Surigao Del Norte Electric Cooperative v. Energy Regulatory Commission

NACHURA, J.:

Assailed in this petition for review on certiorari1 under Rule 45 of the Rules of Court are the Decision dated April 17, 20082 and the Resolution dated June 25, 20083 of the Court of Appeals (CA) in CA-G.R. SP No. 99781. The antecedent facts and proceedings follow- Petitioner Surigao Del Norte Electric Cooperative, Inc. (SURNECO) is a rural electric cooperative organized and existing by virtue of Presidential Decree No. 269. On February 8, 1996, the Association of Mindanao Rural Electric Cooperatives, as representative of SURNECO and of the other 33 rural electric cooperatives in Mindanao, filed a petition before the then Energy Regulatory Board (ERB) for the approval of the formula for automatic cost adjustment and adoption of the National Power Corporation (NPC) restructured rate adjustment to comply with Republic Act (R.A.) No. 7832.4 The case was docketed as ERB Case No. 96-49, and later consolidated with identical petitions of other associations of electric cooperatives in the Philippines.

The relevant provisions of R.A. No. 7832 for compliance are Sections 10 and 14, which provide- Sec. 10. Rationalization of System Losses by Phasing Out Pilferage Losses as a Component Thereof. - There is hereby established a cap on the recoverable rate of system losses as follows: x x x x (b) For rural electric cooperatives: (i) Twenty-two percent (22%) at the end of the first year following the effectivity of this Act; (ii) Twenty percent (20%) at the end of the second year following the effectivity of this Act; (iii) Eighteen percent (18%) at the end of the third year following the effectivity of this Act; (iv) Sixteen percent (16%) at the end of the fourth year following the effectivity of this Act; and (v) Fourteen percent (14%) at the end of the fifth year following the effectivity of this Act.

Provided, that the ERB is hereby authorized to determine at the end of the fifth year following the effectivity of this Act, and as often as is necessary, taking into account the viability of rural electric cooperatives and the interest of consumers, whether the caps herein or theretofore established shall be reduced further which shall, in no case, be lower than nine percent (9%) and accordingly fix the date of the effectivity of the new caps. x x x x Sec. 14. Rules and Regulations.

- The ERB shall, within thirty (30) working days after the conduct of hearings which must commence within thirty (30) working days upon the effectivity of this Act, issue the rules and regulation as may be necessary to ensure the efficient and effective implementation of the provisions of this Act, to include but not limited to, the development of methodologies for computing the amount of electricity illegally used and the amount of payment or deposit contemplated in Section 7 hereof as a result of the presence of the prima facie evidence discovered. Corollary thereto, Sections 4 and 5 of Rule IX of the Implementing Rules and Regulations (IRR) of R.A. No. 7832 provide- Section 4. Caps on System Loss allowed to Rural Electric Cooperatives.

- The maximum rate of system loss that the cooperative can pass on to its customers shall be as follows: a. Twenty-two percent (22%) effective on February 1996 billing. b.

Twenty percent (20%) effective on February 1997 billing. c. Eighteen percent (18%) effective on February 1998 billing.

d. Sixteen percent (16%) effective on February 1999 billing. e.

Fourteen percent (14%) effective on February 2000 billing. Section 5. Automatic Cost Adjustment Formula.

- Each and every cooperative shall file with the ERB, on or before September 30, 1995, an application for approval of an amended Purchased Power Adjustment Clause that would reflect the new system loss cap to be included in its schedule of rates. The automatic cost adjustment of every electric cooperative shall be guided by the following formula: Purchased Power Adjustment Clause (PPA) = A