Warm v. MWSS, et al.

REPUBLIC OF THE PHILIPPINES SUPREME COURT

MANILA

EN BANC

WATER FOR ALL REFUND MOVEMENT

(WARM), INC., represented by its President, RODOLFO B. JAVELLANA

JR., and MARCELO L. TECSON,

Petitioners,

—versus—

SC G.R. NO. ________________

For: Certiorari and Prohibition with Prayer for Issuance of

Temporary Restraining Order and/or Writ of Preliminary

Injunction The METROPOLITAN WATERWORKS

& SEWERAGE SYSTEM (MWSS); RAMON B. ALIKPALA JR., in his capacity as Chairman of the Board of Trustees of the METROPOLITAN

WATERWORKS & SEWERAGE

SYSTEM; 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, in their capacities as Members of the Board of Trustees of the METROPOLITAN WATERWORKS &

SEWERAGE SYSTEM; GERARDO A.I. ESQUIVEL, in his capacity as Administrator and/or Vice Chairman of the METROPOLITAN


SYSTEM; the METROPOLITAN


SYSTEM REGULATORY OFFICE; ATTY. EMMANUEL L. CAPARAS, in his capacity as Chief Regulator of the METROPOLITAN WATERWORKS

& SEWERAGE SYSTEM REGULATORY

OFFICE, and in his capacity as Member of the Board of Trustees of

WARM and Tecson v. MWSS, et al. SC G.R. No. ______________

Petition for Certiorari, Prohibition, and Mandamus, with Prayer for

Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction, Accounting, and Refund

the METROPOLITAN WATERWORKS

& SEWERAGE SYSTEM; MANILA

WATER COMPANY, INC., and MAYNILAD WATER SYSTEMS, INC.,

Respondents.

x -— -— -— -— -— -— -— -— -— x

PETITION FOR CERTIORARI, PROHIBITION, and

MANDAMUS

—with—

PRAYER for:

I. ISSUANCE OF STATUS QUO ANTE ORDER, TEMPORARY RESTRAINING

ORDER (TRO), and/or WRIT OF PRELIMINARY INJUNCTION;

II. ACCOUNTING; AND III. REFUND.

PETITIONERS WATER FOR ALL REFUND MOVEMENT (WARM), represented herein by its President of RODOLFO B. JAVELLANA JR., and MARCELO L. TECSON, by counsel, to this Honorable Court, respectfully state:

PRELIMINARY CONSIDERATIONS

PREFATORY

1. History has an uncanny way of repeating itself. During the Water Crisis, then-President FIDEL V. RAMOS decreed the rehabilitation of the country’s waterworks system and, due to rampant corruption, the reorganization of the Metropolitan Manila Waterworks System.




2. This led to the passing of the Water Crisis Act, which, among other provisions, advocated the privatization of water service.

3. Ultimately, two concessions were established—the East and West Service Areas—which were ultimately awarded to Manila Water Co., Inc. and Maynilad Water Systems, Inc., respectively.

4. These concessionaires were tasked with the rehabilitation of the waterworks system already in place. And this came at a price.

a. First, the concessionaires had to be permitted to recover losses during the entire 25-year concessions.

b. Second, the MWSS was mandated to cooperate with these concessionaires.

c. Third, the MWSS Regulatory Office was created through funding by—and, as will be seen later, under virtual control of—the concessionaires themselves.

5. Eventually, this setup was aggravated by arbitrary interpretations by the concessionaires, with the blessing of the MWSS and its Regulatory Office, on the extent of “expenditures” that may be passed on to the water consumers within their respective Service Areas. Even income taxes—which, as previously held by this Honorable Court, may not be properly characterized as “expenditures”—were passed on to water consumers anyway. Even the costs for projects that were admitted to have been “failed” undertakings were likewise passed on.

6. It is for these reasons—all grounded on the sheer greed and blatant disregard by respondents for the welfare of the water consumers—that petitioners now elevate this matter to this Honorable Court.

NATURE OF THE PETITION

1. This is a Petition for Certiorari,1 Prohibition,2 and Mandamus,3 pursuant to Rule 65 of the 1997 Revised Rules of Court:

1 R. CIV. P. 65, § 1.




a. first, questioning the legality of the Concession Agreements entered into between the Concessionaires;

b. second, proving that public respondents committed grave abuse of discretion amounting to lack or excess of jurisdiction; and

c. third, demonstrating the sufficiency of factual and legal bases to warrant the issuance of injunctive relief.

2. The patent unconstitutionality and legal infirmity of the Concession Agreements coupled with flagrant violations of the law by respondents, all committed with grave abuse of discretion amounting to lack or excess of jurisdiction, leave petitioners with no other plain, speedy, and adequate remedies in the ordinary course of law. Petitioners, therefore, are constrained to seek relief directly with this Honorable Court.

PARTIES

3. Petitioner WATER FOR ALL REFUND MOVEMENT (WARM), represented herein by its President, RODOLFO B. JAVELLANA JR., is a non-stock, non-profit corporation duly organized and existing under the laws of the Republic of the Philippines. It is a people’s organization composed of water consumers and water advocacy consumer groups residing in Metro Manila, Rizal province, and Cavite province, comprising approximately 42,000 members, suing on behalf of themselves and of their respective members, all of whom have suffered, still suffer, and still stand to suffer direct injury as a result of the illegal interpretation and consequent implementation of the Concession Agreements executed between public respondent Metropolitan Waterworks & Sewerage System, on the one hand, and each of the private respondents concessionaires, on the other, coupled with illegal charges passed on to petitioners and to other water consumers within the areas serviced by the concessionaires.

2 R. CIV. P. 65, § 2. 3 R. CIV. P. 65, § 3.




4. Petitioner MARCELO L. TECSON is a Filipino citizen, of legal age, a taxpayer and water consumer. Petitioner is a Certified Public Accountant (CPA), having worked with the PHINMA GROUP OF

COMPANIES and the PHILIPPINE NATIONAL OIL COMPANY (PNOC) and, subsequently, as Controller of flagship oil company PETRON

CORPORATION.4

Both petitioners may hereafter be served with all notices and processes issued, and all judgments, decisions, orders, resolutions, and other forms of adjudication promulgated or rendered, by this Honorable Court, at the office of undersigned counsel, ATTY. ANDRE

R. DE JESUS, located at 1100, 11/F, 88 Corporate Center, Sedeño corner Valero Streets, Salcedo Village 1227, Makati City, Metropolitan Manila, Republic of the Philippines.

5. Public respondent METROPOLITAN WATERWORKS &

SEWERAGE SYSTEM (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,” and to provide for “the proper operation and maintenance of [a] waterworks system to insure an uninterrupted and 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.”5 To achieve this purpose, MWSS has the power to “fix periodically water rates and sewerage service fees as the System may deem just and equitable.”6 Its principal place of business is at 4/F, Administration Building, MWSS Complex, 489 Katipunan Road, Balara 1105, Quezon City, Metropolitan Manila, Republic of the Philippines, where it may hereafter be served with all notices and processes issued, and all judgments, decisions, orders, resolutions, and other forms of adjudication promulgated or rendered, by this Honorable Court.

6. Public respondent RAMON B. ALIKPALA was former Executive Director of the NATIONAL WATER RESOURCES BOARD

4 See petitioner’s profile in MARCELO L. TECSON, PUZZLERS: ECONOMIC

STING (2005).

5 REPUBLIC ACT NO. 6234 (1971), § 1.

6 REPUBLIC ACT NO. 6234 (1971), § 3 (h).




(NWRB) and is the incumbent Chairman of the MWSS Board of Trustees, which likewise holds office at the principal place of business of MWSS at 4/F, Administration Building, MWSS Complex, 489 Katipunan Road, Balara 1105, Quezon City, Metropolitan Manila, Republic of the Philippines, where he may hereafter be served with all notices and processes issued, and all judgments, decisions, orders, resolutions, and other forms of adjudication promulgated or rendered, by this Honorable Court.

7. Public respondent GERARDO A.I. ESQUIVEL, is the Administrator and Vice-Chairman of the MWSS Board of Trustees, which likewise holds office at the principal place of business of MWSS at 4/F, Administration Building, MWSS Complex, 489 Katipunan Road, Balara 1105, Quezon City, Metropolitan Manila, Republic of the Philippines, where he may hereafter be served with all notices and processes issued, and all judgments, decisions, orders, resolutions, and other forms of adjudication promulgated or rendered, by this Honorable Court.

8. Public respondent ATTY. EMMANUEL L. CAPARAS is concurrently the Chief Regulator of public respondent MWSS

REGULATORY OFFICE (Regulatory Office), which likewise holds office at the principal place of business of MWSS at 4/F, Administration Building, MWSS Complex, 489 Katipunan Road, Balara 1105, Quezon City, Metropolitan Manila, Republic of the Philippines, where both respondents may hereafter be served with all notices and processes issued, and all judgments, decisions, orders, resolutions, and other forms of adjudication promulgated or rendered, by this Honorable Court.

9. 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 are Members of the MWSS Board of Trustees, which likewise holds office at the principal place of business of MWSS at 4/F, Administration Building, MWSS Complex, 489 Katipunan Road, Balara 1105, Quezon City, Metropolitan Manila, Republic of the Philippines, where they may hereafter be served with all notices and processes issued, and all judgments, decisions, orders, resolutions, and other forms of adjudication promulgated or rendered, by this Honorable Court.

10. Private respondent MANILA WATER COMPANY, INC. (Manila Water) is a private corporation organized under the




Corporation Code of the Philippines, and existing pursuant and subject to the laws of the Republic of the Philippines, and which likewise holds office at the principal place of business of MWSS at 4/F, Administration Building, MWSS Complex, 489 Katipunan Road, Balara 1105, Quezon City, Metropolitan Manila, Republic of the Philippines, where it may hereafter be served with all notices and processes issued, and all judgments, decisions, orders, resolutions, and other forms of adjudication promulgated or rendered, by this Honorable Court.

11. Private Respondent MAYNILAD WATER SERVICES, INC. (Maynilad) is a private corporation organized under the Corporation Code of the Philippines, and existing pursuant and subject to the laws of the Republic of the Philippines, and which likewise holds office at the principal place of business of MWSS at 4/F, Administration Building, MWSS Complex, 489 Katipunan Road, Balara 1105, Quezon City, Metropolitan Manila, Republic of the Philippines, where it may hereafter be served with all notices and processes issued, and all judgments, decisions, orders, resolutions, and other forms of adjudication promulgated or rendered, by this Honorable Court.

Further, for purposes of this Petition, Manila Water and Maynilad shall be jointly referred to as “concessionaires.”

COMPLIANCE WITH JURISDICTIONAL PRECONDITIONS

The Petitioners have standing to challenge the constitutionality and legality of the Concession Agreements and the 2013 Tariff Schedule.

7. It is established 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.7 Citizens may be accorded standing if the issue raised involves one of transcendental importance that must be settled early.8

7 See Chavez v. Judicial and Bar Council, G.R. No. 202242, 17 July 2012. 8 David v. Gloria Macapagal-Arroyo, 522 Phil. 705 (2006).




8. 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.9

9. 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.10 Under this 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 have “a personal and substantial interest in the case such that he has sustained, or will sustain direct injury as a result.”11

10. Petitioner WARM has legal standing to file this Petition as a juridical person, being a people’s organization composed of water consumers and water advocacy consumer groups residing in Metro Manila, Rizal province, and Cavite province, comprising approximately 42,000 members, suing on behalf of themselves and of their respective members, all of whom have suffered, still suffer, and still stand to suffer direct injury as a result of the illegal interpretation and consequent implementation of the Concession Agreements—precisely because they themselves are among the water consumers being serviced, and consequently being illegally overbilled, by Manila Water and Maynilad.

11. Petitioner Tecson likewise has legal standing to file this Petition as a natural person, as he resides and obtains water from MWSS, through one of its concessionaires. Thus, as a consumer, upon the approval of the 2013 Tariff Schedule, petitioner Tecson will be subjected to water rates far above those that may legally be imposed.

9 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, 14 October 2008.

10 People of the Philippines and HSBC v. Vera, 65 Phil. 56, 89 (1937). 11 Advocates for Truth in Lending, Inc., et al., v. Bangko Sentral Monetary

Board, G.R. No. 192986, 15 January 2013.




The Petition at bar involves constitutional issues of transcendental importance and represents matters of paramount public interest that must be settled early.

12. 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.12

13. There is no question that matters directly involving the price of water within the Metropolitan Manila area, comprising more than 16,000,000 people, including the Members of 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.

14. Petitioners invite the attention 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.

15. As will be more extensively discussed herein, the disregard for this basic human need is exacerbated by insidious attempts by respondents to overbill and, consequently, overcharge the water consumers at large.

12 Senate of the Philippines v. Ermita, G.R. No. 169777, 20 April 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).




MWSS’s basis for and imminent approval of the tariff adjustments in favor of the concessionaires is illegal, irregular, excessive, or unconscionable, or is grossly disadvantageous to the public, which excess tariffs amount to an undue delegation of legislative power.

16. MWSS’s imminent administrative fiat approving such illegal and excessive rates under all RORB exercises, past and present, is unconstitutional and/or ultra vires. Setting tariffs over and above existing fares is illegal, as it is tantamount to an undue delegation of legislative power.13

17. As end-users of the service provided by respondents, there can be no other parties with a more direct and specific interest in the questions being raised than herein petitioners.

The Petition involves an issue that is ripe for judicial inquiry.

18. 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.14

13 See Kilusang Mayo Uno Labor Center v. Garcia, 239 SCRA 386. 14 Joya v. Presidential Commission on Good Government, 224 SCRA 568.




19. Petitioners are proper parties who have personal and substantial interest in the present case and have sustained, continue to sustain, and stand to further sustain, direct injury from the implementation of the Concession Agreements, in general, and the resulting 2013 Tariff Schedule, in particular.

20. The exercise of the power of judicial review is proper and appropriate in this case, as there is an actual case or controversy due to the pending implementation of the 2013 Tariff Schedule.

21. The constitutional and legal questions raised in this petition were raised at the earliest possible opportunity. Petitioners and persons similarly situated have exhausted all available remedies, and have no reasonable expectation of further relief, as MWSS and the Regulatory Office, as will be discussed more extensively herein, are in a state of regulatory capture.

The relief sought by petitioners cannot be obtained elsewhere based on exceptional and compelling circumstances justifying immediate resort to this Honorable Court.

22. It has been held by this Honorable Court that a direct invocation of the Supreme Court’s original jurisdiction to issue extraordinary writs under Rule 65 of the Rules of Court should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition.15

23. Indeed, this Honorable Court has held that, even when other remedies are available, extraordinary writs may be issued by this Honorable Court for special considerations, as public welfare or public policy.16

24. This is not the first time that the MWSS has undergone a Rate Rebasing Exercise. Under the Concession Agreements, the term of the concessions was supposed to last only until 2022. Despite the pendency of the concession term, however, the terms of the

15 Constancia Mendoza, et al. v. Mayor Enrilo Villas, et al., G.R. No.

187256, 23 February 2011. 16 1 FLORENZ D. REGALADO, REMEDIAL LAW COMPENDIUM 719 (8th ed. 2002).




concessions had been extended to 2037, an addition of 15 more years, despite the absence of any extraordinary fact or circumstance warranting it.

25. Coupled with the “entanglement” among MWSS, the Regulatory Office, and the concessionaires, petitioners—indeed, all water consumers serviced by the concessionaires—have no reasonable expectation of speedy, adequate reliefs.

STATEMENT OF FACTS

12. On 19 June 1971, FORMER PRESIDENT FERDINAND E. MARCOS approved Republic Act No. 6234, abolishing the NATIONAL

WATERWORKS & SEWERAGE AUTHORITY or (NAWASA) and creating the MWSS.

13. Considering the inability of respondent MWSS to stave off the water crisis that hit the country in the early- to mid-1990s, compounded by what was characterized as “the serious matter of graft and corruption in all the water agencies,” FORMER PRESIDENT

FIDEL V. RAMOS approved Republic Act No. 8041, otherwise known as the “National Water Crisis Act of 1995,” which articulated “the policy of the State to adopt urgent and effective measures to address the nationwide water crisis which adversely affects the health and well-being of the population, food production and industrialization process.”17

14. Republic Act No. 8041, further, caused the reorganization of respondent MWSS and the LOCAL WATERWORKS & UTILITIES

ADMINISTRATION (hereinafter “LWUA”), empowering the President “to revamp the executive leadership and reorganize respondent MWSS and the LWUA, including the privatization of any or all segments of these agencies, operations or facilities if necessary, to make them more effective and innovative to address the looming water crisis.”18

15. Pursuant to the powers granted to him under Republic Act No. 8041, former President Ramos issued, on 20 March 1996, Executive Order No. 311, directing—

17REPUBLIC ACT NO. 8041, § 2.

18REPUBLIC ACT NO. 8041, § 7. Emphasis supplied.




[respondent MWSS] [to] enter into arrangements that will result in the involvement or participation of the private sector in any or all of [its] segments, operations, and/or facilities[;] [and]

[t]he involvement or participation of the private sector xxx.

16. Sometime in 1997, pursuant to the policy of privatizing respondent MWSS, and taking after the water operation in Paris, France—which had two water concessionaires, one for each bank of the Seine River19—the Metropolitan Manila Area was divided into the East and West Service Zones, likewise necessitating two water concessionaires, thus:

EAST SERVICE ZONE WEST SERVICE ZONE

Within Metropolitan Manila

Cities

Makati Mandaluyong

Manila (certain areas) Marikina

Pasig Quezon City (certain areas)

San Juan Taguig

Municipality

Pateros

Province of Rizal

City

Antipolo City

Towns

Angono

Within Metropolitan Manila

Cities

Caloocan Las Piñas

Makati (certain areas) Manila (except San Andres)

Muntinlupa Parañaque

Pasay Quezon City (certain areas)

Valenzuela

Municipalities

Navotas Malabon

Province of Cavite

City

Cavite

Municipalities

19MARK DUMOL, THE MANILA WATER CONCESSION: A KEY GOVERNMENT

OFFICIAL’S DIARY OF THE WORLD’S LARGEST WATER PRIVATIZATION (The International Bank for Reconstruction and Development/The World Bank [2000]) 13, infra.




Baras Binagonan

Cainta Cardona Jala-Jala Morong

Pililla Rodriquez

Tanay Taytay

San Mateo

Bacoor Imus Kawit

Noveleta Rosario

17. The final prequalified international water operators and local lead firms were:

a. INTERNATIONAL WATER (composed of UNITED

UTILITIES of the United Kingdom and BECHTEL

CORPORATION of the United States) and AYALA CORPORATION;

b. LYONNAISE DES EAUX (France) and BENPRES HOLDINGS;

c. COMPAGNIE GENERALE DES EAUX (France) and ABOITIZ EQUITY VENTURES; and

d. ANGLIAN WATER INTERNATIONAL (United Kingdom) and METRO PACIFIC CORPORATION.

18. The East Service Area concession was ultimately awarded to the group led by AYALA CORPORATION—subsequently incorporated as “Manila Water Company, Inc.”—while the West Service Area was awarded to the group led by BENPRES HOLDINGS—incorporated, in turn, as “Maynilad Water Systems, Inc.”

19. Two separate Concession Agreements were executed by MWSS with the Concessionaires, both dated 21 February 1997, but each with a closing date of 6 May 1997 and an expiration date of 6 May 2022, or for a period of 25 years.20

20 See Concession Agreements dated 21 February 1997, Definitions,

particularly those of “Closing Date” and “Expiration Date.”




Faithful reproductions of these Concession Agreements are attached hereto as Annexes “A” and “B” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made integral parts hereof.21

20. Instead of awaiting—or, at least, lobbying for—the passing of relevant legislation or executive edict, the parties to the Concession Agreements provided for the creation of a Regulatory Office by mere corporate fiat, thus:

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 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.22 (Emphasis supplied)

21. The maximum rates for water and sewerage services were

set for the first five years by a so-called “Schedule 5” attached to the Concession Agreements and, following that period, by the MWSS Board of Trustees, upon the advice of the Regulatory Office, through several rate rebasing exercises to be held every five years, beginning in 2002 and ending in 2017. The tariffs are supposed to factor in the return of all capital expenditure made by each concessionaire over the 25-year term of the Concession Agreements.24

21 Petitioners, consistent with Section 6 of A.M. No. 11-9-4-SC, otherwise

known as the “Efficient Use of Paper Rule,” have dispensed with service of copies hereof on respondents, as the latter are presumed to already be in possession of the same, being privy thereto or previous recipients thereof.

22 Concession Agreements, Clause 11.1.

24 See Concession Agreements, Clause 9.3.4, thus:

9.3.4 General Rates Setting Policy/Rate Rebasing Determination

The maximum rates chargeable by the Concessionaire for

water and sewage services hereunder applicable to the period




22. Sometime in 2000, and in preparation for the 2002 rate rebasing exercise, the MWSS Board of Trustees sought the aid of the COMMISSION ON AUDIT (COA) and caused the audit of both Manila Water and Maynilad to determine whether the actual rates being charged to the public are within the maximum rate of return of 12% as mandated by Section 12 of Republic Act No. 6234.25

through the Second Rate Rebasing Date (subject to interim adjustment’s as described in this Article 9) are set out in Schedule 5 to this Agreement. It is the intention of the parties that, from and after the Second Rate Rebasing Date, the rates for water and sewerage services provided by the Concessionaire shall be set at level that will permit the Concessionaire to recover over the 25-year term of the Concession (net of any grants from third parties and any possible Expiration Payment) operating, capital maintenance and investment expenditures efficiently and prudently incurred, Philippine business taxes and payments corresponding to debt service on the MWSS Loans and Concessionaire Loans incurred to finance such expenditures, and to earn a rate of return (referred to herein as the “Appropriate Discount Rate”) on these expenditures for the remaining term of the Concession in line with the rates of return being allowed from time to time to operators of long-term infrastructure concession arrangements in other countries having a credit standing similar to that of the Philippines. The parties further agree that the maximum rates chargeable for such water and sewerage services shall be subject to general adjustment at five-year intervals commencing on the second Rate Rebasing Date; provided that the Regulatory Office may exercise its discretion to make a general adjustment of such rates on the First Rate Rebasing Date, but, if it does not do so, the Regulatory Office shall implement the assumptions set out in paragraph 2 of Exhibit E on the fifth anniversary of the Commencement Date. It is understood that the determination of the appropriate rate of return will be made separately at the time of each generalized rate rebasing.

It is also the intention of the parties that rates be set in such a

way as to provide appropriate efficiency incentives to the Concessionaire, with a view toward benefiting both the Customers and the Concessionaire.

The Regulatory Office shall determine the Rebasing

Adjustment to be used for the purposes of calculating the Rates Limit for each of the five Charging Years of each Rebasing Period, in accordance with the provisions set forth below. 25 See R.A. No. 6234, § 12, thus:

Review of Rates by the Public Service Commission.—The rates and fees fixed by the Board of Trustees for the System and by




23. On 1 October 2001, the MWSS Board of Trustees held its 9th Special Meeting. Citing the insufficiency of existing mechanisms under the Concession Agreement in recovering foreign exchange losses incurred by the Concessionaire from 1 August 1997, owing to the Asian financial crisis, the MWSS Board of Trustees adopted Board Resolution No. 487-2001, amending Board Resolution No. 457-2001 dated 3 September 2001, allowing Maynilad to implement—

a. a rate adjustment of Php 4.21 per cubic meter during the period covering 15 October 2001 to 31 December 2002, to recover the FOREX losses incurred from 1 August 1997 up to 31 December 2000;

b. a special transitory mechanism to enable Maynilad to recover FOREX losses for the period beginning 01 January 2001 up to 31 December 2001; and

c. a rate adjustment with respect to present and future FOREX losses or gains, including all accruals and carrying costs thereof, from the period 1 January 2002 until the Expiration Date on a quarterly basis.

the local governments for the local systems shall be of such magnitude that the System’s 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. Such rates and fees shall be effective and enforceable fifteen (15) days after publication in a newspaper of general circulation within the territory defined in Section 2 (c) of this Act. The Public Service Commission shall have exclusive original jurisdiction over all cases contesting said rates or fees. Any complaint against such rates or fees shall be filed with the Public Service Commission within thirty (30) days after the effectivity of such rates, but the filing of such complaint or action shall not stay the effectivity of said rates or fees. The Public Service Commission shall verify the rate base, and the rate of return computed therefrom, in accordance with the standards above outlined. The Public Service Commission shall finish, within sixty (60) calendar days, any and all proceedings necessary and/or incidental to the case, and shall render its findings or decisions thereon within thirty (30) calendar days after said case is submitted for decision.

In cases where the decision is against the fixed rates or fees,

excess payments shall be reimbursed and/or credited to future payments, in the discretion of the Commission.




24. This paved the way for the passing of Amendment No. 1, adopting MWSS Board of Trustees’ Board Resolution No. 487-2001, and effectively amending the Concession Agreement between MWSS and Maynilad.

Faithful reproductions of Amendment No. 1 and Excerpts from the MWSS Board of Trustees’ Board Resolution No. 487-2001 are attached hereto as Annexes “C” and “C-1,” respectively, for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made integral parts hereof.26

25. On 12 October 2001 the MWSS Board of Trustees held its 10th Special Meeting. Citing the Asian financial crisis and the resulting “peso devaluation” relative to foreign currencies in which MWSS and concessionaire loans were denominated, and pursuant to the parties’ intent to adequately compensate the concessionaire by allowing water tariff adjustments to “truly account for the financial consequences of unforeseen events,” the MWSS Board of Trustees adopted Board Resolution No. 512-2001 allowing Manila Water to implement—

a. a rate adjustment of Php 1.00 per cubic meter during the period covering 25 October 2001 to 31 December 2002 (allegedly to recover the foreign exchange losses incurred from 1 August 1997 to 31 December 2000;

b. a special transitory mechanism to enable Manila Water to recover foreign exchange losses for the period beginning 1 January 2001 to 31 December2000 and past foreign exchange losses incurred from 1 August 1997 to 31 December 2000; and

c. a rate adjustment for foreign currency differentials (FCDA) with respect to present and even future foreign exchange losses or gains, including all accruals and carrying costs thereof, from the period covered by 1 January 2002 until the Expiration Date (or 6 May 2022).






26. This paved the way for the passing of Amendment No. 1, adopting MWSS Board of Trustees’ Board Resolution No. 512-2001, and effectively amending the Concession Agreement between MWSS and Manila Water.

Faithful reproductions of Amendment No. 1 and Excerpts from the MWSS Board of Trustees’ Board Resolution No. 512-2001 are attached hereto as Annexes “D” and “D-1,” respectively, for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made integral parts hereof.27

27. 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 its Final Draft Report on the rate rebasing project submitted to the MWSS Board of Trustees, Thames Water noted that neither concessionaire allocated any additional capital outlay for the processing of wastewater.28

28. Meanwhile, the Supreme Court, in the related cases of Republic of the Philippines versus Manila Electric Company (MERALCO),29 and Lawyers Against Monopoly & Poverty (LAMP), et al., versus Manila Electric Company (MERALCO),30 upheld the ENERGY

REGULATORY BOARD (ERB) ruling “that income tax should not be included in the computation of operating expenses of a public utility” and that, consequently, “the excess average amount of Php 0.167 per kilowatthour starting with the applicant’s billing cycles beginning February 1998 is ordered to be refunded to MERALCO’s customers or correspondingly credited in their favor for future consumption.”

29. On 9 April 2003, acting on MERALCO’s Motion for Reconsideration, the Supreme Court affirmed its 15 November 2002 Decision.



28 THAMES WATER, TECHNICAL TEAM, UP ECON FOUNDATION, FINAL DRAFT REPORT, RATE REBASING PROJECT, TECHNICAL REVIEW-REVISED BUSINESS PLANS, REGULATORY OFFICE 16.

29 G.R. No. 141314, 15 November 2002.

30 G.R. No. 141369, 15 November 2002.




a. The COA, on 15 September 2003 and 2 December 2003, submitted to the MWSS Board of Trustees separate reports on the concessionaires’ respective rates of returns.

b. The COA found that while Maynilad had a rate of return of 7.71%, Manila Water had a rate of return of 40.92%—28.92% higher than the rate of return cap of 12% pegged under R.A. No. 6234, thus:

Report No. 2000-38 (Re: Maynilad)

Result of the Audit

The audit, after considering the adjustments for rate determination, resulted in an actual rate of return of 7.71% during the period January 1 to December 31, 1999 on MWSI’s invested capital of P3.999 billion inclusive of Concession Fees of P3.36 billion pertaining to completed projects. The return is 4.29% below the allowable Rate of Return Base (RORB) of 12%.

xxx.

Report No. 2000-39 (Re: Manila Water)

Result of the Audit

The audit, after considering the adjustments for rate determination, resulted in an actual rate of return of 40.92% during the period January 1 to December 31, 1999 on MWCI’s invested capital of P971.93 million inclusive of Concession Fees of P556.12 million pertaining to completed projects. The return is 28.92% above the allowable RORB of 12%.

xxx.31 (Emphasis supplied)

c. The COA noted that “only those properties acquired, owned, and actually used in the operation of the concessionaires were included” in computing the concessionaires’ capital.

31 See Freedom From Debt Coalition, et al. v. Metropolitan Waterworks &

Sewerage System (MWSS) and the MWSS Regulatory Office, G.R. No. 173044, 10 December 2007.




d. Meanwhile, on 5 November 2003, an international arbitration panel reportedly ruled that Maynilad, which had not been paying its concession fees, could draw on its performance bond. Maynilad subsequently went into receivership, during which it had 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.

e. The Supreme Court’s Resolution in the MERALCO cases prompted the Regulatory Office to issue, on 31 March 2004, a Notice of Extraordinary Price Adjustment (NEPA) to both concessionaires, stating that “pursuant to Article 9.3.1 of the Concession Agreements, the Regulatory Office has determined that Grounds for Extraordinary Price Adjustment (GEPA) have occurred,” consisting in a purported “change in law, government regulation, rule or order or interpretation thereof, that affects or is likely to affect the Cash Flow of the concessionaires”—citing the MERALCO rulings as the “change in law, rule or interpretation thereof.”32

f. Both concessionaires opposed the NEPA on

the grounds that:

i. they are not public utilities but mere agents and contractors of MWSS by virtue of the Concession Agreements;

ii. their income tax payments are

considered expenditures under the Concession Agreements;

iii. in the case of Manila Water, the

Regulatory Office had approved its Business Plan dated 18 September 2002 and granted it a Rate Rebasing; and that the said Plan treats income tax payments as expenditures;






iv. the premise of the GEPA is that the concessionaires are public utilities;

v. the COA conducted the rate audit

on the premise that the concessionaires are public utilities even if they maintain they are not of such character; and

vi. the MERALCO ruling does not

involve the GEPA contemplated in Clause 9.3.1 (ii) of the Concession Agreements.33 g. On 2 June 2004, the MWSS Board of Trustees

directed its Regulatory Office and the concessionaires to create a TECHNICAL WORKING GROUP (TWG) which will discuss the issues raised by the concessionaires in order to find a mutually acceptable resolution to avoid arbitration before the Appeals Panel.34

h. On 27 July 2004, the TWG submitted its

Report, finding that:

i. the intent of the Concession Agreements is for the MWSS to remain as a public utility providing waterworks and sewerage services, while the concessionaires are its agents and contractors, consistent with the framework of the concession arrangements;

ii. it is the MWSS that has the

legislative franchise under its Charter, while the concessionaires do not have a franchise;

iii. in its operation, the MWSS

contracted the services of the concessionaires to perform certain functions and authorized



34 See also Freedom From Debt Coalition, et al. v. Metropolitan Waterworks & Sewerage System (MWSS) and the MWSS Regulatory Office, G.R. No. 173044, 10 December 2007.




them, by way of agency, to exercise certain rights in performing their obligations;

iv. during the bidding and selection of concessionaires, the latter had submitted their bids on the basis of MWSS representation that it would retain its status as a public utility having jurisdiction, supervision and control over all waterworks and sewerage system within Metro Manila, Rizal and Cavite;

v. based on the framework of the Concession Agreements, the MERALCO ruling has no relevance to the concessionaires’ situation;35

vi. quoting a letter dated 21 November 1996 by the MWSS, “[t]he procedure for rate of return calculation and the 12% ceiling shall be applicable to the entire waterworks system, including both income and assets, held respectively by the [c]oncessionaires and MWSS”;

vii. tariffs charged to consumers shall always be subject to the 12%Rate On Return Base (RORB);

viii. any consumer may question the tariff set by the MWSS before the NWRB, but disputes between MWSS and concessionaires themselves shall be governed by Clause 12 of the Concession Agreements governing “Dispute Resolution”; and

ix. it is the Regulatory Office that determined whether expenditures have been “prudently and efficiently incurred.”

35 See again Freedom From Debt Coalition, et al. v. Metropolitan

Waterworks & Sewerage System (MWSS) and the MWSS Regulatory Office, G.R. No. 173044, 10 December 2007.




i. On 29 July 2004, the Regulatory Office reported to the Board of Trustees the outcome of the TWG’s findings above.

A faithful reproduction of the Memorandum dated 29 July 2004 is attached hereto as Annex “E” and is attached hereto for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.36

j. On 30 July 2004, the Regulatory Office issued Resolution No. 04-006-CA, approving and adopting the findings and recommendations of the TWG in toto, including a rate audit framework that encompasses “the entire waterworks system” in that the rate of return calculation as well as compliance with the 12% ceiling will require the inclusion of all income and assets of the concessionaires and MWSS.37



37 See again Freedom From Debt Coalition, et al. v. Metropolitan Waterworks & Sewerage System (MWSS) and the MWSS Regulatory Office, G.R. No. 173044, 10 December 2007, citing Resolution No. 04-006-CA, thus:

NOW, THEREFORE, BE IT RESOLVED, as it is hereby

resolved: 1. The RO hereby APPROVES and adopts all the findings,

conclusions, and recommendations of the Joint Technical Working Group as contained in its memorandum to the MWSS Board of Trustees dated July 29, 2004;

2. The RO shall consider and treat the Concessionaires as

mere agents and contractors of MWSS, which is and still remains to be the public utility. The Supreme Court Decision in the Meralco case is not applicable to the Concessionaires, thus the NEPA Notice dated 31 March 2004 has no further force and effect. The appropriate procedure in the conduct of rate audit of MWSS has been established by the National Water Resources Board (NWRB).

3. The RO shall provide COA with a copy of the TWG

Report per Assistant Commissioner Cuenco’s request, as well as




A faithful reproduction of Resolution No. 04-006-CA is attached hereto as Annex “F” and is attached hereto for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.38

30. On 28 April 2005, the rehabilitation court approved a Debt Capital and Restructuring Agreement that allowed MWSS to subscribe to 83.97% of Maynilad’s outstanding capital stock.

31. At 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 Manila Water and Maynilad concession fees, as financed by foreign lenders—otherwise known as “concession fee projects.”

32. 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.

inform the COA of the appropriate framework for the conduct of the rate audit.

4. The RO shall inform the COA of the appropriate

framework for the conduct of the rate audit of MWSS such that: a) the rate audit of MWSS as public utility shall observe the procedures/guidelines set out in the MWSS letter to NWRB dated 21 November 1996 and NWRB letter to MWSS dated 02 December 1996, i.e., “The procedure for rate of return (ROR) calculation and, the 12% ceiling shall be applicable to the entire waterworks system, including both the income and assets held respectively by the Concessionaires and MWSS,” and the formula that the ROR is equal to income after interest and taxes divided by the base of Net revalued fixed assets in operation + 2 months operating capital; and b) MWSS and its Concessionaires shall ensure that actual tariff rates as adjusted by Article 9.1 of the CA shall not exceed the maximum tariff rates consisted with the 12% ROR limit, and in case actual rates exceed the tariff ceiling consistent with 12% ROR limit, RO shall propose a service obligation deferment to adjust actual rates or compute Expiration Payment due to Concessionaires. (Emphasis supplied) 38 Petitioners, consistent with Section 6 of A.M. No. 11-9-4-SC, otherwise





33. On 16 May 2005, the NWRB issued a Memorandum where it concluded “that MWSS shall retain its status as the public utility and that the concessionaire shall only be agents or contractor of MWSS.” Noteworthy is the fact that respondent Alikpala, now MWSS Chairman, was then and there the Executive Director of NWRB.

A faithful reproduction of the Memorandum dated 16 May 2005 is attached hereto as Annex “G” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.39

34. On 17 June 2005, the MWSS Board of Trustees held a meeting on the RORB computation. It was at this meeting that Resolution No. 008-0605 was passed, confirming “that the procedure for the ROR calculation and the 12% shall be applicable to the entire waterworks system.”

A faithful reproduction of the Resolution No. 008-0605 is attached hereto as Annex “H” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.40

35. On 21 March 2006, the Committee on Validation of Maynilad’s tariff of Php 30.19 issued a Memorandum stating, in sum, that the applicable tariff for Maynilad for the year 2005 should have been Php 26.48/cu.m, instead of Php 30.19.

A faithful reproduction of the Memorandum dated 21 March 2006 is attached hereto as Annex “I” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.41



40 Petitioners, consistent with Section 6 of A.M. No. 11-9-4-SC, otherwise known as the “Efficient Use of Paper Rule,” have dispensed with service of copies hereof on respondents, as the latter are presumed to already be in possession of the same, being privy thereto or previous recipients thereof.




36. On 12 April 2006, in a Memorandum addressed to the Chairman of the MWSS Board of Trustees, Mr. C.E. DINOPOL JR., DA, Technical Regulation, concluded that “[t]he applicable tariff for [Maynilad] for Charging Year 2005 should have been Php 26.48/cu.m instead of the current rate of Php 30.19/cu.m[,] or a difference of Php 3.71/cu.m.”

A faithful reproduction of the Memorandum dated 12 April 2006 is attached hereto as Annex “J” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.42

37. Sometime in late 2006, the 83.97% subscription of MWSS in Maynilad’s capital stock was awarded, after bidding, to a consortium led by METRO PACIFIC INVESTMENTS CORPORATION and DM CONSUNJI, INC.

38. On 1 January 2008, the new water rates for Manila Water began to take effect, following the mandated rate rebasing exercise.

39. On 1 January 2009, the new water rates for Maynilad began to take effect, following a rate rebasing exercise. At the end of that year, Maynilad posted net income of Php 2,824,626,000.00, after a reduction from 66% to 60% water loss from 2007, when Maynilad was barely solvent, to 2009.

40. Sometime in October 2009, the term of the Concession Agreement with Manila Water was prematurely extended for an additional 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 Manila Water and in spite of the glaring fact that the Concession Agreement was more than 12 years away from expiring.







41. Aside from the question of circumventing mandatory bidding requirements, this unilateral extension had the effect of expanding the valuation of the total asset base in RORB exercises, because, instead of dividing the costs over a 25 year-period, costs would now be spread out over a longer, 40-year period. The 15-year extension should have produced the result of lowering water tariff rates and consumer water bills, but the outcome was the opposite—there was no lowering of tariff rates, and general water rates remained high, if not higher.

42. On 22 April 2010, the term of the Concession Agreement with Maynilad was, like that of Manila Water, also extended for an additional 15 years, or until 2037, again despite the glaring fact that the Concession Agreement was more than 12 years away from expiring.

A faithful reproduction of the Disclosure Letter dated 22 April 2010 prepared by METRO PACIFIC INVESTMENTS CORPORATION, addressed to the DISCLOSURE DEPARTMENT, PHILIPPINE STOCK

EXCHANGE, reflecting these extensions is attached hereto as Annex “K” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.43

43. After his assumption into office as President of the Republic of the Philippines, President BENIGNO SIMEON C. AQUINO III, on 21 July 2010, instructed then-Secretary of the Department of Public Works & Highways (DPWH) 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.

A faithful reproduction of the Memorandum dated 21 July 2010 is attached hereto as Annex “L” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.44



44 Petitioners, consistent with Section 6 of A.M. No. 11-9-4-SC, otherwise known as the “Efficient Use of Paper Rule,” have dispensed with service of




44. On 10 December 2010, in its Memorandum on “Unimplemented Concession Fee Projects,” the Regulatory Office discussed the status of the Laiban Dam Project, among other undertakings, thus:

In 2007 and 2008 Rate Rebasing exercise for [Manila Water] and [Maynilad], respectively, the Laiban Dam Project was included in their respective Business Plans, pursuant to the Development Plan for New Water Sources[,] which was approved under BOT Resolution No. 336-2002 dated December 16, 2002. The project (Phase 1) construction was supposed to commence in 2010 and be completed in 2015, to be financed by a loan contracted by MWSS[,] but shall be paid by the two concessionaires through concession fees. Per NEDA-ICC approved estimate in 2007[,] the project cost is PhP48 Billion. (Emphasis supplied)

45. In the same Memorandum, the Regulatory Office, quoting a letter dated 26 November 2010 by the corporate office of MWSS, adopted the latter’s finding that the Laiban Dam Project—with a project cost of Php 48 billion—”failed.” The Regulatory Office consequently recommended that the concessionaires either establish a trust fund or open an escrow account for collections pertaining to the Laiban Dam Project, among other projects.

A faithful reproduction of the Letter dated 26 November 2010 is attached hereto as Annex “M” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.45

A faithful reproduction of the Memorandum dated 10 December 2010, prepared by Chief Regulator MANUEL P. QUIZON, reflecting the foregoing instructions, is attached hereto as Annex “N” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.46

copies hereof on respondents, as the latter are presumed to already be in possession of the same, being privy thereto or previous recipients thereof.


46 Petitioners, consistent with Section 6 of A.M. No. 11-9-4-SC, otherwise known as the “Efficient Use of Paper Rule,” have dispensed with service of




46. On 24 February 2011 the Regulatory Office issued a Memorandum discussing possible grounds for downward adjustment, and where it concluded, among other matters, that since there is no certainty in the implementation of the Laiban Dam and 15 CMS concession fee projects, the concessionaires should stop collecting tariffs intended for these projects.

A faithful reproduction of the Memorandum dated 24 February 2011, prepared by Chief Regulator MANUEL P. QUIZON, reflecting the foregoing instructions, is attached hereto as Annex “O” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.47

47. On 16 March 2011, the Regulatory Office prepared a Memorandum containing a summary of estimations on revenues collected by the concessionaires for the Laiban Dam and 15 CMS Projects from years 2008-2010, in the case of Manila Water, and from years 2009 to 2010, in the case of Maynilad, thus:

Manila Water

PROJECT NET COLLECTION (IN MILLION PESOS) Laiban Dam Project 1,620.50

15 CMS Water Supply Project 366.47 Total 1,986.97

Maynilad

PROJECT NET COLLECTION (IN MILLION PESOS) Laiban Dam Project 1,559.18

15 CMS Water Supply Project 113.19 Total 1,672.37

48. Just for the Laiban Dam Project alone, the concessionaires obtained a net collection of Php 3,659,340,000.00—for a project that “failed.”






A faithful reproduction of the Memorandum dated 16 March 2011 is attached hereto as Annex “P” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.48

49. On 17 March 2011, the MWSS Board of Trustees adopted Resolution No .2011-024, authorizing the Regulatory Office “to issue to the two [c]oncessionaires xxx cease and desist orders (CDO[s]) directing them to stop collecting advance tariff for the Laiban Dam and the 15 CMS Projects” and “to direct the aforesaid [c]oncessionaires to put in escrow the amounts already collected for the above-mentioned projects.”

A faithful reproduction of the Excerpts from the Minutes of the Third Regular Meeting of the Board of Trustees on 17 March 2011, and which contains Resolution No .2011-024, is attached hereto as Annex “Q” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.49

50. On 21 March 2011, addressing the Executive Committee of the Regulatory Office, the TWG submitted its Position Paper on whether—

a. first, the concessionaires are public utilities; and

b. second, if the first issue is answered in the affirmative, whether income taxes may be passed on by the concessionaires to the water consumers.

51. The TWG, ruling on the first issue, and citing salient provisions of the Public Service Act (Commonwealth Act No. 146), jurisprudential pronouncements by the Philippine Supreme Court in







Iloilo Ice and Cold Storage Co. versus Public Utility Board,50 and relevant provisions of the Concession Agreements themselves, concluded “that the concessionaires are public utilities and not mere agents of MWSS.”

52. As regards the second issue, the TWG submitted, thus:

With the issue on the concessionaires’ status as public utilities or as “mere” agents of the MWSS being brought to the fore anew, it is submitted that the Supreme Court [r]uling on [sic] the MERALCO [c]ase may be applied to them once it is ruled by the [MWSS Board of Trustees] the [sic] they are indeed [p]ublic [u]tilities. This means that their income tax will be excluded from their expenditure streams in the determination of their rates. xxx xxx xxx. (Emphasis supplied)

A faithful reproduction of the Position Paper dated 21 March 2011 is attached hereto as Annex “R” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.51

53. On 11 April 2011, taking up the TWG’s Position Paper dated 21 March 2011, the Regulatory Office likewise prepared a Position Paper referring the issues tackled therein to the Office of the Government Corporate Counsel (OGCC) and/or the Department of Justice for opinion.

A faithful reproduction of the Position Paper dated 11 April 2011 is attached hereto as Annex “S” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.52

54. On 13 June 2013, and in the latest round of public consultations held pursuant to the 2013 rate rebasing exercises, the

50 44 Phil. 551.







Regulatory Office refused to divulge information that should have enabled watchdog groups—such as petitioner WARM—to compute the correct Return of Rate Base for the 2013 rate rebasing exercise, on the grounds that the future expansion plans of both concessionaires are confidential.

55. To date, and to the best of petitioners’ personal knowledge, both MWSS Board of Trustees and MWSS Regulatory Office have not revoked, rescinded or otherwise set aside Regulatory Office Resolution No. 04-006-CA or MWSS Board of Trustees Resolution No. 2004-201, especially as it relates to the 12% cap.

56. The concessionaires, in fact, have been overbilling consumers from 2001 to the present. The tables below show overbilling histories of both concessionaires, distilled from the difference between the total revenues to achieve a 12% return (the ceiling of maximum return that each concessionaire may charge), on the one hand, and actual revenues earned, on the other, from years 2001 to 2012, in the case of Manila Water, and from years 2001 to 2011, in the case of Maynilad, thus:




Manila Water Com

pany, Inc.2001

20022003

20042005

20062007

20082009

20102011

2012Revenues

1,659.00

2,682.00

3,778.00

4,291.00

5,763.10

6,209.64

7,331.90

8,913.57

9,465.00

10,855.00

14,288.00

14,289.00

Operating Expenses1,483.00

2,124.00

2,627.00

2,962.00

3,823.36

3,868.95

3,747.61

4,656.84

5,239.60

6,732.00

7,484.40

8,357.00

Incom

e Tax1,005.00

1,247.00

957.00

1,595.00

Net Incom

e 176.00

558.00

1,151.00

1,329.00

1,939.74

2,340.69

3,584.29

4,256.73

3,220.40

2,876.00

5,846.60

4,337.00

-

A.W

ithout Concession Assets2001

20022003

20042005

20062007

20082009

20102011

2012Total Fixed Assets net of Concession Assets (000)

1,177.00

1,746.00

3,048.00

5,725.00

9,491.00

12,599.00

558.00

723.00

1,205.00

1,973.00

2,092.10

2,317.70

2 months working capital (000)

247.17

354.00

437.83

493.67

637.23

644.83

624.60

776.14

1,040.77

1,329.83

1,406.90

1,658.67

Total (000)1,424.17

2,100.00

3,485.83

6,218.67

10,128.23

13,243.83

1,182.60

1,499.14

2,245.77

3,302.83

3,499.00

3,976.37

Billed Volume of water in cubic m

eters in millions

267.57

273.17

275.94

290.88

311.13

333.52

373.55

386.63

395.54

409.26

411.6

Rate computation for average tariff

12% return on total assets (000)

171

252

418

746

1,215

1,589

142

180

269

396

420

477

Operating Expenses (000)1,483

2,124

2,627

2,962

3,823

3,869

3,748

4,657

5,240

6,732

7,484

8,357

Total Revenues to achieve 12%

return (000)1,654

2,376

3,045

3,708

5,039

5,458

3,890

4,837

5,509

7,128

7,904

8,834

Total Revenues earned

1,659

2,682

3,778

4,291

5,763

6,210

7,332

8,914

9,465

10,855

14,288

14,289

Overbilling5

306

733

583

724

751

3,442

4,077

3,956

3,727

6,384

5,455

Net Income using the RORB derived revenues

171

252

418

746

1,215

1,589

142

180

269

396

420

477

RORB12.36%

26.57%33.02%

21.37%19.15%

17.67%303.09%

283.94%143.40%

87.08%167.09%

109.07%

Average Tariff per cubic meter

6.18

8.70

11.04

12.75

16.19

16.37

10.41

12.51

13.93

17.42

19.20

Actual tariff charged: M

anila Water

Basic15.90

19.64

21.91

23.08

25.11

All-in

20.54

24.86

27.99

30.12

33.57

B.W

ith Concession Assets2001

20022003

20042005

20062007

20082009

20102011

2012Total Fixed Assets with Concession Assets (000)

3,140.00

4,341.00

6,470.00

9,162.00

12,929.00

16,186.00

22,472.00

24,637.00

31,151.00

39,433.00

47,787.90

53,071.60


247

354

438

494

637

645

625

776

1,041

1,330

1,407

1,659

Total3,387

4,695

6,908

9,656

13,566

16,831

23,097

25,413

32,192

40,763

49,195

54,730

Billed Volume of water in cubic m

eters in millions

268

273

276

291

311

334

374

387

396

409

412

-

Rate computation for average tariff

12% return on total assets (000)

406

563

829

1,159

1,628

2,020

2,772

3,050

3,863

4,892

5,903

6,568

Operating Expenses (000)1,483

2,124

2,627

2,962

3,823

3,869

3,748

4,657

5,240

6,732

7,484

8,357

Total Revenues to achieve 12%

return (000)1,889

2,687

3,456

4,121

5,451

5,889

6,519

7,706

9,103

11,624

13,388

14,925

Total Revenues earned

1,659

2,682

3,778

4,291

5,763

6,210

7,332

8,914

9,465

10,855

14,288

14,289

Overbilling(230)

(5)

322

170

312

321

813

1,207

362

(769)

900

(636)

Net Income using the RORB derived revenues

406

563

829

1,159

1,628

2,020

2,772

3,050

3,863

4,892

5,903

6,568

Average Tariff per cubic meter

7.06

9.84

12.52

14.17

17.52

17.66

17.45

19.93

23.01

28.40

32.53

Actual tariff charged: M

anila Water

Basic15.90

19.64

21.91

23.08

25.11

All-in

20.54

24.86

27.99

30.12

33.57

Overcharging18%

25%22%

6%3%




Maynilad Water Services, Inc.2001

20022003

20042005

20062007

20082009

20102011

Revenues-

5,402.41

4,966.91

3,905.17

7,228.01

7,585.26

7,377.04

8,244.86

10,199.00

11,642.00

13,323.00

Operating Expenses

-

5,799.39

5,635.73

4,682.07

5,783.14

6,776.92

6,278.31

6,269.20

4,974.00

4,932.00

5,833.00

Income Tax1,569.00

(214.00)

(188.00)

Net Income

(396.98)

(668.82)

(776.90)

1,444.87

808.34

1,098.73

1,975.66

5,225.00

6,710.00

7,490.00

A.W

ithout Concession Assets2001

20022003

20042005

20062007

20082009

20102011

Total Fixed Assets net of Concession Assets (000)3,297.00

3,601.00

3,800.00

4,233.00

5,505.00

6,134.00

201.00

330.00

334.00

290.00

335.00

2 months working capital - operating expenses (000)

-

967

939

780

964

1,129

1,046

1,045

1,091

786

941

Total3,297

4,568

4,739

5,013

6,469

7,263

1,247

1,375

1,425

1,076

1,276

Billed Volume of water in cubic meters in millions291

270

262

258

252

260

285

318

357

375

405

Rate computation for average tariff 12% return on total assets (000)

548

569

602

776

872

150

165

171

129

153

Operating Expenses (000)-

5,799

5,636

4,682

5,783

6,777

6,278

6,269

4,974

4,932

5,833

Total Revenues to achieve 12% return (000)

6,347

6,204

5,284

6,559

7,649

6,428

6,434

5,145

5,061

5,986

Total Revenues earned-

5,402

4,967

3,905

7,228

7,585

7,377

8,245

10,199

11,642

13,323

Overbilling

(945)

(1,238)

(1,379)

669

(63)

949

1,811

5,054

6,581

7,337

Average Tariff per cubic meter-

23.48

23.67

20.50

26.03

29.38

22.57

20.25

14.41

13.51

14.78

RORB-

-8.69%

-14.11%-15.50%

22.34%11.13%

88.08%143.70%

366.80%623.41%

587.07%

B.W

ith Concession Assets2001

20022003

20042005

20062007

20082009

20102011

Total Fixed Assets with Concession Assets (000)9,829

11,635

12,491

13,101

17,402

18,908

17,346

22,567

29,396

36,479

44,922


-

967

939

780

964

1,129

1,046

1,045

1,091

786

941

Total (000)9,829

12,602

13,430

13,881

18,366

20,037

18,392

23,612

30,487

37,265

45,863

Billed Volume of water in cubic meters in millions291

270

262

258

252

260

285

318

357

375

405

Rate computation for average tariff 12% return on total assets (000)

1,179

1,512

1,612

1,666

2,204

2,404

2,207

2,833

3,658

4,472

5,504

Operating Expenses (000)-

5,799

5,636

4,682

5,783

6,777

6,278

6,269

4,974

4,932

5,833

Total Revenues to achieve 12% return (000)

1,179

7,312

7,247

6,348

7,987

9,181

8,485

9,103

8,632

9,404

11,337

Total Revenues earned-

5,402

4,967

3,905

7,228

7,585

7,377

8,245

10,199

11,642

13,323

Overbilling

(1,179)

(1,909)

(2,280)

(2,443)

(759)

(1,596)

(1,108)

(858)

1,567

2,238

1,986

Average Tariff per cubic meter4.05

27.04

27.65

24.63

31.70

35.27

29.80

28.65

24.18

25.11

27.99

Actual tariff charged: Maynilad W

ater Basic

22.47

23.05

25.86

28.29

30.43

All-in32.96

32.05

31.19

37.40

40.80




Certified true copies of the official breakdown of overbilling charges, prepared by GATMAITAN & ASSOCIATES, CERTIFIED PUBLIC

ACCOUNTANTS, is attached hereto as Annex “T”for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.

57. The concessionaires, worse, include amounts corresponding to their respective income taxes in the charges passed on to water consumers. As will be more extensively discussed later herein, these pass-on charges are illegal.

58. To this very day, notwithstanding the mandate for refunds on concession projects, and the directive by no less than the President of the Republic of the Philippines to put on hold all new ventures and loans of MWSS, coupled with clear overbilled amounts charged to water consumers from the East and West Service Areas, there has been no downward adjustment in the tariff schedule.

59. Hence, this Petition.

ISSUES

60. This case presents the following novel issues for resolution by this Honorable Court:

a. Whether the Concession Agreements are unconstitutional and/or void for being ultra vires;

b. Whether the concessionaires are public utilities subject to the rules and requirements set forth by the general public service law, including the 12% profit cap;

c. Whether the Concession Agreements may cause the creation of the Regulatory Office—a public office performing public functions—and source its funding from the concessionaires, which are the very same entities supposed to be regulated;




d. Whether the concessionaires’ Tariff Schedules allow Manila Water and Maynilad, as public utilities, to overcharge the consuming public for water. In particular:

i. Whether the profit restriction in Republic Act No. 6234 applies to Manila Water and Maynilad individually;

ii. Whether the concessionaires 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;

iii. Whether the concessionaires can declare its income taxes as “expenditures” and, consequently, likewise pass these on to the water consumers within their respective Service Areas.

ARGUMENTS

61. Petitioner advances the following arguments in response to the foregoing issues:

a. The Concession Agreements are unconstitutional and/or ultra vires, since these unduly grant to the concessionaires the exercise of governmental powers—even without the benefit of legislation or, at the very least, a franchise for such purpose;

b. The concessionaires are performing public service and are, therefore, governed by the general public service law, are subject to the 12% profit cap;

i. Contrary to their public pronouncements, the concessionaires are public utilities.

ii. Not only are the concessionaires public utilities—they cannot, despite express




provisions in the Concession Agreements to this effect, be characterized as mere “agents” or “contractors”;

iii. Assuming the concessionaires are mere “agents” or “contractors” of MWSS, with more reason should they be barred from overbilling, and passing on illegal charges to, water consumers, since their principal—MWSS—may not do so anyway; and

iv. In any event, public utility or not, the concessionaires may not pass on their income taxes to the water consumers, since income taxes may not be properly characterized as “expenditures”;

c. The Concession Agreements may not, by sheer will of the contracting parties, cause the creation of the Regulatory Office—a public office performing public functions—and even source its funding from the concessionaires, which are the very same entities supposed to be regulated;

i. Only the Legislature and, as declared by the Supreme Court in the case of Louis “Barok” C. Biraogo versus The Philippine Truth Commission,53 the President of the Philippines, in the exercise of his power of control, may create a public office or ad hoc body, respectively;

ii. By providing for the creation of the Regulatory Office, the Concession Agreements had institutionalized an entanglement among MWSS, the Regulatory Office, and the concessionaires—the very subjects of regulation—placing MWSS and the Regulatory Office in a state of regulatory capture;

53 G.R. Nos. 192935 and G.R. No. 193036, 7 December 2010.




iii. In addition, there have been interlocking directors between MWSS and Maynilad, and between MWSS and the NWRB;

d. The concessionaires’ Tariff Schedules cannot legitimately permit Manila Water and Maynilad, as public utilities, to overcharge the consuming public for water.

62. Petitioner shall discuss the foregoing arguments more extensively in seriatim hereunder, thus:

DISCUSSION

A. THE CONCESSION AGREEMENTS ARE UNCONSTITUTIONAL AND/OR ULTRA VIRES.

The Concession Agreements unduly grant to the concessionaires the exercise of governmental powers—even without the benefit of legislation or, at the very least, a franchise for such purpose.

63. Under the Concession Agreements, MWSS—without reference to any constitutional provision or statute—empowered the concessionaires “to apply for and exercise 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 xxx.”54

64. “The right of eminent domain is usually understood to be the ultimate right of the sovereign power to appropriate, not only the public but the private property of all citizens within the territorial sovereignty, to public purpose.”55


55 JOAQUIN G. BERNAS, THE 1987 CONSTITUTION OF THE REPUBLIC OF THE

PHILIPPINES: A COMMENTARY 396-397 [hereinafter “BERNAS”], citing Charles River Bridge v. Warren Bridge, 11 Pet. 420, 641 U.S. 1837.




65. While jurisprudential pronouncements of the Supreme Court show that government entities56 and even private entities57 may exercise the power of eminent domain, the exercise of such power must be preceded an act of the legislature or, at the very least, the issuance of a franchise expressly granting the concessionaires the authority to exercise these powers.

66. In the case at Bench, however, it is through the Concession Agreements that the concessionaires draw their authority to exercise eminent domain and other enumerated powers, despite the absence of any enabling law—a clear case of usurpation of legislative power.

B. THE CONCESSIONAIRES ARE PERFORMING PUBLIC

SERVICE AND ARE, THEREFORE, GOVERNED BY THE GENERAL PUBLIC SERVICE LAW, ARE SUBJECT TO THE 12% PROFIT CAP.

Contrary to their public pronouncements, the concessionaires are public utilities.

67. A public utility is a business or service which is engaged in regularly supplying the public with some commodity or service which is of public consequence and need, such as electricity, gas, water, transportation, or telephone or telegraph service.58

68. It has been held that the true test for determining if a concern is a public utility is whether it has held itself out as ready, able, and willing to serve the public. The term implies a public use of an article, product, or service, carrying with it the duty of the producer or manufacturer, or one attempting to furnish the service,

56 BERNAS, supra note 55, at 398, citing City of Manila v. Chinese

Community of Manila, 40 Phil. 349, 368 (1919).

57 BERNAS, supra note 55, at 398, citing Tenorio v. Manila Railroad Co., 22 Phil. 411, 414 (1912).

58 Gulf States Utilities Co. v. State, Tex.Civ.App., 46 S.W.2d 1018, 1021, cited in BLACKS LAW DICTIONARY 1232 (6th ed. 1990). Hereinafter “BLACK’S LAW DICTIONARY.”




to serve the public and treat all persons alike, without discrimination.59

69. In the case of Iloilo Ice and Cold Storage Co. versus Public Utility Board,60 the Supreme Court had the occasion to define what a public utility is, thus:

The original public utility law, Act No. 2307, in its section 14, 1n speaking of the jurisdiction of the Board of Public Utility Commissioner, and in defining the term “public utility,” failed to include ice, refrigeration, and cold storage plants. This deficiency was, however, remedied by Act No. 2694, enacted in 1917, which amended section 14 of Act No. 2307, to read as follows:

The term “public utility” is hereby defined to include every individual, copartnership, association, corporation or joint stock company, whether domestic or foreign, their lessee, trustees or receivers appointed by any court whatsoever, or any municipality, province or other department of the Government of the Philippine Islands, that now or hereafter may own, operate, manage or control within the Philippine Islands any common carrier, railroad, street railway, traction railway, steamboat or steamship line, small water craft, such as bancas, virais, lorchas, and others, engaged in the transportation of passengers and cargo, line of freight and passenger automobiles, shipyard, marine railway, marine repair shop, ferry, freight or any other car services, public warehouse, public wharf or dock not under the jurisdiction of the Insular Collector of Customs, ice, refrigeration, cold storage, canal, irrigation, express, subway, pipe line, gas, electric light, heat, power, water, oil sewer, telephone, wire or wireless telegraph system, plant or equipment, for public use: Provided, That the Commission or Commissioner shall have no jurisdiction over ice plants, cold storage plants, or any other kind of public utilities operated by the Federal Government exclusively for its own and not for public use. . . .

It will thus be noted that the term “public utility,” in this jurisdiction, includes every individual, copartnership, association,

59 BLACKS LAW DICTIONARY 1232, citing Buder v. First National Bank in St.

Louis, C.C.A.Mo., 16 F.2d 990, 992.

60 44 Phil. 551.




corporation, or joint stock company that now or hereafter may own, operate, manage, or control, within the Philippine Islands, any ice, refrigeration, cold storage system, plant, or equipment, for public use. Particular attention is invited to the last phrase, “for public use.” (Emphasis supplied)

70. Citing the Philippine case of United States versus Tan Piaco,61 which, in turn, cited the American case of Terminal Taxicab Co. versus Kutz,62 the Supreme Court defined “public use,” thus:

“Public use” means the same as “use by the public.” The essential feature of the public use is that it is not confined to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look not only to the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law compels the owner to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge of the character of the use is whether the public may enjoy it by right or only by permission. (Emphasis supplied)

71. Manila Water describes itself as a corporation with the following primary purpose:

To construct, possess, use, operate, manage, maintain, rehabilitate, remove, repair, improve and expand such waterworks, waste waterworks and treatment facilities, including the laying of pipes, mains, valves, aqueducts and other construction works related to the same and the storage, conveyance, treatment, collection and/or distribution of water and/or wastewater, in order to render water supply and sewerage services to the general public; to collect such fees as compensation for such services; and, for such other purposes, to negotiate, enter, make and execute any and all contracts as may be necessary under the circumstances obtaining. (Emphasis supplied)

A faithful reproduction of the Articles of Incorporation of Manila Water is attached hereto as Annex “U” for the perusal and

61 40 Phil. 853 (1920).

62 241 U. S. 252 (1916).




ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.63

72. Maynilad describes itself as a corporation with the following primary purpose:

To carry on the general business of operating, managing, maintaining and rehabilitating waterworks, sewerage, and sanitation systems and services, specifically, for the distribution, supply and sale of potable water; the provision of sewerage and sanitation systems; the maintenance, development, repair and upgrading of water and wastewater facilities including water supply, treatment, distribution of water, sewerage and sanitation, metering and leakage control, customer service and billing; the construction, maintenance and operation of all necessary and convenient buildings, structures, dams, reservoirs, conduits, aqueducts, tunnels, purification plants, water mains, pipes, pumping stations, machineries, sanitary sewerages and other waterworks and the acquisition, lease, occupation or use of land rights of way and easement therein; the provision of allied and ancillary services; and undertaking such other activities incidental to the foregoing. (Emphasis supplied)

A faithful reproduction of the Articles of Incorporation of Maynilad is attached hereto as Annex “V” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.64

73. As regards the nature of the service of water supply, the Supreme Court, in the case of Initiatives for Dialogue and Empowerment Through Alternative Legal Service, Inc. (IDEALS), et al. versus Power Sector Assets & Liabilities Management Corporation (PSALM), et al.,65 expressly declared that “[t]here can be no doubt that the matter of ensuring adequate water supply for domestic use is one of paramount importance to the public.”




65 G.R. No. 192088, 9 October 2012.




74. By undertaking to supply water, under the terms and conditions set forth in their respective Concession Agreements, consistent with the primary purpose indicated in the Articles of Incorporation, each concessionaire holds itself out “as ready, able, and willing to serve the public,” and are charged with the duty of furnishing water service “without discrimination” its Service Area. Coupled with validation through foreign and local jurisprudence, discussed above, there is no question that the concessionaires are public utilities.

Not only are the concessionaires public utilities—they cannot, despite express provisions in the Concession Agreements to this effect, be characterized as mere “agents” or “contractors.”

75. The concessionaires, resorting to a textual reference to their respective Concession Agreements, argue that they are either “agents”66 or “contractors”67 of MWSS. As discussed above, however, the concessionaires are public utilities.

76. Not only are the concessionaires public utilities—they many not be characterized as “agents” or “contractors.” The obligations of each concessionaire militate against a finding of agency.

77. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.68

a. Among the “Transitional Arrangements” between MWSS and the concessionaires under the Concession Agreements is the undertaking of MWSS,

66 Concession Agreements, Fourth Whereas Clause and Clauses 2.1 and

7.2, which characterize each concessionaire as “agent,” while Clause 8.1 (i) refers to the concessionaires’ “agency powers.”

67Concession Agreements, Fourth Whereas Clause and Clause 2.1, which separately refer to each concessionaire as “contractor” of MWSS.

68 NEW CIVIL CODE, art. 1868.




even prior to opening the Concessions for bidding, to identify permanent MWSS employees “who shall be hired” by each concessionaire, thus:

3.1 Designation of Employees

(i) Prior to bidding on the Concession, MWSS shall have provided the concessionaire with a list of MWSS permanent employees (and salary/benefit levels/length of service) who shall be hired by the concessionaire effective on the Commencement Date (each a “concessionaire Employee”) and a list of MWSS permanent employees who shall be hired by the Other Operator effective on the Commencement Date (each an “Other Operator Employee”). xxx xxx xxx69 (Emphasis supplied)

b. If the concessionaires really were mere “agents” or “contractors,” then neither Manila Water nor Maynilad would have been required to assume operational burdens internal to MWSS—anathema to the representative nature of agency. While there is a recognized physical duality in an agency—i.e., the principal is distinct and distinguishable from the agent—there is no legal duality, since the agent merely represents the principal.

c. The Concession Agreements, however, maintain both the physical and legal duality between each concessionaire, on the one hand, and MWSS, on the other. MWSS, Manila Water, and Maynilad are three separate entities—physically and legally—with Manila Water and Maynilad being required to execute contracts of employment with erstwhile MWSS employees.

d. Further, assuming that the delegation of eminent domain and other sovereign powers granted to the concessionaires is valid, the Concession Agreements themselves uniformly provide that either “concessionaire shall be solely responsible for the payment of any

69 Concession Agreements, Clause 3.1 (i).




compensation to third parties occasioned by the exercise of such rights and powers.”70

e. This contradicts the concessionaires’ theory that they are mere agents or contractors of MWSS, since an agent or contractor, by law, is not liable for the obligations of the principal.

f. Also, assuming without admitting that the concessionaires are “agents,” the New Civil Code provides, thus:

Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal.

Every stipulation exempting the agent from the obligation to render an account shall be void.71 (Emphasis supplied)

g. There is nothing in the Concession Agreements that mandates the concessionaires to not only “render an account” of their respective transactions, but also, and more important, “to deliver to the principal (hypothetically, MWSS) whatever [they] may have received by virtue of the agency.”

h. Moreover, both concessionaires had separately applied for, and were granted, income tax holidays. While this particular fact will be accorded more extensive treatment on a different argument later in this Petition, it is submitted that the concessionaires (purported “agents”), and not MWSS (the putative “principal”), were the ones who benefited from the income tax holidays—again, going against the grain of “representation,” which is the underlying concept of agency.


71 NEW CIVIL CODE, art. 1891.




i. The concessionaires, therefore, are not—in fact, never were—agents.

Assuming the concessionaires are mere “agents” or “contractors” of MWSS, with more reason should they be barred from overbilling, and passing on illegal charges to, water consumers, since their principal—MWSS—may not do so anyway.

78. Assuming for the nonce, without however conceding that the concessionaires are “agents” of MWSS, they may logically exercise powers and be bound by obligations that MWSS itself may exercise or submit to, respectively.

79. There is nothing in the MWSS Charter, however, that permits the MWSS itself to pass on its own income tax liabilities or even future expenditures to water consumers.

80. The MWSS Charter, R.A. No. 6273, provides that MWSS shall have the power “[t]o fix periodically water rates and sewerage service fees as the System may deem just and equitable in accordance with the standards outlined in Section 12 [thereof].”72

81. Section 12, in turn, provides that “[t]he rates and fees fixed by the Board of Trustees for the System and by the local governments for the local systems shall be of such magnitude that the System’s 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.”73

82. If the concessionaires really are “agents,” as they publicly claim, then they may not exercise powers that not even their principal—i.e., MWSS—may itself exercise.

In any event, public utility or not, the concessionaires may

72 R.A. 6234, § 3 (h).

73 R.A. 6234, § 12.




not pass on their income taxes to the water consumers, since income taxes may not be properly characterized as “expenditures.”

83. In its Decision74 and Resolution75 in the consolidated cases of Republic of the Philippines v. Manila Electric Company (MERALCO), the Supreme Court ruled that income tax cannot be properly characterized as an “expenditure” that may be passed on by a public utility to the consuming public.

84. In these cases, the Supreme Court ordered MERALCO to refund the amounts corresponding to its income taxes, which it had passed on to the consumers. The refund, however, was grounded on the inherent nature of income taxes and not on the character of the entity liable for such taxes, thus:

Income tax, it should be stressed, is imposed on an individual or entity as a form of excise tax or a tax on the privilege of earning income. In exchange for the protection extended by the State to the taxpayer, the government collects taxes as a source of revenue to finance its activities. Clearly, by its nature, income tax payments of a public utility are not expenses which contribute to or are incurred in connection with the production of profit of a public utility. Income tax should be borne by the taxpayer alone as they are payments made in exchange for benefits received by the taxpayer from the State. No benefit is derived by the customers of a public utility for the taxes paid by such entity and no direct contribution is made by the payment of income tax to the operation of a public utility for purposes of generating revenue or profit. Accordingly, the burden of paying income tax should be [MERALCO’s] alone and should not be shifted to the consumers by including the same in the computation of its operating expenses. (Emphasis supplied)

85. An excise tax is a tax upon the performance, carrying on, or exercise of some right, privilege, activity, calling or occupation.76

74 G.R. Nos. 141314 and G.R. No. 141369, 15 November 2002.

75 G.R. Nos. 141314 and G.R. No. 141369, 9 April 2003.

76 Cordero v. Conda, 18 SCRA 341 (1966), cited in FEDERICO B. MORENO,

PHILIPPINE LAW DICTIONARY 341 (3rd ed. 1988). Hereinafter “PHILIPPINE LAW DICTIONARY.”




The term “excise tax” is synonymous with “privilege tax” and the two are often used interchangeably.77

86. It is erroneous for the concessionaires, therefore, to continuously assert their being mere “agents” or “contractors” to defeat liability for income taxes. To reiterate, it is the nature of income tax itself that militates against being passed on to water consumers.

C. THE CONCESSION AGREEMENTS MAY NOT, BY

SHEER WILL OF THE CONTRACTING PARTIES, CAUSE THE

CREATION OF THE REGULATORY OFFICE—A PUBLIC OFFICE

PERFORMING PUBLIC FUNCTIONS—AND EVEN SOURCE ITS

FUNDING FROM THE CONCESSIONAIRES, WHICH ARE THE VERY SAME ENTITIES SUPPOSED TO BE REGULATED.

Only the Legislature and, as declared by the Supreme Court in the case of Louis “Barok” C. Biraogo versus The Philippine Truth Commission,78 the President of the Philippines, in the exercise of his power of control, may create a public office or ad hoc body, respectively.

87. In his Dissenting Opinion in the case of Nicanor G. Salaysay versus Hon. Fred Ruiz Castro, et al.,79 Supreme Court Justice Roberto Concepcion stated, thus:

The issues would, perhaps, be clearer if we considered at closer range, the nature of a public office, the essence of which is the right, authority and duty, forming part of the sovereign functions of the government, delegated by operation of law. Insofar as public officers are concerned, two other elements are material, namely, (1) title to the office, and (2) authority to exercise its powers and discharge its duties. The former is usually acquired

77 Villanueva v. City of Iloilo, 26 SCRA 587 (1968), cited in PHILIPPINE LAW

DICTIONARY 341.

78 G.R. Nos. 192935 and G.R. No. 193036, 7 December 2010.

79 G.R. No. L-9669, 31 January 1956.




either by appointment or by popular election, although, in some instances, it may be secured by legislative enactment.

xxx xxx xxx.

A public office, however, “is the right, authority and duty, created and conferred by law, by which for a given period either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the government, to be exercised by him for the benefit of the public.” (Emphasis supplied)

88. In Exhibit A of the Concession Agreements, it is clear that the Regulatory Office has both oversight and regulatory functions, including—

a. the monitoring of the awarded Concession Agreements;

b. reviewing and monitoring of water supply and sewerage rates;

c. implementing Extraordinary Price Adjustment provisions;

d. implementing Rate Rebasing provisions;

e. monitoring contracts between the concessionaire and customers for the provision of water and sewerage services;

f. monitoring and enforcing standards of services to customers, and any agreed improvement in these standards, or extensions in the coverage of water supply and sewerage services;

—among other functions.

89. Since the concessionaires, as discussed above, are public utilities performing public service, there is no other conclusion than that the entity tasked to monitor and regulate these concessionaires—i.e., the Regulatory Office—must, itself, be a public office.




90. The Regulatory Office, au contraire, was created by mere contract—a mere “meeting of minds”80 among the parties to the Concession Agreements—There is, however, no law or executive edict creating the Regulatory Office and/or providing for its authority to monitor and regulate the concessionaires.

91. The Regulatory Office, therefore, and by mere contract, is usurping the powers and functions of a public office. This is a clear case of undue delegation of sovereign powers.

By providing for the creation of the Regulatory Office, the Concession Agreements had institutionalized an entanglement among MWSS, the Regulatory Office, and the concessionaires—the very subjects of regulation—placing MWSS and the Regulatory Office in a state of regulatory capture.

There have been interlocking directors between MWSS and Maynilad, and between MWSS and the NWRB.

92. “Regulatory capture” is a theory associated with GEORGE

STIGLER, a Nobel laureate economist. It is the process by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating. Regulatory capture happens when a regulatory agency, formed to act in the public’s interest, eventually acts in ways that benefit the industry it is supposed to be regulating, rather than the public.81

93. The Regulatory Office, to recapitulate—and which, even by sheer nomenclature, is meant to regulate the concessionaires—is a

80 See NEW CIVIL CODE, art. 1305, thus:

A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.

81 See http://www.investopedia.com/terms/r/regulatory-capture.asp.




contractual creation, particularly an initiatory prestation of MWSS, thus:

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 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. (Emphasis supplied)

94. Under the Concession Agreements, the concessionaires “shall pay to MWSS the amount of 50 million Pesos, which MWSS shall use and allocate in accordance with Section 11.2 for the establishment and budget of the Regulatory Office” as a “Concession Fee.”82

95. In fact, based on the funding mechanism provided under the Concession Agreements, the Regulatory Office is completely funded by the concessionaires, thus:

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. (Emphasis supplied)

96. Under the Concession Agreements, the Regulatory Office is mandated to determine—presumably jointly—with the concessionaires whether the Consumer Price Index accurately reflects the rate of inflation in the Philippines. In the event it does not so

82 Concession Agreements, Clause 6.4 (b).




reflect the rate of inflation, the concessionaires and the Regulatory Office may, themselves, select an alternative index, thus:

2.4 Consumer Price Index Adjustments

In the event that the Concessionaire and the Regulatory Office determine that the CPI is for any period not an accurate reflection of the rate of inflation in the Philippines as it relates to this Agreement, the Concessionaire and the Regulatory Office may select an alternative index.83

97. Under the Concession Agreements, MWSS is required to “cooperate” with the concessionaires “in all reasonable ways to facilitate the concessionaire’s performance, thus:

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 Concessionaire’s 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.

98. The Regulatory Office is a creation of the MWSS, which is mandated to “cooperate” with the concessionaires at their request. The concessionaires are funding the Regulatory Office, the very same entity that is supposed to be regulating them.

99. Regulation of the concessionaires, therefore, is an illusion, since, under the regulatory setup, all parties involved—the MWSS, the Regulatory Office, and the Concessionaires—are all entangled.

100. Further, Amendment No. 1 of the Concession Agreements expressly requires annual computation of RORB before any annual water rate adjustment can be recommended by the Regulatory Office and, consequently, approved by the MWSS Board of Trustees.





101. This is to ensure that capital expenditures or assets used in operations as claimed to have been invested by the concessionaires are “efficiently and prudently incurred.”

102. This is also ensure that MWSS assets used in operation are likewise fully accounted for as depreciated and the RORB will not exceed the 12% cap.

103. Further, it is required that if a pre-computation of the RORB after considering all factors needed for its annual RORB computation will exceed the 12% cap in relation to water rate adjustment or water rate increase, the regulator is required to defer or postpone the concessionaires’ proposals in the business plans.

104. Due to the fault, negligence, or intentional omission by the very first Deputy Regulator for Financial Regulation—and now MWSS Chairman of the Board—respondent Alikpala, who is tasked with initiating the RORB determination described above, no RORB computation or determination was ever commenced since that time. This was followed by subsequent Deputy Regulators for Financial Regulation up to the present, resulting in non-determination of the annual RORB.

105. Thus, whatever business plans and water rates were submitted by the concessionaires over the past two rebasing periods were perfunctorily adopted by the MWSS regulators and/or the MWSS Board of Trustees as a collegial decision, ultimately resulting in uncontrolled and unregulated water rate increases—all to the detriment of water consumers.

106. Moreover, there are interlocking directors between MWSS and Maynilad—with OSCAR GARCIA being in the payrolls of both MWSS and Maynilad—and between MWSS and the NWRB—with respondent Alikpala, now MWSS Chairman, being former Executive Director of NWRB.

Faithful reproductions of the Breakdown of Allowances/Other Personnel Benefits of MWSS and Summary of Benefits of Interim Board Members are attached hereto as Annexes “W” and “W-1” for




the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made integral parts hereof.84

107. Therefore, there is nothing that prevents the concessionaires to impose water consumption fees—no matter how arbitrary or exorbitant—since the MWSS is mandated to cooperate with the concessionaires, while the Regulatory Office owes its very creation to the concessionaires it is tasked to oversee and regulate.

D. THE CONCESSIONAIRES’ TARIFF SCHEDULES

CANNOT LEGITIMATELY PERMIT MANILA WATER AND

MAYNILAD, AS PUBLIC UTILITIES, TO OVERCHARGE THE

CONSUMING PUBLIC FOR WATER.

108. In the 2002 Tariff Schedule, MWSS allowed the concessionaires to collect fees for the following projects in advance:

a. Feasibility Study for Laiban Dam;

b. Business Plan by Manila Water for Wawa Dam; and

c. Business Plan by Maynilad for the Putatan Pumping Station.

109. In the 2008 Tariff Schedule, MWSS allowed the concessionaires to collect fees for the following projects in advance:

a. Pinugay Sewerage System in Antipolo City, valued at Php 1,000,000,000.00;

b. Angat Water Irrigation Replacement System, valued at Php 5,700,000,000.00; and

c. Laiban Dam Feasibility Study.






110. Notwithstanding the non-continuance of the Angat Water Irrigation Replacement System and the Laiban Dam Feasibility Study, neither Manila Water nor Maynilad had taken steps to return the money advanced.

111. Under the Concession Agreements, the concessionaires may, during the term of the Concession, recover operating, capital maintenance, and investment expenditures.85 The relevant provision of the Concession Agreement, however, expressly provides that the expenditures that may be recovered are those that have been “efficiently and prudently incurred.” The concessionaires, therefore, have no basis in passing on expenditures that have yet to be incurred or, worse, had already been suspended or abandoned, thus:

9.3.4 General Rates Setting Policy/Rate Rebasing Determination

The maximum rates chargeable by the concessionaire for

water and sewage services hereunder applicable to the period through the Second Rate Rebasing Date (subject to interim adjustments as described in this Article 9) are set out in Schedule 5 to this Agreement. It is the intention of the parties that, from and after the Second Rate Rebasing Date, the rates for water and sewerage services provided by the concessionaire shall be set at level that will permit the concessionaire to recover over the 25-year term of the Concession (net of any grants from third parties and any possible Expiration Payment) operating, capital maintenance and investment expenditures efficiently and prudently incurred, Philippine business taxes and payments corresponding to debt service on the MWSS Loans and concessionaire Loans incurred to finance such expenditures, and to earn a rate of return (referred to herein as the “Appropriate Discount Rate”) on these expenditures for the remaining term of the Concession in line with the rates of return being allowed from time to time to operators of long-term infrastructure concession arrangements in other countries having a credit standing similar to that of the Philippines. The parties further agree that the maximum rates chargeable for such water and sewerage services shall be subject to general adjustment at five-year intervals commencing on the second Rate Rebasing Date; provided that the Regulatory Office may exercise its discretion to make a general adjustment of such rates on the First Rate Rebasing Date, but, if it does not do so, the Regulatory Office shall implement the assumptions set out in paragraph 2 of Exhibit E on the fifth anniversary of the Commencement Date. It is understood that the determination of the appropriate rate of return will be made separately at the time of each generalized rate rebasing.

85 Concession Agreements, Clause 9.3.4.




It is also the intention of the parties that rates be set in such a

way as to provide appropriate efficiency incentives to the concessionaire, with a view toward benefiting both the Customers and the concessionaire.

The Regulatory Office shall determine the Rebasing

Adjustment to be used for the purposes of calculating the Rates Limit for each of the five Charging Years of each Rebasing Period, in accordance with the provisions set forth below. (Emphasis supplied)

112. Worse, and as mentioned earlier, the concessionaires had

individually applied for, and were granted, income tax holidays by the Board of Investments. This means that the concessionaires had no income tax liabilities to declare, “expenditures” or not. If so, then it was highly anomalous for the concessionaires to have passed on income tax liabilities, peddled as “expenditures,” when they were not liable for these anyway.

113. Manila Water, for instance, even requested for a change in the date of commercial operation of its registered activity from August 2000 to January 2000, which the Board of Investments granted, thus:

Under the specific terms and conditions of your registration (Item 4a) pertaining to the grant of Income Tax Holiday:

“Income Tax Holiday for six (6) years from August 2000 or from actual start of commercial operation, whichever comes first but in no case earlier than the date of registration.”

Hence, the Board interposes no objection to the advanced date of commercial operation. Consequently, the reckoning period of your [Income Tax Holiday] will now be moved to this new schedule of commercial operation (i.e., January 2000).

A faithful reproduction of the Letter by the Board of Investments dated 3 January 2000 is attached hereto as Annex “X” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made an integral part hereof.86


known as the “Efficient Use of Paper Rule,” have dispensed with service of




114. Maynilad was granted an Income Tax Holiday from 1 August 2001 to 31 July 2007, which, upon Maynilad’s request, was changed to January 2003 to December 2008. Maynilad had also applied for an Income Tax Holiday Bonus Year, an extension of the Income Tax Holiday availment, which was approved on 22 December 2008, for a period covering 1 January 2009 to 31 December 2009.87

115. Thus, assuming Maynilad may declare its income taxes as “expenditures,” it was nonetheless prohibited from passing these “expenditures” to water consumers within its Service Area.

116. Worst of all, there are expenditures that, logically, are being passed on by the concessionaires to water consumers even when these items are absolutely unrelated to providing water service.

117. Indeed, even items for “entertainment” are declared as expenditures and, presumably, being shouldered by water consumers—even if these expenses for “entertainment,” even by brute logic, have no relation, proximate or remote, to the very purposes for which the concessionaires were formed.88

Faithful reproductions of the Financial Statements of Manila Water for December 31, 2004 and 2003, December 31, 2005 and 2004, December 31, 2006 and 2005, and December 31, 2007 and 2006; and Audited Financial Statements for the years 2008 and 2009, prepared by SGV & CO., are attached hereto as Annexes “Y,” “Y-1,” “Y-2,” “Y-3,” “Y-4,” and “Y-5” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made integral parts hereof.89


87 See Financial Statements from December 31, 2008 and 2007, and Years Ended December 31, 2008, 2007, and 2006, prepared by SGV & CO. for Maynilad, infra, at 50.

88 See Financial Statements from December 31, 2005 and 2004, and Report of Independent Auditors, prepared by SGV & CO. for Maynilad, infra, at 39.





Faithful reproductions of the Financial Statements of Maynilad for December 31, 2004 and 2003, December 31, 2005 and 2004, December 31, 2006 and 2005, December 31, 2007 and 2006, and December 31, 2008 and 2007, prepared by SGV & CO., are attached hereto as Annexes “Z,” “Z-1,” “Z-2,” “Z-3,” and “Z-4” for the perusal and ready reference of this Honorable Court, incorporated herein by reference, and made integral parts hereof.90

118. In view of all the foregoing considerations, there is an urgent necessity for accounting by the concessionaires and, consequently, consistent with the provisions of the New Civil Code on solutio indebiti,91 refund—completely and immediately—the charges overbilled by the concessionaires to the water consumers of their respective Service Areas.

ALLEGATIONS IN SUPPORT OF THE ISSUANCE OF A STATUS QUO ANTE ORDER, TEMPORARY RESTRAINING ORDER

AND/OR WRIT OF PRELIMINARY INJUNCTION

119. Petitioner repleads all the foregoing allegations in support of its prayer for the issuance of a Status Quo Ante, Temporary Restraining Order, and/or a Writ of Preliminary Injunction.

120. The constitutional and legal infirmity of the Concession Agreements is manifest, as these constitute an undue delegation of inherent sovereign powers.

121. The violations against the legally enshrined rights of 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.



91 See NEW CIVIL CODE, art. 2154, thus:

If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.




a. Petitioner’s rights to affordable potable water are violated when Manila Water and Maynilad 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. Petitioner’s rights to affordable potable water are violated when Manila Water and Maynilad are allowed to charge the general public water rates well above the 12% profit cap imposed by Republic Act No. 6234.

122. Thus, the issuance of a Status Quo Ante Order, temporary restraining order, and/or writ of preliminary injunction ordering all respondents to maintain and observe the current state of affairs prior to the implementation of the latest Rate Rebasing Exercise and enjoining all respondents from implementing the same, is warranted.

PRAYER

Wherefore, in view of all the foregoing considerations, petitioners respectfully pray that this Honorable Court:

a. upon filing of this Petition for Certiorari, ISSUE a Temporary Restraining Order, Status Quo Ante Order and/or Writ of Preliminary Injunction against the all respondents, requiring them to maintain and observe the status quo prevailing before the commencement of the 2013 Rate Rebasing Exercises;

b. GIVE DUE COURSE to this Petition;

c. ISSUE an Order, Resolution, or such other appropriate form of adjudication:

i. DECLARING the Concession Agreements dated 21 February 1997 between MWSS, on the one hand, and Manila Water and Maynilad, on the other, to be void for being constitutionally infirm and/or ultra vires; and,




ii. in the alternative, DECLARING the 2013 Tariff Schedule for Manila Water and Maynilad void for being in violation of law;

iii. SETTING ASIDE any ruling of MWSS and/or the Regulatory Office to the contrary;

iv. DIRECTING MWSS to determine anew the appropriate water tariffs in line with the pronouncements made herein;

v. DECLARING Manila Water and Maynilad to be public utilities subject to the rules and regulations of public service laws and the auditing powers of the COA;

vi. ORDERING Manila Water and Maynilad, whether by themselves or through MWSS, to refund to water consumers within their respective Service Areas the following amounts billed, charged, and/or collected from them:

- All amounts in excess of the 12% cap provided in Republic Act No. 6234;

- All amounts representing income taxes of MWSS and/or the concessionaires; and

- All amounts for future and/or abandoned projects; and

c. SET the case at Bench for oral argument at a time, and on a date, most convenient to this Honorable Court.

Petitioners likewise pray for other just and equitable reliefs under the premises.




Respectfully submitted, Makati City for Manila.

5 August 2013.

ATTY. ANDRÉ R. DE JESUS Counsel for Petitioner

1100, 11/F, 88 Corporate Center Sedeño corner Valero Streets, Salcedo Village 1227

Makati City, Metropolitan Manila Republic of the Philippines

Telephone Number: (63 2) 908 2563 Facsimile Number: (63 2) 908 2555

Roll No. 52205 PTR No. 0320496, 7 January 2013, Makati City IBP No. 922294, 7 January 2013, Quezon City

MCLE Certificate of Compliance No. IV-0020674, 13 June 2013 Copy furnished: METROPOLITAN WATERWORKS & SEWERAGE SYSTEM (MWSS) MWSS REGULATORY OFFICE RAMON B. ALIKPALA GERARDO A.I. ESQUIVEL 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 CLEOFAS Public Respondents 4/F, Administration Building, MWSS Complex 489 Katipunan Road, Balara 1105, Quezon City Metropolitan Manila, Republic of the Philippines MANILA WATER COMPANY, INC. (Manila Water) MAYNILAD WATER SERVICES, INC. (Maynilad) Private Respondents 4/F, Administration Building, MWSS Complex 489 Katipunan Road, Balara 1105, Quezon City Metropolitan Manila, Republic of the Philippines




EXPLANATION AS TO SERVICE OF PLEADING (To be disregarded if effected personally)

Copies hereof intended for respondents were served via registered mail, personal service being impracticable due to lack of material time.

ATTY. ANDRE R. DE JESUS




VERIFICATION AND

CERTIFICATION ON NON-FORUM SHOPPING

I, RODOLFO JAVELLANA JR., a Filipino citizen, of legal age, after having been duly sworn in accordance with law, depose and state that:

1. I am the President of WATER FOR ALL REFUND MOVEMENT

(WARM), INC., one of the petitioners in the case at Bench;

2. I have been duly authorized by WARM to cause the commencement of proceedings against MWSS, Manila Water, and Maynilad, among other parties, as gleaned from the Resolution adopted at a special meeting of WARM’s Board of Directors on 16 July 2013, evidenced by the Secretary’s Certificate issued by WARM’s Corporate Secretary, CESAR C. WALICAN, which accompanies this verification;

3. Pursuant to said authority, I caused the preparation of this Petition;

4. I am in a position to verify the truthfulness and correctness of the allegations in the Petition;

5. I have read the contents thereof and the facts stated therein are true and correct of my personal knowledge and/or on the basis of copies of documents and records in my possession;

6. WARM has not commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency, except for a Petition for Writ of Kalikasan docketed as C.A. G.R. Sp. No. 00020, filed with the Court of Appeals on 19 July 2013;

7. I was advised by my counsel that the Rules of Procedure for Environmental Cases, A.M. No. 09-6-8-SC (2010), notably, Section 17, Rule 7 (Writ of Kalikasan) thereof, allow me to file this Petition.

Section 17 provides: “Institution of separate actions.—The filing of a petition for the issuance of the writ of




kalikasan shall not preclude the filing of separate civil, criminal or administrative actions.”

8. To the best of my personal knowledge, and on the basis of records and other documents in my possession, no other action or proceeding is pending in the Supreme Court, the Court of Appeals, or any other tribunal or agency;

9. If I should thereafter learn that a similar action or proceeding has been filed with, or is pending before, the Supreme Court, the Court of Appeals, or any other tribunal or agency, I hereby undertake to report that fact within five days therefrom to this Honorable Court.

RODOLFO B. JAVELLANA JR. Affiant

Subscribed and sworn to before me this 5th day of August, 2013, at Makati City, Metropolitan Manila, Republic of the Philippines, affiant exhibiting to me his Driver’s License, Numbered N01-95-181135, containing his name, photograph, and specimen signature.

ATTY. ANDRE R. DE JESUS Notary Public for Makati City

Appointment No. M-436 My commission expires on 31 December 2014


1100, 11/F, 88 Corporate Center, Sedeño corner Valero Streets, Salcedo Village 1227


Doc. No. 1 Page No. 1 Book No. 54 Series of 2013




VERIFICATION AND CERTIFICATION ON NON-FORUM SHOPPING

I, MARCELO L. TECSON, a Filipino citizen, of legal age, after having been duly sworn in accordance with law, depose and state that:

10. I am one of the petitioners in the case at Bench;

11. I am in a position to verify the truthfulness and correctness of the allegations in the Petition;

12. I have read the contents thereof and the facts stated therein are true and correct of my personal knowledge and/or on the basis of copies of documents and records in my possession;

13. I have not commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency;

14. To the best of my personal knowledge, and on the basis of records and other documents in my possession, no other action or proceeding is pending in the Supreme Court, the Court of Appeals, or any other tribunal or agency;

15. If I should thereafter learn that a similar action or proceeding has been filed with, or is pending before, the Supreme Court, the Court of Appeals, or any other tribunal or agency, I hereby undertake to report that fact within five days therefrom to this Honorable Court.

MARCELO L. TECSON Affiant




Subscribed and sworn to before me this 5th day of August, 2013, at Makati City, Metropolitan Manila, Republic of the Philippines, affiant exhibiting to me his driver’s license, numbered N03-72-016185, containing his name, photograph, and specimen signature.

ATTY. ANDRE R. DE JESUS Notary Public for Makati City

Appointment No. M-436 My commission expires on 31 December 2014


1100, 11/F, 88 Corporate Center, Sedeño corner Valero Streets, Salcedo Village 1227


Doc. No. 2 Page No. 1 Book No. 54 Series of 2013

Warm v. MWSS, et al.

Documents

Transcript of Warm v. MWSS, et al.