The Supreme Court has upheld sections 6 and 29 of Republic Act 9136, or the Electric Power Industry Reform Act (EPIRA), stating that electricity generation and supply are not public utility operations but are still subject to the regulation of the Energy Regulatory Commission (ERC).
The Court en banc also upheld sections 34 and 43(b)(ii) of the law empowering the ERC to fix and approve the universal charge (UC) imposed on electricity end-users, and Section 43(f), which gives the ERC the power to fix charges to allow distribution utilities to recover their losses.
The EPIRA divided the electric power industry into four sectors, namely generation, transmission, distribution, and supply.
Generation is the production of electricity. The electricity is then transmitted and allocated to transmission assets, which are facilities that transport electricity from power plants to substations, and to sub-transmission assets, which connect the transmission facilities to local distribution systems. Distribution utilities, or electric cooperatives, then provide connections for any end-user within their franchise area. Lastly, electricity is supplied to end-users by entities authorized by the ERC.
The SC ruled that to be considered a public utility, a business must provide a service essential to the general public.
“Power generation and supply companies are not public utilities because they offer their services to limited customers and do not deal directly with the general public,” the SC Public Information Office said in a statement Jan. 7.
However, they remain under government regulation because the EPIRA expressly provides safeguards against abuse or irregular activity, such as the requirement on these companies to secure from the ERC a certificate of compliance, among other regulations.
The Court also ruled that the UC is not a tax because it is not intended to generate revenue but to ensure the viability of the electric power industry in the exercise of the State’s police power to promote public welfare. Under the EPIRA, the ERC was authorized by Congress to determine and approve the universal charge.
The SC likewise upheld the ERC’s authority to impose a system that allows distribution utilities to recover losses to ensure the efficiency and quality of their services. Congress’ delegation of this power to the ERC is safeguarded by sufficient standards and limitations under the EPIRA.
The ruling stemmed from a petition filed by Anakpawis Partylist Rep. Fernando Hicap and militant labor groups Kilusang Mayo Uno and Kilusang Magbubukid ng Pilipinas, among others, challenging the constitutionality of the EPIRA provisions after the ERC authorized Meralco to recover its generation costs from consumers on a staggered basis.
Hicap and others argued that the generation and supply sectors of the electric power industry are not public utilities and thus, not subject to ERC’s regulation, among others. ||
