Contractual Provisions Trump Unjust Enrichment in Electricity Billing Disputes

National Power Corporation v. Benguet Electric Cooperative, Inc., G.R. No. 218378, June 14, 2021

Imagine flipping the switch in your home, expecting the lights to turn on without a hitch. Now, imagine receiving a bill for electricity you thought you had already paid for years ago. This is the reality that Benguet Electric Cooperative, Inc. (BENECO) faced when National Power Corporation (NPC) demanded payment for underbilling spanning four years. The case of NPC v. BENECO delves into the complexities of electricity supply contracts and the legal principles governing billing errors, highlighting the importance of clear contractual provisions in resolving disputes.

The central issue in this case was whether BENECO should pay for the underbilling caused by NPC’s incorrect use of a multiplier in its billing system. The Supreme Court’s decision underscores the significance of contractual agreements over the principle of unjust enrichment, providing a clear roadmap for similar disputes in the future.

Understanding the Legal Framework of Electricity Billing

In the Philippines, the supply of electricity is governed by contracts between suppliers and distributors. These contracts often include provisions for billing errors, which are crucial in determining liability. The principle of unjust enrichment, as outlined in Article 22 of the Civil Code, states that a person who acquires something at another’s expense without just or legal ground must return it. However, this principle is not a catch-all solution, especially when a contract exists between parties.

The key legal concept here is the distinction between errors due to inaccurate meters, which can be corrected at any time, and errors due to wrong readings or omissions, which must be corrected within 90 days. This distinction is vital in electricity billing disputes, as it dictates the timeframe within which corrections can be made and claims can be enforced.

For example, if an electricity supplier mistakenly uses an incorrect multiplier in its billing system, as in the case of NPC, it must correct this error within 90 days of the customer receiving the erroneous bill. Failure to do so results in a waiver of the claim, as per the contract’s terms.

The Journey of NPC v. BENECO

The story begins with a contract between NPC, a government-owned corporation, and BENECO, an electric cooperative, for the supply of electricity. In 1999, NPC installed a metering system at BENECO’s Irisan Substation, setting the Current Transformer Ratio (CTR) at 75/5, which resulted in a multiplier of 5,196.31. From May 2000 to February 2004, NPC billed BENECO using this multiplier.

In February 2004, a BENECO employee discovered unusually low system losses, prompting a review of the billing meter. It was then revealed that the correct CTR should have been 150/5, meaning BENECO had been billed at half the correct amount. NPC demanded payment for the underbilling, but BENECO refused, citing NPC’s negligence and the contract’s 90-day correction period.

The case progressed through the Regional Trial Court (RTC) and the Court of Appeals (CA), both of which ruled in favor of BENECO, citing NPC’s gross negligence and the applicability of the contract’s billing error provisions. The Supreme Court partially granted NPC’s petition, affirming BENECO’s liability for underbilling within the 90-day period but remanding the case to the RTC for determination of the exact amount.

Key quotes from the Supreme Court’s decision include:

“The principle of unjust enrichment does not automatically apply when one party benefits from the efforts or obligations of another. It is necessary to show that the enrichment of one party is without a just or legal ground, and that the plaintiff has no other action against the other party.”

“NPC can only correct erroneous billings arising from the use of a wrong multiplier within ninety (90) days from BENECO’s receipt of the erroneous billings.”

Implications for Future Electricity Billing Disputes

The ruling in NPC v. BENECO sets a precedent for how billing errors in electricity supply contracts should be handled. It emphasizes the importance of adhering to contractual provisions over invoking general legal principles like unjust enrichment. This decision will likely influence how electricity suppliers and distributors draft and enforce their contracts, ensuring clear provisions for billing errors and correction periods.

For businesses and cooperatives involved in electricity distribution, it is crucial to:

• Regularly review and understand the terms of their supply contracts, especially provisions related to billing errors.
• Implement robust systems for monitoring and verifying billing accuracy to prevent similar disputes.
• Seek legal advice promptly if billing discrepancies are discovered to ensure compliance with contractual obligations.

Key Lessons:

• Contracts between electricity suppliers and distributors are binding and take precedence over general legal principles.
• Errors in billing due to incorrect multipliers must be corrected within the specified timeframe to be enforceable.
• Negligence in maintaining accurate billing systems can lead to significant financial losses and legal disputes.

Frequently Asked Questions

What is the principle of unjust enrichment?
The principle of unjust enrichment states that a person who benefits at another’s expense without a just or legal ground must return the benefit. It is not applicable when a contract exists that governs the relationship between the parties.

How are billing errors in electricity contracts handled?
Billing errors due to inaccurate meters can be corrected at any time, while errors due to wrong readings or omissions must be corrected within 90 days of the customer receiving the erroneous bill, as per the contract’s terms.

What happens if a billing error is not corrected within the specified timeframe?
If a billing error is not corrected within the specified timeframe, the supplier is deemed to have waived any claim on the billing error, and the customer is not liable for the underbilling.

Can a customer be held liable for underbilling if they were not aware of the error?
A customer can be held liable for underbilling if the error falls within the correction period specified in the contract, regardless of their awareness of the error.

What steps can electricity distributors take to prevent billing disputes?
Distributors should implement regular checks and balances in their billing systems, ensure clear contractual provisions for billing errors, and promptly address any discrepancies discovered.

How can ASG Law help with electricity billing disputes?
ASG Law specializes in energy law and contract disputes. Our experienced attorneys can provide guidance on drafting clear contractual provisions and navigating billing disputes effectively.

ASG Law specializes in energy law and contract disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.