SC upholds contested EPIRA provisions

THE Supreme Court (SC) affirmed the constitutionality of several provisions of the Electric Power Industry Reform Act (EPIRA), ruling that electricity generation and supply are not public utility operations but remain subject to regulation by the Energy Regulatory Commission (ERC).

In a resolution promulgated on July 31, 2024, but publicized on Jan. 7, the Court, sitting en banc, dismissed a petition filed by Anakpawis Rep. Fernando L. Hicap, and others, against the ERC, Manila Electric Co. (Meralco) and the Executive Secretary, that had sought to declare several sections of the law unconstitutional.

The Court upheld Sections 6 and 29 of EPIRA, clarifying that electricity generation and supply are not considered public utility operations and remain subject to regulation by the ERC.

In the same Resolution, the Court also affirmed Sections 34 and 43(b)(ii) of the law, which grant the ERC the authority to determine and approve the universal charge imposed on electricity end-users.

Additionally, it upheld Section 43(f), empowering the ERC to establish charges that enable distribution utilities to recover their losses.

The Court found no grave abuse of discretion on the part of the ERC in its implementation of the law.

It said that for a business to be classified as a public utility, it must offer a service essential to the public.

Since power generation and supply companies serve only a limited customer base and do not interact directly with the public, they are not considered public utilities.

Nevertheless, companies remain subject to government regulation due to the safeguards outlined in the EPIRA, which are designed to prevent abuse or irregularities.

These safeguards include the requirement for companies to obtain a certificate of compliance from the ERC, along with other regulatory measures.

The court added the universal charge is not a tax, as it is not designed to generate revenue. Instead, it aims to support the sustainability of the electric power industry under the State’s police power to promote public welfare.

EPIRA grants the ERC the authority to determine and approve this charge.

In addition, the court affirmed the ERC’s authority to implement a system allowing distribution utilities to recover losses, thereby ensuring the efficiency and quality of their services.

The delegation of this power from Congress to the ERC is protected by clear standards and limitations outlined in the EPIRA, it ruled.

The petitioners had argued that the ERC committed grave abuse of discretion in issuing guidelines for the Automatic Adjustment of Generation Rate and System Loss Rates by Distribution Utilities (AGRA Rules).

They also questioned the ERC’s approval of a staggered implementation of power rate increases requested by Meralco in December 2013.

They also claimed that the universal charge is a form of tax, which must be set by Congress. — Chloe Mari A. Hufana