DOJ Opinion No. 049, s. 1999

DOJ OPINION NO. 049 , s. 1999 July 1, 1999 Hon. Cyril C. Del Callar Undersecretary Department of Energy Energy Center, Merritt Road, Fort Bonifacio, Taguig Metro Manila Sir : In a letter to this Department dated May 25, 1999, opinion is requested on whether or not privately owned electric distribution utilities, which have long-term power supply contracts with Independent Power Procedures (IPPs) should be allowed to recover their "stranded cost" resulting from the change in regulatory regime through a "special fee or levy". cdta You state that Presidential Decree No. 40 placed upon the National Power Corporation (NPC) the sole responsibility of setting up transmission lines and construction of associated generation facilities in the Philippines; that with the promulgation of Executive Order No. 215 entitled, "Amending P.D. 40 and Allowing the Private Sector to Generate Electricity" on July 10 1987, the private sector was given the opportunity to engage in the power generation, otherwise referred to as the Independent Power Producers (IPPs); that along this line, the distribution utilities were likewise given the opportunity to enter into long-term power supply contracts with these IPPs to augment their power supply capability. You further state that under the proposed industry structure, competition in the wholesale and retail business in supply of electricity will be introduced; that given the wholesale competition, as "electricity spot marker" shall be put in place for the sale and purchase of electricity in bulk; that as such, customers within the franchise area of a distribution utility will now have the power to choose electricity suppliers other than the distribution utility itself or may opt to purchase electricity directly from the electricity spot markers; that as a result of the competition in the electricity spot market, there will be price difference between the contracts entered into by the distribution utilities with the IPPs and the market driven price of electricity; that given the above scenarios, the distribution utilities now contend that they stand to suffer financial losses commonly referred to as "stranded cost or liabilities", hence, they are requesting that they be allowed to recover these "stranded costs" through appropriate recovery mechanism in the form of a universal levy to be paid by all consumers of electricity nationwide; and that under House Bill No. 4579, as certified by the President, such a recovery mechanism is only allowed for the stranded contractual liabilities or costs of NPC. It appears that the concern of the distribution utilities is anchored on the premise that the IPP contracts were given proper accreditation by the Government, specifically by the Department of Energy, by virtue of E.O. No. 215 and its implementing rules and regulations, and, furthermore, the Power Purchase Agreements (PPAs) including the rates have been approved by the Energy Regulatory Board. We regret to inform you that this Department has to decline rendition of opinion on the subject matter of query for the following reasons: Firstly, the query involves the substantial rights of private parties, and since the opinion the Secretary of Justice is merely advisory in nature, such opinion would not be binding upon said private parties who, if adversely affected by such opinion, may take issue therewith and contest it before the courts. As a matter of policy, therefore, the Secretary of Justice has consistently refrained from rendering opinion on questions which are justiciable in nature or those which may be the subject of litigation before the courts (Secretary of Justice Op. No. 91, s. 1957; Ops. Nos. 19 and 92, s. 1971; Op. No. 108, s. 1978; and Op. No. 46, s. 1981). Secondly, the subject matter of the query necessarily involves a money claim which will be dealt with ultimately by the Commission on Audit (COA) pursuant to its constitutional mandate "to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or used of funds . . . pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government owned and controlled corporations with original charters, . . ." (Section 2[1], Article I-D, 1987 Constitution). By established precedents, this Department has consistently refrained from expressing its views on matters which fall within the jurisdiction of another office or agency, unless upon request of the head of the office or agency concerned (Secretary of Justice Opns. Nos. 19, 56 and 60, s. 1996; No. 19, s. 1993; No. 146, s. 1994 and No. 95, s. 1987). aisadc Very truly yours, (SGD.) JUSTICE SERAFIN R. CUEVAS Secretary