7/11/2016

G.R.No.159796

TodayisMonday,July11,2016TodayisThursday,July07,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC
G.R.No.159796July17,2007
ROMEOP.GEROCHI,KATULONGNGBAYAN(KB)andENVIRONMENTALISTCONSUMERSNETWORK,INC.
(ECN),Petitioners,
vs.
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC), NATIONAL POWER
CORPORATION(NPC),POWERSECTORASSETSANDLIABILITIESMANAGEMENTGROUP(PSALMCorp.),
STRATEGIC POWER UTILITIES GROUP (SPUG), and PANAY ELECTRIC COMPANY INC. (PECO),
Respondents.
DECISION
NACHURA,J.:
Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist Consumers Network, Inc. (ECN)
(petitioners), come before this Court in this original action praying that Section 34 of Republic Act (RA) 9136,
otherwiseknownasthe"ElectricPowerIndustryReformActof2001"(EPIRA),imposingtheUniversalCharge,1
and Rule 18 of the Rules and Regulations (IRR)2 which seeks to implement the said imposition, be declared
unconstitutional.PetitionersalsopraythattheUniversalChargeimposedupontheconsumersberefundedand
that a preliminary injunction and/or temporary restraining order (TRO) be issued directing the respondents to
refrainfromimplementing,charging,andcollectingthesaidcharge.3Theassailedprovisionoflawreads:
SECTION34.UniversalCharge. Within one (1) year from the effectivity of this Act, a universal charge to be
determined, fixed and approved by the ERC, shall be imposed on all electricity endusers for the following
purposes:
(a) Payment for the stranded debts4 in excess of the amount assumed by the National Government and
stranded contract costs of NPC5 and as well as qualified stranded contract costs of distribution utilities
resultingfromtherestructuringoftheindustry
(b)Missionaryelectrification6
(c)Theequalizationofthetaxesandroyaltiesappliedtoindigenousorrenewablesourcesofenergyvis
visimportedenergyfuels
(d) An environmental charge equivalent to onefourth of one centavo per kilowatthour (P0.0025/kWh),
which shall accrue to an environmental fund to be used solely for watershed rehabilitation and
management.SaidfundshallbemanagedbyNPCunderexistingarrangementsand
(e)Achargetoaccountforallformsofcrosssubsidiesforaperiodnotexceedingthree(3)years.
The universal charge shall be a nonbypassable charge which shall be passed on and collected from all end
usersonamonthlybasisbythedistributionutilities.CollectionsbythedistributionutilitiesandtheTRANSCOin
anygivenmonthshallberemittedtothePSALMCorp.onorbeforethefifteenth(15th)ofthesucceedingmonth,
net of any amount due to the distribution utility. Any enduser or selfgenerating entity not connected to a
distributionutilityshallremititscorrespondinguniversalchargedirectlytotheTRANSCO.ThePSALMCorp.,as
administrator of the fund, shall create a Special Trust Fund which shall be disbursed only for the purposes
specified herein in an open and transparent manner. All amount collected for the universal charge shall be
distributedtotherespectivebeneficiarieswithinareasonableperiodtobeprovidedbytheERC.
TheFacts
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CongressenactedtheEPIRAonJune8,2001onJune26,2001,ittookeffect.7
OnApril5,2002,respondentNationalPowerCorporationStrategicPowerUtilitiesGroup8(NPCSPUG)filedwith
respondent Energy Regulatory Commission (ERC) a petition for the availment from the Universal Charge of its
shareforMissionaryElectrification,docketedasERCCaseNo.2002165.9
On May 7, 2002, NPC filed another petition with ERC, docketed as ERC Case No. 2002194, praying that the
proposedsharefromtheUniversalChargefortheEnvironmentalchargeofP0.0025perkilowatthour(/kWh),or
a total of P119,488,847.59, be approved for withdrawal from the Special Trust Fund (STF) managed by
respondentPowerSectorAssetsand
LiabilitiesManagementGroup(PSALM)10fortherehabilitationandmanagementofwatershedareas.11
On December 20, 2002, the ERC issued an Order12 in ERC Case No. 2002165 provisionally approving the
computed amount of P0.0168/kWh as the share of the NPCSPUG from the Universal Charge for Missionary
Electrification and authorizing the National Transmission Corporation (TRANSCO) and Distribution Utilities to
collectthesamefromitsendusersonamonthlybasis.
On June 26, 2003, the ERC rendered its Decision13 (for ERC Case No. 2002165) modifying its Order of
December20,2002,thus:
WHEREFORE,theforegoingpremisesconsidered,theprovisionalauthoritygrantedtopetitionerNationalPower
CorporationStrategic Power Utilities Group (NPCSPUG) in the Order dated December 20, 2002 is hereby
modifiedtotheeffectthatanadditionalamountofP0.0205perkilowatthourshouldbeaddedtotheP0.0168per
kilowatthour provisionally authorized by the Commission in the said Order. Accordingly, a total amount of
P0.0373perkilowatthourisherebyAPPROVEDforwithdrawalfromtheSpecialTrustFundmanagedbyPSALM
as its share from the Universal Charge for Missionary Electrification (UCME) effective on the following billing
cycles:
(a)June26July25,2003forNationalTransmissionCorporation(TRANSCO)and
(b)July2003forDistributionUtilities(Dus).
Relative thereto, TRANSCO and Dus are directed to collect the UCME in the amount of P0.0373 per kilowatt
hourandremitthesametoPSALMonorbeforethe15thdayofthesucceedingmonth.
In the meantime, NPCSPUG is directed to submit, not later than April 30, 2004, a detailed report to include
AuditedFinancialStatementsandphysicalstatus(percentageofcompletion)oftheprojectsusingtheprescribed
format.
1 a v v p h i1

LetcopiesofthisOrderbefurnishedpetitionerNPCSPUGandalldistributionutilities(Dus).
SOORDERED.
OnAugust13,2003,NPCSPUGfiledaMotionforReconsiderationaskingtheERC,amongothers,14tosetaside
theabovementionedDecision,whichtheERCgrantedinitsOrderdatedOctober7,2003,disposing:
WHEREFORE, the foregoing premises considered, the "Motion for Reconsideration" filed by petitioner National
Power CorporationSmall Power Utilities Group (NPCSPUG) is hereby GRANTED. Accordingly, the Decision
datedJune26,2003isherebymodifiedaccordingly.
Relativethereto,NPCSPUGisdirectedtosubmitaquarterlyreportonthefollowing:
1.ProjectsforCY2002undertaken
2.Location
3.Actualamountutilizedtocompletetheproject
4.Periodofcompletion
5.StartofOperationand
6.ExplanationofthereallocationofUCMEfunds,ifany.
SOORDERED.15
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Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002194, authorizing the NPC to draw up to
P70,000,000.00fromPSALMforits2003WatershedRehabilitationBudgetsubjecttotheavailabilityoffundsfor
theEnvironmentalFundcomponentoftheUniversalCharge.16
On the basis of the said ERC decisions, respondent Panay Electric Company, Inc. (PECO) charged petitioner
RomeoP.GerochiandallotherenduserswiththeUniversalChargeasreflectedintheirrespectiveelectricbills
startingfromthemonthofJuly2003.17
Hence,thisoriginalaction.
Petitioners submit that the assailed provision of law and its IRR which sought to implement the same are
unconstitutionalonthefollowinggrounds:
1)TheuniversalchargeprovidedforunderSec.34oftheEPIRAandsoughttobeimplementedunderSec.
2,Rule18oftheIRRofthesaidlawisataxwhichistobecollectedfromallelectricendusersandself
generating entities. The power to tax is strictly a legislative function and as such, the delegation of said
powertoanyexecutiveoradministrativeagencyliketheERCisunconstitutional,givingthesameunlimited
authority.TheassailedprovisionclearlyprovidesthattheUniversalChargeistobedetermined,fixedand
approvedbytheERC,henceleavingtothelattercompletediscretionarylegislativeauthority.
2)TheERCisalsoempoweredtoapproveanddeterminewherethefundscollectedshouldbeused.
3)TheimpositionoftheUniversalChargeonallendusersisoppressiveandconfiscatoryandamountsto
taxationwithoutrepresentationastheconsumerswerenotgivenachancetobeheardandrepresented.18
Petitioners contend that the Universal Charge has the characteristics of a tax and is collected to fund the
operations of the NPC. They argue that the cases19 invoked by the respondents clearly show the regulatory
purpose of the charges imposed therein, which is not so in the case at bench. In said cases, the respective
funds20 were created in order to balance and stabilize the prices of oil and sugar, and to act as buffer to
counteract the changes and adjustments in prices, peso devaluation, and other variables which cannot be
adequatelyandtimelymonitoredbythelegislature.Thus,therewasaneedtodelegatepowerstoadministrative
bodies.21PetitionerspositthattheUniversalChargeisimposednotforasimilarpurpose.
On the other hand, respondent PSALM through the Office of the Government Corporate Counsel (OGCC)
contends that unlike a tax which is imposed to provide income for public purposes, such as support of the
government,administrationofthelaw,orpaymentofpublicexpenses,theassailedUniversalChargeisleviedfor
a specific regulatory purpose, which is to ensure the viability of the country's electric power industry. Thus, it is
exactedbytheStateintheexerciseofitsinherentpolicepower.Onthispremise,PSALMsubmitsthatthereisno
unduedelegationoflegislativepowertotheERCsincethelattermerelyexercisesalimitedauthorityordiscretion
astotheexecutionandimplementationoftheprovisionsoftheEPIRA.22
Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the Solicitor General (OSG),
sharethesameviewthattheUniversalChargeisnotataxbecauseitisleviedforaspecificregulatorypurpose,
which is to ensure the viability of the country's electric power industry, and is, therefore, an exaction in the
exerciseoftheState'spolicepower.RespondentsfurthercontendthatsaidUniversalChargedoesnotpossess
theessentialcharacteristicsofatax,thatitsimpositionwouldredoundtothebenefitoftheelectricpowerindustry
andnottothepublic,andthatitsrateisuniformlyleviedonelectricityendusers,unlikeataxwhichisimposed
based on the individual taxpayer's ability to pay. Moreover, respondents deny that there is undue delegation of
legislativepowertotheERCsincetheEPIRAsetsforthsufficientdeterminablestandardswhichwouldguidethe
ERC in the exercise of the powers granted to it. Lastly, respondents argue that the imposition of the Universal
ChargeisnotoppressiveandconfiscatorysinceitisanexerciseofthepolicepoweroftheStateanditcomplies
withtherequirementsofdueprocess.23
On its part, respondent PECO argues that it is dutybound to collect and remit the amount pertaining to the
Missionary Electrification and Environmental Fund components of the Universal Charge, pursuant to Sec. 34 of
theEPIRAandtheDecisionsinERCCaseNos.2002194and2002165.Otherwise,PECOcouldbeheldliable
underSec.4624oftheEPIRA,whichimposesfinesandpenaltiesforanyviolationofitsprovisionsoritsIRR.25
TheIssues
Theultimateissuesinthecaseatbarare:
1)Whetherornot,theUniversalChargeimposedunderSec.34oftheEPIRAisataxand
2)WhetherornotthereisunduedelegationoflegislativepowertotaxonthepartoftheERC.26
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Beforewediscusstheissues,theCourtshallfirstdealwithanobviousprocedurallapse.
PetitionersfiledbeforeusanoriginalactionparticularlydenominatedasaComplaintassailingtheconstitutionality
of Sec. 34 of the EPIRA imposing the Universal Charge and Rule 18 of the EPIRA's IRR. No doubt, petitioners
have locus standi. They impugn the constitutionality of Sec. 34 of the EPIRA because they sustained a direct
injuryasaresultoftheimpositionoftheUniversalChargeasreflectedintheirelectricbills.
However,petitionersviolatedthedoctrineofhierarchyofcourtswhentheyfiledthis"Complaint"directlywithus.
Furthermore,theComplaintisbereftofanyallegationofgraveabuseofdiscretiononthepartoftheERCorany
ofthepublicrespondents,inorderfortheCourttoconsideritasapetitionforcertiorariorprohibition.
ArticleVIII,Section5(1)and(2)ofthe1987Constitution27categoricallyprovidesthat:
SECTION5.TheSupremeCourtshallhavethefollowingpowers:
1.Exerciseoriginaljurisdictionovercasesaffectingambassadors,otherpublicministersandconsuls,and
overpetitionsforcertiorari,prohibition,mandamus,quowarranto,andhabeascorpus.
2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the rules of court may
provide,finaljudgmentsandordersoflowercourtsin:
(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law,
presidentialdecree,proclamation,order,instruction,ordinance,orregulationisinquestion.
ButthisCourt'sjurisdictiontoissuewritsofcertiorari,prohibition,mandamus,quowarranto,andhabeascorpus,
whileconcurrentwiththatoftheregionaltrialcourtsandtheCourtofAppeals,doesnotgivelitigantsunrestrained
freedomofchoiceofforumfromwhichtoseeksuchrelief.28IthaslongbeenestablishedthatthisCourtwillnot
entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts, or where
exceptional and compelling circumstances justify availment of a remedy within and call for the exercise of our
primaryjurisdiction.29Thiscircumstancealonewarrantstheoutrightdismissalofthepresentaction.
Thisproceduralinfirmitynotwithstanding,weopttoresolvetheconstitutionalissueraisedherein.Weareaware
thatiftheconstitutionalityofSec.34oftheEPIRAisnotresolvednow,theissuewillcertainlyresurfaceinthenear
future,resultinginarepeatofthislitigation,andprobablyinvolvingthesameparties.Inthepublicinterestandto
avoidunnecessarydelay,thisCourtrendersitsrulingnow.
Theinstantcomplaintisbereftofmerit.
TheFirstIssue
Toresolvethefirstissue,itisnecessarytodistinguishtheStatespoweroftaxationfromthepolicepower.
Thepowertotaxisanincidentofsovereigntyandisunlimitedinitsrange,acknowledginginitsverynatureno
limits,sothatsecurityagainstitsabuseistobefoundonlyintheresponsibilityofthelegislaturewhichimposes
the tax on the constituency that is to pay it.30 It is based on the principle that taxes are the lifeblood of the
government, and their prompt and certain availability is an imperious need.31 Thus, the theory behind the
exercise of the power to tax emanates from necessity without taxes, government cannot fulfill its mandate of
promotingthegeneralwelfareandwellbeingofthepeople.32
Ontheotherhand,policepoweristhepowerofthestatetopromotepublicwelfarebyrestrainingandregulating
theuseoflibertyandproperty.33Itisthemostpervasive,theleastlimitable,andthemostdemandingofthethree
fundamentalpowersoftheState.ThejustificationisfoundintheLatinmaximssaluspopuliestsupremalex(the
welfareofthepeopleisthesupremelaw)andsicuteretuoutalienumnonlaedas(souseyourpropertyasnotto
injure the property of others). As an inherent attribute of sovereignty which virtually extends to all public needs,
policepowergrantsawidepanoplyofinstrumentsthroughwhichtheState,asparenspatriae,giveseffecttoa
host of its regulatory powers.34 We have held that the power to "regulate" means the power to protect, foster,
promote, preserve, and control, with due regard for the interests, first and foremost, of the public, then of the
utilityandofitspatrons.35
Theconservativeandpivotaldistinctionbetweenthesetwopowersrestsinthepurposeforwhichthechargeis
made.Ifgenerationofrevenueistheprimarypurposeandregulationismerelyincidental,theimpositionisatax
butifregulationistheprimarypurpose,thefactthatrevenueisincidentallyraiseddoesnotmaketheimpositiona
tax.36
InexactingtheassailedUniversalChargethroughSec.34oftheEPIRA,theState'spolicepower,particularlyits
regulatorydimension,isinvoked.SuchcanbededucedfromSec.34whichenumeratesthepurposesforwhich
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the Universal Charge is imposed37 and which can be amply discerned as regulatory in character. The EPIRA
resonatessuchregulatorypurposes,thus:
SECTION2.DeclarationofPolicy.ItisherebydeclaredthepolicyoftheState:
(a)Toensureandacceleratethetotalelectrificationofthecountry
(b)Toensurethequality,reliability,securityandaffordabilityofthesupplyofelectricpower
(c)Toensuretransparentandreasonablepricesofelectricityinaregimeoffreeandfaircompetitionand
full public accountability to achieve greater operational and economic efficiency and enhance the
competitivenessofPhilippineproductsintheglobalmarket
(d) To enhance the inflow of private capital and broaden the ownership base of the power generation,
transmissionanddistributionsectors
(e) To ensure fair and nondiscriminatory treatment of public and private sector entities in the process of
restructuringtheelectricpowerindustry
(f) To protect the public interest as it is affected by the rates and services of electric utilities and other
providersofelectricpower
(g)Toassuresociallyandenvironmentallycompatibleenergysourcesandinfrastructure
(h)Topromotetheutilizationofindigenousandnewandrenewableenergyresourcesinpowergeneration
inordertoreducedependenceonimportedenergy
(i)ToprovideforanorderlyandtransparentprivatizationoftheassetsandliabilitiesoftheNationalPower
Corporation(NPC)
(j) To establish a strong and purely independent regulatory body and system to ensure consumer
protectionandenhancethecompetitiveoperationoftheelectricitymarketand
(k)Toencouragetheefficientuseofenergyandothermodalitiesofdemandsidemanagement.
From the aforementioned purposes, it can be gleaned that the assailed Universal Charge is not a tax, but an
exactionintheexerciseoftheState'spolicepower.Publicwelfareissurelypromoted.
Moreover,itisawellestablisheddoctrinethatthetaxingpowermaybeusedasanimplementofpolicepower.38
InValmontev.EnergyRegulatoryBoard,etal.39andinGastonv.RepublicPlantersBank,40thisCourtheldthat
the Oil Price Stabilization Fund (OPSF) and the Sugar Stabilization Fund (SSF) were exactions made in the
exerciseofthepolicepower.ThedoctrinewasreiteratedinOsmeav.Orbos41withrespecttotheOPSF.Thus,
wedisagreewithpetitionersthattheinstantcaseisdifferentfromtheaforementionedcases.WiththeUniversal
Charge, a Special Trust Fund (STF) is also created under the administration of PSALM.42 The STF has some
notablecharacteristicssimilartotheOPSFandtheSSF,viz.:
1)Intheimplementationofstrandedcostrecovery,theERCshallconductareviewtodeterminewhether
there is underrecovery or over recovery and adjust (trueup) the level of the stranded cost recovery
charge.Incaseofanoverrecovery,theERCshallensurethatanyexcessamountshallberemittedtothe
STF. A separate account shall be created for these amounts which shall be held in trust for any future
claims of distribution utilities for stranded cost recovery. At the end of the stranded cost recovery period,
anyremainingamountinthisaccountshallbeusedtoreducetheelectricityratestotheendusers.43
2)WithrespecttotheassailedUniversalCharge,ifthetotalamountcollectedforthesameisgreaterthan
theactualavailmentsagainstit,thePSALMshallretainthebalancewithintheSTFtopayforperiodswhere
ashortfalloccurs.44
3)UponexpirationofthetermofPSALM,theadministrationoftheSTFshallbetransferredtotheDOFor
anyoftheDOFattachedagenciesasdesignatedbytheDOFSecretary.45
TheOSGisinpointwhenitasseverates:
Evidently,theestablishmentandmaintenanceoftheSpecialTrustFund,underthelastparagraphofSection34,
R.A.No.9136,iswellwithinthepervasiveandnonwaivablepowerandresponsibilityofthegovernmenttosecure
thephysicalandeconomicsurvivalandwellbeingofthecommunity,thatcomprehensivesovereignauthoritywe
designateasthepolicepoweroftheState.46
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ThisfeatureoftheUniversalChargefurtherbooststhepositionthatthesameisanexactionimposedprimarilyin
pursuitoftheState'spoliceobjectives.TheSTFreasonablyservesandassurestheattainmentandperpetuityof
thepurposesforwhichtheUniversalChargeisimposed,i.e.,toensuretheviabilityofthecountry'selectricpower
industry.
TheSecondIssue
The principle of separation of powers ordains that each of the three branches of government has exclusive
cognizanceofandissupremeinmattersfallingwithinitsownconstitutionallyallocatedsphere.Alogicalcorollary
to the doctrine of separation of powers is the principle of nondelegation of powers, as expressed in the Latin
maximpotestasdelegatanondelegaripotest(whathasbeendelegatedcannotbedelegated).Thisisbasedon
the ethical principle that such delegated power constitutes not only a right but a duty to be performed by the
delegatethroughtheinstrumentalityofhisownjudgmentandnotthroughtheinterveningmindofanother.47
In the face of the increasing complexity of modern life, delegation of legislative power to various specialized
administrativeagenciesisallowedasanexceptiontothisprinciple.48Giventhevolumeandvarietyofinteractions
intoday'ssociety,itisdoubtfulifthelegislaturecanpromulgatelawsthatwilldealadequatelywithandrespond
promptly to the minutiae of everyday life. Hence, the need to delegate to administrative bodies the principal
agenciestaskedtoexecutelawsintheirspecializedfieldstheauthoritytopromulgaterulesandregulationsto
implement a given statute and effectuate its policies. All that is required for the valid exercise of this power of
subordinate legislation is that the regulation be germane to the objects and purposes of the law and that the
regulation be not in contradiction to, but in conformity with, the standards prescribed by the law. These
requirementsaredenominatedasthecompletenesstestandthesufficientstandardtest.
Underthefirsttest,thelawmustbecompleteinallitstermsandconditionswhenitleavesthelegislaturesuch
that when it reaches the delegate, the only thing he will have to do is to enforce it. The second test mandates
adequateguidelinesorlimitationsinthelawtodeterminetheboundariesofthedelegate'sauthorityandprevent
thedelegationfromrunningriot.49
TheCourtfindsthattheEPIRA,readandappreciatedinitsentirety,inrelationtoSec.34thereof,iscompletein
allitsessentialtermsandconditions,andthatitcontainssufficientstandards.
AlthoughSec.34oftheEPIRAmerelyprovidesthat"withinone(1)yearfromtheeffectivitythereof,aUniversal
Charge to be determined, fixed and approved by the ERC, shall be imposed on all electricity endusers," and
therefore,doesnotstatethespecificamounttobepaidasUniversalCharge,theamountneverthelessismade
certainbythelegislativeparametersprovidedinthelawitself.Forone,Sec.43(b)(ii)oftheEPIRAprovides:
SECTION 43. Functions of the ERC. The ERC shall promote competition, encourage market development,
ensurecustomerchoiceandpenalizeabuseofmarketpowerintherestructuredelectricityindustry.Inappropriate
cases,theERCisauthorizedtoissueceaseanddesistorderafterduenoticeandhearing.Towardsthisend,it
shallberesponsibleforthefollowingkeyfunctionsintherestructuredindustry:
xxxx
(b) Within six (6) months from the effectivity of this Act, promulgate and enforce, in accordance with law, a
NationalGridCodeandaDistributionCodewhichshallinclude,butnotlimitedtothefollowing:
xxxx
(ii)Financialcapabilitystandardsforthegeneratingcompanies,theTRANSCO,distributionutilitiesandsuppliers:
Provided,Thatintheformulationofthefinancialcapabilitystandards,thenatureandfunctionoftheentityshallbe
considered:Provided,further,Thatsuchstandardsaresettoensurethattheelectricpowerindustryparticipants
meettheminimumfinancialstandardstoprotectthepublicinterest.Determine,fix,andapprove,afterduenotice
andpublichearingstheuniversalcharge,tobeimposedonallelectricityenduserspursuanttoSection34hereof
Moreover, contrary to the petitioners contention, the ERC does not enjoy a wide latitude of discretion in the
determinationoftheUniversalCharge.Sec.51(d)and(e)oftheEPIRA50clearlyprovides:
SECTION51.Powers.ThePSALMCorp.shall,intheperformanceofitsfunctionsandfortheattainmentofits
objective,havethefollowingpowers:
xxxx
(d)TocalculatetheamountofthestrandeddebtsandstrandedcontractcostsofNPCwhichshallformthe
basisforERCinthedeterminationoftheuniversalcharge
(e) To liquidate the NPC stranded contract costs, utilizing the proceeds from sales and other property
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contributedtoit,includingtheproceedsfromtheuniversalcharge.
Thus,thelawiscompleteandpassesthefirsttestforvaliddelegationoflegislativepower.
Astothesecondtest,thisCourthad,inthepast,acceptedassufficientstandardsthefollowing:"interestoflaw
andorder"51"adequateandefficientinstruction"52"publicinterest"53"justiceandequity"54"publicconvenience
andwelfare"55 "simplicity, economy and efficiency"56 "standardization and regulation of medical education"57
and"fairandequitableemploymentpractices."58ProvisionsoftheEPIRAsuchas,amongothers,"toensurethe
total electrification of the country and the quality, reliability, security and affordability of the supply of electric
power"59and"watershedrehabilitationandmanagement"60meettherequirementsforvaliddelegation,asthey
providethelimitationsontheERCspowertoformulatetheIRR.Thesearesufficientstandards.
ItmaybenotedthatthisisnotthefirsttimethattheERC'sconferredpowerswerechallenged.InFreedomfrom
DebtCoalitionv.EnergyRegulatoryCommission,61theCourthadoccasiontosay:
In determining the extent of powers possessed by the ERC, the provisions of the EPIRA must not be read in
separate parts. Rather, the law must be read in its entirety, because a statute is passed as a whole, and is
animatedbyonegeneralpurposeandintent.Itsmeaningcannottobeextractedfromanysinglepartthereofbut
fromageneralconsiderationofthestatuteasawhole.ConsideringtheintentofCongressinenactingtheEPIRA
andreadingthestatuteinitsentirety,itisplaintoseethatthelawhasexpandedthejurisdictionoftheregulatory
body, the ERC in this case, to enable the latter to implement the reforms sought to be accomplished by the
EPIRA. When the legislators decided to broaden the jurisdiction of the ERC, they did not intend to abolish or
reducethepowersalreadyconferreduponERC'spredecessors.TosustaintheviewthattheERCpossessesonly
thepowersandfunctionslistedunderSection43oftheEPIRAistofrustratetheobjectivesofthelaw.
InhisConcurringandDissentingOpinion62inthesamecase,thenAssociateJustice,nowChiefJustice,Reynato
S. Puno described the immensity of police power in relation to the delegation of powers to the ERC and its
regulatoryfunctionsoverelectricpowerasavitalpublicutility,towit:
Over the years, however, the range of police power was no longer limited to the preservation of public health,
safetyandmorals,whichusedtobetheprimarysocialinterestsinearliertimes.Policepowernowrequiresthe
State to "assume an affirmative duty to eliminate the excesses and injustices that are the concomitants of an
unrestrainedindustrialeconomy."Policepowerisnowexerted"tofurtherthepublicwelfareaconceptasvast
asthegoodofsocietyitself."Hence,"policepowerisbutanothernameforthegovernmentalauthoritytofurther
thewelfareofsocietythatisthebasicendofallgovernment."Whenpolicepowerisdelegatedtoadministrative
bodies with regulatory functions, its exercise should be given a wide latitude. Police power takes on an even
broader dimension in developing countries such as ours, where the State must take a more active role in
balancing the many conflicting interests in society. The Questioned Order was issued by the ERC, acting as an
agent of the State in the exercise of police power. We should have exceptionally good grounds to curtail its
exercise. This approach is more compelling in the field of rateregulation of electric power rates. Electric power
generationanddistributionisatraditionalinstrumentofeconomicgrowththataffectsnotonlyafewbuttheentire
nation.Itisanimportantfactorinencouraginginvestmentandpromotingbusiness.Theenginesofprogressmay
cometoascreechinghaltifthedeliveryofelectricpowerisimpaired.Billionsofpesoswouldbelostasaresultof
poweroutagesorunreliableelectricpowerservices.TheStatethrutheERCshouldbeabletoexerciseitspolice
powerwithgreatflexibility,whentheneedarises.
This was reiterated in National Association of Electricity Consumers for Reforms v. Energy Regulatory
Commission63wheretheCourtheldthattheERC,asregulator,shouldhavesufficientpowertorespondinreal
timetochangeswroughtbymultifariousfactorsaffectingpublicutilities.
Fromtheforegoingdisquisitions,wethereforeholdthatthereisnounduedelegationoflegislativepowertothe
ERC.
Petitioners failed to pursue in their Memorandum the contention in the Complaint that the imposition of the
UniversalChargeonallendusersisoppressiveandconfiscatory,andamountstotaxationwithoutrepresentation.
Hence, such contention is deemed waived or abandoned per Resolution64 of August 3, 2004.65 Moreover, the
determination of whether or not a tax is excessive, oppressive or confiscatory is an issue which essentially
involvesquestionsoffact,andthus,thisCourtisprecludedfromreviewingthesame.66
Asapenultimatestatement,itmaybewelltorecallwhatthisCourtsaidofEPIRA:
OneofthelandmarkpiecesoflegislationenactedbyCongressinrecentyearsistheEPIRA.Itestablishedanew
policy, legal structure and regulatory framework for the electric power industry. The new thrust is to tap private
capital for the expansion and improvement of the industry as the large government debt and the highly capital
intensivecharacteroftheindustryitselfhavelongbeenacknowledgedasthecriticalconstraintstotheprogram.
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Toattractprivateinvestment,largelyforeign,thejadedstructureoftheindustryhadtobeaddressed.Whilethe
generationandtransmissionsectorswerecentralizedandmonopolistic,thedistributionsidewasfragmentedwith
over 130 utilities, mostly small and uneconomic. The pervasive flaws have caused a low utilization of existing
generationcapacityextremelyhighanduncompetitivepowerratespoorqualityofservicetoconsumersdismal
to forgettable performance of the government power sector high system losses and an inability to develop a
clearstrategyforovercomingtheseshortcomings.
Thus, the EPIRA provides a framework for the restructuring of the industry, including the privatization of the
assetsoftheNationalPowerCorporation(NPC),thetransitiontoacompetitivestructure,andthedelineationof
therolesofvariousgovernmentagenciesandtheprivateentities.Thelawordainsthedivisionoftheindustryinto
four(4)distinctsectors,namely:generation,transmission,distributionandsupply.
Corollarily, the NPC generating plants have to privatized and its transmission business spun off and privatized
thereafter.67
Finally,everylawhasinitsfavorthepresumptionofconstitutionality,andtojustifyitsnullification,theremustbea
clear and unequivocal breach of the Constitution and not one that is doubtful, speculative, or argumentative.68
Indubitably,petitionersfailedtoovercomethispresumptioninfavoroftheEPIRA.Wefindnoclearviolationofthe
Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA and Rule 18 of its IRR are
unconstitutionalandvoid.
WHEREFORE,theinstantcaseisherebyDISMISSEDforlackofmerit.
SOORDERED.
ANTONIOEDUARDOB.NACHURA
AssociateJustice
WECONCUR:
REYNATOS.PUNO
ChiefJustice
LEONARDOA.QUISUMBING
AssociateJustice

CONSUELOYNARESSANTIAGO
AssociateJustice

ANGELINASANDOVALGUTIERREZ
AssociateJustice

ANTONIOT.CARPIO
AssociateJustice

MA.ALICIAAUSTRIAMARTINEZ
AssociateJustice

RENATOC.CORONA
AssociateJustice

CONCHITACARPIOMORALES
AssociateJustice

ADOLFOS.AZCUNA
AssociateJustice

DANTEO.TINGA
AssociateJustice

MINITAV.CHICONAZARIO
AssociateJustice

CANCIOC.GARCIA
AssociateJustice

PRESBITEROJ.VELASCO,JR.
AssociateJustice
CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had
beenreachedinconsultationbeforethecasewasassignedtothewriteroftheopinionoftheCourt.
REYNATOS.PUNO
ChiefJustice

Footnotes
1Sec.4(ddd)oftheEPIRAprovidesthattheUniversalChargereferstothecharge,ifany,imposedforthe
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recoveryofthestrandedcostandotherpurposespursuanttoSection34hereof.
2RulesandRegulationstoImplementRepublicActNo.9136,entitled"ElectricPowerIndustryReformAct

of 2001, (IRR) approved on February 27, 2002, particularly Rule 4 (rrrr) provides that the "Universal
Charge" refers to the charge, if any, imposed for the recovery of the Stranded Debts, Stranded Contract
CostsofNPC,andStrandedContractCostsofEligibleContractsofDistributionUtilitiesandotherpurposes
pursuanttoSection34oftheEPIRA.
3ParticularlydenominatedasComplaintdatedSeptember15,2003rollo,pp.315.
4Sec.4[vv]oftheEPIRAprovidesthatStrandedDebtsofNPCrefertoanyunpaidfinancialobligationsof

NPCwhichhavenotbeenliquidatedbytheproceedsfromthesalesandprivatizationofNPCassets.
5Sec.4[uu]oftheEPIRAalsoprovidesthatStrandedcontractcostsofNPCordistributionutilityreferto

the excess of the contracted cost of electricity under eligible contracts over the actual selling price of the
contractedenergyoutputofsuchcontractsinthemarket.Suchcontractsshallhavebeenapprovedbythe
ERBasofDecember31,2000.
6Rule4(ddd)oftheIRRprovidesthatMissionaryElectrificationreferstotheprovisionofbasicelectricity

serviceinUnviableAreaswiththeultimateaimofbringingtheoperationsintheseareastoviabilitylevels.
7ManilaElectricCompany,Inc.v.Lualhati,G.R.Nos.166769and166818,December6,2006.
8IRR,Rule4(bbbb)statesthatSmallPowerUtilitiesGrouporSPUGreferstothefunctionalunitofNPC

createdtopursueMissionaryElectrificationfunction.
9ERCRecordforERCCaseNo.2002165,pp.17.
10PSALMisagovernmentownedandcontrolledcorporationcreatedunderSec.49oftheEPIRA,which

shalltakeownershipofallexistingNPCgenerationassets,liabilities,IPPcontracts,realestateandallother
disposableassets.AlloutstandingobligationsoftheNPCarisingfromloans,issuancesofbonds,securities
andotherinstrumentsofindebtednessshallbetransferredtoandassumedbythePSALM.
11ERCRecordforERCCaseNo.2002194,pp.15.
12Supranote9,at110122.
13Id.at215224.
14 NPCSPUG's Motion for Reconsideration dated August 13, 2003 also prayed that it be allowed (1) to

haveflexibilityintheutilizationofUCMEconsideringitsmandatetoimplementtheMEDPresponsivetothe
needsandconstraintsofmissionaryelectrification(2)toauthorizeittoreprioritizeitsCAPEXanditsOPEX
to the extent possible, for CY 2003 and (3) to give it the flexibility to reallocate available UCME funds
amongtherevisedpriorityactivities/projectsforCY2003,Id.at225236.
15Id.at237239.
16Supranote11,at110122.
17Rollo,p.8.
18Supranote3.
19Osmea v. Orbos, G.R. No. 99886, March 31, 1993, 220 SCRA 703 Valmonte v. Energy Regulatory

Board,G.R.Nos.L7960103,June23,1988,162SCRA521andGastonv.RepublicPlantersBank,No.
L77194,March15,1988,158SCRA626.
20ThesefundsaretheOilPriceStabilizationFund(OPSF)andSugarStabilizationFund(SSF).
21Petitioners'MemorandumdatedOctober6,2004rollo,pp.123138.
22PSALM'sMemorandumdatedDecember8,2004id.at154167.
23OSG'sMemorandumdatedJanuary4,2005id.at168187.
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24SECTION46.FinesandPenalties.ThefinesandpenaltiesthatshallbeimposedbytheERCforany

violationofornoncompliancewiththisActortheIRRshallrangefromaminimumofFiftythousandpesos
(P50,000.00)toamaximumofFiftymillionpesos(P50,000,000.00).
AnypersonwhoisfoundguiltyofanyoftheprohibitedactspursuanttoSection45hereofshallsuffer
thepenaltyofprisionmayorandafinerangingfromTenthousandpesos(P10,000.00)toTenmillion
pesos(P10,000.000.00),orboth,atthediscretionofthecourt.
ThemembersoftheBoardofDirectorsofthejuridicalcompaniesparticipatinginorcoveredinthe
generation companies, the distribution utilities, the TRANSCO or its concessionaire or supplier who
violate the provisions of this Act may be fined by an amount not exceeding double the amount of
damagescausedbytheoffenderorbyimprisonmentofone(1)yearortwo(2)yearsorbothatthe
discretionofthecourt.ThisruleshallapplytothemembersoftheBoardwhoknowinglyorbyneglect
allowsthecommissionoromissionunderthelaw.
If the offender is a government official or employee, he shall, in addition, be dismissed from the
governmentservicewithprejudicetoreinstatementandwithperpetualortemporarydisqualification
fromholdinganyelectiveorappointiveoffice.
Iftheoffenderisanalien,hemay,inadditiontothepenaltiesprescribed,bedeportedwithoutfurther
proceedingsafterserviceofsentence.
AnycasewhichinvolvesquestionoffactshallbeappealabletotheCourtofAppealsandthosewhich
involvequestionoflawshallbedirectlyappealabletotheSupremeCourt.
TheadministrativesanctionthatmaybeimposedbytheERCshallbewithoutprejudicetothefilingof
acriminalaction,ifwarranted.
To ensure compliance with this Act, the penalty of prision correccional or a fine ranging from Five
thousandpesos(P5,000.00)toFivemillionpesos(P5,000,000.00), or both, at the discretion of the
court, shall be imposed on any person, including but not limited to the president, member of the
Board,ChiefExecutiveOfficerorChiefOperatingOfficerofthecorporation,partnership,oranyother
entityinvolved,foundguiltyofviolatingorrefusingtocomplywithanyprovisionofthisActoritsIRR,
otherthanthoseprovidedherein.
Anypartytoanadministrativeproceedingmay,atanytime,makeanoffertotheERC,conditionally
orotherwise,foraconsenteddecree,voluntarycomplianceordesistanceandothersettlementofthe
case.Theofferandanyoralloftheultimatefactsuponwhichtheofferisbasedshallbeconsidered
for settlement purposes only and shall not be used as evidence against any party for any other
purpose and shall not constitute an admission by the party making the offer of any violation of the
laws, rules, regulations, orders and resolutions of the ERC, nor as a waiver to file any warranted
criminalactions.
Inaddition,Congressmay,uponrecommendationoftheDOEand/orERC,revokesuchfranchiseor
privilegegrantedtothepartywhoviolatedtheprovisionsofthisAct.
25PECO'sMemorandumdatedApril18,2005rollo,pp.205210.
26Supranote21,at125.
27Emphasissupplied.
28Francisco,Jr.v.Fernando,G.R.No.166501,November16,2006,citingPeoplev.Cuaresma,172SCRA

415,423424(1989).
29LacsonHermanas,Inc.v.HeirsofCenonIgnacio,G.R.No.165973,June29,2005,462SCRA290,294

andSantiagov.Vasquez,G.R.Nos.9928990,January27,1993,217SCRA633,652.
30MactanCebuInternationalAirportAuthorityv.Marcos,330Phil.392,404(1996).
31Proton Pilipinas Corporation v. Republic of the Philippines, G.R. No. 165027, October 16, 2006, citing

ProvinceofTarlacv.Alcantara,216SCRA790,798(1992).
32NationalPowerCorporationv.CityofCabanatuan,449Phil.233,248(2003).
33DidipioEarthSavers'MultiPurposeAssociation,Inc.(DESAMA)v.Gozun,G.R.No.157882,March30,
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2006,485SCRA586,604,citingU.S.v.Torribio,15Phil.85,93(1910)andRubiv.TheProvincialBoardof
Mindoro,39Phil.660,708(1919).
34 JMM Promotion and Management, Inc. v. Court of Appeals, G.R. No. 120095, August 5, 1996, 260

SCRA319,324.
35Philippine Association of Service Exporters, Inc. v. Hon. Ruben D. Torres, G.R. No. 101279, August 6,

1992,212SCRA298,304,citingPhilippineCommunicationsSatelliteCorporationv.Alcuaz,180SCRA218
(1989).
36ProgressiveDevelopmentCorporationvs.QuezonCity,G.R.No.36081,April24,1989,172SCRA629,

635,citingManilaElectricCompanyv.ElAuditorGeneralyLaComisiondeServiciosPublicos,73Phil.133
(1941)Republicv.PhilippineRabbitLines,143Phil.158,163(1970).
37Thepurposesare:

(a)PaymentforthestrandeddebtsinexcessoftheamountassumedbytheNationalGovernment
and stranded contract costs of NPC and as well as qualified stranded contract costs of distribution
utilitiesresultingfromtherestructuringoftheindustry
(b)Missionaryelectrification
(c)Theequalizationofthetaxesandroyaltiesappliedtoindigenousorrenewablesourcesofenergy
visvisimportedenergyfuels
(d) An environmental charge equivalent to onefourth of one centavo per kilowatthour
(P0.0025/kWh), which shall accrue to an environmental fund to be used solely for watershed
rehabilitation and management. Said fund shall be managed by NPC under existing arrangements
and
(e)Achargetoaccountforallformsofcrosssubsidiesforaperiodnotexceedingthree(3)years.
38Osmeav.Orbos,supranote19,at710,Gastonv.RepublicPlantersBank,supranote19,at632,Tiov.

VideogramRegulatoryBoard, No. L75697, June 18, 1987, 151 SCRA 208, 216, and Lutzv.Araneta, 98
Phil.148(1955).
39 Supra note 19, at 539 Decided jointly with Citizen's Alliance for Consumer Protection v. Energy

Regulatory Board., G.R. Nos. L7888890, and Kilusang Mayo Uno Labor Center v. Energy Regulatory,
Board.,G.R.Nos.L7969092.
40Supranote19,at632633.
41Id.at710711.
42Lastparagraph,Sec.34,EPIRAprovides:ThePSALMCorp.,asadministratorofthefund,shallcreatea

Special Trust Fund which shall be disbursed only for the purposes specified herein in an open and
transparent manner. All amount collected for the universal charge shall be distributed to the respective
beneficiarieswithinareasonableperiodtobeprovidedbytheERC.
IRRoftheEPIRA,Rule18,SECTION6,alsoprovides:
(a)PursuanttothelastparagraphofSection34oftheAct,PSALMshallactastheadministratorof
thefundsgeneratedfromtheUniversalCharge.Forthispurpose,thePSALMshallcreateaSTFto
beestablishedintheBureauofTreasury(BTr)orinaGovernmentFinancingInstitution(GFI)thatis
acceptabletotheDOF.SeparateSTFsshallbeestablishedforeachoftheintendedpurposesofthe
Universal Charge. Funds shall be disbursed in an open and transparent manner and shall only be
usedfortheintendedpurposesspecifiedinSection3ofthisRule.
43EPIRA,Sec.33,lastparagraphandIRR,Sec.5(f),Rule17.
44IRR,Sec.6(f),Rule18.
45IRR,Sec.4,Rule21.
46Supranote23,at177178,citingOsmeav.Orbos,supranote19.
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47AbakadaGuroPartyListv.Ermita,G.R.Nos.168056,168207,168461,168463and168730,September

1,2005,469SCRA10,115116.
48Therecognizedexceptionstothegeneralprincipleareasfollows:

(1)DelegationoftariffpowerstothePresidentunderSection28(2)ofArticleVIoftheConstitution
(2)DelegationofemergencypowerstothePresidentunderSection23(2)ofArticleVIofthe
Constitution
(3)Delegationtothepeopleatlarge
(4)Delegationtolocalgovernmentsand
(5)Delegationtoadministrativebodies.AbakadaGuroPartyListv.Ermita,supranote47,at117and
Santiagov.Comelec,336Phil.848,897898(1997),citingPeoplev.Vera,65Phil.56(1937).
49EquiAsiaPlacement,Inc.v.DFA,G.R.No.152214,September19,2006,citingBeltran v. Secretary of

Health,476SCRA168,191(2005)TheConferenceofMaritimeManningAgenciesv.PhilippineOverseas
EmploymentAgency, 313 Phil. 592, 606 (1995) and Eastern Shipping Lines, Inc. v. Philippine Overseas
EmploymentAgency,G.R.No.L76633,October18,1998,166SCRA533,543.
50Emphasissupplied.
51Rubiv.ProvincialBoardofMindoro,supranote33,at706.
52PhilippineAssociationofCollegesandUniversityv.SecretaryofEducation,97Phil.806,814(1955).
53Peoplev.Rosenthal,68Phil.328,342(1939).
54AntamokGoldFieldsv.CIR,70Phil.340(1940).
55Calalangv.Williams,70Phil.726,733(1940).
56Cervantesv.AuditorGeneral,91Phil359,364(1952).
57Tablarinv.Gutierrez,No.L78164,July31,1987,152SCRA731.
58TheConferenceofMaritimeManningAgencies,Inc.v.PhilippineOverseasEmploymentAdministration,

supranote49.
59Sec.2(a)and(b),DeclarationofPoliciesoftheEPIRA.
60Supranote37.
61G.R.No.161113,June15,2004,432SCRA157,182.
62Id.at219220(Emphasissupplied).
63 G.R. No. 163935, February 2, 2006, 481 SCRA 480, 515516, citing Freedom from Debt Coalition v.

EnergyRegulatoryCommission,supranote61.
64Rollo,pp.108109
65Republicv.Kalaw,G.R.No.155138,June8,2004,431SCRA401,406.
66Lopezv.CityofManila,G.R.No.127139,February19,1999,303SCRA448,460,citingTyv.Trampe,

250SCRA500(1995).
67FreedomfromDebtCoalitionv.EnergyRegulatoryCommission,supranote61,at171172.
68Arcetav.Mangrobang,G.R.Nos.152895&153151,June15,2004,432SCRA136,142,citingLacson

v.TheExecutiveSecretary,361Phil.251,263(1999).

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TheLawphilProjectArellanoLawFoundation

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