Freedom From Debt Coalition v. MWSS (G.R. No. 173044)


Respondent MWSS entered into Concession Agreements with the Manila Water Company, Inc. and Maynilad Water Services, Inc. (the concessionaires), the latter acting as contractors to perform certain functions, and as agents to exercise certain rights and powers for the operation of the waterworks and sewerage system. As consideration for the performance of their obligations, the concessionaires are empowered to charge and collect water and sewerage services based on standard rates provided that their net of return shall not exceed 12% per annum. A notice to both concessionaires that their cash flow is likely to be affected by the change in law or government regulation, rule or order prompted the creation of the Technical Working Group. The MWSS Regulatory Office approved and adopted the TWG findings and recommendations that the concessionaires are merely agents and contractors, not public utilities. Petitioners allege that the finding by respondents that the concessionaires are not public utilities, has the effect of excluding the rates set by such concessionaires from the limitation in the MWSS Charter and that in turn, will have the effect of increasing the rates that can be charged against them and the subscribers to the water service provided by the concessionaires.


Whether or not concessionaires herein can be considered public utilities.

Ruling: NO.

In determining whether the concessionaires are public utilities or mere agents of MWSS, there must be an examination of the intention of MWSS and the concessionaires at the time of the bidding process, negotiation, and execution of the Concession Agreements. Certainly, this matter is a factual issue requiring presentation and evaluation of evidence such as bidding documents, memoranda, and the testimonies of the participants of the bidding and contract negotiations.

The MWSS Board of Trustees created a Technical Working Group (TWG) and its report found that the: (1) 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; (2) it is the MWSS that has the legislative franchise under its Charter, while the concessionaires do not have a franchise: (3) in its operation, the MWSS contracted the services of the concessionaires to perform certain functions and authorized them, by way of agency, to exercise certain rights in performing their obligations; (4) 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; and (5) based on the framework of the Concession Agreements the MERALCO ruling has no relevance to the concessionaires’ situation.

*MWSS being a public utility must be the one reviewed by the COA and not herein concessionaires.


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