G.R. No. L-24912. April 9, 1987.
OLONGAPO ELECTRIC LIGHT AND POWER CORPORATION, plaintiff-appellant, vs. NATIONAL POWER CORPORATION and THE MUNICIPALITY OF OLONGAPO, defendants-appellees.

FACTS

Olongapo Electric Light and Power Corporation (OELPC) was granted a legislative franchise to operate an electric system in the newly created Municipality of Olongapo on June 19, 1960. It subsequently contracted with the National Power Corporation (NPC) on May 18, 1961, for the supply of electric power. OELPC also negotiated with the municipal council to lease the existing distribution system turned over by the U.S. government. The council initially agreed in principle and passed a resolution authorizing the system’s disposal. However, a change in municipal leadership led to the repeal of that resolution. The municipality instead resolved to operate the system itself and, on January 4, 1963, executed its own power supply contract with the NPC.
OELPC, lacking a distribution system to receive power from NPC, filed a complaint in the Court of First Instance of Manila. It sought to declare the NPC-Municipality contract null and void for violating the Public Service Law, arguing the municipality could not engage in a public service business without a certificate of public convenience. OELPC also prayed for a writ of preliminary injunction to restrain NPC from delivering power to the municipality. The trial court dismissed the complaint, ruling OELPC had no cause of action.

ISSUE

Whether the contract between the National Power Corporation and the Municipality of Olongapo for the sale of electric power is null and void for violating Section 18 of the Public Service Law.

RULING

The Supreme Court affirmed the trial court’s dismissal. The legal logic centers on the distinction between merely purchasing power and engaging in the business of selling it to the public. Section 18 of the Public Service Act (Commonwealth Act No. 146) prohibits a municipality from “engaging in any public service business” without first securing a certificate of public convenience and necessity. The Court held that the contract in question, Exhibit “C”, was purely a contract for the purchase and sale of electric power between NPC and the municipality. This act of purchasing power, by itself, does not constitute “engaging in a public service business.” The prohibition and the requirement for a certificate would only be triggered from the moment the municipality sells or distributes that power to consumers. Since the execution of the supply contract did not per se violate the law, OELPC’s claim that it was null and void had no basis. The Court also noted that the ancillary remedy of injunction had become moot, as the merits of the main action had been resolved against OELPC.