The Supreme Court has confirmed the validity of Sections 6 and 29 of the Electric Power Industry Reform Act (EPIRA) or Republic Act No. 9136, stating that electricity generation and supply are not public utility operations but under the regulatory authority of the Energy Regulatory Commission. (ERC).

In the decision released by the SC En Banc, the court also upheld Section 34 and 43 (b)(ii) of the law that empowers the ERC to set and approve the universal charge on electricity consumers.

The same provisions of EPIAA also allows distribution utilities to recover losses through system charges.

The case stemmed from a petition filed by former Rep. Fernando Hicap, chair of the Pambansang Lakas ng Kilusang Mamamalakaya ng Pilipinas (Pamalakaya) and several others challenging ther constitutionality of the EPIRA provisions.

The petitioners questioned the ERC decision authorizing the Manila Electric Company (Meralco) to recover generation costs from consumers on a staggered basis.

They argued that electricity generation and supply are not public utiliti4es and should not be regulated by the ERC.

According to Hicap the universal charge - imposed on all electricity users to cover costs like unpaid debts, missionary electrification and watershed management - is essentially a tax, which only Congress can authorize.

The petitioners also questioned the ERC’s authority to allow utilities to recover system losses, arguing this was an invalid delegation of Congress’s legislative powers.

In its ruling the SC stressed that electricity generation and supply are not public utility operations but are still regulated by the ERC.

The Court ruled in favor of the EPIRA provisions, explaining that electricity generation and supply are not utilities because they serve specific customers rather than the general public. However, they stressed the following:

Nature of Power Generation and Supply:
Electricity generation and supply are not public utilities because they serve specific customers rather than the general public. However, they remain regulated to prevent abuse, with companies required to obtain an ERC certificate of compliance and follow other safeguards.
Universal Charge is Not a Tax:

The universal charge is not intended to raise government revenue but to ensure the sustainability of the electric power industry. This falls under the State's police power to promote public welfare. Congress gave the ERC the authority to determine and approve this charge.

System Loss Charges are Lawful:
Allowing distribution utilities to recover system losses is a valid delegation of power by Congress. The EPIRA provides clear standards and limits to guide the ERC in exercising this authority.
Under the EPIRA, the ERC was authorized by Congress to determine and approve the universal charge.