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5/9/2016 G.R.No.

115381

TodayisMonday,May09,2016

RepublicofthePhilippines
SUPREMECOURT
Manila

FIRSTDIVISION

G.R.No.115381December23,1994

KILUSANGMAYOUNOLABORCENTER,petitioner,
vs.
HON.JESUSB.GARCIA,JR.,theLANDTRANSPORTATIONFRANCHISINGANDREGULATORYBOARD,
andthePROVINCIALBUSOPERATORSASSOCIATIONOFTHEPHILIPPINES,respondents.

PotencianoA.Floresforpetitioner.

RobertAnthonyC.Sison,CesarB.BrillantesandJoseZ.Galsimforprivaterespondent.

JoseF.Miraviteformovants.

KAPUNAN,J.:

Public utilities are privately owned and operated businesses whose service are essential to the general public.
They are enterprises which specially cater to the needs of the public and conduce to their comfort and
convenience.Assuch,publicutilityservicesareimpressedwithpublicinterestandconcern.Thesameistruewith
respecttothebusinessofcommoncarrierwhichholdssuchapeculiarrelationtothepublicinterestthatthereis
superinduceduponittherightofpublicregulationwhenprivatepropertiesareaffectedwithpublicinterest,hence,
theyceasetobejurisprivationly.When,therefore,onedevoteshispropertytoauseinwhichthepublichasan
interest,he,ineffectgrantstothepublicaninterestinthatuse,andmustsubmittothecontrolbythepublicfor
thecommongood,totheextentoftheinteresthehasthuscreated.1

Anabdicationofthelicensingandregulatorygovernmentagenciesoftheirfunctionsastheinstantpetitionseeks
toshow,isindeedlamentable.Notonlyisitanunsoundadministrativepolicybutitisinimicaltopublictrustand
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publicinterestaswell.

The instant petition for certiorari assails the constitutionality and validity of certain memoranda, circulars and/or
orders of the Department of Transportation and Communications (DOTC) and the Land Transportation
FranchisingandRegulatoryBoardLTFRB)2which,amongothers,(a)authorizeprovincialbusandjeepneyoperatorsto
increaseordecreasetheprescribedtransportationfareswithoutapplicationthereforwiththeLTFRBandwithouthearingand
approvalthereofbysaidagencyinviolationofSec.16(c)ofCommonwealthActNo.146,asamended,otherwiseknownas
thePublicServiceAct,andinderogationofLTFRB'sdutytofixanddeterminejustandreasonablefaresbydelegatingthat
function to bus operators, and (b) establish a presumption of public need in favor of applicants for certificates of public
convenience(CPC)andplaceontheoppositortheburdenofprovingthatthereisnoneedfortheproposedservice,inpatent
violationnotonlyofSec.16(c)ofCA146,asamended,butalsoofSec.20(a)ofthesameActmandatingthatfaresshould
be"justandreasonable."Itis,likewise,violativeoftheRulesofCourtwhichplacesuponeachpartytheburdentoprovehis
ownaffirmativeallegations.3Theoffendingprovisionscontainedinthequestionedissuancespointedoutbypetitioner,have
resultedintheintroductionintoourhighwaysandthoroughfaresthousandsofoldandsmokebelchingbuses,manyofwhich
are righthand driven, and have exposed our consumers to the burden of spiraling costs of public transportation without
hearinganddueprocess.

Thefollowingmemoranda,circularsand/orordersaresoughttobenullifiedbytheinstantpetition,viz:(a)DOTC
Memorandum Order 90395, dated June 26, 1990 relative to the implementation of a fare range scheme for
provincialbusservicesinthecountry(b)DOTCDepartmentOrderNo.
92587, dated March 30, 1992, defining the policy framework on the regulation of transport services (c) DOTC
MemorandumdatedOctober8,1992,layingdownrulesandprocedurestoimplementDepartmentOrderNo.92
587(d)LTFRBMemorandumCircularNo.92009,providingimplementingguidelinesontheDOTCDepartment
OrderNo.92587and(e)LTFRBOrderdatedMarch24,1994inCaseNo.943112.

Therelevantantecedentsareasfollows:

OnJune26,1990thenSecretaryofDOTC,OscarM.Orbos,issuedMemorandumCircularNo.90395tothen
LTFRBChairman,RemediosA.S.Fernandoallowingprovincialbusoperatorstochargepassengersrateswithina
range of 15% above and 15% below the LTFRB official rate for a period of one (1) year. The text of the
memorandumorderreadsinfull:

Oneofthepolicyreformsandmeasuresthatisinlinewiththethrustsandtheprioritiessetoutinthe
MediumTerm Philippine Development Plan (MTPDP) 1987 1992) is the liberalization of
regulationsinthetransportsector.Alongthisline,theGovernmentintendstomoveawaygradually
fromregulatorypoliciesandmakeprogresstowardsgreaterrelianceonfreemarketforces.

Based on several surveys and observations, bus companies are already charging passenger rates
aboveandbelowtheofficialfaredeclaredbyLTFRBonmanyprovincialroutes.Itisinthiscontext
thatsomeformofliberalizationonpublictransportfaresistobetestedonapilotbasis.

In view thereof, the LTFRB is hereby directed to immediately publicize a fare range scheme for all
provincial bus routes in country (except those operating within Metro Manila). Transport Operators
shall be allowed to charge passengers within a range of fifteen percent (15%) above and fifteen
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percent(15%)belowtheLTFRBofficialrateforaperiodofoneyear.

GuidelinesandproceduresforthesaidschemeshallbepreparedbyLTFRBincoordinationwiththe
DOTCPlanningService.

Theimplementationofthesaidfarerangeschemeshallstarton6August1990.

Forcompliance.(Emphasisours.)

Finding the implementation of the fare range scheme "not legally feasible," RemediosA.S. Fernando submitted
thefollowingmemorandumtoOscarM.OrbosonJuly24,1990,towit:

With reference to DOTC Memorandum Order No. 90395 dated 26 June 1990 which the LTFRB
receivedon19July1990,directingtheBoard"toimmediatelypublicizeafarerangeschemeforall
provincial bus routes in the country (except those operating within Metro Manila)" that will allow
operators "to charge passengers within a range of fifteen percent (15%) above and fifteen percent
(15%) below the LTFRB official rate for a period of one year" the undersigned is respectfully
advertingtheSecretary'sattentiontothefollowingforhisconsideration:

1. Section 16(c) of the Public Service Act prescribes the following for the fixing and
determination of rates (a) the rates to be approved should be proposed by public
serviceoperators(b)thereshouldbeapublicationandnoticetoconcernedoraffected
parties in the territory affected (c) a public hearing should be held for the fixing of the
rates hence, implementation of the proposed fare range scheme onAugust 6 without
complyingwiththerequirementsofthePublicServiceActmaynotbelegallyfeasible.

2.Toallowbusoperatorsinthecountrytochargefaresfifteen(15%)abovethepresent
LTFRBfaresinthewakeofthedevastation,deathandsufferingcausedbytheJuly16
earthquake will not be socially warranted and will be politically unsound most likely
publiccriticismagainsttheDOTCandtheLTFRBwillbetriggeredbytheuntimelymotu
propio implementation of the proposal by the mere expedient of publicizing the fare
range scheme without calling a public hearing, which scheme many as early as during
the Secretary's predecessor know through newspaper reports and columnists'
commentstobeAsianDevelopmentBankandWorldBankinspired.

3. More than inducing a reduction in bus fares by fifteen percent (15%) the
implementationoftheproposalwillinsteadtriggeranupwardadjustmentinbusfaresby
fifteen percent (15%) at a time when hundreds of thousands of people in Central and
NorthernLuzon,particularlyinCentralPangasinan,LaUnion,BaguioCity,NuevaEcija,
and the Cagayan Valley are suffering from the devastation and havoc caused by the
recentearthquake.

4. In lieu of the said proposal, the DOTC with its agencies involved in public
transportation can consider measures and reforms in the industry that will be socially
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uplifting,especiallyforthepeopleintheareasdevastatedbytherecentearthquake.

In view of the foregoing considerations, the undersigned respectfully suggests that the
implementationoftheproposedfarerangeschemethisyearbefurtherstudiedandevaluated.

OnDecember5,1990,privaterespondentProvincialBusOperatorsAssociationofthePhilippines,Inc.(PBOAP)
filedanapplicationforfarerateincrease.Anacrosstheboardincreaseofeightandahalfcentavos(P0.085)per
kilometerforalltypesofprovincialbuseswithaminimummaximumfarerangeoffifteen(15%)percentoverand
below the proposed basic per kilometer fare rate, with the said minimummaximum fare range applying only to
ordinary, first class and premium class buses and a fiftycentavo (P0.50) minimum per kilometer fare for aircon
buses,wassought.

On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to an acrosstheboard
increaseofsixandahalf(P0.065)centavosperkilometerforordinarybuses.Thedecreasewasduetothedrop
intheexpectedpriceofdiesel.

TheapplicationwasopposedbythePhilippineConsumersFoundation,Inc.andPerlaC.Bautistaallegingthatthe
proposedrateswereexorbitantandunreasonableandthattheapplicationcontainednoallegationontherateof
returnoftheproposedincreaseinrates.

On December 14, 1990, public respondent LTFRB rendered a decision granting the fare rate increase in
accordancewiththefollowingscheduleoffaresonastraightcomputationmethod,viz:

AUTHORIZEDFARES

LUZON
MIN.OF5KMS.SUCCEEDINGKM.

REGULARP1.50P0.37
STUDENTP1.15P0.28

VISAYAS/MINDANAO

REGULARP1.60P0.375
STUDENTP1.20P0.285
FIRSTCLASS(PERKM.)
LUZONP0.385
VISAYAS/
MINDANAOP0.395
PREMIERECLASS(PERKM.)
LUZONP0.395
VISAYAS/
MINDANAOP0.405

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AIRCON(PERKM.)P0.415.4

OnMarch30,1992,thenSecretaryoftheDepartmentofTransportationandCommunicationsPeteNicomedes
PradoissuedDepartmentOrderNo.
92587 defining the policy framework on the regulation of transport services. The full text of the said order is
reproducedbelowinviewoftheimportanceoftheprovisionscontainedtherein:

WHEREAS,ExecutiveOrderNo.125asamended,designatestheDepartmentofTransportationand
Communications (DOTC) as the primary policy, planning, regulating and implementing agency on
transportation

WHEREAS,toachievetheobjectiveofaviable,efficient,anddependabletransportationsystem,the
transportationregulatoryagenciesunderorattachedtotheDOTChavetoharmonizetheirdecisions
andadoptacommonphilosophyanddirection

WHEREAS, the government proposes to build on the successful liberalization measures pursued
over the last five years and bring the transport sector nearer to a balanced longer term regulatory
framework

NOW,THEREFORE,pursuanttothepowersgrantedbylawstotheDOTC,thefollowingpoliciesand
principles in the economic regulation of land, air, and water transportation services are hereby
adopted:

1. Entry into and exit out of the industry. Following the Constitutional dictum against monopoly, no
franchiseholdershallbepermittedtomaintainamonopolyonanyroute.Aminimumoftwofranchise
holdersshallbepermittedtooperateonanyroute.

Therequirementstograntacertificatetooperate,orcertificateofpublicconvenience,shallbe:proof
of Filipino citizenship, financial capability, public need, and sufficient insurance cover to protect the
ridingpublic.

In determining public need, the presumption of need for a service shall be deemed in favor of the
applicant. The burden of proving that there is no need for a proposed service shall be with the
oppositor(s).

Intheinterestofprovidingefficientpublictransportservices,theuseofthe"prioroperator"andthe
"priorityoffiling"rulesshallbediscontinued.Theroutemeasuredcapacitytestorothersimilartests
ofdemandforvehicle/vesselfleetonanyrouteshallbeusedonlyasaguideinweighingthemerits
ofeachfranchiseapplicationandnotasalimittotheservicesoffered.

Wheretherearelimitationsinfacilities,suchascongestedroadspaceinurbanareas,oratairports
and ports, the use of demand management measures in conformity with market principles may be
considered.

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The right of an operator to leave the industry is recognized as a business decision, subject only to
thefilingofappropriatenoticeandfollowingaphaseoutperiod,toinformthepublicandtominimize
disruptionofservices.

2.RateandFareSetting.Freightratesshallbefreedgraduallyfromgovernmentcontrols.Passenger
faresshallalsobederegulated,exceptforthelowestclassofpassengerservice(normallythirdclass
passenger transport) for which the government will fix indicative or reference fares. Operators of
particular services may fix their own fares within a range 15% above and below the indicative or
referencerate.

Wherethereislackofeffectivecompetitionforservices,oronspecificroutes,orforthetransportof
particularcommodities,maximummandatoryfreightratesorpassengerfaresshallbesettemporarily
bythegovernmentpendingactionstoincreasethelevelofcompetition.

For unserved or single operator routes, the government shall contract such services in the most
advantageous terms to the public and the government, following public bids for the services. The
advisability of bidding out the services or using other kinds of incentives on such routes shall be
studiedbythegovernment.

3.SpecialIncentivesandFinancingforFleetAcquisition.Asamatterofpolicy,thegovernmentshall
notengageinspecialfinancingandincentiveprograms,includingdirectsubsidiesforfleetacquisition
andexpansion.Onlywhenthemarketsituationwarrantsgovernmentinterventionshallprogramsof
thistypebeconsidered.Existingprogramsshallbephasedoutgradually.

The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics Board, the
MaritimeIndustryAuthorityareherebydirectedtosubmittotheOfficeoftheSecretary,withinforty
five(45)daysofthisOrder,thedetailedrulesandproceduresfortheImplementationofthepolicies
hereinsetforth.Intheformulationofsuchrules,theconcernedagenciesshallbeguidedbythemost
recent studies on the subjects, such as the Provincial Road Passenger Transport Study, the Civil
AviationMasterPlan,thePresidentialTaskForceontheInterislandShippingIndustry,andtheInter
islandLinerShippingRateRationalizationStudy.

Forthecomplianceofallconcerned.(Emphasisours)

On October 8, 1992, public respondent Secretary of the Department of Transportation and Communications
JesusB.Garcia,Jr.issuedamemorandumtotheActingChairmanoftheLTFRBsuggestingswiftactiononthe
adoption of rules and procedures to implement abovequoted Department Order No. 92587 that laid down
deregulation and other liberalization policies for the transport sector.Attached to the said memorandum was a
reviseddraftoftherequiredrulesandprocedurescovering(i)EntryIntoandExitOutoftheIndustryand(ii)Rate
and Fare Setting, with comments and suggestions from the World Bank incorporated therein. Likewise,
resplendent from the said memorandum is the statement of the DOTC Secretary that the adoption of the rules
andproceduresisaprerequisitetotheapprovaloftheEconomicIntegrationLoanfromtheWorldBank.5

OnFebruary17,1993,theLTFRBissuedMemorandumCircular
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No. 92009 promulgating the guidelines for the implementation of DOTC Department Order No. 92587. The
Circularprovides,amongothers,thefollowingchallengedportions:

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IV.PolicyGuidelinesontheIssuanceofCertificateofPublicConvenience.

TheissuanceofaCertificateofPublicConvenienceisdeterminedbypublicneed.Thepresumption
of public need for a service shall be deemed in favor of the applicant, while burden of proving that
thereisnoneedfortheproposedserviceshallbetheoppositor'(s).

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V.RateandFareSetting

The control in pricing shall be liberalized to introduce price competition complementary with the
quality of service, subject to prior notice and public hearing. Fares shall not be provisionally
authorizedwithoutpublichearing.

A.OntheGeneralStructureofRates

1.Theexistingauthorizedfarerangesystemofplusorminus15percentforprovincialbusesand
jeepneysshallbewidenedto20%and25%limitin1994withtheauthorizedfaretobereplacedby
anindicativeorreferencerateasthebasisfortheexpandedfarerange.

2.Faresystemsforairconbusesareliberalizedtocoverfirstclassandpremierservices.

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(Emphasisours).

Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC
allowing provincial bus operators to collect plus 20% and minus 25% of the prescribed fare without first having
filedapetitionforthepurposeandwithoutthebenefitofapublichearing,announcedafareincreaseoftwenty
(20%)percentoftheexistingfares.SaidincreasedfaresweretobemadeeffectiveonMarch16,1994.

On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus
fares.

On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition for lack of merit.The
dispositiveportionreads:

PREMISES CONSIDERED, this Board after considering the arguments of the parties, hereby
DISMISSES FOR LACK OF MERIT the petition filed in the aboveentitled case.This petition in this
case was resolved with dispatch at the request of petitioner to enable it to immediately avail of the
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legalremediesoroptionsitisentitledunderexistinglaws.

SOORDERED.6

Hence,theinstantpetitionforcertiorariwithanurgentprayerforissuanceofatemporaryrestrainingorder.

The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting and preventing
respondents from implementing the bus fare rate increase as well as the questioned orders and memorandum
circulars.ThismeantthatprovincialbusfareswererolledbacktothelevelsdulyauthorizedbytheLTFRBpriorto
March 16, 1994.A moratorium was likewise enforced on the issuance of franchises for the operation of buses,
jeepneys,andtaxicabs.

PetitionerKMUanchorsitsclaimontwo(2)grounds.First,theauthoritygivenbyrespondentLTFRBtoprovincial
busoperatorstosetafarerangeofplusorminusfifteen(15%)percent,laterincreasedtoplustwenty(20%)and
minustwentyfive(25%)percent,overandabovetheexistingauthorizedfarewithouthavingtofileapetitionfor
thepurpose,isunconstitutional,invalidandillegal.Second,theestablishmentofapresumptionofpublicneedin
favorofanapplicantforaproposedtransportservicewithouthavingtoprovepublicnecessity,isillegalforbeing
violativeofthePublicServiceActandtheRulesofCourt.

InitsComment,privaterespondentPBOAP,whilenotactuallytouchingupontheissuesraisedbythepetitioner,
questionsthewisdomandthemannerbywhichtheinstantpetitionwasfiled.Itassertsthatthepetitionerhasno
legalstandingtosueorhasnorealinterestinthecaseatbenchandinobtainingthereliefsprayedfor.

IntheirCommentfiledbytheOfficeoftheSolicitorGeneral,publicrespondentsDOTCSecretaryJesusB.Garcia,
Jr. and the LTFRB asseverate that the petitioner does not have the standing to maintain the instant suit. They
furtherclaimthatitiswithinDOTCandLTFRB'sauthoritytosetafarerangeschemeandestablishapresumption
ofpublicneedinapplicationsforcertificatesofpublicconvenience.

Wefindtheinstantpetitionimpressedwithmerit.

Attheoutset,thethresholdissueoflocusstandimustbestruck.PetitionerKMUhasthestandingtosue.

The requirement of locus standi inheres from the definition of judicial power. Section 1 of Article VIII of the
Constitutionprovides:

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Judicialpowerincludesthedutyofthecourtsofjusticetosettleactualcontroversiesinvolvingrights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentalityoftheGovernment.

InLamb v. Phipps,7 we ruled that judicial power is the power to hear and decide causes pending between parties who
have the right to sue in the courts of law and equity. Corollary to this provision is the principle of locus standi of a party
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litigant.Onewhoisdirectlyaffectedbyandwhoseinterestisimmediateandsubstantialinthecontroversyhasthestanding
to sue. The rule therefore requires that a party must show a personal stake in the outcome of the case or an injury to
himselfthatcanberedressedbyafavorabledecisionsoastowarrantaninvocationofthecourt'sjurisdictionandtojustify
theexerciseofthecourt'sremedialpowersinhisbehalf.8

Inthecaseatbench,petitioner,whosemembershadsufferedandcontinuetosuffergraveandirreparableinjury
and damage from the implementation of the questioned memoranda, circulars and/or orders, has shown that it
has a clear legal right that was violated and continues to be violated with the enforcement of the challenged
memoranda,circularsand/ororders.KMUmembers,whoavailoftheuseofbuses,trainsandjeepneyseveryday,
aredirectlyaffectedbytheburdensomecostofarbitraryincreaseinpassengerfares.Theyarepartofthemillions
ofcommuterswhocomprisetheridingpublic.Certainly,theirrightsmustbeprotected,notneglectednorignored.

Assumingarguendothatpetitionerisnotpossessedofthestandingtosue,thiscourtisreadytobrushasidethis
barren procedural infirmity and recognize the legal standing of the petitioner in view of the transcendental
importance of the issues raised. And this act of liberality is not without judicial precedent. As early as the
EmergencyPowersCases,thisCourthadexerciseditsdiscretionandwaivedtherequirementofproperparty.In
therecentcaseofKilosbayan,Inc.,etal.v.TeofistoGuingona,Jr.,etal.,9weruledinthesamelinesandenumerated
someofthecaseswherethesamepolicywasadopted,viz:

...Aparty'sstandingbeforethisCourtisaproceduraltechnicalitywhichitmay,intheexerciseofits
discretion, set aside in view of the importance of the issues raised. In the landmark Emergency
PowersCases,[G.R.No.L2044(Aranetav.Dinglasan)G.R.No.L2756(Araneta
v. Angeles) G.R. No. L3054 (Rodriguez v. Tesorero de Filipinas) G.R. No. L3055 (Guerrero v.
CommissionerofCustoms)andG.R.No.L3056(Barredov.CommissiononElections),84Phil.368
(1949)], this Court brushed aside this technicality because "the transcendental importance to the
public of these cases demands that they be settled promptly and definitely, brushing aside, if we
must,technicalitiesofprocedure.(Avelinovs.Cuenco,G.R.No.L2621)."Insofarastaxpayers'suits
are concerned, this Court had declared that it "is not devoid of discretion as to whether or not it
should be entertained," (Tan v. Macapagal, 43 SCRA 677, 680 [1972]) or that it "enjoys an open
discretiontoentertainthesameornot."[Sanidadv.COMELEC,73SCRA333(1976)].

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InlinewiththeliberalpolicyofthisCourtonlocusstandi,ordinarytaxpayers,membersofCongress,
andevenassociationofplanters,and
nonprofit civic organizations were allowed to initiate and prosecute actions before this court to
question the constitutionality or validity of laws, acts, decisions, rulings, or orders of various
government agencies or instrumentalities. Among such cases were those assailing the
constitutionality of (a) R.A. No. 3836 insofar as it allows retirement gratuity and commutation of
vacationandsickleavetoSenatorsandRepresentativesandtoelectiveofficialsofbothHousesof
Congress(PhilippineConstitutionAssociation,Inc.v.Gimenez,15SCRA479[1965])(b)Executive
OrderNo.284,issuedbyPresidentCorazonC.Aquinoon25July1987,whichallowedmembersof
the cabinet, their undersecretaries, and assistant secretaries to hold other government offices or

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positions (Civil Liberties Union v. Executive Secretary, 194 SCRA 317 [1991]) (c) the automatic
appropriation for debt service in the GeneralAppropriationsAct (Guingona v. Carague, 196 SCRA
221[1991](d)R.A.No.7056ontheholdingofdesynchronizedelections(Osmeav.Commissionon
Elections, 199 SCRA 750 [1991]) (e) P.D. No. 1869 (the charter of the PhilippineAmusement and
Gaming Corporation) on the ground that it is contrary to morals, public policy, and order (Basco v.
PhilippineAmusementandGamingCorp.,197SCRA52[1991])and(f)R.A.No.6975,establishing
thePhilippineNationalPolice.(Carpiov.ExecutiveSecretary,206SCRA290[1992]).

Other cases where we have followed a liberal policy regarding locus standi include those attacking
the validity or legality of (a) an order allowing the importation of rice in the light of the prohibition
imposedbyR.A.No.3452(IloiloPalayandCornPlantersAssociation,Inc.v.Feliciano,13SCRA377
[1965] (b) P.D. Nos. 991 and 1033 insofar as they proposed amendments to the Constitution and
P.D. No. 1031 insofar as it directed the COMELEC to supervise, control, hold, and conduct the
referendumplebiscite on 16 October 1976 (Sanidad v. Commission on Elections, supra) (c) the
biddingforthesaleofthe3,179squaremetersoflandatRoppongi,Minatoku,Tokyo,Japan(Laurel
v.Garcia,187SCRA797[1990])(d)theapprovalwithouthearingbytheBoardofInvestmentsofthe
amended application of the Bataan Petrochemical Corporation to transfer the site of its plant from
BataantoBatangasandthevalidityofsuchtransferandtheshiftoffeedstockfromnaphthaonlyto
naphtha and/or liquefied petroleum gas (Garcia v. Board of Investments, 177 SCRA 374 [1989]
Garcia v. Board of Investments, 191 SCRA 288 [1990]) (e) the decisions, orders, rulings, and
resolutions of the Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue,
Commissioner of Customs, and the Fiscal Incentives Review Board exempting the National Power
Corporationfromindirecttaxandduties(Macedav.Macaraig,197SCRA771[1991])(f)theorders
of the Energy Regulatory Board of 5 and 6 December 1990 on the ground that the hearings
conducted on the second provisional increase in oil prices did not allow the petitioner substantial
crossexamination (Maceda v. Energy Regulatory Board, 199 SCRA 454 [1991]) (g) Executive
Order No. 478 which levied a special duty of P0.95 per liter of imported oil products (Garcia v.
Executive Secretary, 211 SCRA 219 [1992]) (h) resolutions of the Commission on Elections
concerning the apportionment, by district, of the number of elective members of Sanggunians (De
Guiavs.CommissiononElections,208SCRA420[1992])and(i)memorandumordersissuedbya
MayoraffectingtheChiefofPoliceofPasayCity(PasayLawandConscienceUnion,Inc.v.Cuneta,
101SCRA662[1980]).

Inthe1975caseofAquinov.CommissiononElections(62SCRA275[1975]),thisCourt,despiteits
unequivocal ruling that the petitioners therein had no personality to file the petition, resolved
neverthelesstopassupontheissuesraisedbecauseofthefarreachingimplicationsofthepetition.
WedidnolessinDeGuiav.COMELEC(Supra)where,althoughwedeclaredthatDeGuia"doesnot
appeartohavelocusstandi,astandinginlaw,apersonalorsubstantialinterest,"webrushedaside
theproceduralinfirmity"consideringtheimportanceoftheissueinvolved,concerningasitdoesthe
political exercise of qualified voters affected by the apportionment, and petitioner alleging abuse of
discretionandviolationoftheConstitutionbyrespondent."

Nowonthemeritsofthecase.
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Onthefarerangescheme.

Section16(c)ofthePublicServiceAct,asamended,reads:

Sec.16.Proceedings of the Commission, upon notice and hearing. The Commission shall have
power, upon proper notice and hearing in accordance with the rules and provisions of this Act,
subjecttothelimitationsandexceptionsmentionedandsavingprovisionstothecontrary:

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(c)Tofixanddetermineindividualorjointrates,tolls,charges,classifications,orschedulesthereof,
as well as commutation, mileage kilometrage, and other special rates which shall be imposed,
observed,andfollowedthereafterbyanypublicservice:Provided,That the Commission may, in its
discretion, approve rates proposed by public services provisionally and without necessity of any
hearingbutitshallcallahearingthereonwithinthirtydaysthereafter,uponpublicationandnoticeto
the concerns operating in the territory affected: Provided, further, That in case the public service
equipmentofanoperatorisusedprincipallyorsecondarilyforthepromotionofaprivatebusiness,
thenetprofitsofsaidprivatebusinessshallbeconsideredinrelationwiththepublicserviceofsuch
operatorforthepurposeoffixingtherates.(Emphasisours).

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Under the foregoing provision, the Legislature delegated to the defunct Public Service Commission the
power of fixing the rates of public services. Respondent LTFRB, the existing regulatory body today, is
likewisevestedwiththesameunderExecutiveOrderNo.202datedJune19,1987.Section5(c)ofthesaid
executive order authorizes LTFRB "to determine, prescribe, approve and periodically review and adjust,
reasonable fares, rates and other related charges, relative to the operation of public land transportation
servicesprovidedbymotorizedvehicles."

Suchdelegationoflegislativepowertoanadministrativeagencyispermittedinordertoadapttotheincreasing
complexityofmodernlife.Assubjectsforgovernmentalregulationmultiply,sodoesthedifficultyofadministering
thelaws.Hence,specializationeveninlegislationhasbecomenecessary.Giventhetaskofdeterminingsensitive
anddelicatemattersas
routefixingandratemakingforthetransportsector,theresponsibleregulatorybodyisentrustedwiththepower
ofsubordinatelegislation.Withthisauthority,anadministrativebodyandinthiscase,theLTFRB,mayimplement
broad policies laid down in a statute by "filling in" the details which the Legislature may neither have time or
competence to provide. However, nowhere under the aforesaid provisions of law are the regulatory bodies, the
PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator, or other
publicservice.

Inthecaseatbench,theauthoritygivenbytheLTFRBtotheprovincialbusoperatorstosetafarerangeover
and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of
legislativeauthority.Potestasdelegatanondelegaripotest.Whathasbeendelegatedcannotbedelegated.This
doctrineisbasedontheethicalprinciplethatsuchadelegatedpowerconstitutesnotonlyarightbutadutytobe
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performedbythedelegatethroughtheinstrumentalityofhisownjudgmentandnotthroughtheinterveningmind
ofanother.10A further delegation of such power would indeed constitute a negation of the duty in violation of the trust
reposedinthedelegatemandatedtodischargeitdirectly.11The policy of allowing the provincial bus operators to change
and increase their fares at will would result not only to a chaotic situation but to an anarchic state of affairs. This would
leave the riding public at the mercy of transport operators who may increase fares every hour, every day, every month or
every year, whenever it pleases them or whenever they deem it "necessary" to do so. InPanayAutobusCo.v.Philippine
Railway Co.,12 where respondent Philippine Railway Co. was granted by the Public Service Commission the authority to
changeitsfreightratesatwill,thisCourtcategoricallydeclaredthat:

Inouropinion,thePublicServiceCommissionwasnotauthorizedbylawtodelegatetothePhilippine
Railway Co. the power of altering its freight rates whenever it should find it necessary to do so in
ordertomeetthecompetitionofroadtrucksandautobuses,ortochangeitsfreightratesatwill,orto
regard its present rates as maximum rates, and to fix lower rates whenever in the opinion of the
PhilippineRailwayCo.itwouldbetoitsadvantagetodoso.

ThemererecitalofthelanguageoftheapplicationofthePhilippineRailwayCo.isenoughtoshow
that it is untenable. The Legislature has delegated to the Public Service Commission the power of
fixing the rates of public services, but it has not authorized the Public Service Commission to
delegatethatpowertoacommoncarrierorotherpublicservice.Theratesofpublicserviceslikethe
Philippine Railway Co. have been approved or fixed by the Public Service Commission, and any
changeinsuchratesmustbeauthorizedorapprovedbythePublicServiceCommissionafterthey
havebeenshowntobejustandreasonable.Thepublicservicemay,ofcourse,proposenewrates,
as the Philippine Railway Co. did in case No. 31827, but it cannot lawfully make said new rates
effectivewithouttheapprovalofthePublicServiceCommission,andthePublicServiceCommission
itselfcannotauthorizeapublicservicetoenforcenewrateswithoutthepriorapprovalofsaidrates
by the commission. The commission must approve new rates when they are submitted to it, if the
evidence shows them to be just and reasonable, otherwise it must disapprove them. Clearly, the
commissioncannotdetermineinadvancewhetherornotthenewratesofthePhilippineRailwayCo.
willbejustandreasonable,becauseitdoesnotknowwhatthoserateswillbe.

In the present case the Philippine Railway Co. in effect asked for permission to change its freight
ratesatwill.Itmaychangethemeverydayoreveryhour,wheneveritdeemsitnecessarytodosoin
ordertomeetcompetitionorwheneverinitsopinionitwouldbetoitsadvantage.Suchaprocedure
would create a most unsatisfactory state of affairs and largely defeat the purposes of the public
servicelaw.13(Emphasisours).

Oneveritableconsequenceofthederegulationoftransportfaresisacompoundedfare.Iftransportoperatorswill
beauthorizedtoimposeandcollectanadditionalamountequivalentto20%overandabovetheauthorizedfare
over a period of time, this will unduly prejudice a commuter who will be made to pay a fare that has been
computedinamannersimilartothoseofcompoundedbankinterestrates.

Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus operators to collect a thirty
seven(P0.37)centavoperkilometerfareforordinarybuses.Atthesametime,theywereallowedtoimposeand
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collectafarerangeofplusorminus15%overtheauthorizedrate.ThusP0.37centavoperkilometerauthorized
fare plus P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to P0.42 centavos, the allowed rate in
1990.SupposingtheLTFRBgrantsanotherfive(P0.05)centavoincreaseperkilometerin1994,then,thebaseor
referenceforcomputationwouldhavetobeP0.47centavos(whichisP0.42+P0.05centavos).Ifbusoperators
willexercisetheirauthoritytoimposeanadditional20%overandabovetheauthorizedfare,thenthefaretobe
collectedshallamounttoP0.56(thatis,P0.47authorizedLTFRBrateplus20%ofP0.47whichisP0.29).Ineffect,
commuterswillbecontinuouslysubjected,notonlytoadoublefareadjustmentbuttoacompoundingfareaswell.
Ontheirpart,transportoperatorsshallenjoyabiggerchunkofthepie.Asidefromfareincreaseappliedfor,they
canstillcollectanadditionalamountbyvirtueoftheauthorizedfarerange.Mathematically,thesituationtranslates
intothefollowing:

Year**LTFRBauthorizedFareRangeFaretobe
rate***collectedper
kilometer

1990P0.3715%(P0.05)P0.42
1994P0.42+0.05=0.4720%(P0.09)P0.56
1998P0.56+0.05=0.6120%(P0.12)P0.73
2002P0.73+0.05=0.7820%(P0.16)P0.94

Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive government function that
requiresdexterityofjudgmentandsounddiscretionwiththesettledgoalofarrivingatajustandreasonablerate
acceptable to both the public utility and the public. Several factors, in fact, have to be taken into consideration
beforeabalancecouldbeachieved.Arateshouldnotbeconfiscatoryaswouldplaceanoperatorinasituation
where he will continue to operate at a loss. Hence, the rate should enable public utilities to generate revenues
sufficienttocoveroperationalcostsandprovidereasonablereturnontheinvestments.Ontheotherhand,arate
which is too high becomes discriminatory. It is contrary to public interest.A rate, therefore, must be reasonable
andfairandmustbeaffordabletotheenduserwhowillutilizetheservices.

Given the complexity of the nature of the function of ratefixing and its farreaching effects on millions of
commuters,governmentmustnotrelinquishthisimportantfunctioninfavorofthosewhowouldbenefitandprofit
fromtheindustry.Neithershouldtherequisitenoticeandhearingbedoneawaywith.Thepeople,representedby
reputableoppositors,deservetobegivenfullopportunitytobeheardintheiroppositiontoanyfareincrease.

The present administrative procedure, 14 to our mind, already mirrors an orderly and satisfactory arrangement for all
partiesinvolved.Todoawaywithsuchaprocedureandallowjustoneparty,aninterestedpartyatthat,todeterminewhat
the rate should be, will undermine the right of the other parties to due process. The purpose of a hearing is precisely to
determinewhatajustandreasonablerateis.15 Discarding such procedural and constitutional right is certainly inimical to
ourfundamentallawandtopublicinterest.

Onthepresumptionofpublicneed.

A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the operation of land
transportationservicesforpublicuseasrequiredbylaw.PursuanttoSection16(a)ofthePublicServiceAct,as
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amended,thefollowingrequirementsmustbemetbeforeaCPCmaybegranted,towit:(i)theapplicantmustbe
acitizenofthePhilippines,oracorporationorcopartnership,associationorjointstockcompanyconstitutedand
organized under the laws of the Philippines, at least 60 per centum of its stock or paidup capital must belong
entirely to citizens of the Philippines (ii) the applicant must be financially capable of undertaking the proposed
service and meeting the responsibilities incident to its operation and (iii) the applicant must prove that the
operationofthepublicserviceproposedandtheauthorizationtodobusinesswillpromotethepublicinterestina
properandsuitablemanner.ItisunderstoodthattheremustbepropernoticeandhearingbeforethePSCcan
exerciseitspowertoissueaCPC.

WhileadoptingintototheforegoingrequisitesfortheissuanceofaCPC,LTFRBMemorandumCircularNo.92
009, Part IV, provides for yet incongruous and contradictory policy guideline on the issuance of a CPC. The
guidelinesstates:

TheissuanceofaCertificateofPublicConvenienceisdeterminedbypublicneed.Thepresumption
ofpublicneedforaserviceshallbedeemedinfavoroftheapplicant,whiletheburdenofprovingthat
thereisnoneedfortheproposedserviceshallbetheoppositor's.(Emphasisours).

TheabovequotedprovisionisentirelyincompatibleandinconsistentwithSection16(c)(iii)ofthePublicService
ActwhichrequiresthatbeforeaCPCwillbeissued,theapplicantmustprovebypropernoticeandhearingthat
theoperationofthepublicserviceproposedwillpromotepublicinterestinaproperandsuitablemanner.Onthe
contrary,thepolicyguidelinestatesthatthepresumptionofpublicneedforapublicserviceshallbedeemedin
favoroftheapplicant.Incaseofconflictbetweenastatuteandanadministrativeorder,theformermustprevail.

Byitsterms,publicconvenienceornecessitygenerallymeanssomethingfittingorsuitedtothepublicneed.16As
oneofthebasicrequirementsforthegrantofaCPC,publicconvenienceandnecessityexistswhentheproposedfacilityor
servicemeetsareasonablewantofthepublicandsupplyaneedwhichtheexistingfacilitiesdonotadequatelysupply.The
existenceor
nonexistenceofpublicconvenienceandnecessityisthereforeaquestionoffactthatmustbeestablishedbyevidence,real
and/or testimonial empirical data statistics and such other means necessary, in a public hearing conducted for that
purpose.Theobjectandpurposeofsuchprocedure,amongotherthings,istolookoutfor,andprotect,theinterestsofboth
thepublicandtheexistingtransportoperators.

Verily,thepowerofaregulatorybodytoissueaCPCisfoundedontheconditionthatafterfulldresshearingand
investigation, it shall find, as a fact, that the proposed operation is for the convenience of the public. 17 Basic
convenienceistheprimaryconsiderationforwhichaCPCisissued,andthatfactalonemustbeconsistentlyborneinmind.
Also,existingoperatorsinsubjectroutesmustbegivenanopportunitytoofferproofandopposetheapplication.Therefore,
an applicant must, at all times, be required to prove his capacity and capability to furnish the service which he has
undertakento
render.18Andallthiswillbepossibleonlyifapublichearingwereconductedforthatpurpose.

Otherwise stated, the establishment of public need in favor of an applicant reverses wellsettled and
institutionalized judicial, quasijudicial and administrative procedures. It allows the party who initiates the
proceedings to prove, by mere application, his affirmative allegations. Moreover, the offending provisions of the
LTFRBmemorandumcircularinquestionwouldineffectamendtheRulesofCourtbyaddinganotherdisputable
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presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of the Rules of Court. Such
usurpationofthisCourt'sauthoritycannotbecountenancedasonlythisCourtismandatedbylawtopromulgate
rulesconcerningpleading,practiceandprocedure.19

Deregulation,whileitmaybeidealincertainsituations,maynotbeidealatallinourcountrygiventhepresent
circumstances.Advocacyofliberalizedfranchisingandregulatoryprocessistantamounttoanabdicationbythe
governmentofitsinherentrighttoexercisepolicepower,thatis,therightofgovernmenttoregulatepublicutilities
forprotectionofthepublicandtheutilitiesthemselves.

While we recognize the authority of the DOTC and the LTFRB to issue administrative orders to regulate the
transportsector,wefindthattheycommittedgraveabuseofdiscretioninissuingDOTCDepartmentOrder
No. 92587 defining the policy framework on the regulation of transport services and LTFRB Memorandum
CircularNo.92009promulgatingtheimplementingguidelinesonDOTCDepartmentOrderNo.92587,thesaid
administrative issuances being amendatory and violative of the Public Service Act and the Rules of Court.
Consequently,werulethatthetwenty(20%)percentumfareincreaseimposedbyrespondentPBOAPonMarch
16,1994withoutthebenefitofapetitionandapublichearingisnullandvoidandofnoforceandeffect.Nograve
abuseofdiscretionhoweverwascommittedintheissuanceofDOTCMemorandumOrderNo.90395andDOTC
Memorandum dated October 8, 1992, the same being merely internal communications between administrative
officers.

WHEREFORE,inviewoftheforegoing,theinstantpetitionisherebyGRANTEDandthechallengedadministrative
issuancesandorders,namely:DOTCDepartmentOrderNo.92587,LTFRBMemorandumCircular
No.92009,andtheorderdatedMarch24,1994issuedbyrespondentLTFRBareherebyDECLAREDcontrary
tolawandinvalidinsofarastheyaffectprovisionstherein(a)delegatingtoprovincialbusandjeepneyoperators
theauthoritytoincreaseordecreasethedulyprescribedtransportationfaresand(b)creatingapresumptionof
publicneedforaserviceinfavoroftheapplicantforacertificateofpublicconvenienceandplacingtheburdenof
provingthatthereisnoneedfortheproposedservicetotheoppositor.

TheTemporaryRestrainingOrderissuedonJune20,1994isherebyMADEPERMANENTinsofarasitenjoined
the bus fare rate increase granted under the provisions of the aforementioned administrative circulars,
memorandaand/orordersdeclaredinvalid.

Nopronouncementastocosts.

SOORDERED.

Padilla,Davide,Jr.,BellosilloandQuiason,JJ.,concur.

#Footnotes

1Pantrancov.PublicServiceCommission,70Phil.221.

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2The20thcenturyusheredinthebirthandgrowthofpublicutilityregulationinthecountry.Afterthe
Americansintroducedpublicutilityregulationattheturnofthecentury,variousregulatorybodies
werecreated.TheyweretheCoastwiseRateCommissionunderActNo.520passedbythe
PhilippineCommissiononNovember17,1902theBoardofRateRegulationunderActNo.1779
datedOctober12,1907theBoardofPublicUtilityCommissionunderActNo.2307datedDecember
19,1913andthePublicUtilityCommissionunderActNo.3108datedMarch19,1923.

DuringtheCommonwealthperiod,theNationalAssemblypassedamorecomprehensivepublicutility
law.ThiswasCommonwealthActNo.146,asamendedorthePublicServiceAct,asamended.Said
lawcreatedaregulatoryandfranchisingbodyknownasthePublicServiceCommission(PSC).The
Commission(PSC)existedforthirtysix(36)yearsfrom1936upto1972.

OnSeptember24,1972,PresidentialDecreeNo.1wasissuedanddeclared"partofthelawofthe
land."Thesameeffectedamajorrevampoftheexecutivedepartment.UnderArticleIII,PartXof
P.D.No.1,thePublicServiceCommission(PSC)wasabolishedandreplacedbythree(3)
specializedregulatoryboards.TheseweretheBoardofTransportation,theBoardof
Communications,andtheBoardofPowerandWaterworks.

TheBoardofTransportation(BOT)lastedforthirteen(13)years.OnMarch20,1985,Executive
OrderNo.1011wasissuedabolishingtheBoardofTransportationandtheBureauofLand
Transportation.TheirpowersandfunctionsweremergedintotheLandTransportationCommission
(LTC).

Two(2)yearslater,LTCwasabolishedbyExecutiveOrderNos.125datedJanuary30,1987and
125AdatedApril13,1987whichreorganizedtheDepartmentofTransportationand
Communications.OnJune19,1987,theLandTransportationFranchisingandRegulatoryBoard
(LTFRB)wascreatedbyExecutiveOrderNo.202.TheLTFRB,successorofLTC,istheexisting
franchisingandregulatorybodyforoverlandtransportationtoday.

3Sec.1,Rule131,RulesofCourt.

4DecisionofLTFRBinCaseNo.904794,p.4Rollo,p.59.

5Rollo,p.42.

6OrderofLTFRB,p.4Rollo,p.55.

722Phil.456[1912].

8Warthv.Seldin,422U.S.490,498499,45L.Ed.2d343,95S.Ct.2197[1975]Guzmanv.
Marrero,180U.S.81,45L.Ed.436,21S.Ct.293[1901]McMickenv.UnitedStates,97U.S.204,24
L.Ed.947[1978]SilverStarCitizens'Committeev.OrlandoFla.194So.2d681[1967]InRe
Kenison'sGuardianship,72S.D.180,31N.W.2d326[1948].

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9G.R.No.113375,May5,1994.

10UnitedStatesv.Barrias,11Phil.327,330[1908]Peoplev.Vera,65Phil.56,113[1937].

11Cruz,PhilippinePoliticalLaw,1991Edition,p.84.

1257Phil.872[1933].

13Id.,atpp.878879.

**Assumeafouryearintervalinfareadjustmentasaconstant.

***AssumefurtheraconstantP0.05centavoincreaseinfareeveryfour(4)years.

14StepsintheFilingofPetitionforRateIncrease:

APetitionForAdjustmentofRate(eitherforincreaseorreduction)maybefiledonlybyagranteeof
aCPC.Therefore,whenfranchise/CPCgranteesorexistingpublicutilityoperatorsforeseethatthe
newoilpriceincrease,wagehikesorsimilarfactorswouldthreatenthesurvivalandviabilityoftheir
operations,theymaytheninstituteapetitionforincreaseofrates.Thusinthecaseofpublicutilities
engagedintransportation,telecommunications,energysupply(electricity)andothers,thefollowing
stepsareusuallyundertakeninseeking,particularlyupwardsadjustmentsofrates:

1.FilingofformalPetitionforRateIncrease.Thispetitionallegesthereinamongothers,the
presentscheduleofrates,thereasonswhythesameisnolongereconomicallyviableandthe
revisedscheduleofratesitproposestocharge.AttachedtosaidPetitionforfinancialstatements,
projections/studiesshowingpossiblelossesfromoilpriceorwagehikesundertheoldorexisting
ratesandpossiblemarginofprofit(whichshouldbewithinthe12%allowablelimit)underthenewor
revisedrates

2.Afterthepetitionisdocketed,adateissetforhearingforwhichNoticeofHearingisissued,the
sametobepublishedinanewspaperofgeneralcirculationinthearea

3.Thepartiesaffectedbytheapplicationarerequiredtobefurnishedcopiesofthepetitionandthe
NoticeofHearingusuallybyregisteredmailwithreturncard.TheSolicitorGeneralisalsoseparately
notifiedsinceheisthecounselfortheGovernment

4.TheTechnicalStaffoftheregulatorybodyconcernedevaluatesthedocumentaryevidence
attachedtothepetitiontodeterminewhetherthereiswarranttotherequestforraterevision

5.ThentheCommissiononAudit(COA)isrequestedbytheregulatorybodytoconductanauditand
examinationofthebooksofaccountsandotherpertinentfinancialrecordsofthepublicutility
operatorseekingtheraterevisioniftheapplicants/petitionersarenumerous,arepresentative
numberforexaminationpurposeswoulddo,andtheperiodofoperationcoveredusuallyrangesfrom

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six(6)monthstoone(1)year

COAauditreportiscomparedwiththatoftheregulatorybody.Copiesoftheseauditreportsare
furnishedthepetitionersandoppositorsmaysubmittheirexceptionsorobjectionsthereto.

6.Thenhearingsareconducted.Thepetitionersmaypresentaccountantsorsuchrateexpertsto
explaintheirpleaforraterevision.Oppositorsarealsoallowedtorebutsuchevidenceinchiefwith
theirownwitnessesanddocuments.Afterthehearings,thecorrespondingresolutionisissued.

Toobviateprotractedhearings,thepartiesmayagreetosubmittheirrespectivePositionPapersin
lieuoforaltestimonies.

15YnchaustiSteamshipCo.v.PublicUtilityCommissioner,42Phil.621,631[1922].

16Black'sLawDictionary,5thEdition,p.1105.

17BatangasTransportationCo.v.Orlanes,52Phil.455[1928].

18ManilaElectricCo.v.PasayTransportationCo.,57Phil.825[1933]PleaseseealsoRaymundo
Transportationv.Perez,56Phil.274[1931]PampangaBus
Co.v.Enriquez,38O.G.374DelaRosav.Corpus,38O.G.2069.

19ArticleVIII,Section6,1987Constitution.

TheLawphilProjectArellanoLawFoundation

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