ASSOCIATION OF SOUTHERN TAGALOG ELECTRIC COOPERATIVE, INC. vs.

ENERGY
REGULATORY COMMISSION
G.R. No. 192117, September 18, 2012
CARPIO, J

G.R. No. 192118

CENTRAL LUZON ELECTRIC COOPERATIVES ASSOCIATION, INC. (CLECA) and PAMPANGA
RURAL ELECTRIC SERVICE COOPERATIVE, INC. (PRESCO) vs. ENERGY REGULATORY
COMMISSION

Facts

Petitioners Batangas I Electric Cooperative, Inc., Quezon I Electric Cooperative, Inc.,

Quezon II Electric Cooperative, Inc. and Pampanga Rural Electric Service Cooperative, Inc. are
rural electric cooperatives established under Presidential Decree (P.D.) No. 269 or the National
Electrification Administration Decree. BATELEC I, QUEZELCO I and QUEZELCO II are members of
the Association of Southern Tagalog Electric Cooperatives, Inc (ASTEC); while PRESCO is a
member of the Central Luzon Electric Cooperatives Association, Inc (CLECA). Petitioners are
engaged in the distribution of electricity "on a non-profit basis for the mutual benefit of its
members and patrons.”

On 8 December 1994, R.A. No. 7832 or the Anti-Electricity and Electric Transmission
Lines/Materials Pilferage Act of 1994 was enacted. The law imposed a limit on the recoverable
rate of system loss that may be charged by rural electric cooperatives to their consumers. The
Implementing Rules and Regulations (IRR) of R.A. No. 7832 required every rural electric
cooperative to file with the Energy Regulatory Board on or before 30 September 1995, an
application for approval of an amended PPA Clause incorporating the cap on the recoverable
rate of system loss to be included in its schedule of rates.
On 8 June 2001, R.A. No. 9136 or the Electric Power Industry Reform Act (EPIRA) of 2001
was enacted. Section 38 of the EPIRA abolished the ERB, and created the Energy Regulatory
Commission. The powers and functions of the ERB not inconsistent with the provisions of the
EPIRA were transferred to the ERC, together with the applicable resources of the ERB. All
electric cooperatives were directed to implement the PPA in the manner the then Energy
Regulatory Board had prescribed.

Subsequently, the ERC issued policy guidelines on the treatment of discounts extended
by power suppliers. It also issued an Order which provides that rural electric cooperatives
should only recover from their members and patrons the actual cost of power purchased from
power suppliers because they are non-profit and serve the interest of its members and patrons.
The ERC also ordered BATELEC, et al. to refund their respective over-recoveries to end-users. In
addition, the ERC also adopted the new "grossed-up factor mechanism" in the computation of
the over-recoveries of the electric cooperatives to be remitted to their consumers.
 Thus, BATELEC I, et al. filed motion to reconsider the above orders but the ERC denied
the same. On appeal, the CA upheld the validity of the ERC Orders. Hence, this petition.
BATELEC I, et al. assert that these ERC Orders are invalid for lack of publication, non-submission
to the U.P. Law Center, and for their retroactive application.

Issue
1. Whether the policy guidelines issued by the ERC on the treatment of discounts
extended by power suppliers are ineffective and invalid for lack of publication, non-submission
to the University of the Philippines (U.P.) Law Center, and their retroactive application.
2. Whether the grossed-up factor mechanism implemented by the ERC in the
computation of the over-recoveries is ineffective and invalid for lack of publication, non-
submission to the U.P. Law Center, and its retroactive application.

Ruling

The Supreme Court held that publication is a basic postulate of procedural due process.
Article 2 of the Civil Code, as amended by Section 1 of Executive Order No. 200, states that
"laws shall take effect after fifteen days following the completion of their publication either in
the Official Gazette or in a newspaper of general circulation in the Philippines, unless it is
otherwise provided." Covered by this rule are presidential decrees and executive orders
promulgated by the President in the exercise of legislative powers whenever the same are
validly delegated by the legislature or, at present, directly conferred by the Constitution.
Administrative rules and regulations must also be published if their purpose is to enforce or
implement existing law pursuant also to a valid delegation.
However, there are several exceptions to the requirement of publication such as an
interpretative regulation. I t "adds nothing to the law" and "does not affect the substantial
rights of any person”. It seeks to regulate only the personnel of the administrative agency and
not the general public. The policy guidelines of the ERC on the treatment of discounts extended
by power suppliers are interpretative regulations. The policy guidelines merely interpret R.A.
No. 7832 and it‘s IRR, particularly on the computation of the cost of purchased power. The
policy guidelines did not modify, amend, or supplant the IRR. Hence, it is exempt from the
publication requirement.

Nevertheless, the grossed-up factor mechanism amends the IRR of R.A. No. 7832 as it
serves as an additional numerical standard that must be observed and applied by rural electric
cooperatives in the implementation of the PPA. In light of these, the grossed-up factor
mechanism does not merely interpret R.A. No. 7832 or its IRR. It is also not merely internal in
nature. The grossed-up factor mechanism amends the IRR by providing an additional numerical
standard that must be observed and applied in the implementation of the PPA. The grossed-up
factor mechanism is therefore an administrative rule that should be published and submitted to
the U.P. Law Center in order to be effective.
 It does not appear from the records that the grossed-up factor mechanism was
published and submitted to the U.P. Law Center. Thus, it is ineffective and may not serve as a
basis for the computation of over-recoveries. The portions of the over-recoveries arising from
the application of the mechanism are therefore invalid. Furthermore, the application of the
grossed-up factor mechanism to periods of PPA implementation prior to its publication and
disclosure renders the said mechanism invalid for having been applied retroactively.
Respondent Energy Regulatory Commission is DIRECTED to compute the portions of the
over-recoveries arising from the application of the grossed-up factor mechanism and to
implement the collection of any amount previously refunded by petitioner to their respective
consumers on the basis of the grossed-up factor mechanism.
Partly Granted