Any increase in the fares for the Light Rail Transit (LRT) Lines 1 and 2 and the Metro Rail Transit (MRT) Line 3 require prior notice and hearing to be valid.

Thus, ruled the Supreme Court En Banc in a Decision penned by Justice Jhosep Y. Lopez dismissing the various petitions challenging Department of Transportation and Communication (DOTC) Department Order 2014-014 (D.O. 2014-014), which mandated the application of the “user-pays” principle and adopted a uniform base fare for LRT Lines 1 and 2 and MRT Line 3 of PHP11.00, plus PHP1.00 per kilometer of distance travelled.

On August 5, 2010, the Office of the President directed the Light Railway Transit Authority (LRTA) to conduct a comparative study on the operating costs of the LRT and the MRT vis-à-vis public utility buses. This was followed by several other studies which resulted in the execution by the Finance Secretary, the Budget and Management Secretary, the Socio-Economic Planning Secretary, and the DOTC Secretary of a Memorandum for the President regarding the LRT fare adjustment.

On January 11, 2011, the LRTA Board provisionally approved the fare adjustment of PHP11.00 boarding fare plus PHP1.00/km, with the corresponding fare matrices, subject to a public consultation to be held on February 4 and 5, 2011. The Notice of Public Consultation was published in the Philippine Daily Inquirer on January 20, 2011, and in The Manila Bulletin on January 27, 2011.

Following the public consultation, the LRTA Board approved the fare adjustment, with the 20% student discount, which was concurred in by the Land Transportation Franchise Review Board (LTFRB) on April 20, 2011. However, on May 9, 2011, the LRTA Board and the DOTC (renamed as Department of Transportation or DOTr in 2015) deferred the implementation of the fare increase.

On June 26, 2013, the LRTA Board approved anew the fare increase as previously approved in 2011 but withdrew the 20% student discount. The 1^st step fare adjustment was scheduled to be implemented on August 1, 2013, with the 2^nd step implementation to be decided after the public consultation to be held on December 12, 2013. On December 19, 2013, the LTFRB concurred in the fare increase.

On December 18, 2014, the DOTC issued D.O. 2014-014, or “Light Rail Transit (LRT) Lines 1 & 2 and Metro Rail Transit (MRT) Line 3 Fare Adjustment,” which took effect on January 4, 2015. D.O. 2014-014 effectively increased the total fare per ride for the three rail systems as follows: for LRT-1, from PHP12.00 to PHP20.00, it increased to PHP15.00 to PHP30.00; for LRT-2, from PHP12.00 to PHP15.00, it increased to PHP15.00 to PHP25.00; and for MRT-3, from PHP10.00 to PHP15.00, it increased to PHP13.00 to PHP28.00.

The fare increase prompted the filing of the petitions for certiorari and/or prohibition before the Supreme Court, assailing D.O. 2014-014 as violative of due process for being issued without due notice and hearing. The Petitions additionally argue that the DOTC lacks the power to implement a fare increase for the LRT and the MRT, as such power has been transferred to the LTFRB, and that D.O. 2014-014 was arbitrary, alleging that the 50 to 87% fare increase was without basis.

In dismissing the petitions, the Supreme Court ruled that prior notice and hearing are required in the fixing of rates by administrative agencies.

The Court clarified that while under the 1964 case of Vigan Electric Light Company v. Public Service Commission, no notice and hearing are required in the administrative agencies’ exercise of quasi-legislative functions, this rule does not apply when there is a law that expressly requires notice and hearing.

In the case of fixing rates, while this is considered a quasi-legislative function, the Administrative Code of 1987 expressly requires that there be prior notice and hearing in rate-fixing, with the notice to be published at least two weeks before the hearing. Hence, such requirements must be complied with for any increase in LRT and MRT fares to be valid.

The Court also found that the DOTC substantially complied with the notice and hearing requirements for D.O. 2014-014. The agency published a Notice of Public Consultation on January 20 and 27, 2011 in two newspapers. On February 4 and 5, 2011, the public consultations were held. In 2013, the DOTC published anew a notice for the public consultation scheduled on December 12, 2013.

While the fare increase took effect only on December 20, 2014, the Court held that the previous public consultations substantially serve the purpose of the hearing requirement under the law, as the proposed fare structure was retained and the original basis and purpose for the proposed hike remained the same.

On the issue of whether the DOTC and the LTRA have the power to increase LRT and MRT fares, the Court held that it is well-established in jurisprudence that the rate-fixing power of administrative agencies is a valid delegation of legislative power in response to the growing complexity of society, the multiplication of government regulation subjects, and the increased difficulty of administering laws.

The Court added that such delegated power, however, must comply with the following condition to be valid: Congress must clearly state: (1) the policy to be executed and (2) sufficient guidelines or limitations on the boundaries of the delegate’s authority.

In the case of the DOTC, the Court found that the agency’s power to fix rates has been validly delegated by Congress in the Administrative Code of 1987, which clearly provides that the DOTC shall have the power to determine, fix, or prescribe charges or rates pertinent to postal services and to the operation of public air and land transportation utility and services.

The same law also limits the DOTC’s rate-fixing power under its declared policy and mandate of viability, efficiency, speed, safety, dependability, and reliability, held the Court.

The Court added that the DOTC’s validly delegated rate-fixing power applies to the MRT-3, LRT-1, and LRT-2, which are considered public land transportation utility facilities and services.

As to the LRT, however, the Court ruled that the DOTC’s power is limited by the LRTA’s authority to implement a fare increase over LRT-1 and LRT-2 as provided under Executive Order No. 603 (E.O. 603), the latter’s charter.

The Court held that E.O. 603 clearly vests the LRTA with authority to determine the fares for the light rail system, subject only to consultation with the defunct Board of Transportation, the functions and powers of which are now exercised by the LTFRB.

In the case of D.O. 2014-014, the Court found that the LTFRB duly concurred in the fare increase.

The Court also ruled that the LTFRB has no authority to implement and/or adjudicate fare increases for the rail transit system.

The Court added that the power of the LTFRB is limited to regulating the operation of public and land transportation services provided by motorized vehicles, specifically by: (a) prescribing and regulating the routes of service, capacities, and zones or areas of operation; and (b) issuing, amending, revising, suspending, or canceling Certificates of Public Convenience or permits.

Such power of the LTFRB, the Court ruled, thus, cannot extend to the LRT and MRT given that: (a) the routes of service of the LRT and the MRT are already pre-determined by the respective layouts of their rail systems, and (b) the operations of the LRT and the MRT do not require a Certificate of Public Convenience or a permit, since they are owned and operated, respectively, by an instrumentality of the national government.

The Court also ruled that the requirement that all rates must be reasonable and just was complied with by D.O. 2014-014, which was a result of a thorough and independent evaluation made by the DOTC and the LRTA following the prescribed procedure in implementing the fare increase. Without a clear showing that the DOTC or the LTRA acted arbitrarily, their findings regarding the fare increase under D.O. 2014-014 must be respected, said the Court.

Finally, the Court clarified that the result of the pending arbitration request filed by the Light Rail Manila Corporation (LRMC) with the International Chamber of Commerce on May 6, 2022 against the DOTr and the LRTA will have no effect on the Court’s ruling on the present petitions. The arbitration request does not deal with the fare increase under D.O. 2014-014; rather, it involves the petition for fare increase in 2016, 2018, and 2022 made by LRMC, which were all denied by the government, explained the Court.

The Supreme Court Public Information Office will upload a copy of the Decision to the Supreme Court website as soon as it receives an official copy from the Office of the Clerk of Court En Banc.