IDEALS v. PSALM (G.R. No.

192088) resource by allowing K-Water, a Korean corporation, to bid,

and subsequently awarding the contract to the latter.
October 9, 2012
Issue: Whether or not the Water Code was violated.
Villarama, J.
Ruling: No, the sale of AHEPP to a foreign corporation is
not prohibited. However, only Filipino citizens and
Facts: PSALM, herein respondent is a GOCC created by corporations 60% of whose capital is owned by Filipinos
virtue of RA 9136 otherwise known as the Electric Power may be granted water rights.
Industry Reform Act of 2001 (EPIRA). The EPIRA provided a
The Court stated that the management of water resources is
framework for the restructuring of the electric power
implemented through the regulation of water rights. The law
industry which included the privatization of assets of the
governing this is the Water Code of the Philippines, which
National Power Corporation, transition to competitive
encompasses, among others, the ownership, appropriation,
structure, and definition of the responsibilities of the
utilization, exploitation, development, conservation and
government agencies and private entities under the
protection of water resources.
jurisdiction of EPIRA.
A judicious examination of the provisions of the law make it
Under the EPIRA, PSALM was mandated to mange the
clear that the Water Code limits the grant of water rights
orderly sale and disposition, and privatization of NPC assets,
only to Filipino citizens and juridical entities duly qualified
real estate and other disposable assets, as well as the
by law to exploit and develop water resources. The grant of
Independent Power Producer contracts to liquidate all the
rights extends to corporations with 60% of their capital
NPC’s financial obligations in an optimal manner. The
owned by Filipinos.
timeline for completion was 25 years.
The Court also said that Foreign ownership of a hydropower
In 2005, PSALM commenced the privatization of the Angat
facility is not prohibited under existing laws. The
Hydro-Electric Power Plant (AHEPP) located in Bulacan. The
construction, rehabilitation and development of hydropower
subject of the privatization involved the Angat Complex
plants are among the infrastructure projects which even
which includes the Dam and the Reservoir, as well as the
wholly-owned foreign corporations are allowed to undertake
watershed area.
under RA 7718.
PSALM’s Board of Directors approved the bidding procedures
Furthermore, under the Water Code concept of
for the privatization, and, after the completion of the
appropriation, a foreign company is not appropriating our
bidding process, K-Water emerged as the highest bidder.
natural resources if it utilizes the waters collected in the
It is now alleged that PSALMS violated the Water Code’s dam and converts the same into electricity through artificial
provisions which implemented the Constitutional provisions devices. Since the NPC in this case has remained in control
on the appropriation and utilization of water as a natural of the operation of the dam by virtue of the water rights
granted to it, there is no legal impediment to foreign-owned
companies such as K-Water to undertake the generation of
electric power using waters already appropriated by the
NPC. However, if the facility were to require a public utility
franchise, then the facility operator must be a Filipino
corporation, or at least 60% owned by Filipinos.