G.R. No. L-22766 - Surigao Electric Co., Inc. vs. Municipality of Surigao

On June 18, 1960, Congress enacted amendments to the Public Service Act through Republic Act No. 2677.
The amendments removed the need for a certificate of public convenience and necessity for public services that are owned or operated by government entities or government-owned or controlled corporations.
Despite the exemption from obtaining a certificate, the Public Service Commission (PSC) retained its power of regulation, specifically with respect to the fixing of rates.

Surigao Electric Co., Inc., a holder of a legislative franchise to operate an electric plant.
Arturo Lumanlan, Sr., who received on February 16, 1962, the rights, privileges, plant, and facilities of Surigao Electric Co., Inc.

The Municipality of Surigao – a municipal government involved in the operation of an electric plant.
The Public Service Commission, which is responsible for regulating public services and fixing rates.

The PSC, in its order dated July 11, 1963, approved the tentative schedule of rates submitted by the Municipality of Surigao.
The PSC justified its action on the ground that, based on the legislative amendments, a municipal government—functioning as a government entity—is exempted from the requirement to secure a certificate of public convenience and necessity.
The legal question arose as to whether a municipal government can operate an electric plant without obtaining the specific statutory franchise or certificate, particularly when it functions as an instrumentality of the national government.

The Court had to interpret the intent of Congress in the amendments of the Public Service Act, especially regarding the exemption of “government entities” from the certificate requirement.
The case highlighted the dual character of municipal corporations, as demonstrated in earlier jurisprudence (e.g., Mendoza v. de Leon), which recognized municipalities as both governmental branches and quasi-private corporate entities.
The issue of whether legislative franchises granted to private parties could override later statutory amendments that regulate public services under the police power also emerged.

Whether the amendment to the Public Service Act, in eliminating the requirement of a certificate of public convenience and necessity for government entities, properly exempts a municipal government from this requirement.
The determination of the extent of the PSC’s regulatory authority over rates even after such exemptions were provided.

Whether the Municipality of Surigao, despite its dual character as both a governmental and quasi-corporate entity, qualifies as a “government entity” for purposes of the Public Service Act.
The implications of such qualification on its ability to operate an electric plant without the statutory franchise or certificate.

Whether the legislative franchise held by Surigao Electric Co., Inc. and later transferred to Arturo Lumanlan, Sr., can stand against the regulatory powers exercised by the PSC based on the subsequent amendments.
The balancing of property and contractual rights against the exercise of the government’s police power in regulating public services.