G.R. No. 173044 December 10, 2007
FREEDOM FROM DEBT COALITION, ET AL., Petitioners, vs. METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM (MWSS) AND THE MWSS REGULATORY OFFICE (MWSS-RO), Respondents.

FACTS

Petitioners, a coalition of citizens and party-list organizations, filed a Petition for Certiorari and Prohibition to challenge two resolutions issued by respondents MWSS and its Regulatory Office (MWSS-RO) on July 30, 2004. These resolutions approved an “Extraordinary Price Adjustment” (EPA) for the private concessionaires, Manila Water Company, Inc. and Maynilad Water Services, Inc., which would result in increased water rates. The EPA was premised on a “change in law,” specifically the Supreme Court’s 2003 ruling in Republic v. MERALCO, which held that income tax payments of a public utility are not recoverable as operating expenses. The concessionaires had opposed the EPA, arguing they were not public utilities but mere agents of MWSS, and that their income taxes were considered expenditures under their Concession Agreements.
The legal controversy arose from a prior Commission on Audit (COA) audit, which found that for 1999, Manila Water had a rate of return of 40.92%, far exceeding the 12% cap under the MWSS Charter, while Maynilad’s return was only 7.71%. The MWSS-RO subsequently invoked the MERALCO ruling as a ground for the EPA, ostensibly to adjust the concessionaires’ cash flows. Petitioners contended the resolutions were issued with grave abuse of discretion, arguing the EPA was a veiled attempt to allow the concessionaires to recover income taxes as expenses and to circumvent the 12% rate of return limitation, ultimately burdening consumers with higher rates.

ISSUE

Whether the Supreme Court has jurisdiction over the petition and whether respondents MWSS and MWSS-RO committed grave abuse of discretion in issuing the resolutions approving the Extraordinary Price Adjustment.

RULING

The Supreme Court dismissed the petition for lack of jurisdiction. The Court held that a petition for certiorari under Rule 65 is not the proper remedy to assail the respondents’ resolutions. Certiorari is only available when there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. In this case, the Concession Agreements themselves provided a detailed dispute resolution mechanism. Article 12.1 mandated the parties to resolve disagreements through mutual consultation and negotiation. Furthermore, the agreements stipulated that unresolved disputes could be elevated to an appeals panel and, ultimately, to international arbitration. Petitioners, as consumers claiming to be third-party beneficiaries, were bound to follow this contractual hierarchy of remedies. They failed to exhaust these alternative dispute resolution processes before resorting to a judicial remedy.
The Court found no grave abuse of discretion warranting the extraordinary writ of certiorari. Grave abuse of discretion implies a capricious and whimsical exercise of judgment equivalent to lack of jurisdiction. The respondents’ act of issuing the resolutions, based on their interpretation of the Concession Agreements and the MERALCO ruling, constituted an exercise of their regulatory powers. Any error in the exercise of such power is an error of judgment, correctible by appeal or the contractual dispute mechanisms, not by certiorari. The petition was thus procedurally infirm.