SC strikes down exclusive franchises for electric cooperatives

THE Supreme Court has ruled that electric cooperatives do not have a constitutional right to exclusive franchises within their coverage areas.

In a decision penned by Associate Justice Rodil V. Zalameda and released on July 30, 2024, the high court dismissed a petition filed by Iloilo Electric Cooperative, Inc. I, II, and III (Ilecos) challenging the validity of Republic Act No. 11918, which expanded the franchise of More Electric and Power Corporation (More) to areas previously covered by Ilecos.

Ilecos and More operate electric light and power services in Iloilo and Passi City, with RA 11918 expanding its franchise to include 15 municipalities and one city previously within Ilecos' exclusive area.

The Court emphasized that "A franchise, as a privilege granted by the state, is not the exclusive private property of the franchisee."

The entity must comply with the guidelines set by Congress to serve the common good.

"Congress enacted RA 11918 to make electricity more affordable for the people of Iloilo province. Congress determined that expanding More’s franchise would promote healthy competition since More was capable of offering lower energy rates," the decision stated.

The Court added that allowing competition would benefit consumers by providing them with more options and potentially lower electricity rates.

"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," Justice Zalameda said.

The SC also ruled that contract rights must give way to the broader authority of the State's police power when exercised for the general welfare.

The high court's decision in the Philippine power sector signifies a significant shift towards increased competition and potentially lower electricity rates for consumers. (Leo Solinap/SunStar Philippines)