G.R. No. L-61637 and L-61639, December 3, 1985
NATIONAL POWER CORPORATION and APO CEMENT CORPORATION, petitioners, vs. HON. LEONARDO B. CAÑARES, Presiding Judge, Court of First Instance of Cebu, Branch X, and VISAYAN ELECTRIC COMPANY, INC., respondents.

FACTS

Petitioner Apo Cement Corporation (APOCEMCO), a BOI-registered enterprise, initially sought a direct power supply connection from the National Power Corporation (NPC) for its cement plant in Cebu, which falls within the franchise area of private respondent Visayan Electric Company (VECO). NPC initially confirmed a possible allocation. However, pursuant to Power Development Council (PDC) Resolution No. 77-01-02, which required a waiver from the local franchise holder for direct NPC connections, APOCEMCO was instructed to secure such a waiver from VECO. VECO refused, claiming it could match NPC’s industrial rates. Consequently, APOCEMCO and VECO entered into a formal contract in 1978 for VECO to supply its power.
A dispute later arose over the applicable power rate. During the pendency of this dispute before the Board of Energy (BOE), APOCEMCO reasserted its claim for direct NPC connection. Relying on a subsequent 1981 Memorandum of Agreement between the BOI and NPC, which seemed to allow direct connections for large BOI-registered enterprises, the BOE issued an order permitting APOCEMCO to connect directly to NPC without VECO’s consent. NPC and APOCEMCO then contracted for direct supply. VECO filed a complaint for injunction and damages with the Court of First Instance of Cebu, which issued a restraining order and later a writ of preliminary injunction to stop the direct connection.

ISSUE

Whether the respondent judge committed grave abuse of discretion or acted without jurisdiction in issuing the writ of preliminary injunction to enjoin NPC from directly supplying power to APOCEMCO.

RULING

The Supreme Court dismissed the petitions, ruling that the respondent judge did not act with grave abuse of discretion or in excess of jurisdiction. The Court upheld the validity and application of PDC Resolution No. 77-01-02, which established a policy protecting the economic viability of franchise holders by giving them priority to supply power within their service areas, provided they can match NPC rates. This policy was reiterated by the Secretary of Energy even after the PDC’s abolition.
The legal logic centered on the supremacy of this established national policy over the subsequent 1981 BOI-NPC Memorandum of Agreement. The Court found that the policy under PDC Resolution No. 77-01-02 was not repealed and remained operative. Crucially, the factual circumstances distinguished this case from others where direct connection was permitted. Here, VECO was demonstrably capable of supplying APOCEMCO’s requirements and matching NPC’s rates, and the parties had already entered into and implemented a supply contract. The injunction preserved the status quo and protected VECO’s franchise rights pending final resolution of the main case. Therefore, the lower court’s order was a proper exercise of judicial discretion to prevent a change in the situation that could render a final judgment ineffectual.