Eminent Domain for Uninterrupted Electricity: MORE Power vs. PECO Explained

The Supreme Court, in More Electric and Power Corporation v. Panay Electric Company, Inc. (G.R. Nos. 248061 and 249406, September 15, 2020), settled a significant constitutional question: may the State, through a legislative franchise, authorize a new electric distribution utility to expropriate the existing distribution system of the previous franchise holder for the very same public purpose of distributing electricity? The Court answered yes, reversing the trial court's ruling that such a taking was an unconstitutional "corporate takeover."

The case arose from the transition of the electric franchise in Iloilo City. Panay Electric Company, Inc. (PECO) had held the franchise since 1922, but it expired on January 18, 2019. Congress then granted a new franchise to MORE Electric and Power Corporation (MORE) under Republic Act No. 11212. Because MORE had yet to build its own system, the law allowed PECO to continue operating temporarily. However, Sections 10 and 17 of the law also authorized MORE to exercise eminent domain to acquire PECO's existing distribution system—poles, wires, transformers, and related assets—to ensure an uninterrupted power supply during the transition.

PECO challenged these provisions as violations of due process and equal protection. The Regional Trial Court (RTC) of Mandaluyong City agreed, declaring the provisions unconstitutional. The RTC reasoned that expropriating property already devoted to public use for the same public use served no genuine public necessity and merely advanced MORE's private corporate interest. Both MORE and the Republic, through the Office of the Solicitor General, appealed to the Supreme Court.

The Issue

The central question was whether Sections 10 and 17 of R.A. No. 11212, which allowed MORE to expropriate PECO's distribution system for the same public purpose of power distribution, violated the constitutional guarantees of due process and equal protection.

The Ruling: Expropriation for the Same Public Use Is Valid

The Supreme Court reversed the RTC and upheld the constitutionality of the provisions. The Court clarified the general rule: private property already devoted to public use may be expropriated for a different public purpose, provided this is expressly authorized by law. However, the Court went further, holding that even expropriation for the same public purpose is permissible under the circumstances of this case.

The Court examined the history of PECO's franchise and found that its distribution system was never ordinary private property. From the original franchise under Act No. 2983 to R.A. No. 5360, the system was installed on public spaces pursuant to a franchise and was consistently burdened with the public interest of electricity distribution. The franchise laws even contained provisions allowing the government to take over the system upon expiration or through expropriation. PECO never questioned these provisions during its decades-long franchise.

A Distinct and Genuine Public Purpose

The Court also found that the expropriation served a distinct and genuine public purpose: ensuring the uninterrupted supply of electricity during the transition from the old to the new franchise holder. This is not merely the general purpose of power distribution but a specific public necessity—protecting the public from the disruption and economic harm that would result from a gap in service.

The Court noted that this purpose is consistent with the policy of the Electric Power Industry Reform Act (R.A. No. 9136), which protects the public interest in electricity rates and services. It also cited R.A. No. 11361, which elevated the uninterrupted conveyance of electricity to a matter of national security. The Court rejected the argument that MORE was being unfairly favored, explaining that MORE was not similarly situated to other utilities with existing systems. As a new franchise holder, MORE was "peculiarly and doubly burdened"—it had to supply electricity while also preventing disruption during the takeover.

Practical Takeaways

• Private property devoted to public use is not immune from expropriation. The State, or its authorized agent, may take such property for the same or a different public purpose if expressly authorized by law and if a genuine public necessity exists.
• The "same public use" rule is not absolute. The Supreme Court clarified that legislative franchises can validly authorize the transfer of distribution assets from an outgoing to an incoming franchise holder to ensure uninterrupted service.
• Franchise holders should expect transition provisions. New franchise laws may include eminent domain powers to acquire existing infrastructure. Old franchise holders cannot automatically assume their assets are beyond the reach of expropriation once their franchise expires.
• Due process and equal protection are judged by context. A law that treats a new franchise holder differently from established utilities is not discriminatory if the new holder is genuinely differently situated.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.