The Future of Sustainable Energy

The purpose of expropriation, like its counterparts police power and power of taxation, is to serve the public interest and promote public welfare. Eminent domain is important to public utility franchises, for example broadcast companies, telecommunication, or energy companies, that need land to build facilities that would be good for the public. Such power is usually not given to authorize companies to take over existing facilities, as that would be anti-competitive as well as a violation of the constitutional right of the company that owns the said facilities. And of course, the expectation is that expropriation is the last resort and that there must be a serious attempt to negotiate mutually acceptable terms.

It is in this context that one can understand the controversy between MORE Electric and Power Corporation (MORE) and Panay Electric Company (PECO) that I have written about previously. I have followed this dispute because of its enormous significance to the jurisprudence on the power of eminent domain, the limits on the terms of franchises granted by Congress which should be consistent with constitutional rights, and its practical implications on public utilities.

One must understand that this is a battle is between a veteran with no franchise but with all its power facilities and assets already in place and ready for use as against an upstart with a franchise. Should MORE be allowed to expropriate assets of PECO which are already used for public purpose? Will the taking by MORE redound to public or private benefit?

In addition, where the expropriation is exercised for the benefit of a private individual or private entity, it will be at war with the constitutional mandate for public use. The practical reason behind the proscription of taking for private benefit is because a private beneficiary has a more powerful incentive to concentrate benefit or private aggrandizement and subvert the eminent domain process which may not be the case where the taking is primarily for the general public.

In a virtual press conference held last August 22 by Koalisyon Bantay Kuryente (KBK), a consumer advocacy group in Iloilo, PECO’s legal counsel Atty. Estrella Elamparo asserted that MORE’s hostile takeover of PECO’s assets is unconstitutional and illegal for violating the constitutional rights of the latter not to be deprived of their property without due process of law. She is right.

It is also bad policy in terms of its outcomes on energy development, consumer rights, competition, and foreign direct investment outcomes. According to Elamparo, and I also echo her on this, “If the MORE position is affirmed by the courts, it will be followed by others who are not qualified and are not deserving to be granted a franchise by Congress. A company with zero experience and capabilities and just wants to make money will just look for a franchise that is about to expire, and then lobby to be given the right to take over the franchisee’s assets as well as its franchise rights.”

As reported by Alithea De Jesus of Philippine Business and News, the KBK complained about the performance of MORE in delivering electricity to Iloilo. According to Allen Aquino, KBK coordinator, “Iloilo has suffered more than 400 hours of a power failure that plunged us into darkness since February up to June. Very recently, another series of brownouts, lasting a total of 678 minutes from August 7-11 alone, plunged our city into darkness yet again.” KBK Chairman Ruperto Supena questioned MORE’s billing system: “MORE should have been conducting the necessary processes that would have caused systems loss reduction such as systems review and evaluation, system load balancing, management of thermal scanning, and equipment load, among others. Instead, what we are experiencing are overbilling that charge an unjustifiable increase of almost double the ERC-approved systems loss.”

On my part, in the same press conference, I attributed the power failures and overbilling to Congress granting a franchise to a company that has no experience in delivering electricity and in including unconstitutional terms in that franchise. That is what created the problem for Iloilo.

I pointed out that similar takeovers by unqualified, inexperienced companies of franchises and enterprises in other industries—and not just power—can prove disastrous to the nation.  If companies can get Congress to grant them a franchise, and expropriate competitors’ facilities and equipment, without building their own—-that would allow monopolistic behavior and allow control of vital economic sectors to a few conglomerates or families. This will make the situation for investors, especially in the utilities industry like water and power, uncertain.

I fear that the MORE-PECO fight is just the tip of the iceberg and the next targets will be electricity cooperatives and other politically vulnerable franchises. What is at stake is the future of sustainable energy in our islands.

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