National Power Corporation v. Cañares
REITERATIONFacts
The Antecedents: Petitioners National Power Corporation (NPC) and Apo Cement Corporation (APOCEMCO) sought the nullification of orders issued by the Court of First Instance of Cebu, presided over by respondent Judge Leonardo B. Cañares. APOCEMCO, a BOI-registered enterprise, intended to purchase power directly from NPC. VECO, a private electric utility with a legislative franchise, also operated within the same area. APOCEMCO was initially informed by NPC of a possible allocation of power, but later denied due to Power Development Council (PDC) Resolution No. 77-01-02, which mandated that franchise holders have priority in supplying power to industrial enterprises within their franchise areas. APOCEMCO then contracted with VECO for its power needs. A dispute arose regarding the power rate, which reached the Board of Energy (BOE). Subsequently, the Board of Investments (BOI) and NPC entered into a Memorandum of Agreement allowing BOI-registered enterprises with significant electrical loads to be directly connected with NPC without the prior written agreement of franchise holders. Relying on this, the BOE issued an order allowing APOCEMCO direct connection with NPC. VECO sued NPC and APOCEMCO, seeking injunction and damages. The respondent judge issued a restraining order and subsequently a writ of preliminary injunction enjoining NPC from proceeding with the direct power connection. Procedural History: The Court of First Instance of Cebu, Branch X, presided over by respondent Judge Leonardo B. Cañares, issued a restraining order and later a writ of preliminary injunction enjoining the National Power Corporation (NPC) from proceeding with the direct power connection to Apo Cement Corporation (APOCEMCO), despite the latter's contract with Visayan Electric Company, Inc. (VECO). The Petition: Both NPC and APOCEMCO filed separate petitions for certiorari, prohibition, and mandamus, arguing that the respondent judge acted without jurisdiction and/or with grave abuse of discretion in issuing the orders.
Issue(s)
Whether the respondent judge acted without jurisdiction or with grave abuse of discretion in issuing the restraining order and writ of preliminary injunction. Whether the Power Development Council (PDC) Resolution No. 77-01-02, which grants priority to franchise holders in supplying power, is applicable and binding. Whether the Memorandum of Agreement between the Board of Investments (BOI) and NPC, allowing direct connection without the consent of franchise holders, can supersede the rights of existing franchise holders and prior administrative decisions. Whether the franchise holder's right to due process and priority to be heard on direct contracts can be denied.
Ruling
The petitions are dismissed for lack of merit. The respondent judge did not act in excess of jurisdiction nor commit any grave abuse of discretion. The temporary restraining order is lifted, and any implementation of the direct service contract between NPC and APOCEMCO is ordered discontinued. APOCEMCO is ordered to reconnect its power lines to VECO, which must supply its energy requirements at a rate not exceeding that which would be paid for a direct connection to NPC.
Ratio Decidendi
On the issue of the respondent judge's jurisdiction and grave abuse of discretion: The Court found no merit in the petitions, holding that the respondent judge did not act in excess of jurisdiction or with grave abuse of discretion. The judge's issuance of the restraining order and preliminary injunction was a proper exercise of judicial power to maintain the status quo pending the resolution of the case, considering the conflicting rights and administrative issuances involved. The judge's actions were aimed at preserving the rights of VECO as a franchise holder while the substantive issues were being litigated. On the applicability and binding nature of PDC Resolution No. 77-01-02: The Court affirmed the validity and applicability of PDC Resolution No. 77-01-02. This resolution was issued to give operational meaning to franchise and service area coverage, and to protect the economic growth of franchise utilities and electric cooperatives. It explicitly grants priority to authorized cooperatives or franchise holders in supplying power requirements of industrial enterprises within their franchise areas. The resolution was promulgated pursuant to P.D. No. 948, which vested the PDC with powers to formulate and approve policies for the power industry, with its decisions being final and conclusive unless directed otherwise by the President. On the effect of the BOI-NPC Memorandum of Agreement: The Court ruled that the Memorandum of Agreement between the BOI and NPC, which allowed direct connection to NPC for BOI-registered enterprises without the prior consent of franchise holders, could not supersede or modify the prior act or decision of the Secretary of Energy. The Secretary of Energy, in adhering to PDC Resolution No. 77-01-02, had denied APOCEMCO's application for direct connection. The revisory power over such decisions was lodged only in the President. Furthermore, P.D. No. 395 did not expressly or impliedly allow NPC to sell energy in bulk directly to BOI-registered enterprises in violation of the rights of existing franchise holders. On the franchise holder's right to due process and priority: The Court emphasized that franchise operators' right to due process and priority to be heard on direct contracts cannot be denied. Legislative or municipal franchises for operating a public utility are considered property, guaranteed due process protection under the Constitution. The state policy, as established by Presidential Decree No. 380 (as amended), PDC Resolution No. 77-01-02, and NPC's own operational guidelines, requires that any affected private franchise holder must be afforded an opportunity to be heard and that it must be established that the franchise holder is incapable or unwilling to match the reliability and rates of NPC for directly serving the enterprise. This ensures that the rights of existing utilities are respected and that their economic viability is protected.
Main Doctrine
A franchise holder's right to due process and priority to be heard on direct contracts for power supply cannot be denied, even if the National Power Corporation is statutorily empowered to directly service BOI-registered enterprises, provided that the affected private franchise holder is afforded an opportunity to be heard and is established to be incapable or unwilling to match the reliability and rates of the NPC.