LEONEN, SAJ.:
2.2. Matters Pertaining to Breach of WESM Rules and WESM Manuals.In a letter,[14] the Philippine Electricity Market Corporation requested then Energy Secretary Angelo T. Reyes to approve the conduct of a formal investigation against the Power Sector Assets and Liabilities Management Corporation for possible breach of the Wholesale Electricity Spot Market Rules (Rules) with regard to six power generating plants whose electricity output is traded in the spot market. The letter enumerated the following matters needing action:
Under Section 43 of the EPIRA, the ERC is responsible for enforcing the rules and regulations governing the operations of the electricity spot market and the activities of the spot market operator and other participants in the spot market. On the other hand, Chapter 7 of the WESM Rules lays down the procedures on how an alleged Breach is to be investigated and sanctioned by PEMC.
For orderly procedure, Breaches shall be investigated and penalized as follows:
PEMC, through the ECO [Enforcement and Compliance Officer], shall have the authority to initially investigate and resolve cases involving Breach. Upon completion of ECO's investigation and after PEMC shall have imposed the proper sanctions and penalties, if any, pursuant to the WESM Rules and the relevant WESM Market Manuals, PEMC shall furnish the ERC a copy of its investigation and its conclusion thereon.
Any complaint received by the ERC involving Breach shall, at the first instance, be referred to the ECO for investigation and resolution. The ERC shall correspondingly inform the complainant of said action.
As a result of its monitoring activities, should the ERC find any irregular act or behavior which, it has reasonable ground to believe, involves a Breach, it shall refer the same to PEMC for investigation and resolution.
2.3. Matters Pertaining to Conduct of Anti-Competitive Behavior.
PEMC shall refrain from taking cognizance of a case involving Anti-Competitive Behavior unless it has been directed by the ERC to do so, or has been expressly or impliedly allowed by the ERC to conduct, an investigation of the case.
If upon complaint of a WESM member or a result of the monitoring functions of the PEMC, there is sufficient ground to believe that conduct constituting Anti-Competitive Behavior has been committed, the PEMC shall issue a Notice of Possible Commission of Anti-Competitive Behavior (the 'Notice') and transmit the same to the ERC, together with the complaint and such other relevant documents that may aid the ERC in its investigation. The ERC shall, within ten (10) business days from receipt of the said Notice, communicate to PEMC its decision to either a.) take cognizance of the investigation or b.) on a 'no objection basis', direct PEMC to investigate the matter. Unless it issues an order declaring otherwise, ERC's failure to communicate its decision within the aforestated period shall be deemed to be a consent for PEMC to proceed with its investigation.
Upon conclusion of its investigation, and if it finds reasonable ground to believe that an Anti-Competitive Behavior has been committed, PEMC shall issue a Resolution to such effect including its recommendation to the ERC on the appropriate fines and penalties that should be imposed, if any.
2.4. Matters Pertaining to Acts that Constitute both a Breach and Anti-Competitive Behavior.
For avoidance of doubt, if an act or omission constitutes both a Breach and an Anti-Competitive Behavior, PEMC shall have the authority to investigate the Breach but shall refrain from investigating the alleged Anti-Competitive Behavior unless the ERC has consented/directed otherwise. Upon completion of its investigation, the PEMC shall impose the appropriate sanctions and penalties on the Breach, pursuant to the relevant provisions of the WESM Rules and/or WESM Market Manual.[13]
Attached to this formal request were the memorandum of agreement, the protocol, as well as a letter[16] from the Energy Regulatory Commission, stating that it did not object to the conduct of the investigation.On November 14, 2007, the Corporate Secretary of PEMC received from the MSC [Market Surveillance Committee] its Memorandum to PEM Board in connection with its review of the Investigation Report of the Enforcement and Compliance Officer's (ECO) Report on the Alleged Non-Compliance by Bakun HEPP to Dispatch Schedules and Instructions. The energy output of Bakun is traded by the Power Sector Assets and Liabilities Management (PSALM). In its Memorandum, the MSC ruled that the ECO has complied with the procedural requirements of the Market Surveillance, Compliance and Enforcement Manual (MSCEM) and adopts the ECO's factual findings. Per Memorandum, the ECO concluded as follows:
- Investigation Report Alleged Non-Compliance to the Dispatch Instructions by Bakun Hydroelectric Power Plant (HEPP) – PEMC ECO 2006-0002
The matter is referred to the PEM Board to review the correctness of penalty, where applicable.
- On various trading hours from 27 July 2006 to 6 September 2006, Bakun HEPP generated more electricity from its Real Time Dispatch (RTD) schedule in excess of 3% tolerance limit prescribed by the System Operator;
- PSALM, the registered trader of Bakun HEPP, failed to make Bakun HEPP comply with the MO dispatch schedules and the SO dispatch instructions. Therefore, ECO finds PSALM in violation of Section 4.3, Appendix A.7 of the Dispatch Protocol Manual.
- However, the ECO does not recommend the imposition of any financial penalty against PSALM since the violations were committed during the six-month period when the application of the financial penalties against Trading Participants was suspended under the Transitory Provisions of the MSCEM Manual (Appendix B, paragraph 2.7) and the ECO did not find evidence of bad faith, fraud, gross negligence[,] or gross incompetence on the part of PSALM.
On January 14, 2008, the Corporate Secretary received a memorandum addressed to the Board from the MSC reporting possible noncompliance of certain generators with the submission of offers under Section 3.5.5 and Appendix A1.1 of the WESM Rules. Section 3.5.5 of the WESM Rules provide:
- MSC Non-Compliance Report against Limay CCGT, Bauang DPP, Sual CFTPP, Malaya TPP, Pagbilao CFTPP and Subic Enron OPP all traded by PSALM.
"3.5.5.1 Each Scheduled Generation Company including Generation Companies with bilateral contracts shall submit a standing generation offer for each of its scheduled generating units for each trading interval in each trading day of the week in accordance with the timetable."Appendix A1.1 Generation Offer:
While Appendix A1.1 Generation Offer, as amended, states:
"3.5.5.2 Each generation offer shall include the information specified in Appendix A1.1:(c) May include up to ten (10) energy offer blocks per (aggregate) unit. The maximum combined capacity of generation and reserve offers must not be less than the maximum available capacity of the generator."Thus, the MSC recommends that appropriate investigation be conducted for possible breach of the WESM Rules for the following plants:[15]
Power Plant Trading Team Company Explanations Provided by Trading Participants 1.Limay CCGT PSALM 1 PSALM Technical constraints 2. Bauang DPP PSALM 2 PSALM No offer/cancelled offer due to lower day-ahead dispatch (DAP) market clearing price than plant variable cost 3. Sual CFTPP PSALM 2 PSALM Capacity available for trading is only 2 x 500 MW, which is the capacity covered by the Energy Conversion Agreement between NPC and Mirant; For each unit, a portion of the 500 MW is being nominated as ancillary. 4. Malaya TPP PSALM2 PSALM On economic shutdown due to limited fuel supply adequate only for test and heat runs 5. Pagbilao CFTPP PSALM 3 PSALM Reduced capacity to prolong plant operation when coal stock was low due delay in coal shipment delivery (April 14-25, 2007); Reduced capacity due to high sulfur dioxide (SO2) emission attributed to low coal quality. 6. Subic Enron DPP PSALM 3 PSALM Day-ahead dispatch (DAP) market clearing price below plant variable cost
1. Upon filing of the instant Petition, a Temporary Restraining Order and/or Writ of Preliminary Injunction be issued by this Honorable Court enjoining private respondent, its representatives, agents[,] or anyone acting for and on its behalf, from assuming and/or conducting any investigation against petitioner for possible breaches of the WESM rules or from encroaching, usurping or exercising the exclusive powers, authority[,] and jurisdiction of public respondent.In its Decision,[20] the Court of Appeals dismissed the Petition. It found that the Energy Regulatory Commission did not unduly delegate its powers in the assailed memorandum and protocol. It noted that the Philippine Electricity Market Corporation was created pursuant to EPIRA. Under the rules and regulations implementing EPIRA, the Department of Energy, jointly with the industry participants, was mandated to formulate rules for the Wholesale Electricity Spot Market. It later formulated the Rules after public consultations, which were jointly endorsed by electric power industry participants, including the Power Sector Assets and Liabilities Management Corporation itself.[21]
2. The instant Petition be given due course and after deliberation on the merits:(i) A Writ of Prohibition be issued prohibiting private respondent from encroaching, usurping[,] or exercising the exclusive powers, authority and jurisdiction of public respondent.3. Other reliefs and remedies, as may be just and equitable in the premises are likewise prayed for.[19]
(ii) Nullifying the Memorandum of Agreement dated January 31, 2008 and the accompanying Protocol executed by public and private respondent being in derogation of the provisions of the EPIRA.
PEMC, through the ECO [Enforcement and Compliance Officer], shall have the authority to initially investigate and resolve cases involving Breach. Upon completion of ECO's investigation and after PEMC shall have imposed the proper sanctions and penalties, if any, pursuant to the WESM Rules and the relevant WESM Market Manuals, PEMC shall furnish the ERC a copy of its investigation and its conclusion thereon.On the investigation and sanction of conduct constituting anti-competitive behavior, the protocol provides:
Any complaint received by the ERC involving Breach shall, at the first instance, be referred to the ECO for investigation and resolution. The ERC shall correspondingly inform the complainant of said action.
As a result of its monitoring activities, should the ERC find any irregular act or behavior which, it has reasonable ground to believe, involves a Breach, it shall refer the same to PEMC for investigation and resolution.[45]
If upon complaint of a WESM member or a result of the monitoring functions of the PEMC, there is sufficient ground to believe that conduct constituting Anti-Competitive Behavior has been committed, the PEMC shall issue a Notice of Possible Commission of Anti-Competitive Behavior (the 'Notice') and transmit the same to the ERC, together with the complaint and such other relevant documents that may aid the ERC in its investigation. The ERC shall, within ten (10) business days from the receipt of the said Notice, communicate to PEMC its decision to either a.) take cognizance of the investigation or b.) on a 'no objection basis', direct PEMC to investigate the matter. Unless it issues an order declaring otherwise, ERC's failure to communicate its decision within the aforestated period shall be deemed to be a consent for PEMC to proceed with its investigation.On acts that allegedly constitute both anti-competitive behavior and breach of governing rules, the protocol provides:
Upon a conclusion of its investigation, and if it finds reasonable ground to believe that an Anti-Competitive Behavior has been committed, PEMC shall issue a Resolution to such effect including its recommendation to the ERC on the appropriate fines and penalties that should be imposed, if any.[46]
For avoidance of doubt, if an act or omission constitutes both a Breach and an Anti-Competitive Behavior, PEMC shall have the authority to investigate the Breach but shall refrain from investigating the alleged Anti-Competitive Behavior unless the ERC has consented/directed otherwise. Upon completion of its investigation, the PEMC shall impose the appropriate sanctions and penalties on the Breach, pursuant to the relevant provisions of the WESM Rules and/or the WESM Market Manual.[47]The act of investigating and sanctioning breaches of the Rules may be considered related to Section 43(r) of EPIRA, under which respondent Energy Regulatory Commission has the responsibility to
act against any participant or player in the energy sector for violations of any law, rule and regulation governing the same, including the rules on cross-ownership, anti-competitive practices, abuse of market positions and similar or related acts by any participant in the energy sector or by any person, as may be provided by law, and require any person or entity to submit any report or data relative to any investigation or hearing conducted pursuant to this Act.[48]However, while Section 43(r) states that respondent Energy Regulatory Commission is responsible for this key function in the restructured industry, it does not mandate it to perform all functions related to this responsibility by itself. The Commission may therefore exercise these functions concurrently with the Philippine Electricity Market Corporation.