Officials of the Metropolitan Waterworks and Sewerage System (MWSS) committed grave violation of existing laws and jurisprudence on public utilities when they declared that the two Metro Manila water concessionaires are mere agents and contractors, an advocacy group revealed today.

Blue Drop Campaigners of the Freedom from Debt Coalition (FDC) said that the MWSS Board of Trustees (MWSS BOT) and officials of the Regulatory Office (RO) utterly disregarded the provisions on public utilities of the Public Service Act and the legal opinion of the Office of the Government Corporate Counsel (OGCC) verifying the two private companies as public utilities by themselves.

“The Public Service Act or Commonwealth Act 146 explicitly states that water supply and sewerage services are included in the list of public services. Several decisions of the Supreme Court on related cases confirm this,” said FDC vice-president Francis Isaac.

He added that even the MWSS-RO’s Technical Regulation Administrator refused to endorse the July 2004 MWSS resolution because it was in conflict with existing legal opinions.

“Deputy Administrator Cristeto Dinopol was obviously referring to the OGCC Opinion No. 125 dated 22 June 2000 that explicitly declared Maynilad and Manila Water as public utilities. Even the Regulatory Office, in its report dated 31 May 2004, opined that Manila Water is, by itself, a public utility,” explained Isaac.

FDC noted that it is puzzling why the MWSS Regulatory Office who initially sided with the arguments presented by the OGCC has been very quiet on their earlier pronouncements.

“The question now is why the MWSS officials, both BOT and RO, overturned two strong legal positions. Up to now, they have been very silent on this issue. These officials owe the public an explanation”, Isaac further added.

To make matters worse, last June 1, 2005, Government Corporate Counsel Agnes Devanadera issued a memorandum to the MWSS BOT asserting that the Joint TWG report has legal basis to conclude that the concessionaires are mere agents and contractors of the MWSS, which is the public utility.

“Considering that her memo basically contested the OGCC’s previous declaration, why then did Counsel Devanadera issue a mere memorandum instead of an official OGCC opinion?” Isaac asked.

“It seems that Ms. Devanadera herself was not certain on what position to take; thus she just handed out a rather ambiguous memo instead of an authoritative official OGCC opinion. This is disturbing since this legal issue has far-reaching implications to water consumers in Metro Manila,” he cautioned.

According to FDC, the MWSS decision declaring the water concessionaires are mere agents and contractors poses three negative effects on the public:
  • Ayala-owned Manila Water (servicing the East Zone portion) and mismanaged Maynilad (West Zone concessionaire) are earning more than they should have been allowed under the 12 percent limitation on profit margin of public utilities. This cap on rate of return is stated under Section 12 of the MWSS Charter. The impact of this can be easily seen in Manila Water that would walk away with P281 million. This is the monetary equivalent of the 28.92% rate on return base (RORB) it incurred in excess of the allowable 12% for public utilities for the year 1999 alone.
  • The concessionaries are being allowed to pass on their corporate income taxes oo their consumers. This means that Manila Water and Maynilad add P1.55 and P4.15, respectively, per cubic meter of water to unwitting costumers Had the MWSS BOT and RO stood by what the law prescribed, water rates in Metro Manila should have been reduced.
  • Lastly, having been stripped of their public utility character, the two water utilities may invoke this in refusing to extend any service to anyone within their coverage area.
FDC vowed to hold a series of protest actions on this issue and disclosed its plan to file a case at the Supreme Court challenging the shaky position taken by MWSS officials.

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