Pasig City

March 18, 1998 PSE CIRCULAR FOR BROKERS NO. 412-98 PHILIPPINE STOCK EXCHANGE Philippine Stock Exchange Center Exchange Road, Ortigas Center Pasig City Attention : Ms . Maria Isabel T. Garcia Listing Department Gentlemen : Attached is a copy of Court of Appeals Resolution in CA-G.R. SP No. 46888, Manila Electric Company versus Energy Regulatory Board, et al, promulgated March 17, 1998. cdlex Very truly yours, (SGD.) ATILANO S. GUEVARRA, JR. Assistant Corporate Secretary REPUBLIC OF THE PHILIPPINES COURT OF APPEALS MANILA TWELFTH DIVISION [CA-G.R. SP NO. 46888 March 17, 1998] MANILA ELECTRIC COMPANY , petitioner , vs . ENERGY REGULATORY BOARD, ET. AL . R E S O L U T I O N SALAS , J .: On February 25, 1998, We issued a Resolution requiring the respondents to file their Comment, not a Motion to Dismiss; and deferring the resolution of Meralco's petition for the issuance of a Temporary Restraining Order/Preliminary Injunction, until after submission of the Comment. On February 24, 1998 (Rollo, p. 1031), the petitioner submitted an Urgent Manifestation stating; that under Section 9 of Executive Order No. 172, the Decision of the ERB, determining, fixing and prescribing rates, shall be immediately operative; that unless a TRO is issued, it will be compelled, under the ERB Decision, to already effect the rate reduction starting March 1, 1998, the start of its billing cycle; that this will amount to a drastic change in Meralco's Billing Program and that the adjustment will only serve to confuse the more than three million customers. Reiterated was the prayer for the issuance of a TRO. On March 11, 1998, petitioner again filed a Verified Motion for the Issuance of a TRO/Writ of Preliminary Injunction, stating the following reasons: the contested decision is not only devoid of factual or legal basis but is likewise contrary to law and jurisprudence: Meralco petitioned ERB for an additional period of up to the end of March, 1998, within which to submit the necessary data for the purpose of implementing the ERB Decision: in the Order dated March 3, 1998. ERB granted an extension of fifteen (15) days only and required Meralco to submit the revised rate schedule within the same non-extendible period of 15 days. ERB is determined to implement the contested Decision notwithstanding pendency of the Petition for Review: unless restrained. ERB will compel Meralco to effect the refund and rate reduction on March 18, 1998; the parties who will benefit in terms of the reduction are only those who consume more electricity particularly establishments which produce goods and services for sale to the public; the refund alone translates to an amount of 11.3 billion pesos while the rate reduction would mean a decrease of the 1998 revenue of Meralco by about 3.4 billion pesos: with the refund and rate reduction implemented. Meralco will not have enough funds anymore for system improvement, ultimately resulting in deterioration of the quality of services, not to mention the fact that implementation of the refund and rate reduction program will entail administrative difficulties. It appears that ERB relied solely on the PSC Decision, like what COA did, and apparently referred to it as a Supreme Court decision itself. COA supposedly adopted the view that by the nature of income taxes, the same should be borne by the stockholders instead of passing on to the "rate payers" the burden of payment "PSC Decision, in PSC Cases Nos. 8589, 89890, and 89893, dated December 27, 1957)". A misquotation is obvious, PSC Cases Nos. 85889, 85890 and 85893 eventually reached the Supreme Court and then of the ruling ( Manila Electric Company vs . Public Service Commission, 11 SCRA 317 ) merely setting aside the Decision of PSC on December 27, 1957, together with the March 3, 1958 Order, and then directing that the records be remanded to the Commission, for further proceeding and to render judgment accordingly. In the case of Manila Electric Company vs. Public Service Commission (18 SCRA 651) , also having reference to the three (3) PSC Cases Nos. 85889, 85890 and 85893, and supposedly setting the hearing on November 16, 1964. Meralco on October 15, 1964, filed a Motion to Withdraw said Petition for Review of rates, and after due hearing, was granted on November 10, 1964. There was therefore no official pronouncement by the Court disallowing franchise tax as part of the operating expenses. This is not to mention even ERB Cases Nos. 9170 (1982): 92-105 (1985): and 97-11 (June 2, 1987), which maintains the pronouncement that utility taxes should be treated as part of the operating expenses. After considering the arguments in the Petition for Review: the Urgent Manifestation; and the Urgent Motion for the Issuance of a TRO/Writ of Preliminary Injunction. We find the Urgent Motion to be impressed with merit and to prevent the matter presented from being rendered moot and academic and pending receipt of respondent's Comments. ERB is hereby restrained from implementing the contested Decision dated February 16, 1998, and the Order dated March 3, 1998, in ERB Case No. 93-118. Likewise, without anymore need of oral arguments. a justification should be submitted by the respondents, within a period of ten (10) days from notice, why a writ of Preliminary Injunction should not be issued, as prayed for. Finally and as formally petitioned, the Comment by the public respondent should be submitted not later than March 17, 1998. prLL SO ORDERED. (SGD.) BERNARDO LL. SALAS Associate Justice WE CONCUR: (SGD.) CONSUELO YNARES-SANTIAGO Associate Justice (SGD.) DEMETRIO G. DEMETRIA Associate Justice