SC declares Manila Water, Maynilad as public utilities

The Supreme Court has ruled that Manila Water Co. and Maynilad Water Services Inc. are public utilities, which prohibits them from including as part of their operating expenses their corporate income taxes.

“We rule that Manila Water and Maynilad are public utilities,” the high court said in a 102-page decision.

“A public utility is a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service,” it added.

The decision, penned by Associate Justice Marvic Leonen and concurred in by the magistrates, was in response to the petition earlier filed by former Bayan Muna party-list representatives Neri Colmenares and Carlos Zarate.

Sought for comment, Maynilad said it already accepted its status as a public utility when it signed the Revised Concession Agreement with the  Metropolitan Waterworks and Sewerage System (MWSS) earlier this month and when it applied for and was granted a congressional franchise.

"The [SC] ruling merely affirms that," Maynilad said. "Our existing tariff does not include past or future income taxes; this principle has already been established in our past rate rebasing exercises."

Manila Water, for its part, said it has already excluded corporate income tax as part of its operating expenses since 2013.

In their petition, Colmenares and Zarate claimed that the two water firms had been including corporate income taxes in their recoverable operating expenses, which jacked up the price of water through the years.

“In sum, Manila Water and  Maynilad may not recover its corporate income taxes as operating expenses during the lifetime of the concession agreements considering that they are public utilities. Even assuming that they are not public utilities, they cannot recover income taxes because they are not business taxes under Philippine law,” it said.

Leonen said that “allowing Maynilad to include its corporate income taxes in the rates chargeable to water consumers - taxes which, to repeat, do not inure to the benefit of water consumers - will result not only in unjust but also inequitable rates.”

“A large segment of the water consuming public will be made to pay for something that has no direct benefit to them, while some will enjoy water services without shouldering the same burden. This cannot be allowed,” he added.

In a separate statement, Bayan Muna chairperson Colmenares and Bayan Muna executive vice president Zarate said that while the SC decision is a victory, it is still short of serving justice since it did not provide for the refund of charges.

"We raised [in our petition] that both water utilities are public utilities and thus prohibited from charging the public their corporate income tax. The rates they imposed since 1997, and allowed by the MWSS, charges corporate income tax on us. It’s about time that this unjust imposition is stopped once and for all," Colmenares said.

"While we are glad that the Supreme Court declared Maynilad and Manila Water as public utilities and therefore regulated as such, we are dismayed that the decision did not allow us to demand a refund of all the corporate income tax and other overcharges imposed on us through the years," Colmenares added.

The Bayan Muna officers also asked MWSS to consider the SC decision and eliminate any unjust impositions of water fees on the public now and in the future.

"The people are suffering under extremely high prices and low wages, and any lowering of water rates would be a big help to consumers, especially the poor. The people should not be made to pay merely because previous MWSS administrations allowed the charging of income tax on us," Zarate pointed out.

"Despite our win in the main portion of the decision, we are studying if we are going to file a Motion for Reconsideration at least on this aspect. The billions of pesos in refunds would help the people a lot especially in the midst of rising prices and low wages," Zarate added.  —with Ted Cordero and Llanesca T. Panti/LDF/KBK/VAL, GMA Integrated News