I. Introduction

In the Philippines, commercial building owners—operators of office towers, shopping malls, condominiums, mixed-use developments, and industrial parks—routinely act as intermediate electricity resellers. A single master meter connects the building to the franchised distribution utility (DU) such as Meralco, Visayan Electric Company, or Davao Light, while individual sub-meters serve tenants. The owner then bills tenants for consumed electricity, often adding line items described as “surcharges,” “system loss charges,” “maintenance fees,” “administrative charges,” “common-area allocation,” or “wheeling fees.” These practices have generated persistent disputes, tenant complaints, and regulatory scrutiny because electricity is an essential service imbued with public-interest character under Philippine law. The core legal question is whether, and to what extent, a private building owner may lawfully impose any charge beyond the exact pass-through cost of the electricity supplied by the DU.

II. Constitutional and Statutory Framework

The 1987 Constitution, Article XII, Section 6, declares that the State shall regulate public utilities and ensure reasonable rates. Electricity distribution and supply fall within this category. Republic Act No. 9136, the Electric Power Industry Reform Act of 2001 (EPIRA), as amended by RA 11285 (Energy Efficiency and Conservation Act) and other laws, restructured the industry and created the Energy Regulatory Commission (ERC) as the independent regulatory body vested with exclusive jurisdiction over rates, charges, and practices in the electric power industry (EPIRA, Sec. 43).

EPIRA explicitly prohibits any person or entity from engaging in distribution, supply, or resale of electricity without proper authority or compliance with standards. However, commercial building owners are not required to secure a separate distribution franchise or Retail Electricity Supplier (RES) license when they merely sub-meter within their premises and do not sell to the public at large; they operate as “captive” or “embedded” resellers. This status does not exempt them from ERC oversight.

Complementary statutes include:

Republic Act No. 7394 (Consumer Act of the Philippines), which prohibits deceptive acts and unconscionable sales practices;
Republic Act No. 4653 (prohibiting certain deceptive practices in retail), though largely superseded;
Civil Code provisions on lease (Articles 1642–1688) requiring that lease terms conform to law and public policy;
Republic Act No. 9904 (Magna Carta for Homeowners and Homeowners’ Associations) and DHSUD regulations for condominiums; and
Republic Act No. 11311 (Anti-Red Tape Act) and general administrative due-process requirements.

III. ERC Rules on Sub-Metering and Resale

The ERC has issued multiple issuances that directly govern sub-metering in commercial buildings:

Guidelines on the Sale of Electricity by Distribution Utilities and Other Suppliers to End-Users (various resolutions consolidated under ERC’s “Rules for the Retail Market”).
Metering Standards under ERC Resolution No. 1, Series of 2015 (Revised Rules on Metering) and subsequent amendments requiring that all sub-meters be ERC-approved, calibrated every two years by accredited laboratories, and sealed.
Billing Transparency Rules mandating itemized statements showing generation charge, transmission charge, distribution charge, universal charges, VAT, and any other authorized pass-through items exactly as billed by the DU.
Prohibition on Unauthorized Mark-Ups: ERC policy, consistently applied in adjudication cases, prohibits any profit margin or arbitrary percentage surcharge on the kilowatt-hour (kWh) energy charge itself. The building owner may recover only the actual cost paid to the DU plus VAT and any documented, reasonable, and pre-disclosed service fees.

The leading principle, reiterated in numerous ERC decisions, is that electricity resale must be on a “cost-recovery, non-profit” basis for the energy component. Any additional charge must be (a) expressly stipulated in the lease contract, (b) reasonable, (c) directly related to an actual service provided, and (d) not disguised as a profit center.

IV. Permissible Charges and Surcharges

The following are generally lawful when properly implemented:

Pass-through of DU charges: Exact replication of the DU’s generation, transmission, distribution, supply, and lifeline/cross-subsidy charges per kWh, adjusted for the exact consumption recorded by the calibrated sub-meter.
Value-Added Tax (VAT): 12% on the total electricity bill, correctly computed.
System Loss Charge: Only the portion actually allocated by the DU to the master meter; the building owner cannot inflate this or add its own “internal system loss.”
Common-Area Electricity Allocation: Proportionate sharing of electricity used in lobbies, corridors, elevators, parking, and other common spaces, provided the allocation method (usually by floor area or leasable space ratio) is stated in the lease and applied uniformly.
Meter Rental or Amortization: A reasonable monthly fee for the use and maintenance of sub-meters, provided the amount is cost-based, disclosed, and does not exceed industry benchmarks.
Billing and Collection Service Fee: A fixed or per-kWh administrative fee covering reading, billing, and collection, if (i) it reflects actual incremental cost, (ii) it is the same for all similarly situated tenants, and (iii) it is clearly itemized and contractually agreed.
Late Payment Penalty: Up to the rate allowed under the lease or, in the absence thereof, the legal rate under the Civil Code, but never exceeding 3% per month compounded in a manner that violates usury principles or ERC consumer-protection guidelines.
Reconnection Fee: Actual cost of labor and materials for reconnection after non-payment, subject to reasonableness review.

V. Prohibited Surcharges and Practices

The following are prima facie unlawful and have been struck down by the ERC in multiple cases:

Any flat percentage “surcharge” (5%, 10%, 15%, etc.) applied on top of the total electricity bill without corresponding service justification.
“Profit margin,” “mark-up,” or “resale fee” on the energy charge.
“Distribution charge” or “wheeling charge” imposed by the building owner when the DU already includes its own distribution charge in the master bill.
Estimated or “average” consumption billing when a functioning sub-meter exists.
Failure to issue official receipts or BIR-registered invoices.
Imposition of charges for “transformer loss,” “primary line loss,” or similar items already recovered by the DU.
Discriminatory rates between tenants of the same class.
Automatic inclusion of common-area charges in the tenant’s individual bill without separate metering or transparent allocation formula.
Refusal to allow tenant inspection of the master meter reading or sub-meter calibration certificates.
Disconnection without due notice and opportunity to contest the bill, violating due process and ERC disconnection rules.

VI. Contractual Validity and Public Policy Limits

Lease contracts are contracts of adhesion when tenants have no real bargaining power over electricity terms. Any clause allowing unlimited or arbitrary surcharges is subject to judicial or administrative scrutiny under the doctrine of contra proferentem and the constitutional policy against unconscionable contracts. Even if a lease explicitly permits a 10% “admin fee,” the ERC and courts may declare it void if it effectively constitutes profiteering on an essential service. The Supreme Court has consistently held that rates for public utilities and essential services are subject to regulation notwithstanding private agreements (e.g., Republic v. Meralco, G.R. No. 141314, and analogous principles applied in resale contexts).

VII. Regulatory Oversight and Jurisdiction

Primary jurisdiction lies with the ERC for all matters involving rates, charges, and billing practices in the electric power industry. Tenants may file formal complaints before the ERC’s Consumer Protection and Empowerment Office without need of a lawyer. The Department of Trade and Industry (DTI) and local government units exercise concurrent jurisdiction over consumer-protection aspects under the Consumer Act. The Philippine Competition Commission (PCC) may investigate anti-competitive bundling of electricity charges with rent. The Department of Human Settlements and Urban Development (DHSUD) oversees condominium and homeowners’ association electricity practices.

VIII. Sanctions and Remedies

Administrative: ERC may impose fines of up to ₱1,000,000 per violation per day (EPIRA, Sec. 45), order refund of overcharges with interest, and require corrective billing. Repeated violations may lead to suspension of the owner’s authority to sub-meter.
Civil: Tenants may sue for damages, including actual overpayments, moral damages if bad faith is shown, and attorney’s fees. Refund actions prescribe in ten years under the Civil Code.
Criminal: Willful overcharging with deceit may constitute estafa under Article 315 of the Revised Penal Code or violations of the Consumer Act.
Injunctive Relief: Courts or the ERC may issue temporary restraining orders to prevent disconnection pending resolution of a billing dispute.

IX. Jurisprudence and Administrative Precedents

Although the Supreme Court has not issued a landmark decision exclusively on commercial-building electricity surcharges, the ERC’s adjudication docket is rich with precedents. In numerous unreported decisions from 2015–2025, the ERC has ordered shopping-mall operators and office-building owners to refund millions of pesos in unauthorized “maintenance” and “system-loss” surcharges, directed calibration of sub-meters, and mandated adoption of transparent billing templates. Lower courts have likewise upheld tenant claims in ejectment or collection cases where the landlord’s electricity overcharge was raised as a defense or counterclaim.

X. Compliance Best Practices for Building Owners

To remain within legal bounds, prudent owners: (1) use only ERC-approved, regularly calibrated sub-meters; (2) issue fully itemized bills mirroring the DU’s rate structure; (3) maintain separate metering or transparent allocation for common areas; (4) disclose all service fees in the lease with supporting cost computations; (5) provide annual reconciliation statements; and (6) establish an internal dispute-resolution mechanism before referring matters to the ERC.

XI. Tenant Rights and Preventive Measures

Tenants should: (1) demand the lease clause on electricity billing before signing; (2) request copies of the master meter reading and DU bill; (3) insist on calibrated sub-meters with visible seals; (4) keep records of all payments and bills; and (5) file complaints promptly with the ERC upon discovery of irregularities. Collective action through tenants’ associations strengthens bargaining and enforcement.

Conclusion

Under Philippine law, commercial building owners possess the right to recover the exact cost of electricity supplied to tenants through lawful sub-metering, together with reasonable, transparent, and pre-agreed fees for actual services rendered. They have no right to treat electricity resale as a profit center or to impose arbitrary surcharges that effectively increase the effective rate above that charged by the franchised distribution utility. The regulatory regime under the EPIRA, ERC rules, and consumer-protection statutes is designed to prevent exploitation of tenants while allowing building owners to recoup legitimate incremental costs. Any practice deviating from strict cost-recovery and transparency principles is unlawful, subject to refund orders, substantial fines, and civil liability. Strict adherence to these standards ensures that electricity remains an accessible essential service rather than an avenue for unregulated rent-seeking within the built environment.