While the actual rate adjustment as a result of Meralco’s unbundling of rates was not specified in the appellate court’s decision, several groups of oppositors claimed that the increase would amount to more than P1 per kilowatt hour.

An unbundled rate of power distributors like Meralco refers to "modified structure where the different components of the power rates are made transparent to the power users."

In a decision written by Associate Justice Martin S. Villarama Jr. of the court’s 15th division, the CA ruled that the ERC disregarded the right of consumers to inquire into the issues that affect the necessity and rationality of the rate increase.

With its ruling, the appellate court nullified the unbundled rate of Meralco granted in 2003 and remanded the case to the ERC for further proceedings.

It also ordered the ERC to direct the Commission on Audit (CoA) to audit the books, records, and accounts of Meralco before any rate increase is determined by the commission.

With the passage of the Electric Power Industry Reform Act of 2001 that provided for the restructuring of the electric power industry, Meralco filed a petition with the ERC to unbundle its rates.

Under Section 36 of the EPIRA, distribution companies like Meralco "shall file their revised rates for the approval by the ERC, and the distribution wheeling charge shall be unbundled from the retail rate and the rates shall reflect the respective costs of providing each service."

Several oppositors like Bagong Alyansang Makabayan (Bayan), Kilusang Mayo Uno (KMU), Kalipunan ng Damayang Mahihirap (Kadamay), and Bayan Muna opposed Meralco’s petition to unbundle its rates that would result in a 30-centavo per kwh rate increase.

They claimed that the rates before unbundling and after unbundling should remain the same.

Unbundling should not result in increased electricity charges because the objective of the law is to make these charges transparent by segregating the generation and transmission charges from the retail rate which, under the old system, is bundled into the basic charge.

In resolving the issue, the appellate court said that while findings of administrative agencies on matters within their technical area of expertise are generally accorded not only respect but finality if such findings are supported by substantial evidence, "our fundamental concern in this case is the unjustified disregard by the ERC in failing to give the oppositors that crucial opportunity to rebut the factual claims of Meralco as to the necessity and reasonableness of its applications for rate increase by having the latter’s books, records, and accounts audited by the COA to determine its true financial condition and the propriety of including those items or costs which are strongly objected to by oppositors."

"Our ruling herein is only consistent with the mandate of EPIRA that ERC must consistently observe not only transparency and fairness, but also allow the consuming public the fullest exercise of the right to be heard, which translates to acting always in the best interest of the public," it said.