National Grid Corporation of the Philippines vs. Manila Electric Company

Section 8, paragraph 6 of the EPIRA mandatorily requires all connected distribution utilities to form a consortium or juridical entity, and that entity must obtain an ERC franchise, before any of them may acquire a subtransmission asset; a waiver by one connected distribution utility cannot dispense with this requirement.

Under the EPIRA, TRANSCO was created to assume the electrical transmission function of the National Power Corporation and to segregate and dispose of subtransmission assets to qualified distribution utilities. NGCP operates, manages, and maintains the nationwide transmission system; Meralco is a distribution utility; PEZA manages the Cavite Economic Zone and acts as a distribution utility therein. Section 8 of the EPIRA governs the divestment of subtransmission assets and, where two or more distribution utilities are connected to the asset, requires the formation of a consortium or juridical entity and an ERC franchise.

On December 12, 2011, TRANSCO and Meralco entered into a Contract to Sell covering four sub-transmission lines/assets: (a) the Dasmariñas-Abubot Rosario 115 kV Line; (b) the Rosario S/S Equipment; (c) the Tayabas 115 kV Switchyard; and (d) the Ternate S/S Equipment. The contract was later amended. On April 17, 2012, TRANSCO and Meralco jointly applied to the ERC for approval of the sale under the Contract to Sell. The ERC found the Joint Application sufficient in form and substance and set the case for initial hearing on July 4, 2012.

NGCP thereafter filed a Petition for Intervention (With Opposition), claiming that it was not informed about the sale contract between TRANSCO and Meralco. NGCP based its intervention on its authority and responsibility to operate, manage, and maintain the nationwide transmission system under the EPIRA and its implementing rules. It averred that it incurred considerable improvement and upgrade costs in operating the subject STAs, which were not considered or included in the sale contract, and that Meralco, as buyer, should pay NGCP those costs as additional value to the agreed cost with TRANSCO. The ERC granted NGCP's Petition for Intervention, and hearings on the Joint Application were conducted.

On April 22, 2013, the ERC rendered a Decision approving with modification the Joint Application. It approved the sale of the Tayabas 115 kV Switchyard and Ternate Substation Equipment to Meralco in the amount of One Hundred Nine Million One Hundred Eighty Six Thousand Six Hundred Four and 30/100 Pesos (PHP 109,186,604.30). It disapproved the sale of the Dasmariñas-Abubot-Rosario 115 kV Line and Rosario Substation Equipment (DAR Assets). The ERC held that Meralco was not the only distribution utility connected to the DAR Assets because the Cavite Economic Zone (CEZ) was also served by them. Although PEZA executed a waiver of its rights to purchase the DAR Assets in favor of Meralco, the ERC ruled that under Section 8 of the EPIRA, a consortium or new juridical entity should be formed between Meralco and CEZ as a prerequisite for acquisition. TRANSCO and Meralco could file a new application through a consortium with CEZ.

Both Meralco and TRANSCO moved for partial reconsideration. Meralco averred that CEZ was already a Meralco customer, that PEZA had already waived the purchase of the DAR Assets in its favor, and that the sale would further the EPIRA's mandate to sell and dispose of TRANSCO's subtransmission assets. TRANSCO argued that the consortium requirement under Section 8 of the EPIRA should be read with Rule 6, Section 8(e) of the IRR; that it should be allowed to divest the DAR Assets to Meralco, a willing and capable distribution utility, given PEZA's waiver; and that the word "shall" on the formation of a consortium was permissive rather than mandatory. On May 5, 2014, the ERC issued its First Order denying the motions. The ERC ruled that if one distribution utility waives its right to acquire STAs, TRANSCO cannot divest the asset to the other willing distribution utility because Section 8 does not provide for the abdication of a distribution utility's right to form a consortium. Since the DAR Assets could not be disposed of without a consortium, they would revert to TRANSCO's Regulatory Asset Base. Meralco's Motion for Reconsideration and Clarification was denied in the Second Order dated June 16, 2014.

Meralco then held several meetings with PEZA representatives and proposed the formation of a consortium to acquire the DAR Assets. PEZA sent a letter dated August 14, 2014 pointing out a legal impediment to entering into a consortium with Meralco. Meralco filed a Motion to Re-open Proceedings, arguing that PEZA's legal impediment was a new substantive matter not previously considered. In the Third Order dated March 4, 2015, the ERC denied the motion and maintained that the consortium requirement under Section 8 of the EPIRA does not distinguish whether CEZ had become a Meralco customer or whether PEZA had legal constraints preventing it from entering a consortium. The ERC also recognized NGCP's claim that with the proposed connection of the 40 MW Solar Power Plant of Majestic Energy Corporation to the DAR 115 kV Line, the line should be reclassified as a transmission asset and could no longer be the subject of sale.

• CA Jurisdiction: NGCP questioned whether the CA had jurisdiction to entertain and reverse a final and executory ERC Decision, raising the issue of the reckoning of the 15-day reglementary period.
• Mandatory Consortium and Franchise: NGCP argued that Section 8, paragraph 6 of the EPIRA requires all connected distribution utilities to form a consortium or juridical entity and to obtain an ERC franchise, and that PEZA's waiver cannot dispense with these requirements.
• Judicial Legislation: NGCP maintained that the CA's interpretation effectively read a waiver exception into Section 8, amounting to judicial legislation.
• ERC Expertise and Consistency: NGCP argued that the CA erred in overturning the ERC's settled and consistently applied ruling, which is entitled to great weight as a specialized quasi-judicial agency.
• Reclassification of DAR Assets: NGCP claimed that the DAR Assets are transmission assets and may no longer be divested, especially with the proposed connection of the 40 MW Solar Power Plant of Majestic Energy Corporation to the DAR 115 kV Line.
• Intervention and Upgrade Costs: NGCP claimed that it was not informed of the sale contract and incurred improvement and upgrade costs in operating the subject STAs, which Meralco should pay as additional value.

• Waiver Dispenses Consortium: Meralco countered that PEZA's waiver of its right to acquire the DAR Assets in Meralco's favor removed the need for a consortium; acquisition is a mere right or privilege, not a legal obligation.
• Legal Impossibility: Meralco argued that PEZA had a legal impediment and was unwilling to enter a consortium, so insisting on one would be to ask for the impossible.
• Sole Connected Distribution Utility: Meralco maintained that PEZA's Concession Agreement with Meralco divested PEZA of direct participation in power distribution in CEZ, making Meralco the sole distribution utility connected to the DAR Assets; CEZ was already a Meralco customer.
• EPIRA Divestment Mandate: Meralco argued that the sale to a willing and capable distribution utility would further the EPIRA's mandate to dispose of TRANSCO's subtransmission assets.
• Rate Impact: Meralco contended that reclassifying the DAR Assets as transmission assets would increase electricity rates for CEZ consumers and the public who do not benefit from the assets.

• CA Jurisdiction: Whether the CA had jurisdiction to entertain and reverse the ERC's final and executory Decision.
• Waiver of Consortium and Franchise Requirements: Whether the consortium and franchise requirements under Section 8 of the EPIRA may be waived by a distribution utility.
• Judicial Legislation: Whether the CA's interpretation of Section 8 of the EPIRA amounted to judicial legislation.
• ERC Expertise and Consistency: Whether the CA erred in overturning the ERC's settled ruling, repeatedly applied to the power industry since the EPIRA's enactment.
• Reclassification of DAR Assets: Whether the DAR Assets are transmission assets and may no longer be divested to any other entity.

• CA Jurisdiction: Yes. The CA had jurisdiction; the 15-day period ran from receipt of the Third Order, which finally disposed of the case after the ERC gave due course to Meralco's Motion to Re-open Proceedings.
• Waiver of Consortium and Franchise Requirements: No. Section 8, paragraph 6 is clear and mandatory; all connected distribution utilities must form a consortium or juridical entity, which must obtain an ERC franchise. PEZA's waiver cannot dispense with this requirement.
• Judicial Legislation: Yes. By treating the mandatory consortium requirement as waivable, the CA read an exception not found in Section 8, contrary to verba legis.
• ERC Expertise and Consistency: Yes. The CA erred in overturning the ERC's consistent ruling; factual findings of administrative bodies with specific expertise are accorded great weight and finality absent substantial error.
• Reclassification of DAR Assets: Yes. The ERC's technical finding that the DAR Assets should be reclassified as transmission assets due to connection to a generator was affirmed; they can no longer be subject of sale to Meralco.

• CA Jurisdiction: The CA correctly assumed jurisdiction. The ERC gave due course to Meralco's Motion to Re-open Proceedings and required TRANSCO, NGCP, and PEZA to file comment/opposition; it did not deny the motion outright as a prohibited pleading. The First and Second Orders did not attain finality because the motion to reopen was a continuation of proceedings in view of supervening matters. Only the Third Order finally disposed of the case. The Rule 43 petition was thus filed within the reglementary period.
• Waiver of Consortium and Franchise Requirements: Section 8, paragraph 6 is clear and unambiguous. It states that where there are two or more connected distribution utilities, the consortium or juridical entity shall be formed by and composed of all of them and thereafter shall be granted a franchise by the ERC. The word "shall" is mandatory. No exception is provided. A waiver by one distribution utility cannot circumvent the requirement. Section 8, paragraph 7 allows subscription rights to be proportionate to load requirements unless otherwise agreed, so PEZA could join a consortium while limiting its participation. Rule 6, Section 8(e) of the IRR, stating that TRANSCO is deemed in compliance if a qualified distribution utility refuses to acquire, pertains to TRANSCO's obligation to sell, not to the non-obligatory character of acquisition by a distribution utility.
• Judicial Legislation: The CA's ruling effectively read a waiver exception into Section 8. Under the plain-meaning rule, where the law is clear, there is no room for construction; only application. Had the legislature intended to allow waiver, it could have used "may" instead of "shall" or expressly permitted it. Courts cannot read into the law what is not written. The interpretation would set a dangerous precedent allowing distribution utilities to circumvent the consortium requirement.
• ERC Expertise and Consistency: Factual findings of administrative bodies charged with specific expertise are generally accorded great weight and even finality absent substantial error. The ERC has expertise over the classification and disposition of subtransmission assets. It consistently required a consortium in STA acquisitions. The ERC decisions attached by NGCP showed that consortiums were formed in prior approvals, including two Meralco applications where Meralco had formed consortiums with connected distribution utilities. The CA erred in overturning the ERC's consistent ruling.
• Reclassification of DAR Assets: The ERC made a factual and technical determination that the DAR Assets should be reclassified as transmission assets and could no longer be subject of sale. The proposed connection of the 40 MW Solar Power Plant of Majestic Energy Corporation to the DAR 115 kV Line transformed its function from a subtransmission asset to a transmission asset. No formal reclassification does not change its physical and technical nature. Article III, Section 2 of ERC Resolution No. 15, Series of 2011 classifies lines and assets that allow transmission of electricity to a grid from one or more directly connected generators as transmission assets. ERC approval of final sale hinges on technical and functional criteria; the ERC is not bound by formal current classification. The CA also found that reclassification would reduce rates and that Meralco's simulated scenario lacked basis.

• Plain Meaning Rule / Verba Legis — When a statute is clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. The Court applied this to Section 8, paragraph 6 of the EPIRA, finding no room to read a waiver exception into the mandatory consortium requirement.
• Mandatory Character of "Shall" — The word "shall" in a statute connotes a mandatory order or imperative obligation. Section 8, paragraph 6 uses "shall" twice, requiring both the formation of a consortium or juridical entity by all connected distribution utilities and the grant of an ERC franchise to that entity.
• Consortium Requirement under Section 8, Paragraph 6 of the EPIRA — Where two or more distribution utilities are connected to a subtransmission asset, all of them must form a consortium or juridical entity, and that entity must obtain a franchise from the ERC to operate the asset. A waiver by one connected distribution utility does not dispense with the requirement. The parties may stipulate their subscription rights under paragraph 7, allowing one utility to limit or minimize participation.
• Respect for Administrative Expertise and Findings — Factual findings of administrative bodies with specific field expertise are accorded great weight and finality absent substantial error. The ERC's technical determination that the DAR Assets should be reclassified as transmission assets, and its consistent ruling on the consortium requirement, were upheld.
• No Judicial Legislation / Courts Cannot Read into the Law — The power to interpret and apply the law does not include the power to correct by reading into the law what is not written. The CA's recognition of a waivable consortium requirement was an impermissible judicial amendment.
• Harmonization of Statutes — A statute must be construed to harmonize and give effect to all its provisions. Section 8, paragraph 6's mandatory consortium requirement is not incompatible with the EPIRA's divestment mandate; paragraph 7 provides flexibility through subscription rights.
• Ratio Legis Est Anima — The intent or spirit of the law is the law itself. The EPIRA's intent to divest subtransmission assets must be read with the mandatory consortium mechanism, not against it.

• "Where there are two or more connected distribution utilities, the consortium or juridical entity shall be formed by and composed of all of them and thereafter shall be granted a franchise to operate the subtransmission asset by the ERC." — This is the controlling statutory text of Section 8, paragraph 6, which the Court held mandatory and not subject to waiver.
• "A cardinal rule in statutory construction is that when the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. There is only room for application." — This states the plain-meaning rule applied to reject the CA's waiver interpretation.
• "For the Court to take a contrary position and rule that the subject Section 8, paragraph 6 of the EPIRA be construed as "permissive" rather than mandatory would undoubtedly set a dangerous precedent." — The Court warned that treating the consortium requirement as waivable would allow distribution utilities to circumvent the law.
• "The solemn power and duty of the Court to interpret and apply the law does not include the power to correct by reading into the law what is not written therein." — This articulates the judicial-legislation principle applied against the CA's interpretation.

• Tumabini vs. People, 871 Phil. 289, 304 (2020) — Cited for the cardinal rule of statutory construction that a clear and unambiguous law must be applied literally.
• Power Sector Assets and Liabilities Management Corp. vs. Commissioner of Internal Revenue, 815 Phil. 966, 993 (2017) — Cited for the rule that the word "shall" in a statute connotes a mandatory order or imperative obligation.
• UCPB General Insurance Co., Inc. vs. Hughes Electronics Corp., 800 Phil. 67, 79 (2016) — Cited for the same principle that "shall" indicates a word of command with compulsory meaning.
• MTRCB vs. ABS-CBN, 489 Phil. 544, 555 (2005) — Cited for the rule that courts may not except something from a statute unless a compelling reason appears in law.
• National Tobacco Administration vs. COA, 370 Phil. 793, 808 (1999) — Cited for the principle that a statute must be construed to harmonize and give effect to all its provisions and that legislative intent controls.
• Jose vs. Novida, 738 Phil. 99, 120 (2014) — Cited for the rule that factual findings of administrative bodies with specific expertise are accorded great weight and finality.
• Cabral vs. Adolfo, 794 Phil. 161, 172 (2016) — Cited for the respect owed to the ERC's expertise and factual findings.
• Philippine Amusement and Gaming Corp. vs. Philippine Gaming Jurisdiction Inc., 604 Phil. 547, 553 (2009) — Cited for the plain-meaning rule and verba legis.
• Chavez vs. Judicial and Bar Council, 691 Phil. 173, 209 (2012) — Cited for the principle that the Court cannot read into the law what is not written.
• League of Cities of the Phils. vs. Commission on Elections, 623 Phil. 531, 547-548 (2009) — Cited for ratio legis est anima, that the intent or spirit of the law is the law itself.

• Section 8, paragraph 6, Republic Act No. 9136 (EPIRA) — Requires that where two or more connected distribution utilities exist, a consortium or juridical entity be formed by and composed of all of them and thereafter granted a franchise by the ERC to operate the subtransmission asset. The Court held this mandatory and not waivable.
• Section 8, paragraph 7, Republic Act No. 9136 (EPIRA) — Provides that subscription rights of each distribution utility in the consortium shall be proportionate to their load requirements unless otherwise agreed. The Court used this to show that PEZA could participate in a consortium while limiting its role.
• Rule 6, Section 8(e), EPIRA Implementing Rules and Regulations — States that if a distribution utility is not qualified or refuses to acquire subtransmission assets, TRANSCO shall be deemed in compliance with its obligation. The Court clarified this concerns TRANSCO's obligation to sell, not the non-obligatory character of acquisition.
• Section 2, Republic Act No. 9136 (EPIRA) — Declaration of policy ensuring quality, reliability, security, affordability of electric power, transparent and reasonable prices in free and fair competition, and protection of public interest. The Court cited it to support the consortium requirement as competition-driven.
• Article III, Section 2, ERC Resolution No. 15, Series of 2011 — Technical and functional criteria for classification: lines, power transformers, and other assets held by TRANSCO or NGCP that allow transmission of electricity to a grid from one or more directly connected generators shall be classified as transmission assets. Applied to reclassify DAR Assets.
• Section 12(c), Republic Act No. 7916 (Special Economic Zones Act) — Limits PEZA Board's power to operate and maintain utilities to those in the ECOZONE. The Court noted it does not prevent PEZA from entering a consortium with limited participation outside CEZ.
• Rule 43, Rules of Court — Governs petition for review to the CA from quasi-judicial agencies. The Court upheld CA jurisdiction because the petition was filed within 15 days from the Third Order.
• Rule 45, Rules of Court — Governs petition for review on certiorari to the Supreme Court. NGCP's petition was filed under this rule.

Gesmundo, C.J. (Chairperson), Hernando, Rosario, and Marquez, JJ., concur.