National Power Corporation vs. Philippine Electric Plant Owners Association (PEPOA), Inc.

The ERB has jurisdiction over the NPC's imposition of penalties for contract violations because such penalties are "rates" that cannot be charged without prior ERB approval; and the ERB may issue a cease and desist order as provisional relief without prior notice and hearing under Section 8 of Executive Order No. 172, provided it is supported by substantial evidence and a hearing is held within thirty days.

NPC is a government-owned and controlled corporation created under Commonwealth Act No. 120 and Republic Act No. 6395, which supplies electric power to private electric plant operators, some of whom are members of PEPOA, a non-stock corporation. The Energy Regulatory Board was created by Executive Order No. 172 to provide policy guidelines and the regulatory framework for the power sector, and Republic Act No. 7638 transferred to it the NPC's power to determine, fix, and prescribe rates charged to customers. Republic Act No. 9136 later transferred the ERB's powers to the Energy Regulatory Commission.

National Power Corporation (NPC) is a government-owned and controlled corporation created under Commonwealth Act No. 120 and Republic Act No. 6395. Philippine Electric Plant Owners Association (PEPOA), Inc. is a non-stock corporation composed of private electric plant operators, some of whom purchase electric power from NPC to service power requirements in their respective franchise areas.

NPC charged penalties under its Rules on the Sale of Electricity, specifically No. 5 (Minimum Charges) and No. 6 (Penalty for Consumption in Excess of the Allowable Limit of the Contract Demand/Energy). Under No. 5, whenever a customer's registered demand or energy fell below the Contract Demand or Contract Energy, the difference was billed at applicable rates as if the contract demand or energy had been fully availed of, subject to a reduced basis during yearly maintenance not exceeding two billing periods. Under No. 6, consumption in excess of the maximum limits in the Service Specifications or Contract was penalized by billing the excess demand or energy at twice the unit price of the highest priced block in the rate schedule.

On December 15, 1995, PEPOA filed a complaint before the ERB against NPC for alleged unauthorized collection of rates in the guise of penalties for (1) excess consumption, double or triple the existing rates, or (2) unused consumption, as if fully availed of. On December 20, 1995, the ERB issued an Order directing NPC to cease and desist from collecting the penalties pending resolution of the case.

On May 12, 1998, the ERB rendered a Decision directing NPC to refund or correspondingly credit to the affected electric distribution utilities the total amount of P28,870,497.08, computed as follows: Angeles Electric Corp., P2,184,952.80; Visayan Electric Co., Inc., P23,471,542.00; Cagayan Electric Power and Light Co., P590,515.20; and Tarlac Enterprises, Inc., P2,623,487.08. The ERB ordered that if payments made under protest were passed on to the utilities' customers, the reimbursements should also extend to the end-users; if the utilities had actually refunded the amounts, they were to submit a report showing the actual refund. The ERB also ruled that the collection or imposition of penalties for excess consumption and below-contract consumption was not applicable to electric cooperatives and all other NPC customers, and made the December 20, 1995 cease and desist order permanent.

The ERB denied reconsideration on January 12, 1999. NPC filed a Petition for Review with the Court of Appeals on March 3, 1999; after the CA denied its petition and subsequent motion for reconsideration, NPC filed the present Petition for Review under Rule 45.

• ERB Jurisdiction Over Penalties: Petitioner contended that the ERB's jurisdiction to fix, set, and determine rates does not include authority to overrule the imposition of penalties stipulated in the Contract of Sale and Delivery of Power.
• Limited Transfer of Rate-Making Authority: Petitioner maintained that only its rate-making authority was transferred to the ERB under Section 18 of Republic Act No. 7638, while it retained the power to promulgate rules and regulations governing its operations to provide adequate, stable, reliable, and reasonably priced electric power.
• Penalty Clauses as Corporate Policy: Petitioner argued that the penalty clauses in its contracts with customers are policy matters relating to the implementation of its corporate purpose, not the fixing of rates.
• Discounts: Petitioner contended that if the penalties are subject to ERB approval, so too must be the discounts in its Rules on the Sale of Electricity, because the discounts affect rates and benefit electric plant operators who must reimburse NPC accordingly.
• Cease and Desist Order: Petitioner challenged the ERB's December 20, 1995 Order, arguing that the provisional relief required notice and hearing prior to being granted, similar to the requirement for preliminary injunction under Rule 58 of the Rules of Court, and that PEPOA did not submit supporting documents or affidavits to show great or irreparable injury.
• Injunctive Relief: Petitioner raised whether a temporary restraining order or preliminary injunction should be issued pending resolution of the petition for review.

• ERB Jurisdiction Over Penalties: Whether the ERB had jurisdiction over the subject matter of the imposition of penalties for contract violations.
• Penalties as Rates: Whether the imposition of the penalties is an increase in power rates that requires authorization of the ERB.
• Discounts: Whether the discounts provided in the Contract also require authorization of the ERB.
• Cease and Desist Order: Whether the issuance of a cease and desist order without the benefit of notice and hearing is within the authority of the ERB.

• ERB Jurisdiction Over Penalties: Yes. The ERB has jurisdiction over the imposition of penalties because penalties are rates, and the power to determine, fix, and prescribe rates charged to customers is vested in the ERB.
• Penalties as Rates: Yes. The penalties are covered by the definition of rate; they are exacted in relation to the sale of energy and cannot be imposed without prior ERB approval.
• Discounts: No. Discounts are reductions in rates, not amounts paid or charged for the sale of electricity; ERB approval is not necessary.
• Cease and Desist Order: Yes. Under Section 8 of Executive Order No. 172, the ERB may grant provisional relief without prior hearing, provided it is supported by verified or authenticated papers and a hearing is held within thirty days.

• ERB Jurisdiction Over Penalties: The Court traced NPC's rate-fixing authority. Commonwealth Act No. 120 created NPC and empowered it to sell electric power and fix rates and provide for collection of charges, originally not subject to revision by the Public Service Commission. Republic Act No. 6395 revised NPC's charter and retained its power to fix rates and fees, but made it subject to review by the Public Service Commission. Republic Act No. 7638 transferred NPC's power to determine, fix, and prescribe rates charged to customers under Section 4 of Republic Act No. 6395 to the ERB. Executive Order No. 172 created the ERB to provide policy guidelines and the regulatory framework for the power sector and tasked it to assume functions of the Board of Energy and Bureau of Energy Utilization. The authority of a board or commission is construed in light of the purposes for which it was created, and whatever is incidentally necessary to full implementation of legislative intent is germane to the law. Jurisdiction over penalties is necessarily part of the ERB's regulatory functions and in line with the intent of coherent and effective policy formulation, coordination, implementation, and monitoring within the energy sector.
• Penalties as Rates: The laws did not define "rates," so the Court gave the term its plain, ordinary, common-usage meaning. Rate is defined as a charge, payment, or price fixed according to a ratio, scale, or standard, or an amount paid or charged for a good or service. Rates are fixed on the basis of the investment amount or property value that the public utility is allowed to earn, called the rate base. Rate-fixing calls for technical examination and specialized review primarily entrusted to the administrative or regulating authority, the ERB. The government is not bound to apply any particular method or formula; a just rate is fair and reasonable to both the public utility and the public, giving the utility a fair return on the reasonable value of its property while ensuring the public affordable service. The penalties imposed by NPC in its Rules on the Sale of Electricity are covered by the definition of rate. Minimum Charges and Penalties for Consumption in Excess of Allowable Limit are exacted from customers in relation to the sale of energy and cannot be imposed without the sale of energy. A consideration in fixing rates is the purpose for which the penalties are constituted: regulation of system loads of transmission lines to ensure continuous operation of the public utility or to cover part of its operating expenses. Because the power to determine, fix, and prescribe rates is vested in the ERB, the penalties cannot be imposed by NPC unless the ERB gives prior approval. NPC may issue rules and regulations consistent with its corporate objectives, but provisions bearing on the imposition of rates must be approved by the ERB.
• Discounts: Petitioner argued that if penalties require ERB approval, so must discounts. The Court disagreed. Although discounts affect rates and should be considered in rate-fixing, they are not amounts paid or charged for the sale of electricity; they are reductions in rates. Republic Act No. 7638 transferred NPC's power to determine, fix, and prescribe rates being charged customers. When discounts are given, customers are charged nothing. Thus, ERB approval of the discounts is not necessary.
• Cease and Desist Order: The authority to grant provisional relief was conferred on the ERB not by the Rules of Court but by Section 8 of Executive Order No. 172. Under that provision, the ERB may, upon filing of an application, petition, or complaint or at any stage thereafter and without prior hearing, on the basis of supporting papers duly verified or authenticated, grant provisional relief on motion of a party or on its own initiative, without prejudice to a final decision after hearing, if the pleadings, affidavits, documents, and other evidence substantially support the provisional order, provided the ERB shall immediately schedule and conduct a hearing within thirty days thereafter upon publication and notice to all affected parties. Citizens' Alliance for Consumer Protection vs. Energy Regulatory Board explained that the ERB is authorized to grant provisional relief, whether on its own initiative or on motion of a party, either upon filing of an application, petition, or complaint or at any stage thereafter and without prior hearing, subject to a hearing within thirty days; issuance must rest on substantial evidence and is without prejudice to a final decision after hearing. The ERB thus has authority to issue provisional relief (1) upon motion or on its own initiative, (2) without notice and hearing, and (3) after the filing of an application, petition, or complaint. The ERB's discretion must be supported by substantial evidence in the form of authenticated or verified documents. The order is temporary and subject to adjustment after final hearing. The silence of the law cannot be construed as granting limitless discretion; the ERB must exercise discretion in consideration of its mandate to ensure quality, reliability, security, and affordability of electric power, and provisional relief cannot be ordered whimsically, arbitrarily, or oppressively. If supported by substantial evidence, the factual finding of the ERB, an administrative body charged with a specific field of expertise, is conclusive and should not be disturbed. Administrative bodies are given wide latitude in evaluating evidence. Absent proof to the contrary, official duty is presumed regularly performed. The ERB issued the cease and desist order in recognition that end consumers would ultimately pay the penalties imposed by NPC, and NPC did not rebut this justification. Factual issues may not be raised in a petition for review under Rule 45. Even assuming exceptions, the Court was precluded from considering the allegation that PEPOA did not submit any document or affidavit to support its prayer for a cease and desist order, because petitioner made only bare allegations without referring to the evidence.

• Penalties as Rates — Penalty charges imposed by an energy provider under its rules on the sale of electricity, such as minimum charges and penalties for consumption in excess of allowable limits, are "rates" when they are exacted from customers in relation to the sale of energy and cannot be imposed without the sale of energy. Because the power to determine, fix, and prescribe rates is vested in the ERB, such penalties cannot be imposed without prior ERB approval.
• Construction of Administrative Jurisdiction — The authority of a board or commission is construed in light of the purposes for which it was created, and whatever is incidentally necessary to the full implementation of the legislative intent is upheld as germane to the law. Jurisdiction over penalties is necessarily part of the ERB's regulatory functions.
• Discounts Distinguished from Rates — Discounts are reductions in rates, not amounts paid or charged for the sale of electricity. Although they affect rates and are a consideration in rate-fixing, they do not require ERB approval because no amount is charged to the customer when a discount is given.
• Provisional Relief under Executive Order No. 172 — The ERB may grant provisional relief upon motion or on its own initiative, without prior notice and hearing, after the filing of an application, petition, or complaint, provided the relief is based on supporting papers duly verified or authenticated, is supported by substantial evidence, and a hearing is conducted within thirty days thereafter. The order is temporary and subject to adjustment after final hearing; it cannot be issued whimsically, arbitrarily, or oppressively.
• Substantial Evidence in Administrative Proceedings — Substantial evidence is the amount of relevant evidence that a reasonable mind might accept to justify a conclusion. It is the quantum of evidence required before administrative and quasi-judicial bodies like the ERB. If supported by substantial evidence, the ERB's factual findings are conclusive and should not be disturbed.
• Presumption of Regular Performance of Official Duty — Absent proof to the contrary, official duty is presumed to have been regularly performed. The ERB is presumed to have studied the available evidence before issuing the provisional relief.

• "The penalties imposed by the NPC in its "Rules on the Sale of Electricity" are covered by the definition of rate. "Minimum Charges" and "Penalties for Consumption in Excess of Allowable Limit" are exacted from customers in relation to the sale of energy. These charges cannot be imposed without the sale of energy." — This is the ratio decidendi on why NPC's penalty charges are rates subject to ERB regulation.
• "The power to determine, fix and prescribe rates being charged customers is vested in the ERB. Therefore, unless it gives prior approval, the penalties cannot be imposed by the NPC." — This states the controlling rule that prior ERB approval is required before NPC may impose the penalty charges.
• "The ERB has the authority to issue provisional relief 1) upon motion or on its own initiative; 2) without notice and hearing; and 3) after the filing of an application, a petition or a complaint." — This defines the ERB's authority to issue provisional relief under Executive Order No. 172.
• "If supported by substantial evidence, the factual finding of the ERB -- an administrative body charged with a specific field of expertise -- is conclusive and should not be disturbed." — This states the standard of review for the ERB's factual findings and supports the presumption of regularity in issuing the cease and desist order.

• Citizens’ Alliance for Consumer Protection vs. Energy Regulatory Board, 162 SCRA 521, June 23, 1988 — Explained Section 8 of Executive Order No. 172 and held that the ERB may grant provisional relief without prior hearing, subject to a hearing within thirty days, provided the order rests on substantial evidence.
• Matienzo vs. Abellera, 162 SCRA 1, June 1, 1988 — Cited for the principle that the authority of a board or commission is construed in light of the purposes for which it was created and that whatever is incidentally necessary to implement legislative intent is germane.
• Bautista vs. Board of Energy, 169 SCRA 167, January 13, 1989 — Cited in support of the requirement that provisional relief be supported by substantial evidence in the form of authenticated or verified documents.
• Radio Communications of the Philippines vs. National Telecommunications Commission, 184 SCRA 517, April 23, 1990 — Cited for the rule that a provisional order is temporary and subject to adjustment after final hearing.
• Republic vs. Manila Electric Company, 440 Phil. 389, November 15, 2002 — Cited on rate base, rate-fixing as technical examination, and the conclusiveness of administrative factual findings supported by substantial evidence.
• Smyth vs. Ames, 169 US 466, 42 L. Ed. 819 (1898) — Cited for the principle that the government is not bound to apply any particular method or formula for determining rates.
• Quiambao vs. Court of Appeals, 454 SCRA 17, March 28, 2005 — Cited for the wide latitude given to administrative bodies in the evaluation of evidence.

• Section 18, Republic Act No. 7638 — Transferred to the ERB the NPC's power to determine, fix, and prescribe the rates charged to its customers under Section 4 of Republic Act No. 6395.
• Section 8, Executive Order No. 172 — Authorized the ERB to grant provisional relief, without prior hearing, on the basis of supporting papers duly verified or authenticated, subject to a hearing within thirty days thereafter.
• Section 4, Republic Act No. 6395 — Provided that the NPC Board shall fix rates and fees and that the Public Service Commission shall have exclusive original jurisdiction over cases contesting said rates.
• Section 2(g), Commonwealth Act No. 120 — Granted the NPC the power to sell electric power and to fix the rates and provide for the collection of charges for any service rendered.
• Section 44, Republic Act No. 9136 — Transferred the powers of the ERB to the Energy Regulatory Commission.
• Rule 45, Section 1, Rules of Court — Cited for the rule that factual issues may not be raised in a petition for review under Rule 45.
• Rule 131, Section 3, paragraph (m), Rules of Court — Cited for the presumption that official duty has been regularly performed.

Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Romeo J. Callejo, Sr., and Minita V. Chico-Nazario.