Gerochi v. Doe

GEROCHI v. DOE (KC) July 17, 2007 | Nachura, J. Nachura,  J. | | Power to tax v Police Power  PETITIONER : Romeo P. Gerochi, et al. RESPONDENTS: Department of Energy et al. SUMMARY: After Congress passed EPIRA and its IRR was implemented, NPCSPUG filed with the ERC two petitions. The first one sought to avail from the Universal Charge for Missionary Electrification and the second one from the Universal Chare for the Environmental Charge. Both petitions were granted so PECO was tasked to collect from all end-users the Universal Charge. Petitioner Gerochi went to the Supreme Court to assail the constitutionality of the Universal Charge arguing that is was a tax which was to be collected, and that such delegation of legislative power to ERC was unconstitutional. Respondents DOE et al. argued that the Universal Charge was not a tax (important; what was cited in the book) and there was no undue delegation.

First, Universal Charge was not a tax because for regulatory purposes  –  to  to ensure the viability of the country’s electric power industry. The power to tax is incident of sovereignty and is unlimited in its range. By its nature it has no limits and the security against its abuse is to be found only in the responsibility of the legislature which imposes the tax. It is based on the principle that taxes are the lifeblood of the government and their prompt and certain availability is an imperious need. It emanates from necessity; without taxes, government cannot fulfill its mandate of  promoting t he general welfare and well-being of the people. people. Police power on the other hand is the power of the state to promote public welfare by restraining and regulating the use of liberty and property. It is the most pervasive, the least limitable, and the most demanding of the three fundamental powers of the State. The distinction rests in the purpos for which the charge is made. If the generation of revenue is the primary purpose and the regulation is merely incident, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax. And second, there was no undue delegation of legislative power because EPIRA has sufficient and determinable standards which would guide ERC in the exercise of the  powers granted to it. EPIRA is complete in all its essential terms and conditions. Although it merely provides that within 1 year from the effectivity a Universal Charge shall be determined, fixed and approved by the ERC without specifying the amount to be paid, the amount is nevertheless made certain legislative parameters 1

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Sec. 43(b)(ii) Financial capability standards for the generating companies, the TRANSCO, distribution utilities and suppliers: Provided, That in the formulation of the financial capability standards, the nature and function of the entity shall be considered: Provided, further, That such standards are set to ensure that the electric power industry participants meet the minimum financial standards to protect the public interest. Determine, fix, and approve, after due notice and public hearings the universal charge, to be imposed on all electricity end-users pursuant to Section 34 hereof 

 provided and that EPIRA contains sufficient standards. EPIRA ensuring the total electrification of the country and the quality, reliability, security and affordability of the supply electric power and watershed rehabilitation and management meets the requirements for valid delegation. DOCTRINE: (Power to tax v. Police power) If the generation of revenue is the  primary purpose and the regulation is merely incident, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax. FACTS:: 1. THE CASE: Petitioners Romeo P. Gerochi, Katulong ng Bayan (KB), a nd Environmentalist Consumers Network, Inc. (ECN) seek to: a. declare Sec. 34 of EPIRA and Rule 18 of the IRR unconstitutional  b. refund the Universal Charge imposed upon consumers c. restrain respondents DOE, ERC, NPC, PSALM, NPC-SPUG, and PECO from implementing, charging and collecting the Universal Charge 2.  NPC-SPUG filed with ERC a petition for the availment from the the Universal Charge of its share for Missionary Electrification. It also filed with ERC another petition praying that the proposed share from the Universal Charge for the Environmental Charge of P0.0025/kWH be approved for withdrawal from the Special Trust Fund (STF) managed by PSALM. 3. ERC provisionally approved the computed amount (P0.168/kWH) from the Universal Charge for Missionary Electrification and authorized TRANSCO and Distribution Utilities to collect the same from its end-users on a monthly basis. a. This was subsequently modified by the ERC which increased the amount to P0.0373/kWh.  b.  NPC-SPUG filed an MR asking ERC set aside the modification which the ERC granted. 4. Meanwhile, ERC also approved the petition for the proposed share from the Universal Charge for the Environmental Charge, authorizing NPC to draw up to 70M from PSALM. 5. On the basis of said ERC decisions, PECO c harged petitioner Gerochi and all other end-users with the Universal Charge. Hence, this action assailing the constitutionality of Sec. 34 of EPIRA and its IRR.  Petitioner Gerochi et al.’s argument: 1. The Universal Charge is a tax which is to be collected from all electric endusers and self-generating entities. The Universal Charge is not for regulatory purpose. 2. The power to tax is strictly a legislative function and as such, the delegation of said power to ERC is unconstitutional. It leaves ERC with complete discretionary legislative authority. 3. ERC is empowered to approve and determine where the funds collected should be used.

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The imposition is oppressive and confiscatory and amounts to taxation without representation as the consumers were not given a chance t o be heard and represented  Respondent DOE et al.’s argument: 1. PSALM: Universal Charge is levied for a specific regulatory purpose which is to ensure the viability of the country’s electric power industry; exacted by the State in the exercise of its police power. There is no undue delegation of legislative power since the ERC merely exercises a limited authority or discretion as to the e xecution and implementation of the provisions of EPIRA. 2. DOE, ETC, NPC: Universal Charge not a tax bec ause it is levied for a specific regulatory purpose. It does not possess the essential characteristics of a tax and that its imposition would redound to the benefit of the electric  power industry and not to the public. Its rate is also uniform on electricity end-users, unlike a tax which is imposed based on the individual taxpayer’s ability to pay. There is no undue delegation of legislative power because EPIRA has sufficient determinable standards which would guide ERC in the exercise of the powers granted to it. 3. PECO: it is duty bound to collect and remit the amount pertaining to the Missionary Electrification and Environmental Fund components of the Universal Charge. ISSUE/s: 1. WoN Universal Charge is a tax –  NO (important) 2. WoN there is undue delegation of legislative power to tax  –  NO (important) 3. WoN petitioners Gerochi et al. violated the doctrine of hierarchy of courts  –  YES (not really important jsyk) RULING: WHEREFORE, the instant case is hereby DISMISSED for lack of merit. RATIO:  First Issue 1. Power to Tax v. Police Power: a. Power to Tax: it is incident of sovereignty and is unlimited in its range. By its nature it has no limits and the security against its abuse is to be found only in the responsibility of the legislature which imposes the tax. It is based on the principle that taxes are the lifeblood of the government and their prompt and certain availability is an imperious need. It emanates from necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people b. Police power: Power of the state to promote public welfare by restraining and regulating the use of liberty and property. It is the most pervasive, the least limitable, and the most demanding of the three fundamental powers of the State.

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The distinction rests in the purpos for which the charge is made. If the generation of revenue is the primary purpose and the regulation is merely incident, the imposition is a tax; but if regulation is the  primary purpose, the fact that revenue is incidentally raise d does not make the imposition a tax. 2. Sec. 34 of the EPIRA is not a tax. In exacting Sec. 34, the State’s police  power is invoked. T his can be deduced from the purposes 2  for which the Universal Charge is imposed. 3. Well established is the doctrine that the taxing power may be used as an implement of police power. With the Universal Charge, a Special Trust Fund (STF) is created under PSALM. The STF has some notable characteristics similar to that of the Oil Price Stabilization Fund and Sugar Stabilization Fund which were exactions made in the exercise of the police  power. a. 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 Second Issue 1. Delegation of legislative power to various specialized administrative agencies is allowed as an exeception to the principle of separation of  powers. 2. Given the volume and variety of interactions in today’s society, it is doubtful if the legislature can promulgate laws that will deal adequately with and respond promptly to the minutiae of everyday life.

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(a) To ensure and ac celerate the total electrification of the country;

(b) To ensure the quality, reliability, security and affordability of the supply of electric power; (c) To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market; (d) To enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors; (e) To ensure fair and non-discriminatory treatment of public and private sector entities in the process of restructuring the electric power industry; (f) To protect the public interest as it is affected by the rates and services of electric utilities and other  providers of electric power; (g) To assure socially and environmentally compatible energy sources and infrastructure; (h) To promote the utilization of indigenous and new and renewable energy r esources in power generation in order to reduce dependence on imported energy; (i) To provide for an orderly and transparent privatization of the assets and liabilities of the National Power Corporation (NPC); (j) To establish a strong and purely independent regulatory body and system to ensure consumer  protection and enhance the competitive operation of the electricity market; and (k) To encourage the efficient use of energy and other modalities of demand side management.

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All that is required 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. 4. Tests for a valid delegation of legislative power: a. Complete in all its terms and conditions : EPIRA is complete in all its essential terms and conditions. Although it merely provides that within 1 year from the effectivity a Universal Charge shall be determined, fixed and approved by the ERC without specifying the amount to be paid, the amount is nevertheless made certain by the legislative parameters3  provided. ERC does not enjoy a wide latitude of discretion. It calculates the amount of the stranded debts and stranded contract costs of NPC which shall form the basis for ERC in the determination for the Universal Charge.  b.  Adequate guidelines or limitations in the law to determine the boundaries of the delegate’s authority and prevent from running riot : EPIRA contains sufficient standards. Supreme Court had accepeted as sufficient standards “interest of law and order,” “public interest,” “justice and equity,” etc. EPIRA ensuring the total electrification of the country and the quality, reliability, security and affordability of the supply electric power and watershed rehabilitation and management meet the requirements for valid delegation. 5. ERC, as regulator, should have sufficient power to respond in real time to changes wrought by multifarious factors affecting public utilities. Third issue 1. Petitioner Gerochi et al. violated the doctrine of hierarchy of courts when they filed the complaint directly with the Supreme Court. The Complaint is  bereft of any allegation of G ADALEJ on the part of ERC. Moreover, just  because the SC has concurrent jurisdiction to issue writs of certiorari,  prohibition etc., it does not give litigants unrestrained freedom of choice of forum from which to seek such relief.

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Sec. 43(b)(ii) Financial capability standards for the generating companies, the TRANSCO, distribution utilities and suppliers: Provided, That in the formulation of the financial capability standards, the nature and function of the entity shall be considered: Provided, further, That such standards are set to ensure that the electric power industry participants meet the minimum financial standards to p rotect the public interest. Determine, fix, and approve, after due notice and public hearings the universal charge, to be imposed on all electricity end-users pursuant to Section 34 hereof