SURIGAO DEL NORTE ELECTRIC COOPERATIVE, INC. (SURNECO) vs.

ENERGY REGULATORY COMMISSION

FACTS: On February 8, 1996, the Association of Mindanao Rural Electric Coo eratives, as re resentative of !"R#ECO and of the other $$ rural electric coo eratives in Mindanao, filed a etition before the then Ener%y Re%ulatory &oard 'ER&( for the a roval of the for)ula for auto)atic cost ad*ust)ent and ado tion of the #ational +o,er Cor oration '#+C( restructured rate ad*ust)ent to co) ly ,ith Re ublic Act 'R.A.( #o. -8$../ 0he case ,as doc1eted as ER& Case #o. 962 /9, and later consolidated ,ith identical etitions of other associations of electric coo eratives in the +hili ines. 3n an Order dated February 19, 199-, the ER& %ranted !"R#ECO and other rural electric coo eratives rovisional authority to use and i) le)ent the +urchased +o,er Ad*ust)ent '++A( for)ula ursuant to the )andatory rovisions of R.A. #o. -8$. and its 3RR, ,ith a directive to sub)it relevant and ertinent docu)ents for the &oard4s revie,, verification, and confir)ation. 5hile the assa%e of R.A. #o. 91$66 led to the creation of the Ener%y Re%ulatory Co))ission 'ERC(, re lacin% and succeedin% the ER&. All endin% cases before the ER& ,ere transferred to the ERC. ER& Case #o. 962/9 ,as re2 doc1eted as ERC Case #o. .6612$/$. 3n the Order dated 7une 1-, .66$, the ERC clarifie ER&4s earlier olicy re%ardin% the ++A for)ula to be used by the electric coo eratives, vi8.9 After a careful evaluation of the records, the Co))ission noted that the ++A for)ula ,hich ,as a roved by the ER& ,as silent on ,hether the calculation of the cost of electricity urchased and %enerated in the for)ula should be :%ross: or :net: of the discounts. 0o attain unifor)ity in the i) le)entation of the ++A for)ula, the Co))ission has resolved that; 1. 3n the confir)ation of ast ++As, the o,er cost shall still be based on :%ross,: and .. 3n the confir)ation of future ++As, the o,er cost shall be based on :net.: 0he electric coo eratives filed their res ective )otions for clarification and<or reconsideration. =ence, the ERC issued an Order- dated 7anuary 1/, .66>, statin% that the ++A ,as a cost2recovery )echanis), not a revenue2%eneratin% sche)e, so that the distribution utilities or the electric coo eratives )ust recover fro) their custo)ers only the actual cost of urchased o,er. RULING: !"R#ECO cannot insist on usin% the )ulti lier sche)e even after the i) osition of the syste) loss ca s under !ection 16 of R.A. #o. -8$.. 3ndeed, under #ational Electrification Ad)inistration Me)orandu) #o. 12A, the use of the )ulti lier sche)e allo,s the recovery of syste) losses even beyond the ca s )andated in R.A. #o. -8$., ,hich is intended to %radually hase out ilfera%e losses as a co) onent of the recoverable syste) losses by the distributin% utilities such as !"R#ECO. =o,ever, it is totally re u%nant to and inco) atible ,ith the syste) loss ca s established in R.A. #o. -8$., and is re ealed by !ection 16 of the la,. As bet,een #EA Me)orandu) #o. 12A, a )ere ad)inistrative issuance, and R.A. #o. -8$., a le%islative enact)ent, the latter )ust revail. Additionally, the ++A for)ula rovided in the 3RR of R.A. #o. -8$. ,as only a )odel to be used as a %uide by the electric coo eratives in ro osin% their o,n ++A for)ula for a roval by the then Ener%y Re%ulatory &oard 'ER&(. !ections / and >, Rule 3? of the 3RR directed the electric coo eratives to a ly for a roval of such for)ula ,ith the ER& so that the syste) loss ca s under the la, ,ould be incor orated in their co) utation of o,er cost ad*ust)ents. 0he 3RR did not rovide for a s ecific for)ula@ therefore, there ,as nothin% in the 3RR that ,as a)ended or could have been a)ended relative to the ++A for)ula. 0he 3RR left to the ER&, no, the Ener%y Re%ulatory Co))ission, the authority to a rove and oversee the i) le)entation of the electric coo eratives4 ++A for)ula in the eAercise of its rate2)a1in% o,er over the). !uri%ao del #orte Electric Coo erative, 3nc. '!"R#ECO( vs. Ener%y Re%ulatory Co))ission. B.R. #o. 18$6.6, October /, .616. 0he re%ulation of rates to be char%ed by ublic utilities is founded u on the olice o,ers of the !tate and statutes rescribin% rules for the control and re%ulation of ublic utilities are a valid eAercise thereof. 5hen rivate ro erty is

used for a ublic ur ose and is affected ,ith ublic interest, it ceases to be *uris rivati only and beco)es sub*ect to re%ulation. 0he re%ulation is to ro)ote the co))on %ood. !ub)ission to re%ulation )ay be ,ithdra,n by the o,ner by discontinuin% use@ but as lon% as use of the ro erty is continued, the sa)e is sub*ect to ublic re%ulation. 5=EREFORE, the etition is CE#3EC. 0he Cecision dated A ril 1-, .668 and the Resolution dated 7une .>, .668 of the Court of A eals in CA2B.R. !+ #o. 99-81 are AFF3RMEC. Costs a%ainst etitioner.