Delegation of Powers


Department Secretary alter ego of Congress.


Congress delegated the power of ascertainment of facts upon which the enforcement and administration of the increase rate under the law is contingent to the Secretary of Finance. The legislature has made the operation of the 12% rate effective January 1, 2006 contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters outside the control of the executive. No discretion would be exercised by the President.


In making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. In such instance, he is not subject to the power of control and direction of the President. He is acting as the agent of the legislative department, to determine and declare the event upon which its expressed will is to take effect. The Secretary becomes the means or tool by which legislative policy is determined and implemented, considering that he possesses all the facilities to gather data and information and has a much broader perspective to properly evaluate them. His personality in such instance is in reality but a projection of that of Congress. Thus, being the agent of Congress and not of the President, the President cannot alter or modify or nullify, or set aside the findings of the Secretary and to substitute the judgment of the former for that of the latter. Congress simply granted the Secretary the authority to ascertain the existence of a fact. If it is exists, the Secretary, by legislative mandate, must submit such information to the President who must impose the 12% VAT rate. There is no undue delegation of legislation power but only of the discretion as to the execution of a law. This is constitutionally permissible. (Abakada Guro Party List, etc., et al. vs. Executive Secretary, G.R. No. 168056, and other cases, September 1, 2005).


Q —    Section 34 of RA 9136, otherwise known as the “Electric Power Industry Reform Act of 200_” (EPIRA) imposes Universal Charge upon end-users of electricity (a charge imposed for the recovery of stranded cost; stranded debts refer to any unpaid financial obligations of the NPC which has not been liquidated by the proceeds from the sales and privatization of NPC Assets; stranded contract costs of NPC or distribution utility refer to the excess of the contract cost of electricity under eligible contracts over the actual selling price of the contracted energy output of such contracts in the market.


            ERC issued its Implementing Rules and Regulations defining Universal Charge refers to the charge, if any, imposed for the recovery of Stranded Debts, Stranded Contract Costs of NPC and Stranded Contract Costs of Eligible Contracts of Distribution Utilities and other purposes pursuant to Section 34 of the EPIRA. (Rule 4 (rrr, IRR).


            National Power Corporation-Strategic Power Utilities Group (NPC-SPUG) filed with Energy Regulatory Commission (ERC) a petition for the availment from the Universal Charge of its share for Missionary Electrification.


            The ERC decided the NPC’s petition authorizing it to draw up to   P70, 000, 000.00 from PSALM for its 2003 Watershed Rehabilitation Budget subject to the availability of funds for the Environmental Fund component of the Universal Charge.


            On the basis of the said ERC decisions, Panay Electric Company, Inc. (PECO) charged 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.


            Hence, this original action.


            Petitioners submit that the assailed provision of law and its IRR which sought to implement the same are unconstitutional on the following grounds:


1.            The universal charge provided for under Section 34 of the EPIRA and sought to be implemented under Sec. 2, Rule 18 of the IRR of the said law is a tax which is to be collected from all electric end-users and self-generating entities. The power to tax is strictly a legislative function and as such, the delegation of said power to any executive or administrative agency like the ERC is unconstitutional, giving the same unlimited authority. The assailed provision clearly provides that the Universal Charge is to be determined, fixed and approved by the ERC, hence leaving to the latter complete discretionary legislative authority.

2.            The ERC is also empowered to approve and determine where the funds collected should be used.

3.            The imposition of the Universal Charge on all end-users is oppressive and confiscatory and amounts to taxation without representation as the consumers were not given a chance to be heard and represented.


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 cases Osmeña v. Orbos, G.R. No. 99886, March 31, 1993, 220 SCRA 703; Valmonte v. Energy Regulatory Board, G.R. Nos. L-79601-03, June 23, 1988, 162 SCRA 521; and Gaston v. Republic Planters Bank, L-77194, March 15, 1988, 158 SCRA 626, 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 funds 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 adequately and timely monitored by the legislature. Thus, there was a need to delegate powers to administrative bodies. They posited that the Universal Charge is imposed not for a similar purpose.


The ultimate issues in the case at bar are:


1.            Whether or not, the Universal Charge imposed under Sec. 34 of the EPIRA is a tax; and

2.            Whether or not there is undue delegation of legislative power to tax on the part of the ERC.




ANS:   1. As to the first issue.


            No, the Universal Charge is not a tax. In exacting the said charge through Sec. 34 of the EPIRA, the State’s police power, particularly its regulatory dimension, is invoked. Such can be deduced from Sec. 34 which enumerates the purposes for which the Universal Charge is imposed, and which can be amply discerned as regulatory in character.


Moreover, it is a well-established doctrine that the taxing power may be used as an implement of police power. (Osmeña v. Orbos, Gaston v. Republic Planters Bank, Tio v. Videogram Regulatory Board, No. L-75697, 151 SCRA 208, 216, and Lutz v. Araneta, 98 Phil. 148 (1955)). In Valmonte v. Energy Regulatory Board, et al. and in Gaston v. Republic Planters Bank, it was held that the Oil Price Stabilization Fund (OPSF) and the Sugar Stabilization Fund (SSF) were exactions made in exercise of the police power. The doctrine was reiterated in Osmeña v. Orbos, with respect to the OPSF.


With the Universal Charge, a Special Trust Fund (STF) is also created under the administration of PSALM.


As aptly pointed out by the OSG, 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.


This feature of the Universal Charge further boosts the position that the same is an exaction imposed primarily in the pursuit of the State’s police objectives. The STF reasonably serves and assures 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. (Gerochi, et al. v. Dept. of Energy, et al., G.R. No. 159796, July 17, 2007, Nachura, J).


2. As to the second issue.


            No, there is no undue delegation of powers to the ERC. The EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is complete in all its essential terms and conditions, and it contains sufficient standards.


            Although Sec. 34 of the EPIRA merely provides that within one (1) year from the effectivity thereof, a Universal Charge to be determined, fixed and approved by the ERC, shall be imposed on all electricity end-users, and therefore, does not state the specific amount to be paid as Universal Charge, the amount nevertheless is made certain by the legislative parameters provided by the law itself when it provided for the promulgation and enforcement of a National Grid Code, and a Distribution Code.


            This is also the case when the EPIRA law authorized the PSALM to compute the stranded debts and stranded costs of the NPC which is to form the basis of the ERC in determining its universal charge.


            As to the second test, the 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. (Gerochi, et al. v. Dept. of Energy, et al., G.R. No. 159796, July 17, 2007, Nachura, J).



            It may be noted that this is not the first time that the ERC’s conferred powers were challenged. In Freedom from Debt Coalition v. Energy Regulatory Commission, G.R. No. 161113, June 15, 2004, 432 SCRA 157, it has been held:


                                    “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 entirely, because a statute is passed as a whole, and is animated by one general purpose and intent. Its meaning cannot to be extracted from any single part thereof but from a general consideration of the statute as a whole. Considering the intent of Congress in enacting the EPIRA and reading the statute in its entirety, it is plain to see that the law has expanded the jurisdiction of the regulatory 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 reduce the powers already conferred upon ERC’s predecessors. To sustain the view that the ERC possess only the powers and functions listed under Section 43 of the EPIRA is to frustrate the objectives of the law.


            Chief Justice Reynato S. Puno described the immensity of police power in relation to the delegation of powers to the ERC and its regulatory functions over electric power as a vital public utility, to wit:


                                    Over the years, however, the range of police power was no longer limited to the preservation of public health, safety and morals, which used to be the primary social interests in earlier times. Police power now requires the State to “assume an affirmative duty to eliminate the excesses and injustices that are the concomitants of an unrestrained industrial economy.” Police power is not exerted “to further the public welfare – a concept as vast as the good of society itself.” When the police power is delegated to administrative 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 rate-regulation of electric power rates. Electric power generation and distribution is a traditional instrument of economic growth that affects not only a few but the entire nation. It is an important factor in encouraging investment and promoting business. The engines of progress may come to a screeching halt if the delivery of electric power is impaired. Billions of pesos would be lost as a result of power outrages or unreliable electric power services. The State thru the ERC should be able to exercise its police power with great flexibility, when the need arises.


            This was reiterated in National Association of Electricity Consumers for Reforms v. Energy Regulatory Commission, G.R. No. 163935, February 2, 2006, 481 SCRA 480, where it was held that the ERC, as regulator, should have sufficient power to respond in real time to changes wrought by multifarious factors affecting public utilities.


            From the foregoing disquisitions, we there fore hold there is no undue delegation of legislative power to the ERC.


            Petitioners failed to pursue in their Memorandum the contention in the Complaint that the imposition of the Universal Charge on all end-users is oppressive and confiscatory, and amounts to taxation without representation. Hence, such contention is deemed waived or abandoned per Resolution of August 3, 2004. Moreover, the determination of whether or not a tax is excessive, oppressive or confiscatory is an issue which essentially involves questions of fact, and thus, the Court is precluded from reviewing the same.



            One of the landmark pieces of legislation enacted by Congress in recent years is the EPIRA. It established a new 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-intensive character of the industry itself have long been acknowledged as the critical constraints to the program. To attract private investment, largely foreign, the jaded structure of the industry had to be addressed. While the generation and transmission sectors were centralized and monopolistic, the distribution side was fragmented with over 10 utilities, mostly small and uneconomic. The pervasive flaws have caused a low utilization of existing generation capacity; extremely high and uncompetitive power rates; poor quality of service to consumers; dismal to forgettable performance of the government power sector; high system losses; and an inability to develop a clear strategy for overcoming these shortcomings.


            Thus, the EPIRA provides a framework for the restructuring of the industry, including the privatization of the assets of the National Power Corporation (NPC), the transition to a competitive structure, and the delineation of the roles of various government agencies and the private entities. The law ordains the division of the industry into four (4) distinct sectors, namely: generation, transmission, distribution and supply. Corollarily, the NPC generating plants have to privatized and its transmission business spun off and privatized thereafter. (Freedom from Debt Coalition v. ERC, G.R. No. 161113, June 15, 2004, 432 SCRA 157).