ALYANSA PARA SA BAGONG PILIPINAS, INC. VS ENERGY REGULATORY COMMISSION, DEPARTMENT OF ENERGY, MERALCO, CENTRAL LUZON PREMIERE POWER CORPORATION, – G.R. No. 227670

EN BANC

May 3. 2019

G.R. No. 227670

ALYANSA PARA SA BAGONG PILIPINAS, INC. (ABP), represented by Evelyn V. Jallorina and Noel Villones, Petitioner
vs.
ENERGY REGULATORY COMMISSION, represented by its Chairman, JOSE VICENTE B. SALAZAR, DEPARTMENT OF ENERGY, represented by Secretary ALFONSO G. CUSI, MERALCO, CENTRAL LUZON PREMIERE POWER CORPORATION, ST. RAPHAEL POWER GENERATION CORPORATION, PANAY ENERGY DEVELOPMENT CORPORATION, MARIVELES POWER GENERATION CORPORATION, GLOBAL LUZON ENERGY DEVELOPMENT CORPORATION, ATIMONAN ONE ENERGY, INC., REDONDO PENINSULA ENERGY, INC., and PHILIPPINE COMPETITION COMMISSION, Respondents

D E C I S I O N

CARPIO, J.:

The outcome of this case will greatly affect, for the next two decades, all consumers of electricity in the Philippines, which include the over 95 million Filipinos living in the Philippines as well as the millions of business enterprises operating in the Philippines.

Section 19, Article XII of the 1987 Constitution provides: “The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”

The State grants electricity distribution utilities, through legislative franchises, a regulated monopoly within their respective franchise areas. Competitors are legally barred within the franchise areas of distribution utilities. Facing no competition, distribution utilities can easily dictate the price of electricity that they charge consumers. To protect the consuming public from exorbitant or unconscionable charges by distribution utilities, the State regulates the acquisition cost of electricity that distribution utilities can pass on to consumers.

As part of its regulation of this monopoly, the State requires distribution utilities to subject to competitive public bidding their purchases of electricity from power generating companies. Competitive public bidding is essential since the power cost purchased by distribution utilities is entirely passed on to consumers, along with other operating expenses of distribution utilities. Competitive public bidding is the most efficient, transparent, and effective guarantee that there will be no price gouging by distribution utilities.

Indeed, the requirement of competitive public bidding for power purchases of distribution utilities has been adopted in the United States, Europe, Latin America, India, and many developing countries.  This requirement is primarily aimed at ensuring a fair, reasonable, and least-cost generation charge to consumers, under a transparent power sale mechanism between the generation companies and the distribution utilities.

Section 6, Article XII of the 1987 Constitution provides: “The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands.”

Indisputably, the use of electricity bears a vital social function. The State, in requiring competitive public bidding in the purchase of power by distribution utilities, has exercised its constitutional “duty x x x to intervene when the common good so demands.”

The breakdown of charges in a Manila Electric Company (Meralco) bill contains the following: Generation Charge, Transmission Charge, System Loss Charge, Distribution Charge (Meralco), Subsidies, Government Taxes, Universal Charges, FiT-All Charge (Renewable), and Other Charges. The Power Supply Agreements (PSAs) involved in the present case were executed in April 2016 and have terms that range from 20 to 21 years.

Section 43 of Republic Act No. 9136, or the Electric Power Industry Reform Act of 2001 (EPIRA), includes a description, in broad strokes, of the functions of the Energy Regulatory Commission (ERC): “The ERC shall promote competition, encourage market development, ensure customer choice and discourage/penalize abuse of market power in the restructured electricity industry.” Moreover, Section 2 of the EPIRA declares it a state policy to “ensure the x x x affordability of the supply of electric power.” Further, Section 45 of the EPIRA mandates the ERC to enforce safeguards to “promote true market competition and prevent harmful monopoly and market power abuse.” If the ERC violates its statutory functions, this Court, as mandated by Section 1, Article VIII of the 1987 Constitution, has the duty to strike down the acts of ERC whenever these are performed with grave abuse of discretion amounting to lack or excess of jurisdiction.

The Case

Alyansa para sa Bagong Pilipinas, Inc. (ABP), represented by Evelyn V. Jallorina and Noel Villones, filed G.R. No. 227670, a petition for certiorari and prohibition with an application for a temporary restraining order and/or writ of preliminary injunction. Named as respondents are the ERC, the Department of Energy (DOE), Meralco, Central Luzon Premiere Power Corporation (CLPPC), St. Raphael Power Generation Corporation (SRPGC), Panay Energy Development Corporation (PEDC), Mariveles Power Generation Corporation (MPGC), Global Luzon Energy Development Corporation (GLEDC), Atimonan One Energy, Inc. (AlE), Redondo Peninsula Energy, Inc. (RPE), and the Philippine Competition Commission (PCC).

The petition seeks to declare as void ERC Resolution No. 1, Series of 2016 (ERC Clarificatory Resolution). The petition also seeks that this Court direct the ERC to disapprove the Power Supply Agreements (PSAs) of the Distribution Utilities (DUs) submitted after 7 November 2015 for failure to conduct Competitive Selection Process (CSP). The petition further asks the Court to order ERC to implement CSP in accordance with the Department of Energy (DOE) Circular No. DC2015-06-0008 (2015 DOE Circular) and ERC Resolution No. 13, Series of 2015 (CSP Guidelines).

The Facts

On 11 June 2015, the DOE issued the 2015 DOE Circular entitled “Mandating All Distribution Utilities to Undergo Competitive Selection Process (CSP) in Securing Power Supply Agreements (PSA).” Sections 3 and 10 of the 2015 DOE Circular provide:

Section 3. Standard Features in the Conduct of the CSP. After the effectivity of this Circular, all DUs shall procure PSAs only through CSP conducted through a Third Party duly recognized by the ERC and the DOE. In the case of [Electric Cooperatives (ECs)], the Third Party shall also be duly recognized by the National Electrification Administration (NEA).

Under this Circular, CSPs for the procurement of PSAs of all DUs shall observe the following:

(a) Aggregation for un-contracted demand requirements of DUs;

(b) Annually conducted; and

(c) Uniform template for the terms and conditions in the PSA to be issued by the ERC in coordination with the DOE.

Within one hundred twenty (120) days from the effectivity of this Circular, the ERC and [the] DOE shall jointly issue the guidelines and procedures for the aggregation of the un-contracted demand requirements of the DUs and the process for the recognition or accreditation of the Third Party that conducts the CSP as hereto provided. For clarity, the term aggregation as used in this Circular refers to the wholesale demand and energy requirements of DUs, and not of the Contestable Markets under Retail Competition and Open Access (RCOA) regime.

As used in this section, the un-contracted demand or energy requirements of the DUs shall refer to the energy and demand not yet procured individually or collectively by the DUs, excluding those energy and capacity covered by PSAs that have been filed for approval before the ERC.

x x x x

Section 10. Effectivity. This Circular shall take effect immediately upon its publication in two (2) newspapers of general circulation and shall remain in effect until otherwise revoked. (Boldfacing added)

Section 3 of the 2015 DOE Circular expressly and categorically mandates CSP, or competitive public bidding, whenever DUs secure PSAs. The 2015 DOE Circular took effect on 30 June 2015 upon its publication in two newspapers of general circulation. Section 3 expressly states that “[a]fter the effectivity of this Circular, all DUs shall procure PSAs only through CSP

x x x.”

On 20 October 2015, Joint Resolution No. 1 (Joint Resolution), executed by the DOE and the ERC, reiterated the need to adopt a “regime of transparent process in securing Power Supply Agreements.” The fifth Whereas clause of the Joint Resolution provides:

WHEREAS, the DOE and ERC recognize the adoption of competitive selection as a policy that will encourage investments in the power generation business thereby ensuring electric power supply availability in a regime of transparent process in securing Power Supply Agreements (PSAs), which is an integral part of the power sector reform agenda. (Boldfacing added)

Under the Joint Resolution, the DOE and the ERC agreed that ERC shall issue the appropriate regulation to implement CSP. Section 1 of the Joint Resolution states:

Section 1. Competitive Selection Process. Consistent with their respective mandates, the DOE and ERC recognize that Competitive Selection Process (CSP) in the procurement of Power Supply Agreements (PSAs) by the DUs engenders transparency, enhances security of supply, and ensures stability of electricity prices to captive electricity end-users in the long-term. Consequently, by agreement of the DOE and ERC, the ERC shall issue the appropriate regulation to implement the same. (Boldfacing and italicization added)

On the same date, 20 October 2015, the ERC issued the CSP Guidelines, which directed all DUs to conduct CSP in the procurement of their power supply for their captive markets.

The CSP Guidelines fixed a new date of effectivity for compliance with CSP. This is the first instance that the ERC unilaterally fixed a different date from 30 June 2015, effectively postponing the date of effectivity of CSP from 30 June 2015 to 7 November 2015 or by 130 days:

Section 4. Applicability. The CSP requirement herein mandated shall not apply to PSAs already filed with the ERC as of the effectivity of this Resolution. For PSAs already executed but are not yet filed or for those that are still in the process of negotiation, the concerned DUs are directed to comply with the CSP requirement before their PSA applications will be accepted by the ERC.

This Resolution shall take effect immediately following its publication in a newspaper of general circulation in the Philippines.

x x x x (Boldfacing and italicization added)

Based on its provisions, the CSP Guidelines took effect on 7 November 2015, following its publication in the Philippine Daily Inquirer and the Philippine Star. Section 4 of the CSP Guidelines expressly provides that CSP “shall not apply to PSAs already filed with the ERC as of the effectivity of this Resolution.” Thus, the ERC no longer required CSP for all PSAs already filed with the ERC on or before 7 November 2015. Section 4 of the CSP Guidelines further states that “[f]or PSAs already executed but are not yet filed or for those that are still in the process of negotiation, the concerned DUs are directed to comply with the CSP requirement before their PSA applications will be accepted by the ERC.”

On 15 March 2016, however, the ERC, for the second time, unilaterally postponed the date of effectivity of CSP. The ERC issued the ERC Clarificatory Resolution, which restated the date of effectivity of the CSP Guidelines from 7 November 2015 to 30 April 2016. Paragraph 1 of the ERC Clarificatory Resolution reads:

1. The effectivity of the CSP [Guidelines] is hereby restated to be 30 April 2016. All PSAs executed on or after the said date shall be required, without exception, to comply with the provisions of the CSP [Guidelines]. (Boldfacing added)

The second postponement of the effectivity of CSP from 7 November 2015 to 30 April 2016, or by 175 days, allowed DUs to enter into contracts during the period of postponement to avoid the mandatory CSP.

The table below shows that the following PSAs between Meralco and its power suppliers were executed and submitted to the ERC within 10 days prior the restated 30 April 2016 deadline. According to the ERC Clarificatory Resolution, these PSAs are not required to comply with CSP.

Power Supplier	Power Purchaser	Amount of Power Purchased	Term of Agreement	Start of Negotiations	Date of PSA Execution	Date of Submission of Application to ERC
Redondo Peninsula Energy, Inc. (RPE)	Manila Electric Company (Meralco)	225 Megawatts (MW)	20 years	19 July 2012	20 April 2016	28 April 2016
Atimonan One Energy, Inc. (AlE)	Meralco	2 x 600 MW (net)	20 years and six months	3rd or 4th quarter of 2014	26 April 2016	28 April 2016
St. Raphael Power Generation Corporation (SRPGC)	Meralco	Up to 400 MW	20 years and four months	Latter part of 2014	26 April 2016	28 April 2016
Panay Energy Development Corporation (PEDC)	Meralco	Up to 70 MW	20 years	21 May 2014	26 April 201624	27 April 201625
Global Luzon Energy Development Corporation (GLEDC)	Meralco	600 MW26	20 years 27	9 December 201428	27 April 201629	29 April 201630
Central Luzon Premiere Power Corporation (CLPPC)	Meralco	Up to 528 MW31	21 years 32	18 March 201533	26 April 201634	29 April 201635
Mariveles Power Generation Corporation (MPGC)	Meralco	Up to 528 MW36	21 years 37	11 February 201538	26 April 201639	29 April 201640

AlE and RPE are subsidiaries or affiliates of Meralco.⁴¹ In paragraph 3. 71 of its Comment, Meralco stated that “[a]t the time of the signing of the AlE PSA, AlE was wholly-owned by Meralco PowerGen Corporation (‘PowerGen’), a wholly-owned subsidiary of Meralco. On the other hand, at the time of the signing of the RPE PSA, forty-seven percent (47%) of the total subscribed capital of RPE was owned by PowerGen, and three percent (3%) of its total subscribed capital was owned by the Meralco Pension Fund.”⁴²

CLPPC and MPGC are subsidiaries of SMC Global Power Holdings Corp. (SMC Global), the subsidiary of San Miguel Corporation (SMC) engaged in the construction and operation of various power projects.⁴³

In its Comment, Meralco admitted that “no actual bidding is conducted,”⁴⁴ and that “the PSAs entered into by Meralco undergo competitive selection and thorough negotiations, taking into consideration its specific and unique requirements.”⁴⁵ In short, no CSP was conducted through a third party recognized by the ERC as mandated in the 2015 DOE Circular.

Meralco also stated that, apart from the seven (7) PSAs between Meralco and its power suppliers, there are eighty-three (83) other PSAs filed with the ERC during the period from 16 April 2016 to 29 April 2016, bringing the total PSAs excluded from CSP to ninety (90) PSAs.

DATE	NO. OF PSAS	GENERATION COMPANIES
16 to 24 April 2016	4 PSAs	Mineral Power, Palm Concepcion, Astroenergy, GNPower Kauswagan
25 April 2016	5 PSAs	GNPower Dinginin
26 April 2016	5 PSAs	GNPower Dinginin, Astroenergy
27 April 2016	4 PSAs	GNPower Dinginin
28 April 2016	10 PSAs	A. Brown, GNPower Dinginin, Southern Philippines Power, SMCPC, Surepep, Total Power, Upper Manupali Hydro
29 April 2016	55 PSAs	SMEC, MPGC, SCPC, SMCPC, LPPC, PEDC, GLEDC, CLPPC, A. Brown, A1E, Anda, Astronenergy, Delta P, GNPower Dinginin, GPower, Isabela Power, Levan Marketing, Mapalad Power, Minergy, RPE, SRPGC, Sunasia Energy, TeaM Energy, Trans-Asia, Unified Leyte Geothennal Energy, Western Power Mindanao46

Meralco further stated in its Comment:

1.41. Furthermore, apart from MERALCO, the following DUs and electric cooperatives also filed more than one PSA with the ERC during the second (2nd) half of April 2016: (a) Agusan del Sur Electric Cooperative, Inc.; (b) Bukidnon Second Electric Cooperative, Inc.; (c) Cagayan Electric Power & Light Company, Inc.; (d) Cotabato Light and Power Company; (e) Davao del Sur Electric Cooperative; (t) Iloilo 1 Electric Cooperative; (g) Ilocos Sur Electric Cooperative Incorporation; (h) Isabela I Electric Cooperative, Inc.; (i) Isabela II Electric Cooperative; (j) Leyte III Electric Cooperative, Inc.; (k) La Union Electric Cooperative, Inc.; (1) Pangasinan Electric Cooperative III; (m) Peninsula Electric Cooperative, Inc.; (n) Tarlac II Electric Cooperative, Inc.; (o) Zamboanga City Electric Cooperative, Inc.; and (p) Zamboanga del Sur Electric Cooperative, Inc.⁴⁷

The Issues

ABP raised the following issues:

1. Whether or not the ERC committed grave abuse of discretion in issuing the [ERC Clarificatory Resolution].
2. Whether or not the separate PSAs of Meralco with respondent generation companies should be disapproved for their failure to comply with the requirements of the [2015 DOE Circular] and the [CSP Guidelines].⁴⁸

ABP’s petition thus presents a purely legal issue: Does ERC have the statutory authority to postpone the date of effectivity of CSP, thereby amending the 2015 DOE Circular which required CSP to take effect on 30 June 2015?

The determination of the extent of the ERC’s statutory authority in the present case is a purely legal question and can be resolved without making any finding of fact. The affirmative or negative resolution of this purely legal question will necessarily result in legal consequences, thus:

(a) If the Court rules affirmatively (that is, the ERC has the statutory authority to postpone the date of effectivity of CSP, and thereby ERC can amend the 2015 DOE Circular), then the legal consequence is that the 90 PSAs submitted to the ERC before the amended effectivity of CSP (30 April 2016) will serve as basis to pass on the power cost to consumers for the duration of the PSAs, whatever the duration of these PSAs.

(b) If the Court rules negatively (that is, the ERC does not have the statutory authority to postpone the date of effectivity of CSP, and thereby cannot amend the 2015 DOE Circular), then the legal consequence is that the 90 PSAs submitted to the ERC after the effectivity of CSP on or after 30 June 2015 cannot serve as basis to pass on the power cost to consumers. In such a case, the ERC will have to conduct CSP on all PSA applications submitted on or after 30 June 2015.

Clearly, there is no factual issue in dispute in the present case, and no factual issue has been raised by any of the parties. Thus, the present case can be resolved purely on the legal issue raised by ABP even as the resolution of this purely legal issue will necessarily result in legal consequences either way.

The Court’s Ruling

We GRANT ABP’s petition. The ERC does not have the statutory authority to postpone the date of effectivity of CSP, and thereby cannot amend the 2015 DOE Circular. As a result, the 90 PSAs submitted to the ERC after the effectivity of CSP on or after 30 June 2015 cannot serve as basis to pass on the power cost to consumers. The ERC must require CSP on all PSA applications submitted on or after 30 June 2015.

Certiorari and Prohibition

As Remedy

Petitioner ABP correctly filed a petition for certiorari and prohibition before this Court.

[T]he remedies of certiorari and prohibition are necessarily broader in scope and reach, and the writ of certiorari or prohibition may be issued to correct errors of jurisdiction committed not only by a tribunal, corporation, board or officer exercising judicial, quasi-judicial or ministerial functions but also to set right, undo and restrain any act of grave abuse of discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the Government, even if the latter does not exercise judicial, quasi-judicial or ministerial functions. This application is expressly authorized by the text of the second paragraph of Section 1, [Article 8 of the 1987 Constitution].⁴⁹ (Boldfacing and italicization added)

Not every abuse of discretion can be occasion for this Court to exercise its jurisdiction. Grave abuse of discretion means “such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, in other words where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. It is not sufficient that a tribunal, in the exercise of its power, abused its discretion, such abuse must be grave.”⁵⁰

The Dissenting Opinion of Justice Andres B. Reyes, Jr. would rather have this Court dismiss the petition. Justice Reyes asserts that the ERC, in issuing the ERC Clarificatory Resolution, acted within its jurisdiction⁵¹ and did not act with grave abuse of discretion amounting to lack or excess of jurisdiction.⁵² Justice Reyes claims that the ERC was exercising its quasi-legislative power, as granted by Sections 43 and 45 of the EPIRA and as defined in Sections 3 and 4 of the 2015 DOE Circular, when the ERC issued the ERC Clarificatory Resolution. Justice Reyes advances three reasons to justify his assertion that the ERC did not act with grave abuse of discretion amounting to lack or excess of jurisdiction.

First, the implementation of ERC Resolution No. 13 caused an avalanche of concerns and confusion from the stakeholders of the industry regarding the actual implementation of the provisions of the resolution, so much so that a multitude of [Distribution Utilities] DUs, mostly electric cooperatives, sought for an exemption from the guidelines in the resolution. xxx.

x x x x

Second, ERC did not “evade” its positive duty as provided for in the Constitution, the EPIRA, [the 2015 DOE Circular], or [the CSP Guidelines] as the petitioners would like the Court to believe.xx x.

x x x x

xx x ERC’s action on merely “restating” the date of effectivity of [the ERC Clarificatory Resolution] – its own resolution that has been in effect since April, 2016 – has not been shown to have been promulgated with grave abuse of discretion amounting to lack or excess of jurisdiction.

Third, it must also be emphasized that [the ERC Clarificatory Resolution] enjoys a strong presumption of its validity. x x x. ⁵³

Justice Reyes’s Dissenting Opinion also finds no problem with the issuance and the contents of the ERC Clarificatory Resolution.1âшphi1 According to Justice Reyes, under the Joint Resolution executed by the DOE and the ERC on 20 October 2015, the DOE and the ERC agreed that the ERC shall issue the appropriate regulation to implement CSP. “⁵⁴

Justice Reyes is correct – consistent with their respective mandates under EPIRA, the DOE and the ERC agreed that the ERC shall issue the appropriate regulation to implement CSP in accordance with the 2015 DOE Circular. ⁵⁵ However, the ERC’s delegated authority is limited to implementing or executing CSP in accordance with the 2015 DOE Circular, not postponing CSP so as to freeze CSP for at least 20 years, effectively suspending CSP for one entire generation of Filipinos. The delegated authority to implement CSP does not include the authority to postpone or suspend CSP for 20 years, beyond the seven-year terms of office⁵⁶ of the ERC Commissioners postponing or suspending the CSP, and beyond the seven-year terms of office of their next successors, as well as beyond the six-year terms of office of three Presidents of the Republic.

The ERC’s exercise of its quasi-legislative power, which took the form of the issuance of the ERC Clarificatory Resolution, was done in excess of its jurisdiction. The postponement of the effectivity of CSP was without the approval, and even without coordination with the DOE, in clear and blatant violation of Section 4 of the 2015 DOE Circular mandating CSP. The ERC has no power to postpone the effectivity of the 2015 DOE Circular. Under the 2015 DOE Circular, the ERC can only issue supplemental guidelines, which means guidelines to implement the 2015 DOE Circular, and not to amend it. Postponing the effectivity of CSP amends the 2015 DOE Circular, and does not constitute issuance of mere supplemental guidelines.

The issuance of the ERC Clarificatory Resolution was attended with grave abuse of discretion amounting to lack or excess of jurisdiction for the following reasons:

(1) Postponing the effectivity of CSP from 30 June 2015 to 7 November 2015, and again postponing the effectivity of CSP from 7 November 2015 to 30 April 2016, or a total of 305 days, allowed DUs nationwide to avoid the mandatory CSP;

(2) Postponing the effectivity of CSP effectively freezes for at least 20 years the DOE-mandated CSP to the great prejudice of the public. The purpose of CSP is to compel DUs to purchase their electric power at a transparent, reasonable, and least-cost basis, since this cost is entirely passed on to consumers. The ERC’s postponement unconscionably placed this public purpose in deep freeze for at least 20 years.

Indisputably, the ERC committed grave abuse of discretion amounting to lack or excess of jurisdiction when the ERC postponed the effectivity of CSP. The postponement effectively prevented for at least 20 years the enforcement of a mechanism intended to ensure “transparent and reasonable prices in a regime of free and fair competition,” as mandated by law under EPIRA, a mechanism implemented in the 2015 DOE Circular which took effect on 30 June 2015.

In short, in the absence of CSP, there is no transparency in the purchase by DUs of electric power, and thus there is no assurance of the reasonableness of the power rates charged to consumers. As a consequence, all PSA applications submitted to the ERC on or after 30 June 2015 should be deemed not submitted and should be made to comply with CSP.

Why the ERC Acted in Excess of its Jurisdiction:

Purpose of CSP and Significance of the

Postponement of the CSP Deadline

The EPIRA was enacted on 8 June 2001. Among the EPIRA’s declared State policies are, as stated in its Section 2:⁵⁷

x x x x

(b) To ensure the quality, reliability, security and affordability of the supply of electric power;

(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market; [and]

x x x x

(f) To protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power;

x x x x (Boldfacing and italicization added)

The EPIRA mandates the DOE to “supervise the restructuring of the electricity industry.”⁵⁸ The EPIRA amended Section 5 of Republic Act No. 7638, or “The Department of Energy Act of 1992,” to allow the DOE to fulfill this new mandate under the EPIRA.

More importantly, Section 37 of the EPIRA includes the following in its enumeration of the DOE’s powers and functions:

(a) Formulate policies for the planning and implementation of a comprehensive program for the efficient supply and economical use of energy consistent with the approved national economic plan x x x and provide a mechanism for the integration, rationalization, and coordination of the various energy programs of the Government;

x x x x

(d) Ensure the reliability, quality and security of supply of electric power;

x x x x

(e) x x x [T]he DOE shall, among others,

x x x x

(ii) Facilitate and encourage reforms in the structure and operations of distribution utilities for greater efficiency and lower costs;

x x x x

(h) Exercise supervision and control over all government activities relative to energy projects in order to attain the goals embodied in Section 2 of RA 7638;

x x x x

(p) Formulate such rules and regulations as may be necessary to implement tile objectives of this Act; x x x

x x x x (Boldfacing and italicization added)

Under the EPIRA, it is the DOE that issues the rules and regulations to implement the EPIRA, including the implementation of the policy objectives stated in Section 2⁵⁹ of the EPIRA. Rules and regulations include circulars that have the force and effect of rules or regulations. Thus, pursuant to its powers and functions under the EPIRA, the DOE issued the 2015 DOE Circular mandating the conduct of CSP.

The 2015 DOE Circular, as stated in its very provisions, was issued pursuant to the DOE’s power to “formulate such rules and regulations as may be necessary to implement the objectives of the EPIRA,”⁶⁰ where the State policy is to “[p]rotect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power.”⁶¹ Under the EPIRA, it is also the State policy to “ensure the x x x affordability of the supply of electric power.”⁶² The purpose of the 2015 DOE Circular is to implement the State policies prescribed in the EPIRA. Clearly, the 2015 DOE Circular constitutes a rule or regulation issued by the DOE pursuant to its rule-making power under Section 37(p) of the EPIRA.

The EPIRA also provides for the powers and functions of the ERC. Section 43 of the EPIRA mandates that the ERC “shall be responsible for the following key functions in the restructured industry:”

(a) Enforce the implementing rules and regulations of this Act.

x x x x

(o) Monitor the activities in the generation and supply of the electric power industry with the end in view of promoting free market competition and ensuring that the allocation or pass through of bulk purchase cost by distributors is transparent, non-discriminatory and that any existing subsidies shall be divided pro-rata among all retail suppliers;

x x x x (Boldfacing and italicization added)

Thus, the very first mandate of the ERC under its charter, the EPIRA, is to “[e]nforce the implementing rules and regulations” of the EPIRA as formulated and adopted by DOE. Clearly, under the EPIRA, it is the DOE that formulates the policies, and issues the rules and regulations, to implement the EPIRA. The function of the ERC is to enforce and implement the policies formulated, as well as the rules and regulations issued, by the DOE. The ERC has no power whatsoever to amend the implementing rules and regulations of the EPIRA as issued by the DOE. The ERC is further mandated under EPIRA to ensure that the “pass through of bulk purchase cost by distributors is transparent [and] non-discriminatory.“⁶³

Despite the ERC’s characterization as an “independent, quasi-judicial regulatory body,”⁶⁴ it is incorrect to conclude, as Justice Alfredo Benjamin S. Caguioa holds, that the ERC exercises “inherent and sufficient power,”⁶⁵ and “sufficient power, as the independent regulator of the industry,”⁶⁶ to supplant or change, as it did in the present case, policies, rules, and regulations prescribed by the DOE. The power involved in the ERC’s implementation of the 2015 DOE Circular is not quasi-judicial but executive. There are no adverse parties involved in the implementation by the ERC of the 2015 DOE Circular. The ERC does not adjudicate rights and obligations of adverse parties in the present case. The issue presented here involves the propriety of the exercise of the ERC’s executive implementation of the policies, as well as the rules and regulations of the EPIRA as issued by the DOE.

Moreover, the nature of the power involved in the ERC’s postponement of the effectivity of CSP as mandated in the 2015 DOE Circular is not quasi-judicial but delegated legislative power. Justice Caguioa states that “the ERC could solely issue”⁶⁷ any resolution changing the dates of effectivity of CSP as set by the CSP Guidelines and the ERC Clarificatory Resolution “because it was empowered by the law, i.e., the EPIRA.”⁶⁸

We quote below the entirety of Section 43 of the EPIRA, prescribing the functions of the ERC, and there is absolutely nothing whatsoever in this complete enumeration of the ERC’s functions that grants the ERC rule-making power to supplant or change the policies, rules, regulations, or circulars prescribed by the DOE. The ERC’s functions, as granted by the EPIRA, are limited, inter alia, to the enforcement of the implementing rules and regulations of the EPIRA, and not to amend or revoke them. At most, as stated in paragraph (m) of Section 43, the ERC may only take any other action delegated to it pursuant to EPIRA. The ERC may not exceed its delegated authority. Section 43 of the EPIRA provides as follows:

Section 43. Functions of the ERC. – The ERC shall promote competition, encourage market development, ensure customer choice and discourage/penalize abuse of market power in the restructured electricity industry. In appropriate cases, the ERC is authorized to issue cease and desist order after due notice and hearing. Towards this end, it shall be responsible for the following key functions in the restructured industry:

(a) Enforce the implementing rules and regulations of this Act;

(b) Within six (6) months from the effectivity of this Act, promulgate and enforce, in accordance with law, a National Grid Code and a Distribution Code which shall include, but not limited to, the following:

(i) Performance standards for TRANSCO O & M Concessionaire, distribution utilities and suppliers: Provided, That in the establishment of the performance standards, the nature and function of the entities shall be considered; and

(ii) Financial capability standards for the generating companies, the TRANSCO, distribution utilities and suppliers: Provided, That in the formulation of the financial capability standards, the nature and function of the entity shall be considered: Provided, further, That such standards are set to ensure that the electric power industry participants meet the minimum financial standards to protect the public interest. Determine, fix, and approve, after due notice and public hearings the universal charge, to be imposed on all electricity end-users pursuant to Section 34 hereof;

(c) Enforce the rules and regulations governing the operations of the electricity spot market and the activities of the spot market operator and other participants in the spot market, for the purpose of ensuring a greater supply and rational pricing of electricity;

(d) Determine the level of cross subsidies in the existing retail rate until the same is removed pursuant to Section 7 4 hereof;

(e) Amend or revoke, after due notice and hearing, the authority to operate of any person or entity which fails to comply with the provisions hereof, the IRR or any order or resolution of the ERC. In the event a divestment is required, the ERC shall allow the affected party sufficient time to remedy the infraction or for an orderly disposal, but shall in no case exceed twelve (12) months from the issuance of the order;

(t) In the public interest, establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for the captive market of a distribution utility, taking into account all relevant considerations, including the efficiency or inefficiency of the regulated entities. The rates must be such as to allow the recovery of just and reasonable costs and a reasonable return on rate base (RORB) to enable the entity to operate viably. The ERC may adopt alternative forms of internationally accepted rate-resetting methodology as it may deem appropriate. The rate-setting methodology so adopted and applied must ensure a reasonable price of electricity. The rates prescribed shall be nondiscriminatory. To achieve this objective and to ensure the complete removal of cross subsidies, the cap on the recoverable rate of system losses prescribed in Section 10 of Republic Act No. 7832, is hereby amended and shall be replaced by caps which shall be determined by the ERC based on load density, sales mix, cost of service, delivery voltage and other technical considerations it may promulgate. The ERC shall determine such form of rate-setting methodology, which shall promote efficiency. In case the rate setting methodology used is RORB, it shall be subject to the following guidelines:

(i) For purposes of determining the rate base, the TRANSCO or any distribution utility may be allowed to revalue its eligible assets not more than once every three (3) years by an independent appraisal company: Provided, however, That ERC may give an exemption in case of unusual devaluation: Provided, further, That the ERC shall exert efforts to minimize price shocks in order to protect the consumers;

(ii) Interest expenses are not allowable deductions from permissible return on rate base;

(iii) In determining eligible cost of services that will be passed on to the end-users, the ERC shall establish minimum efficiency performance standards for the TRANSCO and distribution utilities including systems losses, interruption frequency rates, and collection efficiency;

(iv) Further, in determining rate base, the TRANSCO or any distribution utility shall not be allowed to include management inefficiencies like cost of project delays not excused by force majeure, penalties and related interest during construction applicable to these unexcused delays; and

(v) Any significant operating costs or project investments of TRANSCO and distribution utilities which shall become part of the rate base shall be subject to verification by the ERC to ensure that the contracting and procurement of the equipment, assets and services have been subjected to transparent and accepted industry procurement and purchasing practices to protect the public interest.

(g) Three (3) years after the imposition of the universal charge, ensure that the charges of the TRANSCO or any distribution utility shall bear no cross subsidies between grids, within grids, or between classes of customers, except as provided herein;

(h) Review and approve any changes on the terms and conditions of service of the TRANSCO or any distribution utility;

(i) Allow TRANSCO to charge user fees for ancillary services to all electric power industry participants or self-generating entities connected to the grid. Such fees shall be fixed by the ERC after due notice and public hearing;

(j) Set a lifeline rate for the marginalized end-users;

(k) Monitor and take measures in accordance with this Act to penalize abuse of market power, cartelization, and anti-competitive or discriminatory behavior by any electric power industry participant;

(l) Impose fines or penalties for any non-compliance with or breach of this Act, the IRR of this Act and the rules and regulations which it promulgates or administers;

(m) Take any other action delegated to it pursuant to this Act;

(n) Before the end of April of each year, submit to the Office of the President of the Philippines and Congress, copy furnished the DOE, an annual report containing such matters or cases which have been filed before or referred to it during the preceding year, the actions and proceedings undertaken and its decision or resolution in each case. The ERC shall make copies of such reports available to any interested party upon payment of a charge which reflects the printing costs. The ERC shall publish all its decisions involving rates and anti-competitive cases in at least one (1) newspaper of general circulation, and/or post electronically and circulate to all interested electric power industry participants copies of its resolutions to ensure fair and impartial treatment;

(o) Monitor the activities of the generation and supply of the electric power industry with the end in view of promoting free market competition and ensuring that the allocation or pass through of bulk purchase cost by distributors is transparent, non-discriminatory and that any existing subsidies shall be divided pro-rata among all retail suppliers;

(p) Act on applications for or modifications of certificates of public convenience and/or necessity, licenses or permits of franchised electric utilities in accordance with law and revoke, review and modify such certificates, licenses or permits in appropriate cases, such as in cases of violations of the Grid Code, Distribution Code and other rules and regulations issued by the ERC in accordance with law;

(q) Act on applications for cost recovery and return on demand side management projects;

(r) In the exercise of its investigative and quasi-judicial powers, act against any participant or player in the energy sector for violations of any law, rule and regulation governing the same, including the rules on cross-ownership, anti-competitive practices, abuse of market positions and similar or related acts by any participant in the energy sector or by any person, as may be provided by law, and require any person or entity to submit any report or data relative to any investigation or hearing conducted pursuant to this Act;

(s) Inspect, on its own or through duly authorized representatives, the premises, books of accounts and records of any person or entity at any time, in the exercise of its quasi-judicial power for purposes of determining the existence of any anti-competitive behavior and/or market power abuse and any violation of rules and regulations issued by the ERC;

(t) Perform such other regulatory functions as are appropriate in order to ensure the successful restructuring and modernization of the electric power industry, such as, but not limited to, the rules and guidelines under which generation companies, distribution utilities which are not publicly listed shall offer and sell to the public a portion not less than fifteen percent ( 15%) of their common shares of stocks: Provided, however, That generation companies, distribution utilities or their respective holding companies that are already listed in the PSE are deemed in compliance. For existing companies, such public offering shall be implemented not later than five (5) years from the effectivity of this Act. New companies shall implement their respective public offerings not later than five (5) years from the issuance of their certificate of compliance; and

(u) The ERC shall have the original and exclusive jurisdiction over all cases contesting rates, fees, fines and penalties imposed by the ERC in the exercise of the abovementioned powers, functions and responsibilities and over all cases involving disputes between and among participants or players in the energy sector.

All notices of hearings to be conducted by the ERC for the purpose of fixing rates or fees shall be published at least twice for two successive weeks in two (2) newspapers of nationwide circulation.

In the present case, where there is no exercise of the ERC’s quasijudicial powers, the ERC is legally bound to enforce the rules and regulations of the DOE as authorized under the EPIRA. The ERC has no independence or discretion to ignore, waive, amend, postpone, or revoke the rules and regulations of the DOE pursuant to the EPIRA, as it is horn book doctrine that rules and regulations issued pursuant to law by administrative agencies, like the DOE, have the force and effect of law.⁶⁹ In fact, the first duty and function of the ERC under its charter is to “enforce the implementing rules and regulations” of the EPIRA as issued by the DOE. Certainly, the ERC has no power to ignore, waive, amend, postpone, or revoke the policies, rules, regulations, and circulars issued by the DOE pursuant to the EPIRA.

In any event, even in quasi-judicial cases, the ERC is bound to apply the policies, rules, regulations, and circulars issued by the DOE as the ERC has no power to ignore, waive, amend, postpone, or revoke the policies, rules, regulations, and circulars issued by the DOE pursuant to the EPIRA. To repeat, the DOE’s rules, regulations, and circulars issued pursuant to the DOE’s rule-making power under the EPIRA have the force and effect of law which the ERC is legally bound to follow, whether the ERC is exercising executive, quasi-legislative, or quasi-judicial powers.

Pursuant to the DOE’s mandate under the EPIRA,⁷⁰ the 2015 DOE Circular required all DUs to undergo CSP in procuring PSAs. The DOE issued on 11 June 2015 the 2015 DOE Circular which took effect upon its publication on 30 June 2015.

The 2015 DOE Circular recognized that under the EPIRA, the DOE has the mandate to “formulate such rules and regulations as may be necessary to implement the objectives of the EPIRA,”⁷¹ where the State policy is to “[p]rotect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power.”⁷² The 2015 DOE Circular reiterated the EPIRA’s mandate that “all Distribution Utilities (DUs) shall have the obligation to supply electricity in the least-cost manner to their Captive Market, subject to the collection of retail rate du[l]y approved by the [ERC].”⁷³

The 2015 DOE Circular mandated that DUs, including electric cooperatives, obtain their PSAs through CSP. Section 1 of the 2015 DOE Circular states the principles behind CSP:

Section 1. General Principles. Consistent with its mandate, the DOE recognizes that Competitive Selection Process (CSP) in the procurement of PSAs by the DUs ensures security and certainty of electricity prices of electric power to end-users in the long-term. Towards this end, all CSPs undertaken by the DUs shall be guided by the following principles:

(a) Increase the transparency needed in the procurement process to reduce risks;

(b) Promote and instill competition in the procurement and supply of electric power to all end-users;

(c) Ascertain least-cost outcomes that are unlikely to be challenged in the future as the political and institutional scenarios should change; and

(d) Protect the interest of the general public. (Boldfacing added)

In sum, the raison d’etre of CSP is to ensure transparency and competition in the procurement of power supply by DUs so as to provide the least-cost electricity to the consuming public.

The clear text of Section 3 of the 2015 DOE Circular mandates the conduct of CSP after the Circular’s effectivity on 30 June 2015.

Section 3. Standard Features in the Conduct of CSP. After the effectivity of this Circular, all DUs shall procure PSAs only through CSP conducted through a Third Party duly recognized by the ERC and the DOE. In case of the [Electric Cooperatives (ECs)], the Third Party shall also be duly recognized by the National Electrification Administration (NEA).

x x x x (Boldfacing and italicization added)

Section 5 of the 2015 DOE Circular states the non-retroactivity of the Circular’s effect.

Section 5. Non-Retroactivity. This Circular shall have prospective application and will not apply to PSAs with tariff rates already approved and/or have been filed for approval by the ERC before the effectivity of this Circular. (Boldfacing added)

Clearly, PSAs filed with the ERC after the effectivity of the 2015 DOE Circular must comply with CSP as only PSAs filed “before the effectivity” of the Circular are excluded from CSP.

Section 10 of the 2015 DOE Circular provides for its effectivity:

Section 10. Effectivity. This Circular shall take effect immediately upon its publication in two (2) newspapers of general circulation and shall remain in effect until otherwise revoked. (Boldfacing added)

The 2015 DOE Circular took effect upon its publication on 30 June 2015 in the Philippine Daily Inquirer and the Philippine Star.⁷⁴ Section 10 expressly declares that the “Circular x x x shall remain in effect until otherwise revoked.” Indisputably, CSP became mandatory as of 30 June 2015. Taking all these provisions together, all PSAs submitted to the ERC after the effectivity of the 2015 DOE Circular, on or after 30 June 2015, are required to undergo CSP.

Since the 2015 DOE Circular was issued solely by the DOE, it is solely the DOE that can amend, postpone, or revoke the 2015 DOE Circular unless a higher authority, like the Congress or the President, amends or revokes it. Certainly, the ERC has no authority to amend, postpone, or revoke the 2015 DOE Circular, including its date of effectivity.

The Joint Resolution executed by DOE and the ERC on 20 October 2015 reiterated that the ERC shall issue the appropriate regulation to implement CSP. The Joint Resolution did not authorize the ERC to change the date of effectivity of the mandatory CSP. The Joint Resolution expressly mandated that the “ERC shall issue the appropriate regulation to implement” CSP. The power “to implement” CSP does not include the power to postpone the date of effectivity of CSP, which is expressly mandated in the 2015 DOE Circular to take effect upon the publication of the Circular. In fact, to postpone is the opposite of “to implement.”

On the same date, 20 October 2015, the ERC issued the CSP Guidelines, which directed all DUs to conduct CSP in the procurement of their power supply for their captive markets. While the 2015 DOE Circular mandated CSP to take effect on 30 June 2015, the ERC under the CSP Guidelines unilaterally postponed the date of effectivity of CSP from 30 June 2015 to 7 November 2015 or by 130 days. This marks the first postponement by ERC of the effectivity of the mandatory CSP.

On 15 March 2016, however, the ERC, for the second time, unilaterally postponed the date of effectivity of the mandatory CSP. On this date the ERC issued the ERC Clarificatory Resolution, which restated the date of effectivity of CSP from 7 November 2015 to 30 April 2016. The second postponement of the effectivity of CSP from 7 November 2015 to 30 April 2016, or by 175 days, allowed DUs to enter into contracts during the period of postponement to avoid the mandatory CSP.

Why the ERC Acted in Excess of its Jurisdiction:

Required Coordination Between

the DOE and the ERC

The 2015 DOE Circular explicitly stated the instances that required joint action of the DOE and the ERC:

1. Recognition of the Third Party that will conduct the CSP for the procurement of PSAs by the DUs;
2. Issuance of guidelines and procedures for the aggregation of the un-contracted demand requirements of the DUs;
3. Issuance of guidelines and procedures for the recognition or accreditation of the Third Party that conducts the CSP; and
4. Issuance of supplemental guidelines and procedures to properly guide the DUs and the Third Party in the design and execution of the CSP.

These instances are in Sections 3 and 4 of the 2015 DOE Circular:

Section 3. Standard Features in the Conduct of CSP. After the effectivity of this Circular, all DUs shall procure PSAs only through CSP conducted through a Third Party duly recognized by the ERC and the DOE. In case of the [Electric Cooperatives (ECs)], the Third Party shall also be duly recognized by the National Electrification Administration (NEA).

x x x x

Within one hundred twenty (120) days from the effectivity of this Circular, the ERC and [the] DOE shall jointly issue guidelines and procedures for the aggregation of the un-contracted demand requirements of the DUs and the process for the recognition or accreditation of the Third Party that conducts the CSP as hereto provided. x x x.

x x x x

Section 4. Supplemental Guidelines. To ensure efficiency and transparency of the CSP Process [sic], the ERC, upon its determination and in coordination with the DOE shall issue supplemental guidelines and procedures to properly guide the DUs and the Third Party in the design and execution of the CSP. The supplemental guidelines should ensure that any CSP and its outcome shall redound to greater transparency in the procurement of electric supply, and promote greater private sector participation in the generation and supply sectors, consistent with the declared policies under EPIRA. (Boldfacing and italicization added)

In all the foregoing instances, the ERC is mandated to act jointly with the DOE. All these instances merely implement CSP, and do not postpone CSP or amend the 2015 DOE Circular, which are beyond mere implementation of CSP. If the ERC cannot act by itself on certain instances in the mere implementation of CSP, then the ERC certainly cannot act by itself in the postponement of CSP or in the amendment of the 2015 DOE Circular.

We reiterate that the ERC unilaterally postponed the effectivity of the mandatory CSP twice. The ERC made the first unilateral postponement on 20 October 2015, when it stated that PSAs already filed with the ERC on or before 7 November 2015 were not required to undergo CSP. This first unilateral postponement was from 30 June 2015 to 7 November 2015, or a period of postponement of 130 days. The ERC made a second unilateral postponement on 15 March 2016, when it restated the effectivity of the CSP Guidelines from 7 November 2015 to 30 April 2016, or a postponement of 175 days. All in all, the ERC, by itself and without authorization from or coordination with the DOE, postponed the effectivity of the mandatory CSP for 305 days.

The ERC thus amended, and not merely supplemented, the “guidelines and procedures to properly guide the DUs and the Third Party in the design and execution of the CSP.”⁷⁵ This is contrary to what the 2015 DOE Circular clearly intended – that CSP shall take effect upon the Circular’s publication on 30 June 2015.

In its Comment to the present petition, ⁷⁶ the DOE denied any responsibility in the ERC’s restatement of the effective date in the ERC Clarificatory Resolution. The DOE stated:

15. DOE is not aware of the cut-off date shift. There is nothing on record that shows that ERC, contrary to Section 4 of the [2015] DOE Circular, coordinated with DOE in “restating” the date of effectivity to a later date, or from 7 November 2015 to 30 April 2016 for a period of one-hundred and seventy-five (175) days. ⁷⁷ (Boldfacing added)

In contrast, there is nothing in the ERC’s 60-page Comment⁷⁸ which disavowed DOE’s allegation of non-coordination. If anything, the ERC’s Comment underscored its assertion that the ERC Clarificatory Resolution was solely issued by the ERC supposedly as “a legitimate exercise of its quasi-legislative powers granted by law.”⁷⁹

We do not doubt that the ERC has the power to issue the appropriate regulation to implement CSP. This is clear from the EPIRA and the 2015 DOE Circular. Indeed, Justice Reyes in his Dissenting Opinion belabored this delegated power by underscoring the existence of the Joint Resolution. Justice Reyes misunderstood the delegation of power to mean that the Joint Resolution, by itself, is the required “coordination” in the implementation of CSP. Under this theory of Justice Reyes, the required “coordination” could take place only once upon the issuance of the Joint Resolution, and there can be no other coordination required in the future even if the ERC issues additional guidelines or regulations to implement CSP. This interpretation is obviously erroneous.

Moreover, the ERC’s power is neither absolute nor unbridled. The ERC can only promulgate rules, but only insofar as it is authorized. Section 4(b) of Rule 3 of the Implementing Rules and Regulations of the EPIRA states:

Pursuant to Sections 43 and 45 of the Act, the ERC shall promulgate such rules and regulations as autltorized tltereby, including but not limited to Competition Rules and limitations on recovery of system losses, and shall impose fines or penalties for any non-compliance with or breach of the Act, these Rules and the rules and regulations which it promulgates or administers. (Boldfacing and italicization added)

The 2015 DOE Circular specifically stated that the ERC’s power to issue CSP guidelines and procedures should be exercised “in coordination with the DOE.” The purpose of such coordination was “to ensure efficiency and transparency in the CSP.” In short, the ERC could not issue CSP guidelines and procedures without coordination with DOE. The DOE has expressly declared that the ERC did not coordinate with DOE in issuing the ERC Clarificatory Resolution. The ERC’s unilateral postponement of CSP for 305 days, allowing DUs to avoid the mandatory CSP to the great prejudice of the public, was clearly without authority and manifestly constituted grave abuse of discretion. Moreover, the ERC’s unilateral postponement of CSP egregiously prevented “transparency” and resulted in inefficiency by delaying the implementation of CSP.

In their Dissenting Opinions, Justice Reyes⁸⁰ and Justice Caguioa⁸¹ both use the DOE’s letter dated 18 January 2016,⁸² which requested the ERC to allow an electric cooperative (Abra Electric Cooperative, Inc. [ABRECO]) to directly negotiate with a power supplier despite the mandatory CSP, to justify the ERC’s alleged power to amend the 2015 DOE Circular.

First, Justice Reyes overlooks the direction of the exercise of power in this instance: instead of the ERC acting alone, the DOE directed the ERC to take action on the matter. This letter proves that the power to amend the 2015 DOE Circular belongs to the DOE, not to the ERC. There is clearly a necessity for the ERC to coordinate with the DOE with regard to CSP matters.

Second, the DOE’s endorsement to the ERC, as expressly stated in the DOE’s letter dated 18 January 2016, “does not preclude the ERC from exercising its authority to evaluate ABRECO’s PSAs and require further action, such as subjecting ABRECO’s PSA to a Swiss challenge.” A Swiss challenge is “a hybrid mechanism between the direct negotiation approach and the competitive bidding route.”⁸³ It is a system where “[a] third party can bid on a project during a designated period but the original proponent can counter match any superior offer.”⁸⁴ In short, a Swiss challenge is a form of public bidding, and is recognized in the implementing rules of laws such as Republic Act No. 6957, “An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector and for Other Purposes,” as amended by Republic Act No. 7718,⁸⁵ and Executive Order No. 146,⁸⁶ “Delegating to the National Economic and Development Authority (NEDA) Board the Power of the President to Approve Reclamation Projects.”⁸⁷

Third, even assuming that the DOE letter exempted one specific DU from CSP, it did not authorize ERC to postpone the effectivity of the mandatory CSP for 305 days for all other DUs nationwide.

Fourth, the term of exemption for ABRECO was only for three years, or from 2016 to 2018. The PSAs executed during ERC’s unilateral 305-day postponement had terms that range from 20 to 21 years.

In view of the DOE’s explicit assertion that the ERC did not coordinate with the DOE regarding the issuance of the ERC Clarificatory Resolution, and the ERC’s corresponding silence on the same matter, we hold that the ERC’s issuance of the ERC Clarificatory Resolution is void, because it was issued with grave abuse of discretion and in excess of its rule-making authority.

Why the ERC Gravely Abused its Discretion:

Effective Twenty- Year Freeze

of the Mandatory CSP

The PSAs between Meralco and its power suppliers were executed and submitted to the ERC within 10 days prior to the restated 30 April 2016 deadline. The data collated in the above-mentioned tables are, as indicated in the footnotes, found in the pleadings submitted by the pertinent parties. These are judicial admissions, and are not findings of fact. According to the ERC Clarificatory Resolution, these PSAs are not required to comply with CSP.

Obviously, the rationale behind CSP – to ensure transparency in the purchase by DUs of bulk power supply so as to provide the consuming public affordable electricity rates – acquires greater force and urgency when the DU or its parent company holds a significant equity interest in the bulk power supplier. Such a parent-subsidiary relationship, or even a significant equity interest in the bulk power supplier, does not lend itself to fair and arms-length transactions between the DU and the bulk power supplier.

From Meralco’s Comment, we see that the effect of the non-implementation of CSP is more widespread and far-reaching than what petitioners initially presented. Non-implementation of CSP affects various areas of the country and not just Meralco’s extensive service areas. Postponement of the effectivity of the mandatory CSP resulted in the exemption from CSP of a total of ninety (90) PSAs covering various areas of the country. Under the ERC Clarificatory Resolution, the dates of submission put these PSAs outside the ambit of the mandatory CSP for at least 20 years based on the contract terms of these PSAs.

In effect, the ERC Clarificatory Resolution signaled to DUs to rush the negotiations and finalize their PSAs with power generation companies. Meeting the extended deadline would then render the 2015 DOE Circular mandating CSP inutile for at least 20 years. We cannot, in conscience, allow this to happen. To validate the ERC’s postponement of CSP under the CSP Guidelines and the ERC Clarificatory Resolution means to validate ERC’s arbitrary and unauthorized act of putting into deep freeze, for at least 20 years, the principles behind CSP to the great prejudice of the public.⁸⁸

Why the ERC Gravely Abused its Discretion:

The Whereas Clauses of the

CSP Guidelines and of the ERC Clarificatory Resolution

The ERC’s Comment states: “It must be emphasized that the considerable amount of time, money, and effort it took to enter into a PSA would have been wasted if the CSP [Guidelines] took effect immediately.”⁸⁹ Granting that negotiations for the PSAs took considerable time, the issuance of the 2015 DOE Circular and of the CSP Guidelines was not conjured on a whim. We find that ERC’s Comment fails to consider the efforts of both the DOE and the ERC prior to the issuance of the 2015 DOE Circular as well as the CSP Guidelines.

As early as 5 December 2003, the DOE issued Department Circular No. 2003-12-011, entitled “Enjoining All Distribution Utilities to Supply Adequate, Affordable, Quality and Reliable Electricity,” which reiterated the state policy that “all DUs must x x x take cognizance and assume full responsibility to forecast, assure and contract for the supply of electric power within their respective franchise areas to meet their obligations as a DU particularly to their Captive Market.”⁹⁰ Moreover, the DOE had conducted a series of nationwide public consultations on the proposed policy on competitive procurement of electric power for all electricity end-users.⁹¹ The dates and manner of consultations, as well as the acts of the DOE and the ERC, were specifically mentioned in the Whereas Clauses of the CSP Guidelines, thus:

x x x x

WHEREAS, on February 19, 2013, the ERC issued a Notice in ERC Case No. 2013-005 RM, entitled “In the Matter of the Promulgation of the Rules Governing the Execution, Review and Evaluation of Power Supply Agreements Entered Into by Distribution Utilities for the Supply of Electricity to their Captive Market” (PSA Rules), which was posted on the ERC’s website, directing all interested parties to submit their respective comments on the first draft of the PSA Rules, not later than March 22, 2013;

WHEREAS, on various dates, the ERC received comments on the first draft of the PSA Rules from interested parties, namely: a) Cagayan Electric Power and Light Co., Inc. (CEPALCO); b) Visayan Electric Company, Inc. (VECO); c) Quezon Power (Philippines) Ltd. Co. (QPL); d) Power Source Philippines, Inc. (PSPI); e) National Grid Corporation of the Philippines (NGCP); t) Philippine Independent Power Producers Association, Inc. (PIPPA); g) Next Power Consortium, Inc.; h) SN Aboitiz Power Group (SNAP); i) Aboitiz Power Corporation (APC); j) Philippine Electricity Market Corporation (PEMC); k) Manila Electric Company (MERALCO); 1) Department of Energy (DOE); m) Philippine Rural Electric Cooperatives Associations, Inc. (PHILRECA); and n) National Rural Electric Cooperative Association (NRECA);

WHEREAS, on October 16, 2013, the ERC issued a Notice of Posting and Publication in the aforementioned case, which was posted on the ERC’s website, directing all interested parties to submit their respective comments on the second draft of the PSA Rules and setting the same for public consultations on December 2, 2013 in Pasig City for the Luzon stakeholders and on December 5, 2013 in Cebu City for the Visayas and Mindanao stakeholders;

WHEREAS, on various dates, the ERC received comments on the second draft of the PSA Rules from interested parties, namely: a) PHILRECA; b) CEPALCO; c) VECO; d) QPL; e) PSPI; t) NGCP; g) PIPPA; h) Next Power Consortium, Inc.; i) SNAP; j) APC; k) PEMC; 1) MERALCO; m) DOE; and n) NRECA;

WHEREAS, on January 27, 2014, the ERC issued a Notice of Posting and Public Consultation setting the second draft of the PSA Rules for public consultations on February 18, 20 and 24, 2014 in Davao City, Cebu City and Pasig City for the Mindanao, Visayas and Luzon stakeholders, respectively;

WHEREAS, on February 18, 20 and 24, 2014, the ERC conducted public consultations wherein the comments of the interested partied were discussed;

WHEREAS, the ERC, likewise, conducted Focus Group Discussions (FGDs) with the stakeholders on April 22 to 24, 2014 in Pasig City, May 6 to 8, 2014 in Cebu City, May 13 to 14, 2014 in Cagayan De Oro City and May 20 to 22, 2014 in Pasig City, to thoroughly discuss major issues in relation to the draft PSA Rules, such as: a) the requirement of Competitive Selection Process (CSP); b) the proposed PSA template; c) the joint filing of PSA applications by the DUs and generation companies (GenCos); and d) the “walk-away” provision in the PSA, and the ERC likewise set the deadline for the submission of additional comments or position papers for May 30, 2014;

WHEREAS, on various dates, the ERC received position papers/additional comments from interested parties, namely: a) PIPPA; b) APC; c) Mindanao Coalition of Power Consumers; and d) Association of Mindanao Rural Electric Cooperatives, Inc. (AMRECO);

WHEREAS, Article III of the draft PSA Rules requires the DU to undertake a transparent and competitive selection process before contracting for the supply of electricity to its captive market;

WHEREAS, in October 2014, the DOE issued for comments its draft Circular on the proposed Demand Aggregation and Supply Auctioning Policy (DASAP);

WHEREAS, in the proposed DASAP, all DUS will be mandated to comply with the auction requirement prescribed therein and other rules and guidelines as may be prescribed in the implementation of the DASAP;

WHEREAS, by reason of the issuance of the DASAP and pending the finalization thereof, the ERC held in abeyance its action on ERC Case No. 2013-005 RM and final approval of the draft PSA Rules;

WHEREAS, on June 11, 2015, the Department of Energy (DOE) issued Department Circular No. DC2015-06-008, Mandating All Distribution Utilities to Undergo Competitive Selection Process (CSP) in Securing Power Supply Agreements (PSA);

WHEREAS, the ERC and the DOE are convinced that there is an advantage to be gained by having a CSP in place, in terms of ensuring transparency in the DUs’ supply procurement and providing opportunities to elicit the best price offers and other PSA terms and conditions from suppliers[.]⁹² (Boldfacing and italicization added)

In stark contrast to the extensive consensus-building which attended the drafting of the 2015 DOE Circular and the CSP Guidelines, the ERC Clarificatory Resolution explicitly admitted that its issuance was not accompanied by any public consultation or focus group discussion. Rather, the ERC Clarificatory Resolution was unilaterally issued by the ERC, without coordinating with DOE, on the basis of “several letters from stakeholders.” The stakeholders had no way of knowing the concerns of their peers as there was no interaction or discussion among the stakeholders.

WHEREAS, since the publication of the CSP [Guidelines] on 06 November 2015, the [ERC] has received several letters from stakeholders which raised issues on the constitutionality of the effectivity of the CSP [Guidelines], sought clarification on the implementation of the CSP and its applicability to the renewal and extension of PSAs, requested a determination of the accepted forms of CSP, and submitted grounds for exemption from its applicability, among others.

WHEREAS, after judicious study and due consideration of the different perspectives raised in the aforementioned letters, with the end in view of ensuring the successful implementation of the CSP for the benefit of consumers, DUs, and GenCos, the [ERC] has resolved to allow a period of transition for the full implementation of the CSP [Guidelines] and, as such, restates the effectivity date of the CSP [Guidelines] to a later date[.]⁹³

The CSP Guidelines did not, in the words of the OSG, “take effect immediately.” Rather, it was the product of years of negotiation. The stakeholders were aware of the contents and the eventual implementation of CSP. Moreover, the CSP Guidelines, although signed on 20 October 2015, took effect on 7 November 2015, or 18 days after signing.

Why the ERC Gravely Abused its Discretion:

Obligations of a Distribution Utility in the

Electric Power Industry

The EPIRA divided the electric power industry into four sectors, namely: generation, transmission, distribution, and supply.⁹⁴ The distribution of electricity to end-users is a regulated common carrier business requiring a franchise.⁹⁵ We reiterate that the EPIRA mandates that a distribution utility has the obligation to supply electricity in the least-cost manner to its captive market, subject to the collection of distribution retail supply rate duly approved by the ERC.⁹⁶

Republic Act No. 9209 granted Meralco a congressional franchise to construct, operate, and maintain a distribution system for the conveyance of electric power to the end-users in the cities and municipalities of Metro Manila, Bulacan, Cavite, and Rizal, and certain cities, municipalities, and barangays in Batangas, Laguna, Quezon, and Pampanga. Meralco’s franchise is in the nature of a monopoly because it does not have any competitor in its designated areas. The actual monopolistic nature of Meralco’s franchise was recognized and addressed by the framers of our Constitution, thus:

1. DAVIDE: xx x

Under Section 15 on franchise, certificate, or any other form of authorization for the operation of a public utility, we notice that the restriction, provided in the 1973 Constitution that it should not be exclusive in character, is no longer provided. Therefore, a franchise, certificate or any form of authorization for the operation of a public utility may be exclusive in character.

1. VILLEGAS: I think, yes.
2. DAVIDE: It may be “yes.” But would it not violate precisely the thrust against monopolies?
3. VILLEGAS: The question is, we do not include the provision about the franchise being exclusive in character.
4. SUAREZ: This matter was taken up during the Committee meetings. The example of the public utility given was the MERALCO. If there is a proliferation of public utilities engaged in the servicing of the needs of the public for electric current, this may lead to more problems for the nation. That is why the Commissioner is correct in saying that that will constitute an exemption to the general rule that there must be no monopoly of any kind, but it could be operative in the case of public utilities.
5. DAVIDE: Does not the Commissioner believe that the other side of the coin may also be conducive to more keen competition and better public service?
6. SUAREZ: The Commissioner may be right.
7. DAVIDE: Does not the Commissioner believe that we should restore the qualification that it should not be exclusive in character?
8. SUAREZ: In other words, under the Commissioner’s proposal, Metro Manila, for example, could be serviced by two or more public utilities similar to or identical with what MERALCO is giving to the public?
9. DAVIDE: That is correct.
10. SUAREZ: The Commissioner feels that that may create or generate improvement in the services?
11. DAVIDE: Yes, because if we now allow an exclusive grant of a franchise, that might not be conducive to public service.
12. SUAREZ: We will consider that in the committee level
13. MONSOD: With the Commissioner’s permission, may I just amplify this.
14. VILLEGAS: Commissioner Monsod would like to make a clarification.
15. MONSOD: I believe the Commissioner is addressing himself to a situation where it lends itself to more than one franchise. For example, electric power, it is possible that within a single grid, we may have different distribution companies. So the Commissioner is right in that sense that perhaps in some situations, non-exclusivity may be good for the public. But in the case of power generation, this may be a natural activity that can only be generated by one company, in which case, prohibiting exclusive franchise may not be in the public interest.⁹⁷ (Boldfacing added)

Section 5 of Republic Act No. 9209 provides that “[t]he retail rates to [Meralco’s] captive market and charges for the distribution of electric power by [Meralco] to its end-users shall be regulated by and subject to the approval of the ERC.” As the holder of a distribution franchise, Meralco is obligated to provide electricity at the least cost to its consumers. The ERC, as Meralco’s rate regulator, approves the retail rates – comprising of power and distribution costs – to be charged to end-users. As we have demonstrated above, both Meralco and the ERC have been remiss in their obligations. Going through competitive public bidding as prescribed in the 2015 DOE Circular is the only way to ensure a transparent and reasonable cost of electricity to consumers.

Lest we forget, the ERC is expressly mandated in Section 43(o) of the EPIRA of “ensuring that the x x x pass through of bulk purchase cost by distributors is transparent.” The ERC’s postponement of CSP twice, totaling 305 days and enabling 90 PSAs in various areas of the country to avoid CSP for at least 20 years, directly and glaringly violates this express mandate of the ERC, resulting in the non-transparent, secretive fixing of prices for bulk purchases of electricity, to the great prejudice of the 95 million Filipinos living in this country as well as the millions of business enterprises operating in this country. This ERC action is a most extreme instance of grave abuse of discretion, amounting to lack or excess of jurisdiction, warranting the strong condemnation by this Court and the annulment of the ERC’s action.

Absent compliance with CSP in accordance with the 2015 DOE Circular, the PSAs shall be valid only as between the DUs and the power generation suppliers, and shall not bind the DOE, the ERC, and the public for purposes of determining the transparent and reasonable power purchase cost to be passed on to consumers.

On 1 February 2018, the DOE issued Circular No. DC2018-02-0003 entitled “Adopting and Prescribing the Policy for the Competitive Selection Process in the Procurement by the Distribution Utilities of Power Supply Agreements for the Captive Market” (2018 DOE Circular). The DOE prescribed, in Annex “A” of this 2018 DOE Circular, the DOE’s own CSP Policy in the procurement of power supply by DUs for their captive market (2018 DOE CSP Policy). Section 16.1 of the 2018 DOE CSP Policy expressly repealed Section 4 of the 2015 DOE Circular authorizing ERC to issue supplemental guidelines to implement CSP.

In short, the DOE revoked the authority it delegated to the ERC to issue supplemental guidelines to implement CSP, and the DOE itself issued its own guidelines, the 2018 DOE CSP Policy, to implement CSP under the 2015 DOE Circular. This means that the CSP Guidelines issued by the ERC have become functus officio and have been superseded by the 2018 DOE CSP Policy. Under its Section 15, the 2018 DOE CSP Policy is expressly made to apply to “all prospective PSAs.” The 2018 DOE Circular, including its Annex “A,” took effect upon its publication on 9 February 2018. Thus, the 90 PSAs mentioned in this present case must undergo CSP in accordance with the 2018 DOE Circular, in particular the 2018 DOE CSP Policy prescribed in Annex “A” of the 2018 DOE Circular.

WHEREFORE, the petition for certiorari and prohibition is GRANTED. The first paragraph of Section 4 of Energy Regulatory Commission Resolution No. 13, Series of 2015 (CSP Guidelines), and Energy Regulatory Commission Resolution No. 1, Series of 2016 (ERC Clarificatory Resolution), are hereby declared VOID ab initio. Consequently, all Power Supply Agreement applications submitted by Distribution Utilities to the Energy Regulatory Commission on or after 30 June 2015 shall comply with the Competitive Selection Process in accordance with Department of Energy Circular No. DC2018-02-0003 (2018 DOE Circular) and its Annex “A.” Upon compliance with the Competitive Selection Process, the power purchase cost resulting from such compliance shall retroact to the date of effectivity of the complying Power Supply Agreement, but in no case earlier than 30 June 2015, for purposes of passing on the power purchase cost to consumers.

SO ORDERED.

ANTONIO T. CARPIO

Associate Justice

WE CONCUR:

LUCAS P. BERSAMIN

Chief Justice

DIOSDADO M. PERALTA Associate Justice	MARIANO C. DEL CASTILLO Associate Justice
Please see Separate Concurring Opinion ESTELA M. PERLAS-BERNABE Associate Justice	I concure and join J. Carpio and J. Bernabe MARVIC M.V.F. LEONEN Associate Justice
(no part) FRANCIS H. JARDELEZA Associate Justice	See Dissenting Opinion ALFREDO BENJAMIN S. CAGUIOA Associate Justice
See Dissenting Opinion ANDRES B. REYES, JR. Associate Justice	I certify that Justice Gesmundo who is travelling on official business left his vote for the opinion of Justice Carpio ALEXANDER G. GESMUNDO Associate Justice
JOSE C. REYES, JR. Associate Justice	RMON PAUL L. HERNANDO Associate Justice
ROSMARI D. CARANDANG Associate Justice	AMY C. LAZARO-JAVIER Associate Justice

C E R T I F I C A T I O N

Pursuant to the Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

LUCAS P. BERSAMIN

Chief Justice

 

Footnotes

^*No part.

¹ See Renewable Energy Auctions in Developing Countries (2013), https://www.irena.org/ documentdownloads/publications/irena renewable_ energy_ auctions_ in_ developing_ countries .pdf; Electricity Auctions: An Overview of Efficient Practices (2011), http://hdl.handle .net/10986/2346; Competitive Procurement of Retail Electricity Supply: Recent Trends in State Policies and Utility Practices (2008), https://www.analysisgroup.com/uploadedfiles/content/ insights/publishing/competitive procurement. pdf [All accessed 4 March 2019].

² Another way for the State to intervene is to examine the accounts of public utilities. Section 22, Chapter 4, Subtitle B, Title I, Book V of the Administrative Code of 1987 provides: Section 22. Authority to Examine Accounts of Public Utilities. – (I) The Commission [on Audit] shall examine and audit the books, records and accounts of public utilities in connection with the fixing of rates of every nature, or in relation to the proceedings of the proper regulatory agencies, for purposes of determining franchise taxes;

2) Any public utility refusing to allow an examination and audit of its books of accounts and pertinent records, or offering unnecessary obstruction to the examination and audit, or found guilty of concealing any material information concerning its financial status shall be subject to the penalties provided by law; and

(3) During the examination and audit, the public utility concerned shall produce all the reports, records, books of accounts and such other papers as may be required. The Commission shall have the power to examine under oath any official or employee of the said public utility.

³ This provision reads:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

⁴ Under Rule 65 of the Rules of Court.

⁵ Rollo, p. 33.

⁶ Id. at 54, 329, 749.

⁷ Id. at 55, 750.

⁸ Id. at 50 I.

⁹ Id. at 329, 501.

¹⁰ Id. at 329.

¹¹ Id. at 77, 388.

¹² Id. at 77, 591.

¹³ Id. at 501

¹⁴ Id. at 388.

¹⁵ Id.

¹⁶ Id. at 95, 445, 814.

¹⁷ Id.at 96,814.

¹⁸ Id. at 502.

¹⁹ Id. at 445.

²⁰ Id.

²¹ Id. at 148, 698.

²² Id. at 148, 699.

²³ Id. at 501.

²⁴ Id. at 987-988.

²⁵ Id. at 988.

²⁶ Id. at 164.

²⁷ Id.

²⁸ Id. at 502.

²⁹ Id. at 988.

³⁰ Id.

³¹ Id. at 112, 646.

³² Id. at 112, 647.

³³ Id. at 503.

³⁴ Id. at 1326.

³⁵ Id.

³⁶ Id. at 130.

³⁷ Id.

³⁸ Id. at 502.

³⁹ Id. at 1346.

⁴⁰ Id.

⁴¹ Id. at 346 (RPE), 411 (A 1 E).

⁴² Id. at 534.

⁴³ Id. at 1325 (CLPPC), 1345 (MPGC).

⁴⁴ Id. at 497.

⁴⁵ Id. Boldfacing added.

⁴⁶ Id. at 506.

⁴⁷ Id. at 507.

⁴⁸ Id.at 17.

⁴⁹ Araullo v. President Benigno S. C. Aquino, III, 737 Phil. 457, 531 (2014). Italicization in the original. Boldfacing added.

⁵⁰ Filipino Telephone Corporation v. NTC, 457 Phil. 101, 113 (2003), citing Benito v. Commission on Elections, 402 Phil. 764 (2001).

⁵¹ Dissenting Opinion, Justice Andres B. Reyes, Jr., pp. 5-7.

⁵² Id. at 7-12.

⁵³ Id. at 8-11.

⁵⁴ Id. at 9. Emphasis omitted.

⁵⁵ Section l of Joint Resolution No. I reads:

Section I. Competitive Selection Process. Consistent with their respective mandates, the DOE and ERC recognize that Competitive Selection Process (CSP) in the procurement of PSAs by the DUs engenders transparency, enhances security of supply, and ensures stability of electricity prices to captive electricity end-users in the long-term. Consequently, by agreement of the DOE and ERC, the ERC shall issue the appropriate regulations to implement the same.

⁵⁶ Section 38, Republic Act No. 9136.

⁵⁷ This provision reads:

⁵⁸ Section 2. Declaration of Policy. – It is hereby declared the policy of the State:

(a) To ensure and accelerate the total electrification of the country;

(b) To ensure the quality, reliability, security and affordability of the supply of electric power;

(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market;

(d) To enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors;

(e) To ensure fair and non-discriminatory treatment of public and private sector entities in the process of restructuring the electric power industry;

(f) To protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power;

(g) To assure socially and environmentally compatible energy sources and infrastructure;

(h) To promote the utilization of indigenous and new and renewable energy resources in power generation in order to reduce dependence on imported energy;

(i) To provide for an orderly and transparent privatization of the assets and liabilities of the National

Power Corporation (NPC);

1. U) To establish a strong and purely independent regulatory body and system to ensure consumer protection and enhance the competitive operation of the electricity market; and

(k) To encourage the efficient use of energy and other modalities of demand side management.

Republic Act No. 9136, Section 37.

⁵⁹ See the complete enumeration of policies in note 57.

⁶⁰ 2015 DOE Circular, Second Whereas Clause, par. (d).

⁶¹ 2015 DOE Circular, First Whereas Clause, par. ( d).

⁶² Republic Act No. 9136, Section 2(b ).

⁶³ Republic Act No. 9136, Section 43(0).

⁶⁴ Republic Act No. 9136, Section 38.

⁶⁵ Dissenting Opinion, Justice Caguioa, p. 11.

⁶⁶ Id. at 12. Emphasis omitted.

⁶⁷ Id. at 25. Italicization in the original.

⁶⁸ Id.

⁶⁹ Victorias Milling Co., Inc. v. Office of the Presidential Assistant for Legal Affairs, 237 Phil. 306 (1987).

⁷⁰ Section 37 of the EPIRA reads:

SEC. 37. Powers and Functions of the DOE. – In addition to its existing powers and functions, the DOE is hereby mandated to supervise the restructuring of the electricity industry. In pursuance thereof, Section 5 of Republic Act No. 7638, otherwise known as “The Department of Energy Act of 1992,” is hereby amended to read as follows:

(a) Formulate policies for the planning and implementation of a comprehensive program for the efficient supply and economical use of energy consistent with the approved national economic plan and with the policies on environmental protection and conservation and maintenance of ecological balance, and provide a mechanism for the integration, rationalization, and coordination of the various energy programs of the Government;

(b) Develop and update annually the existing Philippine Energy Plan, hereinafter referred to as ‘The Plan’, which shall provide for an integrated and comprehensive exploration, development, utilization, distribution, and conservation of energy resources, with preferential bias for environment-friendly, indigenous, and low-cost sources of energy. The plan shall include a policy direction towards the privatization of government agencies related to energy, deregulation of the power and energy industry, and reduction of dependency on oil-fired plants. Said Plan shall be submitted to Congress not later than the fifteenth day of September and every year thereafter;

(c) Prepare and update annually a Power Development Program (PDP) and integrate the same into the Philippine Energy Plan. The PDP shall consider and integrate the individual or joint development plans of the transmission, generation, and distribution sectors of the electric power industry, which are submitted to the Department: Provided, however, That the ERC shall have exclusive authority covering the Grid Code and the pertinent rules and regulations it may issue;

(d) Ensure the reliability, quality and security of supply of electric power;

(e) Following the restructuring of the electricity sector, the DOE shall, among others:

(i) Encourage private sector investments in the electricity sector and promote development of indigenous and renewable energy sources;

(ii) Facilitate and encourage reforms in the structure and operations of distribution utilities for greater efficiency and lower costs;

(iii) In consultation with other government agencies, promote a system of incentives to encourage industry participants, including new generating companies and end-users to provide adequate and reliable electric supply; and

(iv) Undertake in coordination with the ERC, NPC, NEA and the Philippine Information Agency (PIA), information campaign to educate the public on the restructuring of the electricity sector and privatization of NPC assets.

(f) Jointly with the electric power industry participants, establish the wholesale electricity spot market and formulate the detailed rules governing the operations thereof;

(g) Establish and administer programs for the exploration, transportation, marketing, distribution, utilization, conservation, stockpiling, and storage of energy resources of all forms, whether conventional or non-conventional;

(h) Exercise supervision and control over all government activities relative to energy projects in order to attain the goals embodied in Section 2 of RA 7638;

(i) Develop policies and procedures and, as appropriate, promote a system of energy development incentives to enable and encourage electric power industry participants to provide adequate capacity to meet demand including, among others, reserve requirements;

(j) Monitor private sector activities relative to energy projects in order to attain the goals of the restructuring, privatization, and modernization of the electric power sector as provided for under existing Jaws: Provided, That the Department shall endeavor to provide for an environment conducive to free and active private sector participation and investment in all energy activities;

(k) Assess the requirements of, determine priorities for, provide direction to, and disseminate information resulting from energy research and development programs for the optimal development of various forms of energy production and utilization technologies;

(I) Formulate and implement programs, including a system of providing incentives and penalties, for the judicious and efficient use of energy in all energy-consuming sectors of the economy;

(m) Formulate and implement a program for the accelerated development of nonconventional energy systems and the promotion and commercialization of its applications;

(n) Devise ways and means of giving direct benefit to the province, city, or municipality, especially the community and people affected, and equitable preferential benefit to the region that hosts the energy resource and/or the energy-generating facility: Provided, however, That the other provinces, cities, municipalities, or regions shall not be deprived of their energy requirements;

(o) Encourage private enterprises engaged in energy projects, including corporations, cooperatives, and similar collective organizations, to broaden the base of their ownership and thereby encourage the widest public ownership of energy-oriented corporations;

(p) Formulate such rules and regulations as may be necessary to implement the objectives of this Act; and

(q) Exercise such other powers as may be necessary or incidental to attain the objectives of this Act.

⁷¹ 2015 DOE Circular, Second Whereas Clause, par. (d).

⁷² 2015 DOE Circular, First Whereas Clause, par. (d).

⁷³ 2015 DOE Circular, Third Whereas Clause.

⁷⁴ http://www.nea.gov.ph/nea-ec-legal-conclave?download= 1510%3Adoe-circular-no.-dc-20 I 5-06- 000-mandating-all-dus-to-undergo-competitive-se lection-process-in-securing-psa (Accessed 1 July 2018).

⁷⁵ 2015 DOE Circular, Section 4.

⁷⁶ Rollo, pp. 1140-1152. Filed by the DOE’s Assistant Secretary Gerardo D. Erguiza, Jr., Assistant Secretary Caron Aicitel E. Lascano, and Director III-Legal Services Arthus T. Tenazas.

⁷⁷ Id. at 1145.

⁷⁸ Id. at 1175-1234. Filed by the Office of the Solicitor General, and signed by Solicitor General Jose C. Calida, Assistant Solicitors General Raymund I. Rigodon and Henry S. Angeles, State Solicitor Lawrence Martin A. Albar, and Associate Solicitors Jose Angelo A. David, Lilibeth C. Perez-De Guzman, Maria Cristina T. Mundin, and Patricia Anne D. Sta. Maria.

⁷⁹ Id. at 1193.

⁸⁰ Dissenting Opinion, Justice A. B. Reyes, Jr., p. 5.

⁸¹ Dissenting Opinion, Justice Caguioa, p. 32.

⁸² Rollo, p. 1516. The letter reads:

18 January 2016

HON. JOSE VICENTE B. SALAZAR

Chairman

ENERGY REGULATORY COMMISSION

Pacific Center Building, San Miguel Avenue,

Ortigas Avenue, 1500 Pasig City, Metro Manila

Subject: ABRECO’S Interim Power Supply Requirement

Dear Chairman Salazar:

We refer to the attached communication we received from the Abra Electric Cooperative, Inc. (ABRECO) dated 24 November 2015, seeking DOE’s endorsement to ERC to allow ABRECO to directly negotiate with a power supplier for their short-term requirement in its quest for a secured and affordable power supply and to consequently relieve them from full exposure with the WESM.

In its attached letter to ERC, ABRECO mentioned that AES is considering a 2MW Interim supply for the EC’s power requirements for the next three (3) years from 2016 to 2018. We welcome this as a positive move for the improvement of ABRECO’s operations, thus, we are endorsing for ERC’s consideration to allow ABRECO to directly negotiate with a power supplier for its short-term requirement, albeit the requirement for competitive selection process. This request is made in consideration of ABRECO’s situation as an ailing EC and to prevent its vulnerability to volatile WESM prices given its supply [is] sourced from the WESM currently. This endorsement, however, does not preclude the ERC from exercising its authority to evaluate the DUs Power Supply Agreements (PSAs) and require further action, such as, but not limited to subjecting ABRECO’s PSA to a Swiss challenge.

For your consideration. Thank you.

Very truly yours,

(signed)

Zenaida Y. Monsada

Secretary

⁸³ SM Land, Inc. v. Bases Conversion and Development Authority, 741 Phil. 269, 288(2014).

⁸⁴ Footnote 13 of SM Land, Inc. v. Bases Conversion and Development Authority, id.

⁸⁵ The term “Swiss Challenge” is also found in Section 3.2 of the Revised Implementing Rules and Regulations of Republic Act No. 6957, “An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector and for Other Purposes,” as amended by Republic Act No. 7718. Section 3.2 reads as follows:

Responsibility of the PBAC. -The PBAC herein created shall be responsible for all aspects of the pre-bidding and bidding process in the case of solicited proposals, and for the comparative bidding process (otherwise known as the “Swiss Challenge”), in the case of Unsolicited Proposals, including, among others, the preparation of the bidding/tender documents, publication of the invitation to pre-qualify and bid, pre-qualification of prospective bidders, conduct of pre-bid conferences and issuance of supplemental notices, interpretation of the rules regarding the bidding, the conduct of bidding, evaluation of bids, resolution of disputes between bidders, and recommendation for the acceptance of the bid and/or for the award of the project.

⁸⁶ Repealed by Executive Order No. 74 (2019). The Philippine Reclamation Authority (PRA) shall be under the control and supervision of the Office of the President, while the power of the President to approve all reclamation projects shall be delegated to the PRA governing board.

⁸⁷ The term “Swiss Challenge” is also found in Section 6.2 of the Implementing Rules and Regulations of Executive Order No. 146, dated 13 November 2013, “Delegating to the National Economic and Development Authority (NEDA) Board the Power of the President to Approve Reclamation Projects.” Section 6.2 reads as follows:

6.2. Reclamation projects identified under Sections 2.2.2, 2.3.2, 2.4 and 2.5, after undergoing a thorough review, evaluation and negotiation process and upon acceptance by the PRA Board , shall be subjected to a competitive challenge process (“Swiss Challenge”) in accordance with existing laws such as but not limited to the BOT Law, NEDA JV Guidelines and based on the parameters as approved by the NEDA Board, upon recommendation of the PRA Board.

In all cases, the Public Bidding in Section 6.1 and competitive challenge process (“Swiss Challenge”) under Section 6.2 shall be undertaken after the NEDA Board approval in compliance with the competitive bidding requirement of EO No. 146.

⁸⁸ 2015 DOE Circular, Section I.

⁸⁹ Rollo, p. 1207.

⁹⁰ See 2015 DOE Circular, Fourth Whereas Clause.

⁹¹ See 2015 DOE Circular, Seventh Whereas Clause.

⁹² CSP Guidelines, Third to Seventeenth Whereas Clauses.

⁹³ ERC Clarificatory Resolution, Seventh and Eighth Whereas Clauses.

⁹⁴ See Republic Act No. 9136, Section 5.

⁹⁵ See Republic Act No. 9136, Section 22.

⁹⁶ See Republic Act No. 9136, Section 23.

⁹⁷ III RECORD, CONSTITUTIONAL COMMISSION 261-262 (13 August 1986).

 

 

The degree of freedom by which journalists operate to uncover and write the news is an indication of the current state of our country’s democracy. By freely obtaining vital information on matters of public concern, citizens become socially aware and well-equipped to participate in different political processes to exercise their rights enshrined in the fundamental law. Journalists are the sentinels who keep watch over the actions of the government. They are the eyes and ears of the citizenry. In today’s digital age, the work of journalists is held to a higher standard more than ever. Beyond the multitude that participate on social media, they have value as part of a profession that should be trusted with the truth. Nevertheless, the probing done by journalists must be made “with good motives and for justifiable ends[.]” The protection afforded by the Constitution to the press is not carte blanche that allows journalists to abandon their responsibility for truth and transparency. It is incumbent upon them to exercise a high degree of professionalism in their work, regardless of the subject of their stories. This resolves a Petition for Review on Certiorari assailing the Court of Appeals June 13, 2014 Amended Decision in CA-G.R. CR No. 33256. On March 24, 2004, an article entitled “Malinis ba talaga o naglilinis-linisan lang (Sino si Finance Sec. Juanita Amatong?)”was published in Abante Tonite, a newspaper of general circulation in the Philippines. Written by Raffy T. Tulfo (Tulfo), the article reported that a certain Michael C. Guy (Guy), who was then being investigated by the Revenue Integrity Protection Service of the Department of Finance for tax fraud, went to former Department of Finance Secretary Juanita Amatong (Secretary Amatong)’s house to ask for help. Secretary Amatong then purportedly called the head of the Revenue Integrity Protection Service and directed that all the documents that the Revenue Integrity Protection Service had obtained on Guy’s case be surrendered to her. The article read: Ang mga tanong ngayon, may katotohanan kaya ang akusasyon ni Salanga laban kay Amatong? Nagsasabi naman kaya ng totoo si Amatong nang itanggi niya ang akusasyon ni Salanga laban sa kanya? Narito ang isang balitang natanggap ng SHOOT TO KILL mula sa isang mapagkakatiwalaan at A-1 source na kung saan ay inarbor ni Amatong sa kanyang mga tauhan ang isang negosyanteng iniimb[e]st[i]gahan ng DoF dahil sa katiwalian sa tax refund. Narito ang kwento at kayo na ang bahalang manghusga kung sino ang may kredibilidad, si Amatong o si Salanga? Noong March 20, 2004, Sabado ng hapon pumunta ang isang negosyanteng nagngangalang Michael Guy sa bahay ni Amatong. Si Guy ay iniimb[e]st[i]gahan ng mga tauhan ng Revenue Integrity Protection Service (RIPS) ng DOF dahil sa kahinahinalang mga tax refund na natanggap nito mula sa BIR simula 1998 hanggang 2003. Problemado si Guy sapagkat natunugan niyang iniimbestigahan na siya ng RIPS. Ito’y matapos magpadala ng sulat ang RIPS sa Central Bank at hinihingi rito ang lahat ng mga transaksyon ng kumpanya ni Guy sa lahat ng mga bangko. Ang nakatanggap ng sulat sa Central Bank ay kakilala ni Guy. Noong Sabado ng hapon din, ayon sa aking source, tinawagan ni Amatong ang hepe ng RIPS para hilingin dito na ihinto imbestigasyon laban kay Guy at isurender sa kanyang opisina ang lahat ng mga dokumentong nakalap ng RIPS laban dito!!! Claiming that the article had tainted his reputation, Guy filed before the Office of the City Prosecutor of Makati City a Complaint-Affidavit against Tulfo and the following representatives of Abante Tonite’s publisher, Monica Publishing Corporation: (1) Allen Macasaet; (2) Nicolas V. Quijano, Jr.; (3) Janet Bay; (4) Jesus P. Galang; (5) Randy Hagos; (6) Jeany Lacorte; and (7) Venus Tandoc (collectively, Macasaet, et al.). After a preliminary investigation, the Office of the City Prosecutor filed an Amended Information charging Tulfo and Macasaet, et al. with the crime of libel. On arraignment, Tulfo and Macasaet, et al. refused to enter a plea. Accordingly, the Regional Trial Court ordered that a plea of not guilty be entered for all of them. In its February 24, 2010 Judgment, the Regional Trial Court convicted Tulfo and Macasaet, et al. of the crime of libel. It ruled that the prosecution was able to establish by proof beyond reasonable doubt the elements of the crime. The trial court ordered Tulfo and Macasaet, et al. to pay Guy: (1) ₱5,000,000.00 as actual damages; (2) ₱5,000,000.00 as moral damages; and (3) ₱211,200.00 as attorney’s fees. The dispositive portion of its Judgment read: WHEREFORE, the Court finds the accused Allen Macasaet, Nicolas V. Quijano, Jr., Janet Bay, Jesus P. Galang, Randy Hagos, Jeany Lacorte, Venus Tandoc and Raffy Tulfo, GUILTY beyond reasonable doubt of the crime of Libel, as defined in Article 353 of the Revised Penal Code, and sentences each of the accused to pay a fine of SIX THOUSAND PESOS (P6,000.00) with subsidiary imprisonment, in case of insolvency. They are likewise hereby ordered to pay private complainant Michael C. Guy, jointly and severally, the sum of FIVE MILLION PESOS (P5,000,000.00) as actual damages, FIVE MILLION PESOS (P5,000,000.00) as moral damages, and TWO HUNDRED ELEVEN THOUSAND TWO HUNDRED PESOS (P211,200.00) as attorney’s fees. (Emphasis in the original) Aggrieved, Tulfo and Macasaet, et al. filed before the Court of Appeals separate Appeals assailing the Regional Trial Court February 24, 2010 Judgment. In its August 30, 2013 Decision, the Court of Appeals affirmed the trial court’s Judgment convicting Tulfo and Macasaet, et al. of libel. Nonetheless, it reduced the award of moral damages to P500,000.00 and ordered them to pay Guy exemplary damages in the amount of P500,000.00. The dispositive portion of its Decision read: WHEREFORE, the appeal is DENIED. The February 24, 2010 Judgment of the Regional Trial Court, Branch 132, Makati City in Criminal Case No. 04-3614 is AFFIRMED with MODIFICATION that all accused-appellants are ordered to pay Michael Guy, jointly and severally, P500,000.00 moral damages and ₱500,000.00 exemplary damages. (Emphasis in the original) Insisting on their innocence, Tulfo sought the reconsideration of the Court of Appeals August 30, 2013 Decision. Similarly, Guy moved for partial reconsideration and clarification of the Decision. In its June 13, 2014 Amended Decision, the Court of Appeals modified its August 30, 2013 Decision and deleted the award of exemplary damages. It likewise deleted the Regional Trial Court’s award of actual damages for lack of factual and legal basis. The dispositive portion of its Amended Decision read: WHEREFORE, the appeal is DENIED. The February 24, 2010 Judgment of the Regional Trial Court, Branch 132, Makati City in Criminal Case No. 04-3614 is hereby AFFIRMED with MODIFICATIONS that all accused-appellants are ORDERED to pay Michael Guy, jointly and severally, ₱500,000.00 moral damages and ₱211,200.00 attorney’s fees. The award of ₱5,000,000.00 actual damages is DELETED for lack of factual and legal basis. (Emphasis in the original) On August 26, 2014, Guy filed this Petition for Review on Certiorari, seeking the reversal of the Court of Appeals Amended Decision and the reinstatement of the Regional Trial Court Judgment. Petitioner maintains that contrary to the Court of Appeals’ findings, there is factual and legal basis for the award of actual damages. He avers that it had been established in the trial court proceedings that he may be able to earn ₱50,000,000.00 in 10 years. This possibility, he points out, constitutes the factual basis for the award of actual damages. Assuming that there is no sufficient basis for the award of actual damages, petitioner asserts that he is still entitled to temperate damages. Citing Articles 2216, 2224, and 2225 of the Civil Code, he claims that temperate damages may be awarded even without competent proof, as long as the court finds that the victim has incurred some pecuniary loss. He insists that in his case, the libelous article tainted his reputation, causing some of his clients to terminate their arrangements with him. Petitioner further claims to have had good standing in the community, which the libelous article destroyed. Thus, he argues that the amount of ₱5,000,000.00 as moral damages is a reasonable recompense for the grief and suffering he has endured. Petitioner maintains that as the president of MG Forex Corporation, a company engaged in foreign exchange trading, he was a reputable businessman. However, as a result of the libelous article, his business associates and clients lost trust in him. One (1) of his sisters, who was also his business associate, sold him back her company shares after losing confidence in his dealings. Clients refused to do business with him, terrified that they be linked with the accusations against him. Petitioner likewise avers that his family members doubted him. His mother berated him for bringing shame to the family. His children were questioned in school for the article about their father. Finally, petitioner contends that exemplary damages should be awarded in his favor. He maintains that respondent Tulfo deliberately took advantage of his standing as a renowned journalist to tarnish petitioner’s reputation. He asserts that respondent Tulfo’s penchant for writing defamatory articles should be restrained. In its November 12, 2014 Resolution, this Court directed respondents to file their comment. In its July 13, 2015 Resolution, this Court required the counsels of respondents Tulfo and Macasaet, et al. to show cause why they should not be disciplinary dealt with for their failure to file their respective comments. It also required them to comply with the November 12, 2014 Resolution. On September 3, 2015, respondents Macasaet, et al. filed a Compliance, manifesting that they would not submit any comment and instead leave the Petition to this Court’s discretion. In his Comment filed on August 26, 2016, respondent Tulfo avers that the Court of Appeals correctly deleted the award of actual damages for lack of sufficient legal basis. Maintaining further that the deletion of the award of exemplary damages was proper, he argues that exemplary damages may be awarded only when the crime was committed with one (1) or more aggravating circumstances. He insists that the amount of moral damages should also be deleted. In its September 21, 2016 Resolution, this Court required petitioner to file a reply. In his Reply, petitioner reiterates that he is entitled to actual, moral, and exemplary damages. For this Court’s resolution are the following issues: First, whether or not there is sufficient factual basis for an award of actual damages; Second, whether or not petitioner Michael C. Guy is entitled to moral damages; and Finally, whether or not he is entitled to exemplary damages. The Petition is partly meritorious. I “Generally, a criminal case has two aspects, the civil and the criminal.” This notion is rooted in the fundamental theory that when a criminal act is committed, two (2) different entities are offended: (1) the State, whose law has been violated; and (2) the person directly injured by the offender’s act or omission. As explained in Banal v. Tadeo, Jr.: Generally, the basis of civil liability arising from crime is the fundamental postulate of our law that “Every man criminally liable is also civilly liable” (Art. 100, The Revised Penal Code). Underlying this legal principle is the traditional theory that when a person commits a crime he offends two entities namely (1) the society in which he lives in or the political entity called the State whose law he had violated; and (2) the individual member of that society whose person, right, honor, chastity or property was actually or directly injured or damaged by the same punishable act or omission. . . . While an act or omission is felonious because it is punishable by law, it gives rise to civil liability not so much because it is a crime but because it caused damage to another. Viewing things pragmatically, we can readily see that what gives rise to the civil liability is really the obligation and the moral duty of everyone to repair or make whole the damage caused to another by reason of his own act or omission, done intentionally or negligently, whether or not the same be punishable by law. In other words, criminal liability will give rise to civil liability only if the same felonious act or omission results in damage or injury to another and is the direct and proximate cause thereof. Damage or injury to another is evidently the foundation of the civil action. Such is not the case in criminal actions for, to be criminally liable, it is enough that the act or omission complained of is punishable, regardless of whether or not it also causes material damage to another. (Citations omitted) Nevertheless, the private offended party’s interest in a criminal case is limited to the civil liability arising from it. It is a fundamental principle in remedial law that if the trial court dismisses the case or renders a judgment of acquittal, the private offended party cannot appeal the criminal aspect of the case. Only the Office of the Solicitor General can represent the State in actions brought before the Court of Appeals or this Court. In People v. Santiago: It is well-settled that in criminal cases where the offended party is the State, the interest of the private complainant or the private offended party is limited to the civil liability. Thus, in the prosecution of the offense, the complainant’s role is limited to that of a witness for the prosecution. If a criminal case is dismissed by the trial court or if there is an acquittal, an appeal therefrom on the criminal aspect may be undertaken only by the State through the Solicitor General. Only the Solicitor General may represent the People of the Philippines on appeal. The private offended party or complainant may not take such appeal. However, the said offended party or complainant may appeal the civil aspect despite the acquittal of the accused. (Emphasis supplied, citations omitted) Similarly, in Malayan Insurance Company, Inc. v. Piccio: Accordingly, jurisprudence holds that if there is a dismissal of a criminal case by the trial court or if there is an acquittal of the accused, it is only the OSG that may bring an appeal on the criminal aspect representing the People. The rationale therefor is rooted in the principle that the party affected by the dismissal of the criminal action is the People and not the petitioners who are mere complaining witnesses. For this reason, the People are therefore deemed as the real parties in interest in the criminal case and, therefore, only the OSG can represent them in criminal proceedings pending in the CA or in this Court. In view of the corollary principle that every action must be prosecuted or defended in the name of the real party-in-interest who stands to be benefited or injured by the judgment in the suit, or by the party entitled to the avails of the suit, an appeal of the criminal case not filed by the People as represented by the OSG is perforce dismissible. The private complainant or the offended party may, however, file an appeal without the intervention of the OSG but only insofar as the civil liability of the accused is concerned. He may also file a special civil action for certiorari even without the intervention of the OSG, but only to the end of preserving his interest in the civil aspect of the case. (Emphasis supplied, citations omitted) Here, petitioner’s sole purpose is to question the amount of damages awarded by the Court of Appeals. He neither disputes nor challenges the Court of Appeals Amended Decision on respondents’ criminal liability. He only intends to protect his interest in the civil aspect of the case. Accordingly, petitioner has the legal standing to file this Petition even without the intervention of the Office of the Solicitor General. II Significantly, “[t]he issue on the amount of damages is a factual question that this [C]ourt may not resolve in a Rule 45 petition.” Settled is the rule that only questions of law may be raised in a petition for review on certiorari. “[This] Court is not a trier of facts and it is not its duty to review, evaluate, and weigh the probative value of the evidence adduced before the lower courts.” Absent “any clear showing that the trial court overlooked or misconstrued cogent facts and circumstances that would justify altering or revising such findings and evaluation[,]” this Court will not disturb, let alone overturn the lower courts’ findings of fact and appreciation of the witnesses’ testimonies. Nonetheless, jurisprudence has carved out certain exceptions to this rule: (1) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures . . .; (2) When the inference made is manifestly mistaken, absurd or impossible . . .; (3) Where there is a grave abuse of discretion . . .; (4) When the judgment is based on a misapprehension of facts . . .; (5) When the findings of fact are conflicting . . .; (6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee . . .; (7) The findings of the Court of Appeals are contrary to those of the trial court . . .; (8) When the findings of fact are conclusions without citation of specific evidence on which they are based . . .; (9) When the facts set forth in the petition as well as in the petitioners’ main and reply briefs are not disputed by the respondents . . .; and (10) The finding of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the evidence on record . . . . (Emphasis supplied, citations omitted) Here, the Regional Trial Court awarded petitioner actual damages in the amount of ₱5,000,000.00 based on his testimony that he could earn ₱50,000,000.00 in 10 years. Petitioner’s testimony read: COURT: This is my problem. Now, Php50 Million is not a small amount of money and it has to be based on, for example, the business standing. You did not give me any financial statement. Are you saying that you are making PhP50 Million a year? MR. GUY: No, Your Honor. In my understanding, in moral damages, it is not only the amount of money for a certain period of time. It also includes the sleepless nights. You do not know if there will be new articles against you which are not true. So, I put them all together. COURT: So; it is clear. You do not make PhP50 Million a year? MR. GUY: No. COURT: Maybe in ten years, you can make that? MR. GUY: It is possible. (Emphasis in the original) Actual damages are “compensation for an injury that will put the injured party in the position where it was before the injury. They pertain to such injuries or losses that are actually sustained and susceptible of measurement.” Actual damages constitute compensation for sustained pecuniary loss. Nevertheless, a party may only be awarded actual damages when the pecuniary loss he or she had suffered was duly proven. Thus: Except as provided by law or by stipulation, a party is entitled to adequate compensation only for such pecuniary loss as is duly proven. Basic is the rule that to recover actual damages, not only must the amount of loss be capable of proof; it must also be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable [.] . . . . This Court has, time and again, emphasized that actual damages cannot be presumed and courts, in making an award, must point out specific facts which could afford a basis for measuring whatever compensatory or actual damages are borne. An award of actual damages is “dependent upon competent proof of the damages suffered and the actual amount thereof. The award must be based on the evidence presented, not on the personal knowledge of the court; and certainly not on flimsy, remote, speculative and unsubstantial proof.” (Emphasis supplied, citations omitted) As the Court of Appeals correctly found, petitioner failed to substantiate the loss he had allegedly sustained. Save for his testimony in court, he presented no evidence to support his claim. His allegation of possibly earning ₱50,000,000.00 in 10 years is a mere assumption without any foundation. This bare allegation is insufficient to prove that he has indeed lost ₱5,000,000.00 as earnings. As this Court has previously held, “the award of unrealized profits cannot be based on the sole testimony of the party claiming it.” Notwithstanding the absence of any evidence on the amount of actual damages suffered, a party may be awarded temperate damages should the court find that he or she has suffered some pecuniary loss even if its amount cannot be determined with exact certainty. Unfortunately, petitioner failed to prove that he has suffered any pecuniary loss. While he testified that he lost clients as a result of the libelous article, records reveal that he lost only one (1) client, Jayson Mallari (Mallari). On cross-examination, Mallari even testified “that he was not immediately convinced by the article and called [petitioner] before terminating his business with him[.]” Moreover, as the records show, Mallari started transacting with petitioner again sometime in 2005. III Moral damages are “compensatory damages awarded for mental pain and suffering or mental anguish resulting from a wrong.” They are awarded to the injured party to enable him to obtain means that will ease the suffering he sustained from respondent’s reprehensible act. “Moral damages are not punitive in nature,” but are instead a type of “award designed to compensate the claimant for actual injury suffered[.]” As explained in Mangaliag v. Catubig-Pastoral: It must be remembered that moral damages, though incapable of pecuniary estimation, are designed to compensate and alleviate in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly caused a person. Moral damages are awarded to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he/she has undergone, by reason of the defendant’s culpable action. Its award is aimed at restoration, as much as possible, of the spiritual status quo ante; thus, it must be proportionate to the suffering inflicted. Since each case must be governed by its own peculiar circumstances, there is no hard and fast rule in determining the proper amount. (Citations omitted) Similarly, in Equitable Leasing Corporation v. Suyom: Moral damages are not punitive in nature, but are designed to compensate and alleviate in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly caused a person. Although incapable of pecuniary computation, moral damages must nevertheless be somehow proportional to and in approximation of the suffering inflicted. This is so because moral damages are in the category of an award designed to compensate the claimant for actual injury suffered, not to impose a penalty on the wrongdoer. (Citations omitted) Unlike actual and temperate damages, moral damages may be awarded even if the injured party failed to prove that he has suffered pecuniary loss. As long as it was established that complainant’s injury was the result of the offending party’s action, the complainant may recover moral damages. Article 2219 of the Civil Code specifically states that moral damages may be recovered in cases of libel, slander, or defamation. The amount of moral damages that courts may award depends upon the set of circumstances for each case. There is no fixed standard to determine the amount of moral damages to be given. Courts are given the discretion to fix the amount to be awarded in favor of the injured party, so long as there is sufficient basis for awarding such amount. Here, petitioner insists that he is entitled to moral damages in the amount of ₱5,000,000.00. He argues that he suffered social humiliation and anxiety from the libelous article. His 77-year-old mother castigated him for disgracing their family. His children questioned him after they had been interrogated in school for the article about their father. Finally, petitioner claims that the article tainted his reputation, prompting his clients and business associates to refuse to transact with him. While this Court recognizes the embarrassment and unease suffered by petitioner, it must be emphasized that moral damages may only be awarded when the claimant has sufficiently proved: (1) the factual foundation of the award; and (2) the causal connection of petitioner’s suffering to respondents’ act. In Kierulf v. Court of Appeals: This Court cannot remind the bench and the bar often enough that in order that moral damages may be awarded, there must be pleading and proof of moral suffering, mental anguish, fright and the like. While no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount of indemnity being left to the discretion of the court, it is nevertheless essential that the claimant should satisfactorily show the existence of the factual basis of damages and its causal connection to defendant’s acts. This is so because moral damages, though incapable of pecuniary estimation, are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. In Francisco vs. GSIS, the Court held that there must be clear testimony on the anguish and other forms of mental suffering. Thus, if the plaintiff fails to take the witness stand and testify as to his/her social humiliation, wounded feelings and anxiety, moral damages cannot be awarded. In Cocoland Development Corporation vs. National Labor Relations Commission, the Court held that “additional facts must be pleaded and proven to warrant the grant of moral damages under the Civil Code, these being, . . . social humiliation, wounded feelings, grave anxiety, etc., that resulted therefrom.” (Emphasis supplied, citations omitted) In Mendoza v. Spouses Gomez, this Court disallowed the award of moral damages to the respondents. It ruled that they failed to allege and present “evidence of besmirched reputation or physical, mental[,] or psychological suffering incurred by them.” Similarly, in Quezon City Government v. Dacara, this Court deleted the award of moral damages after finding that the respondent had failed to adduce proof of the emotional and mental sufferings he experienced due to the petitioners’ negligent act. Here, other than his bare allegations of besmirched reputation and loss of clientele, petitioner failed to present evidence supporting his assertions. He submitted no evidence substantiating his claimed loss. He also failed to adduce proof to support his claim that his reputation was tainted due to the libelous article. Moreover, he did not present in court any testimony from the business associates who had allegedly lost faith in him. Indeed, as the Court of Appeals found, the client, whom he had supposedly lost due to the libelous article, has been transacting business with him again. Nonetheless, moral damages should still be awarded. As he had testified during trial, members of his family were displeased with him for being accused of committing illegal and corrupt acts. He was berated by his mother Tor having humiliated their family. His children were questioned at school. As such, an award of ₱500,000.00 as moral damages is an adequate recompense to the mental anguish and wounded feelings that petitioner had endured. IV The Court of Appeals deleted the award of exemplary damages and ruled that under Article 2230 of the Civil Code, exemplary damages may be awarded only when the crime was committed with one (1) or more aggravating circumstances. Contrary to the Court of Appeals’ pronouncement, exemplary damages may be awarded even in the absence of aggravating circumstances. It may be awarded “where the circumstances of the case show the highly reprehensible or outrageous conduct of the offender.” “Exemplary or corrective damages are imposed by way of example or correction for the public good[.] “It is imposed as a punishment for highly reprehensible conduct” and serves as a notice to prevent the public from “the repetition of socially deleterious actions.” “Such damages are required by public policy, for wanton acts must be suppressed. They are an antidote so that the poison of wickedness may not run through the body politic.” Kierulf laid down the requirements that must be satisfied before exemplary damages may be awarded: Exemplary damages are designed to permit the courts to mould behavior that has socially deleterious consequences, and its imposition is required by public policy to suppress the wanton acts of an offender. However, it cannot be recovered as a matter of right. It is based entirely on the discretion of the court. Jurisprudence sets certain requirements before exemplary damages may be awarded, to wit: (1) (T)hey may be imposed by way of example or correction only in addition, among others, to compensatory damages, and cannot be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the claimant; (2) the claimant must first establish his right to moral, temperate, liquidated or compensatory damages; and (3) the wrongful act must be accompanied by bad faith, and the award would be allowed only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. (Citations omitted) Here, respondents published the libelous article without verifying the truth of the allegations against petitioner. As the Court of Appeals found, the Revenue Integrity Protection Service only investigates officials of the Department of Finance and its attached agencies who are accused of corruption. Petitioner, on the other hand, is no government official and, therefore, beyond the Revenue Integrity Protection Service’s jurisdiction. It only goes to show that respondents did not verify the information on which the article was based. Thus, to ensure that such conduct will no longer be repeated, and considering their profession, respondents are directed to pay petitioner exemplary damages in the amount of ₱1,000,000.00. V Among the advantages brought by modern technology is the ease by which news can be shared and disseminated through different social media outlets. News matters are now simultaneously cascaded in real-time. Society is swamped with a myriad of information involving a wide array of topics. News dissemination has always been in a constant state of flux. Occurrences across the globe, or the lack thereof, are immediately subject of the news written by journalists. More often than not, journalists are at the forefront of information publication and dissemination.1âшphi1 Owing to the nature of their work, they have the prerogative to shape the news as they see fit. This Court does not turn a blind eye to some of them who twist the news to give an ambiguous interpretation that is in reckless disregard of the truth. Crafting inaccurate and misleading news is a blatant violation of the Society of Professional Journalists Code of Ethics. The Society of Professional Journalists is a journalism organization dedicated toward stimulating high standards of ethical behavior, promoting the free flow of information vital to a well-informed citizenry, and inspiring and educating current and future journalists through professional development. Its Code of Ethics espouses the practice that journalism should be accurate and fair, and mandates accountability and transparency in the profession. As such, journalists should observe high standards expected from their profession. They must take responsibility for the accuracy of their work, careful never to deliberately distort facts or context by verifying information before releasing it for public consumption. This case comes at a time when the credibility of journalists is needed more than ever; when their tried-and-tested practice of adhering to their own code of ethics becomes more necessary, so that their truth may provide a stronger bulwark against the recklessness in social media. Respondents, then, should have been more circumspect in what they published. They are not media practitioners with a lack of social following; their words reverberate. Thus, exemplary damages in the amount of ₱1,000,000.00 is justifiable. This Court can only hope that respondents appreciate the privilege their fame has brought them and, in the future, become more circumspect in the exercise of their profession. WHEREFORE, the Petition is PARTIALLY GRANTED. The June 13, 2014 Amended Decision of the Court of Appeals in CA-G.R. CR No. 33256 is AFFIRMED WITH MODIFICATION. Respondents Raffy Tulfo, Allen Macasaet, Nicolas V. Quijano, Jr., Janet Bay, Jesus P. Galang, Randy Hagos, Jean y Lacorte, and Venus Tandoc are ORDERED to solidarity pay petitioner Michael C. Guy: (1) Five Hundred Thousand Pesos (₱500,000.00) as moral damages; (2) One Million Pesos (₱1,000.000.00) as exemplary damages; and (3) Two Hundred Eleven Thousand Two Hundred Pesos (₱211,200.00) as attorney’s fees. All damages awarded shall be subject to interest at the rate of six percent (6%) per annum from the finality of this Decision until its full satisfaction. SO ORDERED. Peralta, (Chairperson), A. Reyes, Jr., Hernando, and Carandang, JJ., concur. Footnotes Designated additional Member per Special Order No. 2624 dated November 28, 2018. 1 U.S. v. Perfecto, 43 Phil. 58, 62 (1922) [Per J. Johnson, En Banc]. 2 CONST., art. III, sec. 4 provides: SECTION 4. No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances. 3 Rollo, pp. 17-37. Filed under Rule 45 of the Rules of Court. 4 Id. at 39-60. The amended Decision was penned by Associate Justice Pedro B. Corales, and concurred in by Associate Justices Sesinando E. Villon and Florito S. Macalino of the Former Seventeenth Division, Court of Appeals, Manila. 5 Id. at 18. 6 Id. 7 Id. at 18-19. 8 Id. 9 Id. 10 Id. 11 Id. at 19. 12 Id. 13 Id. at 48. 14 Id. at 49. 15 Id. 16 Id. 17 Id. at 62-82. The Decision was penned by Associate Justice Pedro B. Corales, and concurred in by Associate Justices Sesinando E. Villon and Florito S. Macalino of the Seventeenth Division, Court of Appeals, Manila. 18 Id. at 81. 19 Id. at 82. 20 Id. at 39. 21 Id. at 39-60. 22 Id. at 58-59. 23 Id. at 59. 24 Id. at 17-37. 25 Id. at 22. 26 Id. at 22-23. 27 Id. at 24. 28 Id. at 25. 29 Id. at 26. 30 Id. at 26 and 41. 31 Id. at 43-44. 32 Id. at 43. 33 Id. at 30. 34 Id. at 32. 35 Id. at 83-84. 36 Id. at 97-98. 37 Id. at 99-103. 38 Id. at 114-119. 39 Id. at 114. 40 Id. at 115-116. 41 Id. at 120-121. 42 Id. at 122-130. 43 Heirs of Burgos v. Court of Appeals, 625 Phil. 603, 609 (2010) [Per J. Abad, Second Division]. 44 Banal v. Tadeo, Jr., 240 Phil. 327, 331 (1987) [Per J. Gutierrez, Jr., Third Division]. 45 240 Phil. 327 (1987) [Per J. Gutierrez, Jr., Third Division]. 46 Id. at 331. 47 People v. Santiago, 255 Phil. 851, 861 (1989) [Per J. Gancayco, First Division]. 48 Id. 49 People v. Gabriel, 539 Phil. 252, 256 (2006) [Per J. Sandoval-Gutierrez, Second Division]. 50 255 Phil. 851 (1989) [Per J. Gancayco, First Division]. 51 Id. at 861-862. 52 740 Phil. 616 (2014) [Per J. Perlas-Bernabe, Second Division]. 53 Id. at 622-623. 54 City of Dagupan v. Maramba, 738 Phil. 71, 96 (2014) [Per J. Leonen, Third Division]. 55 RULES OF COURT, Rule 45, sec. 1 provides: SECTION 1. Filing of Petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth. (Emphasis in the original) 56 Frondarina v. Malazarte, 539 Phil. 279, 291 (2006) [Per J. Velasco, Jr., Third Division]. 57 Medina, Jr. v. People, 724 Phil. 226, 234 (2014) [Per J. Bersamin, First Division]. 58 People v. Deloso, G.R. No. 215194, December 14, 2017, < http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/63669 > [Per J. Leonardo-De Castro, First Division]. 59 Medina v. Mayor Asistio. Jr., 269 Phil. 225, 232 (1990) [Per J. Bidin, Third Division]. 60 Rollo, p. 58. 61 Id. at 23. 62 International Container Terminal Services, Inc. v. Chua, 730 Phil. 475, 489 (2014) [Per J. Perez, Second Division]. 63 CIVIL CODE, art. 2199 provides: ARTICLE 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. 64 International Container Terminal Services, Inc. v. Chua, 730 Phil. 475, 489-490 (2014) [Per J. Perez, Second Division]. 65 Metro Rail Transit Development Corporation v. Gammon Philippines, Inc, G.R. No. 200401, January 17, 2018, < http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/63930> [Per J. Leonen, Third Division]. 66 International Container Terminal Services, Inc. v. Chua, 730 Phil. 475, 492 (2014) [Per J. Perez, Second Division]. 67 CIVIL CODE, art. 2224 provides: ARTICLE 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty. 68 Rollo, p. 58. 69 Id. at 45. 70 Id. 71 People v. Jugueta, 783 Phil. 806, 828 (2016) [Per J. Peralta, En Banc]. 72 Mangaliag v. Catubig-Pastoral, 510 Phil. 637, 651 (2005) [Per J. Austria-Martinez, Second Division]. 73 Equitable Leasing Corporation v. Suyom, 437 Phil. 244, 257 (2002) [Per J. Panganiban, Third Division]. 74 Id. at 258. 75 510 Phil. 637 (2005) [Per J. Austria-Martinez, Second Division]. 76 Id. at 651-652. 77 437 Phil. 244 (2002) [Per J. Panganiban, Third Division]. 78 Id. at 257-258. 79 Punongbayan-Visitacion v. People, G.R. No. 194214, January 10, 2018, < http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/63864> [Per J. Martires, Second Division]. 80 CIVIL CODE, art. 2219 (7) provides: ARTICLE 2219. Moral damages may be recovered in the following and analogous cases: …. (7) Libel, slander or any other form of defamation[.] 81 Sulpicio Lines, Inc. v. Sesante, 791 Phil. 409, 427-428 (2016) [Per J. Bersamin, First Division]. 82 Rollo, p. 25. 83 Id. at 26. 84 Kierulf v. Court of Appeals, 336 Phil. 414, 431-432 (1997) [Per J. Panganiban, Third Division]. 85 336 Phil. 414 (1997) [Per J. Panganiban, Third Division]. 86 Id. at 431-432. 87 736 Phil. 460 (2014) [Per J. Perez, Second Division]. 88 Id. at 480. 89 499 Phil. 228 (2005) [Per J. Panganiban, Third Division]. 90 Id. at 243-244. 91 Rollo, p. 59. 92 Id. 93 People v. Jugueta, 783 Phil. 806, 832 (2016) [Per J. Peralta, En Banc]. 94 Spouses Timado v. Rural Bank of San Jose, Inc., 789 Phil. 453, 459 (2016) [Per J. Brion, Second Division]. 95 Torreon v. Aparra, Jr., G.R. No. 188493, December 13, 2017 < http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/63764> [Per J. Leonen, Third Division]. 96 Spouses Timado v. Rural Bank of San Jose, Inc., 789 Phil. 453, 459 (2016) [Per J. Brion, Second Division]. 97 Octot v. Ybañez, 197 Phil. 76, 82 (1982) [Per J. Teehankee, First Division]. 98 Kierulf v. Court of Appeals, 336 Phil. 414, 428-429 (1997) [Per J. Panganiban, Third Division]. 99 Rollo, p. 56. 100 About SPJ – Society of Professional Journalists, < https://www.spj.org/aboutspj.asp> (last accessed April 10, 2019). 101 Society of Professional Journalists Code of Ethics, (last accessed April 10, 2019). 102 Id. 103 See Nacar v. Gallery Frames, 716 Phil. 267 (2013) [Per J. Peralta, En Banc].