G.R. No. 239829 , May 29, 2024
NATIONAL GRID CORPORATION OF THE PHILIPPINES, PETITIONER, VS. MANILA ELECTRIC COMPANY, RESPONDENT.

FACTS

On December 12, 2011, the National Transmission Corporation (TRANSCO) and Manila Electric Company (Meralco) entered into a Contract to Sell covering four sub-transmission lines/assets (STAs). They filed a Joint Application with the Energy Regulatory Commission (ERC) on April 17, 2012, seeking approval of the sale. The ERC granted the petition for intervention filed by the National Grid Corporation of the Philippines (NGCP), which claimed it had incurred improvement costs on the STAs. On April 22, 2013, the ERC issued a Decision approving the sale of two STAs (Tayabas 115 kV Switchyard and Ternate Substation Equipment) but disapproving the sale of the Dasmariñas-Abubot-Rosario 115 kV Line and Rosario Substation Equipment (DAR Assets). The ERC ruled that, pursuant to Section 8 of the Electric Power Industry Reform Act of 2001 (EPIRA), a consortium must be formed between Meralco and the Cavite Economic Zone (CEZ), as both were distribution utilities connected to the DAR Assets, before the sale could proceed. The Philippine Economic Zone Authority (PEZA), which operates utilities within CEZ, had executed a waiver of its right to purchase in favor of Meralco. The ERC denied the motions for partial reconsideration filed by Meralco and TRANSCO, and later denied Meralco’s Motion to Re-open Proceedings, which argued that PEZA had a legal impediment to forming a consortium. Meralco filed a petition for review with the Court of Appeals (CA). The CA initially dismissed the petition but, upon Meralco’s motion for reconsideration, issued an Amended Decision reversing the ERC and approving the sale of the DAR Assets to Meralco. The CA held that the waiver by PEZA was valid and that the consortium requirement under EPIRA was not mandatory when one qualified distribution utility waives its right.

ISSUE

Whether the Court of Appeals erred in ruling that the consortium requirement under Section 8 of the EPIRA is not mandatory, thereby approving the sale of the DAR Assets to Meralco despite the absence of a consortium with the Cavite Economic Zone (CEZ).

RULING

The Supreme Court DENIED the petition and AFFIRMED the Amended Decision of the Court of Appeals. The Court held that the formation of a consortium under Section 8 of the EPIRA is not an absolute requirement for the disposition of sub-transmission assets when one of the connected distribution utilities validly waives its right to acquire them. The Court ruled that PEZA, as the operator of utilities within the CEZ, is a “distribution utility” under the EPIRA. However, the right granted to a connected distribution utility to acquire the assets is a privilege that can be waived. The Court found PEZA’s waiver in favor of Meralco to be valid. The law’s objective of orderly privatization is served by allowing a willing and capable distribution utility (Meralco) to acquire the assets when the other (PEZA) has expressly waived its right. The Court further noted that the ERC’s own guidelines recognize that a waiver from a qualified entity is a mode of compliance with the consortium requirement. Therefore, the CA correctly reversed the ERC’s orders and approved the sale of the DAR Assets to Meralco.