Title
Cagayan Electric Power and Light Co., Inc. vs. National Power Corp.
Case
G.R. No. 72085
Decision Date
Dec 28, 1989
CEPALCO challenged NPC's direct power supply to FPI within its franchise area. SC ruled NPC must prioritize franchised utilities under P.D. No. 40, affirming CEPALCO's property rights and national electrification policy.
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Case Digest (G.R. No. 72085)

Facts:

  1. Parties Involved:

    • Petitioner-Appellee: Cagayan Electric Power and Light Company, Inc. (CEPALCO), a private corporation with a legislative franchise to operate electric power systems in specific areas in Misamis Oriental and Cagayan de Oro City.
    • Respondent-Appellant: National Power Corporation (NPC), a government-owned corporation authorized to generate and transmit electric energy nationwide.
  2. Franchise and Authority:

    • CEPALCO operates under Republic Act No. 3247, as amended, and is authorized to provide electric power within its franchise area.
    • NPC operates under its Charter (Republic Act No. 6395, as amended by P.D. Nos. 380 and 395) and is tasked with generating and transmitting electric power.
  3. The Agreement:

    • On August 20, 1980, NPC entered into an agreement with Ferrochrome Philippines, Inc. (FPI), a BOI-registered enterprise, to directly supply power to FPI’s plant located within CEPALCO’s franchise area.
  4. Legal Action:

    • CEPALCO filed a petition for prohibition, mandamus, and injunction against NPC, arguing that the direct supply of power to FPI violated its franchise rights and the national electrification policy under P.D. No. 40.
    • The Regional Trial Court ruled in favor of CEPALCO, ordering NPC to cease direct power supply to FPI unless coursed through CEPALCO.
  5. NPC’s Defense:

    • NPC contended that its Charter allowed it to sell power in bulk to BOI-registered enterprises without restrictions and that CEPALCO’s franchise was non-exclusive.

Issue:

The sole issue raised in this case is:

  • Whether NPC is authorized under existing laws to sell, supply, and deliver electric power directly to BOI-registered enterprises without giving priority to franchised utilities like CEPALCO servicing the area.

Ruling:

The Supreme Court denied NPC’s appeal and affirmed the lower court’s decision. The Court ruled that:

  1. NPC’s authority to sell power directly to BOI-registered enterprises is subordinate to the national electrification policy under P.D. No. 40, which prioritizes franchised utilities like CEPALCO.
  2. NPC cannot bypass CEPALCO unless it is proven that CEPALCO is incapable or unwilling to match NPC’s reliability and rates, which was not established in this case.
  3. CEPALCO’s franchise, even if non-exclusive, is a valuable property right entitled to protection against unauthorized competition.

Ratio:

  1. Statutory Interpretation:

    • P.D. No. 40 establishes the state policy of total electrification on an area-coverage basis, prioritizing franchised utilities like CEPALCO for power distribution.
    • NPC’s Charter does not expressly or impliedly allow direct sales to BOI-registered enterprises if it violates the rights of existing franchise holders.
  2. Due Process and Property Rights:

    • Franchised operators like CEPALCO have a right to due process and must be given an opportunity to be heard before NPC enters into direct power supply agreements within their franchise areas.
    • A franchise, even if non-exclusive, is a property right protected by the Constitution.
  3. Precedents:

    • The Court relied on its prior rulings in NPC v. Caneres and NPC v. CEPALCO, which upheld the priority of franchised utilities in power distribution and emphasized the need for a hearing to determine the capability of the franchise holder to match NPC’s reliability and rates.
  4. Policy Considerations:

    • The decision reinforces the national electrification policy and ensures that franchised utilities are not bypassed without just cause, promoting stability and fairness in the power distribution sector.


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