G.R. No. 112702 & G.R. No. 113613 September 26, 1997.
NATIONAL POWER CORPORATION and PHIVIDEC INDUSTRIAL AUTHORITY, petitioners, vs. COURT OF APPEALS and CAGAYAN ELECTRIC POWER AND LIGHT CO., INC. (CEPALCO), respondents.

FACTS

CEPALCO holds a legislative franchise under Republic Act No. 3247 , as amended, to generate and distribute electric power for sale within Cagayan de Oro City and several municipalities in Misamis Oriental, including Tagoloan and Villanueva. The PHIVIDEC Industrial Authority (PIA), created under Presidential Decree No. 538, manages the PHIVIDEC Industrial Estate-Misamis Oriental (PIE-MO), located within CEPALCO’s franchise area. On July 6, 1979, PIA granted CEPALCO a temporary authority to distribute electric power within PIE-MO for five years, renewable for another five, with PIA having an option to take over the operation thereafter. Citing CEPALCO’s inability to meet the power demands of industries within PIE-MO, PIA applied for and obtained approval from the National Power Corporation (NPC) for a direct power connection to supply industries like Ferrochrome Philippines, Inc. (FPI). CEPALCO filed a petition for prohibition, mandamus, and injunction (Civil Case No. Q-35945) against NPC, arguing the direct supply violated its franchise rights. The Regional Trial Court ruled in favor of CEPALCO, ordering NPC to permanently desist from directly supplying power to FPI unless coursed through CEPALCO’s lines. This decision was affirmed by the Supreme Court in G.R. No. 72085 on December 28, 1989, which held that NPC’s authority to supply power directly to BOI-registered enterprises is subordinate to the national electrification policy under P.D. No. 40 and that CEPALCO’s franchise, though not exclusive, is a valuable property right. Despite this, FPI filed a new application for direct supply with NPC in September 1990. NPC officials were found in contempt by the RTC for entertaining this application, a ruling upheld by the Supreme Court in G.R. No. 107809 on July 5, 1993. Meanwhile, an NPC Hearing Committee proceeded with hearings on FPI’s new application, recommending a direct connection to PIA instead of FPI, after finding CEPALCO unwilling to match NPC’s rates. Separately, the Energy Regulatory Board (ERB), in ERB Case No. 89-430, ruled on July 17, 1992, that CEPALCO was relatively efficient and reliable and ordered NPC to discontinue all existing direct supplies within CEPALCO’s franchise area. NPC and PIA appealed the ERB decision to the Court of Appeals, which affirmed it. NPC and PIA then filed these consolidated petitions for review.

ISSUE

Whether the National Power Corporation (NPC) has jurisdiction to determine if it may supply electric power directly to an industrial enterprise within the franchise area of an existing and operating franchise holder.

RULING

No. The Supreme Court denied the petitions and affirmed the Court of Appeals’ decision. The Court held that NPC does not have the jurisdiction to make such a determination. The power to resolve disputes between franchise holders and entities seeking a direct power connection from NPC is vested in the Energy Regulatory Board (ERB), now the Energy Regulatory Commission, by virtue of its regulatory authority over public utilities under Commonwealth Act No. 146 (The Public Service Act). The Court emphasized that the national policy, as embodied in Republic Act No. 7638 (the Department of Energy Act of 1992), mandates that NPC’s direct supply of electricity to specific end-users, including BOI-registered enterprises, must be subject to the review and regulation of the ERB. The ERB correctly exercised its jurisdiction in ERB Case No. 89-430. The NPC Hearing Committee’s proceedings were void for lack of jurisdiction, as NPC cannot be the judge in its own cause. The Court also noted that the previous ruling in G.R. No. 72085 , which required a hearing to establish a franchise holder’s incapability or unwillingness to match NPC’s reliability and rates, has been superseded by the policy under R.A. No. 7638 , which places such determinations under ERB’s authority.