GR 166769; (December, 2006) (Digest)
G.R. No. 166769 & G.R. No. 166818 ; December 6, 2006
MANILA ELECTRIC COMPANY, INC. and ENERGY REGULATORY COMMISSION, petitioners, vs. GENARO LUALHATI, BAGONG ALYANSANG MAKABAYAN (BAYAN), KILUSANG MAYO UNO (KMU), GABRIELA, KALIPUNAN NG DAMAYANG MAHIHIRAP (KADAMAY), AND PARTY LIST BAYAN MUNA, respondents.
FACTS
Manila Electric Company (MERALCO) filed an application with the Energy Regulatory Board (ERB), later succeeded by the Energy Regulatory Commission (ERC), for a rate increase and the appraisal of its properties. This was docketed as ERC Case No. 2001-646. While this application was pending, Republic Act No. 9136 (EPIRA) took effect, requiring the unbundling of rates. MERALCO subsequently filed a separate application for approval of its unbundled rates, which also proposed an increase, docketed as ERC Case No. 2001-900. The ERC consolidated the two cases. Various consumer groups, including Genaro Lualhati and several cause-oriented organizations, opposed both applications.
After conducting hearings, the ERC rendered a consolidated Decision approving MERALCO’s unbundled rates and provisional increase. The oppositors elevated the case to the Court of Appeals, which annulled the ERC Decision. The CA ruled that the ERC committed grave abuse of discretion by approving the rate increase without first securing a complete audit of MERALCO’s books by the Commission on Audit (COA), as allegedly mandated by law. MERALCO and the ERC filed separate petitions for review before the Supreme Court.
ISSUE
Whether the Court of Appeals erred in ruling that a prior COA audit of MERALCO’s books is a mandatory precondition for the ERC’s approval of a rate increase.
RULING
Yes, the Court of Appeals erred. The Supreme Court reversed the CA Decision and reinstated the ERC’s approval of MERALCO’s rates, subject to a crucial modification. The legal logic is twofold. First, the Court clarified that the statutory provision requiring the Auditor General (now COA) to assign auditors to assist the Public Service Commission (now ERC) is directory, not mandatory. This function is merely adjunct or supportive to the primary regulatory power of the ERC. A contrary interpretation would unduly hamper the ERC’s quasi-legislative and quasi-judicial functions and its mandate to ensure reasonable electricity rates.
Second, while a prior audit is not a jurisdictional prerequisite, the Court, exercising its constitutional duty to protect public interest, imposed a condition to balance the approval of the rate increase with the need for transparency and reasonableness. The Court reinstated the ERC Decision but ordered that the approved rate increases be deemed PROVISIONAL only. It simultaneously directed the ERC to request the COA to conduct a complete audit of MERALCO’s relevant books and accounts. The final reasonableness of the rates remains subject to the ERC’s evaluation of the COA’s findings. This ruling harmonizes the ERC’s regulatory autonomy with the state’s policy of ensuring just and reasonable utility rates through verification mechanisms.