The Supreme Court (SC) has unanimously declared void for lack of legal basis the regulations issued by the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) which limit the accredited suppliers for big power consumers.
In a 39-page decision penned by Associate Justice Marvic Leonen, the Court en banc granted the consolidated petitions filed by Philippine Chamber of Commerce and Industry, electricity consumer groups, electric cooperatives, school institutions and several business groups seeking to nullify DOE Circular No. DC2015-06-0010 and ERC Resolution No. 5, 10, 11, and 28 all series of 2016 for being unconstitutional.
The DOE circular provided policies for the full implementation of Retail Competition and Open Access (RCOA) which compel electricity end-users with at least 1 megawatt of peak demand to choose from the 23 retail electricity suppliers (RES) designated by the ERC.
It was supposed to take effect on February 26, 2017 but was derailed due to the issuance of a temporary restraining order by the SC.
The ERC resolutions were issued to resolve any displaced contract capacity or energy that the distribution utilities may experience due to the mandatory migration of their customers to RCOA.
The petitioners claimed that the circular is unconstitutional for usurping legislative authority, violating the right to due process, equal protection clause, and non-impairment clause, as well as being an unreasonable exercise of police power.
They argued that the RCOA violated the basic constitutional right to freedom of choice of electricity consumers as it deprived them of the right to choose RES outside ERC’s listed firms.
They stressed that the new regulations do not actually open the power industry nor do they create a fair competition.
They argued that imposing mandatory contestability to electricity consumers would limit their choice of suppliers as it prohibits distribution utilities from participating in the contestable market even if the distribution utilities can offer the lowest price to consumers.
The petitioners added that the assailed circular and regulations violate not only the Constitution but also Republic Act 9136, or the Electric Power Industry Reform Act (EPIRA), because it will lead to higher prices of electricity and will have a negative impact on the economy.
They also warned that the regulations could lead to an increase in the cost of their power requirements which could translate to an increase in the prices of goods and services.
In granting the petition, the Court agreed that the assailed issuances violated the provisions of EPIRA and its policy of promoting competition through greater end-user choice.
“The EPIRA champions customer choice and allows contestable customers to choose from either franchise holders who have unbundled their business or non-regulated electricity suppliers. Clearly, as respondent Department of Energy itself admits, the mandatory migration of qualified end-users to the contestable market required in the assailed issuances finds no basis in the law they seek to implement,” the SC said.
“Undoubtedly, the assailed issuances are ultra vires for going beyond the limits of authority conferred to respondent administrative agencies. They should, therefore, be struck down,” it added.
‘Implement DOE circulars’
The Court also did not give credence to the claim of the DOE that the petition is already considered moot with its issuance of Department Circular Nos. 2017-12-0013 and 2017-12-0014, which supposedly revoked and rectified the policies in Circular No. 2015-06-0010.
Both circulars were issued by the DOE as a result of the Court’s TRO on the assailed issuances, to provide guidance to the affected end-users and suppliers.
Circular No. 2017-12-0013 allowed the voluntary participation or voluntary migration of end-users with a monthly average peak demands of 750 kW and above and 500 kW to 749 kW into the contestable market.
Circular 2017-12-2014, in turn, modified the assailed DOE circular by repealing the prohibition on distribution utilities to supply electricity beyond its captive customers.
The Court noted that a case is rendered moot when there is no longer a conflict of legal rights which would entail judicial review.
In this case, the SC noted that while the repealing two DOE circular may have modified or repealed portions of the assailed circular, respondent ERC continues to assert that distribution utilities should be prohibited from participating in the contestable market, and that the migration of qualified end-users to the contestable market is mandatory.
“Clearly, there remains a continuing controversy which requires judicial resolution,” the SC said.
It pointed out that with Circular 2015-06-00l0 having been repealed, the assailed ERC resolutions, which were regulatory guidelines to the assailed circular, have become “bereft of legal basis.”
The Court noted that the DOE has the power “to supervise the restructuring of the electricity industry” and to formulate the rules and regulations to implement the EPIRA law while the ERC is obliged to enforce the circulars and regulations issued by the DOE.
Thus, the SC directed the ERC “to promulgate the supporting guidelines to Department Circular Nos. DC2017-12-0013 and DC2017-12-0014.”
“Clearly, then, respondent Department of Energy, with its mandate of supervising the restructuring of the electricity industry, is the agency tasked with formulating rules and regulations to give life to EPIRA’s policy objectives,” the SC pointed out.
“Respondent Energy Regulatory Commission, for its part, is tasked with implementing the rules and regulations formulated and issued by respondent Department of Energy. It cannot supplant respondent Department of Energy’s policies, rules, and regulations with its own issuances.”
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