Of legislative franchises and public interest
Manila Electric Co. (Meralco) could also lose its franchise for its refusal to readily comply with the orders of the Energy Regulatory Commission (ERC), Sen. Sherwin Gatchalian said.
This warning came in the wake of a deluge of complaints before the Energy Regulatory Board against the longtime power distributor after furious consumers in Metro Manila experienced what they call a “bill shock,” or the spike in their monthly bills. As a result, ERC had imposed on the company for failing to clearly explain to customers this phenomenon. Gatchalian said that Congress could exercise its oversight function to revoke Meralco’s franchise after it said it would appeal the P19-million fine.
Gatchalian is justified in his warning. By failing to give a satisfactory explanation to the public, Meralco is obviously violating its legislative franchise. The power to grant a franchise is lodged in the legislature subject to limitations imposed by the state constitution. Its primary objective is to benefit the public; the rights or interests of the grantee, the franchisee, is secondary. Thus, the grantee of the privilege is duty bound to obey at all times the terms and conditions of the franchise law, and with the overriding obligation to promote the public good. The fact is that legislative franchises on public utilities are granted to private entities and citizens. Given the multiplicity of governmental functions and the magnitude of its concerns, the state will be hard pressed to operate public utilities as efficiently as most business organizations. To give incentive to these private businesses to undertake the operation of public utilities, they are given reasonable opportunity and time for the return of their investments.
Companies that are granted legislative franchises are granted expropriation or eminent domain powers, subject to terms stated in the delegating law. This is essential for public utility franchises, from telecommunication to electricity distribution companies, that need land to build facilities that would be good for the public. But this power should not be given to companies so that they can take over existing facilities, as that would be anticompetitive as well as a violation of the constitutional right of the company that owns the said facilities.
In this context, Republic Act No. 11212, the law granting MORE Electric and Power Corp. (MORE) the legislative franchise over Iloilo in lieu of the Panay Electric Company (Peco), is not a good precedent. It is remarkable for its generosity and expansiveness on the extent of MORE’s power to expropriate. Under Section 10 of the law, MORE is authorized to exercise the power of eminent domain “insofar as it may be reasonably necessary for the efficient establishment, improvement, upgrading, rehabilitation, maintenance and operation of its services.”
In comparison, the franchises of other distribution facilities, such as Mactan Electric Company Inc., extension of franchise granted to Tarlac Electric Inc., renewal of franchise granted to Angeles Electric Corp., renewal of franchise granted to Ibaan Electric Corp., First Bay Power Corp., Dagupan Electric Corp., Island Country Telecommunications Inc., Olongapo Electricity Distribution Co. Inc., Visayan Electric Co. Inc, Cotabato Light and Power Co., La Union Electric Co. Inc., and a few others, merely allow them to exercise the power of eminent domain “insofar as it may be reasonably necessary for the efficient maintenance and operation of services.”
Again in the same section, MORE is allowed “to acquire such private property as is actually necessary for the realization of the purposes for which this franchise is granted, including, but not limited to poles, wires, cables, transformers, switching equipment and stations, buildings, infrastructure, machinery and equipment previously, currently or actually used, or intended to be used, or have been abandoned, unused or underutilized, or which obstructs its facilities, for the operation of a distribution system for the conveyance of electric power to end users in its franchise area.” In contrast, as worded in their respective franchises, the distribution utilities already mentioned are given the authority simply “to acquire such private property as is actually necessary for the realization of the purposes for which the franchise is granted,” without specifying in detail the properties to be acquired.
RA 11212 is not only satisfied with a similar wording as stated in the other franchises but has settled for a more encompassing phraseology, i.e. “for the efficient establishment, improvement, upgrading, rehabilitation, maintenance and operation of its services.” That allows the franchise holder the to take over the assets of a competitor company, an act repugnant to the constitution.
An objective of the Electric Power Industry Reform Act of 2001 (Epira) is energy reliability, stability and quality service. It restructured the power sector from a vertically integrated state monopoly to a sector that allows competition for some subsectors (i.e. generation and retail supply).
The privatization of power distribution under the Epira law is designed to provide better electricity service to consumers. It is designed to demonopolize the energy sector and allow only qualified players to operate the industry. Yet, to indiscriminately give a franchise to any corporation or entity even when not possessing the capability and experience in power distribution would be self-defeating. This defeats the purpose of Epira—to serve public welfare, particularly the public consumers in this case, and never any private interest. It is specifically aimed to ensure the quality, reliability, security and affordability of the supply of electric power.
In the final analysis, the controversy in Iloilo is about the public interest. The proposition that Peco’s service was unsatisfactory and therefore it had to be replaced by MORE simply does not hold water. The Koalisyon Bantay Kuryente, a reputable consumer advocacy group, has reported the experience of brownouts and overbilling and is set to file complaints to the ERC.
To conclude, going back to the threat that the Meralco franchise might be revoked or, when it expires, not renewed, the big picture question will not be the legal and technical issues involved but on whether the franchise holder has served the public well. —CONTRIBUTED INQ
The author is former dean of the Ateneo School of Government and Professor of Constitutional Law, University of the Philippines College of Law
