G.R. No.

163935 February 2, 2006

NATIONAL ASSOCIATION OF ELECTRICITY CONSUMERS FOR REFORMS (NASECORE)
vs. ENERGY REGULATORY COMMISSION (ERC) and MANILA ELECTRIC and COMPANY (MERALCO)

FACTS: On June 8, 2001, the Electric Power Industry Reform Act of 2001 (EPIRA) was enacted, creating the
Energy Regulatory Commission (ERC) to oversee the electric power industry. EPIRA's Section 36 directed
distribution utilities, including Respondent Meralco, to file unbundled rates for approval by the ERC. In a March
20, 2003 Decision, the ERC approved Meralco's unbundled rates but directed the discontinuation of the
Purchased Power Adjustment (PPA), replacing it with the Generation Rate Adjustment Mechanism (GRAM)
for cost recovery.

On February 24, 2003, the ERC adopted GRAM's Implementing Rules, aiming to balance timely cost recovery
for utilities with the ERC's review of cost reasonableness. Meralco filed an amended application (ERC Case No.
2004-112) seeking to increase its generation charge under GRAM, claiming compliance with the formula in
GRAM's rules. On June 2, 2004, the ERC issued an order approving Meralco's generation charge increase
from P3.1886 to P3.3213 per kWh, effective immediately.

Petitioners NASECORE, et al. filed a petition for certiorari challenging the June 2, 2004, ERC Order for lack of
requisite publication of MERALCO's amended application. Petitioners argue a violation of Section 4(e), Rule 3
of the IRR of the EPIRA, requiring verified applications to be published, acknowledged by LGUs, and
commented on by consumers. Petitioners claim MERALCO's non-compliance with publication deprived them of
procedural due process, rendering the ERC Order null and void.

MERALCO argues the applicability of GRAM Implementing Rules from an ERC Order dated February 24, 2003,
governing fuel and purchased power cost adjustments. Respondent argues the GRAM is a revenue-neutral
recovery process, protecting consumers by allowing quarterly adjustments, subject to ERC review. MERALCO
contends compliance with Section 4(e), Rule 3 of the IRR of the EPIRA is unnecessary, as GRAM rules differ in
procedure and timeline.

The ERC defends the validity of its June 2, 2004 Order, citing authority under EPIRA, specifically Section 43, to
establish methodologies for setting rates. ERC adopts the GRAM Implementing Rules after public consultation,
addressing problems with the previous PPA mechanism. ERC emphasizes the GRAM as an adjustment
mechanism with uniform rules, not requiring the same publication and consultation as per Section 4(e), Rule 3
of the IRR of the EPIRA. ERC argues it adhered to due process, with exhaustive public consultation, submission
of written comments by various stakeholders, and adoption of the GRAM Implementing Rules. ERC asserts that
the petitioners, being present at the consultation, had the opportunity to voice objections and appeal the ERC
Order dated February 24, 2003, but failed to do so.

ISSUE: Whether the ERC committed grave abuse of discretion in issuing the Order dated June 2, 2004 in ERC
Case No. 2004-112 which approved the increase of respondent MERALCO’s generation charge from ₱3.1886
to ₱3.3213 per kWh effective immediately without publication of the latter’s amended application.

RULING: Petition is GRANTED. The assailed ERC Order dated June 2, 2004 in ERC Case No. 2004-112 is
DECLARED VOID and accordingly SET ASIDE.

The respondents argue that the provision in Section 4(e), Rule 3 of the Implementing Rules and Regulations
(IRR) of the Electric Power Industry Reform Act of 2001 (EPIRA) applies only to independent rate applications
and not to adjustment mechanisms like the Generation Rate Adjustment Mechanism (GRAM). However, the
contention is deemed erroneous, as Section 4(e), Rule 3 of the IRR explicitly covers "any application or petition
for rate adjustment or for any relief affecting the consumers."

In Freedom from Debt Coalition v. Energy Regulation Commission (ERC), the Court outlined the requirements
of Section 4(e), Rule 3 of the IRR of the EPIRA. These include filing a verified application for rate adjustment,
notifying the legislative body of the local government unit (LGU), and publication in a newspaper of general
circulation. Consumers and the LGU concerned are given 30 days to file comments, and the ERC must resolve
the motion for provisional rate adjustment within 75 days. A full-blown hearing must follow within 30 days
from the issuance of the provisional order, limiting its lifetime to 12 months.
The absence of publication of Meralco's amended application for a generation charge increase is considered
fatal. This omission deprived consumers of the opportunity to file comments, violating Section 4(e), Rule 3 of
the IRR of the EPIRA. Due process mandates that consumers be informed of any application affecting them
economically, enabling them to contest it effectively.

In Tañada v. Tuvera, emphasized that all statutes, including local and private laws, must be published for
effectivity. Administrative rules and regulations enforcing or implementing existing law must also be published.
The lack of publication renders Meralco's application ineffective. Public consultation and submission of
comments by the parties do not suffice as compliance with the mandatory requirement of publication.

The Court underscored that the GRAM Implementing Rules affect the public by determining electricity
consumption costs. Therefore, the public has the right to be informed through publication in the Official
Gazette or a newspaper of general circulation, providing an opportunity to voice opposition and express
opinions on the matter.