The petition of three Iloilo electric cooperatives seeking to nullify the expansion of More Electric Power Corp.’s (More Power) franchise area was dismissed by the Supreme Court.
Promulgated on 30 July but released only recently, it effectively allowed More Power to compete in areas previously served exclusively by the cooperatives.
The dispute stemmed from the passage of Republic Act 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).
Arguing that the law infringed on their vested rights and violated the Constitution, the cooperatives filed a petition for certiorari and prohibition and raised several key arguments.
They cited a violation of Section 11, Article XII of the Constitution (Non-Impairment of Contracts): the ILECOs argued that the expansion law impaired their existing contracts with generation companies and consumers within their previously exclusive franchise areas.
Also cited was a violation of Section 1, Article III of the Constitution regarding due process. The 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 on equal protection was also alleged as the petitioners contended that the law unfairly favored More Power by granting them access to areas already served by the cooperatives.
The petition also alleged an infringement on rights under the National Electrification Administration (NEA) decree and the Electric Power Industry Reform Act of 2001 (EPIRA). The petitioners argued that the expansion violated provisions within the laws that protected their exclusive franchise rights.
Under the ponencia of Associate Justice Rodil Zalameda, the SC rejected the said arguments.
The Court based its decision on the principle that exclusive franchises are not constitutionally protected.
It 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 SC highlighted the deliberations of Congress during the passage of Republic Act 11918, noting that lawmakers recognized the potential benefits of competition in the electric power sector.
Solution to power woes
On the other hand, 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.
The SC in addressing the cooperatives’ concerns about the non-impairment clause, asserted the supremacy of police power over contractual obligations when the public good is at stake.
It mentioned that police power is “superior to property rights, including non-impairment of contracts” which 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.
The court to support this principle, 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.
