New found hope

What appears to be an already lost cause no longer seems to be so.

Panay Electric Co. (PECO), which lost its 97-year old business of distributing electricity in Iloilo City and three nearby towns when Congress gave a franchise covering the same area to upstart MORE Electric and Power Corp., got the Mandaluyong Regional Trial Court to rule in its favor when the latter declared certain provisions of MORE’s franchise as void and unconstitutional.

Earlier last month, the Mandaluyong RTC, through Judge Monique Ignacio, said the provisions infringed on PECO’s rights to due process and equal protection of the law.

Republic Act No. 11212 signed by President Duterte just last February granted MORE a 25-year power distribution franchise. Two years prior to the expiration of PECO’s franchise on Jan. 19, 2019, a bill was filed for its renewal, but was not acted upon by the House.

To ensure an uninterrupted supply of electricity in Iloilo City, PECO was allowed to provisionally continue distributing power until such time that MORE was ready to operate.

RA 11212’s assailed Sec. 10 which authorized MORE to exercise the power of eminent domain and take over PECO’s assets after paying just compensation. Thus, MORE filed with the Iloilo RTC an expropriation case to take over PECO’s assets used in distributing electricity, citing Sec. 10 which empowered it to take possession of, exercise control over, and manage and operate all of the power distribution assets in Iloilo City.

MORE also asked the Iloilo Court to determine the reasonable value of PECO’s distribution system assets for just compensation, then order the transfer ownership over these upon payment. MORE estimates PECO’s assets to be valued at P481.8 million, while PECO claims these are worth at least P2 billion.

The Mandaluyong court said PECO has no obligation to sell and MORE has no right to expropriate PECO’s assets, adding that PECO’s rights to its properties are protected against arbitrary and confiscatory taking.

Judge Ignacio warned that the state should not intervene in a corporate takeover, explaining that the only tangible effect of the exercise of eminent domain by virtue of the assailed provisions would be to replace PECO with MORE as the owner of the existing electric power distribution system. This, the court emphasized, should be a private matter between PECO and MORE.

The court also permanently prevented MORE from commencing or pursuing the expropriation proceeding against PECO and from taking over PECO’s distribution assets in the franchise area.

MORE has said that it will ask the higher courts to review the Mandaluyong RTC ruling, adding that the latter’s decision has no bearing on the petition for writ of possession pending with the Iloilo City RTC.

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The power of eminent domain, also called the power of expropriation, is one of the three inherent powers of the state, the two others being police power and taxation power.

As held by the Supreme Court in a number of cases, when the power is exercised by Congress, the question necessity is generally a political question, but when exercised by a delegate, as in this case, private company MORE, the determination of whether there is genuine necessity for the exercise is a justiciable question. The High Tribunal has also ruled that the due process clause is violated if a party is not given any form of hearing or procedure by which the propriety of the expropriation can be questioned.

If exercised by the state, expropriation must comply with the requirements of necessity of taking, that it must be for public use, payment of just compensation, that the property involved is private, and that there must be taking in the constitutional sense. But if the power is merely delegated by the legislature, additional requirements can be imposed by law. In one case, Filstream vs. CA, the SC held that expropriation proceedings may be resorted to only when the other modes of acquisition have been exhausted.

In the case of PECO, the Mandaluyong RTC said that the requisite of public use is lacking. It explained that for a valid exercise of the right of eminent domain, it is necessary that the property sought to be taken is not being devoted to the particular public use contemplated by the expropriating body.

“The power of eminent domain was never intended to be used as a tool to take private property already being devoted to public use from one person and transfer the same to another person to be used for the same public purpose. It does not achieve the ultimate end of eminent domain which is to meet a public need or public exigency,” it said.

Here, the court noted, PECO’s properties are already being devoted to public use and the only effect of the exercise of eminent domain is to replace PECO with MORE.

The Mandaluyong RTC, likewise, said that the assailed provisions of RA 11212 violate the equal protection clause of the Constitution since it grants MORE unwarranted benefits than other distribution utilities even if there is no substantial distinction between MORE and other utilities.

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PECO’s fight aided by the legislature is now being closely monitored by other electric cooperatives throughout the nation who fear that they may also be dislodged by Congress when it decides to grant distribution franchises to private entities like MORE.

One of these is Palawan Electric Cooperative (Paleco). During the last Congress, House Bill No. 8829 was filed by Palawan Reps. Frederick Abueg and Gil Acosta for the grant of a 25-year congressional franchise to MORE Reedbank Corp., a subsidiary of Prime Metroline Holdings Corp., to distribute electricity in Palawan.

Although the bill was not acted upon during the 17th Congress, it is expected to be refiled with the 18th Congress. The bill reportedly has the full backing of Palawan Gov. Jose Alvarez and other provincial officials.

At present, it is 45-year-old Paleco that has the franchise to distribute electricity in the province. Paleco is owned by its own power-users, consisting of households and business establishments in the franchise area.

These developments involving PECO and Paleco are said to be sending shivers of dread on the 121-member Philippine Rural Electric Cooperatives (Philreca), the country’s umbrella group for electric cooperatives. This is because any power coop, even the well-entrenched power utilities in the country, may be driven out of business at Congress’ behest.

The Mandaluyong RTC’s brave decision should serve as warning and a reminder to our legislators that Congress’ actions are subject to judicial scrutiny, especially if these violate our fundamental law.

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