IDEALS, Inc. vs. PSALM

The sale of a government-owned hydroelectric power plant to a foreign corporation does not violate the Constitution, but the transfer or assignment of water rights to such foreign entity is unconstitutional because the appropriation of water from a natural source is reserved to Filipino citizens and corporations at least 60% of whose capital is owned by Filipinos; the government entity holding the water permit must retain it and merely authorize the foreign operator to use the impounded water.

The Angat Hydro-Electric Power Plant (AHEPP), a 246-megawatt facility located in Norzagaray, Bulacan, forms part of the Angat Complex, which includes the Angat Dam and Reservoir. The complex serves multiple functions: power generation, irrigation, domestic water supply for Metro Manila, and flood control. While NPC owned the main power units, the Metropolitan Waterworks and Sewerage System (MWSS) funded and owned two auxiliary units. The National Irrigation Administration (NIA) also holds water rights for irrigation. Pursuant to the EPIRA, PSALM was mandated to privatize NPC generation assets to liquidate NPC's financial obligations. In 2010, PSALM conducted a public bidding for the AHEPP, restricting the sale to the power components while requiring the winning bidder to operate and maintain the non-power components (the dam and reservoir) under an Operations and Maintenance (O&M) Agreement. Korea Water Resources Corporation (K-Water), a foreign-owned entity, submitted the highest bid.

• Nature of the Asset: The AHEPP consists of 4 main units (200 MW) and 5 auxiliary units (46 MW). The Angat Dam and Reservoir supply 97% of Metro Manila’s water and irrigation for Bulacan and Pampanga. MWSS owns Auxiliary Units 4 and 5, while NPC owns the rest. MWSS, NIA, and NPC hold separate water permits from the National Water Resources Board (NWRB).
• The Privatization Process: PSALM initiated the sale of the AHEPP’s 4 main and 3 auxiliary units (218 MW). The bidding package specified an "AS IS, WHERE IS" basis, required the buyer to operate the non-power components (dam and reservoir), and mandated compliance with the priority of water usage under Philippine law.
• The Bidding Results: Six firms participated. K-Water, a corporation owned by the Republic of South Korea, submitted the highest bid at US$ 440,880,000.00.
• The Agreements: PSALM and K-Water executed an Asset Purchase Agreement (APA) and an Operations and Maintenance (O&M) Agreement. The APA contained a stipulation (Article 2.04) wherein NPC consented to the transfer of its Water Permit to K-Water, subject to Philippine law, and allowed K-Water to appropriate and use water sourced from the Angat Reservoir for power generation.
• The Water Protocol: A draft Memorandum of Agreement on the Angat Water Protocol was finalized to manage water allocation among agencies, but only MWSS and NIA signed it; PSALM and NPC did not sign prior to the filing of the petition.

• Right to Information: Petitioners argued that PSALM gravely abused its discretion by disregarding the people’s right to information. PSALM commenced bidding without releasing critical information such as terms, conditions, and minimum bid price, and refused to divulge significant information regarding the winning bidder.
• Co-ownership: Petitioners maintained that PSALM could not unilaterally sell the AHEPP because MWSS and NIA are co-owners of the Angat Complex. Being an indivisible thing, PSALM had a positive obligation to offer its undivided interest to the other co-owners before selling to an outsider.
• Constitutional Nationality Requirement: Petitioners contended that allowing K-Water to participate in the bidding and awarding the contract to it violated Sec. 2, Art. XII of the Constitution and the Water Code, which limit the appropriation and utilization of water resources to Filipino citizens and corporations at least 60% Filipino-owned.
• Right to Water: Petitioners asserted that the State has an obligation under international and domestic law to protect the human right to water, which requires prioritizing domestic and community use over power generation.

• Procedural Defenses: PSALM argued that certiorari was not the proper remedy because it was not acting as a quasi-judicial tribunal, the petition was rendered moot by the Notice of Award, the case involved a political question, and petitioners lacked standing.
• Transparency: PSALM avowed that it conducted the bidding transparently, posting updates on its website. Non-disclosure of certain information (like the reserve price) was necessary to ensure the optimum bid price, and the denial of IDEALS' request was due to non-compliance with bidding requirements (failure to pay participation fee/execute confidentiality agreement).
• Ownership and Mandate: PSALM refuted co-ownership, asserting that MWSS's contributions did not create a co-ownership regime and that the agencies held separate water rights. PSALM argued that EPIRA mandated the privatization of all NPC assets except those expressly excluded.
• Constitutionality of Foreign Ownership: PSALM cited DOJ Opinions stating that the utilization of water by a hydroelectric power plant does not constitute appropriation of water from its natural source because the water enters the plant from an artificial structure (the dam). Thus, foreign ownership of the power plant is permissible.

• Locus Standi and Mootness: Whether petitioners have legal standing and whether the petition was rendered moot by the issuance of the Notice of Award.
• Right to Information: Whether PSALM violated the petitioners’ constitutional right to information on matters of public concern.
• Privatization Mandate: Whether PSALM was mandated to privatize the AHEPP under EPIRA and whether MWSS has a right to acquire the facility.
• Constitutionality of Water Rights Transfer: Whether the transfer of water rights to a foreign corporation violates Sec. 2, Art. XII of the Constitution and the Water Code.

• Locus Standi and Mootness: Petitioners possess locus standi as citizens invoking the right to information and asserting the constitutional limitation on natural resource utilization, matters of transcendental importance. The petition is not moot because the execution of the deed of absolute sale is pending, and courts will decide cases otherwise moot if there is a grave violation of the Constitution.
• Right to Information: PSALM’s duty to disclose was satisfied by posting information on its website. However, PSALM’s duty to allow access was violated when it merely referred the petitioners' request for the winning bidder's company profile to K-Water’s counsel instead of providing the documents in its possession. PSALM was directed to furnish petitioners with copies of documents pertaining to K-Water.
• Privatization Mandate: Privatization of AHEPP is mandatory under EPIRA. Applying the principle of expressio unius est exclusio alterius, Congress intended to exclude only the Agus and Pulangui complexes from privatization; AHEPP was not excluded. MWSS’s charter does not grant it the power to operate a hydroelectric power plant, and a transfer to MWSS would contravene EPIRA’s objective of liquidating NPC debts through private sector participation.
• Constitutionality of Water Rights Transfer: The sale of the AHEPP to a foreign corporation is valid because the generation of electric power is not a public utility operation and foreign investors are allowed entry into the electric power industry. However, the stipulation in the APA and O&M Agreement consenting to the transfer of NPC’s water permit to K-Water is unconstitutional. Water in the dam remains part of the country’s natural resources subject to State control. Under the Water Code, only Filipino citizens and qualified domestic corporations may be granted water rights. NPC must retain the water permit to ensure State supervision and control over the extraction of water, and merely authorize K-Water to utilize the impounded water for power generation. Section 6(a), Rule 23 of the IRR of EPIRA, insofar as it directs the transfer of water rights, is declared merely directory.

• Expressio unius est exclusio alterius — The express inclusion of one thing in a statute implies the exclusion of all others. Applied to EPIRA Sec. 47, the express exclusion of the Agus and Pulangui complexes from privatization implies that all other NPC generation assets, including AHEPP, are mandated to be privatized.
• Right to Information: Duty to Disclose vs. Duty to Allow Access — The constitutional right to information encompasses two distinct duties. The duty to disclose is mandatory and covers transactions involving public interest, requiring government agencies to publicly post information even without demand. The duty to allow access is broader and requires a specific request from a citizen, but access must be granted to official records relating to official acts and transactions.
• State Ownership of Natural Resources (Jura Regalia) — All waters belong to the State. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may allow the use or development of waters by administrative concession (water permit), but such privilege is limited to Filipino citizens and qualified juridical persons.

• "While the sale of AHEPP to a foreign corporation pursuant to the privatization mandated by the EPIRA did not violate Sec. 2, Art. XII of the 1987 Constitution... the stipulation in the Asset Purchase Agreement and Operations and Maintenance Agreement whereby NPC consents to the transfer of water rights to the foreign buyer, K-Water, contravenes the aforesaid constitutional provision and the Water Code."
• "Appropriation of water, as used in the Water Code refers to the 'acquisition of rights over the use of waters or the taking or diverting of waters from a natural source in the manner and for any purpose allowed by law.' ... a foreign company may not be said to be 'appropriating' our natural resources if it utilizes the waters collected in the dam and converts the same into electricity through artificial devices."
• "Since the NPC remains in control of the operation of the dam by virtue of water rights granted to it... there is no legal impediment to foreign-owned companies undertaking the generation of electric power using waters already appropriated by NPC, the holder of water permit."

• Chavez v. Public Estates Authority — Followed. Established the rule that the right to information includes official information on on-going negotiations before a final contract, provided the information constitutes definite propositions by the government and does not cover recognized exceptions like privileged information.
• La Bugal-B’laan Tribal Association, Inc. v. Ramos — Followed. Cited for the definition of legal standing and the doctrine that the exploration, development, and utilization of natural resources must be under the full control and supervision of the State.
• Manila Prince Hotel v. GSIS — Distinguished. MWSS cited this case to argue that Sec. 2, Art. XII implies a mandatory preference for qualified Filipinos in the grant of rights over national patrimony. The Court distinguished it based on different factual circumstances, noting that the generation sector is open to foreign ownership.

• Section 2, Article XII, 1987 Constitution — Declares that all waters are owned by the State and cannot be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State, and may be undertaken through co-production, joint venture, or production-sharing agreements with Filipino citizens or corporations at least 60% Filipino-owned. Applied to invalidate the transfer of water rights to K-Water, a foreign corporation.
• Presidential Decree No. 1067 (Water Code), Articles 9, 13, and 15 — Defines appropriation as the acquisition of rights over the use of waters from a natural source; requires a water permit for appropriation; and limits the grant of water permits to Filipino citizens and qualified juridical persons. Applied to rule that K-Water cannot hold a water permit.
• Republic Act No. 9136 (EPIRA), Section 47 — Mandates the privatization of NPC generation assets through public bidding, excluding only specific assets (Agus and Pulangui). Applied to uphold the sale of AHEPP and rule that PSALM had no discretion to exclude AHEPP from privatization.

Sereno, C.J., Carpio, Leonardo-De Castro, Brion, Peralta, Bersamin, Del Castillo, Abad, Perez, Mendoza, Reyes, and Perlas-Bernabe, JJ.

• Velasco, Jr., J. — Argued that the entire Asset Purchase Agreement and Operations and Maintenance Agreement should be declared null and void for infringing Sec. 2, Art. XII of the Constitution. The dissent contended that the waters in the Angat Dam remain part of the natural resources of the Philippines because the dam merely temporarily impounds naturally flowing water; the waters have not been "extracted" from their natural source. Consequently, K-Water, as a wholly foreign-owned corporation, is absolutely disqualified from appropriating or utilizing these waters. The dissent rejected the distinction between NPC retaining the water permit and K-Water utilizing the water, arguing that assigning the right to use the water for power generation is functionally an assignment of the water permit itself, which is prohibited by the Constitution and the Water Code.