NPC v CA and CEPALCO

GR No.112702, 26 September 1997

FACTS:
1. On June 17, 1961, Cagayan Electric and Power Light Company (CEPALCO) was enfranchised by RA 3247,
for 50 years, 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 Cagayan de Oro City and its
suburbs. RA 3570 approved in 1963, expanded the coverage of the franchise to include the municipalities
of Tagoloan and Opol, Misamis Oriental. In 1969, RA 6020 further amended the same franchise to include
the areas of Villanueva and Jasaan, Misamis Oriental.

2. PD 243 issued in 1973 created Philippine Veterans Investment Development Corporation (PHIVIDEC)
authorized to engage in commercial, industrial, mining, agricultural and other enterprises to allow the full
and continued employment of the productive capabilities of and investment of veterans and retirees of the
Armed Forces of the Philippines. In 1974, PD 538 created PHIVIDEC Industrial Authority (PIA) which shall
promote the professional management of well-planned industrial areas. Under Sec 3 of PD 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).

3. PIA, as manager of PIE-MO, granted the Ferrochrome Philippines, INc (FPI) and Metal Alloys Corporation
(MAC) authority to operate in its area of development. In 1979, PIA granted CEPALCO a temporary
authority to retail electric power to the industries operating within PIE-MO which authorized CEPALCO to
operate, administer, construct and distribute electric power within the PIE-MO for a period of 5 years,
renewable for another 5 years, at the end of which, PIA has the option to take over the operation of the
electric service and acquire by purchase CEPALCO’s assets within PIE-MO. However, CEPALCO was not
able to meet the demands of the industries in PIE-MO which led most of the companies to close. Thus, PIA
applied with the NPC for direct power connection which in due course was approved.

4. One of the companies that entered into an agreement with NPC for a direct sale and supply of power was
FPI. CEPALCO contended this agreement saying that it violated its right as the authorized operator of an
electric light and power system in the area and the national electrification policy hence they filed a petition
for prohibition, mandamus and injunction before RTC of QC. The RTC granted such petition which
restrained NPC from supplying power directly to FPI on the ground that such direct sale, supply and
delivery of electric power was violative of the rights of CEPALCO under its legislative franchise. NPC
however violated such directive of the Court and its directors were held in contempt.

5. CEPALCO thereby filed with the ERB a petition praying that the ERB order the discontinuance of all existing
direct supply of power by the NPC within petitioner’s franchise area. The ERB granted such petition.
However, PIA contracted the NPC for the construction of a transmission line from Namutulan substation to
the substation of PIA thus, CEPALCO filed in RTC of Pasig a petition for certiorari, prohibition and
mandamus and injunction against NPC and PIA, however it was dismissed on the ground of res judicata.
Thus, CEPALCO elevated the case to the SC but was later referred to the CA. The CA denied the issuance of
a TRO ruling that since the NPC is a public utility it cannot be issued a TRO, however upon MR, the CA
reversed its decision and granted the TRO. The CA however said that a proper administrative body should
hear the dispute between NPC and CEPALCO to supply the power to PIE-MO with NPC asserting that they
have such power to resolve such dispute. Hence, this petition.

ISSUE: Whether ERB is the proper administrative body to determine who should supply electric power to PIE-MO.
HELD: No.

RATIO:
1. The ERB created under EO No. 172 took effect in May 8, 1987 which basically made ERB a price or rate-
fixing agency. RA 7638 which created the DOE was approved in 1992, which, under sec 18 of said RA
basically transferred to the DOE the non-price regulatory jurisdiction, powers and functions of the ERB.
This transfer of power was likewise affirmed by a DOJ opinion requested by then Acting Chairman of the
 Energy Coordinating Council Delfin Lazaro whereby the DOJ said that only the non-price regulatory
functions of ERB under Section 3 of EO 172 are transferred to DOE. All other powers of ERB which are not
within the purview of its non-price regulatory jurisdiction, powers and functions are not so transferred to
DOE and accordingly remain vested in the ERB.

2. The determination of which 2 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 of the ERB. It deals with the regulation of
the distribution of energy resources which was expressly a function of ERB. However, with the enactment
of RA 7638, the DOE took over such function; hence it is this Department which shall then determine
whether CEPALCO or PIA should supply power to the PIE-MO. The Court likewise held that 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 to hear and eventually grant itself the right to supply power in bulk. Hence, petition is denied. The
DOE is directed to conduct a hearing to determine whether it should be CEPALCO or NPC, through PIA,
which should supply electric power to PIE-MO.