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MACTAN ELECTRIC vs NPC

Facts: Mactan Electric Company, Inc. (MECO) posed the purely legal question of
whether paragraph (v), Section 43 of RA 9136: 1 clothed the Energy Regulatory
Commission (ERC) with jurisdiction to resolve disputes involving MECO as an energy
distribution company with a public franchise, National Power Corporation (NPC) as an
energy generation company, National Transmission Corporation (TRANSCO) as a
transmission and sub-transmission company and Mactan Cebu International Airport
Authority (MCIAA) as an energy end-user.

MECO holds a franchise to operate an electric light and power service in the areas
comprising Lapu-Lapu City and the Municipality of Cordova. It has a contract with
NPC for the supply of contract energy 3 from September 26, 2005 to September 25,
2015.4 It is charged a minimum rate based on the contract energy per billing period,
regardless of whether it fails to consume the contract energy allocated to it.
However, it may apply for reduction of its contract energy upon payment of a buy-out
fee

1. The reduction is caused by the transfer by a consumer of its power and energy
source from [MECO] to [NPC] or, to another customer of [NPC] located within the
same grid prompting the other customer to correspondingly increase its electric
supply requirement with [NPC], notwithstanding that [MECO] may have itself imposed
penalties or buy-out provisions to such transferring consumer

4.7.2.Expected reduction in the Contracted Energy by the [MECO] with the [NPC]
caused or initiated by the industrial customers of the [MECO] as listed in Annex 1a
shall be excused by the SUPPLIER. To be able to avail of this exemption, [MECO] must
inform [NPC] in writing sixty (60) days prior to the effectivity of the reduction in the
Contracted Energy.

MCIAA was listed as an industrial costumer of MECO. MCIAA and MECO had a contract
for electric power service connection 9 for a period of one year, subject to automatic
renewal, unless either party desired to terminate the contract, in which case said
party must serve a 30-day written notice upon the other for the termination or
amendment to take effect. Their contract began on September 19, 1995 and was
renewed every year thereafter. On April 24, 2006, MECO received notice from MCIAA
that it was terminating their contract effective May 24, 2006

MECO filed with the Regional Trial Court (RTC), Branch 54, Lapu-Lapu City, a
complaint for damages with prayer for temporary restraining order and/or writ of
preliminary injunction against MCIAA, NPC and TRANSCO

MECO Avers that Although the MCIAA letter of termination does not indicate from
whom MCIAA will get its electric power supply after May 24, 2006, there are strong
indications as shown by the following circumstances recently validated, and thus
reasonable grounds to believe that NPC will directly supply electric power to MCIAA
and the latter will directly source and buy such electric power from the NPC without
passing through the distribution system of MECO x x x. It must be stressed that with
the advent of the EPIRA of 2001, NPC is now without authority to sell electric energy
directly to end-users including MCIAA.

Granting without conceding that NPC has authority to directly sell electric energy to
end-users, NPC cannot lawfully do so to MCIAA without prior approval from the
appropriate government regulatory agencies such as the ERC and DOE. The intended
sale of electric energy by NPC to MCIAA [not] having [the approval of] ERC and DOE,
plaintiff has a clear and unmistakable right to an injunctive relief to enjoin NPC from
committing such unauthorized act.

SECOND ALTERNATIVE CAUSE OF ACTION TO THE FIRST


CAUSE OF ACTION

3.3.Granting without conceding that NPC has authority to directly sell electric
energy to end-users MECO has a clear, positive and unmistakable property right as a
franchise holder, guaranteed by the due process protection of the constitution, to be
heard first before the NPC can directly supply electric energy to any end user within
MECOs franchise area.

3.4.MECO likewise enjoys the priority in right to distribute electricity to any existing
or prospective enterprises within its franchise area to the exclusion of any person or
entity including the NPC.

MECO furthermore enjoys the constitutional right to free enterprise as well as the
protective mantle of P.D. 2029 from competition with government-owned or
controlled corporation including the NPC in various economic activities like the
distribution of services in which MECO is primarily engaged.

The acts of NPC in directly supplying electric energy to MCIAA grossly violate the
foregoing constitutional rights of MECO and seriously impair the franchise of MECO to
exclusively operate a distribution system in the whole Island of Macta

FIRST CAUSE OF ACTION AGAINST DEFENDANT MCIAA


(For Specific Performance & Injunctive Relief)

xxxxxxxxx - 3.1.MECO has a clear and unmistakable right to demand


from MCIAA to honor and faithfully comply with the terms and conditions of the
MECO-MCIAA Connection Contract which is valid, enforceable and existing until
September 19, 2006.

CAUSE OF ACTION AGAINST DEFENDANT TRANSCO


(For Injunctive Relief)

xxxxxxxxx 5.1.In the commission or performance of the acts complained


of by NPC and MCIAA, NPC and MCIAA will unavoidably and consequently use the
electrical transmission and sub-transmission facilities of TRANSCO and all other
assets related to transmission operations.

5.2.In order not to allow the commission by NPC and MCIAA of illegal acts,
TRANSCO should be enjoined from allowing the use of its electrical transmission and
sub-transmission facilities
COMMON CAUSES OF ACTION AGAINST DEFENDANTS
NPC and MCIAA
(For Damages)

xxxxxxxxx These acts likewise constitute an abuse of right under Articles


19 and 20 of the Civil Code which requires every person to act with justice, give
everyone his due and observe honesty and good faith in the exercise of his rights and
in the performance of his duties. Furthermore, the commission of the acts complained
of will willfully cause loss or injury to MECO in a manner that is contrary to morals,
good customs or public policy in violation of Article 21 of the Civil Code.

The RTC issued a 72-hour temporary restraining order14and later, a status quo

MCIAA,16 NPC17 and TRANSCO18 each filed a motion to dismiss on the grounds of lack
of jurisdiction and improper venue. They argued that, under Section 43 of RA 9136,
ERC had the primary administrative jurisdiction over the dispute as it involved
players in the energy sector. MCIAA further pointed out a stipulation in its contract
with MECO that in case of suit, the same should be filed in Cebu City, not Lapu-Lapu
City

The RTC dismissed the case on the following ground: the ERC, the government
regulatory agency that has original and exclusive jurisdiction to try disputes between
and among players in the energy sector

MECO filed the instant petition for this Court to declare that the RTC and not ERC had
jurisdiction over its dispute with NPC, MCIAA and TRANSCO because the dispute was
purely civil in nature. It arose from a mere violation of its (MECOs) rights under the
Constitution and the Civil Code, and required for the resolution thereof an
interpretation and application of said laws. No technical matter was involved and no
expertise of ERC was needed.

MECO further argued that not all the parties to the dispute were players in the energy
sector. MCIAA was neither a generation company, nor a transmission utility, nor a
supplier of energy, nor a distributor thereof, but a mere end-user. Thus, the dispute
was not between and among participants or players in the energy sector which
would have brought it within the ambit of Section 43 (v) of RA 9136

Issue: was it the RTC or the ERC which had jurisdiction over the dispute involving
MECO, on one hand, and MCIAA, NPC and TRANSCO, on the other?

Held: Jurisdiction is not conferred on ERC by the mere filing of a petition with it.
Its jurisdiction is bestowed by law, specifically RA 9136.

There is, however, nothing in either RA 9136 or its implementing rules which
grants ERC jurisdiction over the dispute.

Section 43 (v) confers on ERC original and exclusive jurisdiction over two kinds of
cases:

(1)all cases contesting rates, fees, fines and penalties imposed by ERC in
the exercise of its powers, functions and responsibilities under Section 43 (a)
through (u); and
(2)all cases involving disputes between and among participants or players
in the energy sector.

Section 4 (n), Rule 3 of the Rules and Regulations to Implement RA 9136


(implementing rules) provides an administrative interpretation of the scope of
Section 43 (v) of RA 9136, to wit:

SEC.4.Responsibilities of the ERC.

xxxxxxxxx

(n)The ERC shall have the original and exclusive jurisdiction over all cases
contesting rates, fees, fines and penalties imposed in the exercise of its powers,
functions and responsibilities and over all cases involving disputes between and
among participants or players in the energy sector relating to the foregoing powers,
functions and responsibilities. (emphasis supplied)

Disputes between and among participants or players in the energy sector which
may possibly be related to the powers, functions and responsibilities of ERC are those
arising from cross-ownership, abuse of market power, cartelization and anti-
competitive or discriminatory behavior by any electric power industry participant as
defined and penalized under Section 45 of RA 9136 and Sections 3, 4, 5 and 8, Rule
11 of the implementing rules. It is ERC which is authorized to monitor and penalize
these prohibited acts and to stop and redress the same through such remedial
measures as the issuance of injunction

The subject matter of the dispute between the parties is neither cross-ownership,
nor abuse of market power, nor cartelization, nor anti-competitive or discriminatory
behavior. Based on the allegations of MECO in its complaint and the essence of the
relief it sought, the subject matter of its dispute with MCIAA, NPC and TRANSCO
involved the distribution of energy resource, specifically the direct supply of
electricity by NPC through TRANSCO to MCIAA, without passing through the
distribution system of MECO as the franchise holder in the area. Therefore, their
dispute was not within the authority of ERC to resolve.

But neither did the RTC have jurisdiction over the dispute. That power belonged to
the Department of Energy (DOE).

DOE has retained such regulatory authority even with the enactment of RA 9136.
Section 80 thereof provides that [t]he applicable provisions of xxx Republic Act
7638, otherwise known as the Department of Energy Act of 1992 x x x shall
continue to have full force and effect except in so far as inconsistent with RA 9136.
Corollary to Section 80, Section 37 assigned to DOE certain powers and functions in
the supervision of the restructuring of the electricity industry, but these are [i]n
addition to its existing powers and functions. Among the existing powers and
functions of DOE is the regulation of the marketing and distribution of energy
resource as provided in Section 18 of RA 7638, amending Section 3 of EO 172.
In fine, the RTC was correct when it dismissed the complaint of MECO for lack of
jurisdiction. However, it erred in referring the parties to ERC because the agency with
authority to resolve the dispute was the Department of Energy.

BF HOMES vs MERALCO
Facts: MERALCO is a corporation duly organized and existing under Philippine laws
engaged in the distribution and sale of electric power in Metro Manila. On the other
hand, BF Homes and PWCC are owners and operators of waterworks systems
delivering water to over 12,000 households and commercial buildings in BF Homes
subdivisions in Paraaque City. The water distributed in the waterworks systems
owned and operated by BF Homes and PWCC is drawn from deep wells using pumps
run by electricity supplied by MERALCO.

On June 23, 2003, BF Homes and PWCC filed a Petition [With Prayer for the Issuance
of Writ of Preliminary Injunction and for the Immediate Issuance of Restraining Order]
against MERALCO before the RTC, docketed as Civil Case No. 03-0151.

In their Petition before the RTC, BF Homes and PWCC invoked their right to refund
based on the ruling of this Court in Republic v. Manila Electric Company:

the Supreme Court ordered MERALCO to refund its customers, which shall be
credited against the customers future consumption, the excess average
amount of P0.167 per kilowatt hour starting with the customers billing cycles
beginning February 1998.

The amount that MERALCO was mandated to refund to [BF Homes and PWCC]
pursuant to the MERALCO Refund cases is in the amount of P11,834,570.91.5

BF Homes and PWCC then alleged in their RTC Petition that:

On May 20, 2003, without giving any notice whatsoever, MERALCO


disconnected electric supply to [BF Homes and PWCCs] sixteen (16)
water pumps located in BF Homes in Paraaque, Caloocan, and Quezon City,
which thus disrupted water supply in those areas.

On June 4, 2003, [BF Homes and PWCC] received by facsimile transmission a


letter from MERALCO, x x x, in which MERALCO demanded to [BF Homes and
PWCC] the payment of electric bills amounting to P4,717,768.15.

[MERALCO] replied in a letter dated June 11, 2003, x x x, requesting MERALCO


to apply the P4,717,768.15 electric bill against the P11,834,570.91 that
MERALCO was ordered to refund to [BF Homes and PWCC] pursuant to the
MERALCO Refund cases. x x x

Even while MERALCO was serving its reply-letter to [BF Homes and PWCC],
MERALCO, again, without giving any notice, cut off power supply to [BF Homes
and PWCCs] five (5) water pumps located in BF Homes Paraaque and BF
Resort Village, in Pamplona, Las Pias City.

In its letter dated June 4, 2003 (Annex A), MERALCO threatened to cut off
electric power connections to all of [BF Homes and PWCCs] water pumps if
[BF Homes and PWCC] failed to pay their bills demanded by MERALCO by June
20, 2003.6

BF Homes and PWCC thus cited the following causes of action for their RTC
Petition:

[BF Homes and PWCC] are clearly entitled to the remedies under the law to
compel MERALCO to consider [BF Homes and PWCCs] electric bills fully paid
by the amounts which MERALCO was ordered to refund to [BF Homes and
PWCC] pursuant to the MERALCO Refund cases, to enjoin MERALCO to
reconnect electric power to all of [BF Homes and PWCCs] water pumps, and
to order MERALCO to desist from further cutting off power connection to [BF
Homes and PWCCs] water pumps.

MERALCOs unjust and oppressive acts have cast dishonor upon [BF Homes
and PWCCs] good name and besmirched their reputation for which [BF Homes
and PWCC] should be indemnified by way of moral damages in the amount of
not less than P1,000,000.00.

As an example for the public good, to dissuade others from emulating


MERALCOs unjust, oppressive and mercenary conduct, MERALCO should be
directed to pay [BF Homes and PWCC] exemplary damages of at
least P1,000,000.00.

MERALCOs oppressive and inequitable conduct forced [BF Homes and PWCC]
to engage the services of counsel to defend their rights and thereby incur
litigation expenses in the amount of at least P500,000.00 for which [BF Homes
and PWCC] should be indemnified.7

BF Homes and PWCC additionally prayed that the RTC issue a writ of
preliminary injunction and restraining order considering that As indicated in its
letter dated June 4, 2003 (Annex A), unless seasonably restrained, MERALCO
will cut off electric power connections to all of [BF Homes and PWCCs] water
pumps on June 20, 2003.

On August 15, 2003, MERALCO filed before the RTC its Answer with Counterclaims
and Opposition to the Application for Writ of Preliminary Injunction 9 of BF Homes and
PWCC.

According to MERALCO:

The service contracts as well as the terms and conditions of [MERALCOs]


service as approved by BOE [Board of Energy], now ERC [Energy Regulatory
Commission], provide in relevant parts, that [BF Homes and PWCC] agree as
follows:

DISCONTINUANCE OF SERVICE:

The Company reserves the right to discontinue service in case the customer is in
arrears in the payment of bills or for failure to pay the adjusted bills in those cases
where the meter stopped or failed to register the correct amount of energy
consumed, or for failure to comply with any of these terms and conditions, or in case
of or to prevent fraud upon the Company. Before disconnection is made in the case
of, or to prevent fraud, the Company may adjust the bill of said customer accordingly
and if the adjusted bill is not paid, the Company may disconnect the same."
(Emphasis supplied)

Instead of paying their unpaid electric bills and before [MERALCO] could effect its
legal and contractual right to disconnect [BF Homes and PWCCs] electric services,
[BF Homes and PWCC] filed the instant petition to avoid payment of [MERALCOs]
valid and legal claim for regular monthly electric bills.

[BF Homes and PWCCs] unpaid regular bills totaled P6,551,969.55 covering the May
and June 2003 electric bills. x x x

Hence, MERALCO sought the dismissal of the RTC Petition of BF Homes and PWCC on
the following grounds:

Honorable Court has no jurisdiction to award the relief prayed for by [BF Homes and
PWCC] because:

a) The petition is in effect preempting or defeating the power of the ERC to


implement the decision of the Supreme Court.

b) [MERALCO] is a utility company whose business activity is wholly regulated


by the ERC. The latter, being the regulatory agency of the government having
the authority over the respondent, is the one tasked to approve the
guidelines, schedules and details of the refund.

c) The decision of the Supreme Court, dated November 15, 2002, clearly
states that respondent is directed to make the refund to its customers in
accordance with the decision of the ERC (formerly ERB) dated February 16,
1998. Hence, [MERALCO] has to wait for the schedule and details of the refund
to be approved by the ERC before it can comply with the Supreme Court
decision.

[MERALCO] has the right to disconnect the electric service to [BF Homes and PWCC]
in that The service contracts between [MERALCO] and [BF Homes and PWCC]
expressly authorize the former to discontinue and disconnect electric services of the
latter for their failure to pay the regular electric bills rendered.

RTC issued an Order granting the application of BF Homes and PWCC for the issuance
of a writ of preliminary injunction. The RTC found that the records showed that all
requisites for the issuance of said writ were sufficiently satisfied by BF Homes and
PWCC. The RTC stated in its Order:

Albeit, this Court respects the right of a public utility company like MERALCO, being a
grantee of a legislative franchise under Republic Act No. 9029, to collect overdue
payments from its subscribers or customers for their respective consumption of
electric energy, such right must, however, succumb to the paramount substantial and
constitutional rights of the public to the usage and enjoyment of waters in their
community.

Aggrieved, MERALCO filed with the Court of Appeals a Petition for Certiorari under
Rule 65 of the Rules of Court. The Court of Appeals agreed with MERALCO that the
RTC had no jurisdiction to issue a writ of preliminary injunction in Civil Case No. 03-
0151, as said trial court had no jurisdiction over the subject matter of the case to
begin with. It ratiocinated in this wise:

For one, it cannot be gainsaid that the ERC has original and exclusive
jurisdiction over the case. Explicitly, Section 43(u) of Republic Act No. 9136,
otherwise known as the "Electric Power Industry Reform Act," (RA 9136), states that
the ERC shall have the original and exclusive jurisdiction over all cases contesting
rates, fees, fines and penalties imposed by the ERC in the exercise of its
powers, functions and responsibilities and over all cases involving disputes
between and among participants or players in the energy sector. Section 4(o) of Rule
3 of the Implementing Rules and Regulations of RA 9136 likewise provides that
the ERC shall also be empowered to issue such other rules that are essential in
the discharge of its functions as an independent quasi-judicial body.

For another, the respondent judge, instead of presiding over the case, should
have dismissed the same and yielded jurisdiction to the ERC pursuant to the
doctrine of primary jurisdiction. It is plain error on the part of the respondent judge
to determine, preliminary or otherwise, a controversy involving a question which is
within the jurisdiction of an administrative tribunal, especially so where the
question demands the exercise of sound administrative discretion.

Needless to state, the doctrine of primary jurisdiction applies where the


administrative agency, as in the case of ERC, exercises its quasi-judicial and
adjudicatory function. Thus, in cases involving specialized disputes, the practice has
been to refer the same to an administrative agency of special competence pursuant
to the doctrine of primary jurisdiction.

Verily, the cause of action of [BF Homes and PWCC] against [MERALCO] originates
from the Meralco Refund Decision as it involves the perceived right of the former to
compel the latter to set-off or apply their refund to their present electric bill. The
issue delves into the right of the private respondents to collect their refund without
submitting to the approved schedule of the ERC, and in effect give unto themselves
preferential right over other equally situated consumers of [MERALCO]. Perforce, the
ERC, as can be gleaned from the afore-stated legal provisions, has primary, original
and exclusive jurisdiction over the said controversy.

Being the agency of origin, the ERC has the jurisdiction to execute the same. Besides,
as stated, it is empowered to promulgate rules that are essential in the discharge of
its functions as an independent quasi-judicial body. 18

ISSUE: Whether jurisdiction over the subject matter of Civil Case No. 03-0151 lies
with the RTC or the Energy Regulatory Commission (ERC)?

HELD: The Petition has no merit. Settled is the rule that jurisdiction is conferred only
by the Constitution or the law. 21 Republic v. Court of Appeals22also enunciated that
only a statute can confer jurisdiction on courts and administrative agencies.

In Manila Electric Company v. Energy Regulatory Board, 24 the Court traced the
legislative history of the regulatory agencies which preceded the ERC, presenting a
summary of these agencies, the statutes or issuances that created them, and the
extent of the jurisdiction conferred upon them, viz:
"SEC. 13. Except as otherwise provided herein, the Commission shall have general
supervision and regulation of, jurisdiction and control over, all public utilities, and
also over their property, property rights, equipment, facilities and franchises so far as
may be necessary for the purpose of carrying out the provisions of this Act, and in
the exercise of its authority it shall have the necessary powers and the aid of the
public force x x x."

Section 14 of C.A. No. 146 defines the term "public service" or "public utility" as
including "every individual, copartnership, association, corporation or joint-stock
company, . . . that now or hereafter may own, operate, manage or control within the
Philippines, for hire or compensation, any common carrier, x x x, electric light, heat,
power, x x x, when owned, operated and managed for public use or service within the
Philippines x x x." Under the succeeding Section 17(a), the PSC has the power even
without prior hearing

(a) To investigate, upon its own initiative, or upon complaint in writing, any matter
concerning any public service as regards matters under its jurisdiction; to require any
public service to furnish safe, adequate and proper service as the public interest may
require and warrant, to enforce compliance with any standard, rule, regulation, order
or other requirement of this Act or of the Commission, x x x.

Then came Presidential Decree (P.D.) No. 1, reorganizing the national government
and implementing the Integrated Reorganization Plan. Under the reorganization plan,
jurisdiction, supervision and control over public services related to electric light, and
power heretofore vested in the PSC were transferred to the Board of Power and
Waterworks (BOPW).

Later, P.D. No. 1206 abolished the BOPW. Its powers and function relative to power
utilities, including its authority to grant provisional relief, were transferred to the
newly-created Board of Energy (BOE).

On May 8, 1987, then President Corazon C. Aquino issued E.O. No. 172 reconstituting
the BOE into the ERB, transferring the formers functions and powers under P.D. No.
1206 to the latter and consolidating in and entrusting on the ERB "all the regulatory
and adjudicatory functions covering the energy sector." Section 14 of E.O. No. 172
states that "(T)he applicable provisions of [C.A.] No. 146, as amended, otherwise
known as the Public Service Act; x x x and [P.D.] No. 1206, as amended, creating the
Department of Energy, shall continue to have full force and effect, except insofar as
inconsistent with this Order."25

Thereafter, on June 8, 2001, Republic Act No. 9136, known as the Electric Power
Industry Reform Act of 2001 (EPIRA), was enacted, providing a framework for
restructuring the electric power industry. One of the avowed purposes of the EPIRA is
to establish a strong and purely independent regulatory body. The Energy Regulatory
Board (ERB) was abolished and its powers and functions not inconsistent with the
provision of the EPIRA were expressly transferred to the ERC.26

The powers and functions of the ERB not inconsistent with the EPIRA were transferred
to the ERC by virtue of Sections 44 and 80 of the EPIRA, which read:

Sec. 44. Transfer of Powers and Functions. The powers and functions of the Energy
Regulatory Board not inconsistent with the provisions of this Act are hereby
transferred to the ERC. The foregoing transfer of powers and functions shall include
all applicable funds and appropriations, records, equipment, property and personnel
as may be necessary.

Sec. 80. Applicability and Repealing Clause. The applicability provisions of


Commonwealth Act No. 146, as amended, otherwise known as the "Public Service
Act." Republic Act 6395, as amended, revising the charter of NPC; Presidential Decree
269, as amended, referred to as the National Electrification Decree; Republic Act
7638, otherwise known as the "Department of Energy Act of 1992"; Executive Order
172, as amended, creating the ERB; Republic Act 7832 otherwise known as the "Anti-
Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994"; shall
continue to have full force and effect except insofar as they are inconsistent with this
Act.

In addition to the foregoing, the EPIRA also conferred new powers upon the ERC
under Section 43, among which are:

SEC. 43. Functions of the ERC. The ERC shall promote competition, encourage
market development, ensure customer choice and penalize abuse of market power in
the restructured electricity industry. In appropriate cases, the ERC is authorized to
issue cease and desist order after due notice and hearing. Towards this end, it shall
be responsible for the following key functions in the restructured industry:

(u) The ERC shall have the original and exclusive jurisdiction over all cases
contesting rates, fees, fines and penalties imposed by the ERC in the exercise of the
abovementioned powers, functions and responsibilities and over all cases involving
disputes between and among participants or players in the energy sector.

All notices of hearings to be conducted by the ERC for the purpose of fixing rates or
fees shall be published at least twice for two successive weeks in two (2) newspapers
of nationwide circulation.

A careful review of the material allegations of BF Homes and PWCC in their Petition
before the RTC reveals that the very subject matter thereof is the off-setting of the
amount of refund they are supposed to receive from MERALCO against the electric
bills they are to pay to the same company. This is squarely within the primary
jurisdiction of the ERC.

It bears to stress that in the MERALCO Refund cases, this Court only affirmed the
February 16, 1998 Decision of the ERB (predecessor of the ERC) fixing the just and
reasonable rate for the electric services of MERALCO and granting refund to
MERALCO consumers of the amount they overpaid. Said Decision was rendered by
the ERB in the exercise of its jurisdiction to determine and fix the just and reasonable
rate of power utilities such as MERALCO.

Presently, the ERC has original and exclusive jurisdiction under Rule 43(u) of the
EPIRA over all cases contesting rates, fees, fines, and penalties imposed by the ERC
in the exercise of its powers, functions and responsibilities, and over all cases
involving disputes between and among participants or players in the energy sector.
Section 4(o) of the EPIRA Implementing Rules and Regulation provides that the ERC
"shall also be empowered to issue such other rules that are essential in the discharge
of its functions as in independent quasi-judicial body."
Indubitably, the ERC is the regulatory agency of the government having the authority
and supervision over MERALCO. Thus, the task to approve the guidelines, schedules,
and details of the refund by MERALCO to its consumers, to implement the judgment
of this Court in the MERALCO Refund cases, also falls upon the ERC. By filing their
Petition before the RTC, BF Homes and PWCC intend to collect their refund without
submitting to the approved schedule of the ERC, and in effect, enjoy preferential right
over the other equally situated MERALCO consumers.

Administrative agencies, like the ERC, are tribunals of limited jurisdiction and, as
such, could wield only such as are specifically granted to them by the enabling
statutes. In relation thereto is the doctrine of primary jurisdiction involving matters
that demand the special competence of administrative agencies even if the question
involved is also judicial in nature.

Since the RTC had no jurisdiction over the Petition of BF Homes and PWCC in Civil
Case No. 03-0151, then it was also devoid of any authority to act on the application
of BF Homes and PWCC for the issuance of a writ of preliminary injunction contained
in the same Petition. The ancillary and provisional remedy of preliminary injunction
cannot exist except only as an incident of an independent action or proceeding. 28

Lastly, the Court herein already declared that the RTC not only lacked the jurisdiction
to issue the writ of preliminary injunction against MERALCO, but that the RTC actually
had no jurisdiction at all over the subject matter of the Petition of BF Homes and
PWCC in Civil Case No. 03-0151

BATALEC v EIAB
Petitioner BATELEC II is an electric cooperative authorized to distribute electric power
in Rosario, Province of Batangas.

Private respondent PSC is a galvanizing steel sheet company in the Philippines,


granted a pioneer status by the Board of Investments, embarked to build in Rosario,
Batangas Province, its new plant.

As this new plant would entail a delivery voltage of 69 kilovolts (kv), PSC commenced
its negotiations for the supply of said energy requirement with BATELEC II, the
electric franchise holder in the area.

As the 69 kv transmission lines owned by the NPC are located about 1.4 kilometers
away from the plant, PSC and BATELEC II entered into an agreement wherein the
latter, not having any 69 kv transmission lines at present, shall handle the
construction of the needed 69 kv transmission lines.6
BATELEC II submitted to PSC a Bill of Materials for the proposed construction of the
69 kv transmission lines amounting to P2,956,838.56 which proposal, PSC accepted.

BATELEC II vouched to complete the installation of the needed facilities by April 1997
but the scheduled completion was never fulfilled by BATELEC II even several months
after the targeted date.9

PSC filed with the Bureau an application for direct connection with the NPC.
As a standard operating procedure, the Bureau, in its evaluation of an application for
direct power connection, takes into account the technical or financial capability of the
electric franchise holder in the applicants site. Thus, the Electricity Division of the
Bureau endorsed to the Hearing Division its evaluation report on the technical and
financial capability of BATELEC II.
For the purpose of looking for any possibility of settlement, the parties concerned
were invited to a conference. In BATELEC II explained their difficulties in acquiring the
right of way for the 69 kv transmission lines. PSC, on the other hand, averred that it
is precisely because of BATELEC IIs failure to accomplish its undertaking that
prompted it to file its application with the Bureau to source its direct power supply
from NPC.

The Bureau made the determination that BATELEC II was neither technically nor
financially capable of supplying the 69 kv of power supply to PSC because of the
technical capability evaluation covered the system loss, the power factor, and the
average voltage variation.

As to its Amortization Payments (AP) records, it was also shown that in 1994,
BATELEC II was three (3) quarters behind with its amortization payments while for
1995 and 1996 it was one (1) quarter behind its payment schedule with the National
Electrification Administration (NEA). Under this parameter, the set standard is a
maximum of one

Further, the Bureau took note that the National Electrification Administration (NEA)
rated BATELEC IIs performance as under Category E C and D for the years
1994, 1995 and 1996. These are equivalent to POOR performance.

Accordingly, the Bureau approved PSCs application for bulk power supply with the
NPC after it made the determination that BATELEC II is not technically and financially
capable of serving the bulk energy needs of PSC.

Consequently, PSC filed a complaint for Damages With Prayer for Preliminary
Injunction and TRO with the RTC to enjoin petitioner BATELEC II from committing acts
that would prevent direct power connection between respondents PSC and the NPC.
PSC alleged that BATELEC II maliciously switched off the air brake switch and
removed cables and insulators from the transmission poles supplying electricity from
the NPC to PSC resulting in complete electric power failure to the facilities. A TRO was
issued against BATALEC.

Displeased, BATELEC II filed before the Court of Appeals a petition for certiorari with a
prayer for the issuance of a writ of preliminary injunction and temporary restraining
order. The CA denied the petition on the grounds of: (1) failure to exhaust
administrative remedies as petitioner did not file a motion for reconsideration of the
Bureaus resolution; and (2) failure to attach a certified true copy or duplicate original
copy of the Bureaus resolution in defiance of Supreme Court Administrative
Circular No. 3-96.
Issue:

(1) Did the Court of Appeals commit a reversible error in dismissing CA-G.R. SP No.
47880 on purely technical grounds, i.e., that the attached copy of the NLRC decision
is a mere photocopy of the original decision? (NO)
(2) Did the Court of Appeals commit a reversible error in dismissing CA-G.R. SP No.
47880 on the ground of non-exhaustion of administrative remedies before filing a
special civil action for certiorari under Rule 65? (NO)
(3) Did the Court of Appeals err in refusing to rule on the correctness of the ERBs
findings? (NO)
On the first issue, the Revised Rules of Civil states:
3. The certified true copy must further comply with all the regulations therefor of the
issuing entity and it is the authenticated original of such certified true copy, and not
a mere xerox copy thereof, which shall be utilized as an annex to the petition or other
initiatory pleading. . . . (Emphasis supplied.)25

From this guidepost, the disputed document, although stamped as Certified True
Copy, was neither a duplicate original copy nor an authenticated original of such
certified true copy thereof, in contravention of paragraph 3 of the above-quoted
guidelines. Neither was the authority of the person who signed the same indicated in
the face of the document
Anent the second issue, the drift of petitioner that the instant case falls under the
recognized exceptions to the rule on exhaustion of administrative remedies cannot
pass judicial muster.
The doctrine of exhaustion of administrative remedies calls for resort first to the
appropriate administrative authorities to accord them the prior opportunity to decide
controversies within their competence before the same may be elevated to the
courts of justice for review. It is presumed that an administrative agency, if afforded
an opportunity to pass upon a matter, will decide the same correctly, or correct any
previous error committed in its forum. Furthermore, reasons of law, comity and
convenience prevent the courts from entertaining cases proper for determination by
administrative agencies. Hence, premature resort to the courts necessarily becomes
fatal to the cause of action of the petitioner.28

In the present case, there is nothing in the records to show that petitioner availed of
administrative relief before filing a petition for certiorari with the Court of Appeals. It
did not appeal the Bureaus Resolution dated 16 March 1998 to the Secretary of
Energy, which under Section 8 in relation to Section 12 of Rep. Act No. 763831 has
the power over the bureaus under the Department. It has not, as well, suggested any
plausible reason for direct recourse to the Court of Appeals against the

Resolution in question. Neither has petitioner shown that the instant case falls among
the recognized exceptions to the rule on exhaustion of administrative remedies.

Moreover, in light of the doctrine of exhaustion of administrative remedies, a motion


for reconsideration must first be filed before the special civil action for certiorari may
be availed of.3
On the merits of the case, the apple of discord between the parties is the propriety of
allowing respondent PSC to directly avail of a power connection with the NPC.
Petitioner strongly asserts that the NPC is disqualified from distributing directly
electric power to respondent PSC in Rosario, Batangas, because it is located within
the franchised area of petitioner BATELEC II. Petitioner adds that respondent NPC is
mandated by law to generate and transmit electric power but not distribute it directly
to the consumers like respondent

We note that respondent PSC is an enterprise registered with the Bureau of


Investments (BOI), as found by the Bureau.39 In Caares, we held that there is
nothing in the provisions of Presidential Decree (P.D.) No. 395, amending P.D. No. 380
and further amending Rep. Act No. 6395, entitled An Act Revising the Charter of the
National Power Corporation, which expressly or impliedly allowed or sanctioned the
sale in bulk by the NPC of energy direct to BOI-registered enterprises, such as
respondent PSC, even if it would be violative of the rights of existing franchise
holders.40 We stressed:

Presidential Decree No. 380, as amended, PDC Resolution No. 77-01-02 and NPCs
own operational guidelines for the implementation of the BOI-NPC Memorandum of
Understanding on direct connection establish the state policy that NPC is statutorily
empowered to directly service all the requirement of a BOI-registered enterprise
provided that, first, any affected private franchise holder is afforded an opportunity to
be heard on the application therefor, and second, from such hearing, it is established
that said private franchise holder is incapable or unwilling to match the reliability and
rates of NPC for directly serving the latter . . .

Here, after careful consideration, the Bureau made the distinct finding that petitioner
is not technically and financially capable of satisfying the power requirements of PSC.
This determination by the Bureau, an administrative government agency which is
tasked to implement a statute, is accorded great respect and ordinarily controls the
construction of the courts. In scores of cases, it is an elementary rule, sanctified by
long and consistent usage, that the courts will not interfere in matters which are
addressed to the sound discretion of government agencies entrusted with the
regulation of activities coming under the special technical knowledge and training of
such agencies.
To hold, as petitioner would have us believe, that industries such as respondent PSC,
are absolute captive markets of the area, power franchise-holders (regardless of their
capability to meet the demands of the market) is to stifle mercantile endeavors in
particular and the nations economy in general, as industrial enterprises will be at the
mercy of unscrupulous franchise-holders which can be lackadaisical in delivering the
power requirements to its customers without fear of losing its contracts to the NPC.
Not only is this proposition unsound as it would be a turn-off to investors, it is likewise
contrary to the spirit of the law aimed towards national electrification, most beneficial
to the greater number of the populace.

. . . Exclusivity is given by law with the understanding that the company enjoying it
is self-sufficient and capable of supplying the needed service or product at moderate
or reasonable prices. It would be against public interest where the firm granted a
monopoly is merely an unnecessary conduit of electric power, jacking up prices as a
superfluous middleman or an inefficient producer which cannot supply cheap
electricity to power intensive industries . . .
The delay caused by petitioner in delivering power supply to PSC translates to higher
costs on its part., i.e., cost of borrowing and lost sales, which ultimately leads to
higher prices of its products to the purchasing public.

Energy Regulatory Board and Iligan Light and Power vs. Court of Appeals
G.R. No. 127373. March 25, 1999
In the present case, the private respondents bypassed the franchise holder in their
area and obtained power directly from the NPC. Petitioner, on the other hand, wants
a disconnection of such direct supply. Which agency of the government has
jurisdiction to hear and decide the dispute-the Energy Regulatory Board (ERB) or the
Department of Energy (DOE)?
The members of the Association of Mindanao Industries (AMI) are enterprises based
in Mindanao and registered with the Board of Investments which were among those
granted direct connection facility by the NPC although operating within the franchise
area of private respondent Iligan Light and Power, Inc.
Iligan filed with the respondent Energy Regulatory Board (ERB) a petition to
implement the 1987 Cabinet Policy Reforms in the Power Sector issued by President
Cory Aquino, specifically that the direct supply of power to industries within its
franchise area be discontinued by NPC.
The Policy Reform states direct connections should continue for industries authorized
under the BOI-NPC Memorandum of Understanding until the appropriate regulatory
board determines that direct connection NPC is no longer necessary in the franchise
area of the specific utility.
Iligan alleged that it can meet, even surpass, the set of financial standards adopted
by the ERB .
AMI filed a Motion to Dismiss for lack of jurisdiction to hear the petition for
implementation of Cabinet Policy Reforms in the Power Sector following the transfer
of its non-price regulatory jurisdiction and functions to the Department of Energy
under Rep. Act No. 7638;
ERB denied in open court AMIs motion to dismiss the petition
The appellate court justified its ruling in favor of AMI. It ruled that to resolve the
issues raised it is necessary to first characterize the petition filed by Iligan with the
ERB. It is clear that Iligan sought to discontinue the direct supply of power by the NPC
to BOI registered enterprises operating within its franchise area. The ultimate relief
sought, is related to the distribution or marketing of energy resources.
Under the law, the matter of direct supply of power or energy distribution, which is
undoubtedly a non-price regulatory matter, is among those granted to the jurisdiction
of the Department of Energy.
Issue: Whether the ERB has jurisdiction to hear and decide cases involving direct
connection issues
Held: No. The petition has failed to show any reversible error on the part of the CA.
Petitioners Ilagan submits that the ERBs jurisdiction to hear and decide cases on
direct connection of power supply with the NPC was conferred by the 1987 Cabinet
Memorandum which provides:
Continue direct connection for industries authorized under the BOI-NPC
Memorandum of Understanding of 12 January 1981 until such time as the
appropriate regulatory board determines that direct connection of industry to
NPC is no longer necessary in the franchise area of the specific utility or
cooperative.
Petitioners claim that RA 7638 transferred to the DOE the ERBs non-price regulatory
powers and functions relative to the petroleum industry only.
Section 3. Jurisdiction, Powers and Functions of the Board.[W]hen warranted
and only when public necessity requires, the Board may regulate the business
of importing, exporting, reexporting, shipping, transporting, processing,
refining, marketing and distributing energy resources. Energy resource means
any substance or phenomenon which by itself or in combination with others,
or after processing or refining or the application to it of technology, emanates,
generates, or causes the emanation or generation of energy, such as but not
limited to petroleum or petroleum products, coal, marsh gas, methane gas,
geothermal and hydroelectric sources of energy, uranium and other similar
radioactive materials, solar energy, tidal power, as well as non-conventional
existing and potential sources.
The Board shall exercise the following, among other powers and functions:
a) Fix and regulate the prices of petroleum products;
b) Fix and regulate the rate schedule or prices of piped gas to be charged by
duly franchised gas companies which distribute gas by means of underground
pipe system;
c) Fix and regulate the rates of pipeline concessionaires under the provisions
of Republic Act No. 387, as amended, otherwise known as the Petroleum Act
of 1949, as amended by Presidential Decree No. 1700;
d) Regulate the capacities of new refineries that may be organized after the
issuance of this Executive Order, under such terms and conditions as are
consistent with the national interest;
e) Whenever the Board has determined that there is a shortage of any
petroleum product, or when public interest so requires, it may take such steps
as it may consider necessary, including the temporary adjustment of the
levels of prices of petroleum products and the payment to the Oil Price
Stabilization Fund created under Presidential Decree No. 1956 by persons or
entities engaged in the petroleum industry of such amounts as may be
determined by the Board, which will enable the importer to recover its cost of
importation.
While conceding that the regulation of the marketing and the distribution of energy
resources has been expressly transferred to the DOE, petitioners contend, that
electric power is not an energy resource. They allege that since the authority to pass
upon issues of direct electric power connection was not mentioned at all in the
above-quoted provision, it could not have been included among the functions given
to the DOE.
Respondents, on the other hand, insist that jurisdiction over the connection issue
belongs to the DOE. They cite the consolidated cases (1) National Power Corp. v. CA
and Cagayan Electric Power and Light Co. and (2) Phividec Industrial Authority v. CA
and Cagayan Electric Power and Light Co. in which this Court stated:
The determination of which of the two public utilities has the right to supply electric
power to an area which is within the coverage of both is certainly not a rate fixing
function which should remain with ERB. It deals with the regulation of the distribution
of energy resources which, under Executive Order No. 172, was expressly a function
of ERB. However, with the enactment of Republic Act No. 7638, the Department of
Energy took over such function.
While the core question raised in these consolidated cases was whether the NPC
could supply power directly to the PIEMO area where CEPALCO had a franchise, we
find the Courts pronouncements on them relevant to the instant controversy.
Corollary to the main question was the issue of whether the NPC had the power to
hear and decide cases involving direct power connection. This Court held that the
NPC is not the proper authority, not only because the subject matter of the hearing is
a matter involving the NPC itself, but also because the law has created the proper
administrative body vested with authority to conduct a hearing.
Under Executive Order No. 172, the ERB: When warranted and only when public
necessity requires, the Board may regulate the business of importing, exporting, re-
exporting, shipping, transporting, processing, refining, marketing and distributing
energy resources.
The Board shall, upon proper notice and hearing, exercise the following, among other
powers and functions:
(a) Fix and regulate the prices of petroleum products;
(b) Fix and regulate the rate schedule or prices of piped gas to be charged by
duly franchised gas companies which distribute gas by means of underground
pipe system;
(c) Fix and regulate the rates of pipeline concessionaires under the provisions
of Republic Act No. 387, as amended, otherwise known as the Petroleum Act
of 1949, as amended by Presidential Decree No. 1700;
(d) Regulate the capacities of new refineries or additional capacities of
existing refineries and license refineries that may be organized after the
issuance of this Executive Order, under such terms and conditions as are
consistent with the national interest;
(e) Whenever the Board has determined that there is a shortage of any
petroleum product, or when public interest so requires, it may take such steps
as it may consider necessary, including the temporary adjustment of the
levels of prices of petroleum products and the payment to the Oil Price
Stabilization Fund created under Presidential Decree No. 1956 by persons or
entities engaged in the petroleum industry of such amounts as may be
determined by the Board, which will enable the importer to recover its cost of
importation.
As may be gleaned from said provisions, the ERB is basically a price or rate-fixing
agency.
SEC. 18. Rationalization or Transfer of Functions of Attached or Related Agencies.
The non-price regulatory jurisdiction, powers, and functions of the Energy Regulatory
Board as provided for in Section 3 of Executive Order No. 172 are hereby transferred
to the Department.
The power of the NPC to determine, fix, and prescribe the rates being charged to its
customers under Section 4 of Republic Act No. 6395, as amended, as well as the
power of electric cooperatives to fix rates under Section 16 (o), Chapter II of
Presidential Decree No. 269, as amended, are hereby transferred to the Energy
Regulatory Board. The Board shall exercise its new powers only after due notice and
hearing and under the same procedure provided for in Executive Order No. 172.
The Court believes that the provision of Section 18 on the transfer of certain powers
and functions from ERB to DOE is clear and unequivocal, and devoid of any
ambiguity, in the sense that it categorically refers to non-price jurisdiction, powers
and functions of ERB.
It may be argued that Section 26 of R.A. No. 7638 contains a repealing clause which
provides that:
All laws, presidential decrees, executive orders, rules and regulations, or parts
thereof, inconsistent with the provisions of this Act, are hereby repealed or modified
accordingly. And, therefore, all provisions of E.O. No. 172 and related laws which are
inconsistent with the policy, purpose and intent of R.A. No. 7638 are deemed
repealed.
It has been said, however, that a general repealing clause of such nature does not
operate as an express repeal because it fails to identify or designate the act or acts
that are intended to be repealed. Rather, it is a clause which predicates the intended
repeal upon the condition that a substantial conflict must be found[ed] on existing
and prior acts of the same subject matter.
In view of the foregoing, it is our opinion that only the non-price regulatory functions
of ERB under Section 3 of E.O. 172 are transferred to the DOE. All the powers of ERB
which are not within the purview of its non-price regulatory jurisdiction, powers and
functions as defined in Section 3 are not so transferred to DOE and accordingly
remain vested in ERB.
The foregoing sufficiently indicates that it is now the DOE that has jurisdiction over
the regulation of the marketing and the distribution of energy resources. It may be
true that this function formerly belonged to the ERB, by virtue of the Cabinet Policy
Reforms in the Energy Sector embodied in the Cabinet Memorandum of 1987 and
EO 172. However, pursuant to Section 18 of RA 7638, which was subsequently
enacted by Congress on December 9, 1992, the non-rate-fixing jurisdiction, powers
and functions of the ERB have been transferred to the Department of Energy.
The applications for the NPCs direct supply or disconnection of power involve
essentially the distribution of energy resources, not by any incident the
determination of power rates. Consequently, these applications must be resolved by
the DOE.
Neither does the Court agree with the petitioners claim that the regulatory functions
of the ERB that were transferred to the DOE concerned those relating to the
petroleum industry only and not to electric power.
Section 3 of EO 172 broadly defines energy resource as any substance or
phenomenon which by itself or in combination with others x x x emanates, [or]
generates x x x energy, x x x.
Moreover, Section 5 of RA 7638 defines the powers and functions of the DOE as
follows:
SEC. 5. Powers and Functions.The Department shall have the following powers and
functions:
xxx xxx xxx
(d) Exercise supervision and control over all government activities relative to energy
projects in order to attain the goods embodied in Section 2 of this Act.
(e) Regulate private sector activities relative to energy projects as provided for under
existing laws; Provided, That the Department shall endeavor to provide for an
environment conducive to free and active private sector participation and
involvement in all energy activities.
The Definition of Terms state that Energy projects shall mean activities or projects
relative to the exploration, extraction, production, importation-exportation,
processing, transportation, marketing, distribution, utilization, conservation,
stockpiling or storage of all forms of energy products and resources.
Definitely, the exploration, the production, the marketing, the distribution, the
utilization, or any other activity involving any energy resource or product falls within
the supervision and control of the DOE.
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED.

National Power Corp v Court of Appeals and CEPALCO terrible... Ill try to
expalin it tomorrow. Sorry
Offered for resolution in these consolidated petitions for review on certiorari is the
issue of whether or not the National Power Corporation (NPC) has jurisdiction to
determine whether it may supply electric power directly to the facilities of an
industrial corporation in areas where there is an existing and operating electric power
franchisee.
FACTS: On 1961, the Cagayan Electric and Power Light Company (CEPALCO) was
enfranchised by Republic Act No. 3247 "to construct, maintain and operate an
electric light, heat and power system for the purpose of generating and/or
distributing electric light, heat and/or power for sale within the City of Cagayan de
Oro for fifty (50) years.
(PHIVIDEC)
P.D. 243, was issued on 1973 which created a "body corporate and politic" to be
known as the Philippine Veterans Investment Development Corporation (PHIVIDEC)
vested with authority to engage in commercial, industrial, mining, agricultural and
other enterprises.
(PIA). (PIE-MO)
On 1974, P.D. 538 was promulgated to create the PHIVIDEC Industrial Authority (PIA),
a subsidiary of PHIVIDEC, to carry out the government policy to encourage, promote
and sustain the economic and social growth of the country. Under Sec. 3 of P.D. No.
538, the first area for development shall be located in the municipalities of Tagoloan
and Villanueva. This area forms part of the PHIVIDEC Industrial Estate Misamis
Oriental (PIE-MO).
(PIE-MO), (FPI) and (MAC)
As manager of PIE-MO, PIA granted the Ferrochrome Philippines, Inc. (FPI) and Metal
Alloys Corporation (MAC) authority to operate in its area of development.
On 1979, PIA granted CEPALCO a temporary authority to retail electric power to the
industries operating within the PIE-MO. The Agreement executed by PIA and CEPALCO
authorized CEPALCO "to operate, administer, construct and distribute electric power
within the PHIVIDEC Industrial Estate, Misamis Oriental, such authority to be co-
extensive with the territorial jurisdiction of PHIVIDEC Industrial Estate, as defined in
Sec. 3 of P.D. No. 538 and shall be for a period of five (5) years, renewable for
another five (5) years at the option of CEPALCO."
According to PIA, CEPALCO proved no match to the power demands of the industries
in PIE-MO that most of these companies operating therein closed shop.
Impelled by a "desire to provide cheap power costs to power-intensive industries
operating within the Estate," PIA applied with the National Power Corporation (NPC)
for direct power connection which the latter in due course approved. One of the
companies which entered into an agreement with the NPC for a direct sale and supply
of power was the Ferrochrome Phils., Inc. (FPI).
Contending that the said agreement violated its right as the authorized operator of
an electric light and power system in the area and the national electrification policy,
CEPALCO filed a petition for prohibition, mandamus and injunction before the QC-RTC
against the NPC. Notwithstanding NPC's claim that it was authorized by its Charter to
sell electric power "in bulk" to industrial enterprises.
RTC rendered a decision favoring CEPALCO and restraining the NPC from supplying
power directly to FPI upon the ground that such direct sale, supply and delivery of
electric power by the NPC to FPI was violative of the rights of CEPALCO under its
legislative franchise.
The CA also denied the appeal interposed by NPC on the ground that the statutory
authority given to the NPC as regards direct supply of power to BOI-registered
enterprises "should always be subordinate to the 'total-electrification-of-the-entire-
country-on-an-area-coverage basis policy' enunciated in P. D. No. 40."
Notwithstanding said decision, FPI filed a new application for the direct supply of
electric power from NPC. The Hearing Committee of the NPC had started hearing the
application but CEPALCO filed with the Regional Trial Court of Quezon City a petition
for contempt against NPC officials led by Ernesto Aboitiz. The trial court found the
respondents in direct contempt of court.
Meanwhile, the NPC Hearing Committee proceeded with its hearings. CEPALCO was
duly notified thereof but it opted to question the committees jurisdiction. It did not
submit any evidence. Consequently, in its Report and Recommendation, the
committee gave weight to the evidence presented by FPI that CEPALCO charged
higher rates than what the NPC would if allowed to supply power directly to FPI.
ISSUE: 1) The principal and common question raised is whether or not the NPC may
supply power directly to PIA through FPI in the PIE-MO area where CEPALCO has a
franchise.
2) Whether or not the NPC itself has the power to determine the propriety of direct
power connection from its lines to any entity located within the franchise area of
another public utility.
HELD: 1) PIA asserts that it may receive power directly from the NPC because it is a
public utility. It avers that P.D. No. 538, as amended, empowers PIA "as and to be a
public utility to operate and serve the power needs within PIE-MO, i.e., a specific area
constituting a small portion of petitioner's franchise coverage," without, however,
specifying the particular provision which so empowers PIA.
A "public utility" is a business or service engaged in regularly supplying the public
with some commodity or service of public consequence such as electricity, gas,
water, transportation, telephone or telegraph service. The term implies public use
and service.
Petitioner PIA is a subsidiary of the PHIVIDEC with "governmental and proprietary
functions." Sec. 4 of P.D. No. 538 specifically confers upon it the following powers To
operate, administer and manage the PHIVIDEC
Clearly then, the PIA is authorized to render indirect service to the public by its
administration of the PHIVIDEC industrial areas like the PIE-MO and may, therefore,
be considered a public utility. As it is expressly authorized by law to perform the
functions of a public utility, a certificate of public convenience, as suggested by the
Court of Appeals, is not necessary for it to avail of a direct power connection from the
NPC. However, such authority to be a public utility may not be exercised in such a
manner as to prejudice the rights of existing franchisees. In fact, by its actions, PIA
recognized the rights of the franchisees in the area.
Clearly, NPC's assertion that its "authority to entertain and hear direct connection
applications is a necessary incident of its express authority to sell electric power in
bulk" is baseless. It is certainly irregular, if not downright anomalous for the NPC
itself to determine whether it should supply power directly to the PIA or the industries
within the PIE-MO.
It simply cannot arrogate unto itself the authority to exercise non-rate fixing powers
which now devolves upon the Department of Energy and to hear and eventually
grant itself the right to supply power in bulk.
2) It is only after a where it is established that the affected private franchise holder is
incapable or unwilling to match the reliability and rates of NPC that a direct
connection with NPC may be granted..
Petitioner NPC attempted to abide by these rulings when it conducted a hearing to
determine whether it may supply power directly to PIA. While it notified CEPALCO of
the hearing, the NPC is not the proper authority referred to by this Court in the
aforementioned earlier decisions, not only because the subject of the hearing is a
matter involving the NPC itself, but also because the law has created the proper
administrative body vested with authority to conduct a hearing.
CEPALCO shares the view of the Court of Appeals that the Energy Regulatory Board
(ERB) is the proper administrative body for such hearings. However, a recent
legislative development has overtaken said view.
The ERB, which used to be the Board of Energy, is tasked with the following powers
and functions by Executive Order No. 172 which took effect immediately after its
issuance on May 8, 1987:
SEC. 3. Jurisdiction, Powers and Functions of the Board.When warranted and only
when public necessity requires, the Board may regulate the business of importing,
exporting, re-exporting, shipping, transporting, processing, refining, marketing and
distributing energy resources. x x x
The Board shall, upon prior notice and hearing, exercise the following, among other
powers and functions:
(a) Fix and regulate the prices of petroleum products;
(b) Fix and regulate the rate schedule or prices of piped gas to be charged by duly
franchised gas companies which distribute gas by means of underground pipe
system.
Xxxxxx
As may be gleaned from said provisions, the ERB is basically a price or rate-fixing
agency. Apparently recognizing this basic function, Republic Act No. 7638 provides as
follows:
SEC. 18. Rationalization or Transfer of Functions of Attached or Related Agencies.
The non-price regulatory jurisdiction, powers, and functions of the Energy Regulatory
Board as provided for in Section 3 of Executive Order No. 172 are hereby transferred
to the Department.
The determination of which of two public utilities has the right to supply electric
power to an area which is within the coverage of both is certainly not a rate-fixing
function which should remain with the ERB. It deals with the regulation of the
distribution of energy resources which, under Executive Order No. 172, was expressly
a function of ERB. However, with the enactment of Republic Act No. 7638, the
Department of Energy took over such function. Hence, it is this Department which
shall then determine whether CEPALCO or PIA should supply power to PIE-MO.
Clearly, petitioner NPCs assertion that its authority to entertain and hear direct
connection applications is a necessary incident of its express authority to sell electric
power in bulk is now baseless.52 Even without the new legislation affecting its
power to conduct hearings, it is certainly irregular, if not downright anomalous for the
NPC itself to determine whether it should supply power directly to the PIA or the
industries within the PIE-MO. It simply cannot arrogate unto itself the authority to
exercise non-rate fixing powers which now devolves upon the Department of Energy
and to hear and eventually grant itself the right to supply power in bulk.53
On the other hand, ventilating the issue in a public hearing would not unduly
prejudice CEPALCO although it was enfranchised by law earlier than the PIA.
Exclusivity of any public franchise has not been favored by this Court such that in
most, if not all, grants by the government to private corporations, the interpretation
of rights, privileges or franchises is taken against the grantee.
Thus in Alger Electric, Inc. v. Court of Appeals,54 the Court said: x x x Exclusivity is
given by law with the understanding that the company enjoying it is self-sufficient
and capable of supplying the needed service or product at moderate or reasonable
prices. It would be against public interest where the firm granted a monopoly is
merely an unnecessary conduit of electric power, jacking up prices as a superfluous
middleman or an inefficient producer which cannot supply cheap electricity to power
intensive industries. It is in the public interest when industries dependent on heavy
use of electricity are given reliable and direct power at the lower costs thus enabling
the sale of nationally marketed products at prices within the reach of the masses. x x
x.
Petitions of both camps respectively were DENIED. The Department of Energy was
directed to conduct a hearing with utmost dispatch to determine whether it is the
CEPALCO or the NPC, through the PIA, which should supply electric power to the
industries in the PIE-MO.