Republic v. MERALCO (G.R. No. 141314)

 

Republic v. MERALCO (G.R. No. 141314)

Facts:

MERALCO filed with petitioner ERB an application for the revision of its rate schedules to reflect an average increase in its distribution charge. ERB granted a provisional increase subject to the condition that should the COA thru its audit report find MERALCO is entitled to a lesser increase, all excess amounts collected from the latter’s customers shall either be refunded to them or correspondingly credited in their favor. The COA report found that MERALCO is entitled to a lesser increase, thus ERB ordered the refund or crediting of the excess amounts. On appeal, the CA set aside the ERB decision. MRs were denied.

Issue:

Whether or not the regulation of ERB as to the adjustment of rates of MERALCO is valid.

Ruling: YES.

 The regulation of rates to be charged by public utilities is founded upon the police powers of the State and statutes prescribing rules for the control and regulation of public utilities are a valid exercise thereof. When private property is used for a public purpose and is affected with public interest, it ceases to be juris privati only and becomes subject to regulation. The regulation is to promote the common good. Submission to regulation may be withdrawn by the owner by discontinuing use; but as long as use of the property is continued, the same is subject to public regulation.

In regulating rates charged by public utilities, the State protects the public against arbitrary and excessive rates while maintaining the efficiency and quality of services rendered. However, the power to regulate rates does not give the State the right to prescribe rates which are so low as to deprive the public utility of a reasonable return on investment. Thus, the rates prescribed by the State must be one that yields a fair return on the public utility upon the value of the property performing the service and one that is reasonable to the public for the services rendered. The fixing of just and reasonable rates involves a balancing of the investor and the consumer interests.

I. Income taxes as operating expenses cannot be allowed for rate determination purposes.

II. Use of "Net Average investment Method" is not reasonable (trending method).



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