SC: electricity generation and supply still subject to regulation by ERC

The Supreme Court has ruled that electricity generation or supply of electricity is not a public utility operation, but it is still subject to regulation by the Energy Regulatory Commission (ERC).

The high tribunal issued this decision on August 1, 2023, but only announced it in a statement on Wednesday. It ruled on a 2013 petition by several rights groups that protested the ERC’s authorization of the Manila Electronic Company (Meralco) to recover their generation costs from consumers on a staggered basis.

The petition was filed by Pamalakaya chairperson Fernando Hicap and others back in 2013 challenging the constitutionality of the Electric Power Industry Reform Act (Epira) provisions giving the ERC the power to authorize universal charges, or the act of allowing public utility companies to impose fixed charges on consumers to recover their losses.

“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 said in its statement.

According to the court, companies that generate and supply power are not considered public utility operations, but they are still regulated by the ERC.

“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 SC added.

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According to the Supreme Court’s resolution, the universal charge is not a tax power granted to public utility companies because “it is not intended to generate revenue but to ensure the viability of the electric power industry in the exercise of the government’s police power to promote public welfare.”

The SC then upheld the constitutionality of certain provisions of Epira, particularly, Sections 6 and 29, which deal with power generation and supply, and Sections 34 and 43, which empower the ERC to determine system losses and any universal charges imposed by distribution utilities.