Association Of Southern Tagalog Electric Cooperatives v. Energy Regulatory Commission

CARPIO, J.:

The Case This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court. The petition assails the 23 December 2008 Decision2 and 26 April 2010 Resolution3 of the Court of Appeals in the consolidated cases, including CA-G.R. SP Nos. 99249 and 99253.4 The Court of Appeals affirmed the Orders of the Energy Regulatory Commission (ERC) directing various rural electric cooperatives to refund their over-recoveries arising from the implementation of the Purchased Power Adjustment (PPA) Clause under Republic Act (R.A.) No. 7832 or the Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994. The Facts Petitioners Batangas I Electric Cooperative, Inc. (BATELEC I), Quezon I Electric Cooperative, Inc. (QUEZELCO I), Quezon II Electric Cooperative, Inc. (QUEZELCO II) and Pampanga Rural Electric Service Cooperative, Inc. (PRESCO) are rural electric cooperatives established under Presidential Decree (P.D.) No. 269 or the National Electrification Administration Decree.5 BATELEC I, QUEZELCO I and QUEZELCO II are members of the Association of Southern Tagalog Electric Cooperatives, Inc. (ASTEC).

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."6 On 8 December 1994, R.A. No. 7832 was enacted. The law imposed a cap on the recoverable rate of system loss7 that may be charged by rural electric cooperatives to their consumers.

Section 10 of R.A. No. 7832 provides: Section 10. Rationalization of System Losses by Phasing out Pilferage Losses as 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 the 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 The Implementing Rules and Regulations (IRR) of R.A. No. 7832 required every rural electric cooperative to file with the Energy Regulatory Board (ERB), 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.8 Section 5, Rule IX of the IRR of R.A. No. 7832 provided for the following guiding formula for the amended PPA Clause: Section 5.

Automatic Cost Adjustment Formula. - x x x x The automatic cost adjustment of every electric cooperative shall be guided by the following formula: Purchased Power Adjustment Clause (PPA) = A