CAGAYAN ELECTRIC POWER AND LIGHT COMPANY, INC., PETITIONER-APPELLEE, VS. NATIONAL POWER CORPORATION, RESPONDENT-APPELLANT.

The sole issue raised in this appeal certified to us involving a
pure question of law by the then Intermediate Appellate Court (now Court of
Appeals) in its Resolution dated August
29, 1985^[1]
is not novel.  The question of whether or
not respondent-appellant National Power Corporation (NPC) is authorized under
existing laws to sell, supply and deliver electric power directly to
BOI-registered enterprises without giving priority to franchised utilities
servicing the area
involved, has been laid to rest in the case of National Power
Corporation vs. Caneres^[2]
and only very recently reiterated in National Power Corporation vs. Cagayan Electric Power and Light Company^[3]
involving the parties herein.

The facts are undisputed.

Petititoner-appellee Cagayan Electric Power and Light Company, Inc. (CEPALCO,
for short) is a private corporation organized under Republic Act No. 3247 as
amended by R.A. Nos. 3570 and 6020. 
Under its legislative franchise, CEPALCO is authorized to construct,
maintain and operate electric and power systems within the municipalities of Tagoloan, Opol, Villanueva and Jasaan, Province
of Misamis Oriental
and in Cagayan de Oro City
and its suburbs.  Respondent-appellant
NPC, on the other hand, is a government-owned and controlled corporation
authorized under its Charter^[4]
to generate and transmit electric energy and set up transmission line grids and
generation facilities in Luzon, Visayas and Mindanao.

On August 20, 1980,
respondent-appellant NPC entered into an agreement with Ferrochrome Philippines,
Inc. (FPI, for short) for the direct sale and supply by the former of all the
latter’s plant operations power requirements. 
FPI is a power-intensive industry registered with the Board of
Investment.  Its facilities are located
at Phividec
Industrial Estate, Tagoloan, Misamis
Oriental, within the area covered by CEPALCO’s
franchise.

Contending that the aforesaid agreement violates not only its
rights as the authorized operator of an electric light and power system in the
area involved but also the national electrification policy^[5]
under existing laws, CEPALCO instituted before the Regional Trial Court of Quezon City^[6] a petition
for prohibition, mandamus and injunction with prayer for a restraining
order and/or preliminary injunction against NPC.  Finding the petition docketed as Civil Case
No. C-35945 to be sufficient in form and substance, the lower Court issued an Order on August 12, 1982 directing, among others, NPC to maintain
the status quo by refraining from
directly connecting or causing direct connection, supply and delivery of
electric power from its lines to FPI. 
That order was subsequently modified by the same court in view of the
joint “Manifestation and Motion” filed by the parties embodying their
agreement to allow NPC to supply electrical power to FPI during the pendency of the case under the terms and conditions stated
therein.

In its answer, the NPC countered that its agreement with FPI is
allowed by law
as NPC is authorized by its Charter to sell electric power “in
bulk” to industrial enterprises as well as to enterprises registered with the BOI, without restrictions
in the latter case.  It further contended
that the agreement in question could not be violative
of petitioner’s franchise, the latter being non-exclusive.

On May 2, 1984, the court a quo rendered
judgment ordering NPC “to permanently desist from effecting, causing, and continuing the direct supply,
sale and delivery of electricity from its power line to the plant of
Ferrochrome Philippines, Inc., and from entering into and/or implementing any
agreement or arrangement for such direct power connection, unless coursed
through the power line of“
CEPALCO, and declaring “any and all acts, arrangements and/or contracts
entered into by (NPC) for direct power connection, and the direct sale,
supply and delivery of electric power by (NPC) to Ferrochrome, without coursing
the same through (CEPALCO) (to be) violative of the
rights of (CEPALCO) under its legislative franchise, and are therefore illegal,
null and void.“^[7]

Hence, this recourse.

As earlier intimated, the present controversy will be resolved on
the basis of our pronouncements in National Power Corporation vs. Caneres, supra.  We categorically stated therein that:

“x x
x we find nothing in the provisions of P.D. No. 395 (amending P.D. No. 380) which
expressly or impliedly allowed or sanctioned the sale in bulk by the NPC of
energy direct to BOI-registered
enterprises even if it would be violative of the
rights of existing franchise holders.  In
National Power Corporation vs. Jacinto
(G.R. No. 67413, promulgated January 31, 1985, by this Court’s Second Division,
134 SCRA 431) this Court had occasion to stress the following:

Presidential Decree No. 380, as amended, PDC Resolution No.
77-01-02 and NPC;s own operational guidelines for the
implementation of the BOI-NPC Memorandum of Understanding on direct connection establish
the state policy that NPC is
statutorily empowered to directly service all the requirements of a BOl-registered enterprise provided that, first, any affected
private franchise holder is afforded an opportunity to be heard on the application therefor, and second, from such hearing, it
is established that said private franchise holder is incapable or unwilling to
match the reliability and rates of NPC for directly serving the
latter.  But even without the
aforementioned statutory or administrative bases, still said franchised
operators’ right to due process or priority to be heard on such direct
contracts cannot be denied.  Like
certificates of public conveyance, (sic) legislative or municipal franchises
for the operation of a public utility are properties (Raymundo vs. Luneta Motor Co., 58
Phil. 889) and therefore guaranteed the due process protection of the
Constitution.”^[8]

It is likewise worthy of note that the defunct Power Development
Council, in implementing P.D. No. 395, promulgated
on January 28, 1977 PDC Resolution No. 77-01-02, which in part reads:

“1)  At any given
service area, priority should be given to the authorized cooperative or
franchise holder in the right to supply the power requirement of existing
or prospective industrial enterprises (whether BOI-registered or not) that are
located or plan to locate within the franchise area or coop service area as
shall be determined by the Board of Power or National Electrification
Administration whichever the case may be.”^[9]

The statutory authority given to respondent-appellant NPC in
respect of sales of energy in bulk direct to BOI-registered enterprises should
always be subordinate to the “total-electrification-of-the-entire-country-on-an-area-coverage-basis
policy” enunciated in P.D. No. 40. 
Thus, in NPC vs. CEPALCO, supra, this Court held:

“x x x The law on the matter is clear.  PD 40 promulgated on 7 November 1972 expressly provides that the generation
of electric power shall be undertaken solely by the NPC.  However, Section 3 of the same decree also
provides that the distribution of electric power shall be undertaken by cooperatives, private utilities
(such as the CEPALCO), local governments and other
entities duly authorized, subject to state regulation.  The pertinent provisions of the aforecited decree read:

“1. The attainment of total electrication
on an area coverage basis, which is a declared
policy of the State, shall be effected primarily through:

a)  The setting up of island grids with
central/linked-up generation facilities

b)  The setting up of cooperatives for
distribution of power.

2.  The setting up of
transmission line grids and the construction of associated generation
facilities in Luzon, Mindanao and
major islands of the country, including the Visayas,
shall be the responsibility of the National Power Corporation (NPC) as the authorized implementing agency of the State.

a) 
Plant additions necessary to meet the increase in power of the area
embraced by any grid set up by the NPC shall be constructed and owned by the
NPC.

b)  In areas not embraced by the NPC grid, the
State shall permit cooperatives, private utilities and local governments to own
and operate isolated grids and generation facilities, subject to State
regulation.

3.  The distribution of
electric power generated by the NPC shall be undertaken by:

a) 
Cooperatives

b) 
Private utilities

c) 
Local governments

d) 
Other entities duly authorized subject
to state regulation.”

Nor should we lose sight of the factual findings of the court a quo that petitioner-appellee CEPALCO had
not only been authorized by the Phividec Industrial
Authority to provide electrical power to the Phividec
Industrial Estate within which the FPI plant is located, but that petitioner-appellee
CEPALCO had in fact, supplied the latter’s power requirements for the
construction of its plant, upon FPI’s application therefor as early as October 17, 1980.

It bears emphasis
then that “it is only after a hearing (or an opportunity for such a hearing)
where it is established that the affected private franchise holder is incapable
or unwilling to match the reliability and rates of NPC that a direct connection with NPC may be granted.“^[10] Here, petitioner-appellee’s
reliability as a power supplier and ability to match the NPC
rates were never put in issue.

It is immaterial that petitioner-appellee’s
franchise was not exclusive.  A privilege
to sell within specified territory, even if not exclusive, is a valuable
property right entitled to protection against unauthorized competition.^[11]

WHEREFORE, the present appeal is hereby DENIED and the decision appealed from is hereby
AFFIRMED in toto. 
No pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr., Bidin, and Cortes, JJ., concur.

Feliciano, J., on leave.

^[1] in AC-G.R. SP No. 05109, Justice Nathanael P. de  Pano, Jr., ponente.  Justices Isidro C. Borromeo
and Luis A. Javellana, concurring.

^[2] 140 SCRA 329.

^[3] G.R. No. 78602, May 5, 1988.

^[4] Republic Act No. 6395, as amended by P.D.
Nos. 380 and 395.

^[5]
Policy enunciated in P.D. No. 40 entitled, “Establishing Basic Policies
for the Electric Power Industry” whereby generation and transmission of
electrical energy was reposed in the NPC and the distribution of the same was
to be coursed through, among other entities, franchised utilities.

^[6]
Presided over by Judge Eduardo C. Tutaan.

^[7] p. 12, Decision, p. 32, Rollo.

^[8] Underscoring supplied.

^[9] Underscoring ours.

^[10]
NPC v. CEPALCO, supra.

^[11]
Castro v. Ice Cold Storage Industries of the Philippines,
L-10147, December 27, 1958.