REPUBLIC OF THE PHILIPPINES

SUPREME COURT
MANILA
EN BANC
WATERWATCH
COALITION,
INC.,
represented
herein
by
RODRIGO G. GATMAITAN, JR.,
ALYANSA NG MAMAMAYANG
NAGHIHIRAP (ALMANA) INC.,
represented by EDUARDO F.
LANDAYAN,
NICANOR
E.
FAELDON, CRISTETO DINOPOL,
JR.,
Dr.
RESTITUTO
T.
ENRIQUEZ, Dr. NOWELL P.
LETRONDO, ALDA E. GARADO,
ALVIN
TADO
JIMENEZ,
MICHAEL
P.
UNTALAN,
SALVACION
CORPIN,
and
EDUARDO D. VERZOLA,
Petitioners
SC-G.R. SP. NO. _______________
--versus-(Petition for Certiorari and
RAMON B. ALIKPALA, JR., in his Mandamus with Prayer for the
capacity as Chairman of the Board Issuance of a Temporary Restraining
of Trustees of the Metropolitan Order)
Waterworks and Sewerage System,
GERARDO A.I. ESQUIVEL, in his
capacity
as
Administrator/Vice
Chairman of the Metropolitan
Waterworks and Sewerage System,
ATTY.
EMMANUEL
L.
CAPARAS, in his capacity as Chief
Regulator, Metropolitan Waterworks
and Sewerage System Regulatory
Office, and in his capacity as
Member of the Board of Trustees of
the Metropolitan Waterworks and
Sewerage System, ATTY. RAOUL
C. CREENCIA, MA. CECILIA. G.
SORIANO, JOSE RAMON T.
VILLARIN, an BENJAMIN J.
YAMBAO, in their capacities as
Members of the Board of Trustees of

the Metropolitan Waterworks and

Sewerage
System,
METROPOLITAN
WATERWORKS
AND
SEWERAGE SYSTEM, MANILA
WATER
COMPANY
INC.,
MAYNILAD WATER SYSTEMS,
INC.
Respondents.
x--------------------------------------------x
PETITION FOR CERTIORARI AND PROHIBITION
with
PRAYER FOR THE ISSUANCE OF A
TEMPORARY RESTRAINING ORDER
Petitioners, by counsel, respectfully state:
PREFATORY STATEMENT
The business and operations of a public utility are
imbued with public interest. In a very real sense, a
public utility is engaged in public service-providing basic commodities and services
indispensable to the interest of the general public.
For this reason, a public utility submits to the
regulation of government authorities and
surrenders certain business prerogatives, including
the amount of rates that may be charged by it. It is
the imperative duty of the State to interpose its
protective power whenever too much profits
become the priority of public utilities. (Emphasis
supplied)
- Former Chief Justice Reynato Puno, speaking
for the Court in ERB v. Meralco, G.R. No.
141314. April 9, 2003.
1.
The nation is facing a severe mismanagement of its water
resource despite the abundance of water, being a tropical country with
frequent rain waters pouring on its land. On the other hand, there is a severe
mishandling of sewerage and sanitation for the health and wellness of its
people the Filipinos.

2.
The agencies of the government responsible in addressing the
effects of global warming and the El Nino phenomenon were slow in putting
up the needed infrastructure and watershed protection measures for water
conservation as well as sewerage and sanitation facilities needed by a
modernizing society and growing economy. This is so now and in the years
ahead, unless necessary measures are formulated and implemented to catch
up with the backlog.
3.
There is therefore an urgent need for all sectors of society to
work together to address this condition prevailing throughout the nation. In
general, only 45% (national average) of our population get potable water
coverage served by Water Districts or LGUs throughout the country.
Another 55% more need access to clean, potable and affordable water. Even
worse is the apparent neglect in wastewater disposal, which may account to
a dismal 1% or even less service coverage nationwide. These deficiencies
are surely a contributing factor to the wellness and health of the people as a
national community.
4.
In their public presentation for the 2013 Rate Rebasing Exercise
to set the 2013 Tariff Schedule for Water Rates (Tariff Schedule) held by
Public Respondent Metropolitan Waterworks and Sewerage System
(MWSS) for Private Respondents Manila Water Company Inc.,
(MWCI) and Maynilad Water Systems, Inc., (MWSI), the Private
Respondents admitted that in the fifteen years that they have operated Metro
Manila's water and sewerage system public utilities, they have not only
failed to stop leaks, they have failed to implement the sewerage system that
they were meant to complete.
Even in the light of this spectacular failure, Private Respondents MWCI and
MWSI now seek to raise the fees that they want to impose on the general
public, on top of the spectacularly high rates for water that they charge, for
the public to pay for these utilities in advance, including costs attributable to
mothballed projects and future contingent projects based on mere business
plans.
NATURE OF THE PETITION
5.
This is a Petition for Certiorari filed with this Honorable Court
pursuant to Rule 65 of the 1997 Revised Rules on Civil Procedure (Rules),
concerning the legality of the Concession Agreements (Agreements)
entered into between Public Respondent MWSS and Private Respondents
MWCI and MWSI dated sometime in February 1997.
6.
Due to the patent unconstitutionality and blatant infringement
of law on the part of the Public Respondents, all of whom have acted with

grave abuse of discretion amounting to lack or excess of jurisdiction, there is

no other adequate or speedy remedy in the ordinary course of law. Thus,
Petitioners are constrained to seek relief from this Honorable Court by filing
the instant petition under Rule 65 of the 1997 Rules of Civil Procedure.
PARTIES
7.
Petitioner WaterWatch Coalition, Inc., is a non-stock, nonprofit corporation duly organized and existing under the laws of the
Philippines, and is represented herein by its President, Rodrigo G.
Gatmaitan, Jr., a Filipino, legal age, with office address at 91 West St., West
Triangle, Quezon City.
8.
Petitioner Alyansa ng Mamamayang Naghihirap (Almana) Inc.,
is a multi-sectoral non-stock, non-profit corporation duly organized and
existing under the laws of the Philippines, and is represented herein by its
President, Eduardo F. Landayan, a Filipino, legal age, with office address at
Rm. 317, JIAO Building, Timog Avenue, Quezon City.
9.
Petitioner Nicanor E. Faeldon is a Filipino of legal age with
address at Block 25 Lot 20, Mango St., Palmera Hills 6 Dolores, Taytay,
Rizal.
10. Petitioner Cristeto Dinopol, Jr. is a Filipino of legal age with
address at Corporate 101 Bldg., Mother Ignacia Street, South Triangle,
Quezon City.
11. Petitioner Dr. Restituto T. Enriquez is a Filipino of legal age
with address at 688 P Esteban St., Caridad Cavite City.
12. Petitioner Dr. Nowell P. Letrondo is a Filipino of legal age with
address at Block 112 Lot 4, Ph 2C2, Karangalan Village, Manggahan, Pasig
City.
13. Petitioner Alda E. Garado is a Filipino of legal age with address
at Bulalakaw St., Sitio Tibagan, Greater Fairview, Quezon City.
14. Petitioner Alvin Tado Jimenez is a Filipino of legal age with
address at Lot 12, Block 3b Royalville Subd., Sta. Elena, Marikina City.
15. Petitioner Salvacion Corpin is a Filipino of legal age with
address at Bulalakaw St. Sitio Tibagan, Greater Fairview, Quezon City.
16. Petitioner Michael P. Untalan is a Filipino of legal age with
address at 59 T.Alonzo St., Sta. Lucia Novaliches Quezon City.

17. Petitioner Eduardo D. Verzola is a Filipino of legal age with

address at 10-A Sagittarius St., Carmel 5 Subd., Brgy Tandang Sora, Quezon
City.
18. Petitioners may be served with legal processes of this
Honorable Court through its counsel of record, Tupaz & Associates, at 41-B
N. Romualdez Street, BF Homes Subdivision, Quezon City 1120.
19. Public Respondent Ramon B. Alikpala, Chairman of the
MWSS Board of Trustees (Board), can be served with legal processes of
this Honorable Court at 4/F Administration Building, MWSS Complex, 489
Katipunan Road, Balara, Quezon City 1105.
20. Public Respondent Gerardo A.I. Esquivel, Administrator and
Vice-Chairman of the MWSS Board, can be served with legal processes of
this Honorable Court at 4/F Administration Building, MWSS Complex, 489
Katipunan Road, Balara, Quezon City 1105.
21. Public Respondent Atty. Emmanuel L. Caparas is concurrently
the Chief Regulator, MWSS Regulatory Office (MWSS-RO), and can be
served with legal processes of this Honorable Court at 4/F Administration
Building, MWSS Complex, 489 Katipunan Road, Balara, Quezon City 1105.
22. Public Respondents Atty. Raoul C. Creencia, Ma. Cecilia G.
Soriano, Jose Ramon T. Villarin, Benjamin J. Yambao, Nathaniel C. Santos,
Zoilo L. Andin, Jr., and Leonor Cleofas, Members of the MWSS Board, can
all be served with legal processes of this Honorable Court at 4/F
Administration Building, MWSS Complex, 489 Katipunan Road, Balara,
Quezon City 1105.
23. Public Respondent MWSS is a government-owned and
controlled corporation (GOCC) formed pursuant to Republic Act No.
6234, and has for its objective owning and/or having jurisdiction,
supervision and control over all waterworks and sewerage systems in Metro
Manila and the provinces of Rizal and Cavite, to provide for the proper
operation and maintenance of [a] waterworks system to insure an
uninterrupted and adequate adequate supply and distribution of potable
water for domestic and other purposes and the proper operation and
maintenance of sewerage systems are essential public services because they
are vital to public health and safety. Republic Act No. 6234 (1971), 1. To
achieve this purpose, MWSS has power to fix periodically water rates and
sewerage service fees as the System may deem just and equitable. Republic
Act No. 6234 (1971), 3(h). It can be served with legal processes of this
Honorable Court at 4/F Administration Building, MWSS Complex, 489
Katipunan Road, Balara, Quezon City 1105.

24. Private Respondent MWCI is a private corporation organized

and incorporated under the Corporation Code of the Philippines, and can be
served with legal processes of this Honorable Court at MWSS
Administration Building, 489 Katipunan Road, Balara, Quezon City 1105.
25. Private Respondent MWSI is a private corporation organized
and incorporated under the Corporation Code of the Philippines, and can be
served with legal processes of this Honorable Court at MWSS Compound,
489 Katipunan Road, Balara, Quezon City 1105.
STANDING
The Petitioners have standing to
challenge the constitutionality and
legality of the Agreements and the
2013 Tariff Schedule.
26.

This finding is required by law.

27. In a recent case, it was held that for locus standi to lie, the
petitioners must exhibit that they have been denied, or are about to be denied
a personal right or privilege to which they are entitled. Chavez v. Judicial
and Bar Council, G.R. No. 202242, July 17, 2012.
28. Citizens may be accorded standing if the issue raised involves
one of transcendental importance that must be settled early. David v. Gloria
Macapagal-Arroyo, 522 Phil. 705 (2006).
29. Moreover, in cases that involve a public right, it is sufficient
that the petitioner is a citizen and has an interest in the execution of the laws.
Chavez v. PCGG, G.R. No. 130716, 9 December 1998, Chavez v. Public
Estates Authority, 433 Phil. 506 (2002). David v. Macapagal-Arroyo, G.R.
No. 171396, 3 May 2006, 489 SCRA 160; Santiago v. Commission on
Elections, G.R. No. 127325, 19 March 1997, 270 SCRA 106; Kilosbayan,
Inc. v. Guingona, Jr., G.R. No. 113375, 5 May 1994, 232 SCRA 110 (1994),
Province of North Cotabato v. Government of the Republic of the
Philippines Peace Panel on Ancestral Domain, G.R. No. 183591, October
14, 2008.
30. For cases that involve the due execution of the laws in public
interest cases such as this Petition, this Honorable Court has adopted the
direct injury test to determine standing. People of the Philippines and HSBC
v. Vera, 65 Phil. 56, 89 (1937). Under the direct injury test, it is not enough
that a petitioner in a public interest case, such as the instant Petition, alleges
that there has been an illegal executive action, but the petitioner must

demonstrate that there is validity of a statute must have a personal and

substantial interest in the case such that he has sustained, or will sustain
direct injury as a result. Advocates for Truth in Lending, Inc., et al., v.
Bangko Sentral Monetary Board, G.R. No. 192986, January 15, 2013.
31. Petitioner Waterwatch Coalition has legal standing to file this
Petition as a juridical person, being a non-stock, non-profit corporation that
has, for its purpose, to act, among others: (a) as a watchdog to provide
continuous protection of the water consumers not only in Metro Manila but
all over the country; and (b) as a resource group and organization to
advance the cause of the water sector, most specifically, the water
consumers for a public entity expressly declared under law to be engaging
in an essential public service on the grounds of it being vital to public
health and safety. Republic Act No. 6234 (1971), 1. Petitioner
Waterwatch Coalition suffers direct injury as a result of the Respondents
actions, because the Public Respondents continued advocacy of Private
Respondents MWCI and MWSIs interests amounts to nothing less than an
abject failure of the corporate objectives of Petitioner.
32. Petitioner Alyansa ng Mamamayang Naghihirap (Almana) Inc.,
has legal standing to file this Petition as a juridical person, being a nonstock, non-profit corporation that has, for its purpose, to develop alternative
solutions to poverty through the support of the government and the private
sector. Petitioner Almana suffers direct injury as a result of the Respondents
actions, because the dismantling of Public Respondents continued advocacy
of Private Respondents MWCI and MWSIs interests is an integral part of
the very raison detre for the said Petitioners existence, and a failure therein
is nothing less than a failure of the corporation, and because the continued
increase in water prices means that the persons who make up Petitioner will
have to literally sacrifice the Petitioners continued existence to support their
very own..
33. Petitioners Nicanor Faeldon, Cristeto Dinopol, Jr., Dr. Restituto
T. Enriquez, Dr. Nowell P. Letrondo, Alda E. Garado, Alvin Tado Jimenez,
Salvacion Corpin, Michael P. Untalan, and Eduardo D. Verzola, all have
legal standing to file this Petition as natural persons who reside and obtain
water from MWSS, through one of its concessionaires, MWCI or MWSI as
end-users, Thus, as consumers, upon the approval of the 2013 Tariff
Schedule, the Petitioners will be subjected to water rates far above those that
may legally be imposed, and in the case of Petitioner Salvacion Corpin, who
has very limited income, far above that which she can afford. Republic Act
No. 6234 (1971), 12.
The Petition
constitutional

at

bar involves
issues
of

transcendental importance and

represents matters of paramount
public interest that must be settled
early.
34.

This is well-supported in case law.

35. This Honorable Court has held that in determining whether a

matter is of transcendental importance:
a. The character of the funds or other assets involved in the
case;
b. The presence of a clear case of disregard of a constitutional
or statutory prohibition by the public respondent agency or
instrumentality of the government; and
c. The lack of any other party with a more direct and specific
interest in the questions being raised. Senate of the
Philippines v. Ermita, G.R. No. 169777, April 20, 2006. Any
relaxation on the rule on standing will not apply without
these matters being established. Anak-Mindanao Party-List
Group v. The Executive Secretary, 531 SCRA 583 (2007).
36. It is beyond cavil that matters directly involving the price of
water for Metro Manila, which services more than 16,000,000 people each
day, including this Honorable Court, especially when there are strong
indicators of regulatory capture in the most essential of regulated public
utilities, as in this particular instance, qualifies the instant dispute as a matter
of paramount public interest. We invite the focus of this Honorable Court to
the nature of the public utility whose actions are assailed and the reason for
this instant action: access to one of the most basic requirements for human
survival: potable water.
37. Here, the disregard of the Respondents cannot be any more
clear. Respondents have overcharged for water despite a clear legal mandate.
Public respondent MWSSs basis
for and imminent approval of the
tariff adjustments in favor of
Respondent Concessionaires is
illegal, irregular, excessive, or
unconscionable, or is grossly
disadvantageous to the public-atlarge, which excess tariffs amount

to an undue delegation of legislative

power.
38. Respondent MWSSs imminent administrative fiat approving
such illegal and excessive rates under all RORB exercises, past and present,
is ultra vires and/or unconstitutional. Setting tariffs over and above existing
fares is illegal, as it is tantamount to an undue delegation of legislative
power. Kilusang Mayo Uno Labor Center v. Garcia, 239 SCRA 386.
39. As end-users of the service provided by the Respondents, there
can be no further persons or entities with a more direct and specific interest
in the questions being raised than herein Petitioners.
40. Worthy to note is that at the onset of the concession agreements
in 1997, the Public Respondent MWSIs water rate per cubic meter was
pegged at P7.21; Public Respondent MWCIs, at P4.02 per cubic meter.
Now, Manila Waters rates are set at P37.66 per cubic meter for those
consuming 20 cubic meters a month, and P39.34 per cubic meter for those
consuming 50 cubic meters a month. Maynilads rates are set at P43.66 per
cubic meter for consumers averaging 20 cubic meters a month and a basic
rate of P45.34 per cubic meter for those using 50 cubic meters a month.
These rates are charged as basic costs to consumers excluding those add-ons
such as sanitation charges, VAT, sewerage, FCDU, currency adjustments,
etc., to their monthly water billings.
41. To better illustrate to this Honorable Court the dramatic and
unabated increase in water rates demanded from consumers, we invite the
attention of this Honorable Court to the following tables, which graphically
illustrates just how steep the increase has been for the delivery of water for
the coverage area of Public Respondent MWSS. While this Honorable Court
may take judicial notice of what the duly published rates are following the
appropriate Rate Rebasing Exercises, the change in the retail price of water
through the years must give pause:

Table 1
Increase in Water Rates M
40

35

30

25

20

15

10

1st - 3rd Quarter1st Quarter

1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
17-Feb
Aug. 1-Jan- 1-Jan- 1-Jan- 21- 21- 1-Jan- 1-Jan- 257- 1-Jan- 1- 1-Jul- 31- 1 jan - 18- 1-Jan- 11- 107- 1-Jan- 1- 1-Jul- 1- 1-Jan- 1- 1-Jul- 1- 201- 1-Jul- 1- 1-Jan- 1- 1-Jul- 9- 1-Jul1997 99
00
01 Apr- Oct- 03
03 Aug- Oct- 04 Apr- 04 Dec- 17 Sep- 06 Feb- Apr- Jul-06 Oct- 07 Apr- 07 Oct- 08 Apr- 08 Oct- Feb- Mar- 09 Nov- 10 Apr- 10 Oct- 10
01
01
03
03
04
04 sept 05
06
06
06
07
07
08
08
09
09
09
10
10
2005
1997 1999 2000 2001 2001 2001 2002 2003 2003 2003 2004 2004 2004 2004 2005 2005 2006 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011

Non-sewered Connections

Basic/Ave. Tariff

CERA

FCDA

Environmental Charge

Sub-total

VAT

All-in Tariff W/ FCDA

10

Table 2
Increase in Water Rates

11

The Petition at bar involves an issue

that is ripe for judicial inquiry.
42.

This finding is required by law.

43. It has been held that no question involving the constitutionality

or validity of a law or act may be heard and decided by the Court unless
there is: (a) a question raised by the proper party; (b) an actual case or
controversy; (c) a question raised at the earliest possible opportunity; and (d)
the decision on the constitutional or legal question is necessary to the
determination of the case itself. Joya v. Presidential Commission on Good
Government, 224 SCRA 568.
44. Here, the Petitioners are proper parties who have personal and
substantial interest in the present case and have sustained, and continue to
sustain direct injury from the implementation. Case law supports this
finding.
45. The exercise of the power of judicial review is proper and
appropriate in this case: there is an actual case or controversy due to the
pending implementation of the 2013 Tariff Schedule.
46. The constitutional and legal questions raised in this Petition
were raised at the earliest possible opportunity. The Petitioners and persons
similarly situated have taken great pains to exhaust all available remedies
before coming to this Honorable Court. Because the Public Respondents
MWSS and MWSS-RO are now under regulatory capture; these efforts to
obtain relief from the appropriate agency have only proved futile. A copy of
the Letter dated July 30, 2012 sent by Petitioner Waterwatch Coalition to
Rep. Jerry Treas of the Committee on Good Government and Public
Accountability is attached to this Petition as Annex J . A copy of the
Letter dated April 18, 2012 of Justice Artemio Tuquero and Rodolfo
Javellana, Jr. covering most of the issues discussed in this Petition is
attached to this Petition as Annex L . Copies of Resolution Nos 2012-155
and 2012-155A of Public Respondent MWSS dated November 12, 2012 and
November 22, 2012, are attached to this Petition as Annex _____.
47. It is plain from the discussion herein that the Decision of this
Honorable Court on the constitutional or legal questions raised are necessary
to the determination of the case itself.
The relief desired
obtained elsewhere

cannot
based

be
on

12

exceptional
and
compelling
circumstances justifying immediate
resort to this Honorable Court.
48.

Case law supports this finding.

49. In a case, this Honorable Court has noted that a direct

invocation of the Supreme Courts original jurisdiction to issue Writs of
Certiorari should be allowed only when there are special and important
reasons therefor, clearly and specifically set out in the petition. Constancia
Mendoza, et al. v. Mayor Enrilo Villas, et al., G.R. No. 187256, February
23, 2011.
50. This is not the first time that the MWSS has undergone a Rate
Rebasing Exercise. Under the Agreements, the term of the Concessions was
supposed to last only until 2017. Moreover, the economic impact of an
unrestrained rate hike over the concession areas being served by MWSI and
MWCI will not be insignificant, the transcendental import of this instant
case cannot be understated. In as late as last week, representatives from
MWCI and MWSI have announced that they expect to charge an extra
P1,000,000,000.00 from their consumers until the next Rate Rebasing
Exercise sometime in 2018.
51. While the Petitioner is mindful of the pronouncement of this
Court in Freedom from Debt Coalition, et al. v. MWSS (G.R. No. 173044,
December 10, 2007), Petitioner submits that with the foregoing, there is
more than substantial justification for recourse to this Honorable Court, with
all due respect to the hierarchy of courts.
Amendatory actions by the MWSS,
MWCI, or MWSI after the filing of
this Petition do not render the
issues moot, because they are
capable of repetition, evading
review.
52. Case law in the United States, from which we derive our law on
standing, is in support of this position.
53. Judicial notice may be taken that this is the third Rate Rebasing
Exercise under the Concession Agreement. Granting arguendo, that the Rate
Rebasing Exercise may yet yield rates that are far lower than that sought by
Private Respondents MWCI and MWSI, such lower rates this time around
will not render the issues moot, because these transgressions are capable of
repetition when the next Rate Rebasing Exercise occurs, yet evading review.

13

Southern Pacific Terminal Company v. Interstate Commerce Commission

and Young, 219 U.S. 498 (1911).
STATEMENT OF FACTS
54. Sometime in 1995, and due to the inability of MWSS to cope
with severe El Nio conditions, given its prior mismanagement, thenPresident Fidel V. Ramos led the passage of the National Water Crisis Act
through Congress. An Act to Address the National Water Crisis and for
Other Purposes [NATIONAL WATER CRISIS ACT OF 1995], Republic Act No.
8041, 2.
55. Following the enactment of the National Water Crisis Act,
MWSS entered into public-private partnership agreements with MWCI, and
MWSI, through separate Concession Agreements both dated sometime in
February 1997, each for a period of twenty-five (25) years. Freedom from
Debt Coalition, et al., v. MWSS, et al., G.R. No. 173044, December 10,
2007.
56. Pursuant to the Concession Agreements, the MWSS Board of
Trustees is to create an independent Regulatory Office, the MWSS-RO, to
regulate the activities of the water concessionaires, funded in part by MWSI,
MWCI, and MWSS. Jorge C. Mateo, Regulatory Office, METROPOLITAN
WATERWORKS AND SEWERAGE SYSTEM REGULATORY OFFICE. A copy of this
presentation is Annexed to this Petition as Annex N . Minutes of the
Meeting of the Committee on Good Government and Public Accountability
held on 15 December 2010 at the Ramon Mitra Building, House of
Representatives, Batasan Hills, Quezon City, 1-2. A copy of these Minutes
are attached to this Petition as Annex E. A copy of the Minutes of the
Meeting of the Committee on Good Government and Public Accountability
held on July 31, 2012 are attached as Annex F .
57. The MWSS-RO, inter alia,(a) monitors the concessionaires
compliance with quality standards, water supply, sewerage, sanitation
development programs and projects, repair and maintenance of assets vis-vis population coverage and required targets, and sets efficiency targets and
customer service standards; and (b) recommends to MWSS Board of
Trustees reasonable water rates that may be imposed by the concessionaires
to cover all necessary capital investments and expenditure necessary to
smoothly operate the water system. Jorge C. Mateo, Regulatory Office,
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM REGULATORY OFFICE.
Minutes of the Meeting of the Committee on Good Government and Public
Accountability held on 15 December 2010 at the Ramon Mitra Building,
House of Representatives, Batasan Hills, Quezon City, 1-2.

14

58. The maximum rates for water and sewerage services were set
for the first five (5) years by a Schedule attached to the Concession
Agreement, and, following that period, by MWSS Board of Trustees, upon
the advice of the MWSS-RO, through several Rate Rebasing Exercises to be
held every five (5) years, beginning in 2002 and ending in 2017. The tariffs
are supposed to factor in the return of all capital expenditure made by
MWCI and MWSI over the length of the Agreement. Concession Agreement
dated February 21, 1997 between Metropolitan Waterworks and Sewerage
System and Manila Water Company & Concession Agreement dated
February 21, 1997 between Metropolitan Waterworks and Sewerage System
and Maynilad Water Systems, Inc. Copies of these Agreements are attached
to this Petition as Annexes A and B respectively. Any cancelled or
unfinished projects are corrected on the fifth year on the next Rate Rebasing
Exercise. Concession Agreement dated February 21, 1997 between
Metropolitan Waterworks and Sewerage System and Manila Water
Company. Minutes of the Meeting of the Committee on Good Government
and Public Accountability held on 15 December 2010 at the Ramon Mitra
Building, House of Representatives, Batasan Hills, Quezon City, 4.
59. Sometime in 2000, and in preparation for the 2002 Rate
Rebasing Exercise, MWSS Board of Trustees sought the help of the
Commission on Audit and commissioned an audit of both MWSI and
MWCI to determine whether the actual rates being charged to the public are
within the maximum Rate of Return of twelve percent (12%) as mandated
by 12 of Republic Act No. 6234.
60. On October 5, 2001, the Concession Agreement with MWSI
was modified by Amendment No. 1, which allowed MWSI to adjust its rates
based on the current exchange rate and scheduled the first Rate Rebasing
Exercise for MWSI on January 1, 2003. Anand Chiplunkar, Ma. Christina
Dueas, and Mai Flor, Maynilad on the Mend: Rebuilding Process Infuses
New Life to a Struggling Concessionaire, Asian Development Bank. A copy
of this publication is attached to this Petition as Annex G .
61. Sometime in 2002, and in preparation for the first Rate
Rebasing Exercise, MWSS engaged the services of Thames Water, a British
public utility, for assistance. In the final report submitted to MWSS Board of
Trustees, Thames Water noted that neither concessionaire allocated any
additional capital outlay for the processing of wastewater. Thames Water,
Technical Team, UP Econ Foundation, Final Draft Report, Rate Rebasing
Project, Technical Review Revised Business Plans, MWSS-RO, 16. A copy
of the Final Draft Report is attached to this Petition as Annex H .
62. On September 15, 2003 and December 2, 2003, the
Commission on Audit submitted to MWSS Board of Trustees separate

15

Reports stating that while MWSI had a Rate of Return of 7.71%, MWCI had
a Rate of Return of 40.92%. This rate is significantly higher compared to the
Rate of Return cap of twelve percent (12%) mandated by 12 of Republic
Act No. 6234. The Commission on Audit noted only those properties
acquired, owned, and actually used in the operation of the concessionaires
were included in computing the concessionaires capital.
63. In the meantime, on November 5, 2003, an international
arbitration panel ruled that MWSI, which had not been paying its concession
fees, could draw on MWSIs performance bond, and MWSI went into
receivership. At the time MWSI went into receivership, MWSI lost 69% of
the water pumped through its concession area, and was only able to bill on
the 31% that made it to their clients faucets.
64. Shortly thereafter, MWSS Board of Trustees informed MWSI
and MWCI that it was exercising its right to adjust the rates pursuant to
9.3.1 of the Concession Agreements. In order to stave off arbitration, MWSS
Board of Trustees commissioned a Technical Working Group, composed of
representatives of MWSS, MWSS-RO, MWSI and MWCI.
65. On July 30, 2004, MWSS-RO issued Resolution 04-006-CA,
whereby it adopted the findings of the specially created Technical Working
Group and ruled that the Rate of Return in 12 of Republic Act No. 6234
must be interpreted to mean that the Rate of Return must be computed based
on the entire capital expenditure of MWCI, MWSI, and MWSS, because
MWCI and MWSI are mere agents of MWSS.
66. On the same day, MWSS Board of Trustees issued Resolution
No. 2004-201, approving MWSS-RO Resolution No. 04-006-CA in its
entirety. To this day, this ruling and interpretation has not been overturned,
repealed, or at least modified. A challenge to the aforesaid ruling before this
Honorable Court, Freedom from Debt Coalition, et al. v. MWSS (G.R. No.
173044, December 10, 2007), was dismissed on technical grounds not
related to the merits of the case.
67. On April 28, 2005, the rehabilitation court approved a Debt
Capital and Restructuring Agreement that allowed MWSS to subscribe
83.97% of MWSIs outstanding capital stock.
68. On or around the same time, MWSS explored the addition of
several sources of fresh water for the Metropolitan Manila area, to be
undertaken by MWSS, financed by MWSI and MWCI concession fees, as
financed by foreign lenders. As such, these projects are known as concession
fee projects. Memorandum dated February 24, 2011 of the Chief Regulator,
MWSS-RO to MWSS Board of Trustees. A copy of the Memorandum is

16

attached to this Petition as Annex M . Among these projects are the

expansion of the capacities of Angat Dam and Wawa Dam, and the
construction of the Laiban Dam in the Kaliwa-Kanan River Watershed.
69. Sometime in late 2006, the 84% of MWSIs capital stock
owned by MWSS was awarded, after bidding, to a consortium led by Metro
Pacific and DM Consunji, Inc.
70. On January 1, 2008, the new water rates for MWCI began to
take effect, following the mandated Rate Rebasing Exercise.
71. On January 1, 2009, the new water rates for MWSI began to
take effect, following a Rate Rebasing Exercise. At the end of that year,
MWSI posted net income of P2,824,626,000.00, after a reduction from 66%
to 60% water loss from 2007, when MWSI was barely solvent, to 2009.
Irineo Dimaano, The Challenge of Reducing Maynilads Non-Revenue
Water, Maynilad Water Services, Inc. A copy of this presentation attached to
this Petition as Annex O .
72. Sometime in October 2009, the term of the Concession
Agreement with MWCI was extended for an additional fifteen (15) years, or
until 2037, despite the absence of a water crisis that justified any exercise of
emergency police powers by the President to extend the term of the
Concession Agreement with MWCI.
73. On April 22, 2010, the term of the Concession Agreement with
MWSI was extended for an additional fifteen (15) years, or until 2037.
Disclosure Letter dated April 22, 2010 of Metro Pacific Investments
Corporation to Disclosure Department, Philippine Stock Exchange. A copy
of the Disclosure Letter is attached to this Petition as Annex K .
74. On July 21, 2010, after the assumption into office of President
Benigno Simeon C. Aquino III, the President instructed then DPWH
Secretary Rogelio L. Singson to put on hold on all new ventures and loans
of MWSS, including concession fee projects, such as the development of
the Laiban Dam complex, the Angat Dam rehabilitation, and the Wawa Dam
rehabilitation. Memorandum dated February 24, 2011 of Chief Regulator
Manuel P. Quizon is attached as Annex M .
75. On February 24, 2011 and March 16, 2011, MWSS-RO issued
Memoranda discussing possible grounds for a downward adjustment in the
tariff rate, to mitigate the impact of the recent tariff adjustments,
considering that the concession fee projects, which had been included in the
business plans of the concessionaires, remain unimplemented, and do not
appear to be implemented any time soon.

17

76. On 13 June 2013, and in the latest round of public consultations

held pursuant to the 2013 Rate Rebasing Exercises, the MWSS-RO refused
to divulge information that should have enabled watchdog groups such as
the Petitioner, to compute the correct Return of Rate Base for the 2013 Rate
Rebasing Exercise, on the grounds that the future expansion plans of MWCI
and MWSI are confidential.
77. To this day, both MWSS Board of Trustees and MWSS
Regulatory Office have not revoked, rescinded or otherwise set aside MWSS
Regulatory Office Resolution 04-006-CA or MWSS Board of Trustees
Resolution No. 2004-201, especially as it relates to the twelve percent
income cap of the MWSS.
78. To this date, notwithstanding the mandate for refunds on the
last year for projects, and the fact that all new ventures and loans of the
MWSS have been put on hold, there has been no downward adjustment in
the tariff schedule.
79.

Hence, this Petition.

ISSUES

80. The instant case presents the following novel issues before this
Honorable Court:
a.

Whether the Concession Agreements are unconstitutional

and/or ultra vires;

b.

Whether Respondents MWCI and MWSI are public utilities

subject to the rules and requirements set forth by the general
public service law, including the 12 percent profit cap;

c.

Whether the Concessionaire Agreement between MWCI and

MWSI can create the MWSS-RO, a public office performing
public functions, funded primarily by MWCI and MWSI; and,
in the alternative,

d.

Whether the 2013-2018 Tariff Schedules for MWCI and MWSI

allow MWSI and MWCI, as public utilities, to overcharge the
consuming public for water, and 12 of Republic Act No.
6234. In particular:
i. Whether the profit restriction in Republic Act No.
6234 applies to MWSI and MWCI individually;

18

ii. Whether MWSI and MWCI can advance and pass on

the cost for projected, contingent, and future water
infrastructure projects on to the consumer/end-user, as
well as continue charging costs for projects which
have failed or remain unimplemented.
ARGUMENT
On their face, and in their
operation, the Concession
Agreements are unconstitutional
for granting the inherent sovereign
powers of police power, eminent
domain, and taxation powers, to the
Concessionaires which insist that
they are purely private entities,
mere agents of MWSS, no more.
Inherent sovereign powers of the
State cannot be contracted away,
nor can they be delegated or
devolved upon purely private
entities save for an enabling statute
or express constitutional grant. The
Concession Agreements do not rise
to the level of statutes which are
issuable only by Congress or the
Legislature, nor do they qualify as
constitutional provisions. The
Concession Agreements are mere
contracts.
Assuming without conceding that
private respondents are mere
agents, no more, with more reason
then that the delegation of
sovereign powers such as eminent
domain, by mere contract or, in this
case, by mere Concession
Agreement, is an undue delegation
of sovereign powers. The
Concessionaire Agreements which
are the direct source of purportedly
sovereign functions are
unconstitutional and/or ultra vires.

19

Because the Agreements are void

for being unconstitutional and/or
ultra vires, consequently the
obligations that flow from them,
including but not limited to the
establishment of the MWSS-RO,
are illegal and void.
81. A facial analysis of the Concession Agreements will require
these findings.
82. Article 5 (Service Obligations of the Concessionaire) of the
Concession Agreements grant various functions and obligations to Private
Respondents MWCI and MWSI to provide water services, sewerage
services, maintain wastewater standards, septic and sanitation, and other
customer service standards for the benefit of the general public. These are all
powers, duties, and functions ordinarily reposed in the State, deemed as
traditional sovereign and governmental functions exercised by public
agencies, normally under the category of police power.
83. To cite another instance, 72 (Easements, Eminent Domain,
Right of Way and Similar Powers) of the Concession Agreement empowers
the Concessionaire, as MWSSs agent and representative to exercise the
powers under 3(k) of the MWSS Charter, in its name, place and stead, to
apply for an exercise [of] its easement, eminent domain, right of way and
similar rights and powers given to MWSS under its Charter in
connection with infrastructure projects and works undertaken relating to the
Concession... The Concessionaire shall be solely responsible for the
payment of any compensation to third parties occasioned by the exercise
of such rights and powers. (emphasis supplied)
84. The power to exercise the inherent State power of taxation is
granted to the Concessionaires, viz:
6.2

Taxes

Subject to the Undertaking Letter, the Concessionaire shall

be responsible for all income and withholding taxes and
other forms of taxes . . . . documentary stamp taxes . . . . all
customs, import duties and other taxes . . . .all local transfer
taxes on property acquired through the exercise of rights
pursuant to Section 7.2. In addition, the Concessionaire
shall pay, for and on behalf of MWSS, or shall reimburse
MWSS within 10 days of demand therefor, any real
property taxes and other taxes or assessments payable by
MWSS on MWSS property or assets in the Service Area
used for the supply of water and sewerage services.

20

85. The foregoing provisions evince an incident of taxation power

purportedly granted to the Concessionaires. It has been held that the
assessment and collection of taxes are, at least, executive or administrative
functions. The Concessionaires are not executive or administrative agencies.
6.2s grant of power to collect, reimburse, or pay taxes for and on behalf
of MWSS is unconstitutional and/or ultra vires.
86. The power of taxation is an inherent power of sovereignty. See,
e.g., Commissioner v. Pineda, 21 SCRA 105 (Lifeblood theory). Taxation
is inherently legislative. Luzon Stevedoring v. CA, 163 SCRA 647 (1988).
The power to collect, reimburse, pay, etc., for and on behalf of MWSS are
aspects of taxation which refer to phases, processes, stages of, or steps in,
the exercise of taxation powers. In particular, assessment and collection is an
act of administration and implementation of the tax law by the executive
through administrative agencies. See Jose C. Vitug & Ernesto D. Acosta,
Tax Law and Jurisprudence 26 (2000).
87. If at all the State can delegate the powers of taxation, the State
can do so by constitutional mandate or by law, to local governments or
political subdivisions. See Cu Unjieng v. Patstone, 42 Phil. 818. The
Concessionaires are not local government units.
88. If at all the State can delegate the powers of taxation, the State
can do so by enabling constitutional provisions. See Vitug & Acosta,
supra, at 9. The Concession Agreements are not enabling constitutional
provisions.
89. If at all the State can delegate the powers of taxation, the State
can do so by administrative implementation passing muster under the
sufficient standards test. See, e.g., Cervantes v. Auditor General, 91 Phil.
359. The Concession Agreements are not administrative regulations.
Assuming without conceding that they are, then the Concessionaires are
public utilities subject to, inter alia, the 12 percent profit cap applicable to
all public utilities.
90. The Concession Agreements also attempt to grant traditional
police power functions, inter alia:
a.

6.13.1(i) (referring to the supervisory responsibility of

the Concessionaires over Existing Projects covered by
the MWSS Loans, interest, and fee obligations for those
Loans)

b.

6.13.1(ii) (referring to the power of the Concessionaire

to continue with projects which remain unawarded to a

21

third
party
via
public
continuing/amending/canceling/funding
design and project).

tender,
by
the
project

c.

6.13.3 (Performance Penalties) (referring to the

power of the Concessionaire to treat liquidated
damages and performance penalties paid to MWSS
as mere Receipts under the Concession and are to be
paid over to the Concessionaire).

d.

6.15 (New Assets) (referring to legal title to all fixed

assets contributed by Concessionaires shall automatically
vest in MWSS upon the expiration)

e.

6.15 with respect to the power to create a security

interest over the facilities to which MWSS has legal
title.

f.

9.5(i) (Connection Charges) (referring to the power

of the Concessionaires to promulgate rules that
permit Payment of Connection Charges in
installments over a five-year period by Low-Income
Customers)

g.

9.5(i) (referring to the right of the Concessionaire to

charge each Customer requesting a Connection)

91. Private Respondents MWCI and MWSI cannot claim to be

purely private entities which do not need a public utility franchise for
Respondents to exercise these functions. Private respondents certainly
cannot claim to be state entities or administrative agencies directly
empowered by a government charter or statute. These theories are
inconsistent with all jurisprudence discussing the legal sovereignty and
inherent governmental powers of the State.
92. Because the Concession Agreements unduly delegate inherent
sovereign powers traditionally reposed in the Legislature to Private
Respondents MCWI and MWSI, so-called mere agents of MWSS, no
more, then the Concession Agreements are unconstitutional and/or ultra
vires.
This
Honorable
Court
has
jurisdiction over MWCI and MWSI
because they are ipso jure public
utilities within the meaning of the

22

law, and must be subject to profit

restrictions on public utilities,
including but not limited to the
restriction on Return on Rate Base
as set forth in Republic Act No.
6234 and within the meaning of
public service laws.
Private respondents MWCI and
MWSI are not mere agents of
MWSS without qualification. The
powers, duties, functions, and
correlative obligations of the
Concessionaires
under
the
Concession Agreements require the
finding that these entities are, at the
very least, ipso jure public utilities,
for many of the Concessionaires
powers and duties are incidents of
the very same sovereign power
granted to MWSS under its own
charter, such as the power of
eminent domain, police power, and
the power to tax.
Because MWSS Board of Trustees
Resolution No. 2004-201, approving
MWSS-RO Resolution No. 04-006CA in its entirety, rules that the
Concessionaires are mere agents
of MWSS, no more, such
administrative
fiat
is
unconstitutional and/or ultra vires.
Because the same Resolution seeks
to exempt MWCI and MWSI from
the 12 percent profit cap otherwise
applicable to public utilities, such
Resolution is void for being
contrary to the public service law.
93.

These findings are required by law.

94. By explicit instruction of Congress, the rates and fees fixed by

the Board of Trustees for the System and by the local governments for the

23

local systems shall be of such magnitude that the Systems rate of net return
shall not exceed twelve per centum (12%), on a rate base composed of the
sum of its assets in operation as revalued from time to time plus two months
operating capital. Republic Act No. 6234, 12.
95. In adopting this standard on the rate of return, it is clear that
Congress intended to restrict any profits that MWSS may make in the same
manner as any other public utility, as set by jurisprudence. Republic v.
Medina, G.R. No. L-32068, October 4, 1971. Manila Electric Company v.
Public Service Commission, 18 SCRA 651, 665-666 (1966). ERB v. Meralco,
G.R. No. 141314, April 9, 2003.
96. This Honorable Court strictly kept this rate of return regime,
even in the absence of a regulatory statute. In the words of former Chief
Justice Puno, Public utilities cannot be allowed to overcharge at the
expense of the public and worse, they cannot complain that they are not
overcharging enough. ERB v. Meralco, G.R. No. 141314, April 9, 2003.
97. It is plain to see that Private Respondents MWCI and MWSI
are ipso jure public utilities within the meaning of statutes and case law.
98. In 13 (b) of Commonwealth Act No. 146, or the Public
Service Law, the supply of water and the provision of a sewerage system
were explicitly considered as public utilities. Moreover, the determination of
the operation of a given business as a public utility depends on the public
character of the services rendered by it and the public consequence and
concern attached thereto. 51 C. J. 5. Luzon Stevedoring Co., Inc., v. Public
Service Commission, G.R. No. L-5458, September 16, 1953
99. In arrogant defiance of these laws, Public Respondent MWSS,
through MWSS Board of Trustees Resolution No. 2004-201, approving
MWSS-RO Resolution No. 04-006-CA, ruled that the Rate of Return in 12
of Republic Act No. 6234 must be interpreted to mean that the Rate of
Return must be computed based on the entire capital expenditure of MWCI,
MWSI, and MWSS, because MWCI and MWSI are mere agents of MWSS.
Resolution No. 2004-201 exempts MWCI and MWSI from the 12
percent profit cap otherwise applicable to public utilities under the public
service law.
100. The obligations of MWSI and MWCI under the Agreements
belie the nature of MWCI and MWSI as public utilities. To highlight these
services and the public consequence and concern attached thereto, we invite
the attention of this Honorable Court to the provisions of the Agreement, in
particular, 5.1, Article 5 of the Agreements, which provides:

24

5.1

General Obligations Regarding the Provision of

Water Services
The Concessionaire shall have the obligations set
forth in this Article 5 in respect of the provision of
water services in the Service Area. The Regulatory
Office may defer the implementation of specific
Service Obligations in any situation where, in the
opinion of the Regulatory Office such a deferment
is warranted in light of unforeseen circumstances
(e.g., material delay in the completion of the UATP
project beyond June 30, 1999 or a material delay in
the completion of the LBT project, if such project is
amended pursuant to Section 6.13.1 (ii)(B) hereof,
beyond June 30, 1999).

101. Congress may not declare a company to not be a public utility

when it is inherently such. Luzon Stevedoring Co., Inc., v. Public Service
Commission, G.R. No. L-5458, September 16, 1953.With more reason,
Public Respondent MWSS and Private Respondents MWCI and MWSI
cannot declare themselves to not be public utilities by their mere say-so.
102. To illustrate the extent of the scale of the overcharge from
MWCI and MWSI, we invite the attention of this Honorable Court to the
following:
a.

By the end of 2009, MWCI posted a net return on its

investment of 34.1%, or around 22.1% points higher than the
12% cap required under 12 of Republic Act No. 6234.1

b.

By the end of 2011, MWSI posted net income of

P5,864,850,000.00, with non-revenue water loss at 48% as of
the end of that year, from 60% in 2009. SyCip Gorres Velayo &
Co., Audited Financial Statements dated December 31, 2011
and 2010 and Years Ended December 31, 2011, 2010, and 2009
and Independent Auditors Report, SGV & Co. A copy of the
Audited Financial Statements is attached to this Petition as
Annex P .

103. A simple comparative analysis of the prices demanded by

Private Respondents MWCI and MWSI show that there is a massive
overprice of the water charged to consumers. For example, the San Jose del
Monte Bulacan Water District gets its water from the same water source,
Angat Dam. This entity also pumps its raw water from the same pipes that

Annex D, at 4.

25

deliver water to Metro Manila. Even though the San Jose Del Monte Water
District pays Public Respondent MWSS P4.50 per cubic meter bulk supply
price, and both Private Respondent MWSI and MWCI do not pay a similar
fee to Public Respondent MWSS, it retails to households only at P27.00 per
cubic meter net price, compared to Private Respondent MWCI that has
1,000,000 households and retails at over P33.00 pesos net price, and Private
Respondent MWSI that has approximately 1,000,000 households and retails
at over P42.00 per cubic meter net price.
104. Notwithstanding this blatant price-gouging, Private Respondent
MWCI wants an additional P5.83 per cubic meter from the current tariff
schedule, while Private Respondent MWSI is asking for an increase of P8.58
in the 2013 Tariff Schedule.
105. Therefore, Private Respondents MWCI and MWSI, in their
individual capacities, are subject to all rules and regulations including the
12% tariff rate limit for public utilities under jurisprudence and under
Republic Act No. 6234 as well as government agencies having jurisdiction
over public utilities generally, such as the Public Service Commission and
its successor agencies.
106. Notwithstanding this financial turnaround for MWSI, there has
been no recalibration from MWSS Board of Trustees on whether these
figures still satisfy the cap on the Rate of Return under 12 of Republic Act
No. 6234.
107. Private Respondents MWCI and MWSI continue to factor
in contingent, future projects, based on mere concept papers and
business plans, in their water rate calculations over the last two Rate
Rebasing Exercises, all of which have been approved by Public
Respondent MWSS.
108. In the 2002 Tariff Schedule, the Public Respondent MWSS
allowed Private Respondents MWCI and MWSI to collect fees for the
following projects in advance: (a) the Feasibility Study for Laiban Dam; (b)
the Business Plan by Private Respondent MWCI for Wawa Dam; and (c) the
Business Plan by Private Respondent MWSI for the Putatan Pumping
Station.
109. In the 2008 Tariff Schedule, the Public Respondent MWSS
allowed Private Respondents MWCI and MWSI to collect fees for the
following projects in advance: (a) Pinugay Sewerage System in Antipolo
City, valued at P1,000,000,000.00; (b) Angat Water Irrigation Replacement
System, valued at P5,700,000,000.00; and (c) Laiban Dam Feasibility Study.
Notwithstanding the non-continuance of the Angat Water Irrigation

26

Replacement System and the Laiban Dam Feasibility Study, neither Public
Respondent MWSI nor MWCI have taken steps to return the money
advanced.
110. In addition, Public Respondent MWSS has consistently allowed
Private Respondents MWCI and MWSI to collect an Environmental and
Sanitation Fee in the amount of 10% of a consumers water bill despite not
having any sewerage coverage at that particular point in time. At this point,
only Private Respondent MWCI has sewerage coverage, representing 11%
of its service area.
111. There is nothing in the Concession Agreement and nothing in
any state policy expressed by the National Water Resources Board
(NWRB) that allows for the transfer of investment risk in projected
investments to the general public. As admitted by then Chief Regulator
Manuel P. Quizon in his testimony before the House Committee on Good
Governance, there is no legal basis nor precedent for this practice. Under the
regime of the Concession Agreements, the concessionaires may only adjust
rates, based on a RORB exercise, on capital expenditures prudently
incurred, i.e., past tense. On top of prudent incurring is an efficiency and
acid audit test by a (government) auditor. Apparently, this has not been the
case. This practice of billing the public for future contingent projects based
on mere business plans, effectively making the public foot the sums
otherwise to be booked as capital expenditures, is highly illegal. This is
outside the Water Rate Setting Policy of the Agreements. A copy of the
Memorandum dated December 10, 2010 of Chief Regulator Manuel P.
Quizon is attached hereto as Annex I .
112. Since the commencement of the Concession Agreement, there
has been no annual audit of Asset Registry, nor any Annual Audit of
Operating Expenses. Hence, there has been no annual computation of Return
of Rate Base through which the MWSS is supposed to compute the
concessionaires profit cap.
113. In a case, it was held what really matters in determining the
appropriate rate of return is whether a particular utility renders efficient and
satisfactory service and whether its net income bears a just relation to the
size of its investment. Republic v. Medina, G.R. No. L-32068, October 4,
1971.
114. Even though private concessionaires were brought in to help
run MWSS, rates of non-water revenue remained high for MWSI, or at
around 65% or higher, dropping significantly only in the last four years.
Moreover, this inefficiency was addressed only when mismanagement on
the part of MWSI was taken to task, and when Malacaang ordered a halt to

27

all new MWSS projects. Until it was ruled upon by this Honorable Court in
MMDA v. Concerned Residents of Manila Bay, G.R. Nos. 171947-48,
December 18, 2008. MWSS paid little to no attention to the sewerage
system, as it collected, and continues to collect, through MWSI and MWCI,
charges for sewerage notwithstanding minute coverage on the part of MWSS
for sewerage facilities.2 There remains scant attention to the development of
wastewater treatment facilities for the entire Metropolitan Manila area.
115. Notwithstanding the issuance of Memoranda dated February
24, 2011 and March 16, 2011 from MWSS Regulatory Office, and the
issuance of a direct order from the Office of the President to then DPWH
Secretary Singson to stop all future projects and loans of MWSS, there
remains no action toward the lowering of the tariffs or water rates. In no
instance since 1997 has MWSS Board of Trustees or MWSS Regulatory
Office proposed lower water rates or tariffs.
116. Thus, Public Respondent MWSSs approval of the 2013 Tarriff
Rates, which allow MWCI and MWSI to exceed the 12% profit cap, is
patently illegal, and must be struck down by this Honorable Court.
The Concessionaires are holders of
Concession Assets and Concession
Fees only in trust, because these
assets are fees are deemed to be
public funds subject to eventual
reversion to the State upon the
expiration of the Concession.
117. A facial analysis of the terms of the Concession Agreements
supports this finding.
118. Any possessory or custodial right over the Concession Assets
and Concession Fees purportedly in favor of the Concessionaires under
contract exist by virtue of usufruct, trust, tolerance, or other temporary
arrangement amounting to less than full ownership, hence one cannot
consider such possession or custody of MWSS assets, along with the stream
of financial returns attendant to that possession, as vested rights.
119. To illustrate this point, 6.15, among others, of the Concession
Agreement expressly acknowledges and stipulates in part that Legal title to
all fixed assets contributed to the MWSS system in the Service Area . . .
during the term of the Concession shall remain with the Concessionaire until

Annex D, at 5.

28

the Expiration Date . . . at which time all right, title and interest in such
assets shall automatically vest in MWSS.
120. In Ardona v. Reyes, 125 SCRA 220, the Court stated that the
concept of public use is not limited to traditional purposes. In particular,
the Court held that the mere fact that private concessionaires will be
allowed to maintain facilities inside the tourist resort does not mean the use
is not public. The fact that private businesses use public streets does not
detract from the public character of the expropriation of property for streets.
The concession system of MWSS,
MWCI, and MWSI is in a state of
regulatory capture.
121. Petitioners restate, by way of emphasis, all the foregoing
paragraphs to support this finding.
122. At the onset of the Concession Agreements, to date, the
establishment and operations of the independent MWSS Regulatory
Office (RO) are funded in no small part by the Concession Fees of the
Concessionaires and their partners and joint-venturers. The annual budget of
MWSS under the Concession Agreement is likewise funded in no small part
by the Concession Fees of the Concessionaires and their partners and Other
Operators and/or joint ventures:
123. 11.1 (Organization) & 11.2 (Funding), Art. 11
(Regulatory Office), of the Concession Agreements provide:
11.2 Funding
Not later than 10 days after the Commencement Date,
MWSS shall allocate from the Concession fees received
from the Concessionaire and the Other Operator the amount
of 100 million Pesos which shall constitute the budget of
the Regulatory Office for the year 1997. Not later than
January 10 of each subsequent year, MWSS shall allocate
from the Concession Fees paid in that year by the
Concessionaire and the Other Operator the annual budget
for the Regulatory Office and MWSS for that year;
provided that such annual budget shall not for any year
exceed 200 million Pesos, subject to annual CPI
adjustments, 100 million Pesos of which, as so adjusted,
shall be allocated by MWSS for the Regulatory Office.

124. Regulatory capture occurs when regulatory agencies, created to

act in the publics interest, eventually come to be dominated by the very
industries they were charged with regulating. The theory of regulatory

29

capture is associated with George Stigler, a Nobel laureate economist, and

traces its history to the writings of Karl Marx:
A more cynical regulatory capture view focuses on the
role of interest groups in shaping public policy. This
intellectual tradition has deep roots. Marx argued that big
business sought and paid for control of important economic
institutions. Stigler [1971], in his theory of regulatory
capture, argued that even small business industries could
capture their regulators. Stigler incorporates Olsens [1965]
theory of collective action, which predicts that for a given
issue and its interested parties, the smaller the group and
the higher the per capita stake, the more likely the group
will be successful in organizing and effectively influencing
regulatory outcomes. Peltzman [1976], noting the
emergence of powerful consumer groups in the 1970s,
extended Stiglers view to incorporate these groups as well,
and saw a role for government officials to weigh competing
interests and not always choose an outcome that favors
business. The further contribution of Laffont and Tirole
[1991] was to emphasize the importance of the complexity
of the issue and the resulting information asymmetries
between the various interest groups and between the
interest groups and the bureaucrats who decide their fate in
determining
the
regulatory
outcome.
Susan
Woodward, Regulatory Capture at the U.S. Securities and
Exchange Commission (paper prepared for the Milken
Institute Conference on Capital Markets, Santa Monica,
California, March 16, 1998).

125. Public choice theorists have criticized the assumption inherent

in public welfare regulation, such that the regulatory authoritys actions are
motivated by the public interest. They argue that individuals are essentially
self-interested in or out of the public arena and that it is therefore necessary
to [analyze] the regulatory process as the product of relationships between
different groups. Literature on regulatory capture concludes that in the
extreme case, regulation always leads to socially suboptimal outcomes
because of inefficient bargaining between interest groups over potential
utility rents. Stigler (1971) and Peltzman (1976) also argue that regulators
are presumed to [favor] producer interests because of the concentration of
regulatory benefits and diffusion of regulatory cost, which enhances the
power of lobbying groups as rent seekers Edmund Amman (Ed.),
Regulating Development: Evidence from Africa and Latin America, (UK:
Edward Elgar Publishing, 2006), 14.
126. In the United States, some examples of regulatory agencies that
have been accused of acting in the interests of their respective industries at
the expense of public welfare interests include: the Securities and Exchange
Commission and the Federal Reserve Bank of New York in light of the 2008

30

financial crisis; the Bureau of Ocean Energy Management, Regulation and

Enforcement (formerly the Minerals Management Service) in the wake of
the 2010 Deepwater Horizon oil spill; among others.
Being a product of the Concession
Agreements, the MWSS-RO is a
creature of contract.
127. Under the terms of the Concession Agreements the
independent Regulatory Office was purportedly established by the MWSS
Board of Trustees. While purportedly established by the MWSS Board of
Trustees, still all decisions of the Regulatory Office are subject to the powers
of control and supervision of the same MWSS Board of Trustees. There is
no real distinction between the MWSS Regulatory Office and the Board
of Trustees. Any distinction between them set forth under the Concession
Agreements ought to be collapsed or pierced. See 11.1-11.2
(Organization) of MWSS-MWCI Concession Agreement:
ARTICLE 11. REGULATORY OFFICE
11.1

Organization

The MWSS Board of Trustees shall establish and fund a

regulatory Office (the Regulatory Office) to be organized
and operated in a manner consistent with the description
contained in Exhibit A hereto, subject to such changes
thereto that the MWSS Board of Trustees may make from
time to time, and shall have the functions and powers
described in that Exhibit. Decisions of the Regulatory
Office requiring action by the MWSS Board of Trustees,
including decisions affecting the level of Standard Rates,
shall promptly be submitted to the Board in accordance
with Section 7.1 hereof.

1 of Exhibit A of the Concession Agreements provides:

1. General
The Regulatory Office shall be established under the
jurisdiction of the MWSS Board of Directors, pursuant to
Section 4(c) of the MWSS Charter and in accordance with
other applicable laws and regulations, not less than 30 days
after the Commencement Date. No change will be made to
the MWSS Charter in connection with the establishment of
the Regulatory Office. Rather, the powers and
responsibilities of the Regulatory Office shall be as set out
in the Concession Agreement, including this Exhibit A.
(Emphasis supplied)

31

128. 7.1 of the MWSS-MWCI Concession Agreement sets forth

the obligation of the MWSS to cooperate with the Concessionaire. 7.1
provides:
ARTICLE 7. OBLIGATIONS OF MWSS
7.1

Cooperation with Concessionaire

Subject to the requirements of the Charter, MWSS shall,

upon request of the Concessionaire, cooperate in all
reasonable ways to facilitate the Concessionaires carrying
out of its responsibilities under the Concession. Pursuant to
the authority given to MWSS by Section 3(h) of the
Charter, and subject to the restrictions contained in Section
12 of the Charter, this cooperation shall include, but not be
limited to, cooperation with actions undertaken by the
Concessionaire to implement changes to the Standard Rates
for water and sewerage services as instructed by the
Regulatory Office or, as appropriate, by the Appeals Panel.
The cooperation to be rendered by MWSS to the
Concessionaire shall not require MWSS or any of its
affiliates to finance (or guarantee the financing of) any
expenditure required in connection with the Concession, or
to undertake any liability in favor of a third party other than
those expressly provided for in this Agreement. (Emphasis
in original)

129. 3 of Exhibit A of the Concession Agreements provides:

3. Physical location
The Regulatory Office shall be given suitable office space
in Metro Manila at a location separate from any other office
or establishment of MWSS or either Concessionaire...
[T]he physical location of the Regulatory Office shall
always be separate from any other office or establishment
of MWSS or either of the Concessionaires.

130. Despite the foregoing prohibition against proximity, Petitioners

wish to underscore the fact that Public Respondents MWSS, MWSS-RO,
and Private Respondents MWCI and MWSC, in clear breach of 3 of
Exhibit A, have all been sharing the same physical office space: MWSS
Administration Building, 489 Katipunan Road, Balara, Quezon City
1105.
Various conflicting interests inhere
in the MWSS concession system for
the reason that there are

32

interlocking directors and key

officers between and among the
MWSS, the Concessionaires and
their successors-in-interest, which
conflict of interest resulted to the
irregular
and
unconscionable
transactions, rates, and RORB
exercises, and which events will be
used by Respondents to justify their
imminent water rate hike.
131. It has been held that holding incompatible offices between and
among various agencies is unlawful. In one case, the Court held that the
duties of the Chief Presidential Legal Counsel and the Chairmanship of the
Presidential Commission on Good Government are incompatible positions.
See Public Interest Center, Inc. v. Elma, 494 SCRA 53.
132. Due to the MWSS-ROs existence as a creature of contract, the
Agreements define the duties, powers and functions of the MWSS-RO and
its officers, including the Chief Regulator. Here, Public Respondents
Alikpala, Esquivel, Soriano, and Yambaos appointment of Public
Respondent Caparas as Chief Regulator on November 22, 2012 through
Resolution No. 2012-155A demonstrates that very incompatibility.
133. The Resolution reads:
Resolution No. 2012-155A
(By Referendum)
So as not to expose the Board or the System to any
unnecessary risk in connection with her appointment, as
requested by Atty. Ma. Cristina P. Fernandez-Milan (copy
attached as Annex "A" hereof, and favorably endorsed by
the Executive Committee, BE IT RESOLVED, as it is
hereby resolved, to ACCEPT the withdrawal of acceptance
of her appointment as Chief Regulator;
In view of the above acceptance; and to ensure continuity
of flow of the rate rebasing exercise, in the interest of
public service, RESOLVED, further io DESIGNATE,
effective immediately, Trustee EMMANUEL L.
CAPARAS as Acting Chief Regulator, Regulatory Office,
to serve without pay.
Quezon City, Philippines, 22 November 2012.

33

134. As a MWSS Trustee, Private Respondent Caparas does not

carry within his duties and functions the power of control and supervision
over the MWSS-RO as Chief Regulator.
135. To demonstrate the incompatibility even further, on December
14, 2012, the MWSS Board of Trustees approved, approved a 3.2%
Consumer Price Index (CPI) Adjustment on the 2012 Basic Charge by virtue
of a recommendation of the MWSS-RO, acting through respondent Caparas,
through MWSS-RO Resolution No. 12-009-CA dated November 28, 2012
and Resolution No. 12-011-CA dated December 13, 2012.
Because the concession system is in
a state of regulatory capture, all
provisions under the Concession
Agreements
purporting
to
regulate, review, or confirm
the actions of the Concessionaires
review powers supposedly held by
an
independent
Regulatory
Office are negated or rendered
ineffective and nugatory, if not
collusive.
136. These provisions include, without limitation:
a. Service Obligations to be revised from time to time by
the Regulatory Office. MWSS-MWCI Concession
Agreement, at 9.
b. Powers to review the Common Purpose Facilities with the
aim of meeting Service Obligations. Id. 3.8(i)
c. Power to defer implementation of specific Service
Obligations in the opinion of the Regulatory Office. Id.
5.1.
d. Power to consent to a phase-in of compliance with respect
to Drinking Water Quality Standards. Id. 5.1.4.
e. Power to determine that any asset or improvement is a
Disapproved Asset. Id. 2, 6.5.2.
f. Power to audit or commission an audit of the Asset
Condition Report of the Concessionaires. Id. 6.5.3.

34

g. Power to conclude that the Concessionaires are not meeting

its general obligations under 6.5.1, nor conducting
remedial works. Id. 6.5.4.
h. Power to waive the Concessionaires obligation to provide
equity capital contribution in cash. Id. 6.11.
i. 6.11 is also void for being ultra vires. State entities
may not waive private obligations owed by the
International Water Operator or Sponsor (in this
case, Ayala Corp.) to pay subscribed capital stock of
the Concessionaire.
ii. Power to approve the Concessionaires decision to
incur debt or liability maturing after the Expiration
Date of the Concessions. Id. 6.12.
iii. 6.12 is also constitutionally suspect because it
empowers MWSS to effectively guarantee private
loans.
i. Power to require a Technical Submission/Financial Model
supporting the Concessionaires Rate Bid and Technical
Submission in a sealed envelope. Id. 6.14.
j. Power to review proposals
Adjustments. Id. 9.2.2

for

Rate

Structure

k. Power to verify whether proposed Standard Rates is

consistent with the Rates Adjustment Limit. Id. 9.2.3
l. Automatic approval and verification whether proposal
complies with Rate Adjustment Limit, and lapse thereof. Id.
9.2.3.1.
i. 9.2.3.1. is also constitutionally suspect because it
allows the Concessionaires to unilaterally set rates in
the event the verification period lapses, without need
of an independent (government) auditor.
m. Power to determine validity of Changes to Basis of Rates.
Id. 9.2.4.
n. Power to determine validity of Interim Standard Rate
Adjustments. Id. 9.2.5. See, in particular, 5, 9.2.5.

35

o. Power to determine validity and grounds for Extraordinary

Price Adjustments. Id. 9.3.
p. Power of all parties to the Concession Agreement, to
exercise Right of Appeal or to constitute the Appeals Panel.
Id. 9.3.3, 10.3.3 (Appeal).
q. Power to determine Rebasing Adjustment to calculate
Rates Limit for each of the five Charging Years of each
Rebasing Period. Id. 9.4.
i.
9.4.4
(Expiration
Payment)
is
also
constitutionally suspect and/or ultra vires because
it passes concessionaire expenditures, liabilities, and
any remaining debt burden to the MWSS/Republic of
the Philippines by treating the Expiration Payment as
an anticipated Receipt and by requiring a US
Dollar-denominated debt instrument issued by MWSS
or by the Republic ranking at least pari passu having a
cash value equal to such Expiration Payment.
ii. 9.4.4 is effectively a state-sponsored or sovereign
guarantee of private debt.
r. Power to determine whether Connection Charges made by
Concessionaires are reasonable and to notify them
whether an adjustment is required. Id. 9.5.1.
s. Power to determine and prescribe Maximum Connection
Charges. Id. 9.5.2.
t. Power to assess financial
Concessionaires. Id. 10.4
The powers, duties, functions, and
correlative obligations of the
Concessionaires
under
the
Concession Agreements do support
the finding that these entities are
ipso jure public utilities, many of
which powers and duties are
incidents of the very same sovereign
power granted to MWSS under its
own charter, such as the power of
eminent domain.

36

penalties

against

the

137. To illustrate, Article 5 (Service Obligations of the

Concessionaire) of the Concession Agreements describe and explain the
various obligations to provide water services, sewerage services, maintain
wastewater standards, septic and sanitation, and other customer service
standards for the benefit of the general public.
138. To cite another instance, Article 7 (Obligations of MWSS) of
the same contract empowers the MWSS to appoint the Concessionaire as its
agent and representative to exercise the powers under 3(k) of the MWSS
Charter, in its name, place and stead, to apply for an exercise [of] its
easement, eminent domain, right of way and similar rights and powers
given to MWSS under its Charter in connection with infrastructure
projects and works undertaken relating to the Concession... The
Concessionaire shall be solely responsible for the payment of any
compensation to third parties occasioned by the exercise of such rights
and powers. (emphasis supplied)
The
Concession
Agreements
between and among MWSS and the
Concessionaires ipso jure vest onto
those Concessionaires the very
privileges and correlative duties
accorded to every public utility or
entity impressed with public
interest. By their very nature, the
Concession Agreements make the
Concessionaires public utilities
within the meaning of the public
service law.
Under the terms of the Concession
Agreement, Concessionaires carry
no greater power than their
principal, the MWSS, which is a
GOCC that exercises sovereign
functions delegated to it by statute.
It is the express wishes and intent of
the parties to the Concession
Agreements
that
the
Concessionaires fall within the class
of public utilities subject to the 12
percent Rate of Return profit cap,
among other duties and obligations

37

required of enterprises impressed

with public interest.
The Concessionaires are estopped
to deny that they are public utilities.
139. A facial analysis of the terms of the Concession Agreements
requires these findings.
140. Any and all rights, powers, and privileges now enjoyed by the
Concessionaires purportedly flow from the MWSS Charter. Whereas clauses
of the Concession Agreements provide:
WHEREAS, Article 3(j) of the Charter authorizes MWSS,
among other things, to dispose of real and personal
property, including rights and franchises, consistent with
the purpose for which MWSS was created and reasonably
required for the transaction of the lawful business of the
same;
WHEREAS, MWSS has determined to grant concessions to
private sector corporations, at least 60% of the outstanding
capital stock of which is owned and controlled by
Philippine nationals, which shall act as contractors to
perform certain functions, and as agents for the exercise of
certain rights and powers, of MWSS under its Charter,
operate the system of waterworks and sewerage services
referred to in the Charter;
xxx
WHEREAS, MWSS and the Concessionaire wish to record
the terms on which the Concessionaire is being granted the
right to operate the waterworks and sewerage services in
the Service Area for the period specified herein; (emphasis
supplied)

141. Core terms of the Concession Agreements which indicate the

full grant of such powers and privileges attending every public utility
include, without limitation:
a. 2.1 (Grant of Concession)
2.1

Grant of Concession

On the terms and subject to the conditions set forth herein,

MWSS hereby grants to the Concessionaire, as contractor
to perform certain functions and as agent for the exercise of

38

rights and powers under the Charter, the sole right to

manage, operate, repair, decommission and refurbish the
Facilities in the Service Area, including the right to bill and
collect water and sewerage services supplied in the Service
Area (the Concession). The Concessionaire shall perform
its functions and exercise its rights under this Agreement
directly or, in respect of functions and rights delegated to
the Joint Venture. The rights and benefits of the
Concessionaire under this Agreement shall be deemed to
apply with equal force to the Joint Venture to the extent
that the Joint Venture is performing functions delegated to
it under this Agreement. (emphasis supplied)

b. Under the Definitions section,

ARTICLE 1. DEFINITIONS
xxx
Qualified Replacement Operator means a corporation, or
a consortium of corporations, (i) that has the technical and
financial capacity to perform all of the obligations of the
Concessionaire under this Agreement and (ii) that meets the
requirements of Philippine law concerning foreign
ownership and management of a public utility. (emphasis
supplied)

c. 4.2.1 of the Concession Agreements states:

4.2.1

Corporate Organization

The Concessionaire is a corporation duly organized, validly

existing and in good standing under the laws of the
Republic of the Philippines. The Concessionaire has full
corporate power and authority to carry on its business as
required under the terms of this Agreement and is duly
qualified to do business in all jurisdictions where the
ownership of its assets or the conduct of its business
requires such qualification. The outstanding voting capital
stock of the Concessionaire is at least 60% owned by
citizens of the Philippines or by corporations that are
themselves at least 60% owned by citizens of the
Philippines. (emphasis supplied)

d. 5.1.1 of the Concession Agreements states:

5.1.1

Water Supply; New Connections

The Concessionaire shall offer water supply services to all

existing Customers in the Service Area on the

39

Commencement Date and, in addition, the Concessionaire

shall make at least sufficient connections (net of any
disconnections) to meet the coverage target percentages of
the population in the designated municipality at the time of
the target (excluding users who obtain water from a legal
source other than the MWSS system) set out in Schedule 2
hereto by the dates specified in that Schedule. Further, the
Concessionaire shall provide data and supporting evidence
to the Regulatory Office that demonstrates compliance with
such coverage targets, along with the method by which
such compliance was calculated, prior to each Rebasing
Date in accordance with Section 9.4.1. (emphasis supplied)

e. 5.1.5 states:
5.1.5

Obligation to Supply Water for Public Purposes

The Concessionaire shall make available an adequate

supply of water for fire-fighting and other public purposes
as the municipalities comprising the Service Area may
reasonably request. The Concessionaire shall not assess a
charge for such water used for fire-fighting purposes but
may charge for all other water used for public purposes.
(emphasis supplied)

f. 5.2 and 5.2.1 state:

5.2

General Obligations Regarding the Provisions of

Sewerage Services

The Concessionaire shall have the following obligations in

respect of the provision of sewerage services in the Service
Area:
5.2.1

Supply of Sewerage Service; New Connections

The Concessionaire shall offer to supply sewerage services

to all Customers in the Service Area who have sewerage
connections on the date hereof for domestic sewage and
industrial effluents compatible with available treatment
processes and, in addition, the Concessionaire shall meet
the coverage target percentages of the total population in
the designated municipality connected to the
Concessionaires water system at the time of the targets set
out in Schedule 3 below by the dates specified in that
Schedule.

142. Other provisions supportive of the finding that the

Concessionaires are public utilities are spread out in the Concession
Agreements, include:

40

a. 5.2.2. (Obligation to Make Connections to a Public

Sewer)
b. 5.2.3. (Wastewater Standards)
c. 5.2.4. (Septic and Sanitation Cleaning)
d. 5.4. (Other Customer Service Standards)
e. 6.7. (Insurance). ([T]he Concessionaire shall at all
times comply with Administrative Order #141 regarding
insurance of Government properties by the General
Insurance Funds of the Government Service Insurance
System).
f. 6.13.1 (referring to the supervisory responsibility of the
Concessionaires over Existing Projects covered by the
MWSS Loan documentation
g. 6.13.1(i) (referring to the supervisory responsibility of the
Concessionaires over Existing Projects covered by the
MWSS Loans, interest, and fee obligations for those Loans)
h. 6.13.1(ii) (referring to the power of the Concessionaire to
continue with projects which remain unawarded to a third
party
via
public
tender,
by
continuing/amending/canceling/funding the project design
and project).
i. 6.13.3 (Performance Penalties) (referring to the power
of the Concessionaire to treat liquidated damages and
performance penalties paid to MWSS as mere Receipts
under the Concession and are to be paid over to the
Concessionaire).
j. 6.15 (New Assets) (referring to legal title to all fixed
assets contributed by Concessionaires shall automatically
vest in MWSS upon the expiration)
k. 8.1 (power of Concessionaire to charge water customers a
CERA of one peso per cubic meter above Standard Rates)
That the Concessionaires are mere
agents as purportedly stipulated,
inter alia, under 2.1 and 7.2 of

41

the Concession Agreements and

affirmed by MWSS Board of
Trustees Resolution No. 2004-201
(approving MWSS-RO Resolution
No. 04-006-CA in its entirety), with
more reason should they be deemed
public utilities within the meaning
of statutes and case law and are
thus subject to all rules and
regulations including the 12%
ROR limit and tariff rate formula
as well as government agencies
having jurisdiction over public
utilities generally, such as the
successor agencies of the Public
Service Commission as well as the
Commission on Audit.
Because the Concessionaires wield
no greater power than their
principal, a finding that the
Concessionaires are purely private
agents unfettered by any franchise
or privilege required of every
regulated
public
utility
or
enterprise impressed with public
interest, would be a finding that is
void for being ultra vires within the
meaning of the MWSS Charter and
public service laws.
Thus the finding of the MWSS
Board of Trustees Resolution No.
2004-201, approving MWSS-RO
Resolution No. 04-006-CA in its
entirety, which ruled that the Rate
of Return in 12 of Republic Act
No. 6234 (MWSS Charter) are
mere agents of MWSS, is void for
being ultra vires.
What is more, so-called Joint
Ventures under the Concession
parties which are not privy to
MWSS but are privy to the

42

Concessionaires may exercise the

same powers and privileges granted
to the Concessionaires.
143. It is the nature of the business, not the form or grant of
authority, which is dispositive of the question of whether that business is a
public utility or not.
144. 13(b) of Commonwealth Act No. 146, as amended, defines a
public utility, viz:
(b)

The term public service includes every person

that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation,
with general or limited clientele, whether
permanent, occasional or accidental, and done for
general use business purposes, any common carrier,
railroad, street railway, traction railway, sub-way
motor vehicle, either for freight or passenger, or
both with or without fixed route and whatever may
be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line,
pontines, ferries, and water craft, engaged in the
transportation of passengers or freight or both,
shipyard, marine railway, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power,
water supply and power, petroleum, sewerage
system, wire or wireless communications system,
wire or wireless broadcasting stations and other
similar public services . . . . (emphasis supplied)

145. The second sentence of 11, Art. XII of the Constitution is

clear: Neither shall any such franchise or right [for the operation of a public
utility] be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the common good so
requires.
146. Case law will require a finding that entities, natural or juridical,
are deemed to be public utilities and are thus subject to general law
applicable to such utilities even if these entities are unarmed with a
legislative franchise, certificate of public convenience and necessity, or other
similar grant of authority to operate a public utility. For instance, it has been
held that legislative franchises are not required before any public utility may
operate, and administrative agencies can be empowered if not required in
the instant case to grant such authority. See, e.g., Tatad v. Garcia, 243
SCRA 436; Bagatsing v. Committee on Privatization, 246 SCRA 344;
Albano v. Reyes, 175 SCRA 264; Philippine Airlines Inc. v. Civil

43

Aeronautics Board, 270 SCRA 538; Telecommunications and Broadcast

Attorneys of the Philippines, Inc. v. COMELEC, 289 SCRA 337; City of
Government of San Pablo v. Reyes, 305 SCRA 353; Republic v. Express
Telecommunication Co., 373 SCRA 316; Pilipino Telephone C. v. NTC, 410
SCRA 82; Metropolitan Cebu Water District v. Adala, 526 SCRA 465,
among others.
147. It would be absurd to argue that the Concessionaires can
avoid mandatory regulatory law by simply declaring itself to be a
purely private entity and by refusing to procure a certificate of public
convenience and necessity or similar franchise or by refusing to
recognize that they themselves are already public utilities by virtue of
the Concession Agreements. Cf. Batangas CATV, Inc., 439 SCRA supra.
148. In other words, assuming without conceding that the
Concessionaires are not holders of a franchise to operate a public utility by
contract, certificate, or otherwise, such want of color of authority alone does
not convert their enterprise from a public one to a private one which can oust
regulatory bodies of their jurisdiction. It is the nature of the business, not
the form or grant of authority, which is dispositive and controlling. See
generally Albano v. Reyes, 175 SCRA 264 (discussing the distinction
between a legislative franchise and an administrative franchise for the
operation of public utilities); see also Philippine Airlines, Inc. v. Civil
Aeronautics Board, 270 SCRA 538.
149. What is more, under 6.13.2(iv) of the Concession
Agreements:
(iv)

The Joint Venture shall be responsible for the

operation, maintenance and renewal of all related
facilities upon completion of UATP [projects,
which are Common Purpose Facilities, e.g., Angat
dam].

150. So-called Joint Ventures under the Concession parties

which are not privy to MWSS but are privy to the Concessionaires may
exercise the same powers and privileges granted to the Concessionaires.
The Concession Agreements are
State Contracts.
151. A state contract is considered to be a public contract entered
into by a public officer acting for an on behalf of the Government within the
scope of his authority and in his official capacity, in which the people are
interested, the subject matter of which is of public concern and affects
private rights only insofar as the law confers such rights when its provisions

44

are carried out by the officer to who, it is confided to perform. People v.

Palmer, 35 N.Y.S. 222, 14 Misc. 41.
152. The State may enter into contracts for its own welfare and that
of its citizens. Having a juridical personality, the Government is endowed
with the authority to enter into contracts and clothed with all of the
privileges and prerogatives attendant and appropriate to the just exercise of
its powers by virtue of being a sovereign political entity. As a Government,
it is capable of realizing the ends for which it was created, by all the means
necessary for their attainment. As an incident of and necessarily implied
from its constitutional powers, the Government possesses the legal capacity
to contract and to be contracted with and, having thus entered into a contract,
to be bound thereby. BARTOLOME C. FERNANDEZ, A TREATISE ON
GOVERNMENT CONTRACTS UNDER PHILIPPINE LAW 3 (2003).3
153. It is well established that contracts or conveyances may be
executed for an in behalf of the Government or of any of its branches,
subdivisions, agencies, or instrumentalities, including government-owned or
controlled corporation, whenever demanded by the exigency or exigencies
of the service and as long as the same are not prohibited by law.
Administrative Code of 1987, Executive Order No. 292, 47 (1987). (In
more specific terms, the respective charters of government-owned or
controlled corporations invariably include in the enumeration of the powers
of such entities the authority to contract and to be contracted with. So, too,
every local government unit (LGU) as a corporate body is empowered to
enter into contracts. (citing Local Government Code of 1991, Republic Act
No. 7160, 22). In this connection, all local government units are expected
to observe and comply with the requirements of existing laws, rules and
regulations pertaining to government contracts. FERNANDEZ, supra, at 3-4.
The government officer who contracts on behalf the State functions as
agent of the Philippine Government for the purpose of making the contract.
There arises then a principal-agent relationship between the Government,
on the one hand, and the contracting official, on the other. The contracting
power of the agent exists only because and by virtue of a law, or by
authority of a law, creating principal-agent relationship and conferring
upon the agent the actual authority to enter into contracts on behalf of the
Government. The agent may make only such contracts as he is so
authorized to make. Flowing from this premise is the principle that the
Government is bound only to the extent of the power it has actually given its
officer-agents.

For further discussion on state contracts, see Kristoffer James E. Purisima, Arbitral
Autonomy Principle in Philippine Jurisprudence, 50 ATENEO L.J. 1019 (2006).

45

154. Pursuant to a well established principle in agency, the acts of

such agents in entering into agreements or contract beyond the scope of their
actual authority do not bind or obligate the Government since the instance
when the agent contracts beyond the scope of his authority, the principalagent relationship between the Government and the contracting officer
ceases to exist. FERNANDEZ, supra, at 8-9.
155. As in the case of ordinary contracts between private individuals
or entities, all the essential elements and characteristics of a contract in
general must be present in order to create a binding and enforceable
Government contract. Id.
156. As such, a Government contract also memorializes a meeting
of the minds between the parties thereto whereby one binds himself, with
respect to the other, to give something or to render some service. The
essential contractual requisites of consent of the contracting parties, an
object certain which is the subject matter, and cause or consideration of the
obligation which is established must concur in state contracts; otherwise, it
shall not exist in the eyes of the law.
157. Peculiar to state contracts, however, is that the approval of the
contract by a higher authority is usually required by law or administrative
regulation as a requisite for its perfection. Id. at 10.
Akin to the public nature of
telecommunication companies in
light of 13(b) of CA 146, as
amended, which provision defines
public utilities, and in light of 6,
Art. XII of the Constitution, the use
and ownership of facilities for water
supply, water distribution, and
sewerage services bear a social
function and are thus subject to the
duty of the State to intervene when
the common good so demands.
158. Constitutional provisions and case law support this finding.
159. 6 of Art. XII of the Constitution provides:
Section 6. The use of property bears a social function, and
all economic agents shall contribute to the common good.
Individuals and private groups, including corporations,
cooperatives, and similar collective organizations, shall
have the right to own establish, and operate economic

46

enterprises, subject to the duty of the State to promote

distributive justice and to intervene when the common good
so demands.

160. In PLDT v. NTC, 190 SCRA 717, the Court upheld the order of
the National Telecommunications Commission directing the petitioner and
respondent to enter into an interconnection agreement, on the ground that the
regulation of the use and ownership of telecommunications systems is in the
exercise of the police power of the State. The Court cited 6 of Art. XII
(quoted above) as basis for this ruling. The Court further held that
interconnection is a form of intervention with property rights dictated by the
objective of the government to promote the expansion of
telecommunications services, to maximize the use of telecommunications
facilities available, and to ensure that all users of the public
telecommunications service have access to all other users of the service.
161. In like manner, the provision of water supply, distribution,
sewerage, and sanitation services are subject to a valid exercise of police
power, pursuant to a constitutionally mandated social function by virtue of
6, Art. XII. This point should be read with 11, Art. XII as well as related
case law, as discussed, which provision empowers the Congress to amend,
alter, or repeal public utility franchises when the common good so requires.
162. Important to note is the fact that 6.3 of the Concession
Agreement requires that the Concessionaire enter into an interconnection
agreement with the Other Operator (as defined under that contract) in
form and substance satisfactory to MWSS.
The Concessionaires enjoy no
irrevocable untouchable vested
property right within the meaning
of case law, because the Concession
Agreements upon which the
Concessionaires predicate their
stream of rights are not purely
private transactions and are
indeed imbued with public interest.
163. Case law requires this finding.
164. It has been held that a revocation of timber licenses, permits,
and license agreements do not vest private entities a permanent or
irrevocable right to a particular concession area (of forest products). They
may be validly amended, modified, replaced or rescinded by the Chief
Executive when the national interests so require, pursuant to the Forestry
Reform Code. Thus, they are not deemed contracts within the purview of the

47

due process of law clause. See, e.g., C & M Timber Corporation v. Alcala,
G.R. No. 111088, June 13, 1997, 273 SCRA 402, 418; Oposa v. Factoran,
Jr., 224 SCRA 792 (1993).
165. Moreover, the Concessionaires enjoy no unalterable,
permanent, protected property right within the meaning of substantive due
process because their authority to engage in water supply and distribution,
etc., is a mere privilege or license which is neither property nor a property
right, nor yet do the Concession Agreements create vested rights in their
favor in ways that would allow them to exempt themselves from the public
service law. In short, there is an absence of protected property under the
Concession Agreements in question, hence the Concessionaires cannot claim
any violation of substantive due process. See, e.g., Chavez v. Romulo, 431
SCRA 534.
166. Important to note is that the nominal distinctions of license,
permit or permission, privilege, authority, concession, or
contract, are no longer legally relevant or necessary because even
contracts traditionally said to be greater than privileges which
ostensibly vest rights unto the parties thereto, still yield to a valid exercise of
police power. This is settled doctrine. See, e.g., Oposa v. Factoran, Jr., 224
SCRA 792 (1993); Ysmael Jr. & Co. v. Deputy Executive Secretary, 190
SCRA 673; Republic v. Caguioa, 536 SCRA 193. See Joaquin G. Bernas,
S.J., The 1987 Philippine Constitution: A Comprehensive Primer 106
(2011).
167. In National Devt Co. v. Phil. Veterans Bank, 192 SCRA 257,
the Court declared a presidential decree unconstitutional because it ordered
the dissolution of all mortgages and liens attached to the assets of the Agrix
Group of Companies, on the ground that the decree impaired the obligation
of contracts without justification. The Court reasoned that the loan contracts
and mortgages in question are purely private transactions and have not been
shown to be affected with public interest.
168. The rationale of National Devt Co. requires a finding that the
Concession Agreements in this case are not purely private transactions and
there is no doubt that they are imbued with public interest.
As a matter of fact, the
Concessionaires cannot invoke the
non-impairment clause provided in
10, Art. III, of the Constitution,
because the MWSS, by striking the
Concession Agreements, was not
acting in its private capacity, hence

48

these Agreements cannot be

deemed to be strictly [privately]
contractual in nature within the
meaning of 10, Art. III and case
law.
169. Even adverse case law supports this finding. In City of Manila
v. IAC, 179 SCRA 428, the Court considered the maintenance of a cemetery
by the City of Manila to be a proprietary (commercial) function. Unlike City
of Manila, the supply and distribution of water, and the operation of sewage
under the Concession Agreements, on the other hand, are clearly
governmental (public) functions normally reposed in public utilities (which
are licensed private entities) or government corporations.
170. Police power, like the power of taxation and the power of
eminent domain, are essential attributes of sovereign powers which are read
into every contract. It was held that RA 7716 which expanded the scope of
E-VAT does not impair the obligation of contracts of sale and lease of real
estate entered into before the effectivity of that law, because the essential
attributes of sovereignty are read into those contracts. Tolentino v. Secretary
of Finance, 235 SCRA 630. In another case, it was held that tax exemptions
in franchises are far from being strictly contractual in nature. For contractual
tax exemptions where the non-impairment clause of the Constitution can
rightly be invoked, are those agreed to by the taxing authority in contracts,
such as those contained in government bonds or debentures, lawfully entered
into by them under enabling laws in which the government, acting in its
private capacity, waives its government immunity. Manila Electric Co. v.
Province of Laguna, 306 SCRA 750.
Through decision making by
interlocking directors and key
officers between and among the
MWSS, MWSS Regulatory Office,
and the Concessionaires, their
erring officials are unduly
delegating their powers and duties
as members of the governing board.
Such undue delegation of
discretionary statutory powers is
ultra vires, if not unconstitutional.
Such a continuing state of
conflicting interests and
interlocking decision making evince

49

regulatory capture over the

concession system.
171. In one case, it was held that in enumerating those who will
compose the board of directors in the privatization of the National Power
Corporation, the legislature vested upon them the power to exercise their
judgment and discretion in running the affairs of the NPC. Thus, they cannot
delegate their duties as members of the board of directors, much less their
power to veto and approve board resolutions, because it is their personal
judgment that must be exercised in the fulfillment of such responsibility.
NPC Drivers and Mechanics Association v. National Power Corporation,
503 SCRA 138.
Because of regulatory capture, any
ostensibly separate, independent, or
distinct legal personalities between
and among public and private
respondents should be collapsed;
the circumstances of this case
justify a piercing of the veil of
corporate fiction of MWSS and the
Concessionaires and thus the courts
should treat them as one
accountable whole.
172. Case doctrine on corporate piercing is replete and fully supports
this finding.
173. For instance, in Concept Builders, Inc. v. NLRC, G.R. No.
108734, May 29, 1996, 257 SCRA 149, the Court explained the doctrine of
piercing the corporate veil as follows:
It is a fundamental principle of corporation law that a
corporation is an entity separate and distinct from its
stockholders and from other corporations to which it may
be connected. But, this separate and distinct personality of
a corporation is merely a fiction created by law for
convenience and to promote justice. So, when the notion of
separate juridical personality is used to defeat public
convenience, justify wrong, protect fraud or defend crime,
or is used as a device to defeat the labor laws, this separate
personality of the corporation may be disregarded or the
veil of corporate fiction pierced. This is true likewise when
the corporation is merely an adjunct, a business conduit or
an alter ego of another corporation. (emphasis supplied).

50

The unwarranted imminent

increase of tariff rates and charges
to all water customers call for
remedial police power regulation to
prevent further harm to all income
groups and society at large, which
exercise of police power public
respondents MWSS and MWSSRO unlawfully fail or refuse to
exercise, to date.
174. Case law supports this finding.
175. Remedial regulatory action can apply retroactively, or apply to
events prior to any prospective or proposed regulatory action. In Melchor v.
Moya, 121 SCRA 1, the lower court declared Presidential Decree No. 20
which imposed rent control, as unconstitutional for violating substantive due
process. The Supreme Court reversed and held that PD 20 is valid, on the
ground that it is a police power legislation intended to remedy the situation
of the lessees because housing shortage has resulted in unwarranted
increases in rentals to the prejudice of low income groups. Since it is a
police power legislation, it is applicable to leases entered into prior to its
enactment. See also Gutierrez v. Cantada, 90 SCRA 1.
Assuming without conceding that
the Concessionaires are mere
agents if not purely private
entities or contractors or
subcontractors operating
independently de jure or de facto
from MWSS, still they are
custodians and users of public
goods and are thus subject to the
police power of the state regardless
of any nominal classification of
private or public, public
utility or private entity.
Despite being subjects of the States
police power, still Public
Respondents MWSS and MWSSRO unlawfully fail or refuse to
exercise remedial police power in
the face of the imminent hike of

51

water rates and flawed RORB

exercises.
176. Case law is supportive of this finding.
177. Water supply and distribution, water lines, and sewerage
systems, are public goods akin to public highways used by motor vehicles.
These vessels, instrumentalities, and channels of commerce and public
goods are subject to regulation pursuant to the police power of the State.
178. The inherent sovereign powers of taxation, police power, and
eminent domain, cannot be contracted away. See, e.g., City of Government
San Pablo v. Reyes, 305 SCRA 353.
179. In one case, the Department of Public Works and
Communications issued Administrative Order No. 1 which prohibited
motorcycles on limited access highways on the basis of R.A. No. 2000.
Petitioners argued that AO No. 1 is unreasonable (under substantive due
process). The Court held that the use of public highways is subject to
regulation as an exercise of the police power of the state. AO No. 1 merely
outlined precautionary measures to ensure public safety and the uninhibited
flow of traffic within limited access facilities. See Mirasol v. DPWH, 490
SCRA 318.
180. Like the supply and distribution systems of water as well as
public streets, highways and main thoroughfares, the police power of the
State may be deployed to oversee airwaves and frequencies. It has been held
that all broadcasting, whether by radio or by television stations, is licensed
by the government. Radio and television companies do not own the airwaves
and frequencies. They are merely given the temporary privilege of using
them. Airwave frequencies have to be allocated. Such right, franchise, or
privilege, even under contract, is subject to amendment when the common
good so requires. In this particular case, the Court allowed for the provision
of free air time during the election period. See Telecommunications and
Broadcast Attorneys of the Philippines, Inc. v. COMELEC, 289 SCRA 337.
To hold that the Concessionaires
are mere agents, no more, and
without further qualification, would
in effect create a bad precedent that
could be used to classify thousands
of other private firms which supply
water to the general public as
purely private entities subject to no
regulatory power of the state.

52

181. Petitioners respectfully submit that in the face of unlawful

imminent hike in water rates based on wrongful RORB exercises, the State
ought to exercise its police power for the protection of the public health and
welfare, public morals, and the common good. A finding by the Honorable
Court declaring that private respondents MWCI and MWSI are indeed
public utilities and/or enterprises impressed with public interest, is in order.
As holders or possessors in trust
of funds and property of the
government within the meaning of
2(1), Art. IX, of the Constitution,
the Concessionaires, as agents of
MWSS (a GOCC), are subject to
both pre-audit and post-audit by
the Commission on Audit.
Public respondents MWSS and
MWSS-RO cannot oust the
Commission on Audit of its
jurisdiction by mere administrative
fiat, for the COA is a
constitutionally independent body.
182. Case law requires this finding. A facial analysis of the terms of
the Concession Agreements likewise requires this finding.
183. It has been held that the determination of the Department of
Finance is conclusive only upon the executive agencies concerned. It is not
conclusive upon the Commission on Audit. The COA is not an executive
agency but an independent commission as defined by the Constitution. To
hold otherwise will violate the constitutional prohibition against the
enactment of any law exempting any governmental entity from the
jurisdiction of the Commission on Audit. Commissioner of Internal Revenue
v. Commission on Audit, 218 SCRA 203.
184. 2(1), Art. IX (Commission on Audit) of the Constitution and
pertinent case law support this finding. 2(1), Art. IX provides:
The Commission on Audit shall have the power, authority,
and duty to examine, audit, and settle all accounts
pertaining to the revenue and receipts of, and expenditures
or uses of funds and property, owned or held in trust by, or
pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities, including government-owned
or controlled corporations with original charters, and on a
post- audit basis: (a) constitutional bodies, commissions

53

and offices that have been granted fiscal autonomy under

this Constitution; (b) autonomous state colleges and
universities; (c) other government-owned or controlled
corporations and their subsidiaries; and (d) such nongovernmental entities receiving subsidy or equity, directly
or indirectly, from or through the Government, which are
required by law or the granting institution to submit to such
audit as a condition of subsidy or equity. However, where
the internal control system of the audited agencies is
inadequate, the Commission may adopt such measures,
including temporary or special pre-audit, as are necessary
and appropriate to correct the deficiencies. It shall keep the
general accounts of the Government and, for such period as
may be provided by law, preserve the vouchers and other
supporting papers pertaining thereto. (emphasis supplied)

185. Assuming without conceding that the Concessionaires are

mere agents of MWSS even to the extent of being capable of exercising
the very same sovereign powers entrusted to MWSS such as eminent domain
and which fact of agency was even admitted or stipulated under the
Concession Agreements , they are subject to pre-audit by COA. Well
settled under the law on agency, fully applicable to state contracts and state
entities, is the rule that the acts of the agents (Concessionaires), are deemed
to be the acts of the principal (MWSS) and hence these very same acts are
subject to the same rules and regulations that would normally apply to the
principal as well. Under the Charter of MWSS, MWSS is subject to preaudit by the COA.
186. Thus, even if the Concessionaires are mere agents of MWSS,
no more, or, in other words, even if they are not GOCCs with original
charters as contemplated by the first sentence of 2(1), Art. IX, of the
Constitution, still by virtue of agency principles these Concessionaires are
subject to pre-audit.
187. Government owned and controlled corporations are not
autonomous bodies independent of government. They are subject to audit by
the COA and subject to control by the President. See, e.g, Strategic Alliance
v. Radstock Securities, G.R. No. 178158, Dec. 4, 2009. It has been held that
local water districts incorporated under PD 198 are GOCCs with original
charters and are under the jurisdiction of the COA. Davao City Water
District v. Civil Service Commission and Commission on Audit, G.R. No.
95237-8, Sept. 13, 1991.
188. Even in cases where pre-audit is allowed and pre-audited has
already been performed, the COA is not estopped from making a post-audit
and may make a ruling accordingly. See DBP v. COA, 231 SCRA 202
(1994).

54

189. A facial analysis of the Concession Agreements would show

that the rules and procedures of the Commission on Audit shall be complied
with, particularly in the disposition of assets.
190. For instance, 3.5 states:
3.5

Inventory

Effective on the Commencement Date, the Concessionaire

shall have the right to use any items of Inventory in
carrying out its responsibility under the Concession. Any
consumable items owned by MWSS and inventory not
identified for use by the Concessionaire shall be subject to
the retention or disposal by MWSS and the applicable rules
and procedures of the Commission on Audit shall be
complied with in the event of any such disposition of assets
by MWSS.

191. This is because the assets under the Concession Agreements are
public funds, or public funds held in trust by private entities.
192. 3.6 of the Agreements provide for MWSSs retention and
reversion of movable property while the Concessionaires proceed to use and
operate such property, viz:
3.6

Movable Property

Legal title to all Movable Property in existence at the

Commencement Date shall be retained by MWSS. The
Concessionaire is hereby granted the right to operate,
maintain in good working order, repair, decommission and
refurbish the Movable Property required to provide the
water and sewage services under this Agreement; provided,
however, that upon expiration of the useful life of any such
Movable Property as maybe determined by the
Concessionaire, such Movable Material shall be returned to
MWSS in its then-current condition at no charge to MWSS
or the Concessionaire.

Assuming without conceding that

the Concessionaires are not subject
to pre-audit, still they can be
audited on a post-audit basis
because they are also deemed
subsidiaries and/or nongovernment entities receiving
subsidy or equity from the
government within the meaning of

55

2(1), Art. IX of the Constitution and

case law.
193. In one case, petitioners, a non-governmental entity, were endusers of copra. PD 276 imposed a levy on copra to be collected by the endusers from the sellers of copra. The fund generated by this levy was to be
used to subsidize the purchase of copra to maintain the stability of the price.
The COA audited petitioners and found that there was a deficiency in their
collection of the levy. Petitioners argued that the COA had no authority to
audit them as they were not a government-owned or controlled corporation.
The Supreme Court disagreed with petitioners and held that under the
Constitution the COA has the power to audit non-governmental entities
receiving subsidy from or through the government. Blue Bar Coconut
Philippines, Inc. v. Tantuico, 163 SCRA 716.
194. There is no question that the Concessionaires are receiving
subsidies from the State in various forms.
The Commission on Audit may
nevertheless subject the
Concessionaires to temporary or
special pre-audit on the ground that
the internal control system of the
audited agencies in question, i.e.,
MWSS, MWSS-RO, and/or its
concessionaires (which are
subsidiaries of MWSS or recipients
of government subsidies or equity),
is inadequate within the meaning of
2(1), Art. IX of the Constitution.
Special pre-audit measures are
necessary and appropriate to
correct the deficiencies of the entire
MWSS concessionaire system,
pursuant also to 2(1), Art. IX of
the Constitution.
195. The underscored text of 2(1), Art. IX of the Constitution,
supra, support this finding.
Under 2(2), Art. IX, of the
Constitution, the Commission on
Audit can disallow expenditures or
uses of government funds and

56

properties which are deemed

irregular, unnecessary,
excessive, extravagant, or
unconscionable within the
meaning of 2(2) and COA
auditing rules and regulations.
196. 2(2), Art. IX of the Constitution, provides:
The Commission shall have exclusive authority, subject to
the limitations in this Article, to define the scope of its
audit and examination, establish the techniques and
methods required therefor, and promulgate accounting and
auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable expenditures or
uses of government funds and properties.

The extension of terms of the

Concession Agreements for another
15 years long before their stipulated
expiry dates (among many other
violations) ought to be declared
void for being ultra vires by the
Honorable Court because such
extensions constitute violations of
mandatory public bidding laws.
197. Unilateral extension of the Concession Agreements without
public bidding is ultra vires, if not unconstitutional.
Respondents conversion and
subdivision into housing of portions
of the Balara and La Mesa Dam,
which conversion favored certain
employees and officers of MWSS
and other agencies of government
collaborating with MWSS, only by
mere MWSS Board fiat, are
unlawful and unconstitutional for
funneling public funds for private
gain.
If no law shall be passed justifying
public expenditures for private
purposes, with more reason should

57

conversion of public property for

private purposes by mere
administrative fiat by public
respondents be deemed
unconstitutional.
198. Case law supports this finding.
199. The conversion of portions of the Balara and La Mesa Dam
may amount to a taking of property for private purposes, or involve
disbursements of public funds for private purposes, which is unlawful. See
Albon v. Fernando, 494 SCRA 141.
This case presents novel issues
before this Honorable Court, and is
in no way inconsistent with
Freedom from Debt Coalition, et al.,
v. MWSS, G.R. No. 173044,
December 10, 2007; res judicata
does not lie.
200. This finding is required under case law.
201. 47 (b), Rule 39 as a whole bars the initiation of further
proceedings between the same parties or their successors in interest on all
issues that were directly adjudged or could have been adjudged in previous
proceedings, including questions necessarily involved in an issue, and
necessarily adjudicated or implied in the final judgment, although no
specific finding may have been made. The criteria for the application of the
doctrine of res judicata have been distilled into the precise wording of 47
(b), Rule 39, which has stringent requisites before it can be applied. Thus,
when the findings in the prior case do not carry with it findings as to the fact
sought to be established, no res judicata can lie.
202. The ruling in The Freedom from Debt Coalition Case does not
in and of itself preclude a later finding of supervening event, a recognized
exception to the applica*tion of the doctrine of res judicata.
ALLEGATIONS IN SUPPORT OF WRIT OF INJUNCTION
203. Petitioner repleads all the foregoing allegations in support of its
prayer for a Writ of Injunction.

58

204. The constitutional infirmity of the Agreements are manifest

because the Agreements constitute an undue delegation of inherent
sovereign powers.
205. The violations against the legally enshrined rights of the
Petitioner are equally manifest, as its legally-protected right against rabid
corporate profiteering on public utilities or services of utmost public import
are currently being trampled upon with the approval of the 2013 Tariff
Schedule.
a. The Petitioners rights to affordable potable water are
trampled when respondents MWCI and MWSI are allowed
to charge the general public for future projects that have not
passed scrutiny for having been prudently incurred, without
any legal basis therefor.
b. The Petitioners rights to affordable potable water are
trampled when respondents MWCI and MWSI are allowed
to charge the general public water rates well above the 12%
profit cap imposed by Republic Act No. 6234.
206. Thus, the issuance of a Status Quo Ante Order and/or writ of
preliminary injunction ordering the Respondents to maintain and observe the
current state of affairs prior to the implementation of the latest Rate
Rebasing Exercise and enjoining the Respondents from implementing the
same.
PRAYER
WHEREFORE, it is respectfully prayed of this Honorable Court:
1. Upon filing of this Petition, a Temporary Restraining Order,
Preliminary Injunction and/or Status Quo Ante Order be ISSUED
against the Respondents, requiring them to maintain and observe
the status quo prevailing before the commencement of the 2013
Rate Rebasing Exercises;
2. This Petition be given DUE COURSE, and issue an ORDER:
a. DECLARING the Concession Agreements dated February
1997 between respondents MWSS, MWCI and MWSI to be
VOID for being constitutionally infirm or ultra vires; in the
alternative,

59

b. DECLARING the 2013 Tariff Schedule for respondent

MWCI and MWSI as VOID for being in violation of law,
SETTING ASIDE any ruling of respondent MWSS to the
contrary, and DIRECTING respondent MWSS to determine
anew the appropriate water tariffs in line with the
pronouncements made herein; in the alternative,
c. DECLARING that respondents MWCI and MWSI are
public utilities subject to the rules and regulations of public
service laws and the auditing powers of the Commission on
Audit.
3. Other reliefs just and equitable are likewise prayed for.
In Quezon City, for Manila, on June 20, 2013. This Petition and its
attachments were prepared, signed, and filed with an electronic copy hereof.
For the Petitioners
TUPAZ & ASSOCIATES
41-B N. Romualdez Street
BF Homes Subdivision, Quezon City 1120
[e] info@tupazlaw.com . T. +63 2 368 5606. F. +63 2 368 5656

By:
ANTHONY EDSEL CONRAD F. TUPAZ
IBP No. 920384 - 02/08/2013 Pasig City
PTR No. 7653187 - 01/14/2013 Quezon City
Roll of Attorneys No. 49482
MCLE Compliance No. IV-0016290, 10 April 2013
[e] aet@tupazlaw.com , edsel.tupaz@gmail.com

60

COPY FURNISHED
RAMON B. ALIKPALA, JR.
Chairman of the Board of Trustees
Metropolitan Waterworks and Sewerage System
4/F Administration Building
MWSS Complex
489 Katipunan Road
1105 Balara, Quezon City

GERARDO A.I. ESQUIVEL

Vice-Chairman of the Board of Trustees
Administrator
Metropolitan Waterworks and Sewerage System
4/F Administration Building
MWSS Complex
489 Katipunan Road
1105 Balara, Quezon City
ATTY. EMMANUEL L. CAPARAS
ATTY. RAOUL C. CREENCIA
MA. CECILIA. G. SORIANO
JOSE RAMON T. VILLARIN
BENJAMIN J. YAMBAO
NATHANIEL C. SANTOS
ZOILO L. ANDIN, JR.
LEONOR C. CLEOFAS
Members of the Board of Trustees
Metropolitan Waterworks and Sewerage System
4/F Administration Building
MWSS Complex
489 Katipunan Road
1105 Balara, Quezon City
METROPOLITAN WATERWORKS
AND SEWERAGE SYSTEM
4/F Administration Building
MWSS Complex

61

489 Katipunan Road

1105 Balara, Quezon City
METROPOLITAN WATERWORKS
AND SEWERAGE SYSTEM
REGULATORY OFFICE
4/F Administration Building
MWSS Complex
489 Katipunan Road
1105 Balara, Quezon City
MANILA WATER COMPANY, INC.
MWSS Complex
489 Katipunan Road
1105 Balara, Quezon City
MAYNILAD WATER SYSTEMS INC.
MWSS Complex
489 Katipunan Road
1105 Balara, Quezon City
EXPLANATION
The copies of the foregoing Petition for Certiorari were served by personal
service.
A. EDSEL F. TUPAZ

62