G.R. No. L-26762 & L-26765. August 29, 1975.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY and MANILA ELECTRIC COMPANY, petitioners, vs. THE PUBLIC SERVICE COMMISSION (now Specialized Regulatory Boards), respondent.

FACTS

This case involves consolidated petitions concerning the interpretation of Section 40(e) of the Public Service Act, as amended by Republic Act 3792. The provision authorizes the Public Service Commission (PSC) to collect annual fees from public utilities. The specific clause in dispute states the fee is “twenty centavos for each one hundred pesos or fraction thereof, of the capital stock subscribed or paid, or if no shares have been issued, of the capital invested, or of the property and equipment, whichever is higher.” The PSC originally construed this to mean that for a stock corporation, the basis is either the capital stock or the property and equipment, whichever is higher. This Court, in a 1970 decision, affirmed this interpretation but modified it to specify that “property and equipment” should be net of depreciation.
The petitioners, PLDT and Meralco, filed motions for reconsideration. They argued that the amendment did not alter the basis for stock corporations, which should remain solely the “capital stock subscribed or paid,” and that the alternative basis of “property and equipment” applies only to non-stock entities. This Court initially viewed the fees as a tax measure, but later remanded the case to the PSC for evidence on whether such fees, if computed on the higher property basis, would be confiscatory. Following the abolition of the PSC and its replacement by the Specialized Regulatory Boards (SRB), the parties submitted a Stipulation of Facts.

ISSUE

Whether Section 40(e) of the Public Service Act, as amended by R.A. 3792, mandates the use of the “property and equipment” as an alternative basis for computing supervision and regulation fees for public utilities organized as stock corporations.

RULING

The Court, upon reconsideration, ruled in favor of the petitioners. It abandoned its prior characterization of the fees as a tax measure. Reaffirming its jurisprudence, the Court held that the fees collected under Section 40 are regulatory in nature, intended to reimburse the government for the costs of supervision and rate regulation, and are not taxes. Consequently, such fees must bear a reasonable relation to the cost of the regulatory service provided; they cannot be arbitrary, oppressive, or confiscatory.
The Court accepted the SRB’s new position, which aligned with the petitioners, that the amendment was not a tax measure. Examining the statutory construction, the Court found that the amendment’s phraseology, particularly the clause “or of the property and equipment, whichever is higher,” was intended to apply specifically to the preceding clause concerning entities “if no shares have been issued.” Therefore, for stock corporations like PLDT and Meralco, the sole basis for the fee computation remains the “capital stock subscribed or paid.” The alternative basis of “property and equipment” applies only to non-stock corporations or entities without issued capital stock. This interpretation avoids the unreasonable and potentially confiscatory result of imposing fees based on the gross value of property, which would bear no relation to the actual cost of regulation. The previous decision was accordingly reconsidered and set aside.