G.R. No. 176935-36 - Zambales II Electric Cooperative, Inc. Board of Directors vs. Castillejos Consumers Association, Inc.

Petitioners are the members of the Board of Directors of Zambales II Electric Cooperative, Inc. (ZAMECO II), namely Jose S. Dominguez (President), Isaias Q. Vidua (Vice-President), Vicente M. Barreto (Secretary), Jose M. Santiago (Treasurer), Jose Naseriv C. Dolojan, Juan Fernandez, and Honorio Dilag, Jr.
Respondents include:

Castillejos Consumers Association, Inc. (CASCONA), representing the aggrieved electric consumers of the municipality of Castillejos, Zambales.
The National Electrification Administration (NEA) and its Office of the Administrative Committee (ADCOM), the government-owned regulatory body empowered to supervise and control electric cooperatives.

ZAMECO II is organized and registered under Presidential Decree No. 269, as amended, while NEA’s authority is similarly based on PD No. 269 and its subsequent amendment (PD No. 1645).

On November 21, 2002, CASCONA filed a letter-complaint with the NEA alleging several irregularities by the board members, including:

The complaint was primarily based on the “Management and Financial Audit Report” covering January 1, 1989, to September 30, 1997 (the 1998 Audit Report), supplemented later by issues raised in a 2003 Audit Report.
Following an exchange of pleadings, the NEA-ADCOM set the case for a preliminary mandatory conference, during which the parties agreed on a compromise period and the subsequent submission of a verified position paper.

CASCONA submitted its position paper on November 19, 2003; however, the petitioners failed to file theirs despite an extension.
On November 24, 2004, the NEA issued a Resolution imposing disciplinary measures on the petitioners, which included the penalty of removal from office with perpetual disqualification from running in future elections.
Subsequent to this, the petitioners filed a motion for reconsideration and eventually a petition for certiorari when further administrative orders (including an Office Order dated December 21, 2004) were issued, setting in motion a series of judicial relief measures such as a Temporary Restraining Order and later a preliminary injunction.

The regulatory power of the NEA was effectively abrogated by the Electric Power Industry Reform Act of 2001 (EPIRA), as all financial obligations from loans were assumed by PSALM Corp.;
They were denied due process, particularly because they were not notified about the additional charges arising from the 2003 Audit Report, thereby being given the opportunity only to respond to issues from the 1998 Audit Report; and
The ADCOM overstepped its authority by assuming jurisdiction over matters that were allegedly election-related.

In contrast, NEA affirms that its supervisory authority is not solely predicated on any creditor-debtor relationship and continues under the express provisions of PD Nos. 269 and 1645 as well as EPIRA.
CASCONA, meanwhile, reiterates that the issues, including the alleged overstay of board members, are administrative in nature and not merely related to election procedures.

A subsequent issue arose when ZAMECO II registered with the Cooperative Development Authority (CDA) on December 4, 2007, raising questions whether this conversion complied with EPIRA requirements mandating a conversion into a stock cooperative.
Both NEA and CASCONA challenged the validity of the CDA registration on procedural grounds, which could impact NEA’s continuing supervisory authority.

The Court of Appeals consolidated the petitions from two separate cases (CA-G.R. SP Nos. 88195 and 88845) and ultimately ruled in favor of NEA’s exercise of supervisory power.
Despite affirming the disciplinary action on certain counts, the appellate court found no due process violation regarding some of the issues; however, concerns over the 2003 Audit Report notification persisted.
The case was remanded to the Court of Appeals on the question of whether ZAMECO II complied with the conversion requirements under EPIRA.

The extent of NEA’s supervisory and regulatory power over electric cooperatives under PD Nos. 269 and 1645, and whether this power was nullified by the EPIRA through the assumption of debts by PSALM Corp.

Does the EPIRA abrogate NEA’s authority to supervise and discipline electric cooperative officials merely because of the shift in financial obligations?

The sufficiency of due process in the administrative proceedings conducted by the NEA-ADCOM.

Were petitioners deprived of their constitutional right to notice and a fair hearing, particularly regarding the charges derived from the 2003 Audit Report?

The proper jurisdictional scope over election-related versus administrative matters.

Should issues such as the alleged “overstaying” of the board members be treated as election-related matters to be resolved by the proper electoral commission, or as administrative violations under NEA authority?

The impact of ZAMECO II’s registration with the CDA on the applicability of NEA’s regulatory power.

Has ZAMECO II duly complied with the EPIRA’s requirement to convert into a stock cooperative before being registered with the CDA, and what are the implications for NEA’s supervisory authority?