Granting Manila Water Company, Inc. a Franchise to Establish, Operate, and Maintain the Waterworks and Sewerage System in the East Zone Service Area of Metro Manila and Province of Rizal

Summary of Republic Act No. 11601

Nature and Scope of Franchise (Section 1):
- Grants Manila Water Company, Inc. (the grantee) a franchise to establish, operate, and maintain a waterworks and sewerage system in the East Zone Service Area of Metro Manila and Province of Rizal.
- The grantee shall ensure an uninterrupted and adequate supply and distribution of potable water for domestic, commercial, and other purposes.
- The grantee shall establish and maintain a sewerage system in the franchise area.

Definition of Terms (Section 2):
- Concession Agreement: The agreement between the grantee and MWSS, including amendments.
- Franchise Area: The Service Area East as defined in the Concession Agreement, including specific cities and municipalities.
- Regulatory Office: The MWSS Regulatory Office or its legal successor.

Rights and Privileges (Section 3):
- The grantee shall establish, manage, operate, repair, rehabilitate, expand, and improve the waterworks and sewerage system in the Franchise Area.
- The grantee shall have the right to bill and collect fees from end-users for water supply and sewerage services.
- The grantee shall have the rights and privileges to:
    - Develop, finance, construct, install, maintain, and operate water sources, treatment plants, and distribution facilities. (Section 3a)
    - Recover, supply, distribute, and reuse treated and grey water. (Section 3b)
    - Finance, construct, install, maintain, and operate sewerage systems. (Section 3c)
    - Purify water from various sources with approval. (Section 3d)
    - Construct works across public places, streets, etc., with restoration. (Section 3e)
    - Disconnect water supply for non-payment or pilferage. (Section 3f)

Manner of Operation (Section 4):
- The grantee shall operate and maintain the waterworks and sewerage systems in accordance with industry standards and relevant laws.
- The grantee shall comply with resolutions, issuances, and standards set by the Regulatory Office and other government agencies.
- The grantee shall manage the La Mesa Dam and Reservoir with MWSS approval.
- The grantee shall modify, improve, and change the systems as required by the Regulatory Office or authorized government agency.
- The grantee shall promote water conservation, establish water impounding facilities, consider wastewater reuse, and adopt waste-to-energy technology.

Certificate of Public Convenience and Necessity (Section 5):
- The Concession Agreement shall serve as the certificate of public convenience and necessity, license, or permit for the grantee's operations.
- The Concession Agreement shall remain valid unless terminated, invalidated, or modified as provided in the Act.
- MWSS may approve the extension of the Concession Agreement's term up to the franchise term, upon application by the grantee.
- The grantee shall apply for a new certificate if a new regulatory framework is established, and shall have the right to match the highest compliant bid if MWSS assets are privatized.

Excavation and Restoration Works (Section 6):
- The grantee may make excavations or lay pipes in public places with prior approval from DPWH, MMDA, or LGUs.
- The grantee shall repair or replace any public place disturbed by its works in accordance with standards set by DPWH, MMDA, or LGUs.
- If the grantee fails to repair or replace after a 10-day notice, the concerned authority may do so and charge the grantee double the cost.

Responsibility to the Public (Section 7):
- The grantee shall conform to the ethics of honest enterprise and provide prudent, efficient, and satisfactory services.
- The grantee shall modify, improve, or change its facilities as required by the Regulatory Office for efficient and reliable service at reasonable costs.
- The grantee shall charge reasonable and just fees in accordance with Section 8.
- The grantee shall comply with environmental and sustainability standards, and work with LGUs for safe and inclusive development.
- The grantee shall comply with obligations under this franchise, relevant laws, jurisprudence, and the Concession Agreement, including obtaining free and prior informed consent (FPIC) when required.
- The grantee shall institute mechanisms for consultation with stakeholders.

Setting Tariffs, Rates and Other Charges (Section 8):
- The Regulatory Office, with MWSS Board approval, shall establish fair and reasonable tariffs, rates, and charges to ensure economic viability and fair return on investments.
- Tariffs, rates, and charges shall be based on a rate-setting methodology considering various factors, including reasonable costs, efficiency, willingness to pay, equity, and administrative simplicity.
- Tariffs, rates, and charges set by the Regulatory Office and approved by MWSS Board shall be presumed valid and reasonable unless declared otherwise.

Protection of Consumer Interests (Section 9):
- The grantee shall establish a consumer desk to handle complaints and ensure adequate protection of consumer interests.
- The grantee shall act with dispatch on all complaints.
- The grantee shall ensure minimal service interruptions and observe standards imposed by the Regulatory Office.

Election of Independent Directors (Section 10):
- The grantee's Board of Directors shall have at least 20% independent directors, elected in accordance with the Revised Corporation Code and other rules.
- Independent directors shall have at least 3 years of management or supervisory experience in relevant fields.

Right of the Government (Section 11):
- The President of the Philippines reserves the special right to temporarily take over and operate the grantee's waterworks and sewerage system in times of war, public peril, calamity, emergency, or disturbance of peace and order, upon due compensation.

Right of Eminent Domain (Section 12):
- The grantee is authorized to exercise the power of eminent domain as reasonably necessary for the efficient establishment, improvement, and operation of services.
- The grantee may acquire private property necessary for the realization of the franchise's purposes, including pipelines, buildings, infrastructure, machineries, and equipment, through expropriation proceedings and payment of just compensation.

Term of the Franchise (Section 13):
- The franchise shall be for a term of 25 years from the effectivity of this Act, unless sooner cancelled or revoked by Congress when public interest requires or the grantee fails to reasonably comply with regulatory standards.
- The franchise shall be deemed ipso facto revoked if the grantee fails to operate continuously for 2 years or in case of default under the Concession Agreement.

Acceptance and Compliance (Section 14):
- The grantee shall give written acceptance of the franchise to Congress within 60 days from the effectivity of this Act.
- Non-acceptance shall render the franchise void.

Warranty in Favor of National and Local Governments (Section 15):
- The grantee shall hold the national, provincial, city, and municipal governments free from all claims, liabilities, demands, or actions arising from accidents causing injury or damage during construction or operation.

Commitment to Provide Employment Opportunities (Section 16):
- The grantee shall create employment opportunities and accept on-the-job trainees, prioritizing residents of the place where it operates.
- The grantee shall comply with applicable labor standards and allowance entitlement.
- The employment opportunities created shall be reflected in the General Information Sheet submitted to the SEC annually.

Liability for Damages (Section 17):
- The grantee shall be liable for any injury to persons and damage to property caused by any accident arising from defective construction or neglect to keep its facilities in safe condition.

Sale, Lease, Transfer, Grant of Usufruct, or Assignment of Franchise (Section 18):
- The grantee shall not sell, lease, transfer, grant the usufruct of, or assign the franchise or rights and privileges acquired thereunder to any person, firm, company, corporation, or other entity without prior approval of Congress, except for certain transactions related to raising capital or financing.
- The grantee shall inform Congress of any such transaction within 60 days after completion.
- Failure to report shall render the franchise ipso facto revoked.
- Any person or entity to which the franchise is sold, transferred, or assigned shall be subject to the same conditions, terms, restrictions, and limitations.

Dispersal of Ownership (Section 19):
- The grantee, a publicly listed corporation, shall maintain its listing in the Philippine Stock Exchange and comply with its minimum public float requirement during the term of the franchise.
- Non-compliance shall render the franchise ipso facto revoked.

Information Dissemination (Section 20):
- An information dissemination campaign regarding the grantee's public services, operations, and general provisions of the franchise, including its term, shall be made known to all end-users in the Franchise Area.

Reportorial Requirement (Section 21):
- The grantee shall submit an annual report on its compliance with the franchise terms and conditions and its operations to Congress on or before April 30 of every year during the franchise term.
- The annual report shall include updates on business development, operation, and expansion; audited financial statements; latest GIS; certification from the Regulatory Office; and an update on the minimum public float.
- The grantee shall submit a completion plan for water, sewerage, and sanitation projects until 2037, with periodic five-year targets, to the Regulatory Office and Congress.
- The Regulatory Office shall conduct a comprehensive assessment of the grantee's operations and compliance every five years and submit a report to Congress.

Fine (Section 22):
- Failure to submit the requisite annual report to Congress shall be penalized by a fine of One million pesos (P1,000,000.00) for each working day of non-compliance, remitted to the Bureau of the Treasury.

Tax Provision (Section 23):
- The grantee shall be liable to pay the same taxes on real estate, buildings, and personal property as other persons or corporations required by law.
- The grantee shall continue to be liable for income taxes payable under the National Internal Revenue Code, which shall not be passed on to consumers.

Equality Clause (Section 24):
- Any advantage, favor, privilege, exemption, or immunity granted under existing or future franchises for water distribution utilities, upon prior review and approval of Congress, shall become part of this franchise and be accorded to the grantee, except for provisions concerning territorial coverage, term, or type of service.

Applicability of Existing Laws (Section 25):
- The grantee shall comply with and be subject to the provisions of the Public Service Act and other pertinent laws relating to the operation of its business.

Repealability and Non-exclusivity Clause (Section 26):
- This franchise shall be subject to amendment, alteration, or repeal by Congress when public interest so requires and shall not be interpreted as an exclusive grant of the privileges provided.

Separability Clause (Section 27):
- If any section or provision of this Act is held invalid, all other provisions not affected shall remain valid.

Repealing Clause (Section 28):
- All laws, decrees, orders, resolutions, instructions, rules and regulations, and other issuances or parts thereof inconsistent with this Act are hereby repealed, amended, or modified accordingly.

Effectivity (Section 29):
- This Act shall take effect 15 days after its publication in the Official Gazette or in any newspaper of general circulation.