The Supreme Court has ruled that exclusive franchises are not allowed under the Constitution for electric cooperatives within their coverage areas.

This decision, dated July 30, 2024, was penned by Associate Justice Rodil V. Zalameda.

The ruling came as the Supreme Court dismissed the petition of Iloilo Electric Cooperative, Inc. I, II, and III (ILECOs) challenging the validity of Republic Act No. (RA) 11918. This law expanded the franchise of another electricity provider, MORE Electric and Power Corporation (MORE), to areas within ILECOs' franchise.

ILECOs hold franchise certificates to operate electric light and power services in various municipalities in Iloilo province and in Passi City. MORE initially held a franchise to operate in Iloilo City until RA 11918 expanded its franchise to include 15 municipalities and one city previously within ILECOs' exclusive franchise area.

ILECOs filed a petition for certiorari and prohibition, with a prayer for a temporary restraining order and writ of preliminary injunction, to invalidate Section 1 of RA 11918. They argued that the law violated their rights to exclusive franchises, due process, non-impairment of contracts, and equal protection.

In dismissing the petition, the court ruled that Section 11, Article XII of the Constitution prohibits exclusive franchises. The court stated that a franchise, as a privilege granted by the state, is not the exclusive private property of the franchisee and must serve the common good, as determined by Congress.

Congress enacted RA 11918 to make electricity more affordable for the people of Iloilo province. It determined that expanding MORE’s franchise would promote healthy competition since MORE was capable of offering lower energy rates.

Allowing another player would benefit consumers, who no longer have to wait until ILECOs’ franchises expire in 2029, 2039, and 2053. This aligns with the Electric Power Industry Reform Act (EPIRA), which encourages competition in the electricity industry.

The Court 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. Moreover, ILECOs failed to show how RA 11918 affected their contracts with their suppliers.