G.R. No. 37869 ; February 17, 1933
PANAY AUTOBUS COMPANY, petitioner-appellant, vs. PHILIPPINE RAILWAY CO., respondent-appellee.

FACTS

The Philippine Railway Company (PRC) filed a petition with the Public Service Commission (PSC) seeking authority to alter its freight rates on the Panay Division at its own discretion to meet competition from road trucks and autobuses. PRC requested that its existing rates be considered maximum rates and that it be allowed to fix lower rates whenever it deemed necessary. The Panay Autobus Company opposed the petition, arguing it would promote ruinous competition and discriminatory rates. The PSC granted PRC’s petition, approving a proposed reduced tariff. Panay Autobus appealed.

ISSUE

Whether the Public Service Commission has the authority to grant a public utility, like the Philippine Railway Company, the power to alter and reduce its freight rates at its own discretion to meet competition.

RULING

No. The Supreme Court reversed the PSC’s decision. The Court held that allowing a public utility to change its rates at will, whenever it deems necessary to meet competition, would defeat the purposes of the public service law. Such a procedure would create an unsatisfactory state of affairs, lead to discriminatory rates, and result in a lack of rate stability. The PSC cannot delegate its rate-fixing power to the utility itself. If there is unlawful competition from other operators, the PSC’s duty is to correct it by enforcing the law against those operators, not by authorizing the railroad to engage in flexible, potentially discriminatory rate-setting. The PSC must retain control over rate changes to ensure they are just, reasonable, and non-discriminatory.

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