G.R. No. 127371 . April 25, 2002.
PHILIPPINE SINTER CORPORATION and PHIVIDEC INDUSTRIAL AUTHORITY, petitioners, vs. CAGAYAN ELECTRIC POWER and LIGHT CO., INC., respondent.

FACTS

Respondent Cagayan Electric Power and Light Co., Inc. (CEPALCO), a legislative franchise holder, filed a petition with the Energy Regulatory Board (ERB) seeking the discontinuation of all existing direct power supply from the National Power Corporation (NPC) within its franchise area, pursuant to a Cabinet Reform Policy. After due notice and hearing, the ERB granted the petition, declaring direct connections to NPC no longer necessary and ordering their discontinuance. The ERB decision became final and executory after NPC’s unsuccessful appeal. To implement this decision, CEPALCO demanded that petitioner Philippine Sinter Corporation (PSC), an industrial locator within the PHIVIDEC Industrial Estate managed by petitioner PHIVIDEC Industrial Authority (PIA), disconnect from NPC and transfer its power supply to CEPALCO.
PSC and PIA refused, citing a subsisting power supply contract with NPC effective until July 26, 1996. They filed an injunction suit before the Regional Trial Court (RTC), arguing the ERB decision was not binding on them as they were not parties to the ERB case, that PIA had its own franchise under its charter, and that the switch would increase costs. The RTC granted the injunction. The Court of Appeals reversed the RTC, prompting this petition.

ISSUE

Whether the final and executory ERB decision, which ordered the discontinuance of direct NPC power supply within CEPALCO’s franchise area, is binding on petitioners PSC and PIA, thereby compelling PSC to shift its power source to CEPALCO.

RULING

Yes, the ERB decision is binding. The Supreme Court affirmed the Court of Appeals, ruling that the ERB, as the specialized regulatory body endowed with technical expertise and jurisdiction over the power industry, had the authority to determine the necessity of direct NPC connections within a franchise area. Its decision, rendered after proper publication, notice, and hearing, attained finality. The legal logic is grounded in the principle of conclusiveness of judgment and the doctrine of primary jurisdiction. The ERB’s determination that CEPALCO was financially and technically capable to supply power, making direct NPC connections unnecessary, constituted a valid exercise of its regulatory power over the distribution of electricity. This adjudication was in rem, binding on all entities within the franchise area, including PSC, regardless of their non-participation in the ERB proceedings, as they were considered sufficiently notified through the publication of the hearing. The existence of PSC’s contract with NPC and PIA’s charter could not override the ERB’s valid and final regulatory order aimed at implementing national policy for orderly electrification. The public interest in the efficient and rational distribution of power, as administered by the competent regulatory board, prevails over private contractual arrangements.