Teresa Electric vs. Public Service Commission

A corporation may be granted a certificate of public convenience to operate an electric plant exclusively for its own use and that of its employees without securing a municipal franchise under Act No. 667, provided such operation is authorized in its articles of incorporation as an act necessary or incidental to its primary business, and notwithstanding the existence of another public utility operator in the same area, provided that public interest and necessity so require and the existing operator is incapable of supplying the required power.

The case involves the regulatory framework governing the issuance of certificates of public convenience for electric utilities under Commonwealth Act No. 146 (the Public Service Act), as distinguished from legislative or municipal franchises required for public service businesses under Act No. 667. It addresses the scope of corporate powers under articles of incorporation and the extent to which existing public utility operators are protected from competition within the same territorial jurisdiction.

• Teresa Electric and Power Co., Inc. is a domestic corporation operating an electric plant in Teresa, Rizal, under a subsisting certificate of public convenience issued on June 2, 1960 (PSC Case No. 129940).
• Filipinas Cement Corporation is a domestic corporation engaged in the manufacture and sale of cement, operating a factory in sitio Kaysapon, barrio Pamanaan, Teresa, Rizal.
• On May 24, 1962, Filipinas filed an application with the Public Service Commission to install, maintain, and operate an electric plant to supply power to its cement factory and provide free light facilities to its employees living within the factory compound.
• Filipinas intended to purchase electric current from MERALCO rather than generate its own power, and its distribution lines would traverse only private properties without using municipal streets.
• Teresa Electric opposed the application, claiming it was the duly authorized operator in the municipality, that Filipinas lacked authority under its articles of incorporation, that it had no municipal franchise, and that Teresa Electric was willing and able to supply Filipinas' electricity needs.
• Evidence showed that Teresa Electric had a load capacity of only 200 kilowatts, while Filipinas required 6,000 kilowatts to operate its cement factory.
• The Municipal Council of Teresa had not authorized Filipinas to operate the proposed electric service.

• Under Act No. 667 of the Philippine Commission, a municipal or legislative franchise is a condition precedent to the granting of a certificate of public convenience and necessity to operate an electric plant.
• Filipinas Cement Corporation is not authorized by its articles of incorporation to operate an electric plant, as its primary purpose is manufacturing cement.
• The Municipal Council of Teresa had not authorized Filipinas to operate the proposed service, which is a necessary requisite.
• As the existing authorized operator in Teresa, Rizal, petitioner enjoys a protected franchise area and Filipinas is not entitled to a competing certificate.
• Filipinas' principal business is manufacturing, which does not fall within the jurisdiction of the Public Service Commission.

• Paragraph 7 of Filipinas' articles of incorporation authorizes it to secure from any governmental authority rights, powers, privileges, and franchises necessary for its business, including the operation of an electric plant.
• No municipal council approval is required for the issuance of a certificate of public convenience because Filipinas possesses the three basic requirements: Filipino citizenship, financial capacity, and public need.
• The proposed electric service is limited exclusively to the factory and its employees (provided free of charge), not to the general public for business purposes, and therefore does not require a municipal franchise under Act No. 667.
• The operation of an electric plant is necessarily connected with and incidental to the business of manufacturing cement.
• The electric lines will not traverse municipal streets, and the service will not adversely affect the interests of petitioner.

• Procedural:
  • N/A
• Substantive Issues:
  • Whether a municipal or legislative franchise under Act No. 667 is a condition precedent to the issuance of a certificate of public convenience for an electric plant operated exclusively for private use rather than for business purposes.
  • Whether a corporation engaged in cement manufacturing is authorized under its articles of incorporation to operate an electric plant as an act necessary or incidental to its primary business.
  • Whether the Public Service Commission may grant a certificate of public convenience to operate an electric plant notwithstanding the existence of another authorized operator in the same municipality.

• Procedural:
  • N/A
• Substantive:
  • The Court ruled that Act No. 667 applies exclusively to persons or corporations desiring to construct and maintain electric lines "for business purposes," meaning to render service to the general public for compensation. Since Filipinas intended to operate the plant exclusively for its own factory use and to provide free light to its employees, it was not required to secure a municipal or legislative franchise under Act No. 667; a certificate of public convenience under Commonwealth Act No. 146 was sufficient.
  • The Court held that Filipinas' articles of incorporation, specifically paragraph 7 and the general clause authorizing acts connected with or incidental to the business of manufacturing cement, validly authorized the operation of an electric plant as necessarily connected with its industrial operations.
  • The Court affirmed that while operators of public convenience deserve protection from unlawful competition, no operator has an exclusive right to a franchise. The grant of certificates must be guided primarily by public service and interest. Given that petitioner could only supply 200 kilowatts while Filipinas required 6,000 kilowatts, public necessity justified the grant of the certificate to Filipinas.

• Incidental Corporate Powers — A corporation possesses not only the express powers enumerated in its articles of incorporation but also those necessary or incidental to its primary business purpose; the operation of an electric plant was deemed necessarily connected with the business of manufacturing cement.
• Distinction Between Legislative Franchise and Certificate of Public Convenience — A municipal or legislative franchise under Act No. 667 is required only for operations "for business purposes" (rendering service to the general public for compensation), whereas a certificate of public convenience under Commonwealth Act No. 146 may be issued for private, non-commercial use if public interest requires.
• Primacy of Public Interest in Public Utilities — The grant of franchises and certificates of public convenience is guided primarily by public service and interest rather than the protection of existing operators from competition; no exclusive right to secure a franchise exists.

• "Clearly, therefore, it should not be made to apply to Filipinas who applied for a certificate of public convenience and service to operate and maintain an electric plant exclusively for its own use in connection with the operation of its cement factory and for the use of its employees living within the compound of the factory — the latter to receive service free of charge."
• "It can not be denied that the operation of an electric light, heat and power plant is necessarily connected with the business of manufacturing cement. If in the modern world where we live today electricity is virtually a necessity for our daily needs, it is more so in the case of industries like the manufacture of cement."
• "While it is true that operators of public convenience and service deserve some protection from unnecessary or unlawful competition, yet the rule is that nobody has any exclusive right to secure a franchise or a certificate of public convenience."
• "Above any or all considerations, the grant of franchises and certificates of public convenience and service should be guided by public service and interest; the latter are the primordial considerations to be taken into account."

• Act No. 667 — Philippine Commission Act requiring the filing of applications with municipal councils and the payment of percentages of gross earnings into provincial treasuries for franchises to construct and maintain electric lines; held applicable only to operations "for business purposes" (public service for compensation).
• Commonwealth Act No. 146, Section 15 — Provision of the Public Service Act authorizing the Public Service Commission to issue certificates of public convenience and necessity upon proper consideration of the public interest.
• Paragraph 7, Articles of Incorporation of Filipinas Cement Corporation — Provision authorizing the corporation to secure from governmental authorities rights, powers, privileges, franchises, and concessions necessary or related to its business.