Freedom From Debt Coalition v. MWSS

FREEDOM FROM DEBT COALITION ET AL, PETITIONERS
VS.
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM (MWSS)
MWSS REGULATORY OFFICE, RESPONDENTS
AND THE
GR no. 173044 December 10, 2007

Sandoval-Gutierrez, J.
SV: a resolution was passed by the Board of Trustees and regulatory office of
MWSS which finds the concessionaires as mere agents and contractors of MWSS
and in effect makes the 12% ceiling of the rate of return as provided for in the
MWSS charter applicable to MWSS and concessionaires and not to each of them.
The petitioners are arguing that this is in violation of consti provisions and would
allow the concessionaires increase their rates beyond the 12% ceiling
SC: unconstitional? But the Petitioners failed to cite any consti provision being
violated by the resolutions. Besides the petition must fail for the SC was not the
proper forum for such petition. The petitioners could have availed of a remedy
before the Public Service commission instead of heading directly to the SC
violating the principle of hierarchy of courts.
1. MWSS is a government corporation created under RA 6234 for the purpose of
owning and/or having jurisdiction, supervision and control over all waterworks and
sewerage systems in Metro Manila, Rizal and Cavite. In 1995 the government
privatized the waterworks and sewerage system of MWSS, Metro Manila was
divided into 2 concession areas, Service area East (awarded to Manila Water
Company, Inc.)and Service area West(awarded to Maynilad Water Services, Inc.).
2. Under the concession agreements, the concessionaires act as contractors to
perform certain functions, and as agents to exercise certain rights and powers for
the operation of the waterworks and sewerage system. Ownership of facilities and
movables remains with MWSS.
3. Art. 9 of the concession Agreements provide that standard rates may be adjusted
from time to time subject to the limitation that the concessionaires rate of net
return shall not exceed 12% per annum
4. The MWSS board of trustees directed COA to conduct a rate audit of
Concessionaires operations for the purpose of making sure that the rate of return
does not exceed 12%. COA submitted 2 reports. These reports show that Maynilad
had a net ROR of 7.71% while Manila water had an ROR of 40.92%.
5. On March 31, 2004 the MWSS regulatory office issued a notice of extraordinary
price adjustment (NEPA) to both concessionaires. It argued that grounds for
Extraordinary price adjustment (GEPA) have occurred consisting of change in law,
government regulation, rule or order or interpretation thereof, that affects or is
likely to affect the Cash Flow of the concessionaires.
a. Said change in law, rule or interpretation thereof was brought about by the
resolution on Republic v. Manila Electric Company where it was held that
income tax payments of a utility are not expenses which contribute to or are
incurred in connection with the production of profit of a public utility
6. The 2 concessionaires opposed the NEPA on the following grounds
a. They are not public utilities but mere agents and contractors
b. Their income tax payments are considered expenditures under the
agreements
c. The MWSS regulatory office agreed to a Rate Rebasing in 2002 where
income tax payments as expenditures

d. Premise of the GEPA is that the concessionaires are public utilities
e. COA conducted the audit as if they are public utilities when they maintain
that they are not
f. The case Republic v. Meralco does not involve the GEPA contemplated in the
Concessionaire agreement (change in law, rule or interpretation thereof)
7. 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 2 to find
a mutually acceptable resolution.
a. The TWG submitted its report finding that the concessionaires are mere
agents and contractors and that MWSS retained its status as a public utility.
Also it found that the MEralco Ruling has no relevance to the
concessionaires situation.
8. On July 2004, the MWSS Regulatory Office issued the assailed Reso no. 04-006-CA
which approved the findings of the TWG.
a. RO shall treat the Concessionaires as mere agents and contractors of MWSS
which is and still remains to be the Public Utility. The ruling in Meralco is not
applicable to the Concessionaires.
b. That the 12% ceiling for rate of return calculation shall be applicable to the
entire waterworks system including both the income and assets held
respectively by the concessionaires and MWSS
c. MWSS and its Concessionaires shall ensure that actual tariff rates as
adjusted by Article 9.1 of the Concessionaire Agreement 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.
9. On the same day MWSS Board of Trustees Reso no. 2004-201 approved the
Regulatory office Resolution no 04-006-CA
10.The petitioners1 filed the present petition for Certiorari and Prohibition (with prayer
for the issuance of a temporary restraining order and a writ of preliminary
injunction) assailing the Resolution of MWSS Board of trustees (Reso no. 2004-201)
and MWSS Regulatory office (Reso no. 04-006-CA). That in issuing said resolutions
the board of trustees and the regulatory office acted with grave abuse of discretion
amounting to lack or in excess of jurisdiction since the resolutions had the effect of
excluding the rates set by such concessionaires from the limitation in Sec. 12 of
RA6234 (MWSS charter) which will have the effect of increasing the rates that can
be charged against the subscriers
Issue/s:
1. WON the resolutions are constitutional
1. The petition must fail.
First, the petitioners failed to resort to the appropriate remedy. Under sec. 12 of the
MWSS charter it was the defunct Public Service Commission which had the exclusive
1 FREEDOM FROM DEBT COALITION, AKBAYAN CITIZENS ACTION PARTY, ALLIANCE OF PROGRESSIVE LABOR,
MARIO JOYO AGUJA, ANA THERESIA HONTIVEROS-BARAQUEL, RENATO B. MAGTUBO, EMMANUEL JOEL J.
VILLANUEVA, EDUARDO C. ZIALCITA, MA. THERESA DIOKNO-PASCUAL, MARY ANN B. MANAHAN AND PATROCINIO
JUDE ESGUERRA III,
original jurisdiction over all cases contesting the rates or fees of water and sewerage
services. They cannot avail of certiorari as a substitute for that plain and speedy
recourse. Writ of certiorari and prohibition may be availed of only when there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary course of law
Second, even if the petition is allowed, it failed to implead the 2 concessionaires who are
indispensible parties (those who have such interest in teh controversy that a final
adjudication of the case would certainly affect their rights, so that the court cannot
proceed without them)
Third, Hierarchy of courts bars this petition. Even if the SC has concurrent original
jurisdiction with the RTC and the CA in the issuance of the extraordinary writ of certiorari
and prohibition, this does not mean that the petitioners have the complete liberty or
discretion to file their petition in any of these courts.
Also the petition raises issues of fact which the SC cannot rule on. The argument of the
petitioners that the resolutions could authorize the increase of water rates beyond 12% is
purely speculative and requires a very complicated and technical computation of the
current rate of return.
The petitioners argue that the resolutions are in flagrant violation of the Consti and
statutory prohibitions, but they did not cite any consti provision being violated.
Santiago v. Vasquez, et al: the practice of disregarding the hierarchy of courts in our
judicial system by seeking relief directly from the SC must be stopped. It does not only
waste precious time but also delays the adjudication of the case when such cases are
remanded to the proper forum. The SC will not entertain direct resort to it unless the
redress desired cannot be obtained in the appropriate courts or where exceptional and
compelling circumstances justify availment of a remedy within and calling for the exercise
of the SCs primary jurisdiction
Justin Benedict A. Moreto

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FREEDOM FROM DEBT COALITION ET AL, PETITIONERS

GR no. 173044 December 10, 2007

income tax payments as expenditures

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