SC orders ERC to enforce DOE’s circular on competition, open access in power industry

Supreme Court (SC)

For lack of legal basis, the Supreme Court (SC) has declared void the issuances by the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) that limited the number of accredited suppliers of big power or electricity consumers in the country.

In a decision written by Associate Justice Marvic M.V.F. Leonen, the SC directed the ERC to promulgate the guidelines on DOE Circular Nos. DC2017-12-0013 and DC2017-12-0014 that rectified the DOE’s void circular issued in 2015.

Circular No. 2017-12-0013 allowed the voluntary participation or voluntary migration of end-users with a monthly average peak demands of 750 kilowatts and above and 500 kilowatts to 749 kilowatts into the contestable market.

Circular 2017-12-2014, on the other hand, modified the assailed DOE circular (DOE Circular No. DC2015-06-0010) by repealing the prohibition on distribution utilities to supply electricity beyond its captive customers.

Five DOE and ERC issuances that were restrained by the SC for implementation in a temporary restraining order issued in 2017 were:

1. DOE Circular No. DC2015-06-0010 --Providing Policies to Facilitate the Full Implementation of Retail Competition and Open Access (RCOA) in the Philippine Electric Power Industry. It compelled electricity end-users with at least one megawatt of peak demand to choose from the 23 retail electricity suppliers (RES) designated by the ERC.

2. ERC Resolution No. 05, Series of 2016 – A Resolution Adopting the 2016 Rules Governing the Issuance of Licenses to Retail Electricity Suppliers (RES) and Prescribing the Requirements and Conditions Therefor.

3. ERC Resolution No. 10, Series of 2016 – Adopting the Revised Rules for Contestability.

4. ERC Resolution No. 11, Series of 2016 – Imposing Restrictions on the Operations of Distribution Utilities and Retail Electricity Suppliers in the Competitive Retail Electricity Market.

5. ERC Resolution No. 28, Series of 2016 – Revised Timeframe for Mandatory Contestability, amending Resolution No. 10.

The TRO was issued on the petition filed by the Philippine Chamber of Commerce and Industry (PCCI), Ateneo De Manila University, San Beda College (Alabang), several electric cooperatives, and mall owner Riverbanks Development Corporation.

With the SC decision made public last Sept. 24, the SC granted the petition filed by PCCI and others.

DOE Circular No. DC2015-06-0010 was assailed 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.

The petitioners said that 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 also said the DOE circular and the regulations violate not only the Constitution but also Republic Act No. 9136, the Electric Power Industry Reform Act or EPIRA Law, as they will spawn higher prices of electricity to ordinary consumers and will impact negatively on the economy.

In granting the petition, the SC said:

“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 said.

The SC noted DOE’s assertion that it had rectified Circular No. 2015-06-0010 with the issuance of Circular Nos. 2017-12-0013 and 2017-12-0014 as a result of the TRO issued in 2017.

But the SC noted that while the repealing two DOE circulars may have modified or repealed portions of the assailed circular, ERC continued 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 the repeal of the earlier circular, the assailed ERC resolutions issued on the basis of the repealed circular are now “bereft of legal basis.”

The SC said: “EPIRA abolished the Energy Regulatory Board and created respondent Energy Regulatory Commission, a quasi-judicial and independent regulatory body, in its stead. Respondent Energy Regulatory Commission was then tasked with promoting competition, encouraging market development, ensuring customer choice, and penalizing abuse of market power in the restructured electricity industry. Both respondents possess similar mandates in that they are the administrative agencies tasked with supervising and overseeing the energy sector.”

Citing a 2019 decision, the SC said: “The Department of Energy formulates the rules and regulations to implement the EPIRA. The Energy Regulatory Commission then enforces these rules and regulations. The Energy Regulatory Commission ‘has no independence or discretion to ignore, waive, amend, postpone, or revoke the rules and regulations of the DOE pursuant to the EPIRA.’”

Thus, the SC said:

“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.

“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.

“WHEREFORE, the Petitions are GRANTED. Department of Energy Circular No. DC2015-06-0010, series of 2015, and Energy Regulatory Commission Resolution Nos. 5, 10, 11, and 28, all series of 2016, are declared VOID for being bereft of legal basis. Respondent Energy Regulatory Commission is DIRECTED to promulgate the supporting guidelines to Department Circular Nos. DC2017-12-0013 and DC2017-12-0014. SO ORDERED.”