THE COMMISSION SHALL HAVE THE POWER
Section 16. Proceedings of the Commission, upon notice and hearing. - The Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary :
x x x

APPROVAL OF COMMISSION IS REQUIRED TO:

1. ADOPT
2. ESTABLISH
3. FIX
4. IMPOSE
5. COLLECT
6. CARRY INTO EFFECT
   
   

ANY INDIVIDUAL OR JOINT RATES OR OTHER SPECIAL RATE.
Section 20. Acts requiring the approval of the Commission. - Subject to established limitations and exceptions and saving provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the Commission previously had -

(a) To adopt, establish, fix, impose, maintain, collect or carry into effect any individual or joint rates, commutation, mileage or other special rate, toll, fare, charge, classification or itinerary.

1. FIX AND DETERMINE RATES AND OTHER SPECIAL RATES OBSERVED AND FOLLOWED BY ANY PUBLIC SERVICE
   (c) To fix and determine
   
   

individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as commutation, mileage, kilometrage, and other special rates which shall be imposed observed and followed thereafter by any public service:

2. APPROVE RATES PROPOSED BY PUBLIC SERVICES PROVISIONALLY AND WITHOUT NECESSITY OF ANY HEARING
   Provided, That the Commission may, in its discretion, approve rates proposed by public services PROVISIONALLY and without necessity of any hearing;

BUT HEARING IS REQUIRED WITHIN 30 DAYS AFTER

1. PUBLICATION; AND
2. NOTICE TO CONCERNS OPERATING IN THE TERRITORY AFFECTED.
   but it shall call a hearing thereon within thirty days, thereafter, upon publication and notice to the concerns operating in the territory affected:

DELEGATION OF RATE-FIXING POWER ONLY REQUIRES JUST AND REASONABLE RATE
: In case of a delegation of rate-fixing power, the only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just.
(Philippine Communications Satellite Corporation v. Alcuaz)

REASONABLENESS IS AN IMPLIED REQUIREMENT
However, even in the absence of an express requirement as to reasonableness, this standard may be implied.
(Philippine Communications Satellite Corporation v. Alcuaz)

RATES MUST NOT BE SO LOW AS TO BE CONFISCATORY OR TOO HIGH AS TO BE OPPRESSIVE
The inherent power and authority of the State, or its authorized agent, to regulate the rates charged by public utilities should be subject always to the requirement that the rates so fixed shall be reasonable and just. A commission has no power to fix rates which are unreasonable or to regulate them arbitrarily. This basic requirement of reasonableness comprehends such rates which must not be so low as to be confiscatory, or too high as to be oppressive.
(Philippine Communications Satellite Corporation v. Alcuaz)

ADMINISTRATIVE, EXECUTIVE, OR LEGISLATIVE ACTS REQUIRE NO NOTICE AND HEARING
Central Bank o the Philippines v. Cloribel, et al.

Notice and hearing are not essential to the validity of administrative action where the administrative body acts in the exercise of executive, administrative, or legislative functions
(Philippine Communications Satellite Corporation v. Alcuaz)

TEMPORARY REDUCED RATES CAN BE UNREASONABLE OR CONFISCATORY
An order of NTC prescribing reduced rates, even for a temporary period, could be unjust, unreasonable or even confiscatory, especially if the rates are unreasonably low

o The utility permanently loses its just revenue during the prescribed period.

o In fact, such order is in effect final insofar as the revenue during the period covered by the order is concerned
(Philippine Communications Satellite Corporation v. Alcuaz)

"RATE" IS A CHARGE, PAYMENT, PRICE FIXED ACCORDING TO A RATION/SCALE/STANDARD
i. Rate is defined as “a charge, payment, or price fixed according to a ratio, scale, or standard 7 ;” or “an amt paid or charged for a good or service 8”
(NPC v. PEPOA)

RATE IS FIXED ON THE BASIS OF INVESTMENT OR PROPERTY VALUE THAT THE PUBLIC UTILITY IS ALLOWED TO EARN

THIS IS THE "RATE BASE"
Fixed on the basis of the investment amt or property value that the public utility is allowed to earn -- an amt value called “rate base”
(NPC v. PEPOA)

FACTORS IN ASCERTAINING RATE BASE
a. Factors considered in ascertaining this value:

1. ORIGINAL COST OF CONSTRUCTION
   i. Original cost of construction
2. AMOUNT SPENT ON PERMANENT IMPROVEMENTS
   ii. Amt expended in permanent improvements
3. AMOUNT & MARKET VALUE OF BONDS & STOCK OF PUBLIC UTILITY
   iii. Amt and market value of the bonds and stock of the public utility
4. PRESENT COST OF CONSTRUCTION vs ORIGINAL COST THEREOF
   iv. Present cost compared w/ the original cost of construction
5. PROBABLE EARNING CAPACITY OF PROPERTY UNDER PARTICULAR RATES PRESCRIBED
   v. Probable earning capacity of the property under the particular rates prescribed
6. SUM REQUIRED TO MEET OPERATING EXPENSES
   vi. Sum required to meet operating expenses
   (NPC v. PEPOA)

PROPERTY VALUATION DEPENDS ON FACTS & CIRCUMSTANCES AFFECTING EACH UTILITY
Property valuation is dependent on the particular circumstances and relevant facts affecting each utility
(NPC v. PEPOA)

("RATE-FIXING" IS QUASI JUDICIAL IN NATURE)
Rate-fixing calls for a technical examination and a specialized review of specific details primarily entrusted to the admin or regulating authority -- in this case, the ERB
(NPC v. PEPOA)

NO PARTICUULAR METHOD OR FORMULA FOR DETERMINING RATES
Gov’t is not bound to apply any particular method or formula for determining rates
(NPC v. PEPOA)

12% RATE FOR PUBLIC UTILITIES
In the Philippines, decisions have consistently adopted the 12% rate for public utilities and the PSC has done no more than adhere to the established Jurisprudence thereon
(Republic v. Medina)

JUST RATE DEPENDS ON CIRCUMSTANCES, NOT FORMULA
However, the weight of authority shows that property valuation is not to be solved by formula.

Instead, it depends on certain circumstances & facts affecting each utility as to what constitutes a just rate base and what would be the fair return.

It should be just to both the utility and the public.
(Republic v. Medina)

RATE OF RETURN OF PUBLIC UTILITY IS NOT PRESCRIBED BY STATUTE BUT BY JUDICIAL PRONOUNCEMENTS
A rate of return of a public utility is prescribed not by statute, but by administrative and judicial pronouncements. In this case, the SC has consistently adopted a 12% rate of return for public utilities.
(Republic of the Philippines v. Meralco)

POWER TO:

1. FIX! RATES IS A LEGISLATIVE FUNCTION
2. DETERMINE REASONABLENESS! OF RATES IS A PURELY JUDICIAL QUESTION
   The power to fix rates is a legislative function. However, the power to determine whether the rates are reasonable is a purely judicial question, subject to the review of the courts.
   (Republic of the Philippines v. Meralco)

"LEAST COST MANNER" TO SUPPLY ELECTRICITY (SEC. 23, RA 9146)

• It was not “in the least cost manner” because the ERC’s used of the ODRC valuation method in computing the rate base had the effect of wealth transfers from electricity consumers to the utilities’s shareholders. Hence, electricity consumers end up paying more for the infrastructure than it costs the shareholders to provide it and shareholders earn a return higher than prescribed by their regulatory cost of capital
  (NAECR v. ERC)

DEPRECIATION IS AN EXPENSE

POLICE POWER IS THE BASIS OF REGULATING RATES
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.

STATE PROTECTS PUBLIC AGAINST EXCESSIVE RATES WHILE MAINTAINING EFFICIENCY AND QUALITY OF SERVICE
a. 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.

BALANCING OF
INVESTOR & CONSUMER INTERESTS
b. The fixing of just and reasonable rates involves a balancing of the investor and the consumer interests.

RESULT-BASED, NOT METHOD-BASED
Under the statutory standard of "just and reasonable" it is the result reached not the method employed which is controlling.
It is not theory but the impact of the rate order which counts.
(NAECR v. ERC)

2. APPROVE RATES PROPOSED BY PUBLIC SERVICES PROVISIONALLY AND WITHOUT NECESSITY OF ANY HEARING
   Provided, That the Commission may, in its discretion, approve rates proposed by public services PROVISIONALLY and without necessity of any hearing;

BUT HEARING IS REQUIRED WITHIN 30 DAYS AFTER

1. PUBLICATION; AND
2. NOTICE TO CONCERNS OPERATING IN THE TERRITORY AFFECTED.
   but it shall call a hearing thereon within thirty days, thereafter, upon publication and notice to the concerns operating in the territory affected:

REQUIREMENTS OF GRANTING PROVISIONAL RATES [Sec. 4(e), Rule 3 of EPIRA's IRR]
The requirements from Sec. 4(e), Rule 3 of the EPIRA’s IRR may be summarized as follows: -

1. PUBLICATION OF:
   a. APPLICATION,
   b. NOTICE,; AND
   c. HEARING
   First, the publication of the application itself is required, not merely the notice of hearing issued by the ERC
2. ERC MUST CONSIDER:
   a. EVIDENCE
   b. COMMENTS OF CONSUMERS & LGUs
   Second, in granting a provisional authority, the ERC must consider not only the evidence submitted by the applicant in support thereof, but also the comments of the consumers and the Local Government Units (LGUs) concerned.
   (Freedom From Debt Coalition v. Energy Regulatory Commission)

ERC MAY PROMULGATE GUIDELINES, BUT CONFORMING TO PERTINENT LAWS
The ERC is not, of course, precluded from promulgating rules, guidelines or methodology, such as the GRAM. However, these rules should conform to the requirements of pertinent laws, including Section 4(e), Rule 3 of the IRR of the EPIRA.
(NASECORE v. ERC)

PUBLICATION REQUIRED FOR RULES & REGULATIONS IF THEIR PURPOSE IS TO ENFORCE OR IMPLEMENT EXISTING LAW
In Tanada v. Tuvera, “Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation.”  In this case, the effectivity clauses of GRAM and ICERA provided that they “shall take effect immediately” and made no mention of publication.  It was also not filed in ONAR in contravention of the Admin Code of 1987.  Thus, the GRAM Rules must be declared ineffective.
(NASECORE v. ERC)

ADMINISTRATIVE AGENCY MAY APPROVE PROVISIONAL RATE WITHOUT HEARING
An administrative agency may be empowered to approve provisionally, when demanded by urgent public need, rates of public utilities without a hearing.
(Padua v. Ranada)

2. APPROVE RATES PROPOSED BY PUBLIC SERVICES PROVISIONALLY AND WITHOUT NECESSITY OF ANY HEARING
   Provided, That the Commission may, in its discretion, approve rates proposed by public services PROVISIONALLY and without necessity of any hearing;

BUT HEARING IS REQUIRED WITHIN 30 DAYS AFTER

1. PUBLICATION; AND
2. NOTICE TO CONCERNS OPERATING IN THE TERRITORY AFFECTED.
   but it shall call a hearing thereon within thirty days, thereafter, upon publication and notice to the concerns operating in the territory affected: