GEROCHI VS.

DEPARTMENT OF ENERGY
The Court made a conservative and pivotal distinction between police power and taxation,
holding that the distinction rests in the purpose for which the charge is made. If generation
of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax;
but if regulation is the primary purpose, the fact that revenue is incidentally raised does not
make the imposition a tax. Thus, the Supreme Court concluded that the Universal Charge
imposed under Sec. 34 of the EPIRA is an exaction that invokes the State’s police power,
particularly its regulatory dimension, gleaned from Sec. 34 itself which enumerates the
purposes of the Universal Charge which can be amply discerned as regulatory in character.

FACTS:

On June 8, 2001 Congress enacted RA 9136 or the Electric Power Industry Act of 2001. Petitioners
Romeo P. Gerochi and company assail the validity of Section 34 of the EPIRA Law for being an
undue delegation of the power of taxation. Section 34 provides for the imposition of a “Universal
Charge” to all electricity end users after a period of (1) one year after the effectively of the EPIRA
Law. The universal charge to be collected would serve as payment for government debts, missionary
electrification, equalization of taxes and royalties applied to renewable energy and imported energy,
environmental charge and for a charge to account for all forms of cross subsidies for a period not
exceeding three years. The universal charge shall be collected by the ERC on a monthly basis from all
end users and will then be managed by the PSALM Corp. through the creation of a special trust fund.

ISSUE:
Whether or not there is an undue delegation of the power to tax on the part of the ERC

Whether or not Universal Charge imposed under Section 42 of the EPIRA Law is an exercise
of police power of power of taxation?

HELD:
No, the universal charge as provided for in section 34 is not a tax but an exaction of the regulatory
power (police power) of the state. The universal charge under section 34 is incidental to the regulatory
duties of the ERC, hence the provision assailed is not for generation of revenue and therefore it cannot
be considered as tax, but an execution of the states police power thru regulation.

Moreover, the amount collected is not made certain by the ERC, but by the legislative parameters
provided for in the law (RA 9136) itself, it therefore cannot be understood as a rule solely coming
from the ERC. The ERC in this case is only a specialized administrative agency which is tasked of
executing a subordinate legislation issued by congress; which before execution must pass both the
completeness test and the sufficiency of standard test. The court in appreciating Section 34 of RA
9136 in its entirety finds the said law and the assailed portions free from any constitutional defect and
thus deemed complete and sufficient in form.