G.R. No. L-19850; January 30, 1964
VIGAN ELECTRIC LIGHT COMPANY, INC., petitioner, vs. THE PUBLIC SERVICE COMMISSION, respondent.

FACTS

Petitioner Vigan Electric Light Company, Inc. held a legislative franchise and a corresponding certificate of public convenience from the respondent Public Service Commission (PSC) to operate an electric service in several Ilocos Sur municipalities. Its authorized schedule of rates was approved by the PSC on May 31, 1950. On January 16, 1962, the PSC advised petitioner of a conference to revise its rates, referencing a letter-petition from Congressman Floro Crisologo and 107 residents alleging anomalies, including the sale of electric meters in the “blackmarket” and the installation of meters registering excessive consumption. Petitioner denied the allegations, noting the meters had been inspected and sealed by the PSC itself.
Subsequently, the PSC requested the General Auditing Office (GAO) to audit petitioner’s books. Based on the GAO’s subsequent report, the PSC issued an order on May 17, 1962, finding that petitioner’s net operating income represented a 45.45% return on its invested capital. The PSC deemed this excessive and, applying a 12% allowable return, unilaterally reduced petitioner’s authorized rates effective June 1, 1962. This order was issued without conducting a formal hearing where petitioner could present evidence on the reasonableness of its rates or contest the GAO findings.

ISSUE

Whether the Public Service Commission acted without or in excess of jurisdiction or with grave abuse of discretion in issuing the order reducing the petitioner’s authorized rates without prior notice and hearing.

RULING

Yes. The Supreme Court granted the petition for certiorari and annulled the PSC’s order. The legal logic rests on the nature of the PSC’s rate-fixing power and the constitutional guarantee of due process. While the PSC possesses broad regulatory authority under Commonwealth Act No. 146 , Section 16(a) explicitly mandates that the Commission shall approve only rates that are just and reasonable, and shall do so “only upon reasonable notice to the public services and other parties concerned, giving them reasonable opportunity to be heard.”
The Court emphasized that the proceeding to modify existing rates is quasi-judicial, not merely legislative or administrative, as it directly affects the established property rights of the utility. The petitioner’s existing rates were presumed fixed in compliance with law after proper notice and hearing. Therefore, any modification of those rates, especially one based on contested factual findings like the GAO audit report, cannot be made over the utility’s objection without affording it the same procedural safeguard of notice and a full opportunity to be heard. To hold otherwise would violate the due process clause. The Court found the order void for this fatal procedural defect, making a prior motion for reconsideration unnecessary, and made permanent the preliminary injunction against the order’s enforcement.