REPUBLIC OF THE PHILIPPINES

COURT OF APPEALS
MANILA

THIRTEENTH (13th) DIVISION

NATIONAL GRID CA – G.R. SP No. 128380

CORPORATION OF THE PHILS.
(NGCP),
Petitioner Members:
DICDICAN, Chairperson,
ELBINIAS, and
- versus - ANTONIO-VALENZUELA, JJ.

Promulgated:
STRONGHOLD STEEL
CORPORATION (SSC), April 3, 2013
Respondent.
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DECISION

DICDICAN, J.:

Well-settled is the rule that courts or quasi-judicial agencies are

obliged to give effect to the parties' agreement and enforce the
contract to the letter. They have no authority to alter a contract by
construction or to make a new contract for the parties. Their duty is
confined to the interpretation of the contract which the parties have
made for themselves, without regard to its wisdom or folly. Courts
cannot supply material stipulations, read into the contract words that
it does not contain or, for that matter, read into it any other intention
that would contradict its plain import (LVM Construction Corporation
vs. F.T. Sanchez Construction Corporation, et al., G.R. No. 181961,
December 5, 1911; National Power Corporation vs. Premier Shipping
Lines, Inc., 600 SCRA 153; Barrera vs. Lorenzo, 389 SCRA 329;
CA-G.R. SP No. 128380 Page 2
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Cuizon vs. Court of Appeals, 260 SCRA 645; German Marine

Agencies, Inc. vs. NLRC, 350 SCRA 629).

Filed in this Court is a petition for review of the decision

rendered by the Energy Regulatory Commission on November 26,
2012 in ERC Case No. 2011-060 MC the dispositive portion of which
reads:

“WHEREFORE, the foregoing premises considered, the

Commission hereby confirms that the transmission charges for
Stronghold Steel Corporation (SSC) should be calculated on the
basis of the Coincident Peak Demand (CPD) of the Luzon System
Peak Demand.

Accordingly, the Cease and Desist Order issued by the

Commission on September 10, 2012 is hereby made
PERMANENT.

Relative thereto, the National Grid Corporation of the

Philippines (NGCP) is directed to comply with the following
directives:

(a) Use SSC's actual demand coincident with the

Luzon System Peak Demand as its billing
determinant in the calculation of its transmission
charges, subject to the approved minimum billing
determinant of 17MW;

(b) Refund to SSC the total amount of over-recovery

in the transmission charges from the time it shifted
from CPD to Non-Coincident Peak Demand
(NCPD); and

(c) Submit its compliance herewith, within ten (10)

days from receipt hereof.”

The background of this case, as can be culled from the record,

is as follows:

The petitioner National Grid Corporation of the Philippines

CA-G.R. SP No. 128380 Page 3
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(NGCP) is a private corporation duly organized under and by virtue of

the laws of the Philippines. It was granted under Republic Act No.
9511, which was signed into law on December 1, 2008, a franchise to
operate, manage and maintain, and in connection therewith, to
engage in the business of conveying or transmitting electricity
through high-voltage back-bone system of interconnected
transmission lines, substations and related facilities, system
operations and other activities that are necessary to support the safe
and reliable operation of the transmission system and to construct,
install, finance, manage, improve, expand, operate, maintain,
rehabilitate, repair and refurbish the nationwide transmission system
of the Philippines. In effect, the petitioner has been authorized to
take over the operation, management and maintenance of the
nationwide electrical transmission system of the Philippines which
were erstwhile undertaken by the National Transmission Corporation
(TRANSCO). It was on January 15, 2009 when the petitioner took
over TRANSCO's operation and management of the nationwide
electrical transmission system of the Philippines.

But for a better understanding of the factual and environmental

circumstances attendant in this case, it would be well to know what
the prevailing situation was then before the petitioner came into the
picture.

For a long time in the past, it was the National Power

Corporation (NPC), a government-owned corporation, that was
operating and managing the nationwide transmission system of the
Philippines. Then, on June 8, 2001, the Electric Power Industry
Reform Act (Republic Act No. 9136) was signed into law. The said
law provided a framework for the restructuring of the electric power
industry, including the privatization of the assets of the NPC. Thus,
TRANSCO became the system operator of the nationwide electrical
transmission and subtransmission system of the Philippines.
TRANSCO was wholly owned by the Power Sector Assets and
Liabilities Management Corporation (PSALM Corp.).
CA-G.R. SP No. 128380 Page 4
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After the effectivity of the Electrical Power Industry Reform Act

(EPIRA), the electric power industry was divided into four sectors,
namely, generation, transmission, distribution and supply. By reason
of this, the rates charged by NPC to customers had to be unbundled
between transmission and generation rates pursuant to Section 36 of
the EPIRA. So it was that the ERC issued an order in ERC Case No.
2001-901 for the submission of the NPC revised rates which
TRANSCO could subsequently charge to its customers. The revised
rates submitted to the ERC called for the payment by all load
customers of a monthly Power Delivery Service Charge and System
Operator Charge, with billing determinants based on the average of
the 12 monthly non-coincident peak demand in kilowatt (kW). So,
TRANSCO, upon becoming the operator of the nationwide
transmission system of the Philippines, adopted and utilized, for
billing purposes, the methodology of billing determinant of all its
customers based on the aggregate non-coincident peak demand of
the customers' metering points.

However, sometime in 2004, SKK Steel Corporation, which is in

the business of steel manufacturing, filed a petition in the ERC
praying that it be granted the privilege by TRANSCO of being allowed
to be imposed a preferential transmission rate of lower than 20% of
the current grid rate. The petition was docketed as ERC Case No.
2004-479. To resolve the matter, SKK Steel Corporation and
TRANSCO, at the behest of ERC, signed a Memorandum of
Agreement (MOA) wherein the former was granted by the latter a
special billing arrangement using the latter's actual demand
coincident with the Luzon System Peak Demand (CPD) as its billing
determinant in computing transmission charges. This MOA was
approved by the ERC in its decision dated October 5, 2005 in ERC
Case No. 2004-479. Then, on April 18, 2005, the respondent
Stronghold Steel Corporation followed suit by filing a petition in ERC
for preferential rate from TRANSCO of 20% lower than the current
grid rate then. The petition of respondent SSC was docketed as ERC
Case No. 2005-230MC. During the preliminary conference
conducted by ERC, TRANSCO and the respondent SSC were
CA-G.R. SP No. 128380 Page 5
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requested by ERC to explore ways of resolving the matter amicably

between themselves. This was because ERC had not yet approved
at that time the Revised Rates proposed by TRANSCO to be charged
to all its load customers. But TRANSCO and the respondent ERC
had not amicably resolved the matter until June 29, 2007.

In the meanwhile, more particularly on December 13, 2006, the

ERC rendered a decision in ERC Case No. 2006-015RC approving
TRANSCO's Revised Rules, Terms and Conditions for the Provision
of Open Access Transmission Service which shall govern
TRANSCO's provision of transmission services to qualified grid
users. These rules have been known as the “2006 Revised OATS
Rules”. These rules comprehensively established a methodology for
setting and computing transmission charges to all load customers,
taking into account all relevant considerations, including the efficiency
or inefficiency of TRANSCO. The rates conceptualized in the “2006
Revised OATS Rules” which are allowed by ERC to be charged to all
grid users or load customers are such as to allow the recovery of just
and reasonable costs and a reasonable return on rate base to enable
TRANSCO to operate viably. The rate-setting methodology so
adopted and applied under the TRANSCO's Revised OATS Rules
ensures a reasonable price of electricity. The rates prescribed
therein have been determined by the ERC to be non-discriminatory.
The “2006 Revised OATS Rules” which ERC approved on December
13, 2006 in ERC Case No. 2006-015RC were promulgated precisely
pursuant to and in accordance with the mandates set forth in Section
43(f) of the Electric Power Industry Reform Act of 2001.

Significantly, TRANSCO's Revised OATS Rules, as approved

by ERC, provide that all load customers shall pay a monthly Power
Delivery Charge and System Operator Charge, with billing
determinants based on the average of the 12 monthly non-coincident
peak demand (NCPD) in kW of their metering points. So, TRANSCO,
under the 2006 Revised OATS Rules, was entitled to use NCPD as
billing determinant in the computation of transmission charges to all
its load customers.
CA-G.R. SP No. 128380 Page 6
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Upon the approval of the Revised OATS Rules, TRANSCO lost

no time in advising its load customers that, henceforth, it would be
using NCPD in computing transmission charges to them, with the
exception of those with existing MOA's with it granting them special
billing arrangement such as SKK Steel Corporation.

On the part of the respondent Stronghold Steel Corporation

which just entered into a Transmission Service Agreement with
TRANSCO on June 26, 2006, it bargained with TRANSCO that it be
granted a special billing arrangement with the use of its CPD as
determinant thereof in computing the transmission charges imposed
or to be imposed on it. Upon the behest and request of ERC,
TRANSCO eventually agreed to grant respondent SSC such special
billing arrangement but subject to the condition that the said billing
arrangement shall cease to be implemented when the ERC approves
another billing determinant methodology or upon the commencement
of the Third Regulatory Period, whichever comes earlier. Thus, on
June 29, 2007, a Memorandum of Agreement was signed by
TRANSCO and the respondent SSC wherein, during the effectivity
thereof, TRANSCO would use SSC's actual demand coincident with
the Luzon system peak (CPD) as its billing determinant in the
computation of transmission charges on it. Section VII of the MOA
states:

“SECTION VII
EFFECTIVITY

“This MOA shall take effect upon its approval by the ERC
and confirmation that Stronghold is similarly situated to that of SKK
Steel Corporation. The billing arrangement set forth herein shall
cease to be implemented subject to the provision in SECTION III of
this MOA or upon the commencement of the Third Regulatory
Period, whichever comes earlier.”

while Section III of the some MOA provides:

CA-G.R. SP No. 128380 Page 7
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“SECTION III
ANOTHER BILLING DETERMINANT METHODOLOGY

“The Parties agree that the method of calculating the billing

determinant herein prescribed shall cease to be implemented once
ERC approves another methodology for the determination of the
billing determinant, e.g., coincident peak demand, average of the
12 highest non-coincident peak demand (kw) within the last twelve
months, measured in fifteen (15) minute interval, at that point of
delivery, and others.”

On July 4, 2007, the ERC approved the said MOA between

TRANSCO and the respondent SSC in a decision rendered in ERC
Case No. 2005-230MC.

In the later part of the year, more particularly on October 3,

2007, the ERC rendered a decision in ERC Case No. 2006-049RC
approving a mechanism for TRANSCO (and its successor) to impose
Ancillary Service Charges to its load customers. Such mechanism is
known as the Ancillary Services-Cost Recovery Mechanism (AS-
CRM). It provides that the Ancillary Service Charges shall be
computed using the customers' NCPD as billing determinant. In
other words, the ERC had been consistent in allowing the use of the
customers' NCPD as billing determinant in computing transmission
charges on them, as it did in approving the “2006 Revised OATS
Rules”. Verily, this was pursuant to and in accordance with the
mandates upon ERC as set forth in Section 43(f) of the EPIRA.

Then came January 15, 2009 when the petitioner NGCP took
over TRANSCO's operation and management of the nationwide
electrical transmission system of the Philippines. The petitioner
continued to do what TRANSCO had been doing. In the matter of
billings its load customers, it billed them according to the 2006
Revised OATS Rules and AS-CRM. Of course, it respected the
special billing arrangement that TRANSCO had with SSC under the
MOA signed on June 29, 2007.

One of the measures taken by the petitioner NGCP in 2009 in

CA-G.R. SP No. 128380 Page 8
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operating and managing the nationwide transmission grid in the

Philippines was to file in the ERC an application which was entitled
“In the Matter of the Application for Approval of the Maximum
Allowable Revenue for the Third Regulatory Period (2011 to 2015)
during the Regulatory Reset Process for the Third Regulatory Period
in Accordance with the Alternative Form of Rate-Setting Methodology
under the Rules in Setting the Transmission Wheeling Rates
(RTWR)”. The application was docketed as ERC Case No. 2009-
180RC. On November 22, 2010, the ERC rendered a decision in this
case which, among others, confirmed that the Third Regulatory
Period for petitioner commenced in January 2011. Consequently, the
petitioner computed, starting in January 2011, its transmission
charges on the respondent SSC, using the latter's NCPD as the
billing determinant thereof. This was pursuant to the “2006 Revised
OATS Rules” and the AS-CRM approved in 2007. It is significant to
note that, from the execution of the MOA between TRANSCO and the
respondent on June 29, 2007 up to the start of the Third Regulatory
Period in January 2011, there was no other billing determinant
methodology that was approved by the ERC to apply to, or to be used
in, petitioner's billing of transmission charges to its customers. Thus,
starting in January 2011, the petitioner billed the respondent SSC by
using the latter's NCPD as the applicable billing determinant. But the
respondent contested the use of its NCPD as billing determinant in
computing transmission charges to it by the petitioner. On July 29,
2011, the respondent filed in the ERC a petition for dispute resolution
relative to the use of its NCPD as billing determinant. The petition
was docketed as ERC Case No. 2011-060MC. On September 10,
2012, the ERC issued a Status Quo Order directing the petitioner to
use the respondent's CPD as its billing determinant in the calculation
of transmission charges on it. On November 26, 2012, the ERC
rendered a decision which is being now assailed in the petition for
review filed in this case.

In the petition at bench, the petitioner NGCP raises the

following issue to be passed upon by this Court:
CA-G.R. SP No. 128380 Page 9
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WHETHER OR NOT THE RESPONDENT SSC IS STILL

ENTITLED TO THE USE OF ITS CPD AS BILLING
DETERMINANT IN THE COMPUTATION OF THE
TRANSMISSION CHARGES ON IT BY THE
PETITIONER WHEN THE THIRD REGULATORY
PERIOD COMMENCED IN JANUARY 2011.

After a judicious and thorough scrutiny of the environmental

facts and circumstances attendant in this case, together with the
applicable laws and jurisprudence, we have come up with a finding
that the respondent SSC is not anymore entitled to the use of its CPD
as the billing determinant in the computation by the petitioner of the
transmission charges on it, and this must be so since January 2011
when the Third Regulatory Period commenced, as confirmed by the
ERC in its decision rendered on November 22, 2010 in ERC Case
No. 2009-180RC.

It is most significant to note that the petitioner, as the

successor-in-interest of TRANSCO, has been duly authorized by the
Energy Regulatory Commission to impose transmission charges on
all its load customers in accordance with the Revised Open Access
and Transmission Service Rules as approved on December 13, 2006
in ERC Case No. 2006-015RC and the Ancillary Services-Cost
Recovery Mechanism as approved on October 3, 2007 in ERC Case
no. 2006-049RC. The 2006 Revised OATS Rules and AS-CRM
provide that all load customers of TRANSCO (now NGCP) shall pay a
monthly Power Delivery Service Charge, System Operator Charge
and Ancillary Service Charge the billing methodology determinants of
which are based on the average of the 12 monthly non-coincident
peak demand (NCPD) in kW of the customers' metering points. The
methodology established for billing transmission charges and the
rates prescribed under the Revised OATS Rules and AS-CRM had
been duly determined by the ERC as just, reasonable and non-
discriminatory in accordance with the mandates set forth in Section
43(f) of the Electric Power Industry Reform Act of 2001. Thus, there
is no gainsaying the fact that the petitioner is perfectly within its rights
CA-G.R. SP No. 128380 Page 10
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in using the customers' non-coincident peak demand (NCPD) as

billing determinant in computing the transmission charges imposed or
to be imposed on all its load customers. The methodology for setting
transmission charges, as used and adopted by the petitioner, had
been duly approved and sanctioned by the ERC.

Of course, there is the claim of the respondent SSC that it had

been allowed to have a special billing arrangement by TRANSCO
under a Memorandum of Agreement signed with it on June 29, 2007
which was approved by the ERC on July 4, 2007 in ERC Case No.
2005-230MC. However, this claim is of no moment now. The fact is
that the privilege granted to the respondent to have CPD as billing
determinant in computing the transmission charges imposed on and
due from it was by virtue of a contract with TRANSCO, the
predecessor-in-interest of the petitioner. That contract had already
ceased to be in force and effect in January 2011.

A careful and cursory reading of Section VII of the MOA

between the respondent SSC and TRANSCO, in conjunction with
Section III thereof, would unmistakably disclose that the special billing
arrangement allowed to and enjoyed by the respondent shall cease to
be implemented when the ERC approves another billing determinant
methodology or upon the commencement of the Third Regulatory
Period, whichever comes earlier. More particularly, Section VII of the
MOA states:

“SECTION VII
EFFECTIVITY

“This MOA shall take effect upon its approval by the ERC
and confirmation that Stronghold is similarly situated to that of SKK
Steel Corporation. The billing arrangement set forth herein shall
cease to be implemented subject to the provision in SECTION III of
this MOA or upon the commencement of the Third Regulatory
Period, whichever comes earlier.”

while Section III of the same MOA provides:

CA-G.R. SP No. 128380 Page 11
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“SECTION III
ANOTHER BILLING DETERMINANT METHODOLOGY

“The Parties agree that the method of calculating the billing

determinant herein prescribed shall cease to be implemented once
ERC approves another methodology for the determination of the
billing determinant, e.g., coincident peak demand, average of the
12 highest non-coincident peak demand (kw) within the last twelve
months, measured in fifteen (15) minute interval, at that point of
delivery, and others.”

From the foregoing quoted provisions of the MOA between the

respondent and TRANSCO, it is clear and manifest that either of two
conditionalities would cause the cessation of the implementation of
the special billing arrangement enjoyed by the respondent, namely,
the approval by the ERC of another billing determinant methodology
or the commencement of the Third Regulatory Period, whichever
would come earlier. It bears noting significantly that, from the
approval of the aforementioned MOA on July 4, 2007 up to the start
or commencement of the Third Regulatory Period in January 2011,
there was no other billing determinant methodology that was
approved by ERC for TRANSCO (now the petitioner). So, of the two
conditionalities just mentioned, it was the commencement of the Third
Regulatory Period in January 2011 that took place earlier. That was
what caused the cessation of the implementation of the special billing
arrangement granted to the respondent under the MOA. Thus,
thereafter the respondent was no longer entitled, as it is no longer
entitled now and henceforth, to the use of its CPD as billing
determinant in the computation of transmission charges imposed on it
by the petitioner. So it was that, after January 2011, the petitioner
billed the respondent by using the latter's NCPD as determinant of
such billings.

Thus, by any legal yardstick, it is evident and plain that the ERC
erred in holding that, after January 2011, the transmission charges for
the respondent SSC by the petitioner should be calculated on the
basis of its coincident peak demand (CPD). In contractual relations,
the law allows the parties much leeway and considers their
CA-G.R. SP No. 128380 Page 12
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agreement or MOA to be the law between them (De Jayme vs. Court
of Appeals, 390 SCRA 380). Courts have no authority to alter a
contract by construction or to make a new contract for the parties;
their duty is confined to the interpretation of the contract which the
parties have made for themselves without regard to its wisdom or
folly as the courts cannot supply material stipulations, read into the
contract words it does not contain or, for that matter, read into it
another intention that would contradict its plain import (LVM
Construction Corporation vs. F.T. Sanchez Construction, et al., G.R.
No. 181961, December 5, 2011; National Power Corporation vs.
Premier Shipping Lines, Inc., 600 SCRA 153; Barrera vs. Lorenzo,
389 SCRA 329; German Marine Agencies, Inc. vs. NLRC, 350 SCRA
629).

In rendering its decision, the ERC ratiocinated as follows:

“Section 7 of R.A. 9136 provides that the transmission of

electric power shall be a regulated common electricity carrier
business, subject to the rate making powers of the ERC. Pursuant
thereto, the Commission was empowered to establish and enforce
a methodology for setting transmission and distribution wheeling
rates and to review and approve the changes in the terms and
conditions of service of TRANSCO (now NGCP) or any distribution
utility x x x.

“x x x x.

“x x x x.

“x x x x.

“x x x x.

“x x x x.

“x x x x.

“x x x x.

“The assertion of NGCP that the privilege granted to SSC

CA-G.R. SP No. 128380 Page 13
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automatically terminates upon the commencement of its Third

Regulatory Period is of no moment. As discussed earlier, aside
from the approval of the MOA between SSC and TRANSCO, the
Commission has already established the CPD is the proper billing
determinant for SSC.”

The foregoing ratiocinations of the ERC are actually untenable

and unavailing. There is no question that the ERC has rate-making
powers. But these rate-making powers are not supposed to be
exercised arbitrarily, whimsically or capriciously. It is clear as daylight
that ERC had properly and rightfully exercised these powers granted
to it under Section 43(f) of R.A. 9136, otherwise known as the EPIRA,
when it acted on, reviewed and passed upon the Revised Rules,
Terms and Conditions for the Provision of Open Access Transmission
which TRANSCO submitted to it in 2006 to govern TRANSCO's (now
NGCP's) provision of transmission services to qualified grid users.
These Rules which are known as the “2006 Revised OATS Rules”
contain the methodology for setting transmission and distribution
wheeling rates and the very rates themselves which TRANSCO
charges to all its load customers. Most importantly, the “2006
Revised OATS Rules” were approved by the ERC on December 13,
2006 in its decision rendered in ERC Case No. 2006-015RC. Again,
the ERC had properly and rightfully exercised its rate-making powers
in 2007 when it passed upon the Ancillary Services-Cost Recovery
Mechanism submitted to it for approval by TRANSCO. This AS-CRM
pertains to the Ancillary Service Charges imposed by TRANSCO
(now NGCP). The ERC approved the AS-CRM on October 3, 2007 in
its decision in ERC Case No. 2006-049RC. In acting on the OATS
Rules and the AS-CRM, the ERC passed upon the transmission rates
and billing determinant methodology charged and used by TRANSCO
(now NGCP) relative to all its load customers. So, enough rate-
making or rate regulation had already been done by the ERC.

Indeed, it is a cause to wonder why the ERC went to the extent

of fixing a different transmission rate for the respondent SSC. What it
is supposed to do, as it is in fact its bounden duty, is to uphold the
rates charged by TRANSCO (now the petitioner NGCP) to all its load
CA-G.R. SP No. 128380 Page 14
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customers pursuant to the OATS Rules and AS-CRM. The ERC

should look with disfavor or should not sanction as much as possible
a deviation from the rates and billing determinant methodology
prescribed pursuant to the OATS Rules and AS-CRM. A piece-meal
and individualistic rate-fixing is definitely unsound, arbitrary,
whimsical and capricious. It would just lead to chaos and
unnecessary vexations and increase in litigation and strife. That is
why, in Philippine Long Distance Telephone Company vs. Medina, 20
SCRA 659, the Supreme Court ruled that rates established in a final
judgment may not be reduced or increased at any time. A new case
should be filed for that specific purpose and notices to the general
consuming public must be given and served. In the case of the
respondent SSC, the reduced rate allowed to it was just by virtue of
the MOA that it had signed with TRANSCO on June 29, 2007 and, as
already discussed in the earlier part hereof, already ceased to be in
force and effect in January 2011. It is not in order for ERC to direct
the petitioner to go on charging the said reduced or preferential rate
with the use of respondent's CPD as billing determinant thereof, after
January 2011 and henceforth, without a new petition filed for said
specific purpose and a hearing thereon duly conducted with proper
notices to all the load customers of the petitioner. In doing so, the
ERC committed an abuse of discretion in the purported exercise of its
rate-making powers. What was filed by the respondent in the ERC in
Case No. 2011-060MC was a petition for dispute resolution, and not a
petition for the fixing of a reduced rate for it. So, it cannot validly fix a
rate for the respondent in said case. Neither could the ERC fix a
special rate for the respondent in ERC Case No. 2005-230MC which
eventually turned out to be merely a petition for the approval of the
MOA between the respondent and TRANSCO and nothing else.

On the issue of whether the petitioner is discriminating against

the respondent SSC in its shift from the use of billing determinant
from CPD to NCPD in computing transmission charges on it, we find
that the petitioner has not committed and is not committing an act of
discrimination. On the contrary, it is just charging the respondent
equally and fairly with the other load customers. A deeper look into
CA-G.R. SP No. 128380 Page 15
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the matter seems to tell us that it is the ERC instead which is

sanctioning discrimination against the greater number of petitioner's
load customers when it directed the petitioner to allow the respondent
to have a special billing privilege, and this unfortunately appears to be
unlawful. Section 43(f) of R.A. 9136 (EPIRA) is very explicit in
providing that the rates fixed or prescribed by the ERC must not be
discriminatory. At this point, emphasis should be given to the fact that
the sentence in Section 43(f) of R.A. 9136 which states that “the rates
prescribed shall be non-discriminatory” is specifically addressed to
the ERC and not to the petitioner because the opening paragraph of
Section 43 of the law provides that the ERC shall be responsible for
the following key functions in the restructured industry:

“(a) x x x x.

“(b) x x x x.

“(c) x x x x.

“(d) x x x x.

“(e) x x x x.

“(f) In the public interest, establish and enforce a methodology

for setting transmission and distribution wheeling rates and
retail rates for the captive market of a distribution utility,
taking intro account all relevant considerations, including the
efficiency or inefficiency of the regulated entities. The rates
must be such as to allow the recovery of just and reasonable
costs and a reasonable return on rate base (RORB) to
enable the entity to operate viably. The ERC may adopt
alternative forms of internationally-accepted rate-setting
methodology as it may deem appropriate. The rate-setting
methodology so adopted and applied must ensure a
reasonable price of electricity. The rates prescribed shall be
non-discriminatory. To achieve this objective and to ensure
the complete removal of cross subsidies, the cap on the
recoverable rate of system losses prescribed in Section 10
of Republic Act No. 7832, is hereby amended and shall be
replaced by caps which shall be determined by the ERC
CA-G.R. SP No. 128380 Page 16
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based on load density, sales mix, cost of service, delivery

voltage and other technical considerations it may
promulgate. The ERC shall determine such form or rate-
setting methodology, which shall promote efficiency.”

As a final note, it is worth pointing out at this juncture the

observation that the respondent SSC itself, through its counsel, had
categorically stated unknowingly or unwittingly that “THE NCPD IS
THE APPROPRIATE BILLING METHODOLOGY FOR THE
RESPONDENT STRONGHOLD x x x”. This statement is couched in
bold letters in lines 1 to 5 on page 7 of the comment filed by the
respondent in this Court on March 1, 2013. Again, this statement was
reiterated in lines 8 to 12 on page 13 of the same comment. A
statement of the same tenor was significantly repeated too in lines 22
to 27 on page 15 of the same comment of the respondent, this time
even stating that the use of NCPD by the petitioner is non-
discriminatory. Apparently, this is a correct statement as it is, in fact,
the finding of this Court.

WHEREFORE, in view of all the foregoing premises, judgment

is hereby rendered by us GRANTING the petition for review filed in
this case. Consequently, the decision rendered by the ERC on
November 26, 2012 and the order issued by it on January 2013 in
ERC Case No. 2011-060MC are hereby SET ASIDE. Likewise, the
Cease and Desist Order issued by the ERC on September 10, 2012
in the same case is hereby SET ASIDE. The motion for
reconsideration of our resolution dated February 12, 2013 as filed by
the respondent on March 1, 2013 is hereby DENIED for lack of merit.

SO ORDERED.

ISAIAS DICDICAN
Associate Justice
CA-G.R. SP No. 128380 Page 17
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WE CONCUR:

MICHAEL P. ELBINIAS
Associate Justice

NINA G. ANTONIO-VALENZUELA
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is

hereby certified that the conclusions in the above decision were
reached in consultation before the case was assigned to the writer of
the opinion of the Court.

ISAIAS DICDICAN
Associate Justice
Chairperson, Thirteenth Division