Meralco Comment

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REPUBLIC OF THE JAN -9 AM 8:
4
I
SUPREME COURT
Manila
EN BANC
Bayan Muna Representatives NERI
JAVIER COLMENARES and
CARLOS ISAGANI ZARATE,
Gabriela Women's Party
Representatives LUZ ILAGAN and
EMMI DE JESUS, Act Teachers
Party-List Representative ANTONIO
TINIO, and Kabataan Party-List
Representative TERRY RIDON,
Petitioners,
--- versus ---
ENERGY
COMMISSION
ELECTRIC
(MERALCO),
REGULATORY
and MANILA
COMPANY
Respondents,
x-----------------------------------------------x
NATIONAL ASSOCIATION OF
ELECTRICITY CONSUMERS FOR
REFORMS, represented by Petronila
L. Ilagan, FEDERATION OF
VILLAGE ASSOCIATIONS,
represented by Siegfriedo A. Veloso,
FEDERATION OF LAS PINAS
HOMEOWNERS ASSOCIATIONS
represented by Bonifacio Daza, and
RODRIGO C. DOMINGO, JR.,
Petitioners,
--- versus ---
MANILA ELECTRIC COMPANY
ENERGY REGULATORY
COMMISSION, and
DEPARTMENT OF ENERGY,
Respondents.
x------------------------------------------------x
G.R. No. 210245
G.R. No. 210255
MANIFESTATION
Respondent MANILA ELECTRIC COMP ANY ("MERALCO"),
by counsel, respectfully states:
1. On 8 January 2014, due to the substantial number of
parties to serve, time constraints, the volume of the pleading to be
filed, and compliance with this Honorable Court's E-Filing Rule,
MERALCO was constrained to file its Consolidated
Comment/Opposition with Counter-Petition dated 8 January 2014
("Consolidated Comment") by registered mail. For the information
of this Honorable Court, MERALCO attempted to personally file the
Consolidated Comment. Unfortunately, undersigned counsel's
messenger arrived at this Honorable Court's receiving section around
5:05p.m.
2. To ensure that this Honorable Court receives the
Consolidated Comment promptly, attached hereto as Annex "1" is a
copy of the said Consolidated Comment with proof of filing by
registered mail.
RESPECTFULLY SUBMITTED.
City of Taguig for Manila, 8 January 2014.
ANGARA ABELLO CONCEPCION REGALA & CRUZ
Counsel for Respondent Manila Electric Company, Inc.
22nd Floor, ACCRALAW Tower
2nd A venue comer 30th Street
Crescent Park West
Bonifacio Global City
0399 Taguig, Metro Manila
Telephone No. (632) 830-8000
Facsimile Nos. (632) 403-7007 and (632) 403-7009
By:
2
ARNOLD M. CORPORAL
PTR No. A -1676779; 01/09 /13; Taguig City
IBP No. 920830; 01/03/13; Makati City
Roll No. 43033
MCLE Compliance No. IV-0012402; 02/12/13
s. 'NAcHuRA, JR.
PTR No. A-1676796; 01/09/13; Taguig City
IBP No.920848; 01/03/13; Quezon City
Roll No. 52683
FILEMONR YL.JAVIER
PTR. No. A - 171603 1/09 /13; Taguig City
IBP Lifetime No. 010 8; 01/10/12; Pasig City
Roll o. 59170
MCLE Compliance o. IV-017983; 04/22/13
MONICA JOY ARCELO
PTR No. A-1827720; 4/30 /13; Taguig City
IBP No. 935366; 4/5/13; Quezon City
Roll No. 62440
MCLE Compliance No. NI A
COPY FURNISHED
By registered mail (sans attachment):
RENE A.V. SAGUISAG
Counsel for Petitioners NASECORE, et al.
4045 Bigasan Street
Brgy. Palanan, Makati City
MARIA CRISTINA P. YAMBOT
Counsel for Petitioners Bayan Muna, et al.
No. 45 K-7th Street,
Brgy. West Kamias, Quezon City
3
ENERGY REGULATORY COMMISSION
Pacific Centre Building
San Miguel A venue, Pasig City
DEPARTMENT OF ENERGY
Energy Center, Rizal Drive,
Bonifacio Global City,
Taguig 1632
PHILIPPINE ELECTRICITY MARKET CORPORATION
9th and 18th Floor, Robinsons Equitable Tower,
ADB Avenue, Ortigas Center,
Pasig City 1600
FIRST GAS POWER CORPORATION
3 /F Benpres Building,
Exchange Road cor. Meralco A venue,
Ortigas Center, Pasig City
SOUTH PREMIERE POWER CORPORATION
808 Building, Meralco A venue cor. Gen. Lim Street,
San Antonio Village, Pasig City
SAN MIGUEL ENERGY CORPORATION
808 Building, Meralco A venue cor. Gen. Lim Street,
MASINLOC POWER PARTNERS CO. LTD.
Masinloc Coal-Fired Thermal Power Plant,
Barangay Bani, Masinloc, Zambales
QUEZON POWER (PHILS.) LTD. CO.
62 H. dela Costa, Mauban,
Quezon Province
THERMA LUZON, INC.
NAC Tower, 32nd Street,
Bonifacio Global City, Taguig
SEM-CALACA POWER CORPORATION
Barangay San Rafael,
Calaca, Batangas
4
FGPCORP.
Exchange Road cor. Meralco Avenue,
NATIONAL GRID CORPORATION OF THE PHILIPPINES
Quezon Avenue comer BIR Road,
Diliman, Quezon City 1100
1590 ENERGY CORPORATION
Unit 107 First Midland Office Condominium Building,
Gamboa Street, Legaspi Village, Makati
AP RENEWABLES, INC.
15/F NAC Tower, 32nd Street,
Bonifacio Global City, Taguig City
BAC-MAN ENERGY DEVELOPMENT CORPORATION/
BAC-MAN GEOTHERMAL, INC.
38/F One Corporate Centre,
Julia Vargas comer Meralco Avenue,
Ortigas Center, Pasig City 1605
FIRST GEN HYRDO POWER CORPORATION
GNPOWER MARIVELES COAL PLANT LTD. CO.
1905 Orient Square Building,
Don Francisco Ortigas Jr. Road,
PANASIA ENERGY HOLDINGS, INC.
2nd floor, 808 Building,
Meralco Avenue, Pasig City 1600
POWER SECTOR ASSETS & LIABILITIES MANAGEMENT
CORPORATION
7th Floor Bankmer Building,
6756 Ayala Avenue, Makati City
SN ABOITIZ POWER - BENGUET, INC.
SN ABOITIZ POWER - MAGAT, INC.
5
STRATEGIC POWER DEVELOPMENT CORPORATION
2nd Floor, 808 Building,
Meralco A venue cor. General Lim,
San Antonio Village, Pasig City 1600
TRANS-ASIA POWER GENERATION CORPORATION
11th Floor PHINMA Plaza
39 Plaza Drive, Rockwell Center,
Makati City 1200
VIV ANT STA. CLARA NORTHERN RENEW ABLES
GENERATION CORPORATION
Unit 107, 1st Midland Office Condominium Bldg.,
Gamboa Street, Legaspi Village,
Makati City
COURTESY COPIES
By registered mail (sans attachment):
NELSON A. LOYOLA
Co-counsel for Petitioners NASECORE, et al.
Suite 201 Carreon Building,
27 46 Zenaida Street,
Brgy. Poblacion, Makati City
RONNIE B. RODILLAS
Co-counsel for Petitioners NASECORE, et al.
No. 136 Libis Gochuico Street,
Circumferential Road 3,
Caloocan City 1400
OFFICE OF THE SOLICITOR GENERAL
134 Amorsolo Street,
Legaspi Village, Makati City
EXPLANATION FOR SERVICEBY REGISTERED MAIL
(Pursuant to Section 11, Rule 13 of the Rules of Court)
Undersigned counsel respectfully manifests that due to time
and distance constraints, the substantial number of parties to be
served, and the temporary lack of messengers, undersigned counsel
will serve copies of the foregoing MANIFEST I N by registered
mail.
6
DECLARATION
I, GERMAINE L. CHUA, hereby declare that the
J\11ANIFESTATION dated 8 January 2014 subn1itted elechonically
jn accordance with the Efficient Use of Paper Rule is/ are complete
and true copy/ies of the MANIFESTATION dated 8 January
?014.
Associate
9 January 2014
SUBSCRIBED AND SWORN to before me this 9th 'day of
Jarnwry 2014, at Taguig City, Philippines, affiant who is personally
known to me, exhibiting to me the follo-vving:
----------r------------------
Con1petent Evid ence of Identity
Affiant
Type of ID
..... -- .. --- ---1----r-------
Gennaine
Chua
l
2
D
. f
nver s
License
Passport
1\To.
.. -------_....___. ___ . ___ _
IJoc 1\f o. :__QL.;
l''age :No. ..r_i: ;
lJook T\Jo. _I_;
Series of 2014.
ID Nun1ber
and Expiry
Date (if
applicable)
I-
N04-08-001992;
expiring on 3
June 2016
f-
EB580297;
expiring on 2.8
June 2017
-----
Comn1unity Tax
Certificate
-
Number
Date/Place
Issued
19001807
28 February 2013; Taguig
City
ANNEX "1"--
OF TI-IE PFIILIPPINES
SUPREME COURT
l\l[anila
EN BA1\JC
Bayau 1Vluna Represenlat:ives NERI
Ji\ VIER COLIVIENARES and
C/-\JtLOS ISAGANI ZARATE,
Gabriela Wo111en's Party
Representalives LUZ ILAGAN. and
ElVIJVII DE JESUS,.. Act Teachers
Party-List Representative AN'fONIO
'TINIO, and Kabataan Pal"ty-List
Represenlative TERRY RIDOl'J,
Petitioners,
--- versus ---
ENERGY
COMlVIISSION
EILECTRIC

REGULATORY
and MANILA
COMPANY
Responde1 L ts,
. \---------------------------------------------------------x
l\T.ATIONAL ASSOCIATION
!ELECTRICITY CONSUMERS FOR
REFORMS, represented by 'Pet1onilo
L. Ilagan, FEDERATION 01:;
VILLAGE ASSOCIATIONS,
represented by Siegfriedo A. Veloso,
iFEDERATIOI\T 01' LAS
HOJ\!IEOWNERS ASSOCIATIONS
represented by Bonifacio Daza, and
H()DRIGO C. DOl\IIIl\TGO, JR.,
. '
Pel'itioncrs,
--- versus .,
lVlANILA ELECTRIC COlVIPANY
REGULATORY
C::OJVUVIISSION, and
DEPARTMENT OF ENERGY,
Respondents .
. \_'-------- --------------------------------------------------x
REGlS1.ERED -
W/RET'URN CARD
_JAN 0 8 2013 II /()//{)2_
G.R. No. 210245
/tJ?/
Post Office " ""
-".i'.f'f "-
Letter/Package No. E'..J";c;'L
Pouted on 't: _
1
8 : Q -.....,""";---
..r' IJl:aP In of Inquiry
"li.1119 l

RECEIPT
Letter/Package No.
Posted on /'
i
Preserve this recel
G.R. No. 210255
CONS:c;JLIDATED

WITI-1 COUNTER-PETITION
Respondent MANILA EtECTRIC COlVIPANY ("MERALCO"),
by counsel, and in con1pliance with this I-Ionorable Court's 23
Decen1ber 2013 H.esolution, respectfully submits its
Cornn1ent/ Opposition to the : Petitions in G.R. Nos. 210245 and
210255, and its Counter-Petition to this I-Ionorable Court, on the
folluwing allegations, argu1nents and premises:
PREFATORY STATEMENT
With the nation to emerge fron1 a crippling power
crisis which caused rotating'blackouts, stunted econo1nic growth and
buried the state-owned and operated generation and nans1nission
con1pany in enorn1ous and continuously increasing government debt,
Congress enacted the Electric Power Industry Reforn1 Act ("EPIRA")
1nore than a decade ago in 2001 with the intention of ensuring
affordable and reliable electricity to all power consu1ners in the
Philippines. The EPIRA was enacted after at least seven (7) years of
public hearings, deliberations, extensive research, consultations and
study. It introduced sweeping .refonns including the restructuring of
the entire power industry and the privatization of most state-owned
povver generation and transmission assets. Such reforrns were
intended to foster n1ore co1npetition an.cl introduce.more choices. for
consurners while leveling the playing field in the power industry to
encourage greater private sector participation and investment.
I'Y1ore than twelve (12) years after the law was enacted and
despite son1e of the1n havirl.g participated in the process leading to
the passage of the law and its. in1plementing rules and regulations,
Petitioners con1e before this Honorable Court erroneously seeking to
an1end the law under the guise of judicial review. Like ahnost all
poV\rers conferred by the Constitution, however, the power of judicial
review is subject to li1nitations,1 none of which Petitioners have
overcon1e here. Congress s,aw, fit to declare that entities engaged in
poV\rer generation are not' public utilities. This detennination is
largely a legislative . function - it involve_s, threshold state policy
considerations and raises a political question, which is within the
exclusive realrn of Congress.
Senale 0 the Philippines v. Ermita, G.R. No. 169777, April 20, 2006, 488 SCRA 1, 35.
2
Moreover, in determining the constih1tionality of a statute (or
certain provisions or implen1e1;1ting rules thereof), the Court should
not lose sight of the presun1ption of validity accorded to. official acts
of Congress. In Laivyers Against Monopoly and Poverty (LAMP) v. the
Secretary of Budget and Management
2
, the Court citing Farinas v. The
Executive Secretary.3 held that:
"Every statute is presumed valid. The presumption
is that the legislature intended to enact a valid, sensible
and just law and one ("vhi,ch operates no further than inay
be necessary to effectt;tate the specific purpose of the law.
Every presumption should be indulged in favor of the
constitutionality and
1
the1 burden of. proof is on the party
alleging that there is: a dear and unequivocal breach of
the Constitution." 4
"To justify the :nullification of the law or its in1plen1entation,
there n1us t be a clear an_d unequivocal, not a doubtful, breach of the
Constitution. In case of: doubt in the sufficiency of proof
establishing unconstituti01;1alfty, the Court n1ust sustain legislation
because 'to invalidate [a l a ~ v ibased on xx x baseless supposition is
an affront to the wisdon1 not'. ;only of the legislature that passed it
but also of the executive 1..Yhich approved it.' This presu1nption of
constitutionality can be overco
1
me only by the clearest showing that
there was indeed an infraction of the -Constitution, and only when
such a conclusion is reached by the required majority n1ay the Court
pronounce, in the discharge of the duty it cannot escape, that the
challenged act 1nust be struck down."
5
From the foregoing alone, the Consolidated Petitions must be
disn1issed and the Ten1porary Restraining Order ("TRO") dated 23
Decernber 2013 of this Honorable Court, which has placed
MERALCO, all other participants in the power industry and
ultiniately, the public in great risk, n1ust with all due respect be
reconsidered and dissolved, and the application for writ of
preliininary injunction denied.
2
3
G.R No. 164987, 24 April 2012; 670 SCRA 373.
463 Phil. 179, 197 (2003).
Lawyers Against Monopoly
1
and Poverty (LAMP) v. the Secretary of Budget and
Management, G.R. 164987, 24 'April 2012, 670 SCRA 373, 386; emphasis supplied.
Lawyers Against Monopoly and Poverty v. Secretary of Budget Management, et al., G.R.
164987, 24 April 2012, 670 SCRA 373, 386 citing Abakada Curo Party List v. Purisima,
G.R. No. 166715, 14 August 2008, 562 SCRA 251 and Drilon v. Lim, G.R. No. 112497, 4
August 1994, 235 SCRA 135.
3
As shown in the table below, MERALCO' s dishibution charges
did not increase in the bill nionth of December 2013. The increase in
the electricity charge for the bill 1nonth of Dece1nber 2013 was
accounted for by increases it} certain "pass-through" charges, namely
generation charge, transmission charge, systeni. loss, and taxes. Thus,
it is unfair to prevent or MERALCO from billing and
collecting these increased : charges unless the sources of such
increased charges are likewise prevented or disallowed from billing
and collecting the same from MERALCO. MERALCO did not and
does not derive a single centavo of profit from any of these charges.
Accordingly, it cannot be 1nade: to finance or: advance the payment of
these "pass-through" charges unless it can recover these charges with
certainty fro1n its custonters. Indeed, any prolonged prohibition
against the collection of the : , pass-through charges would have
disastrous effects not only ! on MERALCO, but on: the , entire
Philippine power industry, electricity consumers, and ultimately, the
national econo1ny.

l'fEUIE
irAXES OTHERS
' I I:
I
The law of supply a:q.d de1nand directly affects the price not
only of elechicity but also .df other corrunodities or goods. Indeed, a
war in the Middle East causf s 9A prices to spike, a typhoon in Baguio
City 1nakes vegetables and ther crops produced by it expensive and
a severe frost in Florida, UpA
1
brings the prices of oranges up. The
increase in generation charges results when demand is higher than
the available supply. In this c:ase, when many power plants shut
down during the san1e electridty supply decreased, but the
den1and remained the same. t-Ience, the generation cost increased .
. 4
This proble1n could have been avoided had concrete ineasures been
taken to likewise increase the capacity to produce power.
Currently, 2,462 MW of installed capacity in the Luzon grid
runs on hydro, dependent qn rainfall and thus, u1u-eliable and
usually unavailable during the su1mner/peak 1nonths. On the other
hand, 1,778 MW installed capacity in the Luzon grid uses oil (diesel,
oil thennal, gas turbine) which;is expensive and usually used only for
peak de1nands but due to tl}e low supply, are constrained to be used
like base-load plants. Moreover, from 2001 to 2013, the Luzon grid
peak den1and of electricity increased by 2,659 MW while new
construclion of base load: power plant during the same period
only 652 MW of installed capacity with a dependable
capacity of only 495 MW. As no new substantial capacity has been
put :in to address the dernand, the existing plants in the grid are
ageing, subject to inefficiency and de-rating, and thus would require
increased 1naintenance to avert risk of outages. This has resulted in
tighter supply of electridty. The increasing demai1d in the maiket
without the corresponding increase in the supply will inevitably
result in price increases.
l\1ERALCO for its part has exerted all reasonable efforts to
effectively inanage the ccist of power in 1neeting its service
obligations within its franchise area through appropriate energy
sourcing arrangements. Asia 1natter of fact, the average generation
cost for 2013 even including .the PhP9.107 per kWh in Dece1nber
amounted only to PhPS.6367 per kWh, which is still lower than the
average generation cost of) per kWh, for 2012, and not
significantly higher than the average generatio11 costs of PhPS.3791
and PhPS.2261, for 2010 and 2011, respectively.
It n1ust also be that MERALCO has complied with
all of its obligations under the law. The retail rates charged by
]VIER.ALCO for the supply of .electricity to its custorr1ers
6
were
approved in con1pliance with, the Energy Regulatory Co1nmission' s
(1'ERC's") regulation as provided in Sections 25 and 43() of the
EPIRA.
In fact, a careful perusal of the Consolidated Petitions reveals
that aside fron1 general allegations of collusion, which NIERALCO
will disprove belovv, there are no particular wrongful or tuilawful
acts or on1issions athibuted to MERALCO. This is because the
.
Pertains lo customers of MElZALCO who belong to the captive market or the non-
conteslable end-users as defined Section 4(c) of the EPIRA.
increased billings co1nplained of here do NOT involve any increase in.
1\IIERALCO's distribution charges, which is the only ite1n in an
electricity bill that IvIERALCO stands to benefit fro1n. There is shnply
no rnotivation, reason or purpose for tq be involved _in .
any alleged collusion relating to generation charges.
Purtherrn.ore, the issue of collusion falls within the original and
exclusive jurisdiction of the ERC under the EPIRA, and so this resort
to the courts ahead of an ERC action is premature and fatal to the
Consolidated Petitions. The' EPIRA has granted the ERC ample
power and authority to address and redress n1arket abuse, anti-
competitive behavior, discrhninatory behavior, cartelization and even
abnorn1al inarket conditions.
The generation charges, , which are the subject of these
Consolidated Petitions, are 1nere "pass-through chaxges" not
accruing to MERALCO. As Distribution Utilities ("DUs") are entities
(aside fron1 the Supply Sector
7
) that directly supply electricity to the
end--users, the DUs collect tbe ','pass-tluough charges" on behalf of
the generation and co1npanies concerned. The
generation charges are billed,' pursuant to Power Supply Agreements
("PSA")
8
duly filed, reviewed and approved by the ERC after public
hearings, or tluough the Wholesale Elechicity Spot Market
("WESM"), which is administered by the Philippine Electricity
l\!Iarket Corporation ("PEMC"). PEMC is chaired by the Secretary of
the Deparhi.1ent of Energy ("DoE") and its Price Detennination
Methodology ("PDM") and 1narket fees are. approved by the ERC.
i-\lso, the trans1nission charges and the fonnula for the pass-through
of the hans1nission rates are duly approved by the ERC. As
generation and transmission charges are pass-through charges,
MERALCO does not stand, and is not allowed and permitted, to
profit fron1 such charges. All arnounts received by MERALCO fro1n
its custorners representing generation, transnlission and other pass-
tluough charges are ren1itted' in Jull to the generation or transmission
co1npany concerned and even to the Govern1nenL
In essence, the an1ount ' collected by MERALCO from its
custo111ers is what MERALCO uses to pay for the elechicity. that it
has purchased fro1n the generation con1panies and wheeled by the
transn1ission con1pany. Accordingly, while the TRO is effective,
MERALCO is at undue, ever-present and constant risk and threat of
-----------
7 See EPIRA, Sec. 29
The term PSA also includes Power Purchase Agreements between MERALCO and
Independent Power Producers namely: Quezon Power Philippines, Ltd., FGP Corp., and
First Gas Power Corporation.
6
being required to pay the full ainomi.t of the increase in generation
and transni.ission charges or, 0
1
being denied continued . access to
electric supply and trans1nissioniunder its PSAs, the WESNI, and the
relevant ERC regulations.
For the Decernber 201'3 billing 1nonth, the increase in the
generalion charge and all oth
1
er pass-through adjustments transJated
to about PhPS.9 Billion. It is .unjust, unfair rui.d for
:rvIERALCO to pay and/ or advance such a huge amount which it is
however restrained from collecting. Due to the TRO, MERALCO's
cash flow is at the risk of being severely restricted. Consequently, its
ability to deliver efficient and reliable service to its customers and to
the public is also hnpaired.
Since the TRO was issued, MERALCO has been constrained to
pay the generation, l-ransn1J$sion and other pass-through charges
only to the extent of what it been ordered to temporruily bill and
collect froni. its custo1ners!. If the current situation persists,
!
J\1ERALCO will face the great risk of not being able to purchase all
the elecl-ricity needed for the succeeding months, especially if
abnormal or exhaordinary: supply versus demand conditions
continue. The generation. companies 1nay then eventually stop .
supplying electricity to MER.ALCO. The trans1nission company may
stop transni.itting if MERALCO is unable to pay for the transmission
charges. The entire power industry 1nay co1ne to a screeching halt.
One can readily ini.agine the dire consequences to the economy and
security of the country should this happen, as there will surely be
rotating blackouts throughout MERALCO' s franchise area.
In fact, :tvIERALCO has already received de1nand letters from
transn1ission and generation coni.panies for the full pay1nent of their
Novernber 2013 power bills. This n.1eans that the griln scenario
described earlier is not at all ftir-fetched and may well be hnrninent.
MERALCO is being enjoined fron.1 perfonning an act that it is
entitled to perforin under the law (i.e., pass-on the generation and
other pass-tluough charges to its customers) "Vvithout ai1y allegation,
n1uch less any proof, of wrongdoing on its part. If there are
accusations of collusion between and ainong generatio11 con1pallies in
order to siinulate an electricity p.rice hike, NIERALCO should not be
I
prejudiced, penalized and dan1aged for it is not even remotely
involved in the alleged scherni:: 0-nd does not stand to receive any
benefit fron1 it. MERALCO: shnply complied with its obligations
under the law and all governrnental regulations in ensuring the
7
quality, reliability, security .and affordability of the supply of elechic
power
9
to its customers. In) fact; MERALCO, even if not required by
la-vv, took ineasures to initigate the effects of the shutdowns of several
power plants and the resulting increase in generation charges by,
arnong others, proposing the staggered billing due to th.e increased
generation rates. It is unfortunate that MERALCO is now being made
to bear the burden and incur the ire of the public for the increased
generation rates for which it is, clearly not responsible for.
Worse, in these Consolidated Petitions, son1e .of the Petitioners
who are n1e1nbers of Congress, desire to use this 1-Ionorable Court to
an1end if not nullify the legislative reforms enacted by their own
branch of Goverm11ent. The Petitioners even have the audacity to
pray that this I-Ionorable Court direct MERALCO to refund amounts
collected by virtue of the a'utornatic adjushnents since 2004, when in
fact, MERALCO not only co1nplied with all relevant laws and
regulations in collecting such ainounts (including the EPIRA), but
n1ore in1portantly, it did not gain from the pass-through generation
charges it is 1nandated to collect from its customers. This is utterly
unfair since all an1ounts cbllectecl in accordance with the automatic
adjustrnent 1nechanisn1 (usually pertaiii.ing'to the fluctuations of fuel
cost and foreign such as generation and transmission
charges, prior to the Dece111ber 2013 billings have already been
rernitted to the generation and hans1nission companies as well as,
when applicable, the govenunE'.nt units concerneq. Despite this,
Petitioners have not even hnpleaded in this proceeding a single
generation con1.par1y or company, which undeniably
received a portion of the auto1natic adjush11.ents, nor have the
Petitioners bothered to explain the 01nission.
Considering all the foregoing, 1\1ERALCO respectfully
beseeches this Honorable Court to disnliss these Consolidated
Petitions, but not before
1
ruling iim11.ediately that the continued
effeclivily of the TRO JVIERALCO without a shnilar order
against the generation trans1nission companies .would prejudice
not only MERALCO but, entire elechicity supply chain, including
ultirnately, the public as well.
EPIRA, Sec. 2 (b).
8
I. COUNTER-STATEMENT OF TI-IE FACTS
For this Court to better appreciate the disastrous
effects, not only of the 23 Decen1ber 2013 TRO, but 1nore importantly,
of granting the baseless relief prayed for by Petitioners, MERALCO is
constrained to lay down a: complete picture of the elecli-ic powe{
industry and the ach1al events that before the filing of the
Petitions.
The Crippling Power Crisis Prior
to EPIRA
1.1 Prior to the of Republic Act No. 9136, otherwise
known as the "Electric _ Power In_dustry Reform Act of 2001
("EPIRA"), the Government, tluough the National Power
Corporation ("NAPOCOR") had the monopoly of ownership and
operation of generation anq trans1nission facilities for the supply of
electricity pursuant to Presidential Decree No. 40.
1.2 l-lowever, in the early 1990's it was foreseen that the
national de111and for electricity would increase by nine percent (9%)
aiu1ually for the next ten (10) years.1 To ni.eet the predicted demand,
I '
5,000 1negawatts was needed, translating to necessary government
infusion of approxhnately PhP38 Billion annually into the
developn1ent of the powei indush-y to curb the shortfall, without
vvhich another power crisis, rentiniscent of the 1980s and 1990s was
expected.
11
1.3 Unfortunately, !the burgeoning budget deficit then
pegged at PhP145 Billion hindered the infusion of funds into the
ailing, highly leveraged financially handicapped NAPOCOR.1
2
Further, the elechicity bills then were bundled, 1naking it impossible
for the public to detennine how their pay1nents were allocated. There
vvas no sei11blance of transparency in the n1am1er customers were
biUed.
1.Ll To assist the then, financially handicapped NAPOCOR,
Executive Order No. 215 allowed the, priyate sector to engage in
povver generation activities'. Su:bsequently, Republic Act 7648 or the
"Electricity Power Crisis Act" gave then President Fidel V. Ramos
10
A13ANES, MENANDRO, "Rcv,isiting the 10-year old Philippine Electric Power Industry
Reform Act-of 2001 (RA 9136) and its Implications", p. 2. , ,
u A13ANES, MENANDRO, "Revisiting the 10-year old Philippine Electric Power Industry
Reform Act of 2001 (RA 9136) its Local Implications".
12 lliid.
9
authority to enter into co1i.hacts with these Independent Power
Producers ("IPPs") for numerous projects.13 By 1994, the Philippines
had 111ore IPP contracts than the rest of the developing world
cmnbined.
14
1.5 In the contracts with IPPs, the Govern1nent guaranteed
the purchase of 75% to 80% 'oftheir production over 10 to 20 years
under take or pay provisions.
15
Thus, when the Asian finan.cial crisis
struck :in the late 1990s, the fiscal and 1nonetary disruption flowing
therefro1n had an te , impact on the IPP sector in the
Philippines, 1naking the take-or-pay or capacity payn1ents included
in the povver purchase conhacts unsustainable.16 As a result of the
inability to sustain sovereign guarantees, the pric_es of electricity.
together with the goverrunent's d.ebt, drastically increased.
1.6 By Dece1nber 2000, NAPOCOR had accun1ulated debts of
PhP900 Billion, nearly half of the government's PhP2.179 Trillion
debt. It nJade each Filipino owe approxin1ately PhPll,842.00 to
.NAPOCOR's creditors.
17
Thus, the Govern1nent saw privatizing the
indusll:y as the 1nost plausible alternative to solve the povver
proble111.
1.7 Following the lTend of rrmny subsidy-laden countries,
including the socialists, the Governn1ent saw deregulation and
privatization as a n1eans to free itself fron1 the enormous burden of
continuing electric subsidy and fron1 otherwise needing to raise taxes
to support electric users. By: encouraging private sector investment,
governn1ent subsidies and funds for the power sector could then be
charu1elecl to other priority concerns.
18
15
16
17
18
Id., at p. 3.
WOODHOUSE, ERIK J., "The, IPP Experience in the Philippines", September 2005,
Program on Energy and Development, Standford University, available at:
htlp://iis-db.stanford.edu/pubs'/20816/PhilippinesIPP.pdf, citing WORLD BANK,
PHILIPPINES POWER SECTOR STUDY: STRUCTURAL FRAMEWORK FOR THE
POWER SECTOR, Report No. ,13313-PH (Nov. 30, 1994) at 43 [hereinafter WORLD
BANK, POWER SECTOR STUDY].
ABANES, MENANDRO, "Revisiting the 10-year old Philippine Electric Power Industry
Reform Act of 2001 (RA 9136) and its Local Implications", p. 3.
WOODHOUSE, ERIK J ., "The i IP:8 Experience in the Philippines", September 2005,
Prngram on Energy and Sustainable Development, Standford University, available al:
http: I I iis-db.stanford.edu/ pubs /20816 /PhilippinesIPP.pdf
ADANES, MENANDRO, "Revfoiting the 10-year old Philippine Electric Power Industry
Reform Act of 2001 (RA 9136) and its Local Implications"
lVid. .
10
EF'IRA: A New Order to Solve the
Poiuer Crisis and Provide the
I .
Franiework for Energy Securitlj
1.8 It was under this factual 111.ilieu that the EPIRA came into
be.ing. On 8 June 2001, after' 1nore than seven (7) yeass of public
hearings and floor deliberations on various versions of the 1neasure
in Congress,
1
9 the EPIRA was enacted into law to address many
issues that plagued the power industry. EPIRA became, and still is,
the State's official policy on the n1atter. An1ong EPIRA' s declared
policies, are to:
19
20
21
22
23
25
a) Ensure the quality, reliability, security and
affordability of the supply of electric power;20
b). Ensure transparent and reasonable prices of
electricity in a reghi-Le of 'free and fair competition and full
public accountability to achieve greater operational and
econonuc efficiency' and enhance the competitiveness of
Philippine products in the global market;21
c) Enhcu-1ce the inflow of private capital and broaden
the ownership base of the power generation, transn1ission and
distribution sectors h1 order to n1inimize the financial risk
I
exposure of the national governrnent;22
d) Ensure fair and non-discrhninatory lTeatment of
public and private sector entities in the process of restructuring
the eleclTic power industry;23
e) Protect tll.e public interest as it. is affected by the
rates and services of electric utilities and other providers of
electric power;
24
and
f) Establish a sb:ong and purely independent
regulatory body and syste1n to ensure consun1er protection and
enhance the con1pelitive.operation of the electricity inarket.
25
See http://www.doe.gov.ph/ elechic-power-statislics/199-energy-faqs/ faqs-epira-ra9136
Republic Act No. 9136, Section 2 (b).
Ibid., Section 2 (c).
Id., Section 2 (d).
Id., Section 2 (e).
Id., Section 2 (f).
Id., Section 2 U).
11
1.9 The EPIRA provided a legal framework for the
restructuring and of the electric power industry. In
restructuring the electric power industry,
2
6 the EPIRA provided that
the power industry be cli\rided into four ( 4) sectors: generation,
transn1ission, disuibution and supply.
1.10 Generation of electricity "refers to the production of
electricity by a generation co1npany."27 A Generation Company
("Gen Co") refers to "any person or entity authorized by the [Energy
Regulatory Cornmission ("!ERC")] to operate facilities used in the
generation of electricity."28
1.11 Trans1nission of elecuicity "refers to the conveyance of
electricity through the high voltage backbone syste1n."29 The EPIRA
created the National Trans1nission Co1npany ("TRANSCO") which
assun1ed the elecuical ttansrnission functions of the NPC. The
TRANSCO concession was awarded to the National Grid
Corporation of the Philippines ("NGCP") which secured a legislative
franchise to operate the trans1nission network under Republic Act
No. 9511.
26
27
28
29
30
1.11.1 As systen1 operator of the Philippine power
grid, NGCP balances the supply and demand of
I
electricity to efficiently serve all of its custo1ners-power
generators, private DUs, electric cooperatives,

utilities, eco-zones, indusuies, as well

as directly-co11nected co1npan.ies. It is primarily
responsible for; putting online the right n:rix of power
plants that generate high-voltage electricity and
transn1itting this 'to the 'variOus distribution utilities
I .
which, in turn,
1
deliver the electricity at a lower voltage
rating to households and other end-users. NGCP also
operates and 111aintains n1etering facilities and provides
technical services, particularly systen;1 studies, and
operation and nl.aintenance of customer facililies.30
1.11.2 Under the EPIRA and EPIRA. IRR, the NGCP
is required to inaintain the reliability, adequacy, security,
I
integrity and stability of the grid in accordance with the
perforrrtance . : standards for the operation and
Id., Section 5.
Id., Section 4 (y).
Id., Section 4 (x).
Id., Section 4 (ccc).
h ttps: I I www.ngcp.ph/ corporale.asp?id=39 (last accessed on 7 January 2014).
12
nmintenance o( the grid. The perforn1ance indicators for
reliability, secufity, adequacy, integrity and stability shall
include but are ,not lin1ited to the following:
1. Number of hi.terruption Events;
2. Sustained Average Interruption
Frequency Index;
3. Mo1nentary Average Interruption
Frequency Index;
L1. ' Sustained Average h1terruption
Duration Index;
5. Syste1n h1terrl.1:pli01'\ Severity Index;
6. Frequency of tripping per 100 c-km;
7. Average Forced Outage Duration;
8. Accun1tilated Tirne Error;
9. Frequency Linut Violation; and
10. Voltage linut Violations.31
1.1.1.3 Under the established procedure, it is the
NGCP that notices of shutdowns fron1 the power
plants and schedules the shutdowns of power
plants. Thus, the l\JGCP has the prilnary obligation to
ensure that a : sufficient nun1ber of power plants are
operating at any given mon1ent, and forewarn the DoE of
any ilnpending decrease in supply.
1.12 Distribution of electricity "refers to the conveyance of
electric power by a distribution utility through its distribution
systen1."
32
Distribution Utility ("DU") refers "to any electric
cooperative, private corporation, governn1ent-owned utility or
existing local govern1nent! uri.it which has an exclusive franchise-to-
,
3.l
32
'
Sec EPIRA IRR, Rule 6, Section 7 (c).
Ibid., Section 4 (n).
13
operate a distribution systein."
33
As defined by EPIRA, MERALCO is
a DU and not a Genco.
1.13 Supply of electricity "1neans the sale of electricity by a
party other than a generator! or a distributor in the franchise area of a
distribution utility using the wires of the disbibution utility
concerned."
34

1.14 While not included. in the sectors enumerated in EPIRA,
one in1portant aspect of the, power industry is the uFuel Sector". As
around 80% of power plants producing electricity are run by fuel
(such as natural gas, coal, d i ~ s e l an1ong others) the rise and fall of the
prices of the power infused: into the grid is primarily dependent on
the price of fuel. In turn, the price of the fuel is based on the
fluctuating price in the international 1narket and affected by the
consequent fluctuations in the foreign exchange between the state of
the supplier and the state of the buyer/ user.
1.15 The power sector supply chain 1S best illustrated as
follows:
33
34
Generation
!Distribution and Supp!ly
Id., Section 4 (q).
Id., Section 4 (zz).
Transmission
14
I
I
1.16 The electricity supply chain begins in power stations
:vhe:re electricity is generatfd . Electricity generators use either fossil
fuels, such as coal and or renewable energy sources, such as
wind, water or the sun. is hansported over long distances
frorn power stations through high voltage transmission power lines
within the island. The electricity is then transfonned to lower
voltages before being dislTi"f,uted to residences and businesses.
1.17 Under the EPIRA, the generation35 and supply36 sectors,
although open and are required to obtain a certificate of
con1pliance and a license frcnn the ERC.
1.18 On the other hand, both the distribution
37
and
trans1nission
38
sectors, being natural monopolies, are considered
public utilities and subject to the ERC's shict regulatory powers. The
dislTibution and transmission sectors are considered natural
1nonopolies because it is hrghly ilnpractical and not cost-effective to
have 1nore than one set of poles and transforn1ers to transmit electric
power fron1 Gen Cos to i end-consu1ners. Hence, to ensure the
protection of the public, ERC was given the power to regulate the
rates of TRANSCO (and NGCP) and DUs. Sections 19 and 24 of the
EPIRA provide:
"Section 19. Transrnission Charges. - The traii.smission
charges . of the TRANSCSJ shall be filed .with
approved by the ERCipursuant to paragraph (f) of Section
L13 hereof.
"Section 24. Distribution Retail Wheeling Charge. - The
retail wheeling rates of distribution utilities shall be filed
with and approved by the ERC pursuant to paragraph (f)
of Section 43 hereof."
1.19 To facilitate entry into the generation sector of various
I
GenCos in an effort to reduce electricity costs, the EPIRA made such
sector open and con1petitive wi:th 1ninilnal state regulation. Section 6
of the EPIRA provides:
35 Id., Sectio11 .6.
36 Id., Section 21.
37
Id., Section 6.
38 Id., Section 7.
15
"Section 6. Generation Sector. - Generation of elechic
power shall be competitive and open.
xxx
Any law to the contrary notwithstanding, power
generation shall not be considere\1- E! public utility
operation. For this purpolie, any person or entity engaged
or which shall engagf1 in power generation and.supply of
electricity shall not be required to secure E! local or
national franchise.
Upon in1plementation of retail competition and .
open access, the charged by a generation company
for supply of electricity shall not be subject to regulation
by the ERC except as otherwise provided in this Act.
xxx
The ERC shall, in deternlining the existence of
:market power abuse or anti-competitive behavior, require
fron1 generation co1npa.nies the sub1nission of their
individual pricing fornl.ulas as well as their financial
I .
staten1ents." supplied)
1.20 Shnilarly, the Supply Sector under the EPIRA is open and
cornpetitive and is not subject to ERC regtilation.39
1.21 Nevertheless, despite the generation (and supply) sectors
being open and con1petitive, the ERC still 1etains authority over
the1n. For one, GenCos ' before being allowed to QPerate are
required to first secu1e !!
1
cerlificate of co1npliance fron1 the ERC
under which certain conditions are or can be imposed. Moreover,
the ERC has the power !:o prevent market power abuse,
cartelization, and anti-con.\petitive or discrin1inatory behavior.
40
In
39
40
Id., Section 29.
Seclion 45 of the EPIRA, in part, provides:
"Section 45. Cross Oiimership, Marlcet Power Abuse And Anti-Competitive
Behavior. - No participant in the electricity industry may engage in any
anti-competitive behavior including, but not limited to, cross-
1 .
subsidization, price :or market manipulation, or 0U1er unfair trade
practices detrimental to the encouragement and protection of contestable
markets.
xxx
16
addition, PSAs of the DUs vyith the GenCos are subject to review and
approval by the ERC as as verification of the billings and
charges.
1.22 Pursuant to the 1foregoing section, and Rule 11, Section 8
of the hnple1nenting Rulesi and Regulations of the EPIRA ("EPIRA
I.RE"), the ERC on 23 2006 pro1nulgated the Co1npetition
Rules and Co111.plaint Procedures ("Co1npetition Rules"). The
objectives of the Con1petition Rules are to ensure and promote
con1petition, ensure market develop1nent and customer choice, and
to discourage or penalize anti-competitive or discrhninatory behavior
and the abuse of 1narket power, in order to further the intent of the
EPIRA and to protect public interest.
1.23 The Co1npetition Rules likewise prescribes the 1naiu1er
ttu-ough which the ERC will investigate possible violations thereof
consistent with the require1nent of due process.41 Specifically, the
Rules grant ERC the power issue orders
42
requiring a Person43 to
stop engaging in the condud that constitutes the violation, requiring
the Person to do any act or.thing to rectify the violation or to remedy
The ERC shall, withht one (1) year from the effectivity of this Act,
promulgate rules and regulations to promote competition, encourage
market development and customer choice and discourage/ penalize
abuse of market power, carlelization and any anti-competitive or
discriminat01y behavior, in order to further the intent of this A.ct and
protect the public interest. Such rules and regulations shall define the
following:
(a) the relevant markets for purposes of establishing abuse or misuse of
monopoly or market position;
(b) areas of isolated grids; and -
(c) the periodic requirements of electric power indushy
participants as may be necessary to enforce the provisions of this Section.
The ERC shall, motu 1propio, monitor and penalize any market power
abuse or anti-competitive or discriminatory act or behavior by any
participant in the electric power industiy
Upon finding that. a, market participant has engaged in such act or
behavior, the ERC stop and redress the same. Such remedies shall,
without limitation, include the imposition of price controls, issuance of
il1jtmclions, requirement of divestment or disgorgement of excess profits
and imposition of fo1es and penalties pursuant to this Act. xxx"
41 ERC Competition Rules and Complaint Procedures, 23 August 2006, Rule 2.
42 lbid., Rule 11, Sec. 2. :
!3 "Person" is defined as a natural or juridical person including an individual, a
corporation, a partnership or an association to which the law grants a juridical
personality, a trustee, a or government conholled corporation, a
local government unit, an electric cooperative organized pursuant to Presidential Decree
No. 269, or an entity o_f ai1y 0U1er kind whatsoever, which has a separate legal
personalily, and whether or not that person is a Philippine National.
1'7
or n1itigate the consequences of the violation including an order
requiring the Person:
a) to vary an agreen1ent, arrange1nent or 1mderstanding
within such time and in such Inanner as is specified in the
order;
b) not to enforce an agree1nent, arrange1nent or
understanding or such provisions thereof as are specified in the
order
. I
c) to refund inoney or return property; and
d) not to carry on a particular business or not to undertake
particular operations.
. '
1.24 Furthennore, the! ERC was also granted the powers,
an1ong others, to issue an order requiring the Person to pay to the
ERC a fine or penalty
4
4 or to 'pay the ERC an amount not exceeding
the ERC' s estiination of 'the ainount of any ni.onetary, financial, or
econ01nic benefits acquired by the Person, or accrued or accruing to
the Person, as a result of the violation of the Competition Rules,
4
5 as
well as the power to fix or control the price at which the Person 1nay
supply or acquire eleclTicity or goods or services that are directly or
indirectly related to or used in connection with the generation,
transn1ission, distribution or l e of elechicity.
4
6
1.25 The ERC was also granted original and exclusive
jurisdiction over all cases contesting rates, fees, fines and penalties it
inay irnpose, in the exercise of its above-1nentioned powers, functions
and responsibilities, and over all cases involving disputes between .
and an1ong participants or players in the energy sector.
47
In
appropriate cases, the ERC is authorized to issue cease and desist
orders48 as well as to:
41
45
46
47
48
49
a) Enforce the. in1plemenling rules and regulations of
the EPIRA;4
9
ERC Competition Rules and Complaint Procedures, 23 August 2006, Rule 11, Sec. 2 (c).
lbid., Rule 11, Sec. 2 ( d).
Id., Rule 11, Sec. 2 (f).
Id., Section <13 (u).
Id., Section 43.
Id., Section 43 (a).
18
b) Enforce the rules and regulations governing the
operations of the electricity spot market, and the activities of
the spot. market o p e r ~ t o r ad other participai)ts in the spot
rnarket, for the purpose of ensuring a greater supply and
rational pricing of electricity;so
c) Monitor and take 1neasures and penalize abuse of
rnarket power, cartelization, and anti-co1npetitive or
discrilninatory behav;ior by any electric power industry
participant;
51
d) Monitor the activities in the generation and supply
of the electTic power indusny with the end view of pro1noting
free n1arket con1petition and ensuring that the allocation or
pass through of bulk purchase cost by distributors is
transparent, non-discriminatory and that any existing subsidies
shall be divided pro-rata among all retail suppliers;s2 and
e) In the exercise of its investigative and quasi-judicial
powers, act against any participant or player in the energy
sector for violations of any law, rule and regulation governing
the san1e, including the rules on cross-ownership, anti-
con1petitive practices, 'abuse of 1narket positions and silnilar or
related acts by any participant in the energy sector or by any
person, as 1nay be provided by law, and require any person or
entity to subn1it any report or data relative to any investigation
or hearing conducted pursuant to the EPIRA.53
Pass-through nature of' generation
charges
1.26 As stated, the 1 power industry is comprised of the
generation, disnibution, nal)lSinission and supply sectors. Each sector
of the elecnic power industry generates a "charge"-. i.e., generation,
rransn1ission, disnibution, and supply chaiges -- which are
unbundled and forn1 part of the Retail Rate charged to custoiners.
54
1.27 The "unbundling of rates" was devised to provide for
greater accountability in the electric power indushy, as well as
transparency to enable the consu1ners to know where every peso of
50
51
52
53
54
Id., Section 43 (c).
Id., Section 43 (k).
Id., Section 43 (o).
Id., Section 43 (r).
Id., Section 36.
19
their payn1ents for elecnicity goes. Thus, generation and trans1nission
charges are specifically and reflected in every bill issued by
the DUs, such as. MERALCO. while DUs, such as MERALCO, are
obligated to supply electricity to their custo1ners in the least cost
lYlaIUler, they have no absolute c,ontrol over the GenCos.
1.28 In the average MER.ALCO bill for the period January to
June 2013, the generation charge constitutes the single largest
co1nponent, which is about 56.9% of the total amount. On the other
hand, the dislTibution-related charges (comprised of the distribution,
supply, and ni_etering charges, which are the only portions that go to
TVIERALCO) are only about 17.6 % of the billed amount. The
re1naining bill components are trans1nission charge55 of about 9%,
systeni_ loss charge of about 5%, and taxes and universal charges of
11.5% of the billed ainount.
1.29 In order to ensure lower electricity rates, generation
charges of GenCos and transnussion charges of NGCP, among others,
are legally considered as 1nere
/1
pass-tluough charges,"56 which are
billed directly by the DUs :to their custoiners.57 When MERALCO
I
bills its customers the pass-tluough charges it does not stand to
benefit therefro1n. The only: portion that goes to MERALCO are the
distribution-related
1.30 This syste1n of passing on the costs of generation charges
billed by the GenCos tluo11gh the DUs has been in place since the
1970s.
1.30.1 Until 1974, MERALCO owned and operated all the
power plants it was using. It charged the basic power rates
based on the cost of fuel and exchange rate at the thne of the
application for approval of the adjusted rates. However, in
1970, a currency exchange rate adjustn1ent to cover changes in
its operation and expenses due to exchange rate
fluctuations was approved for hnplementation. In addition, a
fuel cost adjustni_er{t ("FCA'') was approved for MERALCO ill.
1974 to cover increases in its fuel oil cost above the basic cost
55
Section 4 (aaa) of the EPIRA 'defines "Transmission Charge" as the regulated cost or
charges for the use of a tra11.smission system, which may include the availment of
ancillary services. Transmissio+1 charges are currently paid to the NGCP.
50
See ERC Resolution No. 16, Ser,ies of 2009; Order dated 30 May 2003 in the ERC Case Nos.
2001-646 and 2001-900; Guidelines for the Automatic Adjustment of Generation Rates
and System Loss Rates by Utilities, as amended by Resolution No. 10-01,
Series of 2004; ERC 7, Series of 2011.
57 See Republic Act 9136, Section 25.
20
incorporated in its bas
1
ic charges. Someti1ne in 1975, it sold to
NAPOCOR its five (5) base load generating power plants.
1.30.2 As a result of the sale, MERALCO entered into an
agreernent with NAPOCOR for the latter to supply all the
electric power neededi by the fonner to service its custo1ners
vvithin its franchise mleas. Under the agree1nent, the electric
power and energy pu1:chased by MERALCO from NAPOCOR
would be priced at generating cost, subject to fuel cost
adjustment by NAPOCOR. The fuel cost adjustment allows the
latter to recover the increases in fuel oil over and above a base
price.
1.30.3 In 1978, MERALCO applied with. the Board of
Po-wer and Waterworks ("BPW") for the approval of Purchased
Power Cost Adjustment to cover the increase in the cost of
electric power and being purchased from NAPOCOR.
:NIERALCO also applie
1
d for the approval of the retention of the
fuel adjusbn.ent clause for the three peak-load plants over
I .
which itretained ownership. However, starting 1January1979,
all of MERALCO' s requirements were purchased fro1n
J\JAPOCOR when tl:ie :latter took av.er the operation of
reni.aining plants. stopped hnple1nenting the Fuel
Cost Adjustn1ent which was used to cover changes in the cost
of power purchased fron1 l\TAPOCOR.
' I
1.30.4 In 1980, the Board of Energy ("BOE"), which took
over the functions of the BPW, authorized the continued use of
the Purchased Power 4\,djusl111ent ("PP A") clause stating that it
was strictly for the purppse of cost recovery only. In other
vvords, every increase in the cost of fuel oil to NAPOCOR above
a base price reflected in ,its fuel cost adjustment billing to
MERALCO, vvas autoni.atically recovered by MERALCO from.
its custoni.ers under the autli.ority of the PPA clause.
1.30.5 In 1987, under E.O. No. 172, the Energy Regulatory
Board ("ERB") was It was granted regulatory and
adjudicatory powers and unctions covering the energy sector.
Also enacted was E.O: No. 215 opening the business of electric
power generation to the private sector and allowed private
corporations, cooperatives and sin1ilar associations, or the IPPs,
to operate electric generating plants within the country.
21
58
1.30.6 In addition to its various powers and functions, the
ERB was inandated to E;nforce the pertinent provisions of R.A.
No. 7832, othe1wise known as the" and Electric
Trans1nission Lines/Materials Pilferage Act of 1994." To ensure
the viability of private electric utilities, R.A. No. 7832 allows
DUs to pass on to its consun1ers systen1 losses equivalent to
either the actual electric energy lost due to tecluucal and non-
technical/ pilferage causes, or the cap in1-posed by law,
whichever is lower.
1.30.7Pursuant to R.A. No. 7832 and Rule IX, Sections 2
and 5 of its IlTLplenl.enting Rules and Regulations, the ERB
adopted an auton1atic cost adjustment forn1ula to guide electric
utilities and electric cooperalives in the recovery of purchased
power cos ts frorn all sources fron1 customers. The PP A formula
subsequently underwent several 1nodifications. Each revision
'Was approved by the ERB after service of the notices of public
hearing on the respective 1nayors of the cities and
inunicipalities witlun !1VIERALCO's franchise area, posting
thereof on the respective bulletin boards of the said local
govern1nent units, and publication in two newspapers of
general circulation.
1.30.8 A power adjusl1nent clause is a convenient
regulatory. 1nechanisn1, if not a necessity. Considering the
unstable prices of fuel oil, the clause will reduce' the necessity
for application for rate increase or decrease, whenever there is a
change in the fuel prices. It operates like a foreign currency
adjustment clause the use of which has received the imprilnatur
of this I-Ion.arable Court.SS
1.30.9 Thereafter, the EPIRA was enacted. Pursuant to the
EPIRA, the ERC issued :an Order dated 29 January 2003 setting
for public consultation its proposed hnple1nenting Rules for the
Recovery of Deferred :f'.uel and Independent Power Producers
Cost ("DECOR") and Deferred Incremental Currency Exchange
I
Recovery ("DICER"), Y,hich were fonnulated to replace the
PP A and the Currency Exchange Rate Adjustn1ent ("CERA")
n1echanimns, the auto11.1atic adjustment mechanisms then in
effect, on its view that they (PP A and CERA) did ineet the .
goal of balancing the need for timely recoveries of costs by the
See Manila Electric Company vs. Republic, L-32402, October 4, 1971, 41SCRA644.
22
utilities with the ERC' s need to review the reasonableness and
prudence of such costs.
159
1.30.10 The ERC then caused the publication of a
notice of the public consultation on the proposed implementing
rules for the recovery of DECOR and DICER in. the Philippine
Star on 3 February 2003. DUs and consu1ner groups, including
NASECORE, filed their cormnents thereon.
60

1.30.11 During the public consultation on 17 February
2003, where both the DUs and consumer groups were present,
the consumer groups requested a separate consultation
exclusively for then1, which request was granted by the ERC.
On 21 February 2003, the set date for the public consultation for
the consun1er groups,. the ERC explained what the DECOR and
the DICER are. MERALCO then explained the PP A and the
computation thereof .. The consumer groups manifested their
concerns, which were noted by the ERC.
61
1.30.12 After taking into consideration the positions,
concerns and co1ru11ents of the DUs and the consumer groups,
the ERC promulgated the Order dated 24 February 2003 in ERC
Case No. 2003-4t1, where the ERC adopted the Imple1nenting
H.ules for the Recovery of Fuel and Independent Power
Producer Costs: Generation Rate Adjustlnent Mechanism
(GRAM) and the Ilnpl
1
e1nenting Rules for the Recovery of the
Incren1ental Currency, Exchange Rate Adjushnent (ICERA).
62

The GRAM replaced the PP A, which was discontinued when
the unbundling of rates was ilnplen1ented under the EPIRA,
and the ICERA replaced the CERA.
1.30.13 Subsequently, the ERC replaced the GRAM
with the Auto111atic Generation Rate Adjustl11ent ("AGRA").
On 13 October 2004, the ERC issued the
/1
Guidelines for the
Automatic Adjustment of Generation Rates and Systern Loss Rates by
Distribution Ul-ilities."
63
("AGRA Rules") On 20 and 27 October
2004, the ERC issued Resolutions Nos. 10-01 and 10-04,
respectively, both entitled
11
In the Matter of Aniending ~ h
59 NASECORE v. ERC, et al.
60
Ibid.
61
Ibid.
62
Ibid.
63
PromulgaleLi pursuant to Section 43() of the EPIRA and Rule 7 of its IRR; and Section 10
of R.A. No. 7832; A copy of ERC Order dated 13 October 2004 in ERC Case No. 2004-322
is attached hereto as Annex "1" and made an integral part hereof.
23
65
66
67
Guidelines for the Automatic Adjustment of Generation Rates and
Systeni Loss Rates by Utilities."
1.30.14 The auton1alic generation rate adjustment
1nechanisn1 is in the il.ature of an
/1
escalator clause" or
"purchased power or fuel adjusbnent clause" under American
jurisprudence, which is a inethod allowing DUs 'to reflect the
"changing ele1nents of opera ling costs.;. without having to
resort to the ctunbersome procedure of filing a new rate case as
often as n1aterial changes on the factors effecting the
reasonableness of the rates occur."64 This method
/1
guarantees
to the custo1ner that ;he is not charged more than he ought to
pay and to the utility that it gets its due con1pensation for its
services."
65
As such, the DUs are able to their cost of
power purchased in the inost expeditious manner.
66
1.30.15 The use of the above-described power
acljusl1nent clause is a com1non n1echanisn1 and has received
widespread acceptance and approval in many. jurisdictions. In
the United States, this n1echanisn1 has been operating in
various States without difficulty, .including, among others,
Arizona, Arkansas,, Illinois, Iowa, Louisiana, Michigan,
Mimi.esota, Virginia, Ne:w I-Iainpshire, New Jersey, New York,
and South

The acceptability was affirmed in an
A1nerican case, V\rhere it vvas
"The Coni.1nission has for inany years approved
rates for lower costs of electric power that are based
on fuel clause's. The operation of those clauses
results in increases or decreases in rates ;as the cost
of fuel increases or decreases. No objection has ever
been n1ade to rates despite the long period of
their effectiveness. They cannot be distinguished in
Duquesne Light Co. v. Pennsylvania Public Comm., 5 PUR 3d, 141-142; For power traded
in WESM, the price of electricity changes every hour, while for power sold under
bilateral contracts, the price of elechicity alters, taking into consideration variable costs,
such as for fuel which are computed and reflected every billing
Re Lynchburg Gas C., 6 PUR 3d., 34; City of Norfolk v. Virginia Electric and Power Co.,
11 PUR433.
Re Indianapolis Power & Light Co., 1984, 62 PUR 4th ed. 666.
Re Worcester Gas Light Co., 9 PUR 3d [1955] 1952, 1956; Re Hartfor,d Electric Light Co.
[La 1952] 95 PUR NS 161; Ex Parte Gulf Utilities Co .. [La 1950],' PUR NS 225; National
Forge and Ordinance Co., v. Pe1msylvania Electric Co. [Pa. 1953], 99 PUR NS 161; Re
Community Pub. Service Co.! [NM 1951] 93 PUR NS 18; Re Duke Power Co. [NC 1948] 75
FUR NS 65; Re Rush Counhy Rural Electric Membership Corp. [Ind. 1947] 72 PUR NS
128; Re Wisconsin Michigan'Power Co. [Ws 1948], 76 PUR NS 153; Glens Fall Portland
Cement Co. v. New York Power & Light Corp. [NY 1947] 69 PUR NS 37.
24
effect fron1 the escalator provision proposed here.
Electric rates with'fuel clauses were considered and
accepted by this commission 1nore than thirty years
ago."68
1.30.16. The PPA inechan.isn1 was then the 1nost
convenient, fair and necessary way of allowing MERALCO to
recover frorn its custon;iers. the increases in the cost of power
purchased fro1n GenCos. Under the said mechanis1n,
MERALCO turned over to the GenCos the collection for the
PP A portion of the billings, without retaining any single
centavo thereof. The cost recovery ,device was dictated by the
situation whereby the_ cost of purchased power was unstable
due to escalating fuel oil prices and fluctuating foreign
I
exchange rate, over which 1natter MERALCO had no conhol.
Moreover, these are n1a,tters of public knowledge or are easily
verifiable. -
1.30.17 Thus, this Honorable Court in Emmanuel T. Santos
v. Manila Electric Cmnpany
6
9 already upheld the validity of the
PP A n1echanisn1:
"Petitionel' E1nmanuel T. Santos filed this
action for prohibition and mandainus on November
19, 1981 to prohibit respondent xxx (Meralco) from
including the "puTchased power adjushnent" or
PPA in its billings for delivery of electric services.
I-le contended that 'pp A is unla-wful, arbitrary,
oppressive, and a den.ial of due process.
The issue of validily of the .PP A was settled
in Concerned '1Von1en of the Philippines, et al., v.
National Power Corporation, et al.; and Perla C.
Bautista v. Boardiof Energy, et al., (G.R. Nos. 63354
I
and 63267, J n u i ~ y 30, 1986):
"Insofar as Meralco is concerned, the increase
in its basic rates :was, therefore, brought about by
the increase in 1'.ates of the NPC fron1 where it
purchases power: for disl-ribution to its custorners.
The fonnula used and its application allows the
6
B 7 PUR 3d 108, 112, 113, citing Re Virginia R. & Power Co.- PUR 1921C 193, 208; Re
Lynchburg Traclion &: Light Co. PUR 1921E 87.
25
recovery of increases in the cost of the power
purchased fron1 NPC. In other words, the PP A
cla1,1se in only a
1
.cost pass-through' device. The PPA
clause was approved by BOE as early a's May ~
1980 in BOE Case No. 28-86. The petitioners should
have appealed front that decision if they felt that
the PP A was invalid as a schen1e or would result
in over recovery by Meralco. xxx
The Petitioners have failed to show that the
BOE erred in its appreciation of the 1nathematical
con1putations submitted by both petitioners and
respondents to substantiate their respective
positions on the validity of the approved rates.
xxx"
70
Securing Adequate Electricity either
Through Bilateral Contra.cts or Through
t-he Wholesale Electricity Spot Market
1.31 Under the regulatory set up in EPIRA, the obligations of
the DUs' (such as MERALCO) are, a111ong others, to provide
distribution services and c9nnections to their systems for any end-
user within their franchise area consistent with the distribution code
71
and to supply electricity to their custo1ners in a least costn1.ani1.er.
72
1.32 The DUs' respopsibility is in consonance with the policy
of the EPIRA to ensure quality, reliability, security and: affordability
of the supply of electric power. To note,
/1
affordability" of electricity
is only one of the declared policies in the EPIRA. Equally important
are the quality, reliability and security of power supply to, among
others, avert the 1nore disruptive and dan1aging blackouts.
1.33 In. carrying out its obligation, MERALCO is not required
to, and ca1u1.ot,
/1
over-source" eiectricity supply because doing so
would result in higher electricity cost, which 1nay violate the
principle of "affordability"! On the other hand, even if prices in the
1narket are high, IvlERALCO cam1ot afford NOT to buy or withdraw
less power fro1n the grid because it would result in inadequate
supply, which could result to blackouts, and thereby may run
70
Emphasis and underscoring supplied.
71 See EPIRA, Section 22.
n Illid., Section 25.
26
counter to the principles of quality, reliability and security in the
.EPIRA.
1.34 MERALCO, as a!DU, has -Lwo (2) options where to source
or buy electricity-eithet: [a] directly fron1 the GenCos, through
PSAs/bilateral ag:reen1ents 1or [b] through the WESM, which is a
con1n1odity n1a:rket where electricity is traded.
1.35 As the Market Operator, the Philippine Electricity Market
Corporation ("PEMC") is the ad1ninistrator of the WESM. It is
responsible for the day-to-day operations of the WESIYI, as well as the
registration of WESM ine1nbers. PEMC, as the inarket operator, is
also responsible for coordinating all the corrunercial aspects of WESM
lTansactions. The chainnan: of the PEMC Board of Directors is the
Secretary of the DoE.
1.36 When MERALCO buys generated electricity directly from
the GenCos, the tern1s and conditions, including . the rates, are
governed by the PSAs. The terms of these PSAs, including the
generation rates and the corresponding formula for the computation
of the generation costs, are approv.ed by the ERC. On .the other hand,
if the generated electricity is, sourced from the WESM, t ~ n the prices
are governed by the dictates of the market and determined in
accordance with the PDM approved by the ERC, after due notice and
public hearing.
1.37 Currently, the. trading process at WESM works in this
inmuler:
a) PEMC, or the Market Operator, determines the total
den1and for elecb:icity for each hour of the next clay.
b) The sellers or GenCos, sub1nit offers, essentially
telling PEiYIC they are willing to sell elechicity at a certain price
(e.g., 100 nlegawatts at P10 per nlegawatt:) (the Supply).
c) PEMC then ranks the offers fron1 the lowest to the
highest price, until it has enough supply offers to 1neet the total
de1nand for power.
d) The last highest price offered to n1eet tl1:e buyer's
den1and beco1nes the WESM' s clearing price for the hour and is
the price paid to all the sellers who were dispatched by
PEMC/NGCP to nleet the de1nand.
27
e) Power supply contracted tluough PSAs ntust also
be offered to the WESM wi.der the gross pool concept, but
nonnally at zero price or at variable cost to .assure dispatch of
the PSA plant. I-Iowever, settleinent of prices under PSAs is
done outside the 1narket where the DU pays the GenCos
directly using the contracted price under the PSA' s.
f) : The generators produce the arnount of power (MW)
according to the dispatch instruction fro1n the PEMC/NGCP, in
accordance with PEMC's dispatch schedules, and ,co1npliance
with dispatch inshuction is n1onitored by NGCP.
g) Load custo,1ners (such as DUs) withdraw power
fro1n the grid at vvhateyer price has cleared for ead1 hour of the
billing n1onth.
h) The is distributed. to hous.eholds and
businesses tluough DU:s, like MERALCO, who buy power from
the WESl\1.
1.38 The hading in WESM is on an hourly basis. The prices,
which are driven by ni.arket forces, increase or decrease, by the hour,
depending on one hand ori demand fron1 households, 1nanufacturers,
office buildings, and other consumers and, on the other hand, the
available supply of eleclTicity. The ERC-approved PDM is the
1nechanisni. that calculates the clearing prices in the WESM in
accordance with ERC-approved algoritluns.
1.39 For the first five (5) years of WESM c01mnercial
operations, DUs were required to source at least ten percent (10%) of
their power ron1 WESM. As the five-year period has already lapsed
and the prices in WES1\II are volatile, and in fact, exRected to be
higher during peak periods compared to the prices of eleclTicity
under the PSAs, MERALCO :endeavors to ke.ep sourcing fro1n WESM
beknv 10%. Nevertheless, as1MERALCO cami.ot and should not over-
contract with GenCos under; PSAs, MERALCO still dee1ns it prudent
to \tVithdraw power fron:i. the grid through the WESM for
contingencies or residual requirements.
The rates charged, or the fonnula to
derive such rates, by MERALCO were
approved by the ERC and other relevant
govermnent agencies after the
appropriate notice and hearing
28
1.40 All charges, the actual rate imposed, or' the formula
used to derive the rates, that cmnprise the electridty bills of
IVIERALCO' s customers are hpproved by the ERC.
1Al In the same inanner, the distribution 'charges of
Iv1ERALCO are always approved by the ERC, with the
provisions of the EPIRA, and the EPIRA IRR, which issued by
the DoE and approved .. by the Joint Congressional Power
Comn1ission on 27 June 2001. The EPIRA .IRR was .issued only after
proper notice and hearing were accorded to relevant stakeholders.
-
1.42 Specifically, the distribution charges of MERALCO
con1plied with Section 4(e). of the EPIRA IRR which provides the
following procedure for rate adjustments:
. .
(a) The interested party shall file a verified application
or petition, acco1npanied by:
1. Acknowledgn1ent of receipt of a copy by the
local legislative body;
2. Certifica.tion of a notice of publication;
(b) The ERC n1ay issue a provisional orde:r granting or
denying .the application or petition for not later than seventy-
.five (75) days;
(c) The ERC shall conduct a forn1al hearing on the
application or petition, with:
l. Notice to all parties concerned;
2. At least one public hearing conducted in the
affected localily;
(cl) The ERC shall decide the 111atter on the merits not
later than lwelve (12) 111onths fron1 the issuance of the
provisional order.
1.43 The PSAs between Iv1ERALCO and. which
contain the generation cost con1ponents and the formula for
cornpuling the variable cost components charged by GenCos are
also approved by the ERC. Sirnilarly, as earlier explained, the prices
29
o.f electricity bought by l\tIERALCO fro1n the WESM, ire determined
in accordance with the PDM approved by the ERC. l
1.4L1 On the other hand, the generation charg. passed-on by
l\1ERALCO to its custo1ners is in accordance witi1 the formula
specified in U1e relevant guidelines approved by U1e Etc.
1.45 On 16 August 2006, this' Ho1i.orable Oourt issued a
in NA.SECC:RE, et al:, v. Energy and
NIERALC0,7
3
which: (1) recognized the ERC s power[ to. promulgate
rules, guideline and metho&::>logy for the recovery by the distribution
utilities of their fuel and pui-chased power cost and (ii} that
"unless Section 4 (e), Rule 3 of the.IRR of the EPIRA aiended, the
adjusti11ents of rates based .on purchased povver or fuel adjustment
costs shall not or in no case be "auto1natic" ." ThJs, , clearly, this
I-Ionorable Court, recognizes that there are certain chkrges that 1nay
be auto1natically charged to custon1ers provided tha1
1
1
t the pertinent
rules be an1ended.
1
I
1.46 On 21 June 2007, the DoE made the ameldments to the
EPIRA IRR and pron1ulgated the" Amendments to Sectibn
1
4(e) of Rule 3
and Section 7 of Rule 18 of the Implementing Rules and RJgulations (IRR)
of Republic Act No. 9136 otherwise known as the ElectriciPower Industn;
Reform Act (EPIRA)." Essentially, the amend1nent was to render
Section 4(e) not applicable to generation rate and other
sin1ilar rate adjushnents involving pass-tluough cl:harges. Thus,
insofar as the 1nonthly. a,djusbnents 0 ,generatioh charges .
concerned, the requiren1ents of publication, and hearing
were dispensed with, subject to verification by tlie ERC of the
generation charges passed on by the DUs.7
4
Section 4 (e), in part,
novv provides: I
13
74
I
"Section 4. Responsibilities of the ERC.
I
(a) Any application or petition for rate adjusbnent
or for any relief affecting the customers 1nust verified,
and accon1paniecl wiq1 an acknowledgement receipt of a
copy thereof by the Legislative Body of locality
where the applicant or petitiorrer principally j operates
together with the certification of the notice of pf blication
'
i
. . I
G.R. No. 163935, August 16, 2006, 499 SCRA 103. I
In accordance with the ERC Resolution No. 16, Series of 2009,.MERALCO.has filed
Petitions before the ERC for the confirmation of the subject pass-through charges. The
Pelitions are currently pending: before the ERC. I
30
I
I
thereof in a newspaper of general circulation in the sa1ne
locality
xxx
Thereafter, the ERC shall conduct a forn1al :hearing
on the application or 'petition, giving proper notic,es to all
parties concerned, with at least one public hearing in the
affected locality, and shall decide the 1natter on ni.erits
not later than twelve (12) 1nonths from the issuante of the
afore1nentioned provisional order.
xxx
This section 1 il;l shall not apply to Gene:uation Rate
Adjustn1ent Mechanisrn (GRAM), Incremental Currency
Recovery Adjustment (ICERA), Transhtission
Rate Adjusbnent Mechanism, Trru1sn1ission True-up
Mechanisni., Syste1n Loss Rate Adjustment Mechanism,
Lifeline Rate Recovery Mecharusrn, Cross""Subsidy
Mechanis1n, Local Franchise Tax Recovery Mechanism,
Business Tax Recovery Mechanis1n, Automatic
Generation Rate Adjush11ent Mechanism, and Recovery
of Deferred Accotmting Adjustment for Fuel i Cbst and
Power Producers .Qy NPC. and NPC-SPUG, Provided that,
such adjusbnents shall be subject to subsequent
verification by the ERC !_Q avoid over I under recovery of
charges."
1A7 Notably, Petitioners NASECORE et al., did, not question
the AGRA Rules at the tini.e notwithstanding it actively participated
in its adoption or prornulgation.
1.48 On the other hand, for the lTans1nission charge, the NGCP
ni.akes a separate filing or application with the ERC the approval
of its Maxin1un1 Allowable Revenue ("MAR"). Once, the MAR .is
approved by the ERC, this. arnount is translated intd transmission
charge to be collected by NGCP fro1n its custon1ers, such as the DUs,
and for the DUs to pass tluough and collect fron1 t11eir customers.
31
1.49 The adoplion of the autornatic generatioii. rate adjustnl.ent
is absolutely necessary for the DUs and the public. As tonfirn1edin
the DoE' s statement dated 22 June 2007, the EPIRA IRR!A1nend1nent
will allow the tin1ely recovery of generation and foreign exchange
related costs, thus:
"111e 1 f
imp ementation. o - auto1natic recovery
i11echanisn1 will shield consu111ers frorn the burden of
additional cost given that consumers are often
to additional costs because of interests on, deferred
charges. This way, we will be able to balrui.ce the need for
consun1er protection, of. due. process ru1d
enabling business to beco1ne financially viable. xxx:
This will also provide the ERC inore tin1e to' attend
to other equally iinportant rate applications. Under the
current systern, if all distribution utilities will: apply
inonthly to adjust generation rates, the ERC will be
swainped with approxilnately 1,680 applications ru1d
hearings in various localities in a year."
I
1.50 The EPIRA IRR A1nenchnent was approved' by the Joint
Congressional Power Conlffiission ("JCPC") on 7 June
1
2007. In the
deliberations, the JCPC acknowledged that: (i) auto1natic
adjus tn1ents of pass-tluough charges were aheady in plate even prior
to EPIRA; (ii) the requirement for notice and hearing was inerely in
the old EPIRA IRR and not in the EPIRA itself; (iii} there was a need
to antend the EPIRA IRR because the then regulation was an
"acln1inistrative nighhnare" and resulted in higher cost for the
'consu1ners because of carrying costs; and (iv) the automatic
adjustn1ents do not inure to the benefit of the DUs such being merely
pass--through charges.7s
1.51 The EPIRA IRR An1endn1ent was passed hi view of the
pass-through nature of generation charges. Without an automatic
generation rate adjushnent, the DUs will be in dru1ger of significant
cash shortfalls if generation charges and other pass-through charges
are not recovered in a tin1ely and efficient manner. This is
particularly true considering the volatile market conditions that are
beyond the control of the DUs, brought about by different factors,
75
Copies of the 7 June 2007 TSNs of the JCPC deliberations are attached hereto as Annexes
"2" and "3" and made integral parts hereof;- A copy of the JCPC letter to then DoE
Secretary Raphael Lotilla dated 20 June 2007 confirming the amendment in the IRR is
also attached hereto as Annex "4" and made an integral part hereof.
32
such as the inaintenance or unannounced shutdowns of certain
power plants, the increase in fuel prices and the unpredictability of
foreign exchange rates, and the market-dictated prices iniWESM. The
. I
AGRA Rules serve to ensure not only the financial staqility of DUs
and the viability of the GenCos, but inore importantly the long-term
interest of the consurners who will be ultilnately affected by the lack
of supply or generation capacity and the inability of the DUs to
provide efficient and reliable service clue to the lag in the recovery of
the "pass-tluough" charges ..
1.52 The approved for the automatic adjustment has
been put in place because the require1nent for prior approval of the
prices every tiine a DU would withdraw power from thE7 grid would
prevent the DU fr01n hnmediately buying power from WESM when
the need arises. The delay in the recovery of generation cost entails
carrying cost on the part of the GenCos so that they can pay their
lenders, which also charge interests. The carrying cos't is then billed
to the DUs and forms part of the electricity bills of the DUs'
custon1ers because carrying costs are considered of ithe prudent
and reasonable cost incurred by the DUs as the delay ip the collection
is not a result of the DUs' negligence but brought about by the
process in1posed by regulation. '
1.53 Ulthnately, it is the consun1ers who bene{it from the
autornatic generation rate adjushnent inechanism, as the DUs will not
only have the resources to ensure the efficiency, reliability and
quality of power supply, but carrying costs are avoided.
Conversely, if the DUs are made to suffer cash-flow due to
delayed collection of generation charges, they might be unable to
purchase the needed electricily for the succeeding rponths. The
resulting blackouts would have dire consequences to the economy,
and even national security.
l.54 It bears pointing out that the auton1atic generation rate
adjustn1ent is subject to a post-verificatio1-\ process 'by the
ERC, to protect the public interest by ensuring that only the correct
arnounts are passed on to the consu1ners in accordance 1 with EPIRA
and EPIRA IRR.
'
1.55 Section 45 of the EPIRA grants the ERC suffiFient powers
to address any rnarket power abuse by any poV\('er industry
participant that inay be brought about by the auton1atic adjustn1ent,
and order refund of any e?<cessive collection. The ERC shall, motu
proprio) 111onitor and penalize any market power abuse or anti-
33
co1npetitive or discriminatory act or behavior by any partidpant in
the elecb.ic power industry, Upon finding that a markJt participant
has engaged in such act or behavior, the ERC shall stoi:? and redress
the sarne. Such ren1edies shall, without limitation, i include the
i111position of price conh'ols, issuance of injunctions, and imposition
of fines and penalties puTsuant to the EPIRA.
1.56 Thus, based on law and regulations, eveni if there are
excess payn1ents of generation charges to GenCos, the ipublic is not
without any remedy as these GenCos may, an1ong be ordered
I
subsequently to refund the excess amount to the DUs, and the DUs,
. '
in turn, will hand the refunded arnount over to their
lvialanipaya's and other GenCos' shut
down 1nainly contributed to the supply
constriction and thus, the power - rate
hike
1.57 When SPEX-Malarnpaya Deep Water Gas-to-Power
Project ("Malan1paya") shut down for periodic 1naintenance on 11
T\foven1ber 2013 to 10 December 2013, the generation charges
increased give1.1 that the den1and ie1nained the sa1ne,' the supply
was considerably reduced.
1.58 Malan1paya uses deepwater technology, drawing natural
gas fro1n deep beneath the Philippine waters. The indigenous gas
fuels three natural gas-fired power stations, i.e., Ilijan,
1
San Lorenzo
and Santa Rita, which supply an aggregate capacity of 2700MW to
I
l\1EH.ALCO's f-ranchise, or about 40% to 45% of Luzon's power
generation req uire1nents.
1.59 Malarnpaya is allowed to conduct a scheduled
inaintenance shutdown equivalent to fifteen (15) days every year.
Unused scheduled n1aintenance days can be carried forward to the
following year provided the aggregated scheduled days
shall not exceed thirty (30) days per year. For this year's!maintenance
period, the original shutdown period was fro1n 1 Nove,rnber 2013 to
. I
30 Noven1ber 2013, but was rnoved to 8 Novernber 2013 to 7
Decen1ber 2013. I--Iowever, the start of the shutdown was again
n1oved to 11 November 2013 to 10 Decen1ber 2013 because of
l:yphoon Yolanda.
-:
1.60 The Malampaya shutdown also coindided with the
inaintenance shutdown of other power plants, suchi as Pagbilao
Power Plant - Unit 2, Ilijan Po-wer Plant - Unit 2, Power Plant
- Unit 2 and San Lorenzo Power Plai1t ...... Module 50.' In addition,
iviodule 60 of San Lorenzo Power Plant was still undergoing repair
during the saine period. Moreover, there were also
1
other power
plants that experienced forced outage (i.e., QPPL, Sual 1, Calaca 1,
lVIasinloc 1 and GN Power, 2) dl.1:ring the san1e period.', Particularly,
the schedule of the shutdown of the various power plants which
overlapped with that of Malainpaya was as follows:
a) Power plants with scheduled shutdown
coincided or overlapped with Malampa:xa shutdown
schedule:
Power Plant
Pai:;bilao 2
GNPower2
Santa Rita Unit 20
Ilijan 1
Santa Rita Unit 30
Capacity
(in MW)
Scheduled
Shutdown Period
' I
(*extended its shutdown)
350 31 August - 26 November 2013
300 . 26 Septe1nber -10 r..:r.ovember 2013*
250 23 - 28 October 2013*
1
600 29 - 30 October 2013*, 5 - 11
December 2013
250 31 October - 2 Noven1ber 2013*,
18 - 22 Deceni.ber 2013 ,
1 November - 9 Dece1nber 2013 San Lorenzo Unit

Santa Rita Unit 20 250 3 Nove1nber 2013*
250
Ilijan '.:=-2 _____ _i _ -_1_5_D_e__;___c_em+, _b_e_r_2_01_3_--1
Calaca 1 300 24 Decen1ber 2013 -I 10 January
2014*
b) Various power plants also_ weryt on. a fo,rced outage on
dates overlapping with the Malan1paya shutdown:
Power Plant Capacity Forced Outage Period
(in MW)
i
Calaca 1 300 26 October -15 Noverr:iber 2013
Calaca 2 300 17 - 18 December 2013'
Gl'J Power 1 300 1 - 2 November 2013
Gl'J Power 2 300 10 - 19 November 2013,
GT'J Power 2 300 27 Nove1nber - 8 December 2013
GNPower2 300 11-17 Dece1nber 2013
1
,____
35
Ilijan 1
Ilijan 2
Masinloc -1
IV1asinloc - 1
Masinloc - 2
Masinloc - 2
Masinloc - 2
Masinloc - 2
Pagbilao 1
Pagbilao 2
San Lorenzo Mod
600
600
300
300
300
300
300
300
350
350
250
8 -10 Nove1nber 2013
8 - 9 November 2013
31 October - 7 N oven1ber 2013
6 - 8 Dece1nber 2013
6 - 8 November 2013
24 November 2013
4 - 6 December 2013
13 -16 Dece1nber 2013 i
29 November - 13 2013
. .
29 November - 14 December 2013
11 - 12 Dece1nber 2013

50
14 - 17 Dece1nber 2013 . San Lorenzo Mod
50
San Lorenzo Mod
60
Sta. H.ita I\/Iod 10-40
Sual 1
250
250 28 May-10 Decen1ber 2013
250 11 December 2013 .
600 22 - 26 Octa ber 2013
1.61 In anticipation of the l\!Ialainpaya shutdown, MERALCO
in1ple1nented measures to 1nitigate the impact of the: Malampaya
shutdown on the generation charge to its custo1ners. Particularly,
MERALCO contracted through PSAs at least ninety of
I
its peak power requiren1ent to avoid the volatility of WESM prices.
In addition, First Gas Power Corporation, which operatbs Santa Rita
plant, inquired whether it win run the plant using! liquid fuel.
MERALCO consented to ensure sufficiency of supply to n1eet its
povver require1nent.
1.62 I-Iowever, despite these n1easures, MERALCO still had to
secure additional electricilyrequirements fro1n the WESM in order to
continue supplyhtg electricity to its customers within i its franchise
. I
area. Consequently, as the prices in the WESM turned out to be
higher since the supply levels were low as a result of and
due to the use of m.ore expensive fuel by the Santa Rita and SPPC
I
plants, the Decen1ber 2013 electricity billings o.f MERALCO's
custon1ers significantly increased, with the total cost for
the Novetnber 2013supply1nonth ainounting to PhP22.94 Billion. To
en1phasize, however, the increase in generation cha11ges was the
result of a surge in WESM prices ai1d t11e use of n1ore expensive .fuel
for the Malan1paya gas-fired plants to be able to supply adequate
puwer, and the increase was not due to the distribution charges being
collected by MERALCO.
36
I
1.63 It bears to einphasize, however, that the generation
charge spikes in MERALCO's November and 2013 supply
rnonths (which cover the Dece1nber 2013 and Januaryi 2014 billing
1nonths) are isolated, and primarily the/ result of an
abnonnal confluence of simultaneous and forced or
unscheduled outages, including extended and shutdowns
of n1ajor power plants, leading to extraordinary high WESM prices.
These occurred as did the use of liquid-fuell such as condensate and
bio-diesel (which are inore expensive than natural gas) by the gas-
fired power plants during the maintenance shutdown of the
lVIalarnpaya gas facilities.
1.64 Prior to this of events, the generation cost was
relatively stable. There was adequate supply that was enough to keep
prices at inanageable levels. In fact, prior to the lYialhn1paya and
other power plants' shutdowns, the October 2013 charge
covering the Septernber 2013 supply rnonth cost, as low as
PL1.68/kWh.
1.65 Further, the average generation charge for 2013, even
including the PhP9.107 /kWh generation charge for Decefriber 2013, is
still lower at PhP 5.6367 compared with the average generation
charge in 2012 of Ph.1?5.7517 /kWh.
I
GENERATION CHARGE RATE
I
I
I
2012 12013
..
January 5.L1643 5.7910
February 5.5774 5.2414
March 5.3348 5.1865
April 5.6621 5.3873
May 5.5983 5.4704
June 6.1375 5.6580
July 6.L1549 5.3269
August 6.7397 5.0479
September 5.3965 5.1747
October 5.4979 4.6832
November 5.6331 5.6673
.Decen1be:r 5.4817
9.1070
Average 5.7517 5.6367
37
l\.1ERALCO's efforts to mitigate the
generation clnirge increase
1.66 The AGRA Rules establish a process for the automatic
I
adjustment of Generation. Rates and System Loss Rates by DUs.
Specifically, under Article III, Section 2 of the AGRA Rules,76
I\1ERALCO is authorized to auton1atically reflect the full generation
cost of PhP22.64 Billion in its Dece1nber 2013 billing to customers,
as calculated in accordance with the adjustment fonntila laid down in
Article III, Section 1 of the same rules.
1.67 While MERALCO was legally authorized. toj pass on the
resulting increased generation charge, it saw. it fit to measures to
address the drastic effect . the increase may have. i MERALCO
prepared an action plan to nutigate the effects of the shu,tdowns, and
the resulting increase in the electricity bills of the consu1ners within
its franchise area.
1.68 MERALCO took measures to lessen its exposure to the
\!VESl\II, where electricity prices are known to be highly volatile and
difficult to forecast due to factors such as global , fuel prices,
fluctuations in foreign exchange rates, and the unpredictable spikes
and dips in supply and clen1and. Recently, the high prices in WESM
'Were n1ainly attributed to the shutdown of the Mala1npaya and other
po\.ver plants.
1.69 MERALCO consented to .Sta. Rita Power Plant's use of
liquid fuel, and the re1naining operating portion of Ilijan Power
Plants' use of bio diesel, while Malainpaya was not available during
the rnaintenance

1.70 l\IIERALCO also' entered into a PSA with Mobile,
Inc. (''"TIVIO") which the ERC provisionally approved im its Order
dated 4 Nove1r1ber 2013 recogiuzmg that "[t]he timely
hnple1nentation of the PSA will best serve the interests of the
I
consun1ers."
78
76
77
78
13 October 2004 Order in ERC Case No. 2004-322, entitled, "In the Matter of the Adoption
of the Guidelines for the Automatic Adjuslments of Generalion Rates and System Loss
Rates by Dishibution Utilities."
Copies of the letters elated 8 August 2013 and 6 August 2013 are attached hereto as
Annexes "Ei" and "5-1" and made integral parts hereof. A copy of the lFtter dated 12 July
2013 is also attached hereto as AnneK "6" and made an :integral part
ERC Order dated 4.November 2013, par. 1, p. 1.
. 38
1.71 IYIERALCO, through letters, also requested power
plants to inove their scheduled shutdowns so as not to coincide with
the Nlalan1paya shutdown. In a letter dated 16, o;ctober 2013,
.rvIERALCO requested South Pre1niere Power Corporation ("SPPC")
to re-schedule the 111aintenance outage of Ilijan Block 2 to some other
date that will not coincide with the Malan1paya outage. The pertinent
portion of the letter states:
"We have 1nade a forecast of WESM prices ifor the
supply 1nonths of Noven1ber and December 2013; in
which the SPEX - Malampaya outage 'will take.
place, and we foresee that [the] generation )charge
will greatly increase during' such period. Asl one of
our re1nedial n1easures to lessen the burden to
eleclTicity end users, we would like to you
to n1ake representations withKEPCO Philippines to
ask therr1 to re-s.ched ule the maintenance .ou,tage of
Ilijan Block 2 to sb1ne other date that Will not
coincide / overlap with the Malampaya If
we can run Block 2
1
its 420 IYIW contribulioll. to the
Luzon Grid will temper t11e increase in [WESM
prices, and ulthnately, reduce the cost of electricity
for all consun1ers in Luzon."79
1
1.72 I-Ioweve:r, in a letter dated 23 October l 2013, SPPC
inforn1ed MERALCO that Ilijan Block 2 could no longer re-schedule
the rnaintenance outage since it had schedule of
their Specialist, Teclu1ical Advisors and other 1nanpower and
rnaterial requiren1ents.so Similarly, MERALCO wrote a letter dated
21 October 2013 to Se1n-Calaca Power Corporation to request the
delay of the shutdown of Calaca 2 to avoid with the
Malmnpaya shutdown.s
1
1n a letter dated 15 2013, Sem:..
Calaca Power Corporation infonned MERALCO that, as requested,
Calaca 2 would move its 111aintenance schedule fro1ni 1 Deceni.ber
2013 to 11 December 2013. s2
79
80
81
82
I
A copy of the 16 October 2013 letter of MERALCO is attached hereto as Annex "7" and
made an integral part hereof. '
A copy of U1e 23 October 2013 letter-response to MEE.ALCO is hereto as Annex
"8" and made an integral part hereof.
A copy of the 21 October 2013 letter of MERALCO is attached hereto as .Annex "9" and
made an integral part hereof . ,
A copy of the 15 November 2013 letter response to MERALCO is cittached hereto as
Annex "10" and made an integral part hereof
39
1.73 Furthermore, ME,RALCO proposed various methods to
further reduce its pssible exposure to WESM, duri:qg the various
coordinatioii. rneetings an1ong SPEX, NGCP, SPPC, Co.
(''KEILCO"), NPC, Power Sector Asset Liabilities Management
' ,.
Corporation ("PSALM"), First Gas Corporation ("EGPC") and
FGP Corp. held on L! Nove1nber 2013. MERALCO also, conducted
other coordination ni.eetings on 10 October 2013 and 30 July 2013 on
the scheduled Malampaya shutdown. MERALCO also proposed to
explore the use of adn1inistered price at WESM the
]\!lalan1paya shutdown. ,
1.74 However, despite these n1easures, MERAL,CC( could not
substantially reduce its exposure to WESM for the clration of the
J\!Ialan1paya and other power plants' shutdown. Notably,i aside fron1
scheduled rnaintenance, there were a number of powei;- plants which
extended their shutdowns and several also sustained uhscheduled
' ' I
shutdovvns. The following power plar1ts had scheduled outages:
Power Plant Capadty Scheduled Maintenance Shutdown
(in MW) Period
(*extended its shutd,own)
!!
Pagbilao 2 350 31 August - 26 Noven1ber
GNPower 2 300 26 Septe1nber - 10 Novemlj>er 2013*
Santa Rita Unit 20 250 23 - 28 October 2013*
Ilijan 1 600 29 - 30 October 2013*, 5 - 11
Decen1ber 2013
i
Santa Rita Unit 30 250 31 October -2 Noven1ber 2013*,
18 - 22 December 2013
San Lorenzo Unit 250 1 November-. 9 Dece1nber: 2013
50
I
Sai).ta Rita Unit 20 250 3 Noven1ber 2013*
Ilijan 2 600 9 Noven1ber -15 2013
Calaca 1 300 24 Dece1nber 2013 -10 Janary 2014*
I
On the other hand, the following power plants encountered
forced/ unscheduled outages:
Power Plant Capacity Forced Outage Period
(in MW) i
Calaca 1 300 26 October -15 2013
Calaca 2 300 17 -18 December 2013 ,
I
GI\J Power 1 300 1 - 2 Noven1ber 2013
--
40
-'
GN.Power2
300 10 -19 Nove1nber 2013
Gl\J Power 2 300
'
27 N oveni.ber - 8 2013
"
Gl\J Po\!\Ter 2 300 11 - 17 Dece1nber 2013
Ilijan 1 600 8 -10 November 2013
Jliian 2
600 8 - 9 N ove1nber 2013 . '
Masinloc -1 300 31 October - 7 2013
Masinloc -1 300 6 - 8 December 2013
I
Masinloc - 2 300 6 - 8 N ove1nber 2013
I
Masinloc - 2 300 24 November 2013
i
i
Masinloc - 2 300 4 - 6 December 2013 !
Masin.lac - 2 300 13 - 16 December 2013
!
Pagbilao 1 350 29 N ove1nber - 13 Decemlj>er 2013
Pagbilao 2 350 29 November - 14 Dece1n*er 2013
San Lorenzo Mod 250 11 - 12 December 2013
!
50
San Lorenzo M:od 250 14 - 17 December 2013
i
!
50
I
San Lorenzo Mod 250 28 May-10 December 2013
60
I
Sta. Rita Mod 1. 0- 250 11 Decen1ber 2013
tlO
Sual 1 600 22 - 26 Octa ber 2013
'
i
1.75 On 4 Dece1nber 2013, MERALCO received! the actual
Nove1nber 2013 power bills fro111 its suppliers. The t9tal cost of
generation charges to be
/1
passed-on" to its custoi;nets stood at
PhP22.6t1 billion, translating into a generation for the
Dece1nber 2013 billing period of PhP9.107 per kWh. This
an increase of PhP3.4397 per kWh f-ro1n the generatioh charge of
, . I
PhPS.6673 per kWh that was billed to custo1nersin November 2013.
1.76 Furthennore, since generation charge ilnpacts other bill
cornponents, such as the syste1n loss charge, VAT ar}d the local
franchise tax, the total resulting increase for a 200 kWJ:;i. residential
custo1ner cani.e out to PhP4.1474/kWh.
1.77 Notwithstanding the action plans in1ple,1.nented by
' . I
IVIERALCO, the total generation cost MERALCO had to Rass-on to its
custon1ers in its Dece111ber 2013 billing still amounted Ito PhP22.64
billion, which, under the AGRA Rules, can be readily and
autornatically reflected in the billings. Nonetheless, MEI}ALCO took
it upon itself to address the consequential financial bu1den that its
custo1ners would have had to face.
41
1.78 Notably, with SfTction 2, Article III of the AGRA Rules
dispensing with the necessity of a fonnal notice, ahd hearing,
lVLERALCO, in a letter dated 5 Decen1ber 2013, from
the ERC to ilnplen1ent the increase in generation charge on a.
staggered basis. MERALCO proposed that instead of the
actual generation charge of PhP9.107 per kWh as a one
1
time charge.in
its Decernber 2013 billing, it be allowed to a lower
generation chcirge of PhP7.90 kWh, with the ,to be
collected during the February 2014 billing period. MERALCO's 5
Dece1nber 2013 Letter to the ERC reads, in part:
"Last 10 October 2013, MERALCO
sought an audience with the I-ionorable Conul).ission to
present the projected impact of the SPEX-Malainpaya
["lv'Ialani.paya"] shutdown on MERALCO' s .' blended
generation charge. The shutdown will affect the
of natural gas to the Ilijan, San Lorenzo and Sflnta Rita
plants, which supply an aggregate capacity of 2700Mw to
. I
IVIERALCO' s franchise area. In addition, for the supply
' I
rnonth of Noven1ber, the shutdown will coincide w:ith the
I i
scheduled 1naintenance of Pagbilao 2 and Sual 1. i These
plants collectively contribute over to
MERALCO' s requirements. i
i
"During the said meeting, MERALCO informed the
Con11nissioii. that it has taken measures to the
ill:npact of the Malan1paya shutdown .on the to its
custo1ners. These included allowing First Gas on
liquid fuel and Ilijan to use bio-diesel, and entering into a
power supply agree1nent with Therma Mobile which the
Co1n1nission has provisionally approved. these
. ' I
rneasures, 1YIERALCO showed that the generation
I I
for Deceni.ber 2013, based on projected generatio,n qost for
the Noveni.ber 2013 supply ni.onth, is still expedted to go
up to P7.86 per kwh.
42
"IVIERALCO . yesterday. received the i actual
Novernber 2013 power bills frorn its suppliers. Total cost
of generation to be on to captive custor11-erk stood
at P22.6L! billion, lTanslating into a generation for
December 2013 billing of P9 .1070 per kWh. This is an
' I
increase of P3.44 per kwh.fron1 the PS.6673 per kWh that
was billed to custo1ners last 1nonth and higher; by P1.25
per kWh from the P7.86 per kWh that was presented last
October 10. Furthermore, since the generation icharge
ilnpacts other bill components, such as the
loss
charge, VAT and the local franchise tax, the i re:sulting
effective total increase to a 200 kWh residentialcu!sto111er
is P4.15 per kWh. '
"Under Article III, Section 2 of the for the
Autonzatic Adjustnzent of Generation Rate and 5Y,ste
1
m Loss
Rates by Distribution Utilities ('AGRA Rules'), MERALCO.
is authorized to auto1natically reflect the full genbration
. I
cost of P22.64 billion in its Decen1ber 2013 billing to its
custo1ners, as calculated in accordance with the
adjustment formula laid down in Article III, 1 of
the saine Rules. While MERALCO is 'prepared. to[ reflect
the true cost of generation in its billings to its
this Decen1ber, it is cognizant of the financial btrrdEtn such
rate spike will place on its custon1ers durilig this
Cluistlnas season and consi0-ering further that pricei:;
of other basic con1n1odities have already registered
substantial increases.
1
!
"To nutigate the effects of the abrupt incrrase in
generation cost, MERALCO proposes that of
reflecting the actual generation charge of per
kwh in its Decen1ber 2013 billing, it be al.lu\j\l"ed to
in1ple1nent a lower generation charge of Php7.9Q kwh,
a rnere four centavos higher than the P7.86: kwh
generation charge estin1ate presented to the
last October 10. This would n1ean, however, that of the
total generation cost of P22.64 billion inc;urred in
November 2013, P3 billion will have to be at a
later period. With the expectation that the gerieration
I
charge will norn1alize in February 2014, MERALCO
I
proposes to include the deferred an1ount of P3, bi
1
llion in
the con1putation of the generation charge for February
201 Ll billing. I
43
xxx
"Article VIII, Section 1 of the AGRA Rules provides
I
that 'ERC may allow an exception fro1n any provisid>ns of
these Guidelines, if such exception is found to be in the
public .interest and is not contrary to. law or illfY iother
related rules and regulations.' Considering the
nature of the need to nti.tigate the_ hnpact o.f the Rower
rate spike this Dece1nber, MERALCO respedtfully
requests clearance fro1n the Honorable Co1nmissibn\to: 1)
collect a generation charge of P7. 90 per kwh in its
Dece1nber 2013 billings to its customers; and 2)
1
defer to
' I I .
February 2014 the recovery of.PhP3 Billion, a
portion of the generation costs for the supply 11?-o:r}th of
I\Jove1nber 2013 not passed on to custo1ners in
2013, subject to inclusion of the appropriate cai:rying
charge."
I
1.79 It was based on the foregoh1g proposals qf MERALCO
that the ERC issued its letter dated 9 December /wherein it
agreed that the collection of the generation charge for N
1
ovfmber 2013
be staggered as an exception to the AGRA Rules, in order! to ease. the
elect-ricity consu1ners. In its letter, the ERC to
its nnpnn1atur to the 3-month staggered payment sche111e, starting
. . , I .
with Dece1nber 2013 at the rate of PhP2.00/kWh, Februq.1y
1
2014 at the
, I
rate of PhJ.=>1.00/kWh and the balance in Iviarch 2014, th:U.si
. !
8:3
"The ERC is v\rell-aware of the huge that
MERALCO' s generation charge adjustment will on
the retail rates to its custorners. Given that there iare also
reported increases in the prices of
I '
TvIERALCO' s proposal to stagger the implementation of
I
its generation cost is tin1ely as it will cushion the iJ?-1pact
on the elech'icity consu1ners.
"The ERC therefore grants MERALCO the clearance
it seeks to stagger in1plen1entalion of its generatio:h cost
, I
recovery by way of an exception to the AGRA Rules.
, I I
Accordingly, MERALCO is to a
generation charge of PhP7.67 /kWh in its December 2013
billing and add its. calculated generation for
February 2014 billing the generation charge of
I
Please see Arinex "C" of Petition in G.R: Nu. 210245 and Annex "H'' ofi Petitiorr in G.R.
No. 210255.
44
!
I
. I .
PhPl.00/kWh. The balance on the deferred
charge without any carrying costs shall be inlutled in
NIERALCO's generation charge for March 2014. Should
I
NIERALCO seek to recover its canying costs on entire
. ,. I
deferred ani.ount, it shall file a fonnal application on
!
this.
84
I
"The foregoing should not in any way be c;:ortstrued
as a confirmation of IvIERALCO' s generation/ costs
, . ' I
incurred in November 2013, which shall ren1ain of
the confinnation and post-verification proceJdihgs in
accordance with the applicable ERC resolution the
rnatter."
. . .
1.80 Taking its cue from .the ERC's land prior to
receipt of this I-Ionorable Court's TRO on 23 [)ece1nber 2013,
IVIERALCO consequently released its December 20131 bills to its
custon1ers, which included the PhP2.00/kWh in the
generation charge, an1ong others. 3.8 nlillion have
received their respective December 2013 bills. I
i
1.81 Subsequent to the events raised in the Pet,iti9ns,. i.e., after .
l\/lERALCO' s 5 Decernber 2013 letter and the ERC' s 9 Dece1nber 2013
reply, and thus, presurnably already beyond this Ho11otable Court's
TRO, MERALCO already anticipated that the
generation charge for Dece1l.1ber 2013, which is to be in the
January 2014 billings to MERALCO' s custo1ners, will be Thus,
l\IIERALCO was again conslTained to seek guidance the ERC on
hu\v to address this 1natter. '
i
1.82 Specifically, on 19 Dece1nber 2013,ss before rbceipt' of this
I-Ionorable Court's TRO, MERALCO wrote the ERC ekpressing its
concerns on the possibility that the generation chargef fot the January
' ' I
2014 billing period will be. significantly higher than the estin1ated
PhP?.37 /kWh, as the bills of the suppliers were still t6 received on
the 26th 0 Decen1ber and validated until the early of the next
billing ni.onth.
B1 Emphasis and underscoring supplied. I
BS A copy of MERALCO's 19 December 2013 Letter is attached hereto as Annex "11" and
made an integral part hereof l
45
I
- - I .
1.83 Aeling on the 19 December 2013 letter of MBRALCO, the
EH..C issued-an Order dated 20 Decen1ber 2013, which states that:
I
I
... "On December MERALCO, its
initial assess1nent again wrote the Comrtuss10n
expressing its concerns on the _ possibility
1
the
generation charge for January 2014 will be
higher than the esthnated PhP7.37 as bills of
the suppliers are still to be received after the of the
rnonth and validated until the early days of i next
billing inonth.
xxx.
I
In view of the foregoing and to 1nitigate the
of the ilnpending generation charge adjustment upon
MERALCO custo1ners, the -- Co1nmission herelJy !directs
MERALCO to n1aintain its generation at
PhP7.37 /kWh for the affected billing periods until further
notice and approval of its application for the] re:covery
schen1e. Consequently, MERALCO is directed to file said
application within ninety (90) days from receipt
, I
' ' ' i
1.84 Nevertheless, beginrting 2 January 2014, in c9111pliance ill
good faith with the TH..O issued by tl1is I-Ionorable MERALCO
sent letters to its customers to guide then1: on the payients of the
Decen1ber _ 2013 electricity bills that they received.
Specifically, MERALCO advised its custon1ers to te1111-porarily set
aside its Decen1ber 2013 _bill and gave them the optio:t,L to pay the
equivalent mnount indicated in their Nove1nber 2013 bllling or, the
a111ount in their December 2013 billing, i the same is. than the
arnount billed in their November 2013 billing, subject to subsequent
adjustn1ei1ts as n1ay be directed by the relevant i goven1111ent
authority.
1.85 Based on the billing cycles for the period wherein the
shutdovvn and purchase from WESM occurred, generation
charges were due to be paid by MERALCO to PEMC on !26 December
2013 and on 26 January 2014. On account of the TRO, was
constrained not to pay the increased generation and other
pass-tluough charges.
46
1.86 As a consequence of MERALCO' s of the .
increased pass-through charges to its suppliers, on 3 January 2014,
rvIERALCO received N.GCP's demand letter for the period of
Novernber 2013. NGCP de1nanqed payment of balance of
PhPlli,382,471.77, an1ong others. This amount exd-4.des interest
ainounting to PhP207,913.95 as calculated by Nqcp due to
rvIERALCO' s failure to pay the san1e on the due date. j NGCP gave
l\/IERALCO five (5) days fron1 3 January 2014, or until ]8 J:anuary 2014,
to pay, with threat of legal action upon failure to do so.86 i
i
I
I I
1.87 Silnilarly, AES Masinloc served IVIERALCq its demand
letter dated 30 Dece1nber 2013.for the billing period of Nove1nber
I 1
2013, which amounts to PhP436,6461891.26 for the Reilnlbursible Cost
Payn1ent for the Replacen1ent Power and the VAT in'. ainount of
PhP130, 418,366.15 .87
I
I
1.88 Furthennore, both San Miguel Energy Corporation and
South Pre1nier Po-wer Corp. served their respective letters on
6 January 2014 to MERALCO for payment of the! ainount of
. I
PhPS,080,870.27 and PhP856,794,429.96, respectively.ss
Reports of irregularities and co Uusion
between and anwng GenCos
1.89 When the increase in generation costs was made public,
there were allegations and reports that the GenCos] trkding in the
WESIVI resorted to irregularities and colluded to cause la significant
increase in generation charges.
1.90 As a result thereof, on 10 Dece1nber 201q, House of
Representatives conducted a hearing 011 the powel. hilce. I
. !
1.91 On 13 Decen1ber 2013, ainidst the of possible
collusion an1ong, and n1arket poV\rer abuse by, trading participants
in the WESM, which could have caused the abnormal itj.crease of the
the generation charges, a Tripartite Corrunittee attended by
the Secretary of DoE, ERC Chairperson and Commissic)ners and the
PEIVIC President was held.
86 A copy of the NGCP demand letter is attached hereto as Annex "12" and made an
integral part hereof. I
B
7
A copy of the AES demand letter is attached hereto as Annex "13"and made an integral
part hereof. !
RR Copies of the San Miguel and South Premiere Power Corp. are attached
hereto as Annexes "14" and "15" and made integral parts hereof. I
47
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1.92 On 16 Dece1nber 2013, pursuant to the co1nplaint filed by
Akbayan Representatives Bello and Gutierrez, econohtih Diokno of
the .Center for Power Issues and Initiatives fortaleza of
Partido ng Manggagawa (PIYI) and NAGKAISA and/ from
Debt Coalition (FDC), the Departn1ent of Justice the Office
for C:on1petition ,to condtict an investigation /the cause of
the sharp increase in power rate. .'
!
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1:93 On 18 Decen1ber 2013, the Committee 9n /Energy and
Cornm1ttee on Trade, Co1n1nerce and Entrepreneurship of the Senate
of the Philippines conducted a joint hearing on the rate hike.
Issuance of this Honorable Court"'s 23
December 2013 Resolution
. '
!
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1. 94 On 23 December 2013, MERALCO ' received this
' I
I-Ionorable Court's TRO dated 23 2Q13. among
others, enjoined the imple1nentation of the 9 f.013 letter of
the ERC and the increase of rates based on 1natters MERALCO raised
in its 5 Dece1nber 2013 letter to the ERC, thus: !
. . i .
"e) GRANT a TEMPORARY
ORDER effective ilmrtediately and for the period qf sixty
(60) days, enjoining (1) respondent Energy
Co1nn1ission, its agents, representatives, or pers9ns
1
acting
in its place and stead, fron1 hnplen1enting its Deperfiber 9,
2013 Order and acting further on the letter-req\]-est of
MERALCO dated Decen1bet 5
1
2013; and (2)
1v1ERALCO, its agents, representatives, or persqnsl acting
in its place and stead, fro1n increasing the rates qharges
to its consu1ners based on the 111atters it raised in its
I
Decen1ber 5, 2013 letter."89
, I
1.95 Since the TRO was issued, 1nany refused to
pay their respective . electricity bills, including MERALCO' s
distribution charge.
i
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1. 96 In the saine Resolution, this Honorable Court directed the
Respondents, including MERALCO, to file theit respective
C:o1nn1ents no later than 8 January 2014.
8!) Supreme Court's TRO dated 23 December 2013 ("TRO"), p. 3.
48
filed.
i
1.97 I-Ience, this Consolidated Co1runent which iJ being timely
. I
II. ARGUMENTS
SUBSTANTIVE ARGUMENTS
A.
. . , I .
CONTRARY TO PETITIONERS' CONTEN1fIONS,
TI-IE AUTOMATIC ADJUSTMENT lVIECHA;N]SM AS
IMPLEMENTED BY THE AGRA RULES At;lD) EPIRA
IRR AMENDMENT, WI-UCI-I WERE PROMllJL(;ATED
BY TI-IE ERC AND DOE, RESPECTIVEL YJ IfN TI-IE
EXERCISE OF THEIR QUASI-LEGISIJ-ATIVE
FUNCTIONS, FAITHFULLY COMPLY THE
REQUIREMENTS OF DUE PROCESS. MOREOVER,
THE AUTOMATIC ADJUSTMENT MECH!ANISM
SOUGI-IT TO BE ADDRESSED BY THE AGRAIRULES
AND EPIRA IRR XMENDMENT IS ESSENTIAL TO
THE POWER INDUSTRY . CONSIDERINd THE
NECESSITY OF ADDRESSING THE FOR
ELECTRICITY ON 'A, REAL TIME BASIS.; Afr ANY
RATE, THE AGRA RULES AND THE EPIRA IRR
. : I
AMENDMENT PROVIDE THAT ALL AUTOMATIC
! I
ADJUSTMENTS ARE ALWAYS SUBJECT TO[ POST-
VERIFICATION PROCESS BY TI-IE ERC.
B.
i
PE'I'ITIONERS NASECORE, ET AL.'S PRAY(ER TO
I !, I
REFUND ALL_ AUTOMATIC RATE ADJUSTf\'IENTS
IS NOT ONLY BASELESS BUT ALSO :LEGALLY
' . ' i
INFIRM AS THE SAFvfE IS CONTRARY i T10 THE
DOCTRINE OF OPERATIVE FACT .. TOi RULE
! i
OTHERWISE vVOULD UNJUST, INI<j:iljITOUS,
AND UNFAIR TO MERALCO, .WHICHi 1'f1ERELY
COLLECTED THE GENERATION ClIARGE AND
. . I
OTI-IER PASS-TI-IROUGH CHARGES EOR THE
RELEVANT GENCOS AND NGCP AS WEUL h_s FOR
. . . ,I I '
THE NATIONAL ANO LOCAL
CONCERNED.
49
c.
I
I
I
CONTRARY TO PETITIONERS. BAYAN MNA, ET
AL'S ARGUIViENT, SECTIONS 6 AND 29 OF EPIRA
ARE v ALID AND CONSTITUTIONAL. IN fACT,
SAID PROVISIONS ARE CONSISTE:NT WITHj AND
I I
ESSENTIAL TO, TI-IE SUCCCESSFUL
IMPLEMENTATION OF TI-IE DECLARED POilICIES
OF THE STATE UNDER THE CONSTITUTION.!
D.
I
IF THIS HONORABLE COURT DECLARES! THE
AGRA RULES AND THE. EPIRA IRR AMENDMENT
UNCONSTITUTIONAL, MERALCO AND I J'HE
OTHER DISTRIBUTION. UTILITIES WILL : SUFFER
I I
IRREPARABLE PREJUDICE AS A RESULT Qf ~ I N G
DEPRIVED OF A TIMELY AND EFiFICIENT
MECl-IANISM FOR COLLECTING : / THE
GENERATION CI-IARGES IMPOSED ~ y THE
GENCOS. ULTU\i1ATELY, IT IS THE PUBLIC WHO
WILL SUFFER IRREPARABLE AND
.o I
UNQUANTIFIABLE PREJUDICE 'FROM THE
RESULTING ENERGY CRISIS.
E.
I
BAYAN MUNA ET AL. FAILED TO PROVIDE ANY
I i .
PROOF, AS TIIERE IS NONE, SHOWINy jTHAT
IVIERALCO COLLUDED '1\TITH THE GENCOS. ON
I I
TI-IE CONTRARY, MERALCO TOOK STEPIS TO
IVIITIGATE THE CONSEQUENCES 0
1
F TI-IE
MAINTENANCE SI-IUTDOWN OF VARIOUS POWER
I I
PLANTS. THEREAFTER, EVEN IF MERALCO C,OULD
HAVE FULLY CHARGED TI-IE INCREASE IN
!. t
GENERATION COSTS IN ITS DECEMB:ER 2013
. I I
BILLING TO ITS CUSTOMERS AS PROVIDED BY
. I I
LAW, MERALCO, IN GOOD. FAITI-I, $OGHT
~ I I .
GUIDANCE FROM THE ERC TO IMPLEMENT A
I I
STAGGERED COLLECTION OF THE GENERATION
i 1
RATE INCREASE IN ORDER TO CUSHION TI-IE
I I
BURDEN OFTHEINCREASE ON.THE CO.NfjtJ;MING
PUBLIC.
1
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50
PROCEDURAL ARGUMENTS
F. i
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TI-IE CONSOLIDATED PETITIONS SHouJD BE
DISMISSED FOR FAILURE TO
I I
ED<:HAUST
I
! ADMINISTRATIVE REMEDIES.
G.
. i
. I
THE CONSOLIDATED PETITIONS lVIUSjf BE
DISMISSED FOR VIOLATION OF THE DQCTrl RINE
OF PRINIARY JURISDICTION. .: , ,
i
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H:.
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'I'HE CONSOLIDATED PETITIONS Musk BE
! I
DISMISSED FOR FAILURE OF THE PETITICDNERS
I ',' I
TO BRING THE ACTION AGAINST THE I REAL
PARTIES IN INTEREST.
III. DISCUSSION
SUBSTANTIVE ARGUMENTS
A.
, I
CONTRARY . TO . PETITIONERS' CONTENTIONS,
I I
THE AUTOM:ATIC ADJUSTMENT MECI-IANISM AS
BY THE AGRA RULES ANjDIEPIRA
IRR AMENDlVIENT, WHICH WERE PROMU:LqATED
BY TI-IE ERC AND DOE, RESPECTIVELY,!JN THE
I I
EXERCISE OF TI-IEIR' QUASI-LEGipL)ATIVE
FUNCTIONS, FAITHFULLY COMPLY WiffH THE
REQUIREMENTS OF DUE. PROCESS. MORE/OVER,
THE AUTOMATIC ADJUSTMENT MECI-ItNISM
SOUGI-IT TO BE ADDRESSED BY THE RULES
AND EPIRA IRR AMENDMENT IS TO
TI-IE POWER INDUSTRY THE
NECESSITY 01=< ADDRESSING TI-IE DEMAND FOR
I I
ELECTRICITY ON A REAL TIME BASIS. :AT ANY
RATE, THE AGRA RULES AND THE EP1IR(A IRR
I !
AMENDMENT PROVIDE THAT ALL
ADJUSTMENTS ARE ALWAYS SUBJECT 110 [POST-
VERIFICATION PROCESS BY THE ERC. I
I
I
s1 I
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3.1. Petitioners NASECORE, et al. allege that the AGRA Rules
"are per se illegaJ"90 because under the EPIRA and on acJount of due
process considerations, electTicity rate adjustments! dr increases,
vvhich n1ust undergo publication9
1
and must affortl affected
custon1ers the right to be heard on the matter,92 cannot j be imposed
auto1natically. Petitioners' argu1nent does not have Tuasis.
3.2. Before the AGRA Rules and EPIRA IRR .ln1endment
: I
were approved and :implen1ented they underwent a series of public
consultations and hearings, which were attended by th
1
e 4akeholders,
including the co11Sun1ers. During these public and
hearings, NASECORE, et al. we:re present and Thus,
NASECORE, et al. are aheady barred from the
constitutionality of .. AGRA Rules as. :well as . IEPIRA
Ainend1nent. Considering the lapse of time from i aRproval and
pro1nulgation, i.e., 2004 for the AGRA Rules and 2007) the EPIRA
. . I
IRR Ainendn1ent, it is clearly too late for ef al., to raise
their otherwise baseless clain1. !
!
i
3.3. Moreover, after the public consultations anrJiearh1gs, the
AGRA Rules and the EPIRA IRR Amendment ! V\1ere validly
pr01nulgated by the ERC and the DoE, respectively, inl thf exercise of
their rule-111aking or quasi-legislative power for
1
the better
adn1inistration of collection of pass-through charge9. IThe AGRA
Rules and the EPIRA IRR Amend1nent were published
on 15 October2004 and filed with the UP Law Center bn the san1e
date. As held in Corona v. United Ha'.rbor; Assodation of the
Philippines,93 notice and hearing is not required wh.enl the rule is
issued by the administrative agency in its exercise of
function, thus: '
90
91
92
93
I
"Respondents argue that due process :wAs not
observed in the adoption of PP A-AO No. 04--92
because no hearing was .conducted whereby f'relevant
governn1ent agencies" and the pilots the1nselyes/ could
ventilate their views. They. are obviously to the
procedural aspect of the enactn1ent. Fortunately, the
I I
Court has n1aintained a clear position in this regard, a
stance it has shessed in the recent case of Lurclqued v.
Hon. Exevea, where it declared that
11
(a)s long as 4 party
NASECORE, et al. Petition, p. 19.
NASECORE, et al. Pelition, p. 20.
Baymz Muna, et al. Petition, p. 12.
G.R. No. 111953, 12December1997, 283 SCRA 31.
52
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V\ras given the opportunity to defend his inter.ests }n due
course, he cannot be said to have been denied due process
of law, for this opportunity to be heard is the very
of due process. Moreover, this constitutional manaate is
deen1ed satisfied if a person is granted an oppoftuluty to
seek reconsideration of the action or ruling cotn1dlained
of." !
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'
In the case at bar, respondents questioned /PEA-AO
. ' I
No. 04-92 no less than four times before the 1natter was
finally elevated to this Tribunal. Their bn this
score, however, fail to persuade. While
emphasize that the Philippine Coast Guard) '1which
issues the licenses of pilots after administering /pilots'
exan1inations," was not consulted, the facts show that the
I'v1ARINA, which took over the licensing functibn I of the
Philippine Coast Guard, was duly represente
1
d the
Board of Directors of the PP A. Thus, petitioners'
1
cohectly
argued that, there being no n,1atters of naval defense
involved in the issuance of the adnlliustrative the
Philippine Coast Guard need not be consulted. i
i
i
Neither does the fad that the pilots
vvere not consulted in any way taint the lof the
ad1uinish'ative order. As general rule, notiqe and
hearing, as the fundamental! require1nents of p1iocbdural
due process, are essential only when: ill!
body exercises its quasi-judicial function. ' In the
perf orn1ance of its executive or legislative fhn"ftions,
. such as issuing rules and an ad1nibishative
body need not co1nply with the requhe1nents lofnotice
hearing".
94
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3.4. Clutching at sb.aws, Petitioners NASECORB, et al. cited
. I
this I-Ionorable Court's Decision in the 2006 case ofNASECORE, et al.
v. ERC and MER.ALCO to lend credence to their clailn electricity
rate adjust1nents cannot be autornatic. I-Iowever, the 2906 case was
decided in an entirely different factual background. Then, while the
. I
lmv and jurisprudence do not require notice and for the
carrying out of adrninistrative or quasi-judicial furictifns, the old.
EPIRA IRR required notice and hearing. In fact, this Honorable Court
' I .
has observed that "unless Section 4(e) of the IRR of the EPIRA is
arnended," the adjusb.11ents of rates based on power or
9! ll1itl., at 40-41; emphasis and rn\derscoring supplied.
53
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fuel. costs shall not :in. no case be thereby
[a] 1nd1cabng. that there are s1tuat10ns or charges folij which it is
appropriate that the publication, notice and hearing reql!lirements be
dispensed wHh and that the adjustments be [b]
hr1plying that the only to the automatic of
certain rates then is the EPIRA IRR which the DoE '( JCPC) may
validly an1end. This Honorable Court held: [
"It bears reiterating that the ERC is not
. fron1 promulgating. rules, guidelines or 1netlro401ogy,
such as the GRAM, for the recovery by the di?tr1'bution
utilities of their fuel and., purchased pow,er costs.
J-Iowever, these rules, guidelines or methodology so
adopted should confor1n to require1nents of: pehinent
including Section _!liile of the IRR I of the .
bl IRA. . I
I
!
xxx It should be n1ade; clear that, unless Section
4(e), of the .. IRR of the EPIRAis the
adjushnents of rates. based on purchased br fuel
adjushnent costs shall not or in no be
'autoinatic."'
95
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3.5. Consistent with and by virtue of its powerftol"[f]ormulate
such rules and regulations as Inay be necessary to !irr}plen1ent the
objectives of the" EPIRA,96 t11e DoE ainended Section 4(e) of the
EPIRA IRR on 21 June 2007, precisely to address tpel volatility of
generation cost. If the DUs will be required to obtain! piior approval
before they can pass-on the generation charges, the IDIDs may have
difficulty in paying for the power they bought /the Gen Cos,
which n1ay result in potential disconnection of ) GenCos or
ternunation of the PSAs, leading to shortages in supply.
Further, the delay in payn1ent 111ay bring chrrying costs
that will ultin1ately have to be recovered from the consufuers; Indeed,
apart fro1n invoking n1otherhood state1nents in suppdrt 6 their clailn .
for due process, Petitioners app.ear to have skirted the
nature of electricity supply and the framework of ti1e electricity
industry Y\rhich the ainenchnent sought to a1dress. .
95
EPlRA, Sec. 37(p).
54
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3.6. Neither can it be said that the AGRA and the
. I
EPIRA IRR Ainendment are unrea,sonable or arbihyi. In fact, the
AGRA Rules and the EPIRA IRR Amendment can1e futo existence
because of necessity, vvith ulTilost consideration for/

and accuracy of collection. DUs (or anyone for matter) cannot
predict with exactitude the an1ount of energy consumwtion of their
custo1ners at each and every The n1ost that/ a pu can do is
to forecast the ilnpending den1and for electricity by its customers.
There is no possibility by which a substarl.tial [of electricity
can be stored for future use, such that whatever is left :unused for a
. I .1
particular tin1e is aheady lost. It is physically for the DUs
to apply for approval of the pass-tluough charges eyen before they
buy elechicity fron1 the GenCos. l
II
3.7. Consequently, in order to address the evJr-#uid demand
for electricity, DUs 111ust be able to secure the necessJryj supply from
the GenCos at the precise 11101nent when the demand is needed and
at the costs charged by the Gen.Cos. if the geihet
1
ation cost for
each billing cycle is 111ade to undergo the process of prior notice and
the DUs will not be able to address the real demand for
electTicity. Instead, DUs would have to wait until jthf cost or the
charge is approved by the ERC before they are . to buy
f-ron1 the_ GenCos. . This Wfll I r.esult in a
cons1clerable delay 1n the dehvery of electr1c1ty se1rv1ces to the
custorners or a total failure by the DUs to corr}ply with their
obligation to supply electricity to their custon1ers. '
I . I
3.8. By prorrmlgating the AGRA Rules, the devised a
forn1ula to calculate the "Generation Rate" or the /" cpst of power
generated and sold to the [DU] by the [GenCo], whicl} small be passed
on to the DU's custoirters."97 Applying the formula) ttle Generation
Rate is equal to the generation cost, the price charged By a GenCo to
the DU, less fifty percent (50%) of the pron1pt pa')fn1nt discounts
, . , I
availed of by the DU fron1 the GenCos (net of the qisco1u1ts passed
on to the end users relative to the previous month's cost)
divided by the total pLuchases in kWh for the previotts tponth, thus:
98
97
98
i
' i
Generation Rate= Generation Cost- 50% of Prompt Payrnent Discounts
AGRA Rules, Art. II, Sec. 2.
AGRA Rules, Art. III, Sec. 1. .
Total Purchases in kWh
1
55
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3.9. In order to ensure, however, that the Geheration Rate is
co1nn1ensurate with the cost of generating the electridit}f and. that the
sa1ne is .accurate, apart fron1 the DUs submitting its/cobputation of
the pass-tluough charges with all s.upporting docu!ments every
rnonth, the san1e is subject to a post-verification! ptocess to be
conducted by the ERC
99
wherein the ERC can valiclatJ tl{e recovery of
costs by the DUs.JOO In other words, tl}e
1
lA.GRA Rules
the ni.aiui.er by which the generation chal['ges are passed
tluough by the DUs to their custo1ners. h1 this
process, the DUs are required to file the application
vvith the ERC, and the ERC then conducts public where all
stakeholders, including the consumer sectors, given the
to intervene or submit their co1runents. ; /
I
3.10. In this case, MERALCO con1plied with in arriving
a.t the Retail Rate. The distribution charge and )"I},ass-through"
charges are all collected in accordance with Section 4( e) lo the EPIRA
IRR Amendn1ent, and complied with the due process of
publication, and notice ruicl hearing. Further, MERJ\\.LCO complied
the fonnula provided in the AGRA Rules in.l at the
Generation Rate and other "pass-through" charges. ' I
: I
3.11. Indeed, the Petitioners do not, as they cbuld not, allege
that the formula eni.bodied in the AGRA . iis unfah or
u1u-easonable, or that its imple1nentation is carriedj a-pt arbitrarily.
Petitioners did not, as they could not, contest! necessity,
reasonableness and validity of the fonnula in the AGRA Rules, and
ilnple1nentation thxough the EPIRA IRR
3.12. Accordingly, the AGRA Rules and its imple;1nentation do
not offend the procedural and .substantive due 1requirements
of the Constitution. ' '
B.
I
. I
PETITIONERS NASECORE, ET AL.'S TO
REFUND ALL AUTOMATIC RATE
IS NOT ONLY BASELESS BUT ALSO tLEGALLY
INFIRM AS THE SAME IS CONTRARY! Tb THE
DOCTRINE OF OPERATIVE FACT. 'l:io f RULE
OTI-IERWISE WOULD BE UNJUST,
AND UNFAIR TO .MERALCO, WHICH I l\fIERELY
99 AGRA Rules, Art. V.
ion AGRA Rules, Art. V, sec. 1.
56
\
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COLLECTED THE. GENERATION GHARQE I AND
OTHER PASS-THROUGH CHARGES FORI THE
RELEVANT GEN COS AND NGCP AS WELL! AS FOR
THE NATIONAL AND LOCAL GOVERNMENT
, I
CONCERNED. '
i
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3.13. NASECORE:, et al. contend that a refund 9f lall amounts
collected by MERALCO should be ordered by this Hc;>norable Court,
considering that the "automatic rate adjustments or, increases made
and imposed by MERALc;::O against consumers (?ITe)
inherently and patently illegal for being violative of dti.e process."101
I '
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, 3.14. Specifically, NASECORE,. et al. seek the. of all
generation rate increases made since 2004, thus:
!
"57. The amount collected or imposJd by
MERALCO to its subscribers and consumers irJm the
time the automatic rate adjustments or been
allowed by respondent ERC being patently illegal, the
same should pe returned by way of refund to with
dispatch. Such illegal collection or imposition of
automatic rate adjustments : or -increases. am'.ou'.nts to
unjust enrichment on .the part of . MERALCO,
necessitating its return to the said subscribe:Js and
I consu1ners.
i
58 .. Note must be taken that the herein assailed ERC
Resolutions date back to the year 2004 when i;tufomatic
rate adjustment and increase was allowed by ERC[ Thus,
the year 2004 must be the reckoning year of the kefund
prayed for."102 I
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3.15. At the outset, it must be stressed that NASE<LORE, et al.'s
\, I !
allegation that the automatic rate adjustments amo"1nts to "unjust
enrichment" is devoid of any factual and legal As earlier
explained, under the EPIRA, all pass-through i.e., generation
dl.arges, transmission charges, VAT, local franchise! takes, etc., are
. i I
rrierely collected by MERALCO on behalf of1 the GenCos,
TRANSCO /NGCP, as well as the national and local f government
, I '
agencies concerned. Under this arrangement, gains no
revenue or benefit from the collection of these pass-tl;rrqugh charges.
In fact
1
aside from the generation 'charges and other pass-through
101
102
NASECORE, et al. PETITION, p. 26.
Ibid., pp. 26-27.
57
.....
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this Honorable Court's TRO, MERALCO had alread}r trnitted all
relevant pass-through charges prior to December 2013 to .fl,_e GenCos,
TRANSCO /NGCP and the national. and local govenunJnt 'agencies
concerned. Moreover, all consumers, including
et al.,
already used the electricity previously supplied by MERALCO.
I ' I
Thus, MERALCO has not and could not have . been "unjustly
enriched" by any increase in billings, as'NASECORE et hz.
' I
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3.16. Even assuming for the sake of that the AGRA
Rules are invalid or unconstitutional, any refund of geJeration rate
increases hnple1nented under the said Rules should be given a
prospective application, and should be directed againstfil,_e GenCos,
TRANSCO/NGCP, as well as national and
agencies concerned, which are the actual recipients jthat benefited
' I I
fro1n such generation and other pass-through rate adjustments.
Consistent with the established doctrine of the refund
should not be applied retroactively as to include autonl.atic
rate adjustn1ents not covered by this Honorable Court'$ and the
funds for which are no longer in MERALCO' s possession.I
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3.17. The doctrine of operative fact means that a law is
reco011ized as unconstitutional, its effects prior to thei of
. tr r I
nullity, 1nay be left undishrrbed as a 1natter of equity andJ fair play;
103
It is applicable when a declaration of unconstitutional(ty jwill impose.
an undue burden on those who have relied on the invalidilaw. .
I
3.18. This I--Ionorable Court has lpplied the
of operative .in cases where a party +good faith
on the presumed vahd1ty of the law before 1t : wirs declared
unconstitutional. In Municipality of lVIalabang, et al. v. Pangandapun
Benito, et az.,104 this Honorable Court acknowledge
1
d lthat certain
consequences of the assailed exeeutive order could notl invalidated
retroactively, thus: '., J
103
104
, I
"Executive Order 386 'created no office.' This is not
to say, however, that the acts done by the mtuuqipAlity of
Balabagan in the exercise of its corporate powerJ are a
nullity because the executive order 'is,_
1
inl legal
conten1.plation, as inoperative as though it had never been
passed.' Por the existence of Executive Order 9s6: is 'an
operative fact which caiui.ot justly be ignored.' !Ai Chief
I
'
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Yup v. Thenamans Ships Management, No. 179532, 30 May 201,1, 6f9 SCRA,369, 381.
G.R. No. L-28113, 28 March 1969, 27 SCRA 533. . i
58 !
'1 i
Justice I-Iughes explained in Chicot County 'Drainage
'
District v. Baxter State Bank:
. i
'The courts below have proceeded f on
the theory that the Act of Congress,
been found to be unconstitutional, was not!!
law; that it was inoperative, conferring( nb
rights and hnposing no duties, and
affording no basis for the challenged deqref
(citations 0111itted). It i.s quite clear, howeve11,
I I
that such broad statements as to the effect of a
determination of unconstitutionality n1ust
taken with qualifications. The aduJ1
existence of prior to sucli
detennination:, in an operative fact, and rhay
have consequences which cannot. justly/
igno1ed. The past cannot always be
.Qy new judicial declaration. The effect
the subsequent ruling as to invalidity may
to be in -T
with respect to particular relations, 1nd1v1dual
and corporate, and particular conduct,
and official. Questions of rights claimed tp
have becon1e vested, of status, of priqr
detern1inations deen1ed to have finality
acted upon accordingly, of public policy inj
light of the nature both of the ai1d o:f
previous application, de1nand
These questions are an1ong the 111ost
of those which have engaged the attentiop 9f .
courts, state and and it is n1anifest
fro111 nu1nerous decisions that an all- inclttsiJe
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state1nent of a principle of absolute retroactive
invalidity cannot be justified."'105
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3.19. Sinlilarly, in League of Cities of the Philippines V COMELEC,
et al.,106 this I-Ionorable Court held that the I effects of the
itnple1nentation of unconstitutional' laws 1nust be as
a 111atter of equity and fair play to ilu1ocent peopltj "'fho relied on
then1 prior to a judicial determination that they are ttnc!onstitutional,
thus:
105
IU6
Ibid., at 540.
G.R. No. 176951, 177499 and 178056, 24 August 2010, 628 SCRA 819.
59
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. I
"xxx Under the operative fact the
unconstitutional remains *ut the
effects of the unconstitutional law, prior to its judicial
of n1ay be left undisturbed ar matter
of equity and fair play. In short, the operative fact
doctrine affects or inodifies only the effeds lo the
I ' .
unconstitutional law, not the unconstitutional law itself.
. ' I
' I
"Thus, applying the operative fact dochke! to the
present case, the Cityhood 'Laws re1nain
because they violate .Section 10, Article [of the
Constitution. I-Io-wever, the effects of the ilnplehientation
of the Cityhood Laws prior ,to the declaratioh Jf .their
nullity, such as the payment 'of salaries and by
the 'new cities' or their issuance of licenses or
I j
of contracts, may be recognized as valid and/ effective.
This does not meru1 that the Cityhood Laws for
they ren1ain void. . Only the effects j of the
hnple111entation of these unconstitutional left
undisturbed as !! matter of equity. artd faif . .E>lay to
. . . I I '
innocent people who inay have rehed on the
1
presun1ed
validity of the Cityhood Laws prior to Court's
declaration of their unconstitutionality."107 ! i
I
, 3.20. At this juncture, it n1ust be pointed j that this
I-Ionorable Court refused to apply the doctrine of operapve fact only
in cases where its application would result an injustice.
In Plant-ers Product-s, Inc. v Fertiphil Corporation,10
8
/this Honorable
Court did not find anything "illiquitous" in ordering party who
unduly benefited from the levy it recei;ved to an
unconstitutional law, to make tl-ie necessary refund, tli.us
1
:
I .
I
. . . I
"PPI also argues that Fertiphil cannot seel< al refund
even if LOI No. 1Ll65 is declared unconstitutional. It banks
on the doctrine of operative fact, which lt11at an
unconstitutional law has an effect before being declared
unconstitutional. PPI wants to retain. the paid
under LOI No. 14:65 even if it is subsequently de4ared to
L>e unconstitutional. I
I
xxx
107 Jbid., at 832.
ion C.R. No. 166006, 14 March 2008, 548 SCRA 485.
60
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"At any rate, We find the doctrine inapplicable. The
general rule is that an unconstitutional law is' vbid. It
produces no rights, ilnposes no duties and no
protection .. It _has no_ It is, )in I
conten1plation, 1noperahve as 1 1t has not beer;i :nassed.
Being void, Fertiphil is no_t required to pay the :1e1y. All
levies paid should be refunded in accordance :with the
general civil code principle. against unjust enricliment .
. The general rule is supported by Article 7 of Civil
Code, which provides: :
ART. 7. Laws are repealed only b1
subsequent ones, and their violation or npnt
observance shall not be excused by disuse Of
custo1n or practice to the contrary.
1
When the courts declare a law to
inconsistent with the Constitution, the fonnet
, , I
shall be void and the latter shall govern. . i
: I
"The doctrine of operative fact, as an to
the general rule, only applies as a 1natter 'of equity and
1
!
"The doctrine is applicable when a of
' I
unconstitutionality will impose _an undue b1frden on
those who have relied on. the invalid law. Thqs, lit was
I
applied to a criininal case when a of
unconstitutionality would put the accused in aouble
jeopardy or would put in lin1bo the acts by a
nmnicipality in reliance upon a law creatingit. I
I I
"Here, We do not find anything iniqtiitbus in
ordering PPI to refund the amounts p.
under LOI No. 1465. It unduly benefited from th
1
e
was proven during the frial that the levies paitl were
re1nitted and deposited to its bank account. Qrtite the
reverse, itwould be inequitable and unjust not to brder a
refund. To do so would unjustly enrich PPI at thb ef pense
of Fertiphil. Article 22 of the Civil Code _lexplicitly
provides that 'every person who, tluough I act of
. . I I
perfonnance by another comes into of
son1ething at the expense of the latter without 1ust br legal
I .1
ground shall return the san1e to him .. ' e can:hot allow
, I
61
I
. i
PPI to profit fro1n an unconstitutional law. Jtlstice and
equity dictate that PPI inust refund the a1nourt(s :Qy

i I
. !
3.21. As can be readily gleaned in Navarro, basis for this
I-Ionorable Court's order of refund was unJ'ust- As
. . I I
above, has not could p?ssibly .
been ennched - un1ustly or otherwise - by the collection of
generation and other pass-through charges. s role was
shictly lin1ited to the collection of such charges fro1n the end-users
I I
and, thereafter, the payment of the same to the res:Becpve GenCos,
TRANSCO/NGCP, and to the local and .national g<;>vrmnent unit
and/ or agencies concerned. i I
, I
3.22. Under these circu1nstances, the dochine qf operative fact
. . I
is clearly applicable. Indeed, it vvould be tmjust, iniquitous and unfair
to require MERALCO . to refund collections of paf t auton1atic
adjustn1ents that are no longer in its possession; and f];"on1 which it
did not gain any benefit or revenue. ' : I
I
I
. I
3.23. Furthern1ore; MERALCO had no reason! toi believe that
the AGRA Rules are unconstitutional, in view of the cumulative acts
of the ERC and the DoE in issuiti:g the said Rules, but not
lih1ited to the following: ! I
3.23.1. On 13 October 2004, the ERd issued the
"Guidelines for the
Rates and
Systern Loss Rates by Distributzon Utilities. 110 lt1 provides for a
n1onthly adjusbi.1ent of generation rates, to be .by .the
distribution utilities based on a given fonnula. jS11ch Guidelines
I I
'"'ere issued in due course and in compliance due process
requiren1ents. '
I
3.23.2. On 20 and 27 October 2004, the ERC issued
I I
Resolutions Nos. 10-01 and 10-04, respectively, entitled" In
the Matter of Amending the . Guidelines for i tJiie Automatic
AdjuslTnent of Generation Rates and System : Loss Rates by
Distribui:ion Utilities." . j
!
109 Ibid., at 515-517; emphasis and underscoring supplied.
11
0 Promulgated pursuant to Section 43(f) of the EPIRA and Rule 7of its IRR; and Section 10
of R.A. No. 7832. [
i
62
I
3.23.3. On 21 June 2007,. the DoE ptorhulgated the
11
Arnend1nents to Section 4(e) of Rule 3 and Sectio1i 7/ of Rule 18 of
the Irnplementing Rules and Regulations (IRR) of Act No.
9136 otherwise known as the PC?wer Reform Act
(EPIRA)." Essentially, the mnendment with the
require1nents of publication, notice and hearing[ with respect to
1nonthly adjustments of generation rate and other pass-through
charges. Again, the Amendments . were promulgated in
accordance with the requirements under the law; I .
. I I
I
!
' I
3.23.4. On 13 July 2009, the ERC iss
1
tietl Resolution
No. 16, entitled "A Resolution adopting the foverning the
Automatic Cost Adjustm.ent . and True-Up Nf.echanisms and
Corresponding Confirmation Process for Distributiotz Ntilities." The
said Rules aiin to .establish. a procedure fort .automatic
adjusb11ents of pass-through costs, such as costs,
transmission costs, and system loss costs, and. !thk subsequent
process it, which: requitesl the filii1g of
an application, pubhcabon and heanng a$ part of. the
verificati9n by the ERC of the ainounts of charges
collected fro1n the DU' s custcnners, to cletermme I whether the
DU incurred over or under-recoveries in the hnple1nentation of
t:he automatic adjusb11ents.
I
3.24. Indeed, this I-Ionorable Court in Chavez! v. National
Housing Autlwritylll applied the doctrine of fact in view of
the acts of the executive deparllnent, wlJich lent to the
housing project, thus:
111
l
"Furll1ermore, when petitioner Hied the itjs+t case
against respondents on August 5, 2004, the JYAs were
, I
already terminated by virtue of the MOA the
NI-IA and RBI. The respondents had no reasoi1 tb think
their agree1nents were unconstitutionai dr even
.questionable, as in fact, the ac;tsff the
executive departn1ent lent validity i the
hnple111entation .of the Project. The SMDRP agree1nents
have produced vested rights in favor of ithb slu1n
dwellers, the buyers of reclain1ed land who
issued
titles over said land, and the agencies and who
inade invesh11ents in the project or who bought Sf'JPPCs.
These properties and rights cannot be dis:turbed or
questioned after the passag,g of around ten !(1(1)) years
G.R. No. 164527, 15 August 2007, 530 SCRA 235.
63
I
, I
from the start of the SMDRP im -len1eniation.
Evidently,.the "operative fact" pdnciple has setL The
.titles to the lands in the 'hands of the . dan no
longer be invalidated . .,, /
I
- I I
; _3.25. Moreover, Petitioners NASE CORE, et aL' s )injistence that
this :Honorable Court order MERALCO to make a refund as it did in
2006 case of NASE CORE, et al. v. ERC and MERALCq, is likewise
be,reft of rnerit. The said 2006 case had a different factkal milieu and
is therefore inapplicable in this case. . I .
- I i
3.25.1: The rate increase applied
took place prior to the arnend1nent of Section 4( d) of the EPIRA
IRR, i.e. at that tilne, publication, notice and( were
required even for generation rate increases.
1
I
3.25:2. Thus, MERALCO' s _ non-pub:lichtion in a_
newspaper of general circulation its amended for a
generation rate increase was considered fatal, in !view of the
clear requirement therefor under the' old

4( e) of the
EPIRA IRR. i I
64
I
'
i i
3.26. Based on the foregoing,, Petitioners NASEC<DRE, et al.'s
prayer to refund all auto1natic ;ate adjustments is c1
1
eatly baseless,
legally infinn and should not be given credence by Honorable
Court. To order MERALCO to refund an1ounts frofu which it
obtained no benefit would be tui.just, abd in clear
violation of MERALCO' s constitutionally guaranteed
c.
. I
I
I
' i
CONTRARY TO BAYAN . MUNA, ET /AL'S
ARGUMENT, SECTIONS '6 1AND 29 OF EPIRA ARE
v ALID AND C0N.STITUTIO.: NAL. 11\l FACT,jSAID
ARE CONSISTENT , WITii, . AND
ESSENTIAL TO, . THE SUCCE 'Sl:tUL
IMPLEMENTATION OF THE DECLARED POUICIES
OF THE STATE UNDER THE' CONSTITUTION. I
, I
3.27. Bayan Muna, et al., co1ne before this Court,
' . I I
seeking to snike down Sections 6 and 29 of for being
unconstltutional.11
2
According to Bayan Muna, et "Congress in
passing the said provisions had' .grievously erred injconsiderhi.g
poV1rer generation and supply as not a public utility op 'ration, thus
not subject [to] franchise require1nent and regulatiot1,
1
1113 enabling
players in the generation and supply sectors to escapE1 aclcountability
. . . . . ,. I .
and e1nbolden1ng the1n to maiupulate the market and cmllude with
one another in order to increase rates.114 Bayan
!vluna, et al., allege that. these prov1s10ns haye also the
ERC in approving highly irregular and unjust rate
. , .. ; I
3.28. A careful reading of EPIRA, however, rev
1
eals that Bayan
lviuna, et al., are gravely 1nistaken and their
1
ke baseless.
Sections 6 and 29 of the EPIRA are valid and conslitutibnal. In fact,
said provisions are not only consistent with;. but are J1sJ essential to
the irnplen1entation of, the declared policies of the as provided
in Section 2 of the EPIRA. More ilnportantly, the belate
1
Cl atten1pt of
Bayan Muna, et al., to invalidate said:provisions, whicl1 products
of ni.ore than (7) years of public hearings, floor on
various versions of said 1neasures in Congress, 1nore Vmh twelve (12)
' . . I I
yyars. after its enach11ent on. 8_June 2001, should: not .br
by this I-lonorable Court as 1t 1s beyond the an1.b1t -of Ju;d1c::ial review.
112
113
114
115
Bayan Muna, et al:,'s Petition, p. 16, par. 54.
Ibid,, p. 16, par. 55.
Id., pp. 17-18, par. 59.
Id., p. 18, par. 59.
65
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I
The case of North Negros Sugar is
ivliolly inapplicable in this case. ,
1
: I
3.29. Bayan Muna, et al., cite North Negros Cb v. Hidalgo
("North Negros Sugar") in support of their that the
detennination of whether .or not a business is ilitility "is a
n1a'tterof judicial, not legislative detennination".116 A reading
of North Negros Sugar, however, reveals that the factual antecedents
' . . I I
of the case are different fron1 the case at bar and thus, 'J?a'Man Muna, et
al.' s, reliance thereon is clearly 1nisplaced. i
I
3.30. In North Negros Sugar, the issue was i the
had the right to prohibit the defendant [entering or
passing through the properties of the petitioner. In against the
petitioner, this I-Ionorable Court held; that petitioner cotrld not validly
prohibit defendants fron1 using the. road because by v?1+1tary act of
the petitioner, i.e., allowing vehicles to pass through the road upon
payn1ent of a toll charge of Php0.15, an had been
established and that the same had been charged with public interest.
Thus, this I-Ionorable Court concluded that the petiti9nJr could not
1nake arbihary exceptions to its use and enjoyment. Tpe;lissue in the
case cited was not the propriety of the legislative of
wnether a certain business was a public utility, i bht whether
petitioner could arbiharily discrilninate against the .
. 1 I
. i i
3.31. Thus, the quoted of the case relied by Bayan
Jv:[una, et- al. is 1nerely an obiter dictuni arid is :not a biIHfiri,g authority.
Tirne and again, this :Honorable Court has held that: ' :
116
L17 i
"An obiter dictu1n has been defined as ml.
expressed by a court upon s9rr:ie question of la:w:f which is
necessary to the decision of the case before! it.I It is a
re1nark n1ade, or opinion expressed, by a /in his
decision upon a cause, 'by the way,' that is,
or collaterally, and not directly upon the questi?n /before
hin1, or upon a point not necessarily Jin the
detern1ination of the cause, or introduced iray of
illustration, or analogy or argu111ent. Such i afe not
Jtinding as precedent."117 I
. I
Id.,, p. 18, par. 61. ,
Francisco M. Villanueva v. Court of Appeals, GR No. 142947, March 2002, 319 SCRA
463, 469.
66
I
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3.32. More importantly, however, even if the ob#et dictum of
North Negros Sugar is applied here, the .legislative !definition as .
provided in the EPIRA is not unconstitutional nature of
the .. business, indushy or service being provided by tj1e //generation
and supply con1panies as defined in the EPIRA does rlot fall within
the. definition of public utility as provided by law. As 1efined in the
case of JG Sunnnit I-foldings Inc. v. Court of Appeazsns by Bayan
Muna, et al.: I
.
!
I
"A 'public utility' a 'business or service
in regularly supplying the public with .some
or service of public consequence such as gas,
water, lTansportation, telephone or, telegraph To
constitute a, public utility, the facility must be
for the maintenance of life and occupation I of i the
i I
residents. I-Iowever, the fact that a business offers /services
. : .. ' I
or goods pron1ote public and serve
of the pubhc does not automatically make 1t a J?Ubhc
utility. Public use is not with public
As its nan1e indicates, the term 'public utility' i implies
, I
public use and service to tne public. The
determinative characteristic. of; a public utility of
service to, 01 readiness to serve, ah indefinite or
portion of the public as such 'which has i! to
den1and and receive its services or co1n1noditks. $tated
otherwise, the person in control of public
utility n1ust have devoted it to such se that public
genexally or that part of the which / been
served and has accepted the service, has the 1nght to
de1nand that use or service so long as it is
with reasonable efficiency and under proper ich:arges.
Unlike a private enterprise which
I I
detennines whom it will serve, a 'public utilityholas out
generally and n1ay not refuse legitimate de:n\a4d for
se1-vice."' '
llll ' G.R. No. 112702, September 26, 1997; 279 SCRA 506, 523.
67
I
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GenCos do not .out to the public
as suppliers of a co1nn1od1ty, i.e., The supply
elethic power only to the DUs holding legislative and it is
the latter that, in turn, distribute the electric power td public.119
The public has no right to demai'ld: from the dny service.
Therefore, generation and supply companies, as by the
EPIRA, are not public utilities as defined by jurisprudetcJ; In fact, as
explained above, the express provisions of the EPIRA, !which declare
that generation (and supply) co1npanies are not publi J.tilities seek
to achieve the State's avowed policy of increasing ptitate capital
inflow and encouraging an Open and Competitive e[ectricif market.
3.3Ll. Thus, unlike in North Negros Sugar where tpiJ Honorable
Co
1
urt held that even if .. the road in question did .nor. fall
within the legislative definition of a public utility in No. 3108, the
nature of the business or service rendered by such rbad made it a
public utility, there is no necessity for this Honorable cbutt to declare
the and supply as defined . in. l.tht. EPIRA as
public utilities and declare Sechons ,6 and .29 i;ne.
nature . of the business, indi:stry : or services
generat10n and supply comparues reioves them the defrmtion
of, public utility. In fact, as provided in North Negrosl Sugar, "an
atten1pt to declare a co1npany or enterprise to be a i.pablic utility,
where it is inherently not such, is, by virtue. of the of the
federal constitution, whenever it interferes with Pfiv/ate rights of
property or contract. 120 ,
passage of Sections 6 and 29 of the
EPIRA is a valid exercise of legislative
poioer.
I
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3.35. The. Constitution, as the will of the people in their
original, sovereign and unlinuted capacity, has legislative
power in the Congress of the Philippines. The gran;t df legislative
. 1 d.
1
'L.I . Tl
power to Congress is broad, genera an 1e
legislative body possesses. plenary ;power for all pu'.rppses df civil
governn1ent. Any power, deemed 'to be legislative i by usage and
I I
h?tdition, is necessarily possessed by Congres13, /unless the
Constih1tion has lodged it elsewhere. In fine, except limited by
the Constitution, either expressly or hnpliedly, legislative power
' I
. I
i
120
In accordance with the EPIRA, some GenCos have been issued a license by the ERC to
become Retail Elechicity Suppliers (RES). These GenCos with can supply
power directly to t11e end-users, who are contestable customers. i
Dayan Muna, et al.'s Petition, p. 18, par. 61., I
. 68 I
119
I
empraces all subjects and extends' to matters of or
co1i1n1on interest."121 I :
, II i
; 3.36. EPIRA, which was signed into law on 8 J .bt 2001, was
designed to bring structural reforms to hnprove of
power supply to end-users by encouragmg greater co+ri.Retition and.
efficiency in the electricity industry tluough privatiiaJon;
1
22 The
essence of the reforms, an1ong others, was to give the
power to choose their source of electricil-y among a host of generators
and suppliers, where prices will be market-driven and codi.petitive.123
. . , ; I
' 3.37. It was pursuant to the declared State policies that Sections
6 29 of the EPIRA were passed'. The EPIRA pr4villed a legal
fra111ework for the reshucturing and privatization pf the power
incluslly to ensure that the generation124 and sectors are
. . I
open and co1npetilive, thus: i
l21
122
123
124
125
I
"Section 6. Generation 'Sector. : - of
elecfric power shall be con1petitive and open. . ! . /
i I
I I
I
ii
xxx
I
I
Any law to the conl-rary notwithstanding, power.
generation shall not be .Public .htility
operation. For this pmpose, any person or ,/entity
engaged or which shall in power and
supply of eleciTicity shall not be required to a
local or national franchise. ' !
I
xxx i
Upon in1plementation of retail con1petiiioh and
access, the by a gen:ralion
tor supply of electnc1ty shall not be subject to
by the ERC except as otherwise provided in this{\cf'
i
xxx
I
I
I
, I
Ople v. Torres, et al., G.R. No. 127685, 23 293. SCRA 141, I . . _
http://www.doe.gov .ph/
Ibid. , I
Id., Section 6.
Id., Seclfon 21.
69
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I
The ERC shall, in detennining the of
n1arket power abuse or anti-competitive behaviqr, fequire
from generation companies the sub1nission ! of their
individual pricing formulas as well as their/ #-iancial
staten1ents." i
!
I
i
"SEC. 29. Supply Sector. - The supply s,ector is a
business affected with public interest. Except for
distribution utilities and electric cooperatives

to their existing franchise areas, all suppliers of
to the contestable n1arket shall require a fr
1
on1 the
ERC. ! i
1
. I I
For this purpose, the ERC shall pron1ulgaie rules
and regulations . prescribing the of
electricity suppliers which shall an-i9ng other
requiren1ents, a demonshation of their i
capability, financial capability, and crediNorthiness:
Provided, That the ERC shall have authority to
elechicily suppliers to furnish a bond or other eviqence of
the ability of a supplier to withstand market
l l
. . l f.
1
I .d .
or ot 1er events t 1at inay increase t 1e cost o
ing
I I
service. , I
Any law to the conh'ary notwithstandirlg, . supply
of elecLTicity to the contestable market not be
considered public utility operation. For thi$ Burpose,
any person or entity which shall engage in thef sipply of
elechicily to the contestable inarket shall not be r!equired
lo secure a national franchise. I
I
, ' I
The prices to be charged by s"?-ppliers for supply
of electricity to the contestable 1narket shall b1 subject
to regulation by the ERC. : i
, I
Electricity suppliers shall be subject to the rules and
I
regulations concerning abuse of markE'.t I power,
and other or
. I
discritninatory behavior to be promulgated by ERC.
I i
70
I
In its billings to end-users, every
identify and segregate the con1ponents of its supp her' s
charge, as defined herein."
1
i
3.38. Consistent. with the invisible hand of Adam
Sn1ith,
126
Sections 6 and 29 of the EPIRA made power ge1ieration and
the supply of electricity to the contestable market not ipdblic utilities
in order to promote a free and open. electricity /nus was to
er1sure that barriers to entry of investors and new players in the
pnwer indush-y would be at a 1ni11in1un1, encourage of private
capital to achieve the end goal of
1
increasing supply cfnd provide
. efficient and reliable service at competitive price withtjut financial
risk to the Govenunent.
!
3.39. While GenCos under EPIRA are not as
utilities, they are nonetheless considered busipefses hnbued
with public interest. The 01Jerations ,of the GenCos are subiect to the
. t I J
mnple regulatory and oversight pow;ers of the ERC. For exainple, the
PSAs between GenCos and DUs are sub1nitted to ERC)fot review and
aBproval. Thereafter, the GenCos are required to proof or
dcku1nenta ti on for ERC' s verification, including the: of return
and subject to subsequent adjush11ents,. rates and
cl-larges of GenCos under such bilateral agree1nents ate reviewed by
ERC. On the other hand, in case of power sa
1
ies/ of GenCos
tlfrough WESM, as discussed above, the clearing price/is set pursuant
to the PDM approved by ERC .. The ERC also ihas sufficie1i.t power and
authority to intervene and address and re.dress abuse, anti-
cornpetitive behavior, discriminatory behavior, and
n1arket conditions.
Sect-ions 6 and 29 of the EPIRA do. not
violate: ( i) Section' 6, Article XII; (ii)
Section 1, Article III; and (iii) Section 9,
Article II, of the 198? Constitution.
I
I I
I
126
The phrase invisible hand was introduced by AdainSmith, who often regarded as the
father of Economics; in his book "The Wealth of Nations". According/ to $.mith, an economy
can work well in a free market with minimal regulation. In other the invisible
hand of market forces, in the form. of natural demand and achieve U1e most
efficient level of production, consumption: and distrib.ution of ru1d services.
71
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3.40. Petitioners Bayan Muna, et al., want the
apren1entioned .provisions of the EPIRA invalidate4 a'.llegedly for
violative of the 1987 Constitution, particularly its Section 6,
XII, Section 1, Article III; and Section 9, ArticlefI. /Bayan Muna
et :al.'s argu1nents are specious and should not be /credence by
this I-:Ionorable Court. !
I
I
' 3.41. First. Sections 6 and 29 of the EPIRA do ii!ot afoul of
Article .. XII on National Econon1y and Patrimony. 6, Article .
XII of the Constitution provides:
1
I
I
, 1 I
"Section 6. The use of property . bears I a ,. social
function, and all econontlc agents shall to' the
co1nmon.good. Individuals and private groups,
I ' I
corporations, cooperatives, and similar
organizations, shall have the right to. own, and
operate econontlc enterprises, subject to the dtity /of the
State to pron1ote distributive justice and to intervene
when the com1non good so de1nands." i I
: i
3.42. Conhary to Petitioners Bayan Muna et erroneous
assertion, EPIRA' s mandate, as c;:ontained in Sections. 6 and 29, is not
fo,i the "state to abandon its power to ilnpositions
0$ power generators and suppliers"127 and thus, d<;>es not violate
Section 6, Article XII of the Constitution, which provi4es/ for the duty
of the State to intervene when commoi1 good demand
1
s. f-1.s explained
al.Jove, Sections 6 and 29 of the EPIRA were incluqed in order to
pro1note a free and open market, which is a declare:d policy of the
1 '
0
I
state i
.._ I
! I
3.43. Moreover, a thorough ,reading of the 'ijPilRA and the
assailed provisions, easily reveals that even though /Gen Cos and
suppliers of electricity to the contestable inarket were/ declared not to
be inade public the EPIRA still provided skfeguards to
ensure that no excessive ilnpositions and anti-coil.sumer kctivities will
I !
be propagated. In fact, the assailed Sections 6 and !29 expressly
provide that generation of electric power and the sector are
businesses affected with public interest. Thus, Sectlon 6 of the
EPIRA provides, that the "ERC shall, in deter1ninirlg}he existence
of 1narket power abuse or anti-co1npetiti've. behatior, require
'I , 1
generation coni.panies the submission of their financial
: I '
state1nents." On the other hand, Section 29 of the provides
that elechicity suppliers, even though not considered public utilities,
' '
127
Uayan Muria et al.'s Petition, p. 20, par.65.
72
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"sl}all be subj e.ct to the rules and. regulations concerbing of
power, cartelization, and other or
disbhuinatory behavior to be pro1nulgatedby the ERC.'1
. I I
: 11 '
3A4. Clearly, therefore, Petitioners Bayan Muha et al.'s
allegation of unbridled in1position of increased .and other
anti-consun1er activities
12
s are baseless. Despite the (and
supply) sectors being open and competitive, the retains
authotity over them in preventing n1arket power ckrtelization,
and anti-con1petitive or discrinlinatory behavior. ! f
I
!
3.45. Second. Petitioners Bayan Muna et al. defy logic when
they argue that a taking of propetty without
1
due result fro1n
the declaration in Section 6 and 29 that the generat.iqn and supply
sectors are not public utilities. It 111ust be e1nphasized that there is no.
prohibition of regulation of charges by GenCos and under
the EPIRA. As explained above, as can be seen J. tthe assailed
provisions then1selves, the ERC still retains over the
generation and supply sectors in order to prevent cu}ti-
1
competilive
and discrirninatory behavior, an1ong others. In fact, Se;ctibn 45 of the
provides, an1ong others, that the ERC shall) nlotu proprio,
. d 1.. 1 b I I ti' t'
1n01utor an pena 1ze any n1ar <et power a use or anh-compe 1ve or
discr:in1inatory act or behavior by any participant in /the electric
power industry. Upon finding that a n1arket participa4t lfas engaged
in such act or behavior, the ERC shall stop and redress the same.
_Such re1nedies shall, without limitation, include of
price controls, issuance of injunctions and :the of fines
penalties pursuant ito the EPIRA. In addition, the EPIRA,
the generation129 and supply130 sectors, although I open and
cornpetitive are required to obtain a certificate of. co:tj1pliance and a
license fro1n the ERC, which 1nay impose provisions:/ cbnditions to
.further discourage abuse of n1aiket power and artifcompetitive
behavior.
I
i
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3.46. Moreover, even assu1ning arguendo Congress
ren1oved fron1 the ERC all authority over the GenCos
1
a1fd electricity
suppliers, Section 1, Article III of the Constitution or '/due process
clause" is still inapplicable as this constitutional is not a
blanket1Jrohibition.131 but is a limitation on goverrune:rii.tal actions and
. I I
cmu101: be invoked against private entities such as pmjticipants in the
pm.ver indushy. Thus, as stated above and as will i expounded
12G
129
l'.llJ
Bl.
Ibid., p. 20, par. 70.
ld., Section 6.
I
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ld., Section 21. I I
Uniled Slates v. Ling Su Fan, G.R. L-3962, 10February1908, 10 Phil.10'1, 111.
73
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below, Congress after years 0 deliberations and hearings,
enacted the EPIRA hi.eluding Sections 6 and 29 as a va'.lid exercise of
povver, the those
provisions pose political questions, which are power of
judicial review. . . ! r .
3.47. Considering aH the Petitioners Muna et
al.';s assertion of the alleged violation of Section 9, II of the
Constitution 111ust necessarily fail. As explained abov, tl1e laudable
objectives of the EPIRA, including Sections 6 and 29 do not
"condenu1 people to poverty."
132
This ..Honorable Co.iirt./ should not
I . . I
countenance the general invocation: of Conslitutional
1
provisions hi.
ord.er to invalidate legitin1ate acts :as /tl:e EPIRA,
wlpch underwent years of pubhc heanngs, and
research and study. In fact, the lirrtitatiops/ of judicial
review prevent it froin doing so. I
Sections 6 and
unbonstitutional is tantanwunt to
declari.ng the entire EPIRA
wiconstitutiona l.
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3.48. The EPIRA declared it the. State's policy to, /aJong others:
(a) ensure and accelerate the total electrification of (b)
en.sure the quality, reliability, security and affordability ofthe supply
of electric power; (c) ensure transparent and prices of
electricity in a reghne of free and fair competition aj.1d full public
accountability to achieve greater operational and econbrr{ic efficiency
and enhance the competitiveness of Philippine the global
( d) enhance the inflow o:f capital the
ownership base of the power generation, traI\snss1on and
dis. tribu lion sectors in order to 1niniinize the financial dsk exposure
, i I
of: the national govenunent.
I
3.49. In line with the foregoing State policies, EPIRA was
to a cir the electric
power industry, including the pnvatizatlon of . )the assets of
NAPOCOR, and the tiansition to the desired compeiitif e structure.
A1nong the recognized changes in the frainework and of the
eiechic power industry is: (a) the establish1nent /of [the WESM
vv
1
he:reat electricity supply is freely: traded by the ,G;entos and the
price is set pursuant to the PDM approved by the and (b) the
irnple1nentation of retail con1petition and open provided,
i' , I
'

Id., p. 21, par. 73.
. . . , I
ainong others, that: (i) the WESM is established; and at least 70%
of the total capacity of the. generating assets of is
privatized. I
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3.50. The characterization of Gen.Cos and as, NOT
being public utilities under Sections 6 and 29, is
essential to achieve the above policies and purposes .. on
the sector of generation, Congress saw fit to declare that penCos are
required to secure a local or national _franchise, and the prices
charge forthe supply of electricity are beyond of
the ERC in order. to: (a) encourage; the inflow of private
capital that would address the ever increasing demandf foi electricity,
(b)
1
privatize the generatin.g assets of NAPOCOR, and! (cJ establish a
free and open WESM. . ; i
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. : I
. 3.51. If Sections 6 and 29 are declared on the
basis of the erroneous clainl.s. of Petitioners Bayan M;unf, et al., the
laudatory purposes of the EPIRA and the State it seeks to
hnplernent will i:o be Particular !if GI' enc:os
declared as pubhc utilities, they will, among others, }Je
1
requrred to
secure a franchise, be subject to the nationality requiter:hents under
the Constitution, and their prices for supplying will be
subject to the rigorous process of application, and
heating before the ERC. With the su1f>stantial pecessary to
construct and operate a power plant, the above consequences will
surely deter all potential investors from investing in o
1
'enCos.
I .
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3.52. Ultimately, the intent of the EPIRA to, ;among others,
accelerate the total electrification of! the country, ensttre/ the quality,
reliability, security and affordability of electricity, establish a regime
01 free and fair competition/and thf'. inflo_w capital
will no longer be achieved. Without the GenCos, there will be no
cqn1petitive v\TESM and neither will open accessi' achieved.
O,therwise stated, declaring Sections 6 and 29 pf I the EPIRA
will render ineffective the entire framework and
. I I
shucture of the power indushy as-envisioned underthe
T(ze issue presented is beyond the,
ainbit of judicial review.
. 75
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3.53. The power of judicial review is the power 6 tihe courts to
test the validity of executive and legislative acts for conformity
with the Constitution. Tluough such the enforces
and upholds the supreinacy of the Constitution.133 for a court to
exercise this power, certain requirements inust first be f 1,t, nan1ely:
.
11
(1) an actual case controversy calling for eJercise
f
. d' . 1 I I
o JU 1cia power; . ! i
(2) the person challenging the act must have "s*dtg" to
challenge; he must have a : personal and
interest in the case such that' he has sustaine9, Jr will
sustain, direct injury as a result of its enforcemenf; I
(3) the question of constitutionality n1ust be at the
possible opportunity; and ! I
.I I
(4) the issue of constitutionality inust be the very Zis mota
of the case."
1
3
4
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3.54. In this case, Petitioners Bayan Muna et al. not failed to
raise the question of constitutionality at the possible
opporlunity, tlie issue of constitutionality is .also not t!i.e lis mota
of the case. More in1portantly,. this issue is not to judicial
and .this is not an actual case/ or/
calling for the exercise of this I-Ionorable Court's po,wer of JUdicial
I I
review. 1
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. 3.55. hi. the classic formulation of Justice Brenhai1 in Baker v.
Carr, "[p ]rontlnent on the surface of any case to involve a
political question is found a textually donstitutional
co111Jititn1ent of the issue to a coordinate political depclrtment; or a
lack of judicially discoverable and manageable / stbdards for
resolving it; or the hnpossibility of deciding withoht an initial
pblicx detennination. of kind; Clearly for discretion; .
. , : . . ,. I . .
or ilnpossibility of court's undertaking independent
resolution without expressing lack of the respect:
1
dt1Je coordinate
blanches of government; or an unusual need u1.i.questioning
adherence to a political already n1ade; or thJ pbtentiality of
IJJ
134
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Garcia v. Executive Secretary, et al., G.R. No. 157584, 2 April 2009, 983 SCRA 119, 129.
Francisco, Jr. v. House of Representatives, G.R. No. 160261, Ntjvei{1ber 10, 2003, 415
SCRA 44, citing Angara v. Electoral Commission, 63 Phil. 139 I
76 :
!
I
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e111barrassn1ent fron1 !nttltif arious : pronounce1nents! Uy various
I I
departrnents on the one question."135
1
3.56. As in the case of Garcia. v. Executive et al.,136
what Petitioners Bayan Muna et a.l. raised as an issue isjthe propriety
of :the privatization of most state-owned power. and
assets as as the deregulation of thel e4tire power
Such .de.tenmnation clearlr .dwells on. the._ Fof11_dness _or
of the hnung, 111am1er, and rationale of the enactment of the
EPIRA by Congress. The Petitioners a_re asking this Hohotable Court
to /decide on econonuc issues clearly beyond its Thus,
respectfully submits that. this' issue is! for the
I-Io:ri-orable Court to resolve it ca1u1ot rule I Of when or
vvhether or not generation and supply sectors of the pow
1
er industry
shduld be considered public utilities contrary to. Sectiops -
1
6 and 29 of
the, EPIRA, without passing upon the wisdo1n of policy of
cle1
1
egulation and privatization that Congress has dedde9- upon. "To.
1 I - j - l -
the words of Baker v. Carr; ,the ruling that _asks
requires "an. initial pol-icy detennination of a kind clea,ly for non-
judicial discretion"; _the_ of that! . give.n
the people the full discretionary authority to policy is
legislative departn1ent."1
37
_ i . II . .
: I
3.57. As early as TaiJ,ada v. Yulo, et aL,138 this _
held: !
I ,_
"Counsel in effect urges us to adopt . a liberal
construction of the statute. That in this instance, /as fin the
past, we aim to do. But counsel in his men1<?rapdum
concedes that the language of :the proviso in is
son1ewhat defective and does not clearly the
legislative intent", and at the hearing in to
, . I I
questions was finally forced, to admit that ';VhFt the
Govenur1en,t desired was for !the court to
and phrases in the law in order to supply an int{:lntj.on for
the legislature. That we , cannot do. Byl liberal
. f f h- 1 I I
conshuchon o statutes, courts ro1n .t e angtfage use,
the subject n1atter, and the .. ptuposes of those! fr
1
aming
the1n are able to find their ,true meaning. There is a
sharp distinction,. howeVer, betWeen c'onstructitn rf
'. I
135 lntegrntecl Bar of U1e Philippines v. Zamora, G.R. No. 141284, 1$, 2000, 338 SCRA
81, citing Taflada v. Cuenco, 103 Phil. '1051 and Bakerv. Carr, 369 u.$.
136'
B7
138
G.R No. 157584, 2 April 2009, 583 SCRA119. , I
Ibid., at 131. I
Tafmda v. Yulo, et al., G.R No. May 1935, 61Phil515.
1
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. ;' 11
nature the act of a court :in .engraftin? uppn/ a law
sometlung that ha.s been onutted wluch someone
believes ought to have been. embraced. The forker is
liberal consh'uction and. is 'a legitin1ate of
judicial power. The latter is judicial Ie
1
giJ1ation
;forbidden Qy the: h'ipartite 'division of powet1s an1ong
the three departments of:govern1nentc'the exectiti-tre, the
angthe judici.al."
13
9 . /
I i
3.58. Aside fron1 Petitiol.1ers 'Bayan Muna, et dz.
1
J clailns not
being susceptible to judicial determil.1ation, it cannot airly argued
that. the question. of constitutionality was raised rt /the earliest
possible opporturuty. As narrated above, the EPIRA,.waJs enacted as
early as 8 June 2001 and took effect on 26 June 2001. 1nore than
' I I . '
twelve (12) years have passed since the enaal1nent and
il11ple1nentation of the law, and yet, it is only now thJt Petitioners
Bayan Muna, et al. challenge. pertinent provisions Petitioners
Muna, et al.'s argument that "there was
1
no prqcebding below
that could have enabled Petitioners to assail fue ERC the
of its act or clothed it with con1petence to ansvier/ the san1e"1
4
o
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is! erroneous. While, the assailed act of the ERC was dated 9
Decen1ber 2013, Petitioners Bayan Muna, et al. had various
opportunities to raise the alleged unconstitutionality Sections 6
and 29 of the EPIRA prior to December 2013, but they( failed to do so.
Tirns, the belated allegation of tmconstitutionality ls1buld not be
countenanced by this I-lonorable Court. !
1
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. . . ,: i ,
3.59. Assu1ning arguendo that the Sections 6
and 29 of the EPIRA are properly subject of judicial .
' . ! I .
and at the .earliest opportunity, the that
the consl1tutlonahty of Sections 6 ai}d 29 of the EPIRJ\. 1s not the very
mota case. It has been that the
Court will not pass upon the issue of constitutio1faltty, although
properly presented, if the case .can be disppsed of! some other
ground, such as the application of the statute or the j general law.
Thus, "the petitioner must be able lo show that the/ case cannot be
legally resolved unless the constitutional raised is
determined. This require1nent is based on the rule law has
in its favor the presu1nption of constitutionality;; to justify its
. I I.
nullification, there 1nust be a clear and unequivocal preach of the
----------
lbid., at 519.
139
140
Bayan Muna, et al.'s Petilion, p, 4, par. 9.
78
I
Constitution, and not one that is doubtful, or
argun1entative."141 ; /
i
_ _ 3.60. In. Petitioners Bayan et. al: alleged
tha.t the const1lutionahty of the EPIRA prov1s1ons 1s to
the resolution of the controversy
1
42 without further.
However, a perusal of the Bayan Muna, et al. Petition shors that the
factual and evidentiary support presented in the case were for the
pufpose of proving U-1e .grave ab;use
to ! lack or excess of 1unsd1ction of the ERC n1 the
ge1?eration charge increase on the basis of MER.ALCOl.s 5 December
20-t3 Letter but this question, which may be legally without
the constitutional questi?n raised. Considering all the ifojegoing, the
constitutionality of Sections 6 and .29 of the EPIRA is .:cfoarly a non-
justiciable issue that precludes this I-Ionorable Court ij4- exercising
its power of judicial review. Thus, the Consolidated should
be disrnissecl.
1
/
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. . ! I
3.61. Finally, it n1ust be en1phasized that radically changing the
EPIRA as it currently stands,. by declaring its Sectibnk 6 and 29
unconstitutional, would unduly prejudice various with
foreign investors vvho have invested billions of !rejsos in the
Ph'ilippines, as they would now be fqrced to obtain fracip:ises and be
subjected to U1e ownership requirements proviided in the
Constitution..143 Inevitably, such an action would
1
e
1
xpose the
I
go;verrunent to various suits for violation of the "equal protection
clc:iuse" or the ".fair and equitable treahnent clause'f c
1
bntained in
Bilateral Invesbnent Treaties and investment contracts.I Moreover, the
: I' I
su,dden change in policy would have a chilling effe9t on future
investn1ents in power generation. To recall, the EPIRA I was passed
141
142:
1
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, ' I
Garcia v. Executive Secreta1y, et al., G.R. No. 157584, 2 April 2009, p83 ISCRA 119 SCRA
138 citing People v. Vera, 65 Phil. 56 (1938) and Ronmaldez v. G.R. No.
152259, July 29, 2004, 435 SCRA 371. :
Muna et al. Petition, p. 5, par. 12.
Section 11, Article XII of the Cons.titution provides:
' I I
Section 11. No franchise, certificate, or any other form of authorization/for the operation
of a public utility shall be granted except to citizens of the Philippines 9r to corporations
or associations organized under the Jaws the Philippines, at leas
1
t sbfty per centum of
whose capital is mvned by such citizens; nor shall such fra1}chise, certificate, or
, , ' I
authorization be exclusive in character or' for a longer period thap f1ty years. Neither
shall any such franchise or right be granted except under the conflition that it shall be
subject to amendment, alteration, or' repeal by the Congress when [the /common good so
requires. The State shall encourage equity participation :iJ.1 public by the general
public. The participation of foreign investors in the governing body ofl any public utility
enterprise shall be limited to their proportionate share in its capital;. all the executive
and managing officers of such corporation or association must be citizens of the
I I
Philippines.(Emphasis supplied). ' !
I
79
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precisely because of. the amount of te capital
to 111.eet the increa$1ng, de111md for the supply! ?fl e_lectricity.
It Sect10ns 6 and 29 of the EPIRA are declared unconstlhltional the
. . ' ,' ' ii I . I
insufficient supply to 111.eet the increasing de1nand
only be
aggravated, which would result in a further increase/ itj electricity
rates and by the reoccurrence of blackouts in Metro
:
i
D.
I lF TI-US I-IONORABLE COURT D,ECLAREb ITJ:IE
AUTOMATIC PASS-THROUGI-1 MECI-IJANISM
I I , .
' UNCONSTITUTIONAL, MERALCO AND/ ./THE
OTI-IER DISTRIBUTION UTILITIES WILL SUFFER
, , . I 1.
IRREPARABLE PREJUDICEAS A RESULT OF)BEING
. , , . I
DEPRIVED OF A TlMEL Y AND EFFICIENT
' 1
MECHANISM FOR COLLECTING i I THE
GENERATION CHARGES . IMPOSED B\ j THE
GENCOS. UL'fllVIATELY, IT I IS THE WHO
w1LL SUFFER IRREPARABLE ! .
UNQUANTIFIABLE PREJUDICE FROM : I THE
RESULTING ENERGY CRISIS. , !
i
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3.62. In view of their pass-through nature, and
other pass-through charges 1nust be pro1nptly I c9llected by
IVIERALCO and the other DUs, in order ,for themi t have the
. ' I
wherewithal to pay the respective .GenCos, NGCP /aiJd national
govenu11ent and lo.cal govern1nent uruts
1
I
3.63. The AGRA Rules provide for the mechaiysir to ensure
that i:reneration rates are collected by the DUs on of the
::J I I
GenCos in a titnely and efficient 111a1u1.er. As will I: be explained
! I i
hereunder, this 1nechanis1n is beneficial not only to OUs and the
GenCos, but to the public as well. Conversely, if automatic
adjustn1ent mechanisnl. is abandoned, the impact could disastrous
for the energy sector and, 111ore importantly, the public! :
' I
3.64. As explained earlier, electricity prices in: WESM (which
, , I
translate to generation charges of the DUs) are highly jvolatile and
difficult to forecast. If, as Petitioners would have it, each and every
generation rate increase is 1nade to Ull.dergo an procedure
involving publication, notice and hearing, MERALCQ cqi.d the other
DUs will inevitably have virtually difficulties
' I
responding to the real-time power needs of the commti.nity.
, : I
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80
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3.64.1. For instance, in case of the/ Jnexpected
shutdown of .power plants, such as. what happened recently,
MERALCO will be to purchase /expensive
electricity fron1 the WESM. If such purchase, or of
its costs for such WESM purchases, will enta;ii la lengthy
procedure involving publication and notice '-}114 hearing,
MERALCO will not be able to purchase the necessary power
requirernents in tin1e to actually n1eet the demand ks ft arises.
. . : I
3.64.2. In such an eventuality, MERALCp will be
unable to comply with its franchise obligations,/,
the obligation to supply electricity in an efficient and least cost
inaiu1er within its franchise area. This is hue
considering that certain 1narket conditions are/, bbyond the
control of the distribution utilities, such as glotjal I oil prices,
fluctuations in foreign exchange rates, the spikes
and dips in supply and demand, and $hutdowns
.. I
of puwer plants. J
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. 3.65. Furthern1ore, if this Honorable Court's TRO is
1
not lifted,
. I I
and the generation rate ren1ains pegged at PhP5.6q73 per kWh
indefinitely (which is not reflective of actual prices),
MERALCO will be hard-pressed to obtain the electricity
fro1n the GenCos. Theresults could be devastating. /
3.65.1. NIERALCO' s inability to bill the I Dece1nber
2013 increase in generation charges . and other I
charges in light of this :Honorable Court's iT11"0, would
inequitably expose MERALCO to great risks; As it
stands, NIERALCO is enjoined frmn collecting frbni the public
in the generation charges to
Bilhon, while the GenCos and .NGCP ni.ay o:p collecting
their full billings fro1n MERALCO. Already has.
received demand letters fro1n: (a) NGCP, for PhP111,382,471.77;
a:nd (b) AES Masinloc, for PhP436,646,891.26; San Miguel
Energy Corporation, for PhPS,080,870.27; mid I (d) South
Pre1niere Power Corp., for PhI-'856,794,429.96.
I
3.65.2. because of MERALdO'/s constraint
to pay the outstanding and succeeding bills the
PhPS.6673 per kWh price pecause of this Court's
TRO, MERALCO will, in the succeeding effectively be
unable to buy power if the result will cause p:ass-through
generation charge to exceed PhPS.6673 per kWh. i. the sa1ne
, . . . !
81
144
145
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rnaiu1er, it is. highly that the no longer
sell puwer to 1 the result will the pass-
tluough generation charge to exceed PhP5'.6673 pbr kWh rate as
lVIERALCO would be legally constrained to power at
inarket price. . . / .
I
I
. . With the TRO in it /riot be far-
fetched to 1mag1ne that some GenCos rmght altogetfaer refuse to
sell elechicity to MERALCO, or decide to sell Ito MERALCO
only such ainount of elechicity as is cormnefsurate to the
resulting rate of PhPS.6673 .. per kWh. Eitl]erf . way, the
insufficient power supply will result. in rotatfti.g blackouts,
particularly during the su1nmer months, / historically
drive up the den1and for electricity. :
I
3.65.3.1. the. Philippine) 4'dependent
Power Producers Association ("PIP:L:J A"), cpn1posed of 28
GenCos, recently stated. iI.1 a press.-conferen.Fe1[44 that so1ne
GenCos 1night shut down their operatiops if they are
unable to collect their In "[GenCosJ
with weaker balance sheets" will have unless
the TRO which prevents MERALCO fro1n collecting fro1n
the end-users is lifted soon. i f
i
3.65.3.2. More itnportantly, even t+1e Secretary of
DoE has repeatedly , en1phasizecl that the problem
brought about by the TRO which prevents j MERALCO
fron1 collecting higher generation charges is not
addressed, the situation could lead to pow:er loutages and
1nassive brownouts in Mel-ro Manila.145 ' /
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3.65.4.. As n1ajority, of 'key /are located
within MERALCO's franchise: area, the rotating blackouts that
I I
will disrupt their econon1ic activities will result in
economic losses that are irrepa:rable and to/quantify.
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3.65.5. Co1nplicating Inatters furtl-\er) many of
MERALCO's customers refuse to pay their *ased on the
erroneous . the
MERALCO fro1n collecting the entire billed ain.ounts, 1nclud1ng
-------. . . I I
A copy of the Statement by _the PIPPA dated 4 January 2014 is attached hereto as Annex
"16" and made a11 integral part hereof. Copies of news reports are Jiso hereto as
"16-1" and "16;2" and integral hereof. i j
Sec
1
,http://www.rappler.com/busmess/ 46630-petilla-meralco-broJrnouts (last accessed:
8 January 2014) .. f I
82
I .
the distribu tlon charges, which did not increase! arld were not
. I i
covered by this Honorable s TRO, thus/ p. acing even
inore strain on MERALCO's cash flow. ! !
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3.66. Based on the foregoing, it is not difficult t? iinagine that
whatever dan1ages befall MERALCO as a result of a cash flow
problen1, would lead to even worse economic butdJns for. the
In the larger scheme. of things, the effects of
ani energy crisis could have dire and irreparable on the
national econo1ny and even national security. : /
!
. ! ii
3.67. If the auto1natic pass-tl:trough 111echanism /is declared
unconstitutional, the GenCos may refuse to supply, NGCP will be
to trans1nit, and the DUs' will be unable to the .
an:ount. of necessary to .meet the of a
econo1ny .. Indeed, 11.the supply
and de1nand of electTIC power will p,otenbally lead to the irreparable
prejudice and damage to 4.8 Million: c:ind b-ofnd 500,000
industrial/ co1nn1ercial establishn1ents and even I government
. I
1nstitutions. , f
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E. . I
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. . ' . 'i . .
BAYAN MUNA ET AL. FAILED TO ANY
PROOF, AS TI-IERE . IS NONE, SHOWIN<f . lfHAT
MERALCO COLLUDED WITH THE ON
TI-IE CONTRARY, MERALCO TOOK STEPS TO
MITIGATE THE CONSEQUENCES OF 1 THE
MAINTENANCE'SHUTDO'ry:N OF VARIOUS
1
PPWER
PLANTS. THEREAFTER, EVEN IF MERALC9' cpuLD
I-IA VE FULLY ' CHARGED. THE INCREf\S
1
E IN
GENERATION COSTS IN: ITS DECEMBER 2013
,. ' . .I I
BILLING TO I'IlS CUSTOMERS AS PROV:lDED BY
' . ' I
LAW, MERALCO, IN. GC?OD FAITH, $OjUGHT
GUIDANCE FROM ERC TO A
STAGGERED COLLECTION OF THE GENE
1
RlfTION
RATE. INCREASE IN ORJ?ER TO THE
BURDEN OF THE-INCREASE ON.TI-IE
PUBLIC. . . , I
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3.68. Petitioners Bayan Muna, et al. allude! to a possible.
collusion ainong the power industry players which allegedly resulted .
in "one of the 1nost, if not the 111ost, expen5ive rate in
Philippine history," thus: , I
I
83
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"23. Tl II f _ i I
. 1ese senes o u1uor,tunate events" 1n a Hne of
supposed "coincidences" resulted in one of the. bJst if
not the 1nost, expensive
1
rate ,increase(s) in
because, as res_rondent Meralco claims,/ was
forced to buy expensive power. from the VVholesale
Electricity Spot Market (WESM). ! / ,
24. Another factual consideration that PeBtioners
wishes to raise before this I-Ion.arable Courti if the
increasingly habitual shutdown; of the Project
vvhich naturally increases ;the rates of energy gei1.e:Jation'
even if these were produced by IPPs at a similcl.rlt low
cost. . l I
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xxx i
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33. Then last Nove1nber, the
was again shut clown, making it now an ahnost annual
activity, and, as always, it. is. also by
unscheduled outages of other power plants, resulting to
short-ter111 and artificial , shortage of
Achnittedly, these synchronized shutdowns,. too,
to Meralco' s buying the expensive' I from
vVESM."
146
1
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3.69. It rnust be eni.phasized that nowhere
1
in entire twenty-four
(24) page Petition of Bayan Muna, et al. was there categorical
assertion that MERALCO was a party to. the alleged
' . I
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: 3.70. Moreover, Petitioners Bayan Muna, et al. faileq to mention
their to most,. if 1nost,/ex ..
infrease(s) 1n the Ph1hpp111.es,' mainly to. fin/ increase m
ge:neration charges and other .related charges iniposed by the .
' . . I . I
Gen Cos, NGCP, national government and local. go,yert1IDent uruts.
I . . I
concerned and NOT to the distribution charges of MEI}ALCO.
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3.71. The increase in generation charges was about by
' '1. J
Malainpaya shutdown and other power plant that
cqincided with it. As previously discussed, 'before the I Malampaya
' . . . . , I
the generation charges and pass:--tl}ro
1
ugh charges
were relatively stable. The supply of electr1c1ty was aqequate and the
1 : r 1
de1nands of the custorners were n1et. In fact,. generation charges for
the October 2013 billing (Septe1nber 2013 supply moiltth) wentas
low P4.6832 kWh. i !
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146
Dayan.Muna, et al. Petition, pp. 10-11.
84
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3.72. There is no truth to Petitioners Bayan fyiuna, et al.'s
unfounded insinuation that MERALCO. colluded with players
in the power industry to increase power rates and in fact, /Petitioners
Niuna, et al., failed to provide any proof in suppf as
theye 1s none. In. truth, MERALCO was equally caught RY ?urpnse by
the
1
following developn-:ients and had to take remedial
ineasures to address the san1e:
1
/
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a. Malarrtpaya' s . shutdown, which was / originally
scheduled 1 November 2013 to 30 2013, was
111oved to 8 l\f oven1ber 2013. to 7 December 201.3. t.he .
start of the shutdovvn was again, moved to 11 2013 to
10 Dece1nber 2013 because oftyphoon Yolanda. ' /
I
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b. Other power plants with scheduled[ ni.aintenance
shutdovvn coincided or overlapped . with s new
shutdown schedule: i I
i
Power Plant Capacity
Scheduled
(in MW) Shutdown Period
' I I
\
(*extended its
' I
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Pagbilao 2 350 31August-26 Ncivei;nHer 2013
GNPower2 300 26 Septe1nber -10
2013* I I
Santa Rita Unit 20 250 23 .:... 28 October 2013*,
i
I
Ilijan 1 600 29 30 October 2013*} 5 11
Dece1nber 2013 : i
Santa Rita Unit 30 250 31 October - 2 2013*,
! I
18 , 22 Dece1nber 20]3 I
San Lorenzo Unit 50 250 1 November - 9 2013
Santa Rita Unit 20 250 3 November2013*
I
Ilijan 2 600 9 N oven1ber - 15 Detei:hber 2013
' ,. I
Calaca 1 300 24:Dece1nber 2013 - ioJanuary
' I
-
2014* I
'
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c. Various power plants also went outage
on dates overlapping with the Malan1paya shutdbwn:
Power Plarit
Calaca 1
Capacity
(in MW)
300
! I
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Calaca 2
300
Gl\T Power 1
300
GNPower2
300
) I
17 -18 Dece111ber 2013 /
i
1- 2 November 2013 1
I,
I
1
1
I
1''
10 -19 November 201:?> . I
I
I
27, Nove1nber - 8 2013

Gl\J Power 2 300 11-17 Decen1.ber2013 I
Gl\f Power 2
300
Ilijan 1
Ilijan 2
Iviasinloc - 1
Iviasinloc - 1
Masinloc - 2
Masinloc - 2
Mas:inloc-2
Masinloc - 2
Pagbilao 1
Pagbilao 2
San Lorenzo 1\!lod 50
San Lorenzo Mod 50
San Lorenzo Moel 60
Sta. Rita Mod 10-40
Suall
I i
I
600 8 -10 Noveinber.2013
1
!
600
300
300
300
300'
350
350
250
250
250
250
600
!
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8 - 9 November 2013 I /
I
31 October - 7 2013
6"- 8 December 2013 1
! i
6 - 8'November 2013 !
i
24 Nove1nber 2013
4 - 6 December.2013
1
/
I i
13 - 16 Dece111ber 2013 11
' ,1
29 November -13 De:cefber 2013
29 November -14 De
1
cetnber 2013
: I
11 - 12 Decen1ber 201? /
i
14 - 17 Dece1nber 201r j
28 May-10 Dece1nbet 2013
1 I
11 Dece1nber 2013
1
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22- 26 October 2013 )' I
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3.73. Thus, as soon as it learned. that thJ Laintenance
shutdown of Malan1paya will con1dde and/or. p with
shutdown of other power produces, MERALCO, 1n atc9rdance with
its obligation to obtain electricity at the least cost matjner, took steps
to. address the expected power supply shortage. As explained,
l\!IERALCO prepared an action plan to 1nitig.ate effects of the
sin1ultaneous shutdowns: /
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86
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147
148
149
. '
' ' '
a. MERALCO, through letters, certain
power plants to 1nove their, scheduled shutdowns so as not to
coincide with the Malainpaya shutdown.. In a dated 16
October 2013 MERALCO requested SPPC to the
Inaintenance outage of Ilijan Block 2 to so.n1e otI-iJr date that
\ill not coincide with the Malainpaya outage. Thb pertinent
portion of the letter reads: ' :
I
"We have made a forecast of WESM prices 6r the
supply 1nonths of November and Dece1nberi 2d13, in
which the SPEX - outage "0-illl take
place, and we foresee tl1at. [the] generatiof cl1arge
will greatly increase during such period. Ajsdne of
our remedial 1neasures to lessen the burdkn to
' , 1
electricity end users, we would like to reqb.est you
to inake representations with KEPCO to
ask them to re-schedule the 1naintenance b:uttge of
Ilijan Block 2 to so1ne other date that ;will not
coincide / overlap with the Malampya outcigej If we
can run Block. 2, its 420 MW contributioh to the
' I
Grid ':ill temper the increa_se
pnces, and ultin1ately, reduce the cost of eleqtnc1ty
for all consu1ners in Luzon."147 I
' i
b. MERALCO also wrote a letter 121 October
2013 to Se1n-Calaca Power Corporation, it to delay
the shutdown of Calaca 2 to with the
1\llalan1paya shutdown.148 In a, letter dated 15 2013,
Se1n-Calaca Puwer Corporation informed MERAIJCO that, as
requested, Calaca 2 will rnove its maintenance fro1n 1
, . I
Dece1nber 2013to11Dece1nber2013.
1
49 , I
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I
c. Second, MERALCO had consented to the Sta. Rita
plant's use of liquid fuel, and the ren1aining opkrJting portion
of Ilijan plant's use of bip diesel, while was not
available during its 1naintenance shutdown. 11-1isi was clearly
dee1ned a better and cheaper alternative than riot/ running the
. . . I . ,
plants and suffering the adverse consequence1 of inadequate
supply. 1
See 16 October 2013 letter, Am1ex "7" hereof.
See 21October2013 letter of MERALCO, A1mex "9' hereof. . i
See 15 November 2013 letter response to MERALCO, Annex "10" hJreof.
. I i
87
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d. Finally, MERALCO also entered intb a PSA with
; ' I
TMO to reduce its potential exposure to volatile iWESM prices.
,. . I I . .
1he PSA resulted in an actual rate of PhPB.6466 p;er lkWh, much
lower than the actual WESM charge of PhP33.2160 per kWh
during the Noven1ber 2013 supply inonth.
1
f
. e. MERALCO also conducted briefing the ERC
on 10 October 2013 and DoE on 21 October and 4 November
2013 and inade recon1n1endations on. I n1itigating
Ineasures, including exploring the use of admini$te(ed price at
WESM during the Malampaya shutdown. I
3.74. To einphasize, the assailed increase in charges
(and other pass-through charges) solely to tlJe penCos (as
well as NGCP, and the national government and 9overnment
units concerned) and are revenue-neutral with to DUs like
IYIERALCO. MERALCO did not stand to earn any dr otherwise
benefit fron1 . collecting said generation and other ! Pf ss-through
charges. !
: : i
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3.75. Therefore, contrary to Bayan Muna, et al.':J hlsipuations,
MERALCO did not collude with ai:y ,party to increase; fh4 generation
rates. In fact, MERALCO even. p1iof to the scheduled
shutdown had endeavored to co11trac,t at least,ninety percent (90%) of
its average inonthly peak thxough tJ avoid the
. . I
volatility ofWESM prices. i
3.76. Indeed, were it not for MERALCO's measures
efforts, generation ii1crease would. feen much
higher. Worse, if MERALCO did not resort to buying ff of WESM as
the situation demanded, there would have been a series P>f blackouts
within its franchise area to the dehhnent of its cust6mbrs and the
public in general. ! i
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3.77. It also bears stressing that proposal to
stagger the collection of the generation rate increase,iwi1ich is now
being used against it by Petitioners, was 1neant solely !to I spread and
soften the cash flow in1pact on . tile customers. In fact, although
- ! I
:rvIERALCO was authorized under the EPIRA IRR to make ail
auto111atic adjusli:nent of the generation rate increase single bill,
MERALCO chose instead to obtain guidance fro1n the! ERC for a
staggered collection of the saine.
88
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, .3.78. Based on the foregoing, U is clear MERALCO
exercised due diligence to cushion the impact of th$ supply
shortage occasioned by the inaintenance shutdo
1
wn of the
I , . . i I
IVIalarnpaya and other power plants. In buying elec1tritity fro1n the
WESl\1, MERALCO was only complying with the EFIRA's mandate
t_9 ensure the quality, reliability and security of of '
power to the end-users. Thus,: MERALCO fully co1nphed with its
opligations under the law and Bayan Muna et al.'s insinuation
of collusion against it should be found wanting and denied outright.
I I
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: 3.79. Moreover, as explained in further detC!jll !below, any
suspected collusion by electricpovver participants, amounts 'to
ahti-con1petitive behavior and abu:se of n1arket is properly
within the power of the. DoE, ERC and PEMC to inye9tigate,. or by
the J\JGCP to monitor and report, in accordance v\.fitli the powers
granted to then1 by the EPIRA. Section 45 of the EPfRf. specifically
granted the ERC, 1notu proprio,fhe obligation to penalize
any rnarket power abuse or anti-competitive or act or
behavior by any participant in the, electric power htdush-y. In fact,
upon finding that a 1narket participant .has i4 such ac.t
behavior, the ERC 1uandated to stop and redress 1.!:11$ sa111e; Such
ren1edies shall, wifl1out lhnitation,; include . the itnp6sition of price
cont!]Jls, issuance of ' and impositiort df fines and
p'enalties pursuant to the EPIRA. .
1
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3.80. Further, in accordance with Section 45 of] thf EPIRA, the
:vere pre.scribe / thf n1ann.er in
'l\Th1cb the ERC will investigate possible v1olahons th
1
ereof consistent
, . . I
-with the requireinent of due process.1
51
The PEMC is to
investigate, through its matket : surveillance cotjuilittee,
152
and
possible breaches of WESM. i+clu.dh:g any
possible rnarket power abuse or anh-con1pehtive or; dfscnmmato1y
a.ct or and infonn the of any .. I relativ.e to a
potential of such breach.154 'As for the NGCP, 1t has the prnnary
obligation to forewarn the ERC and DoE of the decrease
in of rate ii:- [with
to 111aintain the rehab1hly; adequacy, security,
1
of the gnd as
provided in Rule 6, 7 (c) of the EPIRA IRR. '. !
]50
151
152
l53
151
EPIRA, Sec. 2 (b). i I
ERC Competition Rules and Complaint Procedures; 23 August 200(), Rule 2.
WESM Rules, 1.6.2. I
WESM Rules, 7.2.5.2. )
WESM Rules, 1.4.5.1. I
89
3.81. Clearly, therefore, if .Petitioners' insinuatic;m collusion,
anti-co111petitive practices and abu .. se of rnarket be
1
harior against
l\1ERALCO has any they should have lodged la d:omplaint in
accordance with the Ccnnpetition Rules before the
or the DoE/ERC/PEMC should have motu proprio ac
1
tecJ against the
cc:i111e I
0(.-l
PROCEDURAL ARGUMENTS
F.
' '
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THE CONSOLIDATED PETITIONS SHOULD BE
I I
DISMISSED FOR .1FAILURE TO EXHAUST
A.DMINISTRATIVE REMEDIES. ! . ]
I
i
3.82. In the present case, BA YAN MUNA et ql. ERC' s
approval of MERALCO' s request to implement tpe I increase in
I\fovernber 2013 generation charge to be passed on to) tl1r consumers
on a staggered basis. Likewise, NASECORE et al, question the. rate
adjustn1ents 111ade by MERALCO and pray for the! rJfund of the
a1nounts, which were subject of the automatic increase. I
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. 3.83. It is settled jn that, adnunisgat}ve re1:11edies
should first be exhausted before one seeks judicial The case of
Bangus Fry Fishe1folk v. Lanzanas155 provides: I .
I
I I !
"The settled rule is before a party inay!. the
intervention of tl1e .he :sl:ould first avail! ofi all .the
1neans afforded by procepses. J1en,ce, 1 a
1re1ned within the adn1:inistrative machine : , s still
with a1 ;procedure prescribed pursuant to:law
for an administrative officer to decide the conttove1sy, a
party should first exhaust such 1emedy
)lo the courts. The pre1nature invocation of I a/ court's
ji.ntervention renders. the co111plaint without! cause of
. . I
and dis1nissible on such ground."156 /
,I I
. i I
3.8Ll. The doctrine of exhaustion. of administrative
that where. a ren1ecly agency is
prov1clecl, and can still be resorted to by giving the
1
agency every
opportunity to decide a matter that comes within litl jurisdiction,
155
156
C.R. No. 131442, 10 July 2003, 405 SCRA 530,
Ibid., at p. 539.
90
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n;lief n1ust first be sought by exhausting this re1nedy bringing
an action in or resorting to the courts of justice.157
, . i !
3.85. A careful perusal ofSectimi. 43 of the EPIEA) reveals 'that
th'ere are adrninistrative remedies available to
157
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Section 43. Functions ofthe ERC. - The ERC shali
con1petilion, encourage 1narket developn1ent, !ensure
' I I '1
customer choice and discourage/penalize abuse of
rnarket power in. the electricity
Towards this end, it shaH be responsible for the following
key functions in the reshuchffed industry:
1
I .
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xxx
(1) lVIonitor and take re1nedial mea,sutes to
penalize abuse of market :power, cartelization, ia11:d anti-
co1npetitive or discriminatory behavior by any Eflechic
power industry partidpant; i
(:U) fines or .! for .. noi::'-
co111phance with or breac,h .of tlus Ad, .the IR,R:pf this
Act and the 1ules and regulations which it pro!nt!tlgates
or ad1ninisters; , j
XXX; !
(p) Monitor the activities of the gene1.,1tiln and
supply of the eled1ic power: industry with tlie in
view of pro111oting free inarket and
ensuring that the allocatio1\ or pass through'. or bulk
purchase cost by is

non-
discrhuinatory and thatany subsidie* shall be
divided pro-rata an1011g all retail suppliers; : I
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)()(X I
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. . . (s) In the exercise of its inv7stigative quasi-
JUd1c1al powers, act on any complaint by or against any
participant or player in the sector yi9lations
of any laws, rules and regulations governing the sa1ne,
including the rules .oni . cross':"ownersh!p, J anti-
con1petitive practices and other acts of abuse market
positions by any participant or player in tl}e
sector, as may be provided by law, and. rectiuh'e any
Pacana v. Consunji 108 SCRA 631 (1981). I I
91 I
I
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person or entity to sub1nit any report or data relaHve to
any investigation or hearing. conducted in
with this Act; i
i I
(t) Inspect, on its own, or through duly
representatives, the pren1ises, books of and
records of any person entity at any . in the
exercise of its quasi-judicial power for of
dletennining the existence. .of any anti-cm.hpktitive
behavior and/or market po';"er abuse and any yiJiaHon
of rules and regulations issued by the ERC; ! I
i ,I
xxx
. I I
(v) The ERC shall have the original and

jurisdiction over all cas.es contesting rates, fe:es) fines
and penalti.es imposed by the !E.RC in the
above111enhoned powers, functions and respons1l:hhhes
d 11
. 1 . I d
0
.b I I d
an over a cases 111v.o v1ng 1sputes . etw"een an
a.1nong participants 01 players in the energy s$ctpr. All
notices of hearings to be conducted by the ER<C for the
P
urpose of fixing rates or fees
1
shall be publishea dt least
I I I' I
twice for two successive w.eeks in two (2) newspa:ll>ers of
nationwide circulation. , . . I !
I . i
' 3.86. A careful review of the allegations .in 1 onsolidated
Petitio:ns reveals that Petitioners are questioning the rease hi. the
gei1eration costs. However, c01;1sistent with the aufhJrities cited,
ini.inediate resort to this Honorable Court is pre1naturel. I . .
! I .
3.87. Section 43 (v) of the EPIRA expressly the ERC
shall have original and exclusive jurisdiction . all cases
contesting rates, fees, fines and penalties hnposed . by'1I the ERC in
exercise of its functions. Clearly, the approval of/ tije auto1natic
increase is within the power of the ERC to implemenJt rules and
provisions of the EPIRA. ! )
I i .
3.88. Considering the foregoing, Petitioners should have first
. I I
lodged a coinp.laint before the ERC before fiUng the (Consolidated
I ! I
Petitions before this 1-Ionorable Court. The doctrine ot e:Xhaustion of
.. the . .going
forward with this Consolidated Petition without pna
1
r ipyocabon of
ERC' s original and exclusive jurisdiction. What is
1
prhnordial in
deternlining whether 'the. rule' on exhaustion of ladnl.inistralive
i I, ,.
ren1edies .applies is the existence of an adiniil.istratiye agency that
I
92
. . . j
was created to deal with issues arising from the conditions
and activities that no longer can be dealt with effectively directly
by the judiciary.1ss
3.89. Bayan Niuna, et al., likewise allege that ERq's :approval of
IVJEH.ALCO's request to auton1atically pass on to the corisun1ers the
increase in the Noven1ber 2013 generation costs on a staggered basis
violates EPIRA' s n1andate to protect the public from ail-ti-tompetitive
practices and abuse of 1narket behavior of indush"y playeri,159
3.90. Notably, the EPIRA provides that ERC "[I]n the
exercise of its investigative and quasi-judicial powers,! act 011 any
fomp_laint by or against any Jzarticipant or 12.Zm1er !in[ the energy
sector.for violations of any laws, rules and regulationsigoverning the
smne, including the rules on cross-oivnership, anti-tonipetitive '
practices and other acts of abuse' of niarket posi'tidns b11 an11
. . . I I c
parf-icipant or player in the energy sector, as tnay provided by
law, require anu person or entitu to sublnit a1111 report or data
relative to amt investigation or hearing conducted 'in !accordance
with this Act." !
-----
3.91. Sin1ilarly, Section L1!5 of the EPIRA projides, among
others, that the ERC shall, motu prf!pio, 1nonitor and any
n1arket power abuse or anti-competitive or act or
behavior by any participant in the electric power 1nclustry. The
ERC,upon finding that a market participant has engagedj in such act
or behavior, shall stop and redress .the same. Such ren1;edies shall,
without linutation, include the hnposition of price controls, issuance
g.f and irnposition of fines and penalties pursuant to
The ERC was further n1andated to proniul'gate rules and.
regulations providing or a c;:>1nplaint procedure ;that, without
lirnitation, provides the accused party with and an
opportunity to be heard within 011e (1) year fron1 the efte9livity of the
EPIRA.
lSH
1.59
. I
See Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 119761, 29 August
1996, 261 SCRA 36, 272 (Dissenting Opinion of Justice citing 73 C.J.S. pp.
295-296).
Dayan Muna, et al. Petition at p. 15
93
3.92. The Con1petition likewise prescribe .the n1am1er in
which the will investigate possible violations thereof consistent
vvith the require1nent of due process.
16
0 Specifically, the/ Rules grant
ERC the power to issue orders
16
1 requiring a Persoi1162 to stop
engaging in the conduct that cohstitutes the violation, the
Person to do any act or thing to rectify the violation or to. remedy or
initigate the consequences of the'violation including:
a) an order requiring the Person to vary an agree1nent,
I
arrange1nent or understanding within such tilne and in such
r:nmu1er as is specified in the order;
b) an order requiring the Person not to enforce an
I
agreen1ent, arrangen1ent or understanding or such provisions
thereof as are specified in the order;
c) an order requiring the Person to refund 1noney or
return property; and
d) an order requ1nng the Person not to carry on a
particular business or not to undertake particular operations.
3.93. Furthennore, the ERC also has the powers, ainong others,
to issue an order requiring the Person to pay to the ERC a fine or
penalty163 or to pay the ERC an ainount not exceeding the ERC's
estin1ation of the an1ount of any inonetary, financial, or econon1ic
benefits acquired by the Person, or accrued or accruing to the Person,
w::: a result of the violation of the Con1petition Rules164 as vvell as the
power to fix or control the price at which the Person .1nay supply or
acquire electricity or goods or services that are directly or indirectly
related to or used in c01u1ection with the generation, hansnussion,
distribution or sale of electricily.
165
.
--- ---------
lGo ERC Competition Rules and Complaint Procedures, 23 August 2006, Rule 2.
ir,t Ibid., Rule 11, Sec. 2.
162 "Person" was defined as a natural or juridical person including .an individual, a
corporation, a partnership or an association to which the law grants a juridical
personality, a hustee, a government-owned or government controlled corporation, a local
government unit, an electric cooperative organized pursuant to Presidential Decree No.
269, or an entity of any other kind whatsoever, which has a separate legal personality,
and whether or not that person is a Philippine National.
H>J ERC Competition Rules and Complaint Procedures, 23 August 2006, Rule 11, Sec. 2 (c).
JM Ibid., Rule 11, Sec. 2 (d). .
lb5 Td., Rule 11, Sec. 2 (f)
3.9tl. Clearly, the Pelitioners' claiin that there
1
were anti-
co1npetitive practices an.cl abuse of 111arket behavior by industry
players should have been lodged and presented before tfte ERC ai1d
not before this I-Ionorable Court.
3.95. The principle of exhaust.ion of re1nedies
has been reiterated time and again by jurisprudence that essentially
adopted a policy of non-interference when it con1es to questions or
inatters that are prirnarily withiI1 the competence of other
deparhnents. The theory 1.s that the adn1inistrative authorities are .in a
better position to resolve questions addressed to their particular
expertise.
166
Thus," (c)ourts cannot and will not resolve a conhoversy
involving a question within the jurisdiction of an adrhlnistrative
tribunal, especially when the question demands the exercise
of ad1ninish'ative discretion requ11:1ng spe.cial knowledge,
m'erience and services of the ad111inish'ative tribunal to detennine
and intricate n1.atters of fact. The court caiu1ht arrogate
unto itself the authority to resolve a controversy, the juLisdiction of
which is initially lodged with the adnlinistrative body of special
coITtpetence."167 The foregoing is especially true considering that this
I
I-Ionorable Court has long ad1n011ished that it is not a trier of fact as
'Will be discussed below.
3.96. Thus, the Consolidated Petitions were at best f?rematurely
filed before this I-Ionorable Court and therefore, should be: disn1issed.
The allegatiou of collusion
is a questiou of which
this I-Io11orable Court cannot
and should not take
coguizance of
3.97. Petitioners accuse son1e sectors of the pow;er :industry of
collusion in causing a price increase in generation and other
pass-lhrough charges.168 In Kaisahan ng 1nga Nlanggagawa: sa Kahoy sa
.F'ilipinas v. Court of Industrial Relations, et al.,
169
this :Honorable Court
clarified that the deterrnination of collusion is essentially a question
of fact, which this I-Ionorable Court should not take cognizance of,
thus:
16C> Sunville Timber Products, Inc. v. Abad, G.R. No. 85502, 24February1992, 206 SClU\ 482,
486-7.
IG7 BF Homes, Inc .. , et. al., v. Manila Electric Company, G.R. No. 171624, 6 December 2010,
636 SCRA ,195, 515-516; emphasis and underscoring supplied.
Bayan, et al.'s Petilion, pp. 17-18, par. 59.
1w G.i\. Nos. L-1970-72, 2October1948, 81Phil566.
95
"It is apparent frmn the nature of the ,charge
1
s and
fro1n the above- quoted order, that the question raised
and the question decided qy the court was a question of
fact. Specifically, the question raised and the question
decided was whether the. two respondent c01npanies
were ide1i.tical, or whether the lease by Dy Pac :of its,
e:stablishn1ent to Central Saw Mill was fictitious, as the
petitioners allege, executed for the n1ain or sole purpose
o:f circu1nventing the court's order. The very argu111ent in
petitioners' 1nen1orandun1 with which they gressl their
accusation is replete with assertions and that
characterisr:ically factual, such as, to mention only
'collusion'; 'bad faith'; 'fictitiously the
n1anagen1ent'; 'a fictitious and fraudulent contract,
shnulated Qy: parties therein, !. !. !. to defeat the
effectiveness of the decisions'; 'suspicious
circu1nstances'; 'obstruction and degiadation of the
ad1ninisfration of -=- all of which rest on
evidentiary fads for their detennination.
"Only questions of law, which 1nust be set
forth, 1nay be raised in an appeal by certiorari frc;>1n an
award, order or decision of the Court of Indstrial
Relations. (Section 2, Rule 44, Rules of Cour:t.) In
consonance with this rule we have steadfastly refused to
interfere with the findings of fact of that court, lin1iting
our attention to questions of law. (Central Azucarera
deTarlac vs. Court of Industrial Relations, 1 No. 46843, 40
Off Caz., 3d Supp., 319; Manila Labor Union, 40 Off Caz.,
9Supp., 132; Nlindanao Bus Co. vs. MBC Employees, 2 Nos.
47544& 47611, 40 Off Caz., 10th Supp., 114; Bohol
LandTransportation Co. vs. BLT Ernployees Labor Union 3 ,
l\fo.47661, 40 Off Gaz., 13th Supp., 88;. Leyba vs. Meralco,
400ff. Caz., 4th Supp., 73; Elks Club vs. Rovira, 4 No. 48411,
promulgated February 24, 1948, 45 Off. Caz., 3829.)1
70
3.98. In I-Ieirs of Simeon Borlado v. Court of Appeals, et al.,
171
this
Flonorable Court also held that it is not a function of thiS I-Ion.arable
Court to review, exmnine and evaluate facts, thus:
170 ll1iil., at 568-569; emphasis and underscoring supplied.
11t C.R. No. 114118, 28 August 2001, 363 SCRA 753.
96
"The Supre1ne Court is not Q trier of facts. If not
.9ur function to review, exantine and evaluate or /weigh
H1e probative :y:alue of the evidence presented. question
gJ fact would arise in such event. Questions of fact cam1ot
be raised in an appeal via certiorari before the Supren1e
Court and are !Wt proper for j.ts consideration."172
3.99. It is undisputed that the issue of collusion, is a factual
question that this :Honorable Court should not take cognizance of. As
exhaustively explained above, the instant case should have been
initially instituted with the ERC, which has prhnary, jurisdiction
thereon. As the agency which has specialized and skill to
deal with the issues raised by Petitioners and detennine 1whether the
.facts would lead to a conclusion that there was collusion ainong son1e
sector of the power industry, Petitioners' pre1nature Consolidated
Petitions should rightfully be dis1nissed.
G.
THE CONSOLIDATED PETITIONS MUST BE
DISMISSED l:;OR VIOLATION OF TI-IE DOCTRINE
01:; PRilVIARY JURISDICTION.
3.100. Under the cloclTine of prin1ary jurisdiction., courts cannot
and will not detennine a conhoversy involving a question which is
within the jurisdiction of an ad1ninistralive tribunal especially where
the question de1nands the exercise of sound ad1ninistrative discretion
n:.>quiring the special knowledge, experience and services of the
tribunal to detennine technical and inhicate inatters : of fact and
'Where a unif Ol'll:lil)!: of ruling' is essential to COrllply with the
of tl1.e regulatory statute adininistered.
173
3.101.In Vicente Villaflor v. Court of Appeals
174
, this I-Ionorable
Court ruled:
"In recent years, it has been the jurisprup.ential
trend to apply this doctrine to cases involving niatters
that demand the special co1npetence of adniinistrative
ageucies eveu if the questiou involved is also _judicial in
cl1aracter. It applies
11
where a clailn is originally
172
J/Jid., at 756; emphasis and underscoring supplied.
t;3 Dretl v. lnlermediate Appellate Court, 191SCRA687 (1991)
11.1 GR No. 95694, OcLober 9, 1997, 280 SCRA 297.
97
cognizable in the courts, and con1es into play whenever
enforce1nent of the claitn requires the resolution 0 issues
which, under a regulatory schen1e, have been placed
,,vithin the special competence of an ad1ninistrative body;
in such case, the judicial process is suspended pending
referral of such issues to the adntinisttative body I for its
view.
11
In cases where the doctrine of priniary jurisdiction
is clearly applicable, the court cannot arrogate unto itself
the authority to resolve a coutroversy, the juris4iction
over 'Which is initially lodged with an adn1inistrative
body of special competence.11s
3.102.While at first blush, the argu1nents raised in the
Consolidated Petitions are cognizable by regular courts, however,
full and complete resolution of these issues would require a clear
understanding of the electric power indust-ry. Likewise,: considering
that the Consolidated Petitions allege that there have been anti-
c0111petitive practices, and abuse of inarket behavior by indushy
players, specialized skills are needed in order to fully and correctly
these allegations.
3.103. In view of the com.plexities in the ele.ctric power
industry, the resolution of these petitions would require a review of
cornplicated and/ or teclu1ical rules, contracts and i agree1nents
between and an1ong the players in the indush'J, ampng other
specialized tasks. Thus, it is the ERC which is possessed with the
technical knovv-how necessary for the proper resolution of the
111alters raised in the Consolidated Petitions. The issues underlying
these petitions should be decided by experts and not by judges, at
least not in the first instance. In fact, the ERC' s jurisdiction and
capability to do so have been shown in cases were it investigated
suspected anti-co1npetitive practices and/ or abuse of 1narket power
by the Power Sector Asset and Liabilities Managernent Corporation
(PSALM) during the third billing 1nonth of operations of the
VVESl\,1.176
3.104.Bayan Jvluna, et al.'s clain1 of-collusion; should be resolved
by the ERC pursuant to EPIRA before resort to the courts. As
discussed above, the ERC has sufficient power and expertise to
adclre:ss and redress 111arket abuse, anti-con1petitive behavior,
175 l/Jid., at 327.
176 A copy of ll1e ERC Order dated 6 June 2007 is attached hereto as Annex "17" and made
an integral part hereof.
98
discrirninatory behavior, cartelization and even abnormal market
conditions.
3.105. Thus, consistent with existing jurisprudence, or failure to
co1nply with the doctrine of prin1ary jtffisdiction, these petitions must
be disn1issed.
H.
BOTH PETITIONS MUST BE DISMISSED . FOR
' '
J:<A .. ILURE OF THE PETITIONERS TO BRING THE
ACTION AGAINST THE REAL PARTIES IN

GenCos, NGCP and other participants
in the power industry are real parties in
inf-erest in the Petitions and should
have becll impleaded in this action.
3.106.Section 2, H.ule 3 of the Rules of Court states:
"Sec. 2. Parties in interest. - A real parly in interest
is the party who stands to be benefited or injured by the
judg1nent in the suit, or the party entitled to the avails 0
the suit. Unless otherwise authorized by law or these
Rules, every action inust be prosecuted or defended.in the
narne of the real party in interest."
3.107. This provision has two require1nents: a) to ,institute an
action, the plaintiff rnust be the real party in interest; 1 and b) the
action rnust be prosecuted in the nan1e of the real party in! interest.
3.108.In Republic of the Philippines v. Coalbrines International
Philippines, Inc.,
1
77 this Flonorable Court had the occasion to explain
the ineaning of "interest" as used in the Rules, thus:
"And 'interest,' within the n1eaning of the rule,
:means inaterial interest, an interest in issue and to be
affected by the decree, as distinguished frmn. 111ere
interest in the question involved, or a inere incidental
interest. Cases construing the real party-in-interest
provision can be inore easily understood if it is borne in
rnind that the true irteaning of real party-in-interest rnay
------- ------
m C.R. No. 161838, April 7, 2010, 617 SCRA 491.
99
be sun1111arized as follows: A11l action shall be prosecuted
i!:! the na1ne of the party w ~ !!y the substantive Jaw,
.!J!as the right sougJ!! to be enforced."178
lH.ERA .. LCO is not i11 the position to
refuud all the amouuts subject of the
claims lll the NASECORE, et al.
f
J .,L.'t"
_ e.1_1011.
3.109. Petitioners NASECORE, et aJ on_ the other hand prayed
for an order declaring all resolutions and issuances of ERC
in1plen1enting or allowing the autm.11atic power rate adjustn1ent null
and void, and consequently, an 01der granting refund of all rate
adjushnents or increases which were automatically billed and
collected ro1n MERALCO custoni.ers.179
3.110. As early as 2004, the AGRA Rules have already been in
place. :Since then, the an1ounts billed and collected by: MERALCO
have already been re1nitted to the GenCos. In the event that this
I--Ionorable Court orders the refund of the said amount, MERALCO is
not the proper party l:o refund the ainounts.
3.111. As previously discussed, these generation charges are
n1erely "pass tluough" charges. As these an1ounts are aV.eady in the
hands of the GenCos, IVIERALCO is in no position to refund all these
arnounts. To con1pel !YIERALCO to do so will have grave
repercussions on MERALCO's finances and operations that will
eventually affect its ability to provide adequate, efficient, and reliable
electric service to the ultiinate prejudice of its custon1ers, the public,
and the national econonlyas a whole.
The Consolidated Petitions, for failure
of the Petitioners to institute the sanie
against the real parties in interest, niust
be disn1issed.
3.112.Therefore, because petitioners disn1ally failed to institute
the instant Petitions against the real parties in interest, the san1e,
consistent with the previous rulings of this I-Ionorable Court, must be
disrnis:sed.
------------
FS ll1id. citing Uy v. Court of Appeals, 372 Phil. 743, 752 (1999) e111pl1asis supplied.
179 See NASECORE et al. Petition at p. 32
100
3.113. Case law is replete with rulings saying that failure to
institute the action against the real party in interest is a ground for
dis111issal of the action.
180
Thus, the instant must be
dis1nissed for failure of the Petitioners to institute the san1e against
the real parties in interest.
IV. FOR THE DENIAL OF TI-IEAPPLICATIONS FOR,
PR LIFTING OF THE, TRO AND/OR WRIT OF PRELIMINARY
INJUNCTION
A.
THIS HONORABLE COURT'S GRANT OF , TRO
SI-IOULD BE RECONSIDERED AND PETITIONERS'
APPLICATION FOR PERMANENT INJUNC:TIVE
RELIEF SI-IOULD BE DENIED, CONSIDERJNG THAT
PETITIONERS FAILED TO ESTABLISH THE
ESSENTIAL REQUISITES FOR THE GRANT A
TRO AND/OR A 1v\TRIT OF PRELIMINARY
INJUNCTION.
1. PETITIONERS FAILED TO ESTABLISH C:LEAR
AND UNlVIISTAKABLE RIGHTS ALLEGED TO
lIA BEEN VIOLATED BY MERALCO.
2. PETITIONERS TO ESTABLISH
MERALCO'S ALLEGED INVASION OF
. . .
PETITIONER'S RIGHT TO DUE PROCESS.
3. THERE IS NO SHOWING THAT PETIJ'IpNER
WILL SUFFER "GRAVE AND IRREP.f\RABLE
INJURY" IF NO INJUNCTIVE RELIEF IS
GRANTED TO THEM BY TI-IIS HON.GRABLE
COURT. ON THE CONTRARY, IT IS l\iIERALCO
' '
WHO WILL SUFFER GRAVE AND IRREPARABLE
INJURY IN THE EVENT THAT THE TRO IS l\TOT
LIFTED OR IN THE EVENT THAT A WRIT OF
PRELIMINARY INJUNCTION IS ISSUED.
Hill See: Espiridon TanpLngco v. Inlermediale Appellate Court, G.R No .. 76225, 31 March
1992, 207 SCRA 652.
101
V. DISCUSSION
A.
THIS HONORABLE COURT'S GRANT OF TRO
SHOULD BE RECONSIDERED AND PETfI'IONERS'
.AlPPLICATION FOR PERMANENT INJUNCTIVE
RELIEF SHOULD BE DENIED, CONSIDERING THAT
PETITIONERS FAILED TO ESTABLISH THE
ESSENTIAL REQUISITES FOR TI-IE GRANT ;!QF A
TRO AND/OR A WRIT OF PRELIMINARY
INJUNCTION.
JI.. PETITIONERS FAILED TO ESTABLISH: CLEAR
AND UNlVHSTAKABLE RIGHT.S ALLEGED TO
HAVE BEEI\I VIOLATED BY MERALCO.
5.1. The requisites for the issuance of an injunctive writ are as
follows:
a. The applicant has a clear right, that is, a;right in esse;
b. There is a n1aterial and substantial invasion of such
right; and
c. There is an urgent need for the writ to prevent
irreparable injury to the applicant.181
5.2. In Transfield Philippines Inc. v. Luzon Hydro Corporat-ion,
182
this Fionorable Court rulecl:
"Before a writ of prelin1inary injunction 1nay be
issued, there n1ust be a clear sho-vving by the complaint
that there exists a right to be protected and that the acts
against "\vhich the writ is to be directed are violative of the
said right. It must be shown that the invasion of the right
sought to be protected is n1aterial and substantial, that the
right of con1plainant is clear and tnunistakable ~ d that
there is an urgent and paran1ount necessity for thei writ to
prevent serious dmnage. Moreover, an injunctive re1nedy
1nay only be resorted to when there is a pressing necessity
------------
rnt See Prosperily Credit Resources, fac., v. Court of Appeals, G.R. No. 114170, 301 SCRA 52,
15 January 1999.
rn2 G.R. No. 146717, 221
1
.Jovember 2004, 443 SCRA 307.
102
to avoid injurious consequences which cannot be
reni.edied under any standard co1npensation/'1s3
5.3. A "clear legal right" to justify injunctive relief: 1neans one
that is clearly granted by law or enforceable as a n1atter of law.184 In
Cereno v. Dictado,
185
this I-Ionorable Court held that injunction will not
issue to protect a right not in esse and which may never arise, and
neither will the writ be granted to reslTain an act which does not give
rise to a cause 0 action_.
5.4. - In Salting v. Velez,186 this I-Ionorable Court explained that
the right entitled to protection must be" clear and unmistakable," and
that the grant 0 injunctive relief despite failure to establish a clear
and unmistakable right mnounts to grave abuse of discretion, thus:
"To be entitled to the injunctive writ, the applicant
rnust show that xxx the invasion 0 the right is n1aterial
and substantial and that there is an urgent and
paran1ount necessity for the writ to prevent serious
dm11age. The applicant's right n1ust be dear, and
un111istakable. In the absence clear legal ;riglit, the
;issuance of the writ constitutes grave abuse of
discretion. Where the s right or , title is
or disputed, injunction is not properl The
]2.!0ssibility of irreparable dainage without proof :of an
existing right js not! for injunction."
187
5..5. Tested against the foregoing criteria, Petitioners'
application for the issuance of a TRO and/ or a writ of preli1ninary
injunction tnus t fail.
5 .. 6. A perusal of the readily shOY\'."S that the
Petitioners, in their application for injunctive relief, alleged that their
Tight to affordable, transparent and reasonable prices of electricity,
right against rnonopolies da1naging to public interest, and their
constitutional right to due process hi1ve been violated by MERALCO.
1s3 Ibid.
134 Boncodin v. National Power Corporation Employees Consolidated Union (NECU), G.R.
No. 162716, 27 September 2006, 503 SCRA 611.
iss G.R. No. L-81550, 15April1988, 160 SCRA 749.
186 G.K No. 181930, 10 January 2011, 639 SCRA 124, citing Ocampo v. Sison Vda. de
Fernandez, G.R No. 164529, 19 June 2007, 525 SCRA 79.
18'? llid. at 133; emphasis and underscoring supplied.
103
S.7. I-Iowever, with respect to the first two, Petitioners failed
to prove that they have a right in esse.
S.8. First-. vVith regard to the right to affordable
hansparent and reasonable prices of elechicity, Petitkm.ers Bayan
f\;1una, et al. relied on Section 2 0 the EPIRA, which sets out the
declared State policies of the law. I-Iowever, this provision of the
EPIRA does not define a1i. obligation nor confer rights in f a v o ~ of
Petitioners. It inerely sets down the policies of the State, in enacting
the law. Hence, it does not give rise to a cause of action e1iforceable in
the courts of law.
S.9. Affordable, tnni.sparent and reasonable prices of energy
are the declared policies of the State, which have not ievolved into a
"clear and unn1istakable" right.
5.10. These declarations of policies are staten1ents that underlie
the enactn1ent of the statute. They are guides for all the departments
of the govern1nent in the in1plen1enl:atioi1 of the law.
S.11. Petitioners Bayal'l Muna, et al. cannot enjoin! IVIERALCO
fro1n collecting the "pass through" charges fro1n its customers by
silnply saying that they have the right to affordable, trai1sparent and
I
reasonable priee of electricity. To sustain such argumentlwould set a
dangerous precedent where a justified increase would be prevented
just because the consun1ers feel that the price is no longer affordable
nor reasonable. It requires us to turn our back on the reality that the
price and costs 0 elecb:icity vary depending on a given .tilne and on
the surrounding circu1nstances.
b.12. Second. As regards the right against : inonopolies
dan1aging to public interest, Petitioners Bayan Muna, et al., rely on
Section 19, Article XII of the 1987 Constitution, to wit:
"Section 19. The State shall regulate or Brohibit
inonopolies when the public interest so requires. No
co1nbinations in reslraint of trade ot unfair cornpetition
shall be allowed."
104
!J.13. It bears en1phasis, however, that this constitutional
F'rovision is not self-executing. In Tanada v. Angara1BB, this Honorable
Court held:
11
As held in the leading case of Kilosbayan,
Jn.corporated vs. Nlorato, the principles. and -state policies
enurnerated in Article II and s01ne sections of Article XII
~ H e not "self-executing provisions, the disregard' of which
!:::an give rise to .: cause of action in the courts. They do
not e1nbody judicially enforceable constitutional rights
but guidelines for legislatio1i."rn9
5.1Ll. I-Ience, Petitioners Bayan Muna, et al. can,not ask for
injunclive relief based on this non self-executing and judicially
unenforceable constitutional provision.
5.15. Interpreting this provision, this I-Ionorable Court in Garcia
v. Execuf:ive Secretary, et az.,190 held:
"Read correctly, this constitutional provision does
not declare an outright prohibition of monopolies. It
silnply allows the State to act "when public inte,rest so
requires
11
; even then, HO oiitright prohibition is maildated,
as the State inay choos.e to regulate rather than to
prohibit. Two elernents n1ust concur before ~ 111onopoly
rnay be regulated or prohibiled:
1. There in fact exists a n1onopoly or an
oligopoly, and
2. Public interest requires its regulation or
prohibition.
Whether a rnonopoly exists is a queslion of fact. On
l:he other hand, the questions of (1) what public interest
requires and (2.) what the State reaction shall be
essentially require the exercise of. disqetion on the part of
the Slate."
191
rna G.R No. 118295, 2 May 1997, 272 SCIZA 18.
JB9 ibid., at 54.
190 G.R. No. 157584, 2 April 2009, 583SCRA119.
191 Ibid., al 131.
105
5.16. A careful reading of the provision and the jurisprudence
thus cited would reveal that there is no right against 1nonopoly as
petitioners Bayan Muna et- al. clairn in their petitions. No outright
prohibition is 111andated by the Constitution against It
rnerely requires that the saine be regulated when the public interest
requires it. Therefore, in the absence of a prohibition, petitioners
cannot clain1 the existence of a right.
5.17. Furthennore,' a cursory reading of. the said prov1s10n
would reveal that n1onopolies per se are not prohibited a'.nd they are
only to be regulated. The conunand to regulate n1onopolies is
directed to the State, which n1eans that it is 1nerely a guideline .for
Congress in passing laws and not a right, which can be enforced
through judicial n1echanis1ns.
5.18. To sustain the Tl\.O enjoining MERALCO from collecting
lhe
/1
pass tluough" charges on the basis of the non-self-executing
provisions of l:he Constitution will create a dangerous precedent. It
would create a situation where a clearly defined legal
right or obligation inay be reneged on by just a inere legislative
guideline.
5.19. If it is the intent of Congress to give flesh to these policies,
then it: should follovv its Constitutional n1andate and pass and/ or
an1encl the law. It is not for the courts tluough the process of
injunctive writs to stop an act in adherence to these absent
any "dear and unnustakable" right.
' i '
5.20. While it is true that Petitioners have an enforceable right
to due process of law, the issuance of the injunctive vvrit is still not in
order as will be discussed below.
2.. PETITIONERS FAILED TO ESTABLISI-I
MERALCO'S ALLEGED VIOLATION OF
PETITIONERS' RIGHT TO DUE PROCESS
5.21. Pelitioners alleged in their respective for
TEO that IVIERALCO violated their right to due process when it
autorna.tically hnposed and collected the power rate adjushnents in
its Dece1nber 2013 billings.
106
5.22. Noteworthy is the fact that under Section. 4(e) of the
EPIR.A IRR, the procedure set forth therein for rate adjusbnent does
not apply to the AGRA f{ules, an1ong others, which provides that a
DU like. MERALCO has the right to autmnatically pass on the
generation costs, on rnonthly basis, even without prior notice and
hearing.
5.23. Furtherrr1ore, the increase in the adjustIT1ent irate did not
occur tluough MER.ALCO' s doing. MER.ALCO infonned ERC of the
I
proposed inami.er of collecting the increase and the latter gave its
iinpriinatur to the proposal.
5.2<1. Therefore/ MER.ALCO did not violate the right to due
process of Petitioners when it auto1natically increased, the generation
rate. It rnerely.follovved the rules .and regulations and the guidelines
set by the in1plementing governni.ent agency. MEH.AL.CO did not
adjust the generation rate, and the relevant "pass-tluough" charges,
without any basis in law. It had all the right and it acted within the
bounds of law when it followed the EPIRA IRR and the AGRA Rules.
5.25. Tin1e and agah1, this,I-Ionorable Court has rul
1
ed that rules
and regulation prmnulgated by adrninistiative agencies pursuant to a
delegating lavv has the force and. effect of a statute, thus:
"Rules and regulations when prmnulgated in
pursuance of the procedure or authority conferred upon
the ad1ninistrative agency by law, partake of the nature of
a statute, and c01npliance therewith inay be enforced by a
penal sanction provided in the law. This is so because
statutes are usually couched in general tenns, after
expressing the policy, purposes, objectives, remedies and
sanctions intended by the legislature. The details and the
manner of carrying out the law are often lini.es left to the
adrninistrative agency entrusted with its enforcen1ent. In
this sense, it has been said that riiles and regulations are
the product of a delegated power to create nevv or
additional legal provisions that have the effect of law."
192
J92 Victorias Milling Company Inc. v. Social Security System, G.R. No. L-16704, 17 March
1962, 4 SCl\A 627, 630.
107
5.26. Sirnilarly, MERALCO nrny not refuse to by the said
rules and regulations. Case laws provide that official: acts of the
, I
gove1T1111ent enjoy a presun1ption of regularity.193 land unless,
these rules and regulations have been ainended, repealed, or struck
dovvn by a judicial act, MERALCO should follovv as, it is bound to
follow the111.
5.27. l\!IERALCO n1erely followed the syste1n dictated by the
EPIRA and its IRR. Thus, IVIERALCO could not have violated
Petitioners' right to due process.
3. THERE IS NO SI-IOWING TI-IAT PETITIONERS
WILL SUFFER INJURY, lVIUCH LESS .1.1GRAiVE AND
IRREPARABLE INJURY" IF NO INJUNCTIVE
RELIEF IS GRANTED TO TI-IEM BY ,i THIS
HONORABLE COURT. ON Tl-IE CONTRARYi IT IS
MERALCO l!'{HO WILL SUFFER . GRAVE 1
1
AND
I '
IRREPARABLE INJURY IN THE EVENT THA} THE
TRO IS NOT LIFTED OR IN THE EVENT THAT A
WRIT OF' PRELIMINARY INJUNCTION IS
ISSUED.
b.28. Petitioners failed to establish and/or satisfy the requisites
for the existence of grave or irreparable injury for the; issuance of
TRO and prelin1inary IYLandatory injunction as requfred by and
conten1plated under the law.
b.29. Under Section 5, Rule 58 of the Rules cif Court, the
req uire1nent for grave or irreparable injury i1.1ust be established by an
applicant for injunctive relief:
"No prelirninary injunction shall be granted
withouthearing and prior to the party .or :perso,n
sought to be enjoined. If it shall appear fro111facts
1
shown
hy affidavits or the verified application that great or
i,rreparable injury would result to the applicant: before
the inatter can be heard on notice, the court to which the
application for prelirninary injunction was rrtade, may
issue a te111porary restraining order to be effective only
for a period of lwenly (20) clays fro1n service on the party
or person sought to been joined, except as : herein
provided x x x
1
9
3 Prudencio M. Reyes, Jr v. Simplicio Belisario, G.R. No. 154652, 14 August 2009, 596 SCRA
31 citing People v. Jolliffe, 105 Phil. 677 (1959)
108
11:owever, and subject to the prov1s1ons of the
preceding sections, if the matter is of exh"eme urgency
and the applicant. will suffer grave injt;t.stice, and
irreparable injury, the executive judge on a 1nulliple-sala
court or the presiding judge of a single sala court rnay
issue ex parte a te1nporary restraining order effectiye for
only seventy-hvo (72) hours fr01n issuance xx x"194
5.30. In Philippine Virginia Tobacco Adrninistration v. de las
i\ngeles,
195
the Supreni.e Court explained that injury is irreparable if:
"x x x [I]t is of such constant and frequent
recurrence that no fair or reasonable redress can be had
therefor in !! court of law or where there is no standard
.Q_y which their a1nount can, be. rneasured with
reasonable accuracy, that is, it is not susceptible of
!1rtathe1natical co1nputation. "196
5.31. Rule 58, Section 6 of the Rules of Court further
provides that it the application for injunction or restraining' order
n1ay ~ ~ denied upon Q showing of its insufficiency. !It hi.ay further
be denied, or, if granted, rnaybe dissolved if it appears after hearing
that although the applicant is entitled to the injunction or restraining
order,, the issuance or continuance thereof, as the case 1nay be, would
cause irreparable dan:1age to the party or person enjoined x x x."
1
9
7
It is Petitioners' burden to illustrate, confonnably with the
sl-ringent requiren1ents of case law, a cause of action based on
"de1nonshable prejudice of legal rights"1
9
s as to warrant the
issuance of injunctive relief in its favor. Absent such, they
cannot clailn entitle1nent to a TRO, much less a preli1ninaiy
injunction.
5.32. In support of its application for . injunctive re.lief,
_Petitioners NASECORE, el: al. n1erely provide a sweeping state1nent
that the "the co1nn1ission or continuance of the acts co1nplained of
during the litigation or the non-perfonnance thereof would work
m Emphasis and underscoring supplied.
195 G.R. No. L-27829, 19August1988, 164 SCRA 543.
196
Ibid., at 555; emphasis and underscoring supplied.
19
7
Board of Oplomeh-y v. Hon. Colet, G.R. No.122241, 30July1996, 260 SCRA 88; citi11g J.M.
& Co. v. Court of Appeals, G.R. No. L-18123, 26December1961, 3 SCRA 696.
109
grave injustice to the herein class petitioners and the general
public."
199
S.33. On the part of the Petitioners Bayan lv1una, et al., they
allege that inost of the end-users who vvill be suffering from
expensive bills are those who haye been hit by the recent caJainity
and the after effects of these disaster are alleged to have drained or
significantly weakened their finances and to impose on tl1e1n a high-
record increase in electricity bills will be unjust.200
S.34. In any case, whatever injury Petitioners nught suffer, if
any, fron1 the non-issuance of an injunctive writ is quantifiable, easily
subject to rnathe111atical computation and, if proven, fully
co1npensable through a refund. As such, whatever might
subsequently clahn is not an irreparable injury warranting the
issuance of an injunctive relief. As held by the Supreme Court in
Power Sites and Signs, Inc. v. United l'1eo11:201
" [A writ of prelin1inary injunction] should 1 never
issue when an action for da1nages would adequately
co111pensate the injuries caused. The very foundation of
the jurisdiction to issue the rests in the probkbility
gf irreparable injury, the inadequacy of pechniary
and the prevention of the n1ultiiJIIcity of
and where facts are not shown to bring the case
within these conditions, the relief of injunction should
be refused."
202
5.35. In this instant case, considering the substm1tial and
significant an1ount of assets and investments of GenCos in the
Philippines, it is possible for the Gen.Cos and NGCP, which
ulti1nately received the pass-tluough an1ounts, to provide a refund if
deter111ined responsible by this I-Ionorable Court
5.36. Finally, if this fionorable Court does not its
TRO and/ or pern1anently grants the injunctive relief prayed for, it is
the entire supply chain business, b_usiness
and distribution business), not only MERALCO, that will suffer great
and irreparable injury. In the encl, this will iinpact severely on the
199 NASECORE ct al. petition at par. 67 p. 29
2uu Btlyall Muna et al. petition at pars. 79 & 79 pp. 21-22
201 G.R. No. 163406, 24 November 2009, 605 SCRA 196.
2u2 nnd., at 211 citing Golding v. 13alatbat 36 Phil. 941, 946 (1917); emphasis and underscoring
supplied.
110
consurners and the public, and will certainly have a crippling effect
on the national econ01ny.
5.37. At the risk of being repetitive, an injunctive writ is an
extraordinary preservative rernedy "not granted lightly or
precipitately."
203
In this case, considering that PetilionE;rs failed to
satisfy the statutory and jurisprudential requisites for its: issuance, it
is therefore incun1bent upon this :Honorable Court to take the rnore
prudent course of action and deny injunctive relief.
5.38. As explained above, the generation charges, which are the
subject of these Petitions, are legally considered as mere "pass-
tluough charges,"
204
which are billed directly to the public or to end
users.
20
s As DUs like 1"1ERALCO are the ones directly supplying
electricity to their custo1ners, it is the DUs which collec
1
t the "pass-
tluough charges" which pertain to the Gen Cos (or TRANSCO for
hansrnission charges) concerned. In other vvords, regard to
generation and transrrtission charges, when MERALCO bills its
f_ttslogters of the pass-through charges, it does not sta11d: to earn any
prof!Jt
5.,39. In the schen1e of things, the an1ount that is collected by
.l\/IERALCO fron1 its custorners is what MERALCO uses to pay for the
supply of elechicily that it has p\trchased fron1 the Ger1Cos. This is
hovv the typical billing cycle of supply, transpires.
Accordingly, if MERALCO's ability to recover or collect the
generation charge is delayed or restricted through ;the process
suggested by the Petitioners, then MERALCO will 110t be in a
financial position to pay for the purchases of power that it, in turn,
will be distributed to its customers.
SAO. For the Decernber 2013 billing, the total generation cost of
IV1ERALCO an1ounts to PhP22.64 Billion. This an1ount is a "pass-
through" charge to such that the ainount collected from
the ctrnton1ers is what MERALCO pays to the GenCos. As it stands,
IVIERALCO is enjoined fro1n collecting fron1 the public the pass-on
increase in generation charges, but the GenCos are not prevented
frmn collecting the san1e generation charges fron1 MERALCO for the
pnwer supplied. Without a timely recovery of generation charge frmn
203 Olalia v. I-Iizon, C.R. No. 87913, 6May1991, 196, SCRA 665, 672.
20 See ERC Resolution No. 16, Series of 2009; Order dated 30 May 2003 in the ERC Case Nos.
2001-616 and 2001-900; Guidelines for the Automatic Adjustment of Generation Rates
and System Loss Rates by DislTibution Utilities, as amended by Resolution No. 10-01,
of 2004; ERC Resolution No. 7, Series of 2011.
211s See Republic Act 9136, Section 25.
111
its custo1ners, MERALCO may not be able to purchase the required
vohune of energy to ineet its future de1nand. This inay constrain
TVIERALCO to obtain loans (with, perhaps, high rates) to
serve the public. This will place a considerable strain on MERALCO's
assets that are intended for other purposes, which ,would have a
direct benefit to the customers, i.e., efficient.and c;ontinubus services.
\Norse, the interest arising from such loans, will eventually be an
additional burden for its customers.
5.41. As MERALCO inay end up being cash strapped just to
pay the generation charges, it inay ultin1ately be unable: to purchase
the needed elechicity for the succeeding inonths. On the
1
other hand,
if 11ERALCO does not pay the increased generation costs and related
"pass-through" costs to the Gen.Cos, PEMC and l\TGQP, this inay
result in the tennination of MERALCO' s PSAs with the Gen.Cos, and
rnen1bership in PEMC. Gen.Cos may eventually stop electricily
to NIERALCO and PEMC inay prevent MERALCQ fron1 buying
power fron.1 vVESM. For NGCP, it inay refuse to wheel power to
l\1ERALCO' s distribution facilities. As earlier stated, one can readily
in1agine the dire consequences to the economy and :security of the
country should this happen, as there will surely be rotating blackouts
tluoughou t IYIERALCO' s franchise area.
'
5.42. It bears e1nphasis that if the TRO is extended to cover the
succeeding billing cycles beyond its effective perfod, i.e. the
Dece1nber 2013 billing, these disastrous effects would be aggravated
and more likely, will only intensify. Instead of effecting the TRO, the
n1ore proper and prudent course of action is to :address the
ten1porary increase in generation costs in a 1naiu1er thatiwill cushion
the financial burden on the end-users, and at the saine time, allow the
power industry to contint10usly function, e.g., the
staggered payn1ent schen1e offered by MERALCO and approved by
the ERC.
5.43. Indeed, lifting the TRO is consistent with the in1portance
and urgency of ensuring and safeguarding the needs of the market.
IVlaintaining the resiTaining order against. MERALCO: will lead to
enonnous potentially irreparable prejudice and dainage to 4.8 M
households and around 500,000 indushial/ conunercial
establishn1ents and even governn1ent institutions due: to the ever-
present and pervasive dire consequences of the of the
supply chain in the elechic power industry.
112
5.44. One can only imagine the disastrous effects if fuel
suppliers (Malampaya gas, coal, diesel and bunker oil,; steam and
hydro) stop supplying fuels to the generators. Such would prevent
GenCos from producing electric power, the NGCP from transmitting
such electric power, and the DUs and electric cooperatives from
distributing and supplying to the market. It is evident that default in
any part of the power industry supply chain will affect
every participant in the power industry. The failure in one part of the
chain higgers the failure of the whole.
5.45. Thus, if this Honorable Court will not immediately lift the
TRO and will permanently enjoin MERALCO from collecting the
increase in generation charges from its consumers, it is akin to
enjoining the whole electric power industry from functiorung.
VI. COUNTER-PETITION
iYIERALCO respectfully repleads the in the
preceding paragraphs in support of the following Counter-Petition:
6.1. Section 5, Rule 65 of the Rules of Court, upop which the
Consolidated Petitions were elevated to this Honorable Court,
provides:
"Section 5. Respondents and costs in certain cases. -
When the petition filed relates to the acts or omissibns of
a judge, court, quasi-judicial agency, tribunal,
corporation, board, officer or person, the petitioner shall
join as private respondent or respondents with such
public respondent or respondents, the person or
persons interested in sustaining the proceedings
1
in the
court; and it shall be the duty of such: l?rivate
respondents to appear and defend, both in his or their
own behalf and in .behalf of the public responqent or
respondents affected by the proceedings, and 'the costs
awarded in such proceedings in favor of the petitioner
shall be against the private respondents only, and not
against the judge, court, quasi-judicial agency, tribunal,
corporation, board, officer or person impleaded as public
respondent or respondents.
113
Unless otherwise specifically directed by the court
'Where the petition is pending, the public respondents
shall not appear in or file an answer or corrunent
1
to the
petition or any pleading therein. If the case is to
a higher cotfft by either party, the public respondents
shall be included therein as nonunal parties. llowever,
unless otherwise specifically directed by the court, they
shall not appear or participate in the proceedings
therein." 206
6.2. In Lotte Phil. Co., Inc. v. Dela Cruz,207 this I-Ionorable Court
ruled as follows:
An indispensable party is. a party-in-interest
without \l\Thon1 no final detennination can beihad of
an action, and who shall be joined . either as
plaintiffs or defendants. The joinder of
indispensable parties is inandatory. The! pt'.esence
of indispensable parties is necessary to the
court with jurisdiction, which is uthe authority to
hear and detern1ine a cause, the right to act in a
case." Thus, without the presence of indispensable
parties to a suit or proceeding, judgment of a court
cannot attain real finality. The absence of an
indispensable party renders all, subsequent actions
of the court null and void for want of authority to
act, not only as to the absent parties but even as to
those present."2os
6.3. In the case at bar, the GenCos, and l\JGCP are
indispensible parties. As exhaustively explained above, the GenCos,
PEtvCC and NGCP stand to be injured or benefited by the outcome of
the C'.onsolidated Petitions, which ultin1ately seek to pennanently
enjoin MERALCO f-:rorn recovering the aut01natic increase in
generation charge and other pass-tlu-ough adjustn1ents in the total
mnount of PhP4.147L1/kVVh (specifically, for a 200 kWh residential
custorner) for the Dece1nber 2013 billing 1nonth. Moreover, the
Consolidated Petitions question the constitutionality of Sections 6
and 24: in EPIRA and the validity of the regulations pertaining to
autofftatic adjushnents, which affect the sector of the GenCos.
211G RULES OF COURT, Rule 65, Sec. 5.
207 C.R No. 166302, 28 July 2005, <164 SCRA 591.
2us Jllid. at 595-596.
114
6.4. The 111aterial interest 0 the GenCos, PEMC.and NGCP in
the controversy is beyond dispute as the final decree of this
I-Ionorable Court, granting or denying the auton1atic increase in
generation charge (and other pass tluough including
transrnission charge) authorized by the 9 Dece111ber 2013 letter of the
ERC, would necessarily affect the GenCos, PEMC's and NGCP's
rights. Thus, while MERALCO as private respondent is i11terested in
sustaining the assailed letter of the ERC for various reasons discussed
above, i.e., the same was the product of a valid and governing law,
this Court caiu1ot, and should not, resolve' the issues
raised in the Petitions without first hearing fro1n the GenCos, PEMC
and l'JGCP,2
9
which will ultimately be affected by any decision of
this 1-Ionorable Court.
6.5. In fact, after receipt of the ERC Order dated 20 Dece1nber
2013
2
10 and the TRO issued by th.ls I-Ionorable Court on 23 Dece1nber
2013
211
that enjoined MER.ALCO fro1n collecting frorn: customers
lhe increase in generation charges for the Noven1ber 2013 supply
tnonlh, MERALCO inu11ediately filed a Manifestation with Very Urgent
Nlolion dated 23 Decen1ber 2013
212
praying that the ERC direct the
PElVIC ''to defer collection of any billing to MERALCO, and for
lVlERAl,CO to defer pay111ent to PEMC, corresponding to the increase
in the generation charge attributable to all WESM for the
supply 111onlhs of Nove1nber and Dece1nber 2013, to an
esti1nated generation rate of PhP2.42/kWh (out of the PhP3.44/kWh)
or at least PhP1A4/kWh representing the deferred generation rate
adjusl:lnent, for. Noven1ber 2013; and the .difference b:etween the
aclual generation charge and PhP7.37 /kWh, for Dece1nber 2013,"
pending the outcmne of on-going proces'ses.
-------------
209 T1111 Chun Suy v. Court of Appeals, G.R. Nos. 91004-05, August20, 1992, 21f?, SCRA 713, 719.
210 A -copy of ERC Order daled 20 December 2013 is attached hereto as
1
Annex "18" and
made an integral part hereof.
2u Supreme Court's TRO dated 23 December 2013, p. 3.
212 A copy of MERALCO's Manifestation and Very Urgent Motion dated 23 December 2013
is altached hereto as Annex "19" and made an inlegral part hereof.
115
6.6. MERALCO explained that to allow the and other
Gen.Cos to collect ron1 and any other affected DU the full
arnount of the WESM billings for the supply months of Nove1nber
and Decen1ber 2013, would be grossly unjust, ineql.1itable, and very
unfair. to MERALCO and to its n1illions of consu1ners wl1ich the ERC
is 1nandated to protect.
21
3 MERALCO reminded the ERC that DUs,
lik'.e :MlERALCO, are equally affected by the high WESM prices and
such generation charges are purely pass-tluough charges and
therefore, revenue neutral to MERALCo.214
6.7. On 20 Decen1ber 2013 Order, the ERC, taking cognizance
of the Nlanlfestation 1uith Very Urgent Motion, issued an Order dated 23
Dece:mber 2013, setting a hearing on 26 2013 for
IVIERALCO' s Manifestaf-ion with Very Urgent Motion. Tl}e ERC also
directed PEMC to "a) file its con11nent tl:iereqn on .or before December
26, 2013; and b) inforrrt and direct the concerned
generation con1panies to file their respective conunents thereon
within the sarr1e period."21s
6.8. I-Iovvever, in another Order dated 23 Decen1ber 2013, the
ERC recalled the Order it issued earlier that day and cancelled the
hearing set on 26 Decen1ber 2013, "in deference to the Supre1ne Court
which has taken cognizance of [the] petitions [before it]."
6.9. Thus, on 26 Dece1nber 2013, MERALCO had to write the
DoE Secretary inforn1ing the latter of the impact of the TRO on
IVIERALCO. explained that due to the ,TRO which
effectively enjoined the recovery by MERALCO of the increase in
generation charge and of other pass-tluough adjushnents in the total
an1ounl of PhP4.1474/kWh
216
from its customers and: ten1porarily
pegs the generation charge for Decen1ber 2013 billing n1onth to
PhPS.6673/kWh (versus the actual generation charge of
PhP9.l070/kWh), it became physically and legally ilnpossible for
:NIERALCO to fully re1nit pay1nents for the related purchases from
the \IVESM, the PEl\IIC, ai1d for generatio1i. charge increase and other
related charges to the conlTacted power suppliers, i.e., First Gas
' I
Pm.ver Corporation, South Pre1niere Power Corporation, Masinloc
Puwer Partners Co. Ltd. and San Miguel Energy Corporation as well
as the ]\JGCP for the l\Jovember 2013 supply n1onth.
213
214
215
216
l11id., at p. 8, par. 16.
Id., at p. S, par. 17. '
A copy of the ERC Order dated 23 December 2013 is attached hereto as Annex "20" and
made an integral parl: hereof.
a 200 kWh residential customer.
116
6.10. MERALCO explained that in view of the enormous
a1nount involved, MERALCO' s finanoial and credit position and
continued operations, would be seriously hnpaired and dmnaged, if
it would be required to pay an an1ount beyond the ,ten1porarily
capped recovery amount. Thus, MERALCO was coristrained to
partially defer pay1nents to PEMC, some power suppliers (GenCos)
and the NGCJj which contributed to the increase in generation cost
and other related charges, as follows:
- - - - - - - - - - ~ - - - - - - - - - - - ~ - - - - - - - - - - - - -
1. PErVIC-WESIVI
(parlicular
genera tors not
kno-vvn)
Arnount (in Million) Remarks
Billed Deferred
PhP9,894.00. PhPS,998.20 Deferral of pay1nent
for WESM purchases
equivalent to
PhP2..42/kWh,
representn1g tl1e
increases
1
in clearing
price attributable to
WE$M purchases.
2. First Gas PhP376.40 PhP210.50 Deferral of pay1nent
for incremental fuel
cost, repr,esenting the
Power
Cc;rporation
217
- US$ 105.20 US$ 30.20
Sta. Rita Gas
Plant
3. Sot11th Pre1niere PhP2,577AO PhP856.80
Power
Corporation
218
- Ilijan Gas
Plant
US$ 5.1
cost of liquid
condensate over
natural gas
Deferral of pay1nent
I
for incren1ental cost
representing the
excess cost of bio-
diesel over natural
gas
2r7 h1ERALCO entered into a PPA with First Gas Power Corporation on 9 January 1997,
vvhich was approved through ERC Decision dated 11June1997 and ERC Decision dated
31May2006. .
21s IvlERALCO entered into a PSA with South Premiere Power Corporation on 12 December
2011, which was approved Uuough ERC Decision elated 17 December 2012 ..
117
<l. Mm>inloc
PhPl,086.8
PhP436.6
Replace1nent
power
Power Partners
sourced fron1 WESM
Co. Ltd.
219
-
which was, included
IVIasinloc Plant
in the c01nputation
of MERALCO's
WESM, purchases
-
5. San lVIigueA
PhP725.10 PhP8.1.
Replace1nent power.
Energy
sourced fron1 WESM
Corporation220
US$3.65
which was included
- Sual Plant
In the co1nputation
of MERALCO's
WES1vI. purchases
6. NGCP
PhP2,878.4 PhP111.4
Deferral of payment
corresponding to
contribution of
increase to
MERALCO's total
bill
6.11. MERALCO, however, paid in full (Phils.)
Ltd. Co,
221
Thern1a Luzon, Inc.,
222
Sern-Calaca Power Corporation
223
and PGP Corp.2
2
4 for its Noven1ber 2013 supply 1nonth purchases.
'This notwithstanding, these GenCos which have been f\1lly paid by
IVIEl\.ALCO for the povver supplied by the1n, as vvell as all other
GenCos that lTade or sell power in WESM, will clearly be adversely
affected by any judg111ent of this I-Ionorable Court declaring
unconstitutional the provisions of EPIRA, particularly Sections 6 and
29, and Rule 3, Section 4(e) of the EPIRA IRR allowing for the
aulornatic pass tluough of generation costs and other pass-through
adjushnents.
-------------
219
221
122
224
MERALCO entered into a PSA with Masinloc Power Partners Co., Ltd. on 21 December
2.011, which was approved Uuough ERC Decision dated 17 December 2012.
MERALCO entered into a PSA with San Miguel Energy Corporation on 25 June 2012,
which was approved through ERC Decision dated 17 December ,2012.
MERALCO entered into a PSA with Quezon Power (Phils.) Ltd. Co. on 12August1994,
which was approved through ERC Decision in ERB Case No. 94-217 dated 6 July 1995.
MERALCO entered into a PSA with Thenna Luzon, Inc. on 29 Februa1y 2012, which was
approved through ERC Decision daled 17 December 2012.
MERALCO entered into a PSA with Sem-Calaca Power Corporation on 20 December
2.011, which was approved tluough ERC Decision dated 17 December 2012.
1V1ERALCO entered into a PSA with FGP Corp. on 22July1999, which amendments were
approved through ERC Decision dated 31May2006.
118
6.12. Considering all the foregoing, MERALCO respectfully
beseeches this Honorable Court to mo tu proprio22s join the fpllowing as
parties-respondents being indispensible parlies in this case:
6.12.1. Philippine Electricity Market Corporation
("PEI\IIC") is a non-stock, organization, incorporated
in. Nove1nber 2003 upon the iiutia:tive of the , DoE with
representatives front the various sectors of the electric power
indushy to be the governance arm, i.e., the Market Operator, of
the WESIVI. PEMC may be served with notices, orders,
pleadings, ni.otions, decision$, and other legal processes of this
I-Ionorable Court at its office address at the 9th and 18th Floor,
Robinsons Equitable Tower, ADB Avenue, Ortigas Center,
Pasig City 1600 Philippines.
6.12.2. First Gas Power Corporation ("FGPC") is a
generation co1npany currently operating the Sta. RHa Gas Plant
duly organized and existing under Philippine . laws, with
principal office address at 3 /F Benpres Building, Exchange
:Road, cor. Meralco Avenue, Ortigas Center, Pasig City, where it
n1ay be served with notices, orders, pleadihgs, motions,
decisions and other legal processes of this I-Ionorable Court.
6.12.3. South Preni.iere Power (SPPC) is
a generation company currently operating the Ilijan Gas Plant
duly organized and existing under Philippine . laws, with
principal office address at 808 Building, Meralco Avenue cor.
Gen. Li1n Sheet, San Antonio Village, Pasig City, where it may
be served with notices, orders, pleadings, 1nolions, decisions
and other legal processes of this I-Ionorable Court.
6.12.4. San Miguel Energy Corporation is a
generation con1pany currently operating the Sual Plant duly
organized and existing under Philippines laws, with principal
office address at 808 Building, Meralco Avenue cor. Gen. Li1n
Street, San Antonio Village, Pasig City, where it 1nay be served
v1ith notices, orders, pleadings, 111otions, decisions and other
legal processes of this I-Ionorable Court.
22s Plasabas v .. CA, G.R. No. 166519, March 31, 2009, 582 SCRA 686, 692; 692; Nocom v.
Camerino, C.R. No. 182984, February 10, 2009, 578 SCRA 390, 4i3; Macababhad, Jr. v.
Masirag, G.R. No. 161237, January 14, 2009, 576 SCRA 70, 88; Pepsic<?, Inc. v. Emerald
Pizza, Inc., C.R. No. 153059, August 14, 2007, 530 SCRA 58, 67; Pamplona Plantation Co.,
Inc. v. Tinghil, G.R. No. 159121, February 3, 2005, 450 SCRA 421, 433.
119
6.12.5. Masinloc Power Partners Co. Ltd.
("MPPCL") is a generation c01npany currently operating the
l\/lasinloc Plant dLlly organized and existing under Philippines
laws, with business address at Masinloc Coal-Fired Thermal
Puwer Plant, Barangay Bani, Masinloc, Za1nbales, where it 1nay
be served with TLotices, orders, pleadings, motions, decisions
and other legal processes of this Honorable Court.
6.12.6. Quezon Power (Phils.) Ltd. Co. is a generation
cmnpany duly organized and existing under Philippines laws,
with business address at 62 I-I. dela Costa, Mauban, Quezon
Province, where it 1nay be served with notic;es, orders,
pleadings, n1otions, decisions and other legal !Jrocesses of this
Flonorable Court.
6.12.7. Thern1a Luzon, Inc. ("TLI") is a. generation
con1pany currently operafing the Pagbilao Coal Plant duly
organized and existing under Philippines laws, with principal
office address at NAC Tower, 32
11
d Street, Bonifacio Global City,
I
Taguig, where it n1ay be served with notices, orders, pleadings,
.rnotions, decisions and other legal processes of this I-:lonorable
Court.
6.12.8. Se1n-Calaca ("SCPC") is a
generation co1npany . currently operating the Calaca Power
Plant duly organized and existing under Philippines laws, with
principal office address at Barangay San Rafael, Calaca,
Batangas, where it 1nay be served with notices, orders,
pleadings, n1otions, decisions and other legal processes of this
I-Ion.arable Court.
6.12.9. FGP Corp. is a generation compa1:1Y currently
operating the San Lorenzo Gas Plant duly organized and
existing under Philippines laws, witl1 office address at 3/F
Benpres Building, Exchange Road cor. Meralco Ortigas
Center, Pasig City, where it Inay be served with notices, orders,
pleadings, motions, decisions and other legal processes of this
1--Ionorable Court.
120
6.12.10. I\Tational Grid Corporation of the Philippines
("NGCP") is a tTm1s1nission con1pany and the systen1 operator
of the WESM, which was granted on 1December2008 through
H.epublic Act r\Jo. 9511, the franchise to operate, inanage and
expand the electTic trans1nission business of the coml.tJ.y. NGCP
is duly organized and existing under Philippine laws and n1ay
be served with notices, orders, pleadings, motions, decisions,
and other legal processes of this Honorable Court at Quezon
Avenue corner Road, Dili1nan, Quezon City 1100.
The following that are registered and: hade in the
VVESM should likewise be in1.pleaded in this case:
6.12.11. 1590 Energy Corporation is a generation
co1npany eturently operating the Bauang Diesel Power Plant
duly organized and existingunder Philippine laws, with office
address at Unit 107 First Midland Office Condonuniun1
Building,. Gan1boa Street, Legaspi Village, Maka.ti, where it inay
be served with nolices, orders, pleadings, motions, decisions
6.12.12. AP Renewables, Inc. is a generation company
currently operating the l\!Iakban Geotherrnal
1
and Tiwi
Geothennal Power Plants duly orgaiuzed ai1d exfoting under
Philippine laws, vvith office address at 15/F NAC Tower, 32nd
Street, Bonifacio Global City, Taguig Cily, where it inay be
served vvith notices, orders, pleadings, inotions, decisions and
other legal processes of this I-Ionorable Court.
6.12.13. Bac-1\!Ian Energy
Corporation/Bae-Man Geothermal, Inc. is a generation
con1pany currently operating the Bacn1an Geothennal Power
Plant duly organized and existing under Philippine laws, with
office address at 38/F .One Corporate Centre, Julitt Vargas car.
Nleralco Avenue, Ortigas Center, Pasig City 1605, ".\'here it inay
be served with notices, orders, pleadings, inotions, decisions
121
6.12.lLl. First Gen Hy1:do Power Corporation is a
generation con1pany currently operating the Pantabangan and
JVlasivvay I-Iydro EleclTic Power Plants duly 'organize.cl and
existing under Philippine laws, with office address iat 3rd Floor
Benpres Building, Exchange Road car. Meralco ;Avenue, Pasig
City, where it 111ay be served with nolices, orders,
rnotions, decisions and other legal processes of this J-Ionorable
Court.
6.12.15.
GNPower Mariveles Coal Plant 1..tcl. Co. is a
generation cornpany currently operating the Mariviles Coal-
Fired Power Plants Unit 1 and 2 duly organized ar1d existing
tmder Philippine laws, with office address at J905 Orient
Square Building, Don Francisco Ortigas Jr. Road, Ortigas
Center, Pasig City, where it n1ay be served with notices, orders,
pleadings, 1notions, decisions and other legal processes of this
I-Ionorable Court.
6.12.16. PANASIA Energy I-Ioldings, Inc. is a
generation con1pany currently operating the Lin1ay Combined
Cycle-Gas Turbine Power Plant duly organized and existing
under Philippine laws, with office address at 2nd floor, 808
Building, Meralco Avenue, Pasig City 1600, where it 1nay be
served with notices, orders, pleadings, 1notions, decisions and
6.12.17. Power Sector Assets & Liabilities
IVlanagernent Corporation is a generation con1pany currently
operating the Botocan, Casecan, Caliraya, I-fedcro and Kalayaan
1-Iydro Eleclric Power Plants, Malaya Oil Thennal Power Plant,
Leyte A (I-IVDC) duly organized and existing under Philippine
Lrws, with office address at 7th Floor Bank1ner Building, 6756
Ayala Avenue, Ivfakali City, where it n1ay be served with
notices, orders, pleadings, 111otions, decisions 'and legal
processes of this I-Ionorable Court.
6.12.18. SN Aboitiz Power is a generation con1pany
currently operating the .A,..1nbuklao, Binga and Magat I-Iydro
Electric Power Plants duly organized and existing under
Philippine laws, with office address at 10/F NAC Tower, 32nd
Street, Bonifacio Global City, Taguig City, where it 1nay be
served with notices, orders, pleadings, n1otions, decisions and
122
6.12.19. SLTategic Power Develop1nent Corporation is
a generation con1pany currently operating the : San Roque
I-Iydro EleclTic Power Plant duly organized and existing under
Philippine laws, with office address at 2nd Floor, 808
J'Vleralco Avenue cor. General Lhn Avenue, Pasig City 1600,
-where H may be served -with notices, orders, pleadings,
n1otions, decisions and other legal processes of this :Honorable
Court.
6.12.20. Trans.,.Asia Power Generation Corporation is a
generation cmnpany currently operating the T.A'.PGC Diesel
Power Plant duly organized and existing uncle! Philippine
laws, with office address at 11th Floor PfIINMA Plaza, 39 Plaza
Drive, Rockwell Center, Makati City 1200, where it n1ay be
served vvith notices, orders, pleadings, 1notions, decisions and
other legal processes of this I-Ionorable Cou1:t.
6.12.21. Vivant Sta. Clara :Northern Renewables
Generation Corporation is a generation corr1pany curre;ntly
operating the Bakun I-Iy.dro Elecnic Power . Plant duly
organized and existing under Philippine laws,, with office
address at Unit 107, 1st Midland Office Condominiun1 Bldg.,
Gan1boa Sneet, Legaspi Village, Makali City and Suite 907-908
Ayala Life-FGU Center Mindanao Avenue cor. Biliran Road,
Cebu City, where it rnay be served with notices, orders,
pleadings, inotions, .decisions and other legal processes of this
I-fonorable Court
6.13. In light of the iinportance of having the issues raised in
this case resolved inunediately, it is vital that the foregoing
i1npleacled parties be already rnade parties and to answer
t:he Consolidated Petitions as well as this Counter-Petition at the
soonest possible tiine, preferably before the Preli1ninary Conference
scheduled on 13 January 2014, or at least, before the scheduled oral
argu1nents on 21 January.2014.
6.14. Copies of this Consolidated Co1n1nent with Counter-
Petition were served on the foregoing iinpleaded parties at their
respective addresses indicated above.
123
CLOSING STATEMENT
The Government should offer a pern1anent solution that would
benefit both the electric power indushy and the consu1n'ers. The DUs
:3hould not be left to be vilified by the public for a situation, which
they did not create, but which on the contTary, they diligently tried to
shield the public fron1. Instead of focusing solely on the alleged fact
that the Philippines' electricity rates are among the in Asia,2
2
6
it is an opportune tin1e to exainine the root cause thereof, i.e. the
subsidies given by other countTies vis-a-vis the taxes, in1.posed in the
Philippines, the royalties when Malainpaya' s natural 'gas is used, the
subsidy for lifeline custo111ers, the increasing the
lack of additional generating capacity, and provide proactive 1neans
(other than baseless suits against MERALCO), to . remedy the
situation.
Fronl. 2001 to 2013, the peak deinand of electricity increased by
2,659 IVIW while the increase in installed capacity contributed by
additional power plant during the saine period only am9unted to 652
l\1W. This kind of situation results in scarcity in the supply of
electricity. The increasing denl.and in the Inarket iw:ithout the
corresponding increase in. the supply will inevitably result in priCe
increases.
rvloreover, as previously pointed out, the i electric power
industry is a chain that involves several links. The supply of
electricity passes through several entities "'."" ron1 the GenCos to the
TRANSCO /NGCP to the DUs, before it reaches the end+users. As the
electricity passes through several entities, costs accu1np.late and are
charged to consun1ers. Further, it bears noting that to date, a
Universal Charge is still being charged to consumers to pay for,
mnong others, the stranded debts in excess of the ainount assu1ned
by the Governnl.etl.t and shanded conh:act c_osts qf NAPOCOR as well
as inissionary (subsidized) electTification.
In this situation, MERALCO is perceived to be the fall guy. It
sends the bills to the consu1ners. What consu1ners 'see are their
electricity bills and the entity that sent it to ther,n-. : Perhaps, the
Petitioners do not see, 1nuch less con1prehend the charges of other
participants in the power industry and that the bulk the an1ount
covered in their bills does not go to MERALCO. But despite the fact
that the generation charge (and other pass-tluough charges) subject
of these Consolidated Pefrtions are not "charges" of I\l[ERALCO,
-------------
226
Uayan Muna, et al. Petition, p. 23, Final Word.
124
l\!IERALCO is the only private entity iinpleaded by the Petitioners
and is now the only one link in the supply chain expressly reshained
by this I--Ionorable Court fron1 collecting charges that MERALCO
does not stand to profit f-ro1n.
If the objective is to provide the public with low;..cost eleclTicity,
then concrete solutions should be put in place to address: the concerns
of aJ.l involved. The DUs and/ or other. particip8=nts in the pqwer
industry must not be sacrificed 'or allowed to suffer. ~ h e i Constitution
itself provides that in pursuit of the State's economic I growth, "all
sectors of the econmny and all regions of the country shall be given optinzum
opportunity to develop.221"
Indeed, the increase in generation charge is but a .syn1pton1 of,
and a signal for, rnore basic underlying issues tI\at need to be
addressed.
]First, the Luzon Grid needs the early co1nplelion and
cornrnissioning of new, highly efficient, highly reHable base load,
rnid-n1erit, and/ or peaking plants. l\!Iost .of the. country's existing
power plants were built prior to the turn of the century and even as
they have been refurbished to the credit of the generatir1g companies,
their efficiency and Teliability are challenged. Over the
1
period 2001-
2013, the Luzon peak dernand has grown by 2,659 M:VV !or 47%, fron1
5,646 1\1W to 8,300 MW. Yet, no new 111ajor base load plant has been
constructed and added to the Luzon Grid other than tli.e coal-fired
plant of GN Power in Mariveles, Bataan .with a reported installed
capacity of 6Ei2 I\II\N and current dependable capacity of 495 MW.
Accordingly, demand has outgrovvn new base load capacity addition
by around 2,000 MW over this period.
The Luzon Grid Peak Dernand registered on 8 May 2013 is
8,300 TvlW. The reported aggregate dependable capaci.ty:is only 11,466
MvV. I-Iowever, 19% of this dependable capacity is! hydroelectric
plants, large and Sfftall, vvhich are highly subject to the vagaries of
weather and rainfall patterns; 15 % are 111ore costly oil-Bred plants;
211 % are the gas-fired plants fueled by Malarnpaya Gas 'which cannot
continue to operate during Malan1paya shutdown. unless on inore
costly liquid fuel is used. This renders the Luzon 0rid,
1
including the
IvlERALCO franchise area, susceplible not only to
1
the risks of
increasing and spiking generation charge, but also to the risk of lack
of power supply to n1eet the growing deni.and during peak hours.
--- --------
2
,.,
~ 1
Article XII, Section 1 of the 1987 Conslilution.
125
The strong support of all in the electricity supply chain,
(generators, NGCP, distribution utilities, and cons:u1ners), the
national and local government, and interest groups, including those
vvho are protesting the high cost of power generation a:nd yet have
also opposed and hindered the early' construction of new power
plants, to fast t-rack highly fuel efficient, highly reliable new builds, is
crucial in averting the risk of insufficient power generating capacity
to power the country's econ01nic growth and development, and the
q_uali ty of life of consun1ers.
Second, the counh-y needs to accelerate exploration,
developn1ent and production of indigenous fuels for! our power
plants-natural gas and oil, coal, geothennal and hydro, in addition
to the developn1ent of cost competitive renewables.
Third, at this time when the dependable capacity and
supply/ dernand balance is. not at a healthy or con1fortable level and
wilI get tighter until new plants are brought on line, ad1ninishators
and regulators 1nay wish to revisit the advisability of 1natters which
function best or 1nore effectively under surplus or favorable supply
versus den1and conditions as the current WESM cap and the phasing
of contestability under Retail Co1npetition and Open Access.
V\Tith all due respect, however, to this I-Ionorable Court, it is the
executive and legislative departinents of the Governn1enr that should
address these concerns. hnposing a resfraining order at this point
tirne only disrupts the power supply n1echanis1n, prejudices the
supply chain and darnages all power industi-y participants, the
public
1
and ultin1ately, the national econ01ny as a whole.
126
PRAYER
'NHEREFORE
I-Ionorable Court:
I MERALCO respectfully prays that this
a) LIFT the Te1nporary ReslTaining Order and DENY the
prayer for the issuance 0 a Writ 0 Preliminary
Injunction.
b) JOIN Philippine Elechicity Market Corporation, First Gas
Power Corporation, South Pre1niere Power Corporation,
San Miguel Energy Corporation, Masinloc Power
Parhi.ers Co. Ltd., Quezon T'ower (Phils.') Ltd. Co;,
Thenna Luzon, Inc., Se1n-Calaca Power Corpqration, FGP
Corp., and National Grid Corporation of theiPhilippines,
and the following generation co1npanies that hade in the
VVESl\1, nmnely: 1590 Energy Corporation, AP
Renewables, Inc., Bae-Man Energy Develop1nent
Corporation/Bac-Nian Geothennal, Inc., First Gen I-Iyrdo
Power Corporation, Gl\JPower Mariveles Coal Plant Ltd.
Co., PAN ASIA Energy I-Ioldings, Inc., Power Sector
Assets & Liabilities Managen1ent Corporation, SN Aboitiz
Power, Strategic Power Develop1nent Corporation, Trans-
Asia Povver Generation Corporation, Vivar1t Sta. Clara
Northern Renewables Generation Corporation, as
parties-respondents to this case, and the1n to file
their respective Conunents to the Consolidated Petitions
and this Cotu1ter-Petition at the soonest possible ti1ne,
preferably before the .Prelhninary Confe1:ence scheduled
on 13 January 201L1, or at least, before the scheduled oral
argun1ents on 21 January 2014; and
c) After the conduct of oral arguni.ents and sub1nission
of the appropriate pleadings and inernoranda, DISMISS
the Petitions filed by Bayan Muna, et al. and NASECORE,
et al.
IvIERALCO likewise prays for such further or other relief as
nmy be deen1ecl just or equitable under the circumstances.
City of Taguig for Manila, 8 January 2014.
127
ANGARA ABELLO CONCEPCION REGALA & CRUZ
Counsel for Respondent Manila Electric Inc.
22nd Floor, ACCRALAW Tower
By:
2nd A venue corner 30th Street
Crescent Park West
Bonifacio Global City
0399 Taguig, Metro Manila
Telephone No. (632) 830-8000
Facsimile Nos. (632) 403-7007 and (632) 403-7009
VICTOR P. LAZATIN
IBP No. 920805; 01/03/13; Pampanga
Roll No. 23979
. ARNOLD M. CORPORAL
PTR No. A -1676779; 01/09 /13; Taguig City
IBP No. 920830; 01/03/13; Makati City
Roll No. 43033
ANTONIO .E U RDO S. JR.
IBP No.920848; 01/03/13; Quezon City
Roll No. 52683

IBP No. 920882; 01/03/13; RSM
Roll No. 59125
128
FILEMONR I.:.JAVIER
PTR. No. A-1716032 01/09/13; Tag.uigCity.
IBP Lifetime No. 010 8; 01/10/12; Pasig City
Roll o. 59170
MCLE Co1npli1P1ce o. IV-017983; 04/22/13
CLARISSA B TTINA F. FAYLONA
IBP No; 920870; 01/03/13; Makati
Roll No. 60756
MCLE Compliance No. IV- 0017947; 04/22/13
MONICA JOY M. MARCELO
IBP No. 935366; 4/5/13; Quezon City
Roll No. 62440
MCLE Compliance No. N/ A
Verification and Certification Follows ..
COPY FURNISHED
By personal service:
RENE A.V. SAGUISAG
Counsel for Petitioners NASE CORE, et al.
4045 Bigasan Street
Brgy. Palanan, Makati City
No. 45 K-7thStreet,
By registered mail:
San Miguel Avenue, Pasig City
129
~
/
/ -
c:c-: __
FILEMON ~ y L. JAVIER
PTR. No. A-171603 ; 01/09/13; Taguig City
IBP Lifetime No. 01 ~ : 1 8 ; 01/10/12; Pasig City
Rol No. 59170
MCLE Complian No. IV-017983; 04/22/13
CLARISSA BETTINA F. FAYLONA
IBP No. 920870; 01/03/13; Makati
Roll No. 60756
MCLE Compliance No. IV- 0017947; 04/22/13
MONICA JOY M. MARCELO
IBP ]\Jo. 935366; 4/5/13; Quezon City
Roll No. 62440
MCLE Co1npliance No. N/ A
-
Verification and Certification Follows ..
COPY FURNISHED
By personal service:
RENE A.V. SAGUISAG
Counsel for Petitioners NASE CORE, et al.
L!045 Bigasan Street
Brgy. Palanan, Maka ti City
No. 45 K-7thSLreet,
Brgy. West Kainias, Quezon City
By registered mail:
129
REGISTERED
'\/!lETUltN CARD
JAN 0 8 20ir :ii()/
DEPARTlVIENT OP ENERGY
REGISTERED
Vv/RRTURii.CARD
:mro n 1013 fl 02
Taguig 1632
REGISTERED
I'HILIPPINE ,ELECTRI.CITY CORP01Vf7RETiJJftN CAR
9th and 18th ]:'loor, Robinsons Equitable Tower, JAN -
A.DB A venue, Ortigas Center, -==-"-- u u 2011 # 03
:Pasig City 1600
FIRST GAS POWER
3/F Benpres Building,
REGISTERED
CARl
JAN O 8 2013 if <Xf
SOUTll PREMIERE POWER CORPORATION REGISTERED
808 Building, Merako Avenue cor. Gen. Liln CARI
San Antonio Village, Pasig City JAN 0 8 2013 #OS--
SAJ\f lVIIGUEL ENERGY CORPORATION
REGISTERED
8013 Building, Meralco Avenue.car. Gen. Liln
CARJD
San Antonio Village, Pasig City JAN 0 8 2013 # d.h
REGISTERE.D
l\1:ASJ[NLOC POWER PARTNJ;RS CO. LTD.
Masinloc Coal-Fired Therrnal Power Plant,
Daran gay Bani, Masinloc, Zainbales
Vi
..... '"'RN CAURrt' t J k:t. .u I, , j<I(! 1 . .-'.
v i:J. "o-.l
1
"I v ... . . ,,}\.
JAN 0 B 7
QUEZON POWER (PllILS.) LTD. CO.
62. FL dela Costa, Mauban,
1
Quezon Province
THERIVIA LUZON, INC.
NAC Tower, 32
11
d SlTeet,
SEM[-CALACA POliVER CORPORATION
Barangay San Rafael,
Calaca, Batangas
.FGPCORP.
()rl:igas Center, Pasig City
130
REGISTERED
W/R,El"UiJRN U\RI)
JAN. o a 2ruJ!

lr.
7
'rr:i" rl\j"' 1U N CAR.
i .,:i .. !L.e H r,
}!.:.; ..i
:JAN_ 0 B 2013-... #-(}CJ
REGISTERED

_JAN_ 0 B
REGISTERED
.. C
1
AR" .. 11)
\I I .. ,, ...... "' " .. . li"fili. . l./
JAN 0 8 2013 IJ,(J/ I
REGISTERE.D
NATIONAL GRID CORPORATION OF TI-IE CA1
Quezon Avenue corner BIR Road, JAN 0 8 2013 .-/CJ/2-
Dili1nan, Quezon City 1100 ..
1S90 ENERGY CORPORATION
REGISTERED
Unit 107 First Midland Office Condo1ninium Bui11W/JR.E1flLJRN CA.E
Ga1nboa Street, Legaspi Village, Maka ti JAN 0 u 2013_-# 0/3
AP RENEWABLESJ, Il'IJ'C.
15 /F NAC Tower, 32nd Street, .
RE
.a r.'RE:"" D
- I.ti.. . ._..,._..,. I
,W/RETURN CAR
JAN 0 8 2013#0/)f
JBAC-MAN ENERGY DEVELOPMENT CORPORAR.ilGJSTERED
GEOTHERMAL, INC. CARJ
38/l" One Corporate Centre,
Julia Vargas corner Meralco Avenue, JAN 0 8 2013 ii 0 /f-
Ortigas Center, Pasig City 1605
REGISTERED
FIRS'T GEN llYRDO POWER

D1]
3 / F Ben.pres Building, - "y' ......
1
'
11
.'"1A'\..!
Exchange Road cor. Meralco A venue, JAN 0 8 2013 -1/ 0 Ii:;;
GNPOWER MARIVELES COAL PLANT LTD.
1905 Orient Square' Building, W CARD
I)on Francisco Ortigas Jr. Road, JAN O 8 201f # 0/:;.
P Al"lASIA HOLDINGS, INC.
2nd floor, 808 Building,
JV[eralco Avenue, Pa.sig City 1600
REGlSTERED
CARD
_JAN D B 2013 #OI,?
PO\IVER SECTOR ASSETS & LIABILITIES
CORPORATION C'"-R,.,...
lff.lil..' ..t-1 }i')
7th Bank1ner Building, "''
6756 Ayala Avenue, Makati City JAN 0 8 2013" -if o /Cf
SN ABOITIZ POWER- BENGUET, INC.
SN i\BOITIZ POWER- MAGAT, INC.
10(F NAC Tower, 32nd SLTeet,
13oni.facio Global City, Taguig City
131
REGISTERED
VI/RETURN CARf)
JAN a a 2013# 020

STRATEGIC POWER DEVELOPMENT CA.H
2nd Floor, 808 Building, UfN- O .i/1)2,/
lVleralco Avenue cor. Gene1;al L:in1,
San Antonio Village,, Pasig City 1600
REG.!STERED
TRA.I'-JS-ASIA POWER GENERATION C AR1
11th Floor PI--HNMA Plaza w I i'lli l
Jl
39 Plaza Drive, Rockwell Center, )AN 2DJJ..J ()22
J\1akaU Cily 1200
VIVANT STA. CLARA :NORTI-IERN RENEW.t\llt.IE.GIS'I''ERED
GENERATION CORPORATION W/RET'URN CARJ
LJnit 107, 1st 1\1idland Office Condominium Bldg., JAN 0 8 2013 .JI 023
Ga1nboa SlTeet, Legaspi Village,
IVfakat:i City
COURTESY COPIES
Hy registered 111ail:
NELSON A. LOYOLA
Co-counsel for Petitioners NASE CORE, ef al.
Suite 201 Carreon Building,
27116 Zenaida Sneet,
RON"I,HE B. RODILLAS
Co---counsel for Petitioners NA.SECORE, et al.
No. 136 Libis Gochuico Street,
Circun:1ferential Road 3,
Caloocan City 1400
OFFICE OF THE SOLICITOR.
J3r.J Arnorsolo StTeet,
132
REGISTERED
W CARD
JAN 0 B 2013# 02<j
REGISTERE .. D
\V/RETUR.N
JAN O b 20( tJ$-
REGISTERED
W/RETtJfti'l CAR.Ji)
JAN 0 8 2013 II 02,0
VERIFICATION AND CERTIFICATION
OF SI-IOPPING
. I, WILLIAMS. PAMINTUAN, of legal age, with office address
at the Lopez Building, Ortigas Avenue, Pasig City, after having been
duly sworn to in accordance with law, do hereby depose and state
that:
,,.,
1. I ain the authorized representative of MANILA
ELECTRIC COMP ANY ("MERALCO"), a Respondent in
. the Petitions docketed as G.R. Nos. 2102Ll5 and!210255.
2. As evidenced by the Secretary's Certificate. duly executed
for this purpose, a copy of which is hereto as
ANNEX "A", I ain authorized by MERALCO, to cause the
preparation of the foregoing CONSOLIDATED
COMMENT/OPPOSITION with COUNTER-PETITION,
and to verify the san1e.
3. I have read and ui1derstood the contents 'of the said
CONSOLIDATED COMMENT/OPPOSITION with
COUNTER-PETITION, and the allegations, therein are
l-rue and correct based on n1y personal knowledge and/ or
authentic records.
4. MERALCO has not c01n1nenced any action or filed any
action or clailn involving the san1e issues in the
CONSOLIDATED . with
COUNTER"".PETITION before this I-Ionorable Supre1ne
Court, I-Ionorable Court of Appeals, or different division
thereof, or any other h'ibunal or agency, and to the best of
our knowledge, no such other action or clailn is pending
therein.
5. If I should thereafter learn that a silnilar action or clain1 has
been filed or is pending before this I-Ionorable Supre1ne
Court, I-Ionorable Court of Appeals, or different division
thereo( or m1y other tribm1al or agency, I shall pro1nptly
infonn such fact to the aforesaid courts m1d other tribunal
or agency within five (5) days therefro1n ..
133
134
WILLIAM . PAMINTUAN
First Vice resident,, Assistant
Corporate Secretary and flead,
Legal
MERALCO
0RTl,GAS AVENUE, PASIG CITY
0300 PHILIPPINES
ANNEX "A"
SECRETARY'S 'CERTIFICATE
1, WILLIAM S. PAMINTUAN, a duly elected, qualified and
incmnbent Assistant Corporate Secretary of the Manila Elechic
Co1npany (MERALCO), a corporation duly organized and existing
under and by virtue of the laws of the Philippines, do hereby certify
that:
At the organizational ineeting of the Board of Directors of the
Co1npany duly convened and held on May 29, 2012, at/ which
1neeting a quorun1 was present, acted throughout and voted, the
following resolution an1ending the resolution of the Board on
February 27, 2012 on the saine subject, was approved and that said
ainendatory resolution is in full force and effect on the date hereof:
"RESOLVED, that the Board of Directors of the
Manila Elech'ic Cmnpany (MERAlCO) authorize, as it
hereby authorizes, Messrs. MANUEL V. PANGILINAN,
Chainnan, OSCAR S. REYES, President &. Chief
Executive Officer, SIMEON KEN R. FERRER, Corporate
Secretary & Compliance Officer, RICARDO V.
BUENCAMINO, Executive Vice President & Head,
Networks, ALFREDO S. PANLILIO, Senior Vice
President, Head, Customer ;Retail Services and Head,
Corporate Marketing, RAMON B. SEGISMUNDO,
Senior Vice President & Head, Human Resources &
Corporate Services, ROBERTO R. ALMAZORA, Senior
Vice President, RAFAEL L. ANDRADA, First Vice
President & Treasurer, RUBEN B. BENOSA, First Vice
President & Head, Corporate Logistics, Ms. !VANNA G.
DELA PENA, First Vice President & Head, Regulfitory
Manage111ent Office, .WILLIAM S. PAMINTUAN, First
Vice President, Assistant Corporate Secretary & Head,
Legal, ANTHONY V. ROSETE, Vice President and
Infonnation Disclosure Officer, MARTHYN S. CUAN,
Vice President & Head, Corporate Inforn1ation and
Technology, HORATIO ENRICO M. BONA, Assistant
Vice President & Head, Criminal Law, RAUL ~
CORALDE, Assistant Vice President & Head, Civil Law,
TERESITA M. MAGP A YO, Assistant Vice President &
Head, Paralegal Services, EUGENE JUDE DENIS
GERARD E. ALABANZA, Senior Manager & Head,
Labor Law, Ms. MARIA ZARAH R. VILLANUEVA'."
CASTRO, Assistant Vice President & Head, Corporate
Law, CORNELIO MANUEL C. DICCION, Manager &
Head, Taxation, JOSE RONALD V. VALLES, Assistant
Vice President and Head, Regulatory Affairs, and any
TEL. No. (632) 631-2222 (632) 16220
www.n1eralco.com.ph
lawyer or eiuployee of MERALCO that any of the111 may
designate, na1ne or appoint:
(1) to represent_ the Cmnpany, in the
institution, prosecution, and defense of
any claim, cmnplaint, action,
proceeding, petition, application,
protest, suit, or case, for or against the
Co111pany, before any court, prosecutor's
office, regulatory, quasi-judicial,. or
achninistrative body, agency, or office of
the national or any local govern111ent;
(2) to sign, execute, and deliver in
connection therewith the necessary or
appropriate cmnplaint, petition,
application, position . . p a p ~ r
ine111orandum, all types of pleadings
and inotions, verifications, affidavit-
c0111plaint, counter-affidavit, affidavit of
inerit, affidavit of desistance, affidavit
of witness, and all other affidavits of
whatever nature, ceitificate of non-
orum shopping, powers of attorney,
certifications, and all other insh'uments
as inay be necessary or proper;
(3) to represent the Co111pany or to
designate, name, and appoint a
representative or an attorney-in-fact in
behalf of the cmnpany during the
investigation, inquest, preli111inary
investigation, preliminary conference,
pre-trial, inediation, conciliation,
arbHration, trial, execution, and all other
stages of or incidents related to the case,
proceeding or action; to negotiate, enter
into, and agree to an a111icable
settle1nent, c6mpro111ise agree1i1ent, plea
bargaining, achnissions or stipulations
of fact or documents, siinplification of
issues, limitation on the ntunber of
witnesses, alternat.ive modes of dispute
resolution, withdrawal, dis1nissal or
waiver of claim or .action:; and to perf onn
and execute any and all actions or deeds
as may aid in the prompt disposition of
such cases, proceedings, or actions filed
in behalf of or against the Con1pany;
"RESO"LVED, FURTHER, that any previous
resolution of the Board of Directors on the same subject
inatter that is inconsistent herewith, shall be dee1ned
terminated, superseded and revoked."
Pursuant to the above resolution, it is hereby certified that
NIERALCO is authorized . to file the CONSOLIDATED
COMMENT/OPPOSITION WITH COUNTER-PETITION with the
Supre1ne Court (SC) ii1 the consolidated petitions docketed as G.R.
Nos. 210245 and 210255 and that WILLIAM S. PAMINTUAN, First
Vice President, Assistant Corporate Secretary and Head, Legal
1
is an
authorized representative and signatory of the Con1pany with respect
to the aforesaid application. '
WITNESS THE SIGNATURE of the undersigned as such officer
of the Cmnpany and its corporate seal hereunto affixed on this 8th
day of January 2014.

Assistant Corporate
Secretary
SUBSCRIBED AND SWORN ine this Sth day of
January 2014, affiant exhibited to n1e is Taxpayer Identification
Nu1nber (TIN) 146-473-562, issued by th ureau of Internal Revenue
(BIR) as his co1npetent eviderice of iden ity.
Doc. No. ttq:t
Page No. qi
Book No. XXv11\
Series of 2014.
EXPLANATION FOR SERVICE
BY REGISTERED MAIL
(Pursuant to Section 11, Rule 13 of the Rules of Court)
Undersigned counsel respectfully manifests that pursuant to
the directive of this Honorable Court in its Order dated 23 December
2013, the foregoing CONSOLIDATED COMMENT/OPPOSITION
WITH COUNTER-PETITION is being served on _the_
counsel of Petitioners in G.R. No. 210245 and on the lead counsel of
Petitioners in G.R. No. 210255.
Due to tilne and distance constraints, the substantial number of
parties to be served, and the temporary lack of messengers,
undersigned counsel is constrained to serve copies of! the foregoing
CONSOLIDATED COMMENT/OPPOSITION WITH COUNTER-
PETITION on the other Respondents and the parties impleaded in
the Counter-Petition by registered mail.
In order to ensure, however, that the and the
impleaded parties receive copies of the CONSLIDATED
COMMENT/OPPOSITION WITH COUNTER-P
soonest possible time, undersigned counsel reb
provide advance copies thereof personal courier
tomorrow.
5.7772 Mera/co (Co11so/idateil Co111111e11t - SC) Final
DGL P/e11di11gs 14-1
135

REPUBLIC OF TI-IE 'PHILIPPINES)
TAGUIG, METRO MANILA )S.S.
AFFIDAVIT OF SERVICE
I, JOY G. LORENZO, as Messenger Clerk of ANGARA ABELLO CONCEPCION
REGALA & CRUZ LAW OFFICES with office address at the 22nct Floor, ACCRALAW
Tower, Second Avenue comer 30th Street, Crescent Park West, Bonifacio Global City,
0399 Taguig, Metro Manila, after being duly sworn, depose and say:
That on 8 January 2014, I served a co.Py of the CONSOLIDATED
COMMENT/OPPOSITION WITH COUNTER-PETITION. in the.case entitled "Bayan
Muna Representatives NERI JAVIER COLMENARES and CARLOS ISAGANI ZARATE,
Gabriela Women's Party Representatives LUZ ILAGAN and EMMI DE JESUS, Act Teachers
Party;_List Representative ANTONIO TINIO, and Kabataan Party-List TERRY
RIDON vs. Enery Regulatory Commission and Manila Electric Company (Meralco), docketed
as G.R. No. 210245 AND NATIONAL ASSOCIATION OF ELECTRICITY CONSUMERS
FOR REFORMS, represented by Petronila L.. Ilagan, FEDERATION . OF VILLAGE
ASSOCIATIONS, represented by Siegfriedo A. Veloso, FEDERATION OF LAS PINAS
HOMEOWNERS ASSOCIATIONS represented by Bonifacio Daza, and RODRIGO C.
DOMINGO, JR. vs. Manila Electric Company EnergtJ Regulaton; Commission and 'Department
of Energy, docketed as G.R. No. 210255, Supreme Court, Manila pursuant to Sections 5, 6,
7, 11 and 13, Rule 13 of the Rules of Court as follows:
Personal Service:
RENE A.V. SAGUISAG
Counsel for Petitioners NASECORE, et al.
4045 Bigasan Sheet
Brgy. Palanan, Maka ti City
by delivering personally a copy on 8 January 2014 evidenced by the acknowledgement of
receipts appearing on the Consolidated Comment/Opposition with Counter-Petition.
8 January 2014, Taguig, Metro Manila.
SUBSCRIBED AND SWORN to before me this day 8th day of January 2014 at
Taguig, Philippines, affiant who is personally known to me, exhibiting to me the
following:
Affiant
Com etent Evidence of Identit Communit Tax Certificate
Type of ID ID Number and Number Date/Place Issued
Expiry' Date (if
a licable)
1 SSS ID No. 33-6030868-5 06119314 01-29-2013/, Manila
JOY G. LORENZO 2 HDMF
Transaction
Card ID
No. 0003-802081-
05
Doc. No. ;
Page No. _j_;
BookNo. J:
Series of 2014.
o I
)1
OFFICE COPY
REPUBLIC OF THE PHILIPPINES)
TAGUIG CITY )S.S.
AFFIDAVIT OF SERVICE
I, TELESPORO S. BACULNA, as Messenger Clerk of ANGARA ABELLO CONCEPCION
l\EGALA & CRUZ LAW OFFICES with office address at the 22nd Floor ACCRALA W Tower Second Avenue
corner 30th Street Crescent Park West Bonifacio Global City, 0399 Taguig, Metro Manila, after being duly
sworn, depose and say:
That on 8 January 2014, I served a copy of the CONSOLIDATED COMMENT/OPPOSITION WITH
in the case entitled "Bayan: Muna Representatives NERI JAVIER COLMENARES
and CARLOS ISAGANI ZARATE, Gabriela Women'si Party Representatives LUZ ILAGAN and EMMI DE
JESUS, Act Teachers Party-List Representative ANTONIO TJNIO, and Kabataan Representative
TERRY RIDON vs. Enery Regulatory Commission and Manila Electric Company (Meralco), docketed as G.R.
, No. 210245 AND NATIONAL ASSOCIATION OF ELECTRICITY CONSUMERS FOR REFORMS,
represented by Petronila L. Ilagan, FEDERATION OF VILLAGE ASSOCIATIONS, represented by Siegfriedo A.
Veloso, FEDERATION OF LAS PINAS HOMEOWNERS ASSOCIATIONS represented by Bonifacio Daza, and
RODRIGO C. DOMINGO, JR. vs. Manila Electric Company Energy Regulatory Commission and Department of
Energy, docketed as G.R. No. 210255, Supreme Court, Manila pursuant to Sections 5, 6, 7, 11 and 13, Rule
13 of the Rules of Court as follows:
Bi1 Petsonal Seroice to:
No. 45 K-7t11Street,
I
by delivering personally a copy on 8 January 2014 evidenced by the acknowledgement of receipts appearing
on the Consolidated Conunent/Opposition with Counter-Petition.
Blt Registered Mail to:
San Miguel A venue, Pasig City
DEPARTMENT OF ENERGY
Taguig 1632
PHILIPPINE ELECTRICITY MARKET CORPORATION
9th and 18th Floor, Robinsons Equitable Tower,
ADB Avenue, Ortigas Center,
Pasig City 1600
FIRST GAS POWER CORPORATION
Exchange Road car. Meralco Avenue,
Orligas Center, Pasig City
SOUTH PREMIERE POWER CORPORATION
808 Building, Meralco Avenue cor. Gen. Lim Street,
Antonio Village, Pasig City
, SAN MIGUEL ENERGY CORPORATION
0 (p 808 Building, Meralco Avenue car. Gen. Lim Street,
DI
MASINLOC POWER PARTNERS CO. LTD.
Masinloc Coal-Fired Thermal Power Plant,
I3arangay Bani, Masinloc, Zambales
or
QUEZON POWER (PHILS.) LTD. CO.
62 H. dela Costa, Mauban,
Quezon Province
THERMA LUZON, INC.
NAC Tower, 32
11
d Street,
SEM-CALACA POWER CORPORATION
QI () Barangay San Rafael,
Ol 1
Calaca, Batangas
FGPCORP.
3/F Ben.pres Building,
!) 1'1 NATIONAL GRID CORPORATION OF THE PHILIPPINES
L L Quezon A venue corner BIR Road,
Diliman, Quezon City 1100
.
2
1590 ENERGY CORPORATION
0 J ) Unit 107 First Midland Office Condominium Building,
Gamboa Street, Legaspi Village, Makati
0 I Lt AP RENEW ABLES, INC.
BAC-MAN,ENERGY DEVELOPMENT CORPORAT,ION/
0
. ( BAC-MAN GEOTHERMAL, INC.
) 38/F One Corporate Centre,
Julia Vargas corner Meralco A venue,
Orligas Center, Pasig City 1605
FIRST GEN HYRDO POWER CORPORATION
0
/ Exchange Road cor. Meralco A venue,
. Ortigas Center, Pasig City
GNPOWER MARIVELES COAL PLANT LTD. CO.
bJ
7
1905 Orient Square Building,
Don Francisco Ortigas Jr. Road,
P ANASIA ENERGY HOLDINGS, INC.
6/(2nd floor, 808 Building,
0 / ~
Meralco A venue, Pasig City 1600
POWER SECTOR ASSETS & LIABILITIES MANAGEMENT CORPORATION
7th Floor Bankmer Building,
6756 Ayala A venue, Makati City
. 7' Q SN ABOITIZ POWER - BENGUET, INC.
C) SN ABOITIZ POWER - MAGAT, INC.
STRATEGIC POWER DEVELOPMENT CORPORATION
(}1 / 2nd Floor, 808 Building,
Meralco Avenue cor. General Lim,
San Antonio Village, Pasig City 1600
TRANS-ASIA POWER GENERATION CORPORATION
11th Floor PHINMA Plaza
()"} ;?- 39 Plaza Drive, Rockwell Center,
Makati City 1200
VIV ANT STA. CLARA NORTHERN RENEW ABLES GENERATION CORPORATION
()
1').., Unit 107, lst Midland Office Condominium Bldg.,
V/ Gamboa Street, Legaspi Village,
Makati City
NELSON A. LOYOLA
i\
2
U Co-counsel for Petitioners NASECORE, et al.
U ) Suite 201 Carreon Building,
'2746 Zenaida Street,
RONNIE B. RODILLAS
__ Co-counsel for Petitioners NASECORE, et al.
~ N o . 136 Libis Gochuico Street,
Circumferential Road 3,
Caloocan City 1400
OFFICE OF THE SOLICITOR GENERAL
()'20134 Amorsolo Street,
by depositing copies thereof on 8 January 2014 in the post office of Makati in a sealed envelope plainly
addressed to them, with postage fully prepaid, as evidenced by Registry Receipt Nos. attached hereto after
the name of the addressee, and with instructions to the poshnaster to return the mail to the sender after ten
(10) days if undelivered.
8 January 2014, Taguig City.
SUBSCRIBED AND SWORN to before me this 8t
11
day of January 2014, at Taguig City
Philippines, affiant who is personally known to me, exhibiting to me the following:
Telesporo S.
Baculna
Doc. No. 3Qo;
Page No. 2];
Book No.__!_;
Series of 2014.
Communit Tax Certificate
Number Date/Place
06119584
Issued
4 March 2013 I
Manila
Com etent Evidence of Identit
Type Details
SSS ID
No. 09-1332518-6
HDMF
ANNEX "t" J
Republic of the Philippines
ENERGY.R.EGUU\TORY COMMISSION
OF THE ADOPTION
OF THE GUIDELINES FOR THE
. ADJUSTMENT OF
GENERATION RATES AND SYSTEM
LOSS RATES BY DISTRIBLJTIOl\I
UTILITIES
x - - - - .... - .. - - - - - - .. - - - - - - - - - - -x .
OH DER
EHC Ca$e No. 2004-322

Dute: __
Dy:
Pursuant. to Section 43 (f) of RepubJic Act No. 9136, otherwise known as
thl:J Electric Power Industry Reform Act of 20:01 (EPIRA), the Energy'Regulatory
Commission (the Commission for brevity) is authorized to adopt alternative forms
of internationally-accepted rate setting methodology tl1at will. ensure reasonable
price of electricity and non-discriminatory rates.
l\l present, Distribution Utilities (DUs) recover their generation costs
through t11e Generation Rate Adjusti:nent Mecl1anism (GRAM), .which is a
deferred recovery mechanism using a three (3) month test period. The GRAM
provides a Deferred Accounting Adjustment (DAA) consisting of any under/over
recoveries plus the corresponding carrying charge and recoverable over t11e
same test period.
The implementation of the GRAM had been criticized for, among others,
the foil owing reasons: a) it does not represent the. true: cost bf power during the
period for which it is being mcovered; and b) it resulted to cash flow probleri1s on
.the part of the DUs.
R13lative thereto, the Commission formulated a new methodology for the
D'Us to recover any adjustments in the generation rates and system loss rates to
be lrnown as the "GuidelinHs for the .Automatic Adjustment of Generation
and System Loss Rates by Distril;Jutioti Utijities". ,,
........... ..:r
thereto, the Commission. issued a Notice .on September 15, 2004
setting the Guidelines for public consultation on Octoqer 4, 2004; Said Notice as
!
, ... -...... well the Guidelines were posted in, the Commission's website as early as
'-- . September 14, 2004 and published in the Manila Standard on September 18,
2004.

'.
ERC Case No. 2004-322
Order/ 13 October 2004
_Page 2ofJ1

In tl1e aforesaid Notice, i.nterested parties were directed to submit iheir,
written comrnentp on the .said proposed GuidelinEis on or before September 30,
.2004.
In compliance therewith, the following parties filed their respective written
comments on various dates:
'I. Visayan Electric Company, Inc. (VECO);
2. Cotabato Light and Power company (COLIGHT);
Dagupan Electric Corporation (DECORP);
4. Zamboanga City Electric Cooperative, Inc. (ZAMCELCO);
ti. 1.ligan Light and Power, Inc. (ILPI);
G. Cagayan Electric Power and Light Company, Inc. (CEPALCO);
i'. Benguet Electric Cooperative, Inc. {BENELCO);
EL Manila Electric Company (MERALGO);
Misarnis Oriental 11 Electric Service Cooperative, Inc. {MORESCO);
10. Cabanatuan Electirc Corporation (CELCOR);
1 1, Consumer Oil & Price Watch {COPW); and
12. Napocor Industrial Consumers Inc. {NICAI),
At the schedule.d pub!ic consultation on October 4, 2004, representatives
of the various distribution utilities appeared and were given opportunities to
elaborate their submitted written comments. They were, likewise, alklwed to
manifest their additional comments .
. On the other hand
1
the consumer sector was represented by a
representative of the National Association of Electricity Consumers for Reforms,
Inc'. (Nl\SECORE) who requested that a separate consultation be ,conducted
exclusively for the residential consumers to them to fully understand the
nature and effects of the proposed guidelines.
ISSUES
The following issues were raised: a) deduction of the Prompt Payment
Discount (PPD) from recoverable generation costs; b) inclusion. of a correction
factor in the formula to address errors in power bills from suppliers; c} calculation
of the system loss charge; d) calculation of the Average Transmission Rates
(ATR); e) of the proposed guidelines on the lifeline rates; and 'f} transition
fro.m the Generation Rate Adjustment Mechanism (GRAM) to the propos::v
automatic adjustment mechanism. . " . r
FGBIC:\lvty Doi:u111ents\october\2004-3220rder.do(;
('"')
" ,''
, ..
\ }
... /
- EHC No. 2004-322
Order/ 130ctober 2004
.?age 3of11
I
DISCUSSION
The DU.s were of the .opinion that the PPD should not be deducted from
the recoverable generation costs considering that fifty percent (5o'%) of :these
were already used to reduce their rates in the distribution charges portion of their
unbundled rates. They further claimed that under the proposed Guidelines, the
consumers would practically be getting another on.e and a half (1 %) discount
while DUs no more incentive t.o pay their bills early.
The Commission maintains its position that 50% of the. PPD, net of the
discounts granted end-consumers, should be deducted from the generation
costs. However, it takes note of the fact that there could be some adjustments In
the distribution charges as a. result thereof inasmuch as PPD is actually
generation-related rather than
DUs contended that a correction should be incorporated in the
formula for computing generation costs to i:ccount for errors in power bills from
suppliers as well as for possible C:ldjustments for under/over recovery. The
Commission finds said contention meritorious. Accordingly, an adjustment factor
to be called the "Other Generation Rate. Adjustments (OGA)" is adopted and
incorporated in the aforementioned formula to address these concerns as well as
other aside from those occurring in the basic generation costs.
Incidentally, the provides the review and implementation of the OGA.
l\s to the computation of the system loss charges, DUs alleged that
system loss charges may differ from one DU to another. Some DUs have the'
same system loss charge for all customer classes while others have
system loss charge for. each customer class. As such, they asserted that
whenever applicable, the calculation of the system loss charge should be on a
per customer . class basis. This ci;incern is already addressed in the last
paragraph of Article IV, Section 1 of the Guidelines wherein it is provided that
"actual systems loss can be calculated on an individual customer class ,level if
the DU has the requisite information to support individual Loss Rates".
J\nother concern raised by the DUs was the calculation of the Average
Transmission Rate (ATR). DUs suggested that the calculation of the ATRshould
be clearly presented .. Further, the DUs moved that the transmission costs be
based on the recent National Transmis&ion Corporation (TRANSCO) billings
r.:1tller, than their respective unbundling decisions.
The Commission maintains its position that the ATR should be based on
the averag1:i charge for transmission per unbundling decision. It should be noted
that the transmission charue established in the DUs' respective unbundling
decisions were so designed to address the incorporation of the three (3.) year
I.
I
i
i
i.
Gradual removal of - subsidy in tll'Fl rates. As su.cli., t!le use of . . i
the transmission costs based on recent TRANSCO gs for purposes of . I
FGB/C:\My Documents\oclobe1\2004-3220rder.doc '
1
r
Page 4of11
the transmission costs based on recent TRANSCO billi.ngs for purposes of
the ATR would be inappropriate. Accordingly, the ATR should be
computed as the Transmission Costs the DUs' respective unbundling
decisions divided by the annualized kWh sales in accordance witl1 the same
unbu-ndling decisions.
Finally, DUs requested that there should be a transition provision. to .cover
adjustments for the first period of implementation of the new recovery
niechanism. Said concern is already in Article VI of the Guidelines
which contains the procedure for t11e last filing under the GRAM methodology to
pave the way for the implementation , of the. new automatic adjustment
mechanism under the Guidelines. Moreover, the correction factor "OGA" in the
formula for Generation Charge will include the DAA recoveries/refund pertaining
to the GRAIVI periods.
WHEREFORE
1
the foregoing premises considered, the Commission
tiereby RESOLVES TO ADOPT as it hereby ADOPTS the following guidelines:
GUIDELINES FOR THE AUTOMATIC ADJUSTMENT OF
GENERATION RATES AND SYSTEM LOSS RATES BY.
DISTRIBUTION UTILITIES
Pursuant to Section 43 (f) of Republic Act No. 9136 or the Act, Rule 7 of
its Implementing Rules and Regulations (IRR) and Section 10 of Republic Act
No. 7832, the Energy Regulatory Commission (ERG) hereby adopts and
promulgates these Guidelines to establish a process for the automatic
adjustment of Generation Rates and System Loss Rates by Distribution Utilities.
ARTICLE I
GENERAL PROVISIONS
These Guidelines shall have the fallowing objectives:
a) To ensure and maintain the quality, reliability, security and affordability
of the supply of electric power;
b) To ensure transparent and reasonable prices of electric power:service
in a regime of free and fair competition and to achieve greater
operational and economic efficiency;
c) To ensure full recovery of all' allowable ,Gene.ration .Costs and other
costs associated with tile System Loss Caps in an efficient and timely J J
manner; and _(i
1
_
q (
FG B/C :\My Documents\october\2004-3 220rder.doc
.C ..)
13 October 2004

d) To protect the public interest as it is affected by the rates and services
of Distribution Utilities.
ARTICLE II
SCOPE AND DEFINITION OF TERMS
Ser.:tion 'I. Scope - These Guidelines shall apply to all Distribu.tion Utilities.
Section 2. Definition of Terms - As used in these Guidelines, the
folhwin\J terrn.s shall have the following respective meanings:
a) "Act" unless otherwise stated, sh9ll refer to Republic Act No. 9136,
otherwise-known as the "Elect1ic i:;'ower Industry Reform Act of 2001".
b) "Average Transmission Hate {ATR)" shall mean the transmission
costs approved per unbundling divided by the annualized l<Wh sales
per unbundling.
c) "Deferred Accounting Adjustment (DAA)" shall mean the
component of the generation calculated in' accordance with the
Generation Rate Adjustment .Mechanism (GRAM), intended to recover
deferred accounting balance.
. . .
d) "Distribution Util.ity (DU)" shall refer to any electric cooperative,
private corporation, utility or existing local
government unit which has . an exclusive frar:ichise to operate a
distribution system in accordance with the Act.
H) "Energy Regulatory Commission" or "ERC" shall refer to the
regul'atory agency created by Section 38 of the Act.
f) . . "Generation Cost" shall mean costs associated with the acquisition of
purchased power. Generation costs include only those costs that are
reasonable, prudently incurred, and are eligible for recovery in
accordance with the current practice of the ERC.
g) "Generation Rate" shall mean the cost of power generated and sold
to the distribution utility by the National Power Corporation (NPC) as
well as the Independent Power Producers (IPPs), which shall be
passe? on. to the customers, as in the formu(la
prescribed in these Gu1Clel1nes. "
FG B."C :\My Doc1m1ents\october\2004-3 220rder.doc
....... ) Order/ 13 October 2004
( .1 _!:'age(iofll
h)
11
lneligible Supply Contracts" shall mean power supply agreements
entered into by the DUs. with the IPPs, which were not approved by the
then Energy Regulatory Board or by the ERC.
i) "Other Generati1:m Rate (OGA)" shall refer to
undE!r(over)-recoveries in generation costs, recoveries from violation of
contracts. and other pilferages, as well as other adjustments deemed
necessary by the ERC, subject to the of these guidelines.
Tile OGA shall not be subject tb any carryin'g charge.
j) "Prompt Payment Discount (PPD)
11
shall mean the three percent
(3%) discount that electric distribution utilities get from NPC for paying
their power bills on or before the tenth '('I0
1
h) day of the month following
tile billing period.
k) "System Loss
11
shall mean the difference (kilolJl-'.att-hour)
lcWh purchased and/or generate,d and kWh sold by.a Distribution Utility
expressed as a percentage of kWh purchased and/or generated.
I) "System Loss Cap" shall mean the level of System Loss recoverable
from customers as established by the EHC in accordance with Section
43 (f) of the Act.
rn) "System Loss Rate" shall mean the rate determined in accordance
with the formula set forth in Article IV hereof. Individual System Loss
may be calculated for different customer cla.sses if the
Distribution Litillty maintains records on the in.dividual customer class
System 'Loss.
ARTICLE Ill
'MONTI-IL Y ADJUSTMENT OF THE GENERATION RATE
Section 1. Adjustment Formula - On the tenth (10) clay 9f eacJl
calendar 'month, Distribution Utilities shall calculate new Generation Rates based
on the following formula:
(3F\ = AGC + OGA
Where:
GR= Generation Rate to be charged per kWh
ACK: = Adjusted Generation Cost, automatically computed without need
of prior ERC verification ancl confirmation, as fallows:
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[(GC1 + GC11 + ..... + GCn) - (PPD * 50%)]
- ------: ... _____ .,. __ ..,_ ... ___ ... __ .,, ____ .. -................ __________ .,. ____ _
TP
GC i 10 n = Th El Generation Cost in pesos from source of power 1
through source of power n for the previous month,
excluding power sourced from self-generating facilities
PPD = Prompt Payment Discounts availed by the Distribution
TP
Utility, ne't of the Prompt Payment Discounts passed
1
on to
the end customers relative to the previous mor:ith's
generation cost
=Total Purchases in kWh for lhe previous mon1h
.
OGA == Other Generation Rate Adjustments, refer to adjustments
deemed necessary by the Commission . after . prior
verification and confirmation, which shall include, but
shall not be limited to, under(over)-recoveries in
generation costs and recoveries from violation of
contracts and other pilferages. The OGA shall not be
subject to any carrying charge.
Jn the case of ineligible supply contracts, generation costs from such
contracts shall not be included in the calculation of recoverable generation :costs.
In 1:1.ie event, however, that a DU inadvertently or. willfully recovers the same, the.
ERC st1all automatically order the refund thereof through the "OGA" without
to the imposition of appropriste penalties.
Section 2. Billing of New Generation Rate - The Distribution Utilities
shall bill their customers the Generation Rates ca.lculated in with the
preceding Section on the tenth {10) d.ay of month.
ARTICLl:: IV
MONTHLY ADJUSTMENT OFTME SYSTEM RATE
Sei:;tion 1. Adjustment Formula qn tl1e tenth (10) day of each
calendar month, Distribution Utilities shall calCulate new System Loss .
based on the following formula:
SLR= U) + (ATR * U)
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Page8ofl1

liVhere:
SLR = System Loss Rate
GR= GenerC!tion calculated in accordance with Article Ill
ATR =Average Transmission Rate. based on the most recent
unbundling decision in Peso per kWh, computed as
Transmission Costs per unbundling divided by the
Annualized Sales in kWh per unbundling
U = Gross Up Factor= (% System Loss I [1- %System Loss]).
The % System Loss is based on the actual System Loss or the System
Loss cap whichever is lower. plus actual company use or the company use cap of
1 % whichever is lower. The actual System Loss and company use are based on
the previous month figures to be submitted. by the DU. Actual System Loss can.
be calculated on an individual customer class i.f the Distribution Utility
the requisite informatio_n to support individual System Loss Rates .
. Section 2. Billing of System Loss Rate - The Distribution Utilities: shall
bill their customers on the tenth (10) day .of each month the System Loss Rates
calculated in accordance with the immediately preceding Section.
ARTICLIE V
VERIFICATION PROCESS
1. Monthly Reporting Requirements - On or before the
twentieth (20th) day of each month, the Distribution Utilities shall provide the
ERG with all calculations related to Articles Ill and IV along with supporting
_ documentations, which shall include, but not li[Tiited to, the following:
Invoices from power suppliers;
Sample bills to end-users;
Official receipts of payment of power supplier invoices
ERG Forms M-00.1 & M002; and
Other documents d1:iemed relevant by the ERG.
Section 2. Post Verification - At least every six (6) months, the ERC
shall verify the recovery of Generation Costs by comparing the actual allowable
costs incurred for the period with the actual revenues for the same period
gi:merated by the Generation Rates and the portion of the Systems Loss Rates
atlributable to Generation Costs.
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Should the to verify the Generation Rate (including the OGA) and
System Loss Rate within six (6) months from the submission of calculation and
suppo1iing documentations in accordance with tl1e immedic:Jtely preceding
Section, the rates shall be deemed final and confirmed. .
Upon completion of the semi-annual verification process, the ERG shall
issue an Order establishing the to be included in the OG.A resulting
from said semi-annual verification. These adjustments sh.all be implemented in
tile succeeding six (_6) month period to reflect any over or under recovery.
3. Prior Verification of Other Generation Rate Adjustments
(OGA). OGA other than those included in Article V, Section 2 shall be verified
and conrirmed by the ERC withii1 forty five (45) days from date of its filing and
only thereafter shall they be recoverable .
. ARTICLE VI
FINAL FILING UNDER THE GENERATION RATE ADJUStMENT
MECHANISM
1. Effectivity of the Generation Rate Adjustment Mechanism
(Gl;:.AM) - Upon the effectivity of these Guidelines, the shall no longer be
applicable to. Distribution Utilities.
Section 2. Final filing under GRAM - Distribution Utilities that are. using
the GRAM to recover Generation Costs shall file their final GRAM applications
within sixty (60) days from the effectivity nf these Guidelines. The final GRAfy1
filing shall include the period from their last approved GRAM filing to the
effectivity of these Guidelines for purposes of calculating the final Deferred
Accounling Adjustment (DAA).
ARTICLE VII
Section 1. Fines and Penalties. Violation of an.i provision of these
Guicleliries shall be subject to the imposition of fines 'and penalties in accordance
. with the Guidelines to Govern the Imposition of Administrative Sanctions in the
Form of Fines and Penalties Pursuant to Section 46 of Republic Act No. 9136
promulgated by the ERG on May '17, 2002.
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1mc Case No. 2004-322
_Page 10 of 11
ARTICLE. VIII
FINAL PROVISIONS
Section 1. Exception Clause. Where good cause appears, the, ERC may.
allow an exception from any provisions of these Guidelines, if such exception is
found to be in the public interest and is not contrary to law or any other related
rules and regulations:
Section 2. Separability Clause If for any reason, any part or section of
these Guidelines is declared unconstitutional or invalid, the . other parts or
sections hereof which are not affected U:iereby shall continue to be in full force
and effect.
Section 3. Effectivity These Guidelines shall take effect on the fifteenth
('! 5
111
) clay following its publication In twci (2) newspapers of general circulation ..
S.6 ORDERED.
Pasig City, October '13, 2004.
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(On Official Travel)
OLIVER B. BUTAUD
Commissioner .

RAUF A. TAN
Commissioner
,l _.,../
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JESU N. ALCORDO
Commissioner
ORlGINAL SIGNED
ALEJANDRO Z. BARIN
Commissioner
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Page 11 of 11
Copy furni.s hed:
1.
2.
3.
3.
4.
5.
6.
7.
8.
9.
Philippine Electric Plant Owners Association (PEPOA)
8th Floor, Strata 100 Building
m ~ r a l d Avenue, Ortigas Center, Pasig City
PHILIPPINE RURAL ELECTRIC COOPERATIVES, ASSOC. (PHILRECA)
4/F Gasman Bldg., Quezon Avenue
Quezon City
Office of the Solicitor General
134 Amorsolo Street, Legaspi VillagEi'
City of Makali - 1229
Senate Committee on Energy
GSIS Building, Roxas Boulevard
Pasay City - 1300
House Committee on Energy
Balasan Hills, Quezon City - 1126
Department on Energy (DOE)
PNOC Complex, Merritt Road
Fort Bonifacio, Taguig, M.M.
MS. HELEN B. ARIAS
Consumer Welfare and Promotion OF.fies
Department of Energy (DOE)
Energy Center, Merrit Road,
Fort Bonifacio,'Taguig City
Regulatory Operations Service (ROS) - ERC
Consumer Affairs Service (CAS)- ERC
ALL DISTRIBUTION UTILITIES (OUs)
fGB/C:IMy Docurnents\october\2.004-3220rder.doc
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CONGRESS10F THE PHILIPPINES
!3ENATE
Pasay City
ANNEX "2"
.JOINT CONGRESSIONAL POWER COMIVllSSION
Thursday, June 7, 2007
10:00 A.M.
. Date
Time
Venue Sen. C.M. Recto Rm., Senate of the Philippines
Roxas Boulevard Pasay qity
Present:
Senate Panel
HON. JOKER P. ARROYO
HON. SERGIO
HON. JUAN PONCE ENRILE
House Panel
HON. ALIPIO CIRILO V. BADELLES
HON. CONSTANTINO G. JARAULA
HON. ARNULFO P. FUENTEBELLA
HON. EDGAR L. VALDEZ
HON. REP. MATIAS DEFENSOR
HON. RODOLFO G. PLAZA
GUESTS/RESOURCE PERSONS:
- Member
- Member
- Chairman
- Member
- Member
- Member:
- Member
- Member
Mr. RAPHAEL PERPETUO M. LOTILLA, Secretary,
Department of Energy, (DOE)
Mr. RODOLFO B. ALBANO, JR., Chairman, Energy
Regulatory Commission (ERC). .
Mr. JOSE C. IBAZETA, President, Power Sector Assets
and Liabilities Management Corporation (PSALM)
Mr. CYRIL C. DEL CALLAR, President, National Power
Corporation (NAPOCOR)
Mr. ARTHUR AGUILA.R, President, National Transmission
Corporation (TRANSCO)
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Page 2 (Attendance, POWERCOM, 7 June 2007)
Mr. JESUS P. FRANCISCO, President, Manila Electric
Company (MERALCO)
Mr. RANULFO M. OCAMPO, President, Private Electric
Power Operators Association (PEPOA)
Mr. ERNESTO B. PANTANGCO, President, Philippine .
Independent Power Products Association (PIPPA)
Mr. WENDELL V. BALLESTEROS, President, Pl1ilippine
Rural Electric Cooperatives Association (PHILRECA)
Mr. RUBEN AUSTRIA, Philippine Chamber of Commerce
And Industries (PCCI)
Mr. PETE tLAGAl\J, National Association of Electricity
Consumers for Reforms (NASEC'ORE)'
(For other guests, please see attached attendance list)
Senator's Staff:
Atty: Fatima Panontongan( Office of Sen. Santiag.o
Ms. Malou Rigets, Office of Sen. Enrile
Mr. Russen Lopez, Office Sen. Osmena
Mr. Oscar Ala, Office of Sen. Osmena
r_)owercom Secretariat:
Ms. Evelyn S. Rojo, Executive Director
Ms. Imelda C. Badelles, SLSO r
JVls. Judith M. Manjares, LSO Ill
lVlr. Miguelita Jose H. Badelles, LSO Ill
Ms. Nelly N. Maglasan9, LSD Ill
Ms. Ruelra T. Fullado, LSO Ill
Mr. Elmer Barinan; LSQ Ill
Ms_ Tyra .,lane S. Castor, LSA II
Secretariat:
Senate Panel -
Ms. Maria Lourdes C. Panotes, Committee Secretary
Ms. Carolina F. Driz
1
Committee Stenographer
Ms. Aida R Guinhawa, Committee Stenographer
Ms. Anna Leah C. Catirnbang, Committee Stenographer
Ms. Ma. Rosalinda J. Catadman, Committee Stenographer
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Page 3 (Attendance, POWERCOM, 7 June 2007)
Ms. Paulette L. Manuel, Committee Stenographer
Ms. Sonia N. Tupaz, Committee Stenographer
Ms. Ana Armena, Legislative Page
Mr. Raul Balansag, Legislative Page
Mr. Alex Altomia, Audio Technician
Mr. Peter Turingan, SEPO
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JOINT CONGRESSIONAL POWER COMMISSION
Aliccatimbang 111-2 JL1ne 7, 2007 12:07 p.m.
1
MR. PANTANGCO. . .. is a pass-through as far as the IPP is concerned.
We do not have any control over our cost of fuel.
Secondly, Mr. Chair, if I may be allowed? We think that if tile provision for
an automatic pass-through of the generation cost and the foreign currency is not
allowed, then we seriously tt1ink this will affect the privatization of the Napocor
assets that's currently being undertal<en by PSALM.
Thanl< you, Mr. Chair.
THE ACTING CHJ\IRMAN (SEN. ARROYO). Mr. Chairman, I move for
. . .
recess so that the members of the panel can discuss in an executive session.
And please don't leave. Please don't go first.
SEN. OSMENA. Mr. Chairman, may I be recognized, please?
THE ACTING CHAIRMAN (SEN. ARROYO}. 011, yes, Senator Osmena.
SEN. OS MENA. I would like to l<now. Before, you know, the EPIRA ...
Yeah. Will Mr. Callar please stop laughing? We might bring up your $80
cost of coal which is supplied to all the IPPs and why that was done without
bidding because that's going to be affecting-- that's one of the reasons why
we're having cost increases.
Anyway, before all this, before we pass the EPIRA, there was. already a
structun:; in place for automatic cost recovery. So thaf was standard. How long
was t11at in existence even prior to the EPI RA? Five years, 10 years, 15 years,
20 years? How long was that in existence?
MS. OCAMPO. Sir, actually long, long before because ...
SEN. OSMENA. What is long, long? A ~ ,
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JOINT CONGRESSIONAL POWERCOMMISSION
Aliccatimbang 111-2 June r, 200"7 . 12:07 p.m.
2
MS. OCAMPO. When I was there in the Energy Regulatory Board, it was
already being implemented.
SEN. OSMENA. What year was tllat?
MS. OCAMPO. 1998, sir.
SEN. OSMENA. 1998. Before that, in 1988, was there an automatic cost
adjustment in place?
MS. OCAMPO. Yes, sir.
SEN. OSMENA. In 1978, was there an automatic cost adjustment in
place?
SEN. OSMENA. So this is not new.
MS. OCAMPO. Not new.
SEN. OSMENA. Now, I think what happened, after the EPl.RA, when the
Department of Energy ancl the ERC, ERB were drawing up the hTiplernenting
rules and regulations, we decided to make it strict because wala sa EPIRA ito.
And I think it was our partner here, Congressman Jaraula, who caused this. But
this is not in the EPIRA. I think the EPIRA applies-- refers to automatic cost--
recovery of reason8ble cost. All right.
unfortunately, with tl1is requirement, every time that there is an
application, say, just from the 116 cooperatives, ERC will now have to hold 116
hearings all over the country which is an administrative nightmare. Essentially,
any cost increase, correct me if l'.m wrong, does not inure to the profit of the
dislribulion utility. Wala sila clito, it's pure pass-through. But there would now be

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.JOINT CONGRESSIONAL POWER COMMISSION
Aliccatimbang 111-2 June 7, 2007 12:07 p.m.
3
carrying cost, would t!1ere not, if you were to approve a ~ e r a lag of six months.
Woulcl the distribution utilities be allowed to charge interest?
IVIS. OCAMPO. Sir, based on ERC's practice now, it's part.
SEN. OSMENA. It's what?
MS. OCAMPO. It's part. The_y charge.
, SEN. OS MENA. They charge.
SEN. OSIVIENA. How much?
Mr. Francisco, how much would the ...
MH. FRANCISCO. It's T-bill plus three, Honorable Senator.
SEN. OSMENA. T-bill plus three.
M l ~ FRANCISCO. Yes, percentage.
SEN. OS MENA. T-bill. One year T-bill.
IVIR. FRANCISCO. Ninety days .
SEN. OSMENA. Ninety-day T-bill. What would that be today? Pai-don?
MH. FRANCISCO. About 6 percent.
SEN. OSMENA. Six percent. So you'll be charging 9 percent. That's an
approved formula? T-bill plus 3 percent. So, therefore, when and if it is
approved. the consumer now has to pay 9 percent.
IVJR FRANCISCO. It's a total of 6 percent, Senator. The T-bill rate today
plus three is now 6 percent. /JJ.1"\
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. J ANNEX "3"
JOINT CONGRESSIONAL POWER COJV[MISSION (POWERCOM)
i::n.r. catadman IV-2 June 7, 2007 12:21 a.m. 1
(The hearing was resumed at 12:21 P.M.}
THE CHAIRMAN {REP. BADELLES). The hearing is now
We will now proceed in coming up will1 a decision as far as the
proposed Initiated by DOE and ERC, and consensus is to
limit the amendment Lo the last paragraph. Okay? Meaning, the version that
was just presented to us wherein which the.re were additional enumerations of
cost recovery mechanism will be the one th:al will be concurred and approved
by this Commission. In the meantime, we now ask that it be reflected in the
chart for finalization.
MR. LOTILLA. Than!< you, Mr. Chairman. This _is as it appears in the
boar6 that this is now the amendment. The Section 4 (e) shall not apply to
automatic rate adjustments that generation rate adjustment
mechanism ...
THE CHAlRMl\N (SEN. ARROYO}. Are we taking this down? All
right, go ahead.
MR. LOTILLA. Than!< you, Mr. Chairman. lncrep1ental currency
exchange recovery adjusbnent, rate adjustment mechanism,
transrnlssion... mechanism, system loss rate adjt,1slrf1ent mechanisms . lifeline
rate recovery mechanism, cross subsidy mechanism, local franchise. tax
recovery rnechanisrn, b\..1siness tax mechanism, automatic
,,
generation
rate adjustment mechanism, VAT recovery mechanism,
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JOINT CONGRESSIONAL POWER COMMISSION (POWERCOM)
m.r: catadman N-2 June 7, 2007 12:21 a.JI'J..
2
incremental generation cross <Jdjustment mechanism, and recovery of
deferred accounting adjustment for fuel co!;.l and power pro<.1ucers by NPC
ancl NPC-SPUG, provided that such acjjustments shall be. subject to
subsequent verification by the ERG to avoid over or underrecovery of
charges.
SEN. ENRJLF.i. Why don't you just say, "This section shall not apply
to ... "--" without the adjustment rate .. ,no, automatic rate ad_justment, just
rnrnove that up to the word Just the things.
MR. LOTl(LA. Ol<ay. That will be acc:eptable to us, Mr. Chairman.
SEN. ENRlLE. So tt1at ... Anyway, If you invent another one, you come
bacl< to us and we will include it. (laughter)
THE {REP. BADELLES). Do J formal motion to
adopt t11is?
Congressman Valdez.
REP. VALDEZ ... Mr. Chairman, I mov<' to the adoption of the proposed
amendment to t11e !RR particl1larly .Section 4i(e), Your Hbnorr as worded and
appearing on the screen.
SEN. ENRILE. Only the amendment 1hat is now- not the amendments
in tlie matrix, bu.t only that one.
MR. LOTILLA. That's dght.
SEN. ENHILE. On the board.
MR. LOTILLA. )'es, as the ultimate, as the last paragraph.
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JOINT CONGRESSIONAL POVlfER .COMMISSION {YOW1ZRC:OM)
m.r. catadman IV--2 June 7, 2007 a.;n. 3
SEN. ENRILE. Yeah, just ... shaft not apply to !CERA, GRAM, et
cetera. Tapos.
MR. LOTILLA. Thank you very much.
THE CHAIRMAN (REP. EIADELLES). Ol<ay, can we now proceed on
the next proposal, which is Rule 15, Section Vil. Can we as!< DOE to
expound on it?
MH. LOTILLA. Mr. Chairman, this is just a simple amendment wnlcll is
to extend for a five-year period from June 30, ?007 the non-coverage of self-
generation facilities from the universal charge.
THE CHAIRMAN {SEN. ARROYO). During the meeting, the executive
cornrniltee the agreement was to fix it at three years so as not to tie
the hands of th1;1 incoming Cornrnisslon.
IVJR. LOJILLA. Thank you very much. We are willing .to accept that,
Mr. Chairman. .
THE CHAIRMAN (REP. 6AOELLES). So, again, may I hear a motion
to adopt the proposed amendment as Initiated by tl1e DOE as far as Rule 18,
Section 7, extending it for another years beginning June 2007.
SEN. ENRILE. l move, Mr. Chairman.
...
THE CHAIRMAN (REP. BADElLES). Okay: There is a motion and
duly seconded. There being no objection, the.same is hereby approved.
Last agenda, Hern in ll1e agenda is on the bmwnouts that occurred last
. . .
April and May in B[c.01. This was requested to by Vice Chair Arroyo.
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ANNEX "4''
3Republit of tbe
JOINT CONGRESE]JONAL POV\1'rER.COMMISS10N
(POWER COM)
Sec. Raphael P. M. Lotilla ,
Department of Energy
Energy Center, Merritt Road,
Fort Boni.:fo.cio, Taguig City, M.M.
Dear Sec, Lotilla,
20 June 2007

In. response to your letter dated 8 June 20(}7, received by this Commission
on 13 June 2007, we v.rish to affi.t'Ill that . in the hearing of the Joint
Congressional Power Commission (JCPC) held last 7 June 2007, Sen. C.M. Recto
Room, Senate of the Philippines, the proposed amendment$ initiated
by your Depru.imen\ was cluly ;arid approved. by the Commission by
'mty of <L motion. The amendments a};'!&S follow!>; .
;:.. . .: ;.; . :. .:
EPIRA IRR, Rllle :1, Si:ction 4 (e), last paragraph reads, "This Section 4(e)
shall not apply to Gent:rnti(w IUtte i}.pju8trnent Med1anism (GRAM), Incremental
Clmency Exchange Recovery Adjustment (!CERA), Transmission Adjustment
Meehan.ism, Transmission True-Up Mechanism,. System . Loss Rate -Adjustment
Ivlecban.ism, Lifeline Rate Recovery 1\1echanism, Cross-Subsidy 'Mechanism, Local
Franchise Tax Recovery : Busines.s Tax Recovery Mechanism,
Automatic Generation Rate Adjustment Mecharrlsm, VAT Recovery Meehanism.
Incremental Generation Cost Adjustment,' MechaniS114 and Recovery of Deferred
Accounting Adjustment for Fuel Cost and Poweir Producers by NPC arid NPC-
SPUG,, Provided that, adjustmer
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by the ERC to avoid charges."
;
EPfRA IRR, Rule.18, Section 7 reads, "All Se.lf"Geueration Facilities
new, existing or under ;;onstruction shall . not be covered; by the
imposition of UniversB.l Ghru:ge :l:o.r u. period of' . (3) years from .June 30,
2007: Provided that, sucl. Facili1lies shall register with BR.C and
PSALM .. "
During the said hea1'ing, the following JCPC members were present:
Senator Joker .P. Arroyo.
:Senator Juan P.qni;:e. Eirrile
Senator Sergio R. 111
2"' Floor Vld<.:1 SuHdlng, 1670 Queion 1Wem1;i, Clly, PhlUpplnes
Telefax No. (632) 920&362 E,mall Address: JC!Jt:,JJhlllplnes@yahoo.com
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k.louse of Representatives Panel
Rep. Alipio Cirilo V. Badelles, Officer
Rep. Constantino G. Jarm.tlB.i
Rep. Arnulfo P. Fuentebella
Rep. Vincent J. Garcia
Rep. Matias V. Defonsor
Rep. Rodolfo G, Plaza
Rep. Edgar L. Valdez
Attache.d are pertin.cnt portions of tlm transcript of stenographic notes for
your reference.
Very truly yours,

ep. _ ipio .. Badelles
I' Co-Chairperson
Ml:l:tAll.CO
OR llGl\S l\VEMUE, PASIG CITY
0300 PHILIPPINES
August08,2013
IVIR. JULICER A. ALVIS
08&M General Manager
FOP Corp.
3rd Floor, Benpres Bldg.
Exchange road cor:i1er Meralco Avenue
Pasig City, Philippines
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ANNEX "5" . __ _]
SLtbject: Rt!-scheduled 30-day November 20.13 :NatutalGas Supply .Cuttaiimeht
. t . .
Dear lvfr. Alvis:
We refer to your letter dated August 6, 2013. with the above subject for the Santa Rita
CCPS. Please find the attached revised hourly dispatch for the said power plant.
Please note that these hourly dispatch levels are only indicative and .are subject to
change depending on actual demand co11dition immediately preceding the said period.
Thank you and best regards.

<.. / -\
Rola1 o M. Cagampan
Senior AVP and Head,
Energy Management

/CCM/
TELN0.(632) 631-2222 (632) Hi220
'fol"?!'

'MEwuto
1mn: Uwu1rn' u11d1u/w1

;,i-Nov
03:': 11,000 ',:'
04'' 1,000
05 ' 110!>0
06 ! . 1,000
07 1.000
OB 1.boo
09 1,0UO
10 1,000
11 !,000
12 1;000
13
14
15
16
17
18
19
08
09<>
10 '
\1
12
13
'" 15
16
17
10
19
20
21
22
23, ' 1,000 .
24'
?,!AL ' 24 000

i
'
.

First Gas
liOWER
06 .'\ugust 2013
Mr. Rqialldo M. Cagarnpan
Senioi' AVP, H\"ad ,... Energy Management

No: (02) 63:;\8437
OL11' reference: on'1 rnco:68,2_/JflV.
Subject: Santa 1000 MW CCP,S
',/_
, ..
,,1
..:,
..
Ro-schedule.d 30,rlay Nqverriber 2013 Gas ,,Supply
Curtallrnent
Dear Mr.Gagamp;in,
We rect?lved last 02 Auoust 2013. the.formal regarding'
the}'fovernber 2013 SPEX outage. Per SPEXriotific;.ations, U1;: gauupply will not
be av:arlable comrnencinQ OO,Q1H of 09 November 2013 fqr;11;perjo<j! of thirty '(30)
days: supply will at 0901 09 :zo 1 y'. : (' . . ' , ;. ,
In lhiii. regard. FGPC. would like \6 rElqlrest the' '.
hourly dispatch level for the Saniil Rita Plantconsideiing 'lli<1tboth San Lorenzo
Units 50 and. 60' will pqt ,bi;i availat.>Je quri[Jg the 3Q day5'gas supply'curlaUm;nt
perioi;I.... : '' : .. :
The requested 11ourly dispatchlevel 'uquid, Fuel ope wi11 FGPClu ...
determine, the requi(ed.quanlity of Liquid Fuel and accordingly pla(\for ils limely ..
pracure111enl and cjeliver{ . ': , .. .: " .:, , ,
' .. ,! . .. ' ,:.1. . ' !
Yours Sincerely,
copy: JH Cainglel CJD Fleming
1
ANNEX

,, '--
-
0RTIGAS /\VENUE, PASIGCirY
0300 PHILIPPINES
LJuly 12, 2013
Ms. Ellen D. Go
-General Manager
South Premiere Power Corp.
808 Building Meralco Avenue corner Gen. Lirn Street
San Antonio Village, Pasig City, Philippines
Subject: ;Malampaya Shutdown
Dear Ms. Go:
1
ANNEX "6"
We reply to your letter of July 4, 2013 on the subject matter requesting for
confirmation of our intention to run Uijan. Block 1 using during
Malarn.paya's shutdovin in November 20.J.3.
Our latest simulations show that the capacity from Hijan will still be needed by
Meralco during the said period, and thus, we hereby tpi:l-firtn our to
run Block 1 of Ilijan on bio-diesel during the un:..availability of gas from
Malampaya in November 2013.
For your planning purposes, please find attached with this le.tter the hourly load
profile of our intended dispatch for Ilijan Block 1 fat the period Novembet 1 to
30, 2013.
Thank you.
Very truly yours,

JR6li 1do ivl. Cagampan
Seni r AVP and Head,
Energy Management
.....
TEL. No. (632) 631-2222 (632) 16220

<lJ.,,
MEIWCO
mur liwun11g ull,4.bidwr
TIME 1-Nov ZNllV
01 '280 280 280
02 ! 280 280 280
03 280 200 200
04 280 280 280
05 280 2BO 280
00 280 280 280
07' 200 280 280
08 280 280 280
09 ' 200 280
10 200 280
11' 2"0 280
12 2"0 280
13 260 280
14 260 280
ts: 200 280
18 280
' ,17 280
18. 280
:.19 280
20i. 280
,':
2BO
,28d

280
,280
T01AL, 6120: .

. 1a. ov. 1:.
: . .o1:;: i;i '280,,. i :,
:..-.021:; '280
'031 200:
04" 280
05, 280
OB : 2BO
01::: 280
08 280
09 280
10 420
11 420
"
420
1J 420
1ol 420 ,280
15 420 '280
1B ' 420 280
17 420 280
420 2BO
<120 280
420 : 200
280
280
!, 280
ESP-SPPC_Mala111pa1a_Shu\dovm-04-20131125-r!!vl
A\/ENLIU, PASIC, CW\'
1l300 PHILIPPINES
Oct:ober 16, 2013
MS. ELENITA D. GO /
General Mm1age1
/
- Sci1.:1.l:h Premiere Powh (SPPC)
808 Building, Avenue car. Genertil Li:Jn Street
Pasig City, tvietro Manila
I "7_"______.
Subject: ,lleqttest for Re-scheduHng of the Maintenance Outage of Block 2
Dear Ms. Go:
We have ma.de a forecast o.f WESM prices fo1' the su.pply months of November and
l)ecernbcr 2013
1
in which SI'EX-Mala.n1paya outa.ge will tm.ke place, and we for\;!see-
thnt Meralco'g generntlon charge will greatly increase during such perlod. /v.1 one of our:
ren:i.ediciJ lneasurns to lessen the burden to electricity end-users, '"'e would lil<:e t:o
request you to niake represenhltions wH.h KEPCO Philippines to ask then.1. to re-
schedule the mainte,na.nce outage of Ilij&n 'Bfoc;:k 2 to olhl'::!r date tl1at will not
coincide/overlap with the Malampayct outage. TJ we can tu.n Block 2, its 420 MW
1;ontl'ibution to the Luzon Grid will temper the increase in VVESM pdces, and
uUirn.<:1tely, reduce the cost of -electricity for all consumers ln Luzon.
We wHl g1:eatly e:"lppreciate your c:in thi.s matter. 'J.'li.El.n:k you. vety much.
Vexy tn1ly yow:s,
:5:v-"
.Rolan } Iv!. Cagatnpa:n
Sen.tor VP ax1d Head
Energy
i:c: K \T, IJuencami.no
J. R. V. Valles
23 Octciber 2013
sourH
POWER CORP.
MR. ROLANDO 1\11,
8e11ior Assistant Vice President and
Head, Energy Management Office
Manila Electric Comparly
Ortigas Paslg City
Dear llllr. Cagampan:
L. "8"
We refer to your letter dated October 1 a, 2013 regarding Meralco's request for the
scheduling of the Maintenance Outage of llijan Block 2.
Upon representation wilh t<:epco-llijan Corporation, we were fnfonnecl that they can no
longer re-schedule the maintenance outage, since they have already arranged me
sct1edule of tl1elr Specfaflsts, Technical Advisors and other manpower and nmte1ial
requlrnments. Any "further postponement will also put tl1elr main equipment at risk
under tl1e Gas Turbine EOM maintenance guidelines.
Thank yciu and we hope for your kind u11derstancli11g 011 this matter.
Very truly yours,
1
}.LLJ((
ND. GO
Gen ral Manager
9)/
..... _ )< ..
2/g 8 08 .ll Ull .DINO, M/JlWJCO A V!iNU!S COliNl\rl V(:N, .llM S1'RElff, SA.v ANl'ON/O ViU.ACJJJ, p I.SIG C:JTI'
1'm./iP/fONI! NUMfJli.i1; (632} 667 5011; fiiLY NVt111JP.R.' (632) 667 .5 /88
.
I
ORT I GAS AVENUE, PASIG CITY
0300 PHILIPPINES
October 21, 2013
IVIr. Andreo 0. Eslrellado
A VP, Market and Commercial.Operations
Sem-Calaca Power Corporation
3rct Flr., East Wing, DMCI Plaza Bldg.
ns1 Chino Roces Avenue, Maka ti City
Subject: Request for of lhe for Calada 2,
Dear Mr. Esbellaclo:
ANNEX"g" J
.. ..
This is with regard to the scheduled n1aintenance for Calaca 2 whiclrwilf start. this con:Ur:tgDecember 1,
2013 until March 1, 2014. .
- As you know, the SPEX-M_alampaya Gas .facilit.ies :its
starting November 9, 2013 December 2013> .l;'heJitst ...
schedule overlaps withJhe 'htst eight(s)'days .Qf .that.:
is from December 1, 2013do December 8, We forecast prjc;es<d\1r41i9
Malam pay a outage to greatly ihcrease and wottldiref!ult in sig!Wicanbimp,')ct to.
.gE;Jp,er1:1.tion .
cost. Hence, as part of its mandate to provide pow.er.at.thi:!leasii.cost:,,:m@ner,Met'afoo'adopts te1:11edial
measures to lessen the burden.ofhigh powen:ates fo the elecfr!cify .
ln view thereof, we would reqestjfor.JHe ci1ay,ing bf
Calaca 2 from December 1, 2013.i(as.currently scheduled) to De.c1Uher
1
9, 20l3 so
2 will not overlap witlt the laf!t eight (8) days of
discussed this re-scheduling issue withNGCP last September 26, ah4i.U1ey
1
$ that
delaying the scheduled outage. ofCalaca 2to 9 Will,be .t1wLuzoh,Qrid ih;,ter#w.of
increased capacity margin. If Calaca 2 will. runzj.i,tlg_:hP,:)b ;30Q:l\!f\Wi'
conLTibution to the Luzon Grid the .expected tif:pdqes dn ,th,e WESM
the affected period, and.ult:ih1ately, reducl:'. tl.m'cost .. .
We will greatly appredale yout favorable responseto tl1is Tharik;ou very
Very truly yours,

... ,
M. Cagampan
Senior A VP and Head
Energy 1:vlanagement
cc: R. V. Buencamino
J. R. V. Valles
rn.No.(632) 631-2222 [632) 16220,.

EM-CAIACA PWER CORPORATION
:LS November 2013
HOLANDO NI. CAGAMPAN
Senior AVP and Energy .Management
Ml\NILA ELECTRIC COMPANY
Meralco Center, Ortigas Avenue
Pasig City
'. ".""
, .... ::
,.
Telefax: (632) 92,13541.lbcal 5602.
Subject
Request for Re"scheduling of the ,Cal.aca 2
[)ear Mr. Cagampan:
This is with reference to your letter-dated the aboveinehtloned .
subject. .
I ., '
Please be informed that SCPC has your r.equest to defer the .start Qf its
December 01, 2013 orlginal'rnaintenan<;:e ,scbequle to: December, 11
1
'2013; proyided, however,
that M ERALCO agree to,.,add the :l1nutJlized,:butage: allP,W,CJri,cef,tjfi:S,GRC (not exceeding .Si38f\Jll
,' . ", ,
1
' .:
1
1r'. . . , ' ; :. 'l ' : ., . ': , :,11 '.: :: ::. :: .,:,'. . '!.,:. .' ., .:'. ': .: ..
1
:, ' , ; . .' . . ," ." : . . ' . , . : . '.
load equivalent .. the 60 days
Full Load Outage ... (pecernber 26
1
.. 20l3ito'.Decernber'2s,
2014). . i' ' ' ,, ' i
Shoulchhis be acceptable to prqvided
. '. .' ,_,' ,,. . . . : . '
Very truly yours,
/// .vv
ESTRELLAOQ
AVP, Market and Comn1ercial Operations
Sern-Cala ca Power Corporation
Conforme:
ROLANDO IVI. CAGAMPAN
Senior AVP and Head Energy
Manila Electric Company
,., "' ,; h
Cc: V.A. ConsUhji - SCPC
J.R. Sadullo - SCPC
R.V. Buencamino -
.. ,., .. , .. . .. --: ... .
J.R.V,Valles ,-, JYI gRALC.Q
Bll!mlllllllBlllBmllll
San Rafael, Calaca, Batangas 4212
01111GAS /l.vwu1;, PASIG Crrv
0300 PlllUPPINES
19 December 2013
ZENAIDA G. CRUZ-DUCUT
Chairperson
ENEHGY REGULATORY COMMISSION
ANNEX "11"
- - ........... -...,. ____ ........... - ., ... ,, .. ----- ----- ........
r.:;1 ;'.:c: t:. ii. i ,-: r1
f .... t., .,_r1 ..... .: . .. ........
I
l
l
'
, , ... , ... I
l
,,.1/.\:r:.,;9: .. - ............... ,., ..... - ... --.--- t
"1\.'1,. !
bi' ...... -......... 1 ............ -..... ,. .. i
I
(
'" ,, ... C\I t.l.4' q j
.Jl i." ,,
........ _ .. ,,.;.,._ ....... .... --.;, ........ __, ... -... ...---------- '
SUBJECT: Updated Estimate of the Generation Charge for January 2014
Dear Chairperson Ducut:
We thank the Commission for its letter dated December 9, 2013 which provided guidance for a three-step
staggered implementation of the P3.44 per kwh increase in the generation charge this December 2013
resultingfrorn the P9.11 per kwh cost ofgeneration for November 2013. Following the guidance from the
Commission, we started the December billing of our customers in the evening of December 9. The bills
reflect a generation charge of P7.6673 per kwh, an increase of P2.00 per kwh from the November 2013
level of PS.6673 per kwh.
The Malarnpaya shutdown from l\Jovember 11 to December 10; 2013 affects two supply months,
November and December 2013, and consequently', the generation charge for the billing months of
December 2013 and January 2014. Due to the use. of liquid fuels by the natural gas plants and the high
prices in the WESM resulting from the tight supply situation, internal projections show that the generation
I
cost will continue to be high in Decernb_er 2013: Our presentations to the Commission, the House
Committee on Energy and business groups, show an estimated generation charge for January 2014 of
p;
7
.37 per kwh. It is for this reason that with respect to the staggered recovery of the generation cost for
November 2013, there was no add-on of any component ofthe deferred cost in 2014.
We are writing the Commission to express our concern on the possibility that the generation charge for
Januuy 2014 will be significantly higher than the estimated P7.37 per kwh we had earlier shown. While
the bills of suppliers are still to be received after the 26th and validated until the early days of the billing
rnonth, our updated projection, based on an internal assessment of demand and supply conditions and
the prices prevailing in the WESM, indicate that generation cost for December 2013 may eJ<ceed P9.00
per kwh, similar to the occurrence in November 2013.
Given this development, we would like to seek an urgent meeting with the Commission, if possible
tomorrow, to discuss the bases of our apprehension, our updated estimate.of December 2013 generation
and possible mitigation steps to cushion tile impact to our consumers.
Ta. Mo. (Gl2) 631-2222 (632) 16220
We seek your understanding and support on the matter.
('J .

DELA PENA
-First Vitte-President & Head
Regulatory Management
ANNIEX "1:?"
NGCP
Stronger tra11s1nlsslon
for a stronger nation
NetAccess-KAP-RRA-2014-01-
January 2, 2014
MR. RAFAEL L. ANDRADA
Vice President and Treasurer
11
1
" Floor, Lopez Bldg., Meralco Center
Ortigas /\venue, Pasig City
Subject: NOTICE OF NON-PAYMENT , . .
Dear Ni r
This refeA> to the unpaid account of Manila Electric Company (MERALCO) to the National
Grid Corporation of the Philippines (NGCP) for the billing period of November:201Yin the
amount of PESOS: ONE HUNDRED iWENTY FOUR MILLION FIVE 1 HUNDRED
THOUSAND THREE HUNDRED SIXTY SEVEN AND 8/100 as per
attachecl Statement of Account.
Under, Flule F5. 1 of tile Open Access Transmission Service (OATS Rules), a Transmission
Customer is obligated to pay the amount stated in the Billing Statement without: necessity of
demand no later than twelve noon (12:00 p.m.) of the last working day of the succeeding
Billing Period ("Due Date''), via immediately available funds or bywire transfer to a bank
designated by the Transmission Provider, ur1fess otherwise. agreed. De$pite this provision,
MERALCO failed to settle its outstanding obligation.
Thus, NGCP demands t.he immediate settlement of the above-mentioned amount with
interest within five (5) days from your receipt of this letter. Your failure to do so will compel
us to commence legal action to protect NGCP's rigllts and
We l1op(3 that you will give tt1is matter utmost preferential attention.
PLEASE DISREGARD IF ALREADY PAID
Ouozon Avenue corner BIR Road, Dlliman, Quezon City 1100 Tel.: +632.981.2100 Website: www.ngcp.ph
.J-.
I . I
" .,I

' I' ::"'"'I''(' J
-
ANNEX"13"
30 December 2013
rfAESPhilippines
1Veare tho energy
MANILA ELECTHIC COMPANY
Lopez Building
Ortigas Avenue
f>asig City, Metro Manila
Philippines 0300
Attention: Mr. Oscar S.
President and Chief Executive Officer
Subject:
Demand for Full Payment of November 2013 Power Bill
Gentlemen:
Maslnloc Power Partners Co. Ltd.
Maslnloc Power Facility
Maslnloc Coal-Fired Thermal Power Plant
Barangay Bani, Maslnloc
Zambales, 2211 Philippines
tel 047 821 4000
fax 047 8214002
www.aes.ph
Under Article 10.2.1 of the Power Supply Agreement between Masinloc Power Partners Co. Ltd.
- ("MPPCL") and Manila Electric Company ("Meralco") dated 21 December 2011 (the "PSA")i Meralco
is obliged to pay Final Invoices on Payment Date.
In this regard, we refer to our November 2013 Power Bill (the "November Bill") under Final Invoice
No. PB 000059 dated 16 December 2013 covering the total amount of PhP 1,217,238,084.06
(inclusive of. VAT in. the amount of PhP 130,418,366.15), which is due and payable on 26 December
2013, the Payment Date. On 26 December 2013, MPPCL only received the amount of
PhP 650,172,826.65 as payment by Meralco for the November Bill. Our record shows that no
payment was made corresponding to the (i) Reimbursible Cost Payment for Replacement Power in
the amount of PhP 436,646,891.2Ei, and (ii) VAT in the amount of PhP 130,418,366.15. We note that
no portion of the Final Invoice has been disputed by Meralco that would justify its non-payment in
full of the November Bill on Payment Date.
We therefore request Meralco to pay the Reimbursible Cost Payment for Replacement Power in the
amount of PhP 436,646,891.26, and the VAT in the amount of PhP 130,418,366.15, in accordance
with the PSJ\. Should we fail to receive your payment, we would be constrained to exercise our
rights under the PSA, and under any and all applicable laws, rules and regulations.
Should you have any questions on the above, please contact rne at my office at 459 2631 or mobile
phone +63 917 8677895.
We trust that Meralco will give this matter its usual preferential attention.
Very truly yours,
Mm:inloc Power Partners Co. Ltd.
By:
.
. -:;.-:.-;1
\
/"' q11'ysogonus,)Fj)lerrera ............. \.
- Commercial Affairs
cc: Mr. Ricardo V. Buencamino
Senior Executive Vice President & Head, Networks
/A

San Miguel Ener,gy
. Corporation
January 6, 2014
MR. OSCAR S. REYES
Chief Operating Officer
Lopez Building,. Ortigas Avenue
Pasig City, Metro Manila
Philippines 0300
Subject: Power Bill No. 101 MEC0-1311
Dear Mr. Reyes,
[ ANNEX "14"
This is regarding the letter dated December 26, 2013 from MERALCO addressed to San
Miguel Energy Corporation ("SMEC"), signed by your Mr. Rafael L. Andrada, informing
SMEC that in view of the TRO issued by the, Supreme Court, MERALCO has to partially
defer payments to SMEC in the amount of PhPs;oa0,870,27.
MERALCO is aware that generation charges due to SMEC under our Power Supply
Agreement are pass-through charges that 'are due. to the Power Sector Assets and
Liabilities Mana9ement Corporation ("PSALM"). Under the IPP Administration Agreement
between SMEC and PSALM, SMEC has the obligation to make generation payments within
the appropriatn time, otherwise SMEC will be liable for penalties and carrying charges .
. PSALM in turn must make full payment to the IPP under their energy conversion
agreement, which is covered by sovereign guarantees.
To this end, we entreat MERALCO to remit the deferred amount as soon as possible,
otherwise SMEC will be constrained to impose penalties and carrying charges as provided
for our Power Supply Agreement.
We hope to receive payment soonest. Thank you.
Very truly yours,

EL' D. Gt)
Manager
R3-Lt(PBlll I 0 I MEC0-1311 )jbe
C1;:
Hon. Carlos Jericho L. Petilla
Secretary
, Department of Energy
Energy Center, Merritt Road
Fort Bonifacio, Taguig City
, I
,.,:.
! f 'd
. "i.'.
-.:i-.: .... :
., .
. .l . ' !.
2/F, 808 BUILDING, MERALCOAVENUE CORNEii GEN. LIM ST/IEEI, SAN ANTONIO VILLAGE, PASIG ('Ii l'
TELEPHONE NUMB/ill: (632) 667 5015; FAX !{UMBER: (632) 667 5188
_[ _JU
January 6, 2014
MR. OSCAR S. REYES
Chief Operating Officer
SOUTH PREMIERE
POWER CORP.
Lopez Building, Ortigas Avenue
Pasig City, Metro Manila
Philippines 0300
?ubject: Power Bill No. 201MEC0"131'1
Dear Mr. Reyes,
This is regarding the letter dated December 26, 2013 from MERALCO addressed to South
Premiere Power Corp. ("SPPC"), signed by your Mr. Rafael L. Andrada, informing SPPC
that in view of the TRO issued by the Supre'me Court, MERALCO has to partially defer
payments to SPPC in the amount of PhP856,794,429.96.
MERALCO is aware that the generation cha1:ges due to SPPC under our Power Supply
Agreement are pass-through charges that are ,due to the Power . Sector, Assets and
Liabilities Management Corporation (PSALM). Under the IPP Administration Agreement
between SPPC and PSALM, SPPC has the obligation to make generation payments within
the appropriate time, otherwise SPPC will be liable for penalties and carrying charges.
PSALM in turn must make full payment to the IPP under their energy conversion
agreement, which is covered by sovereign guarantees.
To this end, we entreat MERALCO to remit the deferred amount as soon as possible,
otherwise SPPC will be constrained to impose penalties and carrying charges as provided
for under our Power Supply Agreement.
We hope to receive payment soonest. Thank you.
/
Very truly
iL
,r)
J J
ELL ND. GO
Gen ral Mana1er
R1-Ll(PB201MEC0-1311)/jbe
Cc:
Hon. Carlos Jericho L. Petilla
Secreta1y
Energy Center, Merritt Road
Fort Bonifacio, Taguig City
'::iii
i. .
,.
'
2/F, sos Bu II.DING, 1VIERALCO A l'ENUE CORNER GEiv. LIM Sr11EET, SAN ANmNro VILLAGE, PAsJ<; C1 n
. TELEPHONE NUMBEll: (632) 667 5014; FAX NUM/lff/I: (632) 667 5188
. ' ,J
. '\,''. i
, ....
'.
: i
I ..
.!ANNEX "16" .J
Pippa raises specter of summer blackouts
BY LENJE Lr.CTUHA
A
. of power producers on Fri.day said that while
I there was enough power supply for. Luzon at present, it
is poss.ible that problems on the supply side may arise
con1e surnmer when dernand is at its peak.
At a news conference, the Philippine Incle- fortunately, this is the time of the year when
pendent Power Producers Association (Pippa) d.emandislowest, from December 20 to March
said demand for power is at its lowest every 15," Aboitiz said. "If there are no forced out-
first three months of the year. agesandaslongaswehavenomajordroughts,
"From the supply side, right now, there's there won't be any problem."
sufficient supply. There's more than enough Buttherewillbeaproblemif"wehavelarge
supply.January to February are normally the plants that will fail or if we would absolutely
lowest demand times of the year and then it havenoraininMarch;that.wouldbringabout
gets around to April," Pippa President, Luis a tight power situation," he added.
Miguel Aboitiz said. Tight supply could be "1ddressed byputting
Pippa, an assoc.iation of 28' companies up more power plants, he said. "Typically, you
. in power generation, said the want between 250 MW and 300 MW of new
;eather plays an important factor in the capacity of base load a year to handle growth
'supply of electricity by power to in demand," he added.
the distribution firms, sttch as the Manila Hecitedsomepowerplantsthatwillstart
Electric Co. (Meralco), or electric coopera- commercial operation this year. "There are
tives, which, in turn, dist:r.ibute electricity new plants that came in, particularly GN
to end-consumers. Power. There is a geothermal that came in, 20
"The biggest effect on demand is weather. MW. There is 135 MW coming in the middle
Fo.r every degree Celsius, we consume 140
megawatts (MW] inore," Aboitiz said, adding the power-supply situation would be more
that the power-supply situation will depend stable. Ideally, "."ould want.another plant
on the water levels. coming in 2015 and 2016," th.e Pippa official
"Right now, we don't see a problem because, said.
--------------------------------------------------------------
Powered by:
iSENTIA
ANNEX
Wed I 01/08/2014 Ot:44am I Forex: $1: 44.800
FOLLOW US:

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11>':1-.\
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.
, Palace: No magic wand to reduce power costs
(The Philippine Star) I Updated .January 4, 2014 - 12:00am
googleplus Like I 5J I
MANILA, Philippines - Malacariang is awaiting a proposal from Congress on the Issue of pow<>r costs.
Deputy presidential spokesperson Abigail Valle said the law limits the actions of Malacariang, referring to tile Electric Power Industry Reform Act (EPIRA).
"There is no magic wand to wave," she said. "While you believe that the executive has so much power, (it is) perceived power, we are limited by what the law says."
Valle said "it depends on the proposal, and also remember that the President is very careful about using his certification powers," when asked whether President
Aquino would ceiiify as urgent bills seeking to amend EPIRA. . ' '
' "Normally, the process is such that we look at the bills that are already pending in Congress, not the ones that are initiated by the administration," she said.
Aquino has asked agencies to look into tl1e problem and to find possible solutions within the law, Valle said.
,.,. X Various bills have been filed in Congress seeking to amend EPIRA.
Tight supply to raise prices?
Electricity rates might shoot up again in Luzon this summer if unpaid power producers are unable lo
generate power lo meet higher demand.
The Philippine Independent Power Producers Association (PIPPA) said a tight power supply situation
might appear in summer if power generators are lefi unpaid because of the Supreme Court's 60-day
temporary restraining order (TRO) on Meralco's rate hike.
A tight power supply situation happens when power producers are unable to supply eno,ugh electricity to
meet demand for a certain period.
It leads to high prices at the Wholesale Electricity Spot Ma[ket (WESM), the country's trading floor for
electricity.
In November 20"13, due to tight supply at the spot market, the price of electricity for Luzon in the spot market rose to P15.51 per kilowatt-hour from P6.16 per kwh in
October.
The higher rate was reflected in the December 2013 bills of consumers.
Speal<ing to reporters yesterday, PIPPA president Luis Miguel Aboitiz said while the TRO's impact differs for each generator, those lhat,l\ave weaker balance
sheets might not be able to continuously generate capacity if the issue drags on and they are left unpaid for the fuel supply.
For now, electricity demand is at its lowest so there is no supply problem, he added.
Meralco has not yet been able to pay power producers roughly P10 billion because the TRO prevents it from collecting_ from its 5.3 million customers.
Aboitiz sees a problem if the issue drags on beyond March and unpaid power generators are unable to generate more electricity coupled with the lack of rain to
rower hydro plants.
'"If there are no forced outages, there won't be any problem. Fortunately, this Is the time of the year when demand is at its lowest," he said.
''This is from DBc. 20 to March 15. If we have large plants that fail or absolutely no rain in March, that would bring in a lighter" power situation. "The impact on the
industry depends on how long this lasts. You cannot have one impact for the whole industry."
/\boiiiz hopes the problem is resolved as soon as possible.
"The consequence is minimal if it's resolved quickly," he said.
I
l/8/20 l 4 1 :44 M
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l11dustry group Philippine Independent Power Producers Association, Inc. has denied collusion in the
' shutdown of power plants that led to a power rate hike.
"There are buyers and there are sellers, right? Obviously, the buyers benefited, the sellers lost out,"
PIPPI\ president Luis Miguel Aboitiz said in a "24 Oras" report aired Friday evening.
"But when you say there was collusion ... Who colluded? There are 31 generators. If somebody claims
collusion, he should say who did it or how the collusion was done," he added.
According to PIPF'A website, Aboitiz is president and chief executive officer of Aboitiz Energy
Solutions, Inc. and senior vice president for power marketing and trading of Aboitiz Power Corporation.
In December, Senator Sergio Osmeiia Ill, chairman of the Senate Committee on Energy, said he saw
110 irl(liCations of collusion among power producers.
"Will you shut down your bus so I can run my jeepney? I don't think so. If you also own the jeepney,
baka. Pero if you don't own the jeepney, why will you shut down your bus line?" he said.
The Supreme Court has issued a temporary restraining order on a'P4.15 per kilowatt hour increase
imposed by the Manila Electric Co. The high court has set oral arguments on the Meralco rate hike on
Jan. :?'I.
Lower demand
Meralco said it had to raise prices because it had to buy more expensive electricity from power
producers after plants shut down in December.
PIPP/\ said its members have to be paid soon. "If it's not resolved in a long period of time, then some of
the generators with weaker balance sheets will have problems," Aboitiz said.
Aboitiz said he thinks power plants will not shut down while waiting for the Supreme Court to decide on
the Meralco rate hike. "But if they have no fuel, they ca.n't generate," he said, adding that could happen
to diesel-run plants.
PIPPA said power producers can still bear not being paid since the Supreme Court TRO was issued in
the colder months, when demand for electricity is lower. Higher demand during the summer months will
mean l1igher prices, though.
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For Energy Secretary Carlos Jericho Petilla, it will be best for everyone if the Supreme Court rules on
the rate hike as soon as possible.
"It has to be re$olved quickly because there is a financial gap. The worst-case scenario, which I don't
think will happen, is that the generators will not provide Meralco any power," he said.
Petilla assured the public, though, that the impasse between Meralco and independent power
prod1o1cers will not result in brownouts.
''l'rn not lawyering for them. Ako nga itinuturo nila na naga-accuse daw sa kanila [ng collusion]. But I'm
trying to make sure also na yung financial burden na iyan ay naaayos nila because I want to make sure
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\/8/2014 1:45 AM
. Republic of the Philippines
IN THE MATTER OF THE
INVESTIGATION CONDUCTED ON
ALLEGATIONS OF ANTI-
COMPETITIVE BEHAVIOR AND
POWER ABUSE
COMMIITED BY THE POWER ERC CASE NO. 2007 - 421 MC
SECTOR ASSET AND LIABILITIES
MANAGEMENT CORPORIHION
(PSALM) IN THE WHOLESALE
ELECTmcnY SPOT MARKET
x-------------------------------------------x n 0 C KE T E D
Dato: ..
nv: ............. Mf:::'. ..... _
ORDER
Before the Commission for deliberation is the Investigatory Unit's (IU)
Report dated 4 June 2007, which is hereto attached, detailing the IU's
findings and recommendation relative to the allegation of anti-competitive
behavior and/or market power abuse committed by the Power Sector f\sset
-:: ..
and Liabilities Management Corporation (PSALM) during the third billing
month of operations of the Philippine Wholesale Electricity Spot Market
(WESM).
The instant case stemmed from an Investigation Report issued by the
Enforcement and Compliance Office (ECO) of the Pl1ilippine Electr.icity Market
Corpbration (PErVlC) after it investigated tl;ie. increase in the load weighted
average price in the WESM during the thwd montl! of operations the
bidding beh,Clvior of PSALM's trading learnt during the third billing period,
which was "observed to be the cause of such.,increase. As a result of its
". . .
inquiry, the ECO issued its Investigation Report Jit1ding that PSALM behaved
' ... '
anti-competitively and abused its market power.
,. '

ANNEX "17"
Order/06 June 2007
Page 2 of 6
The said ECO Investigation Report was reviewed, and the findings
therein confirmed, by the Market Surveillance Commlltee (MSC) of the PEMC
in the MSC Memorandum Report dated 20 November 2006.
Pursuanl to its mandatE1 to penalize ab;ise of market power under
Section 43 of Republic Act No. 9136, otherwise known as the Electric Power
Industry Reform Act of 2001 (EPIRA), and in accordance with the Competition
F<ules and Complaint Procedures, the Commission constituted the IU to
determine whether or not them is suffiCient evidence to initiate appropriate
.
action against PSALM for anti-competitive behavior and/or market power
abuse.
From December 2006 to March 2007, the Investigatory Unit conducted
ils investigation, directing PEMC and PSALM to provide it with all the relevant
documents and information.
On 4 June 2007, after concluding its inV!Stigation, the IU submitted to
the Commission for ils consideration the attached IU Report wherein It states
and recommends lhat:
The !U finds no prima fade case against PSALM for anti-
competitive behavior or market power abuse. For this reason,
further investigation and proceedings are not warranted. The IU,
therefore, recommends that this investigation be terminated.
The Commission is called upon to deter;mine whetheror not to accept
the JU's recommendation lo terminate this based on its findings
t11at lhenil exists no prima facie case against \PSAUvl for anti-competitive
1hl !Ir" '
behavior" or market power abuse. In this issue, however, and

. . ....
consistent with its mandate under the EPff.-:A .. to promote competition and

,
i!

oy
\c (F,,
\

I
ff
1
I
/;
Order/06 June 2007
Page 3 of 6
---------------------------------------
encourage market development, the Commission deems it prudent to dwell on
tangential issues concerning irregular behavior and trading arrangements
within the WESM, which are anathema to the objectives of competition.
l\fter due deliberation and a comprehensive review of the IU Report
and t11e entire records of the investigation conducted by the IU, the
Commission accepts the findings therein and thus adopts the IU's
recomrnendation.
Tl1e fundamental objective of the entire restructuring process is
competition and for U1ere to be a truly competitive electricity market, there
should bn sufficient number of buyers and sellers so that individual firms have
no control over market conditions of price or quantity supplied. The
Commission is fully cognizant that this not the case yet for WESM considering
the National Power Corporation's (NPC) and PSALM'S market shares. Hence,
. . .
it is nol surprising that any action on their part thal impacts on the electricity
price is readily viewecl with suspicion of market power abuse. It is for NPC
c:md PSALM, therefore, to be more circumspect and transparent in their
cleali119s in t11e WESM.
Mere suspicions, however, cannot substitute for proof and the absence
of proof to constitute a prima facie case against PSALM does not justify the
condct forrnal proceedirigs .against it. The Commission cannot simply rely
on speculation, conjectures or no matter how appealing, to

establish the act or conduct of PSALM that amounts to anti-competitive
bellavior or market power abuse.
. ..
0
ct'
\i
r
'. ....
\
.
(,
I .
(
11/
Order/06 June 2007
Page 4 of fi
The Commission, however, notes the letters of NPC President Cyril C.
de! Callar to PSALM. attributing the losses incurred by NPC and PSALM
during Ifie first two billing months to the PSALM trading teams' strategies at
the WESM and urging PSALM to adopt certain recommendations that
ultimately affects l1ow lhe PSALM trading teams submit their ot'rers in the
market.
It is highly inappropriate and irregular for NPC to write such letters to
PSALM. The participants in the market are expepted to act Judiciously and be
circumspect in their dealings with each other to thwart any notion of collusion
or any tacit agreement or understanding among them. To the mind of tile
Commission, NPC's proposal may in fact be taken as an invitation lo
collaborate so as to vary market results and it is no secret that the dominant
. . '
position or PSALM can enable it to capitalize on such to easily dictate tile
prices in the WESM. The influencing capacity of NPC over PSALM and the
biddinq behavior of the trading teams, whether intended or not, cannot be.
discounted. Markel participants, specifically NPC, should refrain from making
such recommendations to PSALM lhat may have an impact on the market
conditions.
ThEl Commission also observes that while the F'S.l\LM is possessed
with market power as a seller in the WESM, the safeguards that have been
put in place; in an attempt lo dirninish-its d o n ~ i n n t position, are insufficient.
The division of the entire capacity held by PSALM into four (4) trading
po1ifolios is not sufficient. Apart from the oeed lo reduce the influence or
define the authority of upper management over t'hese trading learns, policies
. j,
and protocols must be stren1lhened to ensu_re indfilpendence of these trading
I '
.
learns from each other and from upper manage1i1ent.
I
r
'
nY
Orcler/06 June 2007
F'age !5 of 6
Finally, the Commission draws PEMC's attention to its deficient
Lo the IU Order dated 11 December 2006 issued in the course of
the IU's investigation. The IU is one constituted by tl1e Commission as a fact-
finclintJ body upon whom the Commission's powers of inquiry have been duly
delegated. When an industry participant is called upon by the IU to assist it in
or submit to its investigation, ils compliance and full coqperalion are expected.
WHEREFORE, PREMISES CONSIDERED, lhe Comm.ission hereby
the findings of the lnvestinato1y Unit as contained in the attached IU
F{eport dated 4 June 2007 and approves the recommendation to terminate
this investigation.
As for NPC's conduct, which was found to be highly inappropriate and
irregular under the circumstances, the Commission hereby issues a stern
warning for NPC lo refrain from such conduct that is inimical to the objectives
of 1'ree competition. Let it be a warning also to all other industry participants
that conduct of similar naturn shall be dealt with more severely by this
Commission.
The Commission also directs PSALM to adopt policy measures that will
strengthen the independence of its trading teams from one another and from
PSALM management insofar dealings 1n the WESM are concerned and
F'EMC to make the necessary changes in its .re.gistration policies to reflect the
. '
.
same, within thirty (30) days from their receipt hereof. PSALM and PEMC are
fu11her clirected lo immediately apprise the CC{tnrnission of the measures so
adopted.
...
.
Order/06 June 2007
Page 6 of 6
-----------
Finally, the Commission issues this warning to PEMC for its failure to
rully comply with a valid directive of lhe Investigatory Unit.
SO ORDERED
Pasig City, 06 June 200"/..

/ ROOO Ct1airman

RKUF A. TAN -\
Commissioner ,,,. '
TANEDA
Copy furnished:
1. Phlllpplne Electricity Market Corporation
9
1
" Floor, Robinsons EqLJitable Tower
Ortlgas Center, Pasig City
Commissioner
4/'
J!REYES
Commissioner
2. Power Sector Asset and Liabilities Management Corporation
ylh Floor, Bankmer BLJilding,
6756 Ayala Avenue, Makali City
3. I-Ion. Raphael P.IVI. Lof:llla
Secretary
4.
/DTL t-.j'
Department of Enemy
Energy Center, Fort Bonilacio
Taguig City
National Power Corporation
Quezon Avenue cor. BIR Road
Diliman. Quezon City

"1
..
'
.
{'
i
I
II
Republlc of the Phlllpplnes
ENERGY R.IEGULATORY COMMISSION
San Miguel Avenue, Paslg Qty
INVESTIGATORY UNIT
XU CASIE NO. 0601
INVESrIGATION REPORT
TABLE OF CON1'ENTS
1 l:NTRODUCUON .. ,.,, "'f'"r ..
2 DACKGROUND .............................................................................................. ........................................... l
:3 PROCEEC)INGS : auc,"'''"''''''''""'-''''' .. n 2
1
4 t'IATCRIAL FAC"TS AND ADMISSIONS ,, ... D .. ,.G
SUAL G01
1
PAGBlLAO G01 AND G02 AND lWAN G01 AND GOZ'S
OFFERS OF PHP 10,000 AND HIGHER ......................................................................... : ..................... 6
SUAL GO!, PAGBILAO GOl .AND G02 AND IWAN GO! AND G02'S
Ol'FEH.S FOR THE FlRSTTWOBl.L!JNG MONTHS ................... ; ..................................... ..... ; .............. 7
SUPPLY AND DEMAND.SITUATION ....................................................................... : , .... , .................. 8
PSALM MARKET SHARE .................................................................................................................. 9
WESM Q.EARING PRICES ................................................................................................................ 9
. THE NATIONAL POWER CORPOHATION'S (NPC) LITTERS TO PSALM ................................................ 10
!i PSALM'S EXPLANATION . "-"''"''12
. 6 ECO'S FINDillfGS ANl>-C::ONCLUSIONS ................................................................................................. 15
7 lSSUE . , . , . , ............. ,,. ... , ........... ,,,, ............... "l" ............................................... 16
IJ DISCUSSION .......... , . ,,,,,,,., ........................................... ,,, ,, , ,,,,,,,, ..... , . 11 ........ ,,,.,.,,u .... , 16
ON 1HE QUANTUM OF PROOF , ..................................................................................................... 16
CONDUCT ALLEGEDTO BE ANTI-COMPETITTVE OR TO CONSTllUTE ABUSE OF MARKET POWER ...... 17
. .
IBE ECO'S REJ\SONING ............ ,. .... , .......................... , : ......... , ,, ,, ,,,,,,,,,,,.,, ......... , ;,., 17
IU'S ANALYSIS ............................................ ; ... , ............................................................................ 18
AND ltlECOMMENDATION ; ....... ;, ... ; ..... " ............................................................ 23
1
1.1
1.2
1.3
2
2.1
2.2
2.3
I11troduct/011
Republic of tile PhlHpplnes
ENERGY. REGULATORY COMMISSION
San Miguel Avenue, Paslg Clly
INVES'rIGATORY UNIT
JU.CASE NO. 06-01
INVESTIGATION REPORT
.
Referring to the electric power Industry, Section 45 of Republic Act No. 9136
(EPIRA) prohibits anti-competitive behavior Including, but not limited to, cross-
subsidization, price or market manipulation, or other unfair trade practices
detrimental to tl1e encouragement.and protection of contestable markets.
The Energy Regulatory Commission (ERC) . is the administrative body
empowered In Section 43 of the EPlRA to penalize abuse of market power as
proscribed in Section 45.
Pursuant to this mandate, the ERC has created this Investigatory Unit (IU) to
Investigate allegations, in particular by the Philippine Eledi-iclly flfarl<et
Corporation (PEMC), of anti-competitive behavior and market power abuse in
the commercial operation of the wholesale Electrlclly Spot Market (VIJESM),
committed by the Power Sector Asset and Liabilities Management (PSALM).
Background
PEMC, through its Enforcement and Compliance Office (ECO) and Market
Surveillance Committee (MSC), conducted an of PSALM's conduct
in the commercial of the WESM for tile third bill!ng month.
The ERC decided to await the outcome of PEMC Investigation before
conducting its own Investigation, If still necessary. In the exercise of Its authority
to penalize market power abuse.
After concluding Its lnvestlgatlon
1
PEMC transmitted to the ERC on 24
November 2006 a c:opy of the MSC Memorandum Report dated 20 November
2006.
II
.I!
IU CASE NO. 05-01
IU Report/ 1 June 2007
Page 2 of 23
' .. ,.,..,_.,.,,_., . . ..- .... ;,, . .,-.., . .,, ,., .... ,,.,..,, . .,' ,.,,_,., .. ::-"" "'"'" .... ,, .. ,, .... , . ...... .... n ......... , ...I"""- ....... .. . .............. , . ,..,. ... ,..,
2..4 As stated In its Memorandum Report, the MSC found that PSALM behaved antl-
competltively and abused Its market power. It said:
;Jding as one through its three trading teams., exercised market
power, 771ey were able tv set the market price to a level that they" wanted
during peak hours. Since the production costs were well below the
PJ0,000/MW and above offered during the :r' bl/ling mont/1
1
they abused
market power during the peak hours which market power would not have
been there l1ad the three trading teams acted competltively and
independently with each other. (MSC Memorandum Report, p. 3) .
2.5 Given this finding, and In accordance with its Competition Rule.s and Complaint
Procedures (CRCP), the ERC constituted on 29 November 2006 this IU to
conduct an Inquiry Into the alleged anti-competitive behavior and market power
abuse.
3 A11tecedtmt Proceedi11gs
3.1 In a letter dated 22 September 2006 addressed to PEMC, the Manila Electric
Company (MERALCO) expressed concern about the Increasing WESM clearing
prices ancl requested PEMC, tl1rough the MSC, to investigate tile matter to
determine wheU1er or not tl1ere was breach of the WESM rules or any. anti-
competitive behavior that occurred and to determine the person or persons
respqnslble for tt1e violation.
3.2 On 25 September 2006, tile MSC requested the PEMC Board (or PEM Board) to
autl1orlze the ECO to conduct an Investigation In view of the following
observations:
The Load Weighteo'Average Price (LWAP) was relatively hig/7 during the
third month of WESM commercial operation where the LWAP was most of
the time above Pi0/000/MWIJ during peak hours,- .
The most frequent price setters, KEPCO Jlijan, Pagbilao Cf-7PP and Sual
are being traded by tt1e different trading teams., but all under PSALfl't,
771e said three generating plants significantly increased its offer prices
during the third month compared to .tl1e nrst two months .
.
3.3 Through a Certification by it!;; Corporate Sec;:rerary dated 29 September 2006,
the PEM Boarcl directed the ECO to conduct an investigation of the following:
.. ...... , ..., ... _ . ...... __ , __ 1wmmwUUilllllc: ..;. ... ....-.---------
JU CASE NO. 0601
[lJ Report/ 4 June 2007
Page 3 of 23
--------- .....
- '---.. - .--, .. 'P,J .. -! o 0.- ........ , .................... .... - .. ,.._ . '' J t'J .... , ........ _,. .. .,._ ...
Possible abuse of market power and/ or anti-competitive
Po11rer Sector Assets and Liabi/ltles Management (PSALM) for power
plants: Kepco Ilijan, Pagbllao Coal Fired Thermal Power Plant and Sual.
3.4 The ECO conducted Its Investigation and came out with an ECO Investigation
Report (or ECO Repo1t).
J
3.5 . Tile MSC reviewed the ECO Report and came out with the MSC Report on the
ECO Report (MSC Memorandum Report), which it transmitted to the PEM.
Board.
3.6 PEMC inFormed the ERC of the result of the investigation by furnishing It with a
copy of tile MSC Memorandum Report.
3.7 PEMC agreed with the ECO and MSC finding that PSALM behaved anti-
competitively and abused its market power. It the1) publicized such finding
and, on this basis, adjusted the settlement prices for the third and fourth billing
period of the WESM commercial operations.
3.8 There being an al/egatlon of anti-competitive behavior and market power
abuse, on 29 November 2006, tl1e ERC constituted the IU to conduct an
Investigation of the matter and to Jnltiate appropriate action and/or make such
recommendations as may be wcirranted by the results of Its Investigation
conducted in accordance with the CRCP and such other pr,ocedural guidelines
that it m<1y issue in the course of its investigation.
3.9 On 4 December 2006, the IU Issued Its Nol:ice of Investigation and directed
PEMC and PSALM to appear before it on 11 December 2006. for a pre-
investigation conference to discuss, amon9 others, the procedures to be
observed in the conduct of the Investigation.
3.10 On 8 December 2006, the IU appro\'.ed its "procedure to the Condu,ct of
Investigation by the Investlgato1y Unit (IUY'.
3.11 The lU conducted the pre-Investigation con"erence on 11 December 2006 with
representatives from PEMC and PSAL VJ. During the pre-investigation
conference, the IU discussed with PEMC a; .j PSALM the nature and purpose of
the Investigation and furnished them W th the "Procedure to Govern the
Conduct of Investigation by the Investigatl .ry Unit" and the IU Order dated 11
December 2006, directing PEMC and/or thr MSC to clarify certain statements In
the MSC Memorandum Report; to provide 1ddltlonal lnformatlon/explanatlon ln
support thereof; and to submit ce1taln doc: ments to the IU.
3.12 . On 9 January 2007, PEMC submitted its Mar ifestation/Compllance .
. ,
llJ CASE NO. 06-Ul
1u rteport I 4 June 2001
Page 4 of 23
---------"-----
- ... , ............. - ..... ................ h_, __ .. _ ............ . ......... , -,. - ----.............. --................. ' ...... -------- -----.........
3.13 In the said Manif'estatlon/Compllance, PEMC did not address point by point the
Issues and questions raised In the IU Order dated 11 December 2006. Without
stating Its reasons, It also did not submit all the required documents and
Information, especially the ECO Report, the transcript of the proceedings before
tl1e ECO, and i:lll the submissions of PSALM to the ECO or MSC, which the IU
deemed to be relevant to the investigation of. the alleged anti-competitive
behavior and market power abuse of PSALM.
3.1.4 PEMC's compliance consisted of the following:
Reiteration of the significant Increase In the market clearing price with np
significant change In the supply and demand situation on the third bllllng
morith and that the most frequent price setters are being traded by
separate trading teams but all under PSALM;
The bidding of 'tl1e three trading teams which submitted offers
for the KEPCO llljan, Pagbilao CFTPP and Sual, the most frequent price
setters, as indicated In the affidavits of each of the three (3) trading
managers attached t11erewlth;
The trading behavior of the three concerned trading teams and the
continuation of the trading behavior into the fourth mo.nth of WESM
operations;
The fixed and marginal costs of the most frequent price setters as verbally
given to the PEMC Investigating group;
Submission of tl1e following documents:
o The Market Surveillance, Compliance and Enforcement Market Manual;
o The Trader's Code of Ethics.
3.15 The deficient compliance of PEMC constrained the. IU to secure whatever
available lnfomrntion it needed from PSALM. Consequently, It issued an Order
dated 15 January 2007, directing PSALM to submit within ten (10) days certain
documents, information, and explanations ln response to certain Issues arising
from the MSC Memorandum Report.
3.16 On 12 February 2007, PSALM flied its Manifestation dated 9 February 2007,
stating that:
JU CASE NO. 06-01
UJ Report / 4 Jtxle 2007
Pagi: S of 23
..
-----...... _ .. ___ ...................... -.......... ..... --------------" ................... _.__,,_,_ .. _____ ... __ " __ " ...----.......... ..
PEMCs failure to: (a) answer the queries contained 111 tt1e JU Order dated
11 December (b) subscribe,. swear or verify that the, allegations are
true based oh tt1eir personal knowledge or authentic records and (c)
attach. documents, which are readily available, demonstrates that the
finding that "PSALM be/Javed antl-competltlvely and abused its market
power" does not f1ave sufficient legal i!nd evidentlary basis.
.
By requiring PSALM to an$wer queries contained in the JU Order dated 15
January 2007, PSALM is placed in an absurd situation where Jt has to
prove its innocence instead of PEMC proving and sustalnin_q its position
tl1at P.5ALM committed market power llbuse and anti-competitive
be/1avlor.
Instead, the investigation should proceed against PEMC to determine
wl1ether or not it usurped the authority of the ERC which has sole
jurisdiction to hear and penalize market power abuse and anti-competitive
behavior pursuant to Sedfon 45 of the EPIRA.
Since tfJe investigation was initiated by the ERC motu proprio, if there
would be a resolution (or the filing o(a complaint against it.,. PSALM would
face a situation where the initiator, investigator, complainant, :prosecutor
and the quasi-judicial body that would hear and determine t/1e case, are
all rolled inlo one, a violation of its constitutional right to procedural due
process.
3.17 In response to PSALM's Manifestation dated 9 February 2007, the IU issued an
Order dated 26 February 2007, denying PSALM's prayer In Its Manifestation
dated 9 February 2007 for the termination of the investigation. In denying
PSALM's prayer, the IU stated:
PSALM's argument in support of Its prayer for the termination of the
investigation is baseless. Regard/f!!sS o( t/Je actions of tf1e P/1ilipplne
Electricity Market Corporation (PEMC) or its inaction, this investigation can
proceed. PEMC's failure to submit the docume(1ts and Information as
directed In the Order of the Investigatory Unit (JU) dated 11 December
2006 does not take away from ERC and, as delegated _tv the JU, from the
tl1e authority to investigate
abuse of
market positions and similar or.related acts". To say otherwise is absurd.
Moreovefr that this investigation is one initiated motu proprio does not
amount to viO!atlon of. due process consiclerlng thal; aside from being
el(JJressly provided for and allowed in tl1e !aw,. the ERC remains to be
impartial under such circumstances, wit/1 the JU being separately tasketj to
Investigate the matter and prosecute the appropnate case/s with the ERC,
............ -----------..--.-
lU CASE NO. 0601
IU Report I 4 June 2007
Page 6 of 23
.
February 2007) ..
. 3.:LB In the IU Order elated 26 February 2007, the IU also required PSALM to comply
with the IU Orde1 dated 15 January 2007 on or before 1 March 2007.
3.:19 On 1 March 2007, PSALM submitted Its Compllance dated 28 February 2007,
together with Its Answers (with Annexes).
3.20 Upon evaluation of PEMC's and PSALM's submissions-and the other Information
and documents at hahd, the Ill resolved that It could not dispense with the
ECO Report, surmising that the bases for the allegation of anti-competitive
behavior and market. power abuse were cited and explained more.thoroughly In
that document than in any of the submissions of PEMC or PSALM. To compel
the presentation of the ECO Report, the IU Issued an Order dated 26 March
2007, which reads In part:
... the JU hereby reiterates its directive for the submission of the required
documents and information as contained In the Order dated 11 December
particularly, the ECO Report PEMC is further directed to Include all
the annexes to the said report If any, and such other documents
submitted to the ECO in. the conduct of Its Investigation. Compliance to
these directives shall be made within five (5) days from receipt of this
Order. (IU Order dated 26 March 2007)
3.21 Finally, on 29 Marcil 2007, PEMC. furnished the IU with a copy of the ECO
Report.
<f Material Facts mid
..:u Going d1tect to the -allegation that PSALM behaved and
abused its market power, the IU deemed .it necessary to conduct an
assessment of the facts, assumptions, and observations that led PEMC to this
conclusion.
Sua/ GOl, fagbllao GOJ and G02 and Jlijan GOl and offers of
P/JP10, 000 and higher
-tf,2. Perusing over the ECO Repo1t, It appeared that PEMC's allegation was drawn
from tile following:
..
Tllere were significant ine,reases In the offer pnces (bids) for I/fjan,
Pagbilao cmd Sua/ during 'the t/1/rd montl1 of operation especially during
peak periods.
.""
.. ........ ....., ..... ......i...-.......,........--.--
r
I
!
-- ---------
!LI NO. 06-01
!LI Report I 4 June 2007
Page 7 of 23
Bid offers submitted for Il)jan, Pagbilao and Sua/ were Increased to
Pl0,000/NW and l1/g/1er starting August 30 for peak hours starting at
trading interval 11 (from trading intervals 11 to 21). The Pl0,000/MW
bids staro'3d from the first block for .. tl1ese three. (3) plants. The
investigating team expressed concern that the simultaneous and almost
similar bids of PJ0,000 and higher were made for 3 plants by 3 different
trading teams of PSAL/11 . From 30 August 2006 the deartng
price significantly increasc..id, whic/1 most of tf1e time was at PJ0,000/NW
during peak /1ours.
The day before (August 29), lt1e bids for the peak trading Intervals were
dissimilar. .. xxx
For these three plants, the bids offered were as follows on August 30. It .
is observed that all three plants' bids started at Pl0,000. , For Sual GOJ,
Pagbilao GYJJ, and Il/jan GOJ and G02,. the bids are observed tv cluster
a1vund ... xxx. (Excerpts from the ECO Report)
4.3 The IU validated the factual statements contained In the above excerpts from
the ECO Report against the available data of the Spot Market Division (SMD) of
the Market Operations Service (MOS), which is to monitor t_he
movement of demand and , price, bidding behavior of. trading participants,
occurrences of price spikes or lrregfarltles and forecast
4A The JU confirmed that Indeed PSALM's three electricity trading teams (Trading
Teams or ETT) that traded the capacity of Sual GOl, Pagbilao GOl and G02 and
Illjan GOl and G02 submitted offers of PhP 10,000 and higher starting on 30
August 2006 during the peak hours from trading Intervals 1100H to 2100H.
4.5 Looking at the actual offers, the IU determined that the exact. slrnlfarltles on
the price offers of Sual G01, Pagbilao Go1 and G02 and llljan GOl and G02
occurred on 30 and 31 August 2006, for the time period llOOH to 2100H, with
price offers of PhP 10,000 on the first two blocks. The offers of the three
plants, however, differed In the other blocks on tl1ese trading Intervals. The
number of times of the exact slrnl!arities was fewer than the Instances when
the offers differed.
Sua/ GOlr Pagbilao GOJand G02 and Illjan GOJ and G02's offers ror
the first two billing months
4.6 Based on avallable data on the offers of the three PSALM Trading Teams, prlOr
to 30 August 2006, Illjan GOl and G02 submitted offers of PhP 10,000 and P.hP
15,000 on OS to 08 August 2006 for tile first two offer blocks and on 20 to 25,
.......
JU CASE NO. 0601
IU Repor1 / ti June 2007
Page 8 or 23

4.7 During the ECO Investigation, the PSALM Team Managers disclosed their
respective bidding strategies for the first two bllllng months, as follows:
t 7.1 Team Manager of ElTl, Mr. Pablo B. Anldo (Anldo), disclosed in hls 18 October
2006 Affidavit that on the first month, the offers were al med at recovering at
least the variable costs. On tile second month, the offers were guided by the
objective of recovering variable costs as well as recovering losses Incurred
during off-peak hours wherein the prices for eoergy were zero.
4.7.2 Team Manager of E'IT2, Ms. Marla P. Gan::la (Garcia), disclosed in her 18
October 2006 Affidavit that on tl1e first month, the offers were based on
variable cost of the plant with some adjustments to lower prices to get a share
in the dispatch order. On the second month, the bid prices were still based on
variable cost but adjusted a liltte higher ..
4.l.3 Team Manager of E1T3, Mr. Nestor F. Altman {Allman), disclosed in his 18
October 2006 Affldavlt that with zero clearing prices during off-peak periods,
his offer prices during peak hours were at a level sufficient ta achieve an
average price that can recover the production cost for the entire day and to
contribute to the reduction of losses Incurred during the first two months of
operations. He also stated that the average market prices during the first two
months of WESM operations were not sufficient. to recover the production cost
of Pagbllao, which was around PhP 4,500/MWh.
Supply and demand situation
4.H There had not been any sJgnlflcant Increase in the demand during the first two
billing months and the demand during the third billing month. In Its letter
dated 22 September 2006 to f>EMC, MERALCO mentioned that the Increase In
demand was only by an average of four percent (4%).
'l.9 . The st.1pply for the third billing period was ernJugh to meet the Increase In
demand. As MERALCO pointed out in its letter, "there ls a significant capacity in
the current month due to the lower level of plant on outage compared to the
previous two months, where the capacity is more than enough to satisfy the
increase in demand."_
4.1.0 In Its Memorandum dated 13 November 2006 submitted to the ECO, PSALM
admitted tht: foregoing factual assertions on the demand and supply conditions
prevailing d urlng the first three billing months.
,. ' o> , ,,A. ................ --------- ----
JU CASE NO, OQ-01
Page 9 of 23
, . .,..... ........ ,,... ................... , .._,.,., ._..,,, ....... ,_n<\ .. ".,.f ........ ,.., .. ,,., ... ,_ .. '-I .. ,...... ., ..... ....... --......... u . ., .... , ... ... ... f I, . .....,' 1-
PSALN's market share
4.ll As of 31 October 2006, tile total registered maximum capacity In the WESM.
was at 11,986.2 MW. Each PSALM Trading Team's share of the market ranged
from 12% to 20% share of the market. However, if taken as one, PSALM
controlled 57% percent of the total market share.
. .
Percentage Share of Each -Plant In the Total Registered
Caoadtv In the WESM
Unit Percentaae Share
PS.l:\LM 57%
NPC 24%
FGP S_ta. Rita 8%
-
FGP San Lorenzo .. 4%
--
QPPL 4%
DUl:u\COM 2%
100%
-
(Source: ECO Report)
vl.icSM clearing prices
4.12 Based on MOS data, in t11e first billlng month, the WESM clearing price
averaged at PhP 2,398/MWli (ex-ante). In the second f?llllng month, the
average clearing price stood at PhP 2,984/MWli (ex-ante), which translated to a
percent (24%) Increase from the previous month. In the third
bllllng month, the average clearing price reached PhP 4,903/MWh (ex-:ante) or
a percentage increase from the previous billing montll of sixty-four percent
(64%). The fourth billing month showed a further Increase. In the WESM
average clearing price at PhP 7,218/MWh. . .
4.13 The chart below shows the average daily LWAR during tile third billing month
(26 August to 25 September 2006). From PhP 980/MWh on 27 August 2006,
the LWAP rose to PhP 5,422/MWh on 31 August 2006. Thereafter, the dally
LWAP ranged from PhP 422/MWh to PhP 9,407/MWh
. ..... .........
JU CASE NO. 06-01
Page 10 or 23
,,., ... -'' ,.._..... _.,_...-.u ........""'"'"' ,,.P...,_.....,. .. ,,_ .. _!i.'. ..:,,.,_...,..... __ .. 111.o,.,,. ...... ,,_ .. __ 'l II--.--. ....... ,_,.,.,..,, .. - ..... lf-
F'(MWh
9000
6000.
7000.

5000_

3000.
2000
1000
0
/."\
I \
/ \
v I
i1 29 J1
Au9, 2006
06
- l\TO appro. LWAP l\V9
1fi'" I I
Sep, 2006
;:
---
J\i o I o 2'o o 2
1
2 I' 24
(Source: MOS)
T/1e National Power Corporation"s (NPC) letters to PSALN
. .
4.14 On two occasions prior to 30 August 2006, NPC President Cyril c. del Callar
wrote PSALM about the staggering losses Incurred by NPC and PSALM during
the first two billing months. In his letter dated 23 August 2006, the NPC
President summarized his assessment of how the losses were Incurred:
xx x i11cluding the displacement of d1eaper NPC plants by NPC
IPPs (Independent Power Producers) due to lower bid offers from
tlle trading teams. xx x
On the other hand,, tile average Clear/11g price of electricity for
NPC .IPPs traded by PSALM is 56.23% lower tha11 their
productio11 costs and 55.29% tower tfran EJ'lC-
approved average TOU rates. "n7is is due to zero dea11ng prices in
tl1e mc.wket during off-peak period and Sundays and lower clearing
prices during peak period which is the dired result of lower or even
negative bid offers from the PSALM trading teams.
........... .............
JIJ CASE NO. 06-01
JU fleportf 4 June 2007
Page 10 of 23
........-,, . .,,...., -_,,_ .. ,_, ............ , ....... ... ....... .. .. ...,._-...---.,,- -1'"--JI, >--
lt/MWh l\egloti bJllly'
9000_
- tno
J
8000.
7000
1000 I \
5000:\ /.\ . /
J \
1000
(Source: MOS)
The National Power (NPC) fetters to PSAL/11
4.14 On two occasions prior to 30 August 2006, NPC President Cyril C. del Callar
wrote PSALM about the staggering losses incurred by NPC and PSALM during
the first two bllllng months. In his letter dated 23 August 2006, the NPC
President summarized his assessment of how the losses were Incurred:
xx x including the displacement of' cheaper NPC plants by NPC
IPPs (Ind,ependent Power Producers) due to lower bid offers n-om
the P.5ALM trading teams. xx x
On tf1e ott1er hand,: the average clearing price of electrfclty for
NPC IPPs traded by PSALM is 56.23% lower than their
productio11 costs a11d SS.29% tower tfran ERC
approved average TOU rates. This Is due iv zero clearing prices In
t/1e market during off-peak period and Sundays and lower clearing
ptices during peak period whic/1 is the direct result of lower or ei:en
negative bid offers from the PSALM trading teams.
"-- --- --- ...... ----. - -

IU CASE NO. 0601
IU Report / 4 June 2007
i>ay6! 11of23
-.------.. , .. ;:a19s ;;;
compared to a total production cost of PS.6728 or a net toss of
P J..8538. This exdudes the consumption of Kalayaaf) during pumping
which accounts to P91.0M. The resulting "!oss is.attributable to
the maximized generation objective of the PSALM trading
teams even if such objective results in lower. clearing prices /11
tf1e market and losses to NPC. Tile PSALM trading teams are
bidding 'at below the ERC approved TOU raies, below tile
production cosl.:$1ol the IPP's t/Jey are bidding or e.ven at zero
If only tv maximize the generation and dlspatcll of tt1e IPP's
even ifsuc/1 results in losses to the government,:
4.15 In his letter, f\IPC President del C'1llar also proposed to PSALM adoption of
certain policies some of them affecting how offers should be made by the
PSALM Trading Teams:
WE..)/\'f bidding policies should be ba.sed on the .true pricing of
e/ectr!c/ty. NPC and PSALM trading teams should be made responsible
for delivering,. at the end of the month, the minimum revenue required
to cover for the production costs of tl1eir respective plants. In ih/s
regard, NPC and. PSALM should enter into an agreement on the
revenue requirement for each trading team.
PSALN trading teams should btd based on the established mt:dt order
of both NPC owned plants and NPC JP'Ps. At the vety least,. the PSALM
trading teams should bid prices that are based on the
TOU rates. xx x,.,.
4. 1.6 PSALM, In Its reply to NPC dated 15 September 2006, expressed Its
disagreement to NPC's suggestions above. It said:
The adjustments we .all huve to make will not be easy. We are now
operating tn a different po/icy regime fai. from the h!gh/y regulated milieu
tl1at prevailed for decades. Wit/J the policy reforms that have been put in
place, we are Institutionalizing, through WESM, a market-oriented pricing
and !Jupply mechanism the country's electricity Industry.
In light of these po/fey reforms, we find It d/ftiQJ/t to agree to your
suggestion that National Power and PSALM should "enter Into an
agreement on the revenue requirement for each trading team"'and that
the P.SALM trading teams should bid based on the established merit oraer
of both National Power-owned plants and National Power IPPs." By taking
that t(ack, we would be subverting the goals and objectives of EPIRA,
which NPC and PSALM, are supposed to champion as (he lead
.. ,,, _ ---- - -------- .....
IU CASE NO. 06-01
lU Report/ 4 June 2007
Paye 12 of 23
.......
the success o( tt1e Industry reforms we are currently implementing and
counter accusations that government is using its market power.
'1.17 Notwithstanqing its disagreement to the suggestions and recommendations of
NPC, as admitted by the PSALM Trading Managers In their affidavits, PSALM
Management relayed to them these concerns ancJ proposals of NPC.
4.18. As admitted also by the PSALM Trading Managers, NPC's letters affected thefr
bidding strategy starting on the third bllfing month.
Prior to 30 August 2006, I l1ad been lnlbrmed of compla1i1ts from NPC
on the recuning zero prices during off-peak hours. There were also
allegations that it was the PSALM Trading Teams that are causing the
zero prices during off peak hovrs. Also because of NRC's letter which
alleged that PSALM was bidding low In order to clear the market a
meeting was calleci by the Office of PSALM President on 25 August
2006 in order to respond to letter w/7ich alleged that PSALM has
offered low and dispatched the oil-based plants in the Wl:SM. (Anido
Affidavit)
On August 30, 2006, PSALM received a letter from NPC dated Agust
23,. 2006. n1e letter alleged that the heavy losses that NPC incurred
were due to PSALM's trading of t11e IPPs. Again, this allegation from
NPC somehow affected the bidding strategy of E/T2. (Garcia Affidavit)
.. A letter from NPC President dated August 2006 whicl1 was received
by PSALM on August 2006, stating that NPC had incurred loss.es
during the first and second months of operations, served to reinforce
our team's resolve that starling August 30
1
2006
1
pricing for Pagbl/ao
would be based on total production cost with the rattonafe
that to do othe1Wise would be to contribute to the ballooning debts of
NPC and and ultimately, of the National Govemment (Aliman
Affidavit)
5 P!lALM's Exp!an-aiio11
5.1 PSALM stated In Its 18 October 2006 letter addressed to the ECO that the "rise
In LW/.\P level Is but a natural phase In the process of market stabilization and
adjustment of the three-month old market".
T71e records show that during the first .month of wESM operations,_ the
MERALCO JPPs caused prices to dip to zero levels during off-peak hours by
offerinp zero bids. Ji1 response, the PSALM traders then started with price
'., d..O.r-"" _____ ,___...._,_. ... ,....__, ______ _
IU CASE NO. 06-01
Page 13 of 23
----------------. --
. -.. .-............. _, ...... --- ............ -4-- .... - ...... - .. - .. - ......... _ .... _ ................. , ..._ 1 ........ .- ...... ..................... _ ....
offers the! r respective plants' marginal costs. Consequently, the
market yielded depressed prices, whic/1 came to about.P 2.81/kWh on the
average tor the first bllllng period. This caused huge under-recoveries for
most not to mention t/1e under-compensation for. those pkmts
which were being run at their minimum operating levels (Pmin) and the
''must offer
0
po/Icy considering that the market at the time (and even to
date) !J,1d not been clear on the policy for Pmin and mu.st-run plants.
Whtie the second month of operations showed a higher l WAP of
PJ.07/kwll, the same was stfll lnsumc1ent to enable tile traders of the
contracted energy of Keiko II/fan,. Pagbllao ,1nd sual to recover the energy
production costs.
The WESM is a new market In the start-up stage. While initial glitches and
mistakes should be expected., we believe that It is but just for the
individual trading teams of PSALM to make ac/justments in their trading
strategies for their plants in their port.folio. MERALCO,. as a monopsony,
should not be t1'1e only patticipant entitled to recover Its costs; as the
govemment too l1as to maximize the use of Its assets and minimize losses.
(PSALM'S l8 October 2006 letter)
5.2 PSALM also stated In its 18 October 2006 letter that the alleged significant
increase In the offer prices during the third month arose out of the efforts of
the Trading Managers "to recover production cost and avert, If not minimize,
further losses." According to it, the rise In prices In the third month was "part
of price adjustment and discovery process from unrealistic, artificfal
levels during the first and second month of operations which benefited only the
biggest consumer." Moreover, the Increase In the offers during the third month
could not be considered excessive "because the resulting load weighted
average of Php 4.853/kWli is still less than the ERC approved grid rate with the
DAA (GRAM and ICERA) of Php 4.91/kWh; Also, "at no time did the offers of
Kepco Ilijan, Pagbllao and Sual plants exceed the bid cap of PhP 62,000/MWh,
as set by the WESM Tripartite Committee."
5.3 PSALM categorically declared that it "has not committed any breach1 nor
violated any rule as would serve as basis for the allegation of anticompetitive
behavior/marl<et power abuse" and that Its. '<'traders have conducted their
business In good faith and in accordance with all applicable laws,
and rules ancl with commitment to having due regard to the
contractual and nna nclal .obligations relati. : to tile energy output of tile NPC-
IPP's."
SA PSALM also mentioned that It had Intended to. be registered as four (4)
Independent rnarkelc participants, as suppcrted by the acknowledgement letter
... ... .... n..s:. ....... ...-.. __ , ___ _
"
.. - --
JU CASE NO, 06-01
Ill Report/ 4 June 2007
Pcige 14 of 23
"''"' ' I , ,...,...., ... ....... _..,,.,,. .,.,.._., . . .,. .. ,.,,._._.. ...... ' .,. .. _,. ,..,__, ....... - .,
from PEMC dated 24 January 2005, ....
PSALM as one market participant only for the trading of the energy output of
the NPC-IPPs comprising the, power plants in the portfolio of the four PSALM
Tra?ing Teams. This "resulted to PSALM, as the registered market participant,
having an aggregate rated capacity of 6,559 MW, which comprises
approxlmately 54% of the capacity in the WESM." . It then argued that this
"Imperfection In the market :structure should not be attributed to (It) as to
warrant the Imputation of marke:t power behavior."
5.5 On tile part of the PSALM traders, In his 18 October 2006 Affidavit, Anldo of
ETfl explained his team's bidding strategies. According to him, during the first
month of WESM commercial operations
1
the prices offered energy were
based on the economic principle for short run costs which aimed. at recovering
at least the variable costs. During the second month, the offers were guided
by the objective of recovering variable costs as well as recovering losses
incurred during hours When the prices for .energy were zero. In the
third month, the objective was to recover variable and fixed costs or total
production costs, as well as losses Incurred during off Mpeak hours.
5.6 In her 18 October 2006 Affidavit, Garcia stated that her team's (ElT 2) offers
for the third month were already based on production cost in order to minimize
the losses incurred during the first and second trading periods, when her
team's offers were based on the varlable costs of the plant with . some
adjustments.
s.7 In his 18 October 2006 Affidavit, Allman stated that with zero clearing prices
during off-peak his trading team's (ITT 3) strategy for ttie third.billing
month was to offer prices at a level sufficient to achieve an average price that
can recover the production cost for the entire day and to .con,trlbute to the
reduction of losses during the nrst two months of operation. He 'further stated
that the average market prices during the first two months were not sufficient
to recover Pagbllao's production cost, which was at around PhP 4,500/MWh.
5.8 All three Trading Managers categorlcally asserted that their offers were the
result of and were ''not influenced by or ln any way
directed at setting the price high.''
5.9 Anldo, Garcia, and Aliman executed supplemeptal affidavits on 3 November
2006 to further explain their offers of PhP 10,000/MWh starting on 30 August
2006.
5. 9 .1 An I do stated In his 3 November 2006 Affidavit that based on the estimated
losses and his desired level of price of PhP 4.50/kWh to allow the recovery of
the fuel and tlle Electricity Conversion Agreement (ECA) costs ol' llijan (at
.. k-/
.. " ...............
--
llJ CASE NO. 06-0l
IU Report / 4 June 2007
15 of 23
.. it ;111
rec::over that hours costs as well as those for the zero prices during off-peak
hours. He said that the strategy will cover the production cost of Ilijan but not
Casecnan which Is part of ET;T l's portfolio. He out that even prior to
30 August 2006, ETT l had been offering PhP 10,000, PhP 12,000 and PhP
15,000/MWh at the higher price bands, which offers were clearing at these
levels.
5.9.2 Garcia explained in her 3 November 2006 Affidavit that the low clearing prices
during. the flr.:."t and second billing period caused her team to change the bases
of offers In accordance with the market forces and social impact prevalllng at
that time. The offers during tile third period were based on production cost to
minimize the previous btlling periods' losses. She mentioned that the letter
from NPC dated 23 August 2006 affected the bidding strategy of ETT 2. ll)e
fixed costs were included in the bid offers Jn a positive contdbution
margin for third period. ETr2 prepared simulations of bid offers of PhP 8,000
and PhP 10,000. The _offer of PhP 10,000/MWh during peal<. hours was adopted
and sustained with the view of minimizing losses. In her affidavit, she
mentioned that she hoped "that the sustained PhP 10,000/MW bid strategy
would ease the pressure on the PSALM traders for allegedly causing the
government losses because of the previous low bids, as expressed In the letter
from NPC dated August 23,.2006."
5.9.3 Allman explained In his 3 November 2006 Affidavit that his team arrived at PhP
10,000 using PhP 4,884/MWh or PhP 4.88/kWh as.target average for the day.
Prices were raised during peak hours to compensate for the losses during the
off-peak period.. He added that NPC's letter dated 23 August 2006 reinforced
ITT 3's unanimous resolve that starting 30 August 2006, pricing for Pagbllao
would be based on total production cost with the rationale that to do
otherwise would be to contribute to the ballooning debts of NPC and PSALM,
and ultimately, of the National Government.
G ECO's Findings and Conclusions
6.1 As concluded In tl1e ECO Report, Sual GOl, Pagbilao GOl and G02 and Illjan
GOl and GOZ's offers of PhP :l0,000 and higher, although possible, were tlot
coincidental.
Based on the events that had occurred prior to and on August 3' the
i11vestigating team concludes that the submission of Increased bids to at
least PJ0,000 during the peak hours by tt1e 3 different PSALM trading
teams occurring at the $ame time and at the same date, whlle in the
realm of posslbl/if:'!J is not coincidental. The 1nv:est1gation team therefore
looks at it wil/1 guarded caution, especialty If the with PSALM
., . , I,, " ...
11 ...
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lU CASE NO. 0601
JU Report/ '1 June 2007
Page 16 of 23
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management and t/1e NPC letters are taken into account There was
unifo1mity in bidding levels frotn a previously dlssimllar !eve/. " (Excerpts
from the ECO Report)
6.2 This conclusion assumed . that the PSALM Trading Teams agreed or were
directed to raise their offers to at least PhP 10,000 durlng peak hours, realizing
that with the combined capacities of the Suaf, Pagbllao, and Ilijan plants, and
the demand during the peak hours, these plants would. be dispatched
notwithstanding the increased offers. This .also assumed that the PSALM
Trading Teams uniformly Increased their offers In response to NPC's lettersand
instructions from PSALM Management.
W/Jile the traders said they acting Independently of the other teams,
it Is ii-ery unnatural for a trader to suddenly bid based on Its production
cost wl'1lch would create a swtfl: substantial Increase In its bid offer
because of the possible consequence of not being dispatched. Moreover
this offer price Increase happened just after the 25 August 2006 meeting
where tl1e first NPC letter (Annex K) alleging losses, was discussed. Even
assuming tflat PSALM Management met with the traders 'fnd/vldual!y, and
theref"ore no strategy was planned or shared by each trading team as a
group,, the uniformity of their acts undoubtedly reveal that'an authority
higher and outside the trading teams has made and caused the individual
traders to act and trade as one.
These factors clearly establish that the PSALM through its three trading
teams acting In unlty'has exercised market power during the third billing
month, notably starting on 30 August 2006. (Excerpts from the ECO
Report)
7 Issue
;1.1 In this investigation, the IU was guided by the following:
Were the evidences gathered during the investigation sufficient to warrant the
Institution of a formal Complaint against PSALM for anti-competitive behavior
and/or market power abuse?
B Discussion
On the quantum of proof
8.1
The CRCP sets the standard by which the IU shall decide whether or not to file
a formal Complalnt against any person it Investigated. Section 9, Rule 20 of
the CRCP provides that: "(l)f, after conducting the investigation, the
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JU CASE NO. 06-01
JU Report/ '\ June W07
Page 17 of23
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Person lnve..c;tigated for violation of these Rules, he . shall prepare the
appropriate Complaint for filing with the ERC. Otherwise, he shall transmit his
recommendation to the ERC to terminate and close. the Investigation, together
with the entire records of the Investigation."
8.2 Slnce no definition of what comprises. prima facie case Is provided ln the CRCP,
the IU accorded it its usual, natural,. plain, ordlnaiy and commonly understood
meaning, consistent with the .canons of statutory construction.
8.3 Consequently, It interpreted Section 9 as giving it the responsibility to
determine if there Is a case, which If accepted and. not contradicted, would be
sufficient to find the respondent admlnlstrativeiy liable for anti-competitive
behaviqr and/or market power and to ensure that 'there ls sufficient
support to justify the commencement of such adrninlstrative case before. the
ERC. .
Conduct alleged to be anti-compet:ltlve or to constitute abuse of market power
8.4 As alleged
1
the PSALM Trading Teams did not act competltively "with each
other" based on their offers of "at least PhP 10
1
000 and the events that
occurred prior to and on 30 August 2006." However, as later on concluded In
the ECO Report, they did not act In bad faith. PSALM, on the other hand,
behaved anti-competltlvely when It had a "meeting" with Its traders to apprise
them of the "flnahcial status with regard to the IPP contracts" and exercised Its
market power when It relayed to them NPC's letter dated 23 August 2006.
(ECO Report, pp. 27-28)
Tlu'! ECO's reasoning
8.5 Willie therewas no finding of collusion among the PSALM Trading Teams to fix
prices In tile WESM or the existence of any explicit Instruction from PSALM for
tllem to offer prices at a certain level or to adopt any specific bidding strateg,y,
the ECO concluded that PSALM behaved antlcompetltlvely and abused its
market power when It. "Influenced" the Trading Teams to offer higher prices .for .
lt to recover its losses for the first two billing months. Such Influence
manifested Itself in the uniform offers of PhP 10,000 made by the three Trading
Teams on certain trading hours starting on 30 August 2006 and was also
Inferred from the conduct of the meeting between PSALM Management and the
traders to discuss NPC's letter to PSALM.
W71lle the traders said they were acting independently of the other teams,
ft Is veiy unnatural fvr a trader. to suddenly bid based on Its production
cost whic/1 would create a swift substantial increase in its bid offer
.. .. .. ,,. l..-u,1-.li'....r..a ,. ..... - ......,,.....,..., __ _... _________
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IU CASE NO. 0601
JU Report / 4 June 2007
Pil,ge 19 or 23
... ". -
this offer price increase happened just after the 25 August 2006 meeting
where the first NPC letter (Annex K) alleging losses, was. discussed. Even
. assuming that PSALM Management met with the traders Individually, and
therefore no strategy was planned or shared by each trading team as a
group, the uniformity of their acts undoubtedly reveal that an authonty
l1/gt1er and outside the trading teams has made and caused the Individual
traders lo act and trade as one.
These factors clearly establish that the PSALM through- its three trading
teams acting in unity has exercised market power during the t/1/rd billing
month, notably starting on 30 August 2006. (ECO Report)
.Il/'S Analysis
13.6 It Is important at the outset to lay down the standard against which PSALM's
conduct would be compared and from which the resolution of whether or not
there was anti.;competltlve. behavior or market abuse committed In this case
would be
8.7 Rule 11, Section 8 of the EPIRA IRR generally treats anti-competitive conduct
as something that "unreasonably restricts competition In any market for
electrlclty" and nsts certain acts or conduct that constitute abuse of market
power or attempted monopolization, to wit:
Section El. Antl-lompetitive Behavior and Other Unfair Trade Practices.
The ERC shall promulgate Competition Rules prohibiting, and specifying
appropriate penalties and ot/Jer remedies for, any contract, combination or
consp1iac.y that unreasonably restricts competition In i any market for
electricity, or any conduct that constitutes an abuse of market power or an
attempted monopolization of any market for electridty, inCltfdlng but not
limited to the fol/owing:
{a) p11ces of products or seNices: Electric Power Industry
Participants l11at are competitors shall not enter into aqy agreement or
understanding, tacit or explicit, to fix, peg or stabl//ze t11e price of any
product or service. Price fixing shall be deemed to agreements on
bids, price floors, price cellings, pricing formulas an,d r!sale pr(ces, and
agreements on credit or any other terms of a transaction between a buyer
and a set !er.
(b) Fixing output ot' products or services: Power Industry
Participants t/1at are competitors shall not enter Into any agreement or
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JU CASE NO. 06-01
JU Report/ 4 ]IJOI! 2007
Pa.ge 19 of 23
.. --- ...... their
output of any product or service.
8.8
8.9
(c) Customer; Service or Territorial Divisions: Electric Power
Industry Partlc;pants : that are competltors shall not enter . Into any
agreement or understanding;, tacit or expl/dt, as to t11e customers or the
geographic te1Titor/es they wt!/ serve/ or the products or services they wlll
sell. -
( d} 7j4ng: Electric Power Industry Participants shall not use a position
of market power to condlb'on the sale of one product or service on the
purchase of another product or. service. No Dlsttfbution Utility shall make
access to Its Distribution System contingent upon the purchase of
generation, metering/ bl//lng or other services.
, .
(e) Pt1ys/ca/ or Economic. Withholding: Electrlc Power Industry
Participants shall not us& phys/ca/ operating pradlces or bidding strategies
that limit tl7t:! market: participation of a generation unit under conditions
that will result in significant increases In market prices.
(f} D1:r;crirninatory provision of regulated distribution or transmission
se1Vtces: Regulated distribution and transmission se1Vlces shall be
provided on a basis that is not unduly discrlmlm1tory.
In the CRCP, the ERC describes anti-competitive agreements partly as
agreements or arrangements which would have or would' likely to .have "the
effect of substantially lessening competition In a Market." This evokes that
anti-competitive conduct Is conduct that has or will have the effect of
substantially lessening competition or, In the language of Rule l1, Section 8,
conduct that unreasoliably restricts competition.
As for abuse of market power, In addition to the enumeration In Rule 11,
Section 8, and the factors provided In the CRCP with reference to "misuse of
power", the Ill finds the discussion In the ECO Report on market power to be
relevant:
There are numerous references and papers readily ava/lable on market
power abuse and anti-competitive bel7avlor. These are produced by
leading authorities In_ competition and the power Industry. There are
general tflemes and' common grounded on sound economic
principles. The following reflects commonly held views and general
agreements on rnarket power abuse. -Market power Is commonly defined
as tile lJbil/ty of tile seller to set prices above competitive levels end to do
so profitably. Profitably means to profit or gain from the ad:
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!U CASE NO. 06-01
Page 20 or 23
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B.10 WitlT these in mind, it should then be asked: Did PSALM Influence its three
Trading Teams and made. them act as one, thereby substantially lessening
competition or unreasonably restricting competition In the market? Did PSALM
through Its three Trading Teams profited by setting the prices above
coi'npetitive levels? The. answers to these should resolve whether or not there
was anti-competitive behavior or market abuse committed by PSALM.
. H.11 The bidding behavior of. the market participants during the first two billing
months resulted .to low prices. There were.also the zero offers during off-peak
hours, which had a significant Impact on the level of prices during these
months. These contributed to .. NPCs losses, whlch it brought to PSALM's
attention and which the latter brought to its Trading Teams' attention.
8.12 The IU examined NPC's letter, call Ing PSALM's attention to .the estimated losses
to the National Government of PhP 1.965 Billion resulting the combined
trading operations of NPC and PSALM In :the WESM. In the letter, NPC
recommended that NPC and .PSALM implement certain policies, among them,
that "the WESM bidding policies should be based on true pricing of electricity";
that "NPC and PSALM should enter Into ! an agreement on the revenue
requirement For each trading team; that "the PSALM trading teams should bid
based on the established merit order of both NPC owned
1
and NPC IPP's"; and
that "at the very least, the PSALM trading teams should bid based on the.ERC-
approved TOU rates".
3.13 These recommendations plalnly suggest that NPC and PSALM agree on policies,
which If Implemented; would surely affect the prices in the !WESM. Without
question, had PSALM agreed to such recommendations, there would have been
a clear vlolatlon of the provisions. of the CRCP and abuse of market power as
provided in Rule 11, Section 8 (a) of the EPIRA IRR, which provides:
Axing prices of produces or services: Elfictdc Power Industry Participants
' that are competitors shall not enter into any agreement or understanding,
tacit or explicit, to flx, peg or stabilize the price. of any product or service.
xxx.
8.14 From the tenor of PSALM's reply-letter to NPC's letter and from tl1e fact that
PEMC did not find any basis to Include NPC In Its market power abuse
allegation, no agreement was reacheq between NPC and PSALM .to Implement
these recommendations and thus no market' power abuser as described above,
was established to have been committed by NPC and PSALM.
8.15 Ironically, notwithstanding that it rejected NPC's recommendations, Which
would have resulted to price-fixing, PSALM, and only PSALM, was found to
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IU CASE NO. 06-01
IU Report I 4 June 2007
Page 21 of 23
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"influenced" the Trading Teams by meeting with them and relaying to them
NPC's concerns and. recommendations.
. . . . .
8.16 The question, therefore, that begs to be answered is this: Do the three Trading
Teams' PhP 10,000/MWh ,offers starting on 30 August 2006 establish that
PSALM Influenced Its Tradlng Teams for them to act as one in setting the
WESM prices and, ln the process, abused its market power? _
.S.17 In this regard, the IU differs from the ECO's findings, which the MSC and PEMC
adopted.
8.18 It Is expected that market participants will have a common approach to offer
high during peak periods when dernand Is high. That the offers are the same
on the same dates and tradlt:lg Intervals by it.self does not prove:that those who
made these offers were inflenced by some higher authority and that without
such Influence these similar offers would not helve been made.
8.1'4 The ECO found it too colncldental that the three PSALM Trading Teams would
be submitting offers of PhP '10,000/MWh starting on 30 August 2006. Hence,
on Its assumption that the offers for the third month -should not have differed
much from the LWAPs for the previous months, there being' no substantial
changes in the costs of production and In the supply and demand, It concluded
that PSALM must have influenced them to submit such offers, thereby
increasing WESM price.
8.15 The records showed, however, that Ilijan previously submitted offers of PhP
10,000 and .PhP 15,000 on 05 tri. 08 August 2006. for the ffrst two offer blocks
and on 20 to 25, 28, 29 August 2006 for the last blocks of 600 !MW. Likewise,
Pagbilao also submitted offers of PhP 20,000 on 21"'22 August 2006 for the first
blocks and PhP 10,000 011 26"30 August 2006 for the last blocks. Hence, It was
not only starting on 30 August 2006 the offers reached the PhP
10 ,000/MWh level.
8.16. As for the underlying assumption that led ECO to conclude that PSALM must
have Influenced Its Trading Teams, it could be said that the, LWAPs for the first
and second months of WESM commercial operation did not reflect the true
prices of generating electrlclty, with the market participants stlll learning the
Intricacies and implications of trading In the electricity spot market. nie
Increases In the LWAP In the third month from the first two months, whlle
appearing to be substantial, did not readily reveal that at PhP' 4.86/kWh, the
LWAP in the third month during which the market power abuse was allegedly
committed by PSALM was still below the ERC-approved NPC effec.tlve rate of
PhP 4.91/kWh prevailing before WESM operation.
t, "
IU CASE NO. 06-0 l
IU lleport / 4 June 2007
Page 22 of 2J
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8.17 Consequently, even If there had been no substantial.increases In costs and In
demand, contrnry to the ECO's belief, it was probable thatthe Trading Teams'
offers for the third billing month, without any Influence or pressure. from PSALM
Management, would substantially differ from their offers in the first two billing
montfls. As the Trading Team Managers explained, the PhP. 10,000/MWh or
more offers were not some arbitrary figure that they happened to submit for
lhe same trading Intervals. . These offers were products of their bidding
strategies Independently arrived at, which took Into account NPC's concerns on
tile losses sustained by NPC and PSALM during the first two bll,llng. months that
were partly attributed to the bidding strategies the Trading Teams Implemented
during these months. Besides, regardless Of costs, the offers could vary as
there was simply no requirement In the WESM rules, that the offers should
matcl1 the costs.
8.:18 As for PSALM's referral of NPC's letter to its Trading Teams and also the
holding of a meeting to discuss sucli.letter, these were nelther,anti-competltlve
nor Indicative that PSALM intended to Influence. Its Trading Teams to Increase
their offers. The members :of the Trading Teams remain to be employees of
PSALM, which continues to exercise supervision them. It was not unusual
or anti-competitive that PSALM met with its Trading Teams to discuss NPC's
concerns. all, there was no rule in the WESM that prohibited PSALM from
discussing with the Trading Teams matters relating to thefr job performance.
B.19 That there was supposedly competition prior to 30 August 2006, which was
subverted when PSALM Influenced its Trading Teams to offer high, was more of
an llluslon, far detached from reality. With PSALM's registration Into the WESM
as one market participant, thereby enabling each PSALM Trading Team "to see
the market results of other PSALM teams, .during the f:lour," (ECO P.
15), it was not farfetched that. even without any such meeting with PSALM, the
three Trading Teams, after reading NPC's letter, would behave the way they
did on 30 August 2006 and onwards without fearing that their plants would not
be dispatched because of their offers:
B.20 Neither was there any evidence of the elements as cited In the ECO Report that
determine abuse of market power: (a) that PSALM used Its market power to set
the prices above competitive levels; and (b) that PSALM profited from such
exercise. In the first place, there l1ad been no showing of whatthe competitive
level of prices should have been at that time. Given that the market was at Its
infancy and taking into account the price levels before the market started, It
was simply inappropriate to conclude that because there had been a marked
Increase in the offers of PSALM'S Trading Teams for the third billlng month, as
compared to the first two billing months, It could already be said that" the
, ............
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IU CASE NO. 06-01
JU Report / 4 June 2007
P21ge 23 of :u
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resulting prices based on such offers were already above competitive levels and
that PSALM profited from such hlgher prices.
8.21 Absent any other evidence t11at would, even If Indirectly; prove what transpired
during the meeting or what other discussions took place between PSALM and
Its Trading Teams, partlcularly, that there was such an agreement or
understanding, express or Implied, on the Trading Teams' offers Into the
WESM, and that the Trading Teams' offers pushed the prices above competitive
levels, thereby making PSALM profit thereby, the IU would only be speculating
If It would say that because the three Trading Teams slmultaneously offered
similar offers of Pt1P 10,000/MWh starting on 30 August 2006, PSALM alt'eady
unduly Influenced the submission of such offers and abused itsmarl<et power.
8.22 Of course, this could have been what really happened. But then, this \'could
have been" possibility, to the IU's determination, falls short of the "prima facie
case" standard to warrant the filing of a formal Complaint against PSALM.
9 Conclusr/011 a11d Recommendat/011
9.1 The IU finds no prima facie case against PSALM for anti-competitive behavior
or market power abuse. For this reason, further Investigation .'and -proceedings
are not warranted. Tite IU, therefore, recommends that this: lnvestigat19n be
terminated.
Far tl1e Investigatory Unit:
~ ~ ~ - ~ -
Francis Sa nlno C. Juan
Investig ng Officer
.. w=----,...--------
ENERGY REGULATORY connMISSION
San Miguel Avenue, Pasig "ity MERALCO
IMPLEMENTATION BY MANILA
ELECTRIC COMPANY
(IVJERALCO) OF THE
GENERATION RATE
ADJUSTMENT UNDER
RESOLUTION NO. 16, SERIES
OF 2009 FOR THE SUPPLY
PERIOD OF NOVEMBER TO
DECEMBER 2013
x-----------------------x

CL
\J L-JU U
. .r;;o CE
ERC CASE NO. 2013-092 MC
ORQER
On 09 Decernber 20'13, in response to a letter dated 05
December 2013 of MERALCO seeking clearance to stagger
collection of its generation costs of the November 2013 supply month,
invoking Article VIII, Section 1 of the AGRA (Automatic Generation
Hate Adjustment) Rules, which allows an exception from any
provisions of the Guidelines, if such is found to . be in the public
int<3rest and is not contrary tp law or any other related rules and
the Commission granted clearance for MERALCO. to
implement a staggered colleCtion of its generation costs for the
November 20'13 supply month.
It is significant to note that the conditions that purportedly
contributed to the upward adjustment in the generation cost covers
the November and December billing periods which would further
necessitate adjustments in succeeding billing periods to the
consumers.
ERC Case No. MC
ORDER/December 20, 2013
Page 2 of 5
Amidst allegations of possible abuse of market power
committed by some of. the trading participants in the spot market
which could have caused the spiralling of the prices and its effect on
generation charges that will be imposed by MERALCO to its
customers, a Tripartite Committee meeting, attended by the
Secretary of Energy, ERC Chairperson and Commissioners and the
PEMC President, was held last 13 December 20'13.
On '16 December 2013, pursuant to the complaint filed by
Akbayan Representative Walden Bello and Barry Gutierrez,
economist Maitet Diokno of the Center for Power Issues and
Initiatives (CPll), Wilson Fortaleza of Partido ng Manggagawa (PM),
and NAGKAISA and FreedOm from Debt Coalition (FDC), the
of Justice (DOJ): orde'red the Office for Competition to
conduct an investigation regarding the cause of the sharp increase in
power rate.
1
On 18 December 2013, the Commission was summonetj by the
Committee on Energy of the Senate, aside from the House of
Representatives inquiries on v.arious dates, to shed light on the
increase in generation charge of MERALCO.
On 19 December 20'13, MERALCO, based on its initial
assessment again wrote the Commission expressing its concerns on
the possibility that the generation charge for January 2014: will be
significantly higher than the estimated PhP7.37/kWh, as the. bills of
the suppliers are still to be received after the 26
1
h of the month and
validated until the early days of the next .billing mol}th.
With the foregoing factual antecedents and given the n;iandate
of the Commission to ensure the adequate promotion , of the
consumer interest under Section 41 of Republic Act No. 9136 (RA
913G), as well as its responsibility-to validate that no abuse o"f market
power
2
was committed by any of the participants in the spot market,
the Commission is directing the deferment of the imposition of any
fL1rt11er generation charge adjustment.
1
Cited in Inquirer Article dated 16 December 2013 entitled "DOJ office probing power rate hil<e
given Jan. deadline."
2
Section 45 of R.A. No. 9136e
ERG Case No. 2013-092 MC
OHDER/December 20, 2013
Page 3 of5
-
Be that as it may, the Commission, in observance of due
process, will undertake a confirmation process consistent with
Sections 23 and 41 of RA 9136 and Resolution No. 16, Series of
200B (Automatic Rate Adjustment Rules) in order to
safeguard that the fJeneration charges that will be passed on to its
consumers passes the test of prudence and reasonable economic
cost incurred
3
and that the MERALCO procured its supply
requirement in the least cost manner
4
.
As enunciated in Gerochi vs. DOE and ERC
5
, the State thru the
EHC should be able to exercise its police power with great flexibility,
when the need arises, the ERC as regulator, should have sufficient
power to respond in real time to changes wrought by multifarious
factors affecting public utilities, the Qomn_iissio!l is deferring the
imposition of any further generation charge increases.
Thus, in cognizance of the severe impact th.at the further
adjustment may cause the. consumers within the franchise of
MEHALCO and taking into account the harsh realities of the time and
in the interest of substantial justice and equity, the Commission
hereby applies Section 'I, Article 7 (Exception Clause) of Resolution
No. '16, Series of 2009, which provides that where good cause
appears, the Commission may:allow an exemption from ahy provision
o"f these Rules, if such is found to be in the public interest and is not
contrary to law or any other related rules and regulations.
In view of the foregoing and to mitigate the impact of the
impending generation charge adjustment upon MERALCO
customers, the Commission hereby directs MERALCO to maintain its
generation rate at PhP7.37/kWh
6
for the affected billing periods until
further notice and approval of its application for the scheme.
Consequently, MERALCO is directed to file said application within
ninety (90) days from receipt hereof.
a 25, R.A . 9136
4
HOW AGRA WORKS (A DU computes for the Generation Rate, using previous months data, to
pay its power supplier/s or recover cost of own generation for the current month's supply. The
rates approximate the actual costs incurred by the DU for the current month. Since the DU
should neither lose nor gain from the cost adjustment mechanism, tile Generation Rates it
implements are subject to a confirmation process to determine over or under recoveries.
5
G.R. No. 159796 dated 17 July 2007
6
Based on preliminary data available
ERC Case No. 2013-092 MC
ORDER/December 20, 2013
Page 4 of 5
For clarity, this modifies the 09 December 2013 letter of the
Commission.
SO ORDERED.
Pasig City, 20 December 2013.

ENAIDA 6. CRUZ-DUCUT
Chairperson

Commissioner
Commissioner
Case No. 201 :3-092 MC
OHDER/DecHmber 20, 2013
Page 5 of 5
Copy furnished:
'I. Manila Electric Company (MERALCO)
Lopez Building, MERALCO Center,
Ortigas Avenue, Pasig City
2. Philippine Market Corporation (PEMC)
Attn: Atty. Criselda S. Martin-Funelas
Atty. Caryl Miriam Y. Lopez .
9
1
h/'l 8
1
h Floors, Robinsons-Equitable Tower,
ADB Avenue corner Poveda St., Pasig City
3. Department of Energy (DOE)
Energy Center, Merritt Road, Fort Bonifacio,
Taguig City 1201
4. The Office of the Solicitor General
'134 Amorsolo Street, Legaspi Vi!l9ge, Makati City
5. The Commission on Audit
Commonwealth Avenue, Ouezon City
6. The Senate Committee on.Energy
GSIS Building, Roxas Boulevard, Pasay City
The House Committee on Energy
Batasan Hills, Quezon City
.....
ANNEX "19"
H.epub.lic of the Philippines
ENERGY REGULATORY COl\11\11.ISSION
San l\/liguel A venue, Pasig City
H.J THE l\!lATTER 01' THE Il\!IPLElVIENTATlOl\T
BY rvIANILA ELECTRIC COl\!IP ANY (iVIERALCO)
O.F THE GENERATION RATE ADJUSTIVIENT
UNDER RESOLUTION NO. 16, SERIES OF 2009
HJ.R THE SUPPLY PERIOD OF NOVEMBER TO
DECElV[BER 2013
ERC CASE NO. 2013-092 r11c
)(-.. -... --- -------------------------------------- ---------- x
.
1\!IANII'ESTATION \tVITI-:I
VERY URGEI\JT 1"10TION.
COIVJES NOW, the J\!fanila Electric Company (1\!1ERALCCl), by counsel and unto
this Honorable Commission, most respectfully avers, THAT:
t. ()n 20 December 2013, IVIEEALCO received an Order of the same date issued
by the E-Ionorable Commission in the above-entitled case, the relevant portion of
1vhich reads:
"On 09 December 2013, in response to a letter elated 05 December
2013 of l\!IERALCO seeking clearance to stagger collection uf ils
generation costs of the Novernber 2013 supply month, invoking
Article VIII, Section 1 of the AGRA (Automatic Ceneral:ion Rate
i-\djuslment) Rules, which allows an exception from any provisions of
the Guidelines, if such is found. to be in the public inlerest and is not
conl:rary to law or any other related rules and regulations,
C'onunission granted clearance for MERALCO to ... -i11;i,ple1nent a f
staggered collection of its generation co;:; Ls for the November 2013
supply month.
lt is significant to note that the conditions that purportedly
cnntributed to the upward adjustment in the generation cost covers
the November and December billing periods whiclt wc'Jcdd further
11ecessitate . adjustments in succeeding billing lo the
consu1ners.
Arnidsl allegations of possible abuse of market
1
po1ver conuuitled
. I
by smne oJ the trading participants in the spot market which ccmld
have caused the spiralling oJ the prices and its effect on lhe generation
charges that will be imposed by MERALCO to its customers, a
Tripartite Committee meeting, attended by the Secretary of Energy
ERC Chairperson and Commissioners and the PEMC President, was
held last 13 December 2013.
xxx xxx xxx
With the foregoing factual antecedents and given the mandate of
the Commission to ensure the adequate promotion of the consumer
interest tmder Section 41 of Republic Act No. 9136 (RA 9136), a well
as its responsibility to validate that no abuse of market power was
committed by any of the participants in the spot market, the
!::::ommission is directing the defermei1t of the imposition of any
further generation charge adjustment.
xxx xxx xxx
In view of the foregoing ai1d to mitigate the impact of the
impending generation charge adjustment upon MERALCO
customers, lhe Commission hereby directs MERALCO to maintain
its generation rate at PhP7.37/kWh for lhe affected billing periods
until further notice and approval of its application for the recovery
scheme. Consequently, MERALCO is directed to file said application
within ninety (90) days from receipt hereof.
For clarity, this modifies the 09 December 2013 letter of the
Conunission.
SO ORDERED." (Elllph11ses and underscorillg supplied)
2. SLtbsequently, on the same date of 20 December 2013, the Honorable
issued a. press . release, which was posted in its website at
the pertinent portion of which reads:
"The Energy j{egulatory Commisaion (ERC), in an Order dated 20
December 2013, directed JVIERALCO to maintain the gene1ation
charge for its January 2014 billing at PhP7.37/kWh. The Order is in
response to a letter from l\!IERALCO to the ERC dated 19 December
2013 where it expressed its concerns on the possibility that its
generation charge for January 2014 may be higher than the
PhP7.37 /kVVh estimate it earlier made for its January billing .
.
Citing its mandate "to ensure the adequate promotion of the
consumer interest under Section 41 of Republic Act No. 9136 (RA
9136), as well as its responsibility to validate that no abuse of market
power was committed by any of the participants in the spot market,"
the ERC directed MERALCO to def et "the imposition of any further
generation charge adjustment." Given this directive, lVIERALCO
will be constrained to imple1nent a generation . charge of
PhP7.37/kWh in its January billing even :if its calculated generation
charge for the January billing, based on the ERC's Automatic
Generation Rate Adjustment Rulles, will be higher. The deferment
Order issued by ERC also modifies the earlier clearance granted to
2
MERALCO for it to inipose a generation charge of PhPl.00/k\!Vh in
ils .February 2014 billing and PhP0.44/kvVh in its :rvforch 2014 billing,
to recover the generabon costit deferred in its December 2013 billing.
xxx'' (E111pl1t1ses aucl underscoring supplied)
3. By way of Manifestation, it .ts clear from both the Order and the Press Release
both dal:ed 20 December 2013, issued by the I-Ionorable Commission that the
PhP7.37 / k\!Vh generation charge pegged by the I-Ionorable Commission applies only
to MEHJ\LCO's January 2014 billing. l:fowever, with regard to the December 2013
bi.Hing generation charge, although MERALCO is authorized to .bill a generation
of under existing laws and regulations, it is MERALCO's
understanding that such generation chELrge shall be billed on a staggered basis, and
for the December 2013 billing, it should reflect the generation rate of PhP7.67/ k\Nh,
as earlier approved by the I-fonornble Commission in its Letter to MERALCO dated
09 December 2013. Thus, MERALCO has already rendered its bills for December 2013
lo i.ts custo1ners which contained the average generation charge of PhP7.67 /kWh.
This .is 1vithout prejudice to any subsequent adjustment in the generation cost ;;ind/ or
lhe clearing price that: may be ordered by the flonorable Commission as a
rctmH of on-going processes being undertaken by the government
agencies.
,J_ ln light of said Order dated 20 Dece1nber 2013, l\!IERALCO respectfully
:mbrnits that, pending the outcome of the on-going processes, the Honorable
Conunjssion should likewise direct PEMC to defer collection of any billing to
i\JERALCO, and for MER.ALCO lo defer payment to PEJ\!IC, corresponding lo the
increase in the generation charge attributable to all vVESM purchases for the supply
months of November and December 2013, equivalent to an estimated generation rate
- uf Php2.42/ kWh (out of PhP 3.44/k\t\Th) or at least representing the
deferred g;eneration rate adjustment for November 20,13; and the difference between
the c1ctual .
... - JYLE]tA:IC:<S- is a legal ground and factual basis for the
1-loncirable Commission to direct the PEivlC to .defer such collection, and .for
MERALCCJ lo defer payment, consistent vvith the State policies enunciated in !:he
JWLRA.
5. A.rnong the declared policies of the EPIRA are: (1) to protect the public interest as it
is affected by the rates and services of electric utilities and other providers of electric
r1ower; and (2) to est.i1blish a strong and purely independent regulatory body and
t;ystem lo ensure consumer protection and enhance the competitive operation of the
declr.icity market
1
Thus, the said law created the Energy Regulatory Commission
(ERC) to net as the regulating body tasked lo ensure the successful restructuring and
Jnodernizalion 0 the electric pov\rer industry. To this end, the ERC 1vas given the
follo1Ning functions:
"Section 43. Fu11chu11s cf tlw ERC. The ERC shall promote
1 Scl'111.1ii :?(/). .. A. 9136
J
competition, encourage market development, ensure custo1ner choice
Emd penalize abuse of market power in the restructmecl electricity
industry. xxx Towards this end,. it shall be responsiple for tl:ie
following key functions in the restructured industry:
xxx xxx xxx
(c) Enforce the rules and regulations governing the operations of
the electricity spot market and the activities of the spot market
operator and other participants in the spot market for the purpose of
ensuring a greater supply and rational pricing of electricity;
xxx xxx xxx
(k) Nlonitor and take measures in accoidance with this Act to penalize
abuse of market power, cartelization, and anti-competitive or
discriminatory behavior by any electric power industry participant;
x x )(
( o) Nlonitor the activities in the generation and supply of the electric
power industry with the end view of promoting free market
competition and ensuring that the allocation or pass tluough of bulk
purchase cost by distributors is transparent, non-discriminatory and
that any existing subsidies shall be divided pro-rata among all retail
sL1ppliers;
(r) In the exercise of its investigative and quasi-judicial powers, act
against any participant or player in the energy sector for violations of
any law, rule and regulation governing the sam.e, including the rules
on cross-ownership, anti-competitive practices, abuse of market
positions and similar or related acts by any participant in the energy
sector or by any person, as may be provided by law, and require any
person or entity to submit any report or data relative to any
investigation or hearing conducted pursuant to this Act;
) ~ ) ;
(t) Perform such other regulatory fw1ctions as are appropriate and
necessary in order to ensure the successful restructuring and
modernization of the electric power incl us.try, xx x".
6. It is in consommce with these Slate policies and the objective of achieving the
reforms envisioned by the EPIRA that the Supreme. Court, in the case of Freedorn fro Ill
Dcu/. Conlil'io11, et. al. us. ERC and lvlERALC0
1
, highlighted the expanded jurisdiction
of the ERC to regulate electric power indust1y participants, thus:
"The powers enumerated in Section 43 have a common thread.
Characterized as the
11
key functions," they are the uew powers granted
to the ERC in relation to the reform and modernization of the electric
pm,ver industry sought to be achieved by the law. They are also
invariably mentioned with particularity in other provisions of the
law. In other wol'ds, Section 43 merely repeats what is found in the
other sections. }t is a compendium of powers provided in other
provisions of the same law butwere not enjoyed by the previous
2 1_;_,1;, No. 16111.3, 15 June 2004.
4
regulatory bodies. It is a statutory tool to achieve clarity and
convenience, at least with respect to the new powers.
xxx
C.:on.sidering the intent of Congress in enacting the EPIRA and
reading the statute in its entirety, it is plain to see that the' law has
expauded the jurisdiction of the regulatory body, the ERC in this
case, lto enable the latter to implement the reforms sought to be
accomplished by the EPIRA. vVhen the legislators decided to
broaden the jurisdiction of the ERC, they did not intend to abolish or
reduce the powers already conferred upon ERC's predecessors. To
sustain the view that the ERC possesses only the powers and
functions listed .under Section 43 of the EPIRA is to frustrate the
obj eclives of the law." [Emphases Supplied]
The foregoing unmistakably ERC' s authority to intervene for the
greater interest of the industry and consum.ers, it1 order to ensure "rational pricing of
electricity" and "successful restructuring and of the electric power
industry". The EPIRAclearly provides for the legal grounds for the to, inter-alia,
intervene, set the WESlVI prices at reasonable levels when circumstances warrant, and
consequently direct PElVIC to defer collection of any billing to MERALCO, and for
fo defer payment to PEJVIC, corresponding to the !increase in the
generation charge attributable to all v\TESlVI purchases for the supply months of
November and Dece1i1ber 2013, due to the imusually high WESM prices foi the said
period. Such exercise of its authority is consistent with.the restructuring objectives of
ensuring consumer protection and the Honorable Commission's mandate under the
EPIRA.
g_ There are also indubitable factual grounds obtaining in this case which necessitate
ERC' s exercise of such authority.
(i) For one, it is very clear that, during the November to December 2013 supply
months, WESM clearing prices were abnormally high, which recorded the
highest level in recent history.
(ii) Secondly, several generationplants went on unscheduled or forced outage,
in addition to scheduled and extended maintenance shutdowi1, during the
affected period. This resulted in the sky-rocketing increase in 1/VESM prices,
which translated into the . highest generation rates to . consm:ners in .recent
history.
(iii) Finally, there were several events that took place which, with due respect,
should warrant ERC' s cognizance and appropriate action, to wit:
a. Conduct of hearings before the Committees on
Energy of both I-Io use of Representatives and the Senate
of the Philippines, to investigate the generation rate
increase;
5
b. The subsequent pronouncement of the Department of
Energy (DOE) that it will investigate any market power
abuse committed by trading participapts in.the WES1Vl;
c. Filing 0 a complaint by certain interest groups before
the Department of Justice (DOJ) to conduct an
investigation regarding the cause 0 the sharp increase
in power rate; and
d. Filing of a Petition by certain interest groups before
the Supreme Court, seekiri.g to stop the
of the generation rate increase.
9. vVhile the EPIRA mandates the ERC to intervene and penalize market power abuse
or anti-competitive behavior, the EPIRA also does not the ERC from
intervening in other cases where extraordinary circmnstances exist to call for such
intervention. The ERC, as a regulator, is empowered by the same law to step-in to
safeguard the general public and electric power industry as a whole, where the
paramount consideration is the protection of public interest. Such iS the case at bar.
__ 10. In a similar case involving the 3rd and ,:th months 0 WES1VI operations, the ERC
.intervened to set the WESiv1 Settlement prices at NPC-TOU rates. While the ERC
Decision in said case (ERC Case No. 2007-421 MC) provides that there was no pri11w
ji1cic case against PSALI\11, it did not, hov,rever, negate the fact that t.he WESM prices
for l:he th:ird and fourth billing periods were unreasonably high and were affected by
othe.r factors which demand ERC's intervention.
11. ln sum, a directive that may be issued lo PE1vlC to defer collection of any billing
lo :MERALCO, and for IvfERALCO to defer payment to PEMC, corresponding to the
increase in l:he generation charge attributable to all WESIVI purchases for the supply
months of November and December 2013, will depend largely on the fact that the
\VESivI prices for the affected period were extremely and abnormally high, which
demand the immediate intervention of the regulator, to ensure that the public interest
is adequately protected.
12. Further, under Section 30 of the EPIRA, it is provided, in relevant parts:
"SEC. 30. vV/wlesale Electricity Spot lv1arket. - Within one (1)
year from the eectivity 0 this Act, the DOE shall establish a
wholesale electricity spot market composed of the wholesale
electricity spot market participants. The market shall provide the
mechanism for identifying and setting the price of actual variations
from the quantities transacted contracts betweeri sellers
purchases of electricity.
Jointly with the electric power industry participants, the
DOE shall formulate the detailed rules for the wholesale electricity
spol market. Said rules shall provide for the mechanism for
determining the price of electricity not covered by bilateral contracts
between sellers and purchasers of electricity users. The price
determiuatiou methodology coJrtaiued iu said rules shall be subject
6
to the approval ER.C. Said rules shall also reflect accepted
eco1tomic principles aud provide a level playiug field to all electric
power iudustry participauts. The rules shall provide, among others,
procedures for:
xxx
(a) Determining the warket-cleariug price for each time period; xxx"
(E111phnses supplied)
13. Under the EPIRA, and the WESlvI Rules, the WESM clearing prices for all
transactions at the vVESM are determined in accordance with the Price Determination
1Vlethodology approved by lhe ERC. It is also the ERC which has the authority under
the huv lo determine whether such WESM clearing prices reflect the actual and true
con1n1ercial and market forces, and if no,t, to take appropriate corre<;:tive measures to
ensure lhe successful restructuring of the power. industry: including the
implementation and/ or operation of the VVES!vl, and thus protec;t the interest of
eleci:ricity end-users. For this purpose, the EPIRA grants the ERC the power to
perform such regulatory functions as are necessary and appropriate under the
circurnslances.
"SEC. 43. FuJLctious of t:lie ERc;. - ER,C shall promote
competition, encourage market development, ensure customer choice
and penalize abuse of market power in the restructured electricity
industry. xxx Towards this end, it shall be responsible for the
following key functions in the restructured industry:
( t) Pe1forw other regulatory fuuctious as are appr'opriate
11ecessary iu order to eusure the successful aud
JJWderuizatiou of the electric p01oer industry, xxx" (E111plwses supplied)
14. ll: is clear that, under the circumstances obtaining in this case, the ERC has the
po,,ver lo direct PEJVIC to defer collection of any billing to MERALCO, and for
lVlERALCO to defer payment to PElVIC, corresponding to the increase in the
general.ion charge attributable to all vVESl\1 purchases for the supply months of
November and December 2013, pending the completion of the legal processes being
undertaken by the relevant government agencies.
15. ln fact, ERC's intervention under these circumstances sends a strong signal to
investors that WESJ\!I prices are transparent and competitive, consistent with the
objectives oJ vVESJVI to establish an efficient, competitive, transparent and reliable
market for electricity:', where a level playing field exists among vVESivI Participants
4
and prices are governed as far as practicable by commercial and market forces
5
.
3 Sec/ro11 L2.2, tVESlvl Rules
1 SeLlio11 1.2.5 (11), WESi\!I Rules
" S1oc1'/1J11 L.2.5 (d), WESM Rules
7
I u: Vvith respect, to al101v the PEJ\'1C to collect from IvIERALCO, and any other
.:dtecled DU tor that matter, pending the resull of the legal processes being undertaken
by l:he relevant government agencies, the full amount of the WESM billings for the
sL1pply months of November to December 2013, would be grossly unjust, ineqiiitable
<u1d very unfair to l'vlERALCO and its niillions of consumers which the Flonorable
Conun.ission is mandated to protect. Such imposition undermi1ies ;the mandate 0
EPifZi\ lo protect the consumers and ensure a reasonable and affordable price of
electricilv.
l/. For distribution utilities (DUs) like J\1ERALCO, which were affected by the extra-
ordinarily high VVES.M prices for the November to December 2013 ,supply months,
::>uch genera lion costs are purely pass-through charges and therefore, revenue-neutral
tu lhc DUs. According to the I-Ionorab.le in verifying the
of I\!lERALCO, it "strictly 11dheres to Nie principle that: the DU should uot earn
r,1'ih''J'We uor loss _fi-0111 l11c i111plen1e11taN011 tf the ge11emtio1i cluzrges.''
1::1. 111 particular, for Lhe affected supply month oJ November 2013, the increase in the
generation charge of .MERALCO attributable to its WESiv1 purchases is estimated to
<:J.tnount tu PhP6 BiUion, out of a total 0 approximately PhPlO Billion, excluding VAT.
.. for December 2013 supply month, such increase in generation charge is also
ci\pectcd, but is yet Lo be determined _pending Lhe completion of the supply month. 1
is made lo pay to PEJVIC on clue date without the ability to collect the
frorn its c:ustorners, such mnounts would create a significant ilnpact and dmnage
Lu l\llERALCO's cash flow and financial/ credit position, would affect IvlERALCO's
iibilitv lo linance its operations and much needed capital expenditures.
j\). Tlrns, in the interest of fairness E\rtd equity, and lo prevent significant damage to
J\JEFALCO (Ell.l other affected DUs for that matter) that could threaten its viability, it
i::; exLrente.ly important that the Honorable Commission's directive to defer,. until
lurllu:r nolicc and approval, the collection from consumers of any generation rate
;:idjw>trnent in of the PhP 7.67/kWh and PhP7.37/k\Nh generation charge for
lhe supply ntunlhs of November and December 2013, respectively, must include a
directive lo PEIVlC to also defer collection of any billing to J\1ERALCO, and for
l'v1ERA.LCO Lu defer payment to PEI'v1C, corresponding to the increase in the
generation charge attributable to all VVESivl purchases for the supply months of
.l\luvcrnber and December 2013, pending the outcome of the legal process being
cullducted by the relevant government agencies. This will be in keeping with the
inLenl and spirit of the EPIRA and its implementing rules, as well as the existing
n'gulalions of the Honorable Commission, which all affirm that generation costs are
<1utu1.1.wbc pass-through charges of the DUs. ,, ,,
:.:
1
.U. Considering that the vVESJ'v1 bill of lVIERALCO Jcir the November 2013 supply
1.nonth 1vill be due on the 26th of December 2013, it is extremely urgent and of
pJramount irnportance that the foregoing concerns be immediately addressed.
hlERt\LC:'O most respectfu.lly implores to this Honorable Commission to intervene in
lltis c:_1se and direct PENIC lo defer collection o.f any billing to l\IIERALCO, and for
I\ !1J ddc1: payrnenl to PEMC; corresponding to the increase in the
(.J
0
generation charge attributable to all 'NESTvl purchases for the supply months of
November and Dece1nber 2013.

1!\THEREFORE, premises considered, it is respectfully prayed to the Honorable
Commission that an Order be immediately issued NOTING and GRANTING the
instant Manieslalion with Very Urgenl Tviotion, and, pending the result of the legal
processes beir1g conducted by the relevant government agencies, DIREC'fING PEMC
to defer collection of any billing to MEH.ALCO, and for MEH.ALCO to defer payment
to PEIV[C,. corresponding to the increase in the generation charge attributable to all
\NESl\11 purchases for the supply months of November and December 2013,
equivalent to an estimated generation rate of Php2.42/kWh (out of PhP 3.Ll4/kWh)
. I
or at least PhPl.44/kWh representing the deferred generation rate adjustment, for
November 2013; and the difference betvveen the achml generation charge and
PhP7.37/k\Vh, for December 2013.
Other relief just and equitable under the premises are likewise prayed for.
Pasig City, 23 December 2013.
J\IIANILA ELECTRIC COMP ANY
lvlERALCO
lVlERALCO Compound
Ortigas CiW
By:/,/ ,, ..... .
\. ""-.., /
. ' /. .
'., ... _ ';,. / l
-
( __ Cmrilsel for lvlERALCO
Roll 0 Attorneys No. 42281
PTR No. 8521869; 01/31/13; Pasig
IBP No. 926324; 01/16/13; RSM
lVlCLE Compliance 26 JVIarch 2012
. /
AP
Co s '{fcJJ LCO
Roll Atkw 1eys No. 43007
PTR No. 8521899; 01/31/13; Pasig
IBP No. 926323; 01/16/13; RSTvl
J\llCLE Compliance No. IV-00052.96; 26 Tvlarch 2012
7th Floor, Lopez Building
Ortigas A venue, Pasig City
Telephone Number 1622-2260; Fax No.1622-3550
Email address: regulatory .legal.adm.in@1neralco.con1..ph
9
REPUBLIC 01' THE PHILIPPINES
CITY 01' P ASIG }S.S.
VERIFICATION
l, 'WILLIAM S. PANUNTUAN, Filipino, of legal age, and with office address
at 8th Floor, Lopez Building, .l\!IERALCO Center, Ortigas Avenue, Pasig City, after
being sworn in accordance 'With law, depose and say, that-
1. I am the First Vice President m1cl Flead, Legal Services of MERALCO;
2. l have caused the preparation and filing of the iI1Stant Manifestation with
Very Urgent lVlotion. l hereby certify that I have read and understood the allegations
ccmtained therein and all the facts stated therein are true and correct based on
authentic records made available to me in the ordinary course of business of
MERALCO.
DEC 2 3 2013
ll\I lNITNESS WHEREOF, I have hereunto affixed my signature this _ day
of December 2013 at Pasig City, Philippines.

Affinnt
SlJBSCRIBED and SWORN to before me tfJfuC_ll d!lJfJof December 2013,
affiant exhibited to ine J-Iis Taxpayer Identification No. (TIN) 146-473-562 issued by
Lhe Eureau of Internal Revenue as his competence evidence of i e tity.
Doc. No.
l
:Ja :rr" J' ,,-;;1,,,,._
c L, - . -"
Book l\To. }$.___
Seri.:>.s of 2013.
,)(;> -

M- L. YAP
NtQJ R p LIC
Pasig,
& San Juan

lswed on. _.!f../}
0
al Pasig Cily.
11nlil December 31, 20 Lt
Holl No. 430U7 I IBP lfo. '2t t ; l/..l..; RSM Chapler
0
T
0
No .J![li_r. '1.; ...;.[l]llii.; Pasig CTiy
NOTICE OF HEARING !
1
" Lopez BIJg., Ortigas Ave., Pasig Cily
To lhe Clerk of the Commission
Energy Regulatory Commission
Please submit the foregoing Manifestation with Very Urgent J:VIotion for the
consideration and approval of the Honorable Commission immediately upon
receipt hereof.
10
Copy furnished:
Philippine Electricity Market Corp.
A.r:tn. Atty. Criselda S. Martin-Funelas
9ll
1
/l8th Floors, Robinsons-Equitable Tower
ADD Avenue, corner Poveda St., PasigCil:y
Energy Center, Meritt Road, Fort Bonifacio
Taguig City 1201
The Office of the Solicitor General
1'.'.\<'J Amorsolo St. Legaspi Village 1\!lakcrti City
The Commission on Audit
- Commonwealth Ave., Quezon City
The Senate Committee on Energy
GSJS Bldg., Roxas Blvd., Pasay City
Th2 House Commiltee on Energy
13atasan I-Iills, Quezon City
Explanation:
Registry Receipt #_j_ tf/(J
Date: -DEC .... 2.-1-2013 '
Registry #--,- J/!!111
Dai:c: Of:C 2 3 2013
- - .. . . ... ----..----
U.cgistn1 Ifr.cci:.11." # !i.Let21.
C! ... . JJEC 2'..J ... __
Rellistn1 Rc.?i
1
;t # L'( {f /?j_
(.} .. DEC 2 ') Wl"'
/Jr; le; . . ... ., ... :,_, ____ ..
This pleading is being served by registered mail, with retuxn card, due to lack of
material time and messengerial services.
11
IMPLEMENTATION BY
MANILA ELECTRIC
COMPANY (MERALCO) OF
THE GENERATION RATE
ADJUSTMENT UNDER
RESOLUTION NO. 16, SERIES
OF 2009 FOR THE SUPPLY
PERIOD OF NOVEMBER TO
DECEMBER 2013
ANNEX. "2C>"
ERC CASE NO. 2013-092 MC
X-------------------X
ORDER
On December 23, 2013, the Commission issued an Order
settin9 the
11
Manifestation with Very Urgent Motion" filed by the Manila
Electric Company (MERALCO) for"hearing on December 26, 2013.
Based on the news report, on even date, the Supreme Court
has issued a 60-day Temporary Restraining Order (TRO) relative to
petitions filed by the National' Association of Electricity Consumers
(NASACORE) and Federation of Village Association (FOVA) on the
generation rate increase of the Manila Electric Company
(MERl\LCO). Thus, in deference to the Supreme Court which has
taken cognizance of the above-mentioned petitions, the Commission
is recalling its Order dated December 23, 2013 and cancelling the
hearing set on December 26, 2013.
SO ORDERED.
Pasig City, December 23, 2013.
'J-A J,,, (
z( NAIDA DUCUT
(\nn'V
VICTORl1JC. YAP-TARUC
Commissioner Commissioner
JOSEFINA

Ts Er<C Case No. 2013-092 RC MERALCO SC TRO
ERC Case No. 20'1 MC
Order/December 23, 20'13
Page 2 of 2
Furnished:
1. Atty. Jose Ronald V. Valles
Lopez Building
MERALCO Compound
Ortigas Avenue, Pasig City
2. Atty. Criselda S. Martin-Funelas
The Philippine Electricity Market Corporation
9th/18th Floors, Robinsons-Equitable Tower
ADB Avenue, corner Poveda Street
Pasig City
:3. The Office of the Solicitor General
234 Arnorsolo Street, Legaspi Village, Mal<ati City
Metro Manila
4. The Commission On Audit
Don Mariano Marcos Avenue
Diliman, Quezon City, Metro Manila
5. The Committee On Energy
Senate of the Philippines
GSIS Building, Roxas Blvd., Pasay City, Metro Manila
6. The Committee On Energy
House of Representatives . .
Batasan Hills, Quezon City, Metro Manila

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utilities, eco-zones, indusuies, as well

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