SECOND DIVISION
[G.R. No. 219380. November 14, 2018.]
MELTERS STEEL CORPORATION, petitioner, vs.NATIONAL GRID CORPORATION OF THE PHILIPPINES, respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution dated14 November 2018which reads as follows:
"G.R. No. 219380 (MELTERS STEEL CORPORATION, petitioner, v.NATIONAL GRID CORPORATION OF THE PHILIPPINES, respondent.)
G.R. No. 219380 is a petition 1 filed by Melters Steel Corporation (MSC) assailing the Decision 2 dated 22 December 2014 and the Resolution 3 dated 10 July 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 128508, entitled "National Grid Corporation of the Philippines v. Melters Steel Corporation." The CA granted the petition of National Grid Corporation of the Philippines (NGCP) which assailed the Decision 4 dated 26 November 2012 and the Order 5 dated 17 January 2013 of the Energy Regulatory Commission (ERC) in ERC Case No. 2008-062 MC, entitled "In the Matter of the Application for the Adoption of the Same Billing Methodology Approved for SKK Steel Corporation and Stronghold Steel Corporation by the National Transmission Corporation, with Prayer for Provisional Authority." The ERC approved MSC's Application.
The CA found the facts as follows:
Petitioner NGCP (formerly, National Transmission Corporation or Transco) is a government-owned and controlled corporation, and functions as the country's central operator of high voltage transmission facilities. [MSC] is a client of petitioner NGCP, and is engaged in steel manufacturing.
Respondent MSC filed the Application before the ERC. cDHAES
The Application alleged: respondent MSC has a unique operational structure which makes its hourly electricity consumption erratic, resulting to a lower load factor compared to other industrial companies; prior to 2001, steel companies were given preferential lower power rates, however under the Open Access Transmission Services Rules ("OATS Rules"), petitioner NGCP adopted the methodology of billing determinants of all its customers, based on the aggregate non-coincident peak demand ("NCPD") of the customers' metering point, and under the present scheme, respondent MSC is incurring higher costs in steel production; upon application by similar steel companies, SKK Steel Corporation ("SKK") and Stronghold Steel Corporation ("SSC"), the ERC granted preferential rates to SKK and SSC; respondent MSC was similarly situated to SKK and SCC, thus ERC should also grant respondent MSC the same preferential rate scheme.
The Application prayed for the adoption of a similar preferential power rate scheme granted by petitioner NGCP to other steel companies (i.e., SKK and SSC).
Acting on the Application, the ERC issued the Order dated 12 June 2008 which scheduled the hearings, and directed respondent MSC to publish the attached Notice of Public Hearing. Respondent MSC filed the Compliance which showed that respondent MSC published the Notice of Public Hearing in the 16 June 2008 issue of the Taliba Newspaper.
Prior to the initial hearing, petitioner NGCP, through the letter dated 1 July 2008, granted respondent MSC a six-month non-firm billing arrangement which was based on respondent MSC's actual consumption. Thereafter, petitioner NGCP reverted from non-firm to firm billing arrangement.
After the conduct of several hearings, the parties filed their respective memoranda. 6
The ERC approved MSC's application. The dispositive portion of the ERC's Decision reads:
WHEREFORE, the foregoing premises considered, the application filed by Melters Steel Corporation (MSC) for the adoption of the same billing methodology approved for SKK Steel Corporation (SKK) and Stronghold Steel Corporation (SSC) by the National Transmission Corporation (TRANSCO) is hereby APPROVED. ASEcHI
Accordingly, the National Grid Corporation of the Philippines (NGCP) is directed to use MSC's actual demand coincident with the Luzon System Peak demand as its billing determinant in the calculation of its transmission charges, subject to the approved minimum demand level of 17 MW and submit to the Commission its compliance with the said directive, within ten (10) days from its implementation.
SO ORDERED. 7
In an Order 8 dated 17 January 2013, the ERC denied NGCP's Motion for Reconsideration for lack of merit.
The CA took a contrary view from that of the ERC. The CA stated that MSC's application is a prayer for exemption from the Open Access Transmission Rules (OATS Rules). Under the OATS Rules, the method of billing determinants for customers is based on the aggregate non-coincident peak demand (NCPD). MSC effectively asked ERC for two things: to exercise its rule-making power by asking it to amend the OATS Rules, and to exercise its rate-making power by asking for a grant of a preferential rate scheme in its favor.
The CA found that in granting MSC's application, the ERC failed to comply with its Rules of Practice and Procedure (RPP). MSC only published the Notice of Public Hearing as mandated by Rule 13, Section 4 of the RPP. 9 MSC failed to: (1) publish its entire Application as mandated by Rule 6, Section 2 of the RPP 10 and (2) show that the Notice of Public Hearing was published at least two weeks before the scheduled hearing as mandated by Rule 21, Section 3 also of the RPP. 11 Thus, the CA reversed the ERC's Decision and Resolution. The dispositive portion of the CA's Decision reads:
We REVERSE and SET ASIDE the Decision dated 26 November 2012, and the Order dated 17 January 2013 issued by the Energy Regulatory Commission, and DISMISS the Application filed by Melters Steel Corporation.
IT IS SO ORDERED. 12
The CA denied MSC's Motion for Reconsideration in a Resolution dated 10 July 2015. MSC filed the present petition on 11 September 2015.
MSC raises the following issues before this Court:
1. Whether or not the Court of Appeals committed a serious error of law when it dismissed the application filed by [MSC] on the alleged ground of failure to comply with the publication requirement imposed by the Energy Regulatory Commissions' Rules of Practice and Procedure.
2. Whether or not the Court of Appeals committed a serious error of law when it overlooked the circumstance that the Energy Regulatory Commission is correct when it granted the application of petitioner MSC for the adoption of the same billing determinant approved for SKK Steel Corporation and Stronghold Steel Corporation. ITAaHc
3. Whether or not the Court of Appeals committed a serious error of law when it overlooked the circumstance that petitioner MSC is entitled to the same billing methodology approved for SKK Steel Corporation and Stronghold Steel Corporation by Transco (now the NGCP). 13
MSC argues that the Rules cited by the CA 14 to justify its decision that MSC failed to comply with the publication requirements are applicable only to "rate applications of distribution facilities affecting their respective consumers." 15 NGCP contends that MSC misinterpreted the Rules. MSC's Application with the ERC is a rate application, or a proposal for amendment of the OATS Rules.
We affirm the CA's decision on this matter. Reference should also be made to Section 1 of the same Rule 6. Rule 6 pertains to pre-filing requirements:
Section 1. Rate Applications and Other Applications or Petitions for Relief Affecting the Consumers. — Among the Rate Applications or petitions that directly affect the electricity rates chargeable to the end users or directly affect the consumers are applications for a general change in rate schedules or revision of rates and applications for approval of a power supply contract between a distribution utility and power producer.
The Commission may consider other applications and petitions as falling under this category of applications/petitions and thus direct compliance with the pre-filing requirements in Section 2 of this rule.
A cursory reading of the above-mentioned Section shows that MSC is not justified in asking for an exemption of application of the above rule. Indeed, Section 1 refers not just to "applications for approval of a power supply contract between a distribution utility and power producer," but also to "applications for a general change in rate schedules or revision of rates." Thus, there is no reason why MSC should be exempt from the pre-filing requirements enumerated in Section 2 of Rule 6. CHTAIc
We shall jointly discuss the second and third issues raised by MSC. MSC stated that its Application is not about rate-fixing, hence publication is not required. However, MSC also stated that ERC's approval of MSC's Application is a correct exercise of its rate-fixing powers. MSC actually seeks exemption from the imposition of rates under the OATS Rules and asks for imposition of a preferred rate.
The ERC approved the OATS Rules in December 2006. These Rules apply, among others, to all Transmission Customers. MSC is a Transmission Customer of NGCP, and is governed by the OATS Rules. The OATS Rules imposed the use of NCPD as the billing determinant. The use of NCPD applies to all Transmission Customers. MSC seeks the use of coincident peak demand as its billing determinant.
In its Decision favoring MSC, the ERC exempted MSC from the rates imposed by the OATS Rules without requiring MSC to comply with publication requirements. To bolster its position, MSC further emphasized that the ERC quoted from this Court's Decision in Republic of the Philippines v. Manila Electric Company, 16 thus:
The regulation of rates to be charged by public utilities is founded upon the police powers of the State and statutes prescribing rules for the control and regulation of public utilities are a valid exercise thereof. When private property is used for a public purpose and is affected with public interest, it ceases to be juris privati only and becomes subject to regulation. The regulation is to promote the common good. Submission to regulation may be withdrawn by the owner by discontinuing use; but as long as use of the property is continued, the same is subject to public regulation.
In regulating rates charged by public utilities, the State protects the public against arbitrary and excessive rates while maintaining the efficiency and quality of services rendered. However, the power to regulate rates does not give the State the right to prescribe rates which are so low as to deprive the public utility of a reasonable return on investment. Thus, the rates prescribed by the State must be one that yields a fair return on the public utility upon the value of the property performing the service and one that is reasonable to the public for the services rendered. The fixing of just and reasonable rates involves a balancing of the investor and the consumer interests. EATCcI
In his famous dissenting opinion in the 1923 case of Southwestern Bell Tel. Co. v. Public Service Commission, Mr. Justice Brandeis wrote:
The thing devoted by the investor to the public use is not specific property, tangible and intangible, but capital embarked in an enterprise. Upon the capital so invested, the Federal Constitution guarantees to the utility the opportunity to earn a fair return. The Constitution does not guarantee to the utility the opportunity to earn a return on the value of all items of property used by the utility, or of any of them.
xxx xxx xxx
The investor agrees, by embarking capital in a utility, that its charges to the public shall be reasonable. His company is the substitute for the State in the performance of the public service, thus becoming a public servant. The compensation which the Constitution guarantees an opportunity to earn is the reasonable cost of conducting the business.
We point out that in asking for an exemption from the ERC-approved OATS Rules, MSC failed to show that the imposed rates under the OATS Rules are arbitrary and excessive. Rates fixed by an administrative agency are reasonable, and the courts will not interfere in the absence of abuse of discretion. MSC has the burden to prove that the ERC-approved OATS Rules are arbitrary, excessive, unreasonable, and confiscatory. This, MSC has failed to accomplish. ISHCcT
WHEREFORE, the petition is DENIED.
SO ORDERED." (Reyes, J., JR., J., designated additional member per Special Order No. 2587 dated 28 August 2018)
Very truly yours,
MARIA LOURDES C. PERFECTODivision Clerk of CourtBy:(SGD.) TERESITA AQUINO TUAZONDeputy Division Clerk of Court
Footnotes
1.Rollo, pp. 10-39. Under Rule 45 of the 1997 Rules of Civil Procedure.
2.Id. at 41-52. Penned by Associate Justice Nina G. Antonio-Valenzuela, with Associate Justices Vicente S.E. Veloso and Jane Aurora C. Lantion concurring.
3.Id. at 54-55. Penned by Associate Justice Nina G. Antonio-Valenzuela, with Associate Justices Ricardo R. Rosario and Jane Aurora C. Lantion concurring.
4.Id. at 152-168. Signed by Chairperson Zenaida G. Cruz-Ducut, and Commissioners Maria Teresa A.R. Castañeda, Jose C. Reyes, Alfredo J. Non, and Gloria Victoria C. Yap-Taruc.
5.Id. at 177-179. Signed by Commissioner Maria Teresa A.R. Castañeda for and by authority of the Commission.
6.Id. at 42-43. Citations omitted.
7.Id. at 167.
8.Id. at 177-179.
9. This provision reads:
Section 4. Publication and Other Requirements. — The notice of hearing for any application or petition for rate adjustment or for any relief affecting the consumers shall be published by the applicant or petitioner, at its own expense, at least twice for two (2) successive weeks in two (2) newspapers of nationwide circulation, the last day of publication not to be later than ten (10) days before the scheduled hearing. In all other applications or petitions, the publication of the notice shall only be once in a newspaper of general circulation in the locality or localities where the applicant or petitioner operates its business, if there be any such local newspaper, or in a newspaper of nationwide circulation, at least ten (10) days before the scheduled hearing.
All notices of hearing of any application or petition shall also be posted on the Commission's Website upon its issuance.
In its discretion, the Commission may impose upon the applicant or petitioner such other requirements as may be deemed necessary to the end that persons who may be affected by the application shall be apprised thereof and have opportunity to file their intervention or to comment on and/or submit their opposition to the application or petition.
10. This provision reads:
Section 2. Pre-filing Requirements for Rate Applications and Other Applications/Petitions for Relief Affecting the Consumers. — Before the Commission shall accept and docket rate applications and other applications or petitions for relief affecting the consumers, the applicant or petitioner must comply with the following requirements:
(a) The applicant or petitioner must furnish the Local Government Unit (LGU) Legislative Body (and not the Office of the Mayor) of the city or municipality where it principally operates, a copy of the application or petition, and not a mere notice of application/petition, with all its annexes and accompanying documents. If such principal place of operation is a component city or a municipality, the applicant or petitioner shall likewise furnish the LGU Legislative Body of the province of which such component city or municipality is part.
(b) The applicant or petitioner must cause the publication of the entire application or petition, excluding its annexes, and not a mere notice of filing or notice of application or petition, in a newspaper of general circulation within its franchise area or area where it principally operates.
11. This provision reads:
Section 3. Notice of Rule-making. — The Commission shall give Notice of Proposed Rule-making and cause the proposed rule to be published on its Website. Depending on the nature or subject matter of the proposed rule, the Commission may also cause the publication thereof in newspapers of general circulation and send copies thereof to affected parties. For proposed rules that involve the fixing or setting rates and charges, the notice shall be published in a newspaper of general circulation at least two (2) weeks before the scheduled hearing thereon.
The Notice shall set any written comment period, the manner these comments will be received by the Commission, and will specify the time, date, and place of any public hearing thereon.
12. Rollo, p. 52.
13. Id. at 19-20.
14. See notes 9 to 11.
15. Rollo, p. 22.
16. 440 Phil. 389, 397-398 (2002). Boldfacing supplied. Italicization in the original. Citations omitted.