offer of Evidence only on 8 December 2009 and believed they had until 18 December 2009 to comment.
Petitioners filed a Manifestation with Motion dated 9 December 2009 on 10 December 2009 seeking (a) compliance by MERALCO with items in the 7 December 2009 directive, (b) copies of records of the hearings, and (c) additional time measured from receipt of compliance.
ERC approved MERALCO’s MAP 2010 application on 14 December 2009, which petitioners protested as premature because they asserted there were still four days before expiration of the period to oppose the formal offer of evidence and before their receipt of the additional submitted documents.
Petitioners alleged that they received the additional documents on 15 December 2009, after ERC’s approval.
After the assailed approval, Mallillin filed an MR before the ERC, and petitioners did not file their own MR.
Petitioners resorted to a Rule 65 petition instead of pursuing ERC MR.

Issues Presented by the Parties

Petitioners’ core contention was that the ERC decision approving MAP 2010 rates was void for having been issued in violation of their right to due process of law.
Petitioners also sought to stay the execution of the assailed decision by asserting that a void decision could not be the source of rights for MERALCO to collect additional charges from customers.
Petitioners invoked urgency and claimed grave consequences on the four point three million (4.3 million) MERALCO customers.
In reply, petitioners attempted to expand the theory to include arguments on the reasonableness of rates and ERC’s rate-setting choice, including references to the twelve percent (12%) reasonable rate of return and alleged COA validation issues.
The Court ruled that these newly introduced matters were not squarely raised for resolution in the petition and that the sole issue was whether petitioners’ procedural due process was violated when ERC issued its order before the lapse of their asserted period to file their comment.

Petitioners’ Arguments on Due Process

Petitioners argued that ERC committed grave abuse of discretion by prematurely issuing the approval order before they were afforded a reasonable opportunity to comment or oppose.
Petitioners asserted that ERC deprived them of the chance to submit evidence or a memorandum regarding their claim that MERAL