Manila Electric Company vs. Public Service Commission

The governing principle is that public service companies are not required to affirmatively prove the reasonableness of their regulations prior to enforcement, nor must they secure prior approval from the Public Service Commission, absent an express statutory mandate. Because compliance with the law is presumptively established, the burden of proof rests on the party alleging that a utility regulation is unjust, unreasonable, or discriminatory.

The Manila Electric Company (Meralco) formulated an operational rule governing the reconnection of electric service for customers previously disconnected for nonpayment. Under the proposed regulation, customers lacking a sufficient outstanding deposit to guarantee future accounts would be required to settle all arrears and post a new deposit equivalent to approximately two months of estimated consumption. The deposit would accrue six percent annual interest and become refundable after one year, contingent upon the customer’s prompt payment of all electric bills during that period. Meralco issued formal notice of its intent to enforce the measure effective August 1, 1934, and submitted the text of the rule to the Public Service Commission.

• The Manila Electric Company (Meralco) drafted a regulation requiring customers disconnected for nonpayment, who lacked a sufficient existing deposit, to clear all outstanding bills and post a new deposit equivalent to two months of estimated consumption prior to service reconnection.
• The proposed deposit would earn six percent annual interest and be refunded after one year if the customer maintained a record of prompt bill payment during that period.
• Meralco notified the Public Service Commission (PSC) of its intent to enforce the rule beginning August 1, 1934.
• The PSC issued a letter-order on July 24, 1934, directing Meralco to desist from implementing the regulation without prior Commission approval, citing Section 16(c) of Act No. 3108.
• The PSC required Meralco to bear the burden of proving that the regulation was not unjust, unreasonable, or discriminatory, and demanded a P15 application fee for the review.
• Meralco filed a petition for certiorari, contending that the PSC unlawfully shifted the evidentiary burden and exceeded its statutory jurisdiction by imposing a pre-approval requirement not found in the Public Service Law.

• Petitioner maintained that the PSC order improperly reversed the burden of proof by compelling Meralco to demonstrate the reasonableness of its regulation prior to enforcement.
• Petitioner argued that Act No. 3108 contains no provision requiring prior PSC approval for operational rules of this nature, and that the Commission’s directive contravened established rules of statutory construction and procedural law.

• Respondent countered that its general supervisory authority under the Public Service Law justified the requirement for prior submission and review to ensure compliance with the statutory prohibition against unjust or discriminatory regulations.
• Respondent asserted that the P15 fee and the burden-shifting directive were necessary administrative measures to fulfill its statutory duty to prevent arbitrary utility practices under Section 16(c) of Act No. 3108.

• Procedural Issues: Whether the burden of proof properly rests on the public utility to establish the reasonableness of its regulations prior to enforcement, and whether the Public Service Commission possesses the authority to mandate prior approval and impose registration fees for such regulations.
• Substantive Issues: Whether a legal presumption exists that regulations adopted by public service companies are inherently unjust, unreasonable, or arbitrary, and whether the Public Service Commission’s directive violated the statutory limits on its regulatory jurisdiction under Act No. 3108.

• Procedural: The Court held that the PSC improperly shifted the burden of proof to the utility. Because the Code of Civil Procedure establishes the disputable presumption that the law has been obeyed, the burden of proving unreasonableness properly rests on the party challenging the regulation. The Court further ruled that the PSC lacks statutory authority to mandate prior submission and approval of such rules, as the Public Service Law does not expressly require it.
• Substantive: The Court ruled that no legal presumption exists that utility regulations are unjust or arbitrary. Because the legislature expressly required prior PSC approval only for specific corporate acts, the absence of a similar mandate for operational rules indicates that prior approval is unnecessary. The PSC’s general supervisory power extends only to post-implementation notice and investigation upon complaint, not to pre-emptive approval. Accordingly, the challenged order was declared null and void.

• Presumption of Lawful Compliance — The disputable presumption that the law has been obeyed applies to public utilities. The Court applied this evidentiary rule to hold that a utility’s regulations are presumed just and reasonable unless affirmatively proven otherwise, thereby placing the burden of proof on the party alleging regulatory impropriety.
• Statutory Construction (Expressio Unius Est Exclusio Alterius) — The Court applied the principle that what is not expressly or impliedly prohibited by law may be done, barring conflicts with public order or morals. By contrasting the challenged rule with Section 16(h) of Act No. 3108, which explicitly requires prior PSC approval for asset transfers, the Court concluded that the legislature’s silence regarding operational rules precludes the Commission from imposing a pre-approval requirement.

• "If compliance with the law is presumed, it should be presumed that the petitioner Manila Electric Company has complied with the prohibition contained in section 16, subsection (c), of Act No. 3108, not to adopt any unjust, unreasonable and arbitrary measure or regulation, and that the measure or regulation which was adopted by it and of which it gave notice to the Public Service Commission, is just and reasonable." — The Court grounded its reversal in the statutory presumption of lawful compliance, establishing that utilities need not affirmatively prove reasonableness absent a specific challenge.
• "It is a rule of statutory construction that what is not expressly or impliedly prohibited by law may be done, except when the act is contrary to morals, customs and public order." — The Court invoked this principle to delineate the boundaries of the PSC’s regulatory authority, holding that the Commission cannot impose pre-approval requirements absent an express legislative grant.

• Section 16(c) of Act No. 3108 (Public Service Law) — Prohibits public utilities from adopting unjust, unreasonable, or discriminatory regulations. The PSC invoked this provision to justify its directive, but the Court held it does not create a presumption of unreasonableness or mandate prior approval.
• Section 13 and Section 24(h) of Act No. 3108 — Grant the PSC general supervision and authority to investigate complaints regarding unjust regulations. The Court found these provisions authorize post-implementation oversight, not pre-approval mandates.
• Section 16(h) of Act No. 3108 — Expressly requires prior PSC approval for the sale, transfer, mortgage, or lease of utility property. The Court relied on this provision to demonstrate that prior approval is only required when explicitly stated by the legislature.
• Section 334, No. 31 of the Code of Civil Procedure — Establishes the disputable presumption that the law has been obeyed. The Court applied this rule to allocate the burden of proof to the challenger of the utility’s regulation.

• Malcolm, Imperial, Butte, and Goddard, JJ. — Concurred in the judgment without issuing separate opinions.