Gerochi v. Department of Energy Digest

ROMEO P.
GEROCHI, KATULONG NG BAYAN (KB) and

ENVIRONMENTALIST CONSUMERS NETWORK, INC. (ECN), vs.
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY
COMMISSION (ERC), NATIONAL POWER CORPORATION (NPC),
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT
GROUP (PSALM Corp.), STRATEGIC POWER UTILITIES GROUP
(SPUG), and PANAY ELECTRIC COMPANY INC. (PECO), G.R.
159796,
17 JULY 2007, EN BANC, NACHURA
Digest by: Vanessa V. Malolot, EH 202
Principle in sum:
“The power to tax is an incident of sovereignty and is unlimited in its range,

acknowledging in its very nature no limits, so that security against its abuse
is to be found only in the responsibility of the legislature which imposes the
tax on the constituency that is to pay it”
“The principle of separation of powers ordains that each of the three

branches of government has exclusive cognizance of and is supreme in
matters falling within its own constitutionally allocated sphere”
FACTS:
1. June 8, 2001 - Congress enacted the EPIRA (Electric Power Industry

Reform Act of 2001)
2. June 26, 2001 – EPIRA took effect
3. Respondent Panay Electric Company, Inc. (PECO) charged petitioner

Romeo P. Gerochi and all other end-users with the Universal Charge
as reflected in their respective electric bills starting from the month of
July 2003
4. Petitioners assail the validity of Section 34 that imposes a monthly

“Universal Charge” to all electricity end users that would serve as
payment for government debts, equalization of taxes and,
environmental charge, among others, for being an undue delegation of
the power of taxation.
5. SECTION 34. Universal Charge. — 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 end-users for
the following purposes:
(a) Payment for the stranded debts in excess of the amount assumed
by the National Government and stranded contract costs of NPC
and as well as qualified stranded contract costs of distribution
utilities resulting from the restructuring of the industry;
(b) Missionary electrification;
(c) The equalization of the taxes and royalties applied to indigenous or

renewable sources of energy vis-à-vis imported energy fuels;
(d) An environmental charge equivalent to one-fourth of one centavo

per kilowatt-hour (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) A charge to account for all forms of cross-subsidies for a period

not exceeding three (3) years.
The universal charge shall be a non-bypassable charge which shall

be passed on and collected from all end-users on a monthly basis
by the distribution utilities. Collections by the distribution utilities
and the TRANSCO in any given month shall be remitted to the
PSALM Corp. on or before the fifteenth (15th) of the succeeding
month, net of any amount due to the distribution utility. Any end-
user or self-generating entity not connected to a distribution utility
shall remit its corresponding universal charge directly to the
TRANSCO. The PSALM Corp., 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 distributed to the
respective beneficiaries within a reasonable period to be provided
by the ERC.
ISSUES:
A. Whether or not the Universal Charge imposed under Sec. 34 of the

EPIRA is a tax.
B. Whether or not there is undue delegation of legislative power to tax on

the part of the ERC.
SUPREME COURT’S RULING:
A. No. The universal charge as provided for in Section 34 is not a tax

but an exaction of the regulatory power (police power) of the state.
Below are other direct quotes from the Supreme Court ruling relevant in the
issue [A]:
1. SC: “The OSG is in point when it asseverates: Evidently, the
establishment and maintenance of the Special Trust Fund, under the
last paragraph of Section 34, R.A. No. 9136, is well within the
pervasive and non-waivable power and responsibility of the
government to secure the physical and economic survival and well-
being of the community, that comprehensive sovereign authority we
designate as the police power of the State.”
2. SC: “The STF reasonably serves and assures the attainment and
perpetuity of the purposes for which the Universal Charge is imposed,
i.e., to ensure the viability of the country's electric power industry.”
B. No. There is no undue delegation of legislative power to the ERC.

The court in appreciating Section 34 of RA 9136 in its entirety finds the said
law and the assailed portions free from any constitutional defect and thus
deemed complete and sufficient in form. Below are other direct quotes from
the Supreme Court ruling relevant in the issue [B]:
1. SC: “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 requirements are denominated as the completeness test
and the sufficient standard test.
Under the first test, the law must be complete in all its terms and
conditions when it leaves the legislature such that when it reaches the
delegate, the only thing he will have to do is to enforce it. The second
test mandates adequate guidelines or limitations in the law to
determine the boundaries of the delegate's authority and prevent the
delegation from running riot.”
2. SC: “Thus, the law is complete and passes the first test for valid
delegation of legislative power.”
3. SC: “As to the second test, this Court had, in the past, accepted as
sufficient standards the following: "interest of law and order;"
"adequate and efficient instruction;" "public interest;" "justice and
equity;" "public convenience and welfare;" "simplicity, economy and
efficiency;" "standardization and regulation of medical education;"
and "fair and equitable employment practices." Provisions of the
EPIRA such as, among others, "to ensure the total electrification of
the country and the quality, reliability, security and affordability of
the supply of electric power" and "watershed rehabilitation and
management" meet the requirements for valid delegation, as they
provide the limitations on the ERC's power to formulate the IRR.
These are sufficient standards.
4. SC: “Finally, every law has in its favor the presumption of
constitutionality, and to justify its nullification, there must be a clear
and unequivocal breach of the Constitution and not one that is
doubtful, speculative, or argumentative. Indubitably, petitioners failed
to overcome this presumption in favor of the EPIRA. We find no clear
violation of the Constitution which would warrant a pronouncement
that Sec. 34 of the EPIRA and Rule 18 of its IRR are unconstitutional
and void.”
xxx

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ROMEO P.

GEROCHI, KATULONG NG BAYAN (KB) and

Digest by: Vanessa V. Malolot, EH 202

“The power to tax is an incident of sovereignty and is unlimited in its range,

“The principle of separation of powers ordains that each of the three

1. June 8, 2001 - Congress enacted the EPIRA (Electric Power Industry

2. June 26, 2001 – EPIRA took effect

3. Respondent Panay Electric Company, Inc. (PECO) charged petitioner

4. Petitioners assail the validity of Section 34 that imposes a monthly

(b) Missionary electrification;

(c) The equalization of the taxes and royalties applied to indigenous or

(d) An environmental charge equivalent to one-fourth of one centavo

(e) A charge to account for all forms of cross-subsidies for a period

The universal charge shall be a non-bypassable charge which shall

A. Whether or not the Universal Charge imposed under Sec. 34 of the

B. Whether or not there is undue delegation of legislative power to tax on

SUPREME COURT’S RULING:

A. No. The universal charge as provided for in Section 34 is not a tax

B. No. There is no undue delegation of legislative power to the ERC.

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