SC: Electric cooperatives do not have right to exclusive franchise

MANILA, Philippines – A Supreme Court ruling dismissed the petition of the Iloilo Electric Cooperative, Inc. I, II, and III (ILECOs) that challenged the validity of Republic Act (RA) 11918, which expanded the franchise of another electricity provider, MORE Electric and Power Corp. (MORE), to areas within ILECOs' franchise.

In the decision dated July 30 and published on Thursday, the SC underscored that electric cooperatives did not have a constitutional right to an exclusive franchise within their coverage areas.

ILECOs hold franchise certificates to operate electric light and power services in various municipalities in the province of Iloilo and Passi City.

MORE initially held a franchise to operate in Iloilo City until RA 11918 expanded its franchise to include 15 municipalities and one city previously within ILECOs' exclusive franchise area.

ILECOs filed before the Court a petition for certiorari and prohibition, with prayer for the issuance of a temporary restraining order and writ of preliminary injunction, to invalidate Section 1 of RA 11918 for violating their rights to exclusive franchises, due process, non-impairment of contracts, and equal protection.

In dismissing the petition, the Court ruled that Section 11, Article XII of the Constitution prohibits exclusive franchises.

«A franchise, as a privilege granted by the state, is not the exclusive private property of the franchisee. Thus, it must yield to serve the common good, as determined by Congress,» the high court said.

«Without competition, ILECOs can easily dictate the price of electricity. Allowing the entry of another player thus benefits consumers, who no longer have to wait until ILECOs' franchises expire in 2029, 2039, and 2053. This is in accordance with the Electric Power Industry Reform Act (EPIRA), which encourages competition in the electricity industry.»

The Court added that contract rights must give way to the broader authority of the State's police power when exercised for the general welfare, as in this case.

«In any case, ILECOs failed to show how RA 11918 affected their contracts with their suppliers,» it said.

The court also noted that RA 11918 does not give preferential