CUSTOMERS of Metro Manila’s two water concessionaires will soon see an increase in their bills, the sector’s regulator announced on Thursday.
The Metropolitan Waterworks and Sewerage System (MWSS) Board of Trustees has approved the recommendation of the regulatory office for an adjustment in the rates of Maynilad Water Services, Inc. and Manila Water Co., Inc.
The approved tariff hikes amount to P0.99 per cubic meter (/cu.m.) for Manila Water and P0.06/cu.m. for Maynilad, MWSS Chief Regulator Patrick Lester N. Ty said in a briefing.
The movement reflects the foreign currency differential adjustment (FCDA). Water concessionaires are allowed to recover losses or refund gains through the FCDA tariff mechanism that factors in the movements of the peso against foreign currencies.
The forex gains and losses arise from the payment of concession loans and foreign currency denominated debt. Adjustments are reckoned quarterly.
“The effect for the monthly bill for the customers in Manila Water would be at P5.21 per month for those consuming 10 cu.m. or less. For 20 cu.m. or less, it’s going to be P11.55 per month. And for those consuming 30 cu.m. there will be an adjustment in their water bills of P23.59 per month,” Mr. Ty said.
“For Maynilad, the impact is going to be smaller because it’s just a P0.06 adjustment. So if you’re consuming 10 cu.m. there will be an adjustment of P0.23 per month in your water bill. For 20 cu.m., there will be an increase of P0.86 per month. For those residents consuming 30 cu.m., there will be P1.75 adjustment in your monthly bill,” he added. “There’s a huge discrepancy in the adjustment. The reason behind this is the debt obligation of Maynilad this year is smaller.”
He said debt servicing for Maynilad is at P968 million for this year, compared to Manila Water’s P5.5 billion.
The adjustments will take effect on July 1.
Meanwhile, the Court of Appeals (CA) has denied for lack of merit the petition for review filed by MWSS on the arbitral award granted to Maynilad, the holding firms with shares in the water concessionaire told the Philippine Stock Exchange on Thursday.
In their disclosures, DMCI Holdings, Inc. and Metro Pacific Investments Corp. said the CA in its May 30 decision denied the MWSS petition and affirmed in its entirety the Aug. 30, 2017 ruling of the Regional Trial Court (RTC) of Quezon City on and its decision on Nov. 23.
They quoted Maynilad President Ramoncito S. Fernandez as saying that the decision “reinvigorates investor confidence in the public-private partnership program of the government, and strengthens confidence in the mechanisms for enforcement of arbitral awards. This also ensures the continued implementation of Maynilad’s capital expenditure projects that are intended to benefit further our customers.”
Mr. Ty said his office has yet to receive a copy of the CA decision. “I cannot comment at this time. We haven’t received [a copy] formally. We’re following [it] up with the OGCC (Office of the Government Corporate Counsel) if they got a copy. I still haven’t received any word if they were able to get a copy,” he said in an interview. “I believe that the Maynilad counsel was able to get it two days ago.”
Normally, MWSS has about 10 to 15 days to file a motion for reconsideration (MR) from the time of its receipt of the CA decision, he said.
“Of course, we will exhaust all our legal remedies. And the next legal remedy for this one is to file a motion for reconsideration [with the CA]. Afterwards, there is a possibility that we will go to the Supreme Court, if needed,” he said.
“So we will simply file an MR. After that, if ever it’s again against us, then we will go the Supreme Court, if needed.”
The CA decision is the latest development in the legal row between MWSS and Maynilad that centered on the question of whether the company’s corporate income tax is a recoverable expense, or can be passed on to consumers.
It affirmed the RTC decision that confirmed the Dec. 29, 2014 final award issued in the arbitration between Maynilad and the MWSS, and ordered its immediate implementation by the government agency.
Under Maynilad’s concession agreement with the Philippine government, the company may request tariff rate adjustments based on movements in the Philippine consumer price index, foreign exchange currency differentials, a rate rebasing process scheduled to be conducted every five years and certain extraordinary events.
The final award in 2014 upheld Maynilad’s entitlement to the inclusion of corporate income tax in its tariff, and the 13.41% rebasing adjustment that it proposed for the fourth rate rebasing period covering Jan. 1, 2013 to Dec. 31, 2017.
“While the MWSS may (still) appeal to the Supreme Court the CA Decision affirming the RTC Decision and the RTC Order, this appeal should not stay the immediate implementation of the Final Award,” DMCI and MPIC said in their separate disclosures.
Under its previous leadership, the MWSS regulatory office had said it would await clarification from the Supreme Court before proceeding with the tariff adjustment.
But Maynilad said any tariff adjustments that are not granted, in a timely manner, in full or at all, could have a material adverse effect on the results of its operations and financial condition.
The new rate should result in a 9.8% increase in the 2013 average basic water charge of P31.28 per cubic meter, inclusive of the P1.00 currency exchange rate adjustment, which the MWSS has incorporated into the basic charge.
However, the MWSS refused to implement the final award even after Maynilad’s repeated written demands for implementation.
On Feb. 20, 2015, Maynilad wrote a letter to the Philippine government, through the Department of Finance (DoF), to call on the undertaking which the Republic of the Philippines issued in favor of Maynilad on July 31, 1997 and March 17, 2010.
The undertaking provides, among other things, that the government shall indemnify Maynilad in respect of any loss that caused by a delay by the government or any state agency in implementing any increase in the standard rates.
Following the inaction of the government represented by the DoF in response to Maynilad’s request to compel MWSS to implement the final award, the company wrote again a letter to the Republic on March 9, 2015, through the DoF, to reiterate its demand against the undertaking.
The letters dated Feb. 20 and March 9, 2015 are collectively referred to as Maynilad’s “demand letters.” The company demanded that it be paid, immediately and without further delay, the P3.4 billion in revenue losses that it had sustained as a direct result of the MWSS’ and the regulatory office’s refusal to implement its correct rebasing adjustment.
On March 27, 2015, Maynilad served a notice of arbitration and statement of claim upon the Republic. — Victor V. Saulon