Maynilad wins P5.73/cu.m. tariff hike

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MAYNILAD Water Services, Inc. has obtained an increase of P5.73 per cubic meter (cu. m.) in water tariffs for Metro Manila’s west zone, which the company is offering to impose on a staggered basis.

In a disclosure to the stock exchange, the water concessionaire’s listed shareholders Metro Pacific Investments Corp. and DMCI Holdings, Inc. said Metropolitan Waterworks and Sewerage System (MWSS) approved Maynilad’s rate hike for the fifth rate rebasing period, which covers 2018 to 2022.

“To mitigate the impact of the tariff increase on its customers, Maynilad offered to stagger its implementation over a four-year period,” the listed companies said.

The start dates and the staggered rate increases are as follows: Oct. 1, P0.90; Jan. 1, 2020, P1.95; Jan. 1, 2021, P1.95; and Jan. 1, 2022, P0.93. The current average basic water charge is P32.48 per cu.m.

MWSS Chief Regulator Patrick Lester N. Ty said Maynilad asked for P11.04 percu.m. but the agency had to remove the corporate income tax (CIT) and some expenses from the computation.

“We removed the CIT that’s why we were able to bring it down further,” he said in a phone interview.

“The total increase would have been smaller but that would mean a ‘one time-big time’ rate hike in October,” he added. “Instead of that, we staggered it but there’s an issue about the cost of money involved.”

The listed companies noted that the approved tariff increase did not include Maynilad’s corporate income tax, which an appeals panel upheld in Maynilad’s favor in a final award dated Dec. 29, 2014 in its arbitration with MWSS.

“Neither does the tariff increase reflect the compensation that Maynilad is entitled to claim from the Republic of the Philippines… pursuant to Maynilad’s call on the Republic’s letters of undertaking which was upheld in an international arbitration between Maynilad and the Republic,” they added.

“While Maynilad has agreed to implement a partial (excluding the CIT) and staggered increase, Maynilad has indicated that it would exercise all legal remedies available to it to preserve its entitlement to the CIT,” they said.

Mr. Ty said the reason for the exclusion of the CIT, including the computation of foregone revenue, is because these are the subject of pending cases at the Supreme Court.

“There won’t be any effect or slow down in any of the capex [capital expenditure projects] of Maynilad but we basically asked them to remove the Kaliwa [dam] concession fees and just asked them to consider that in the next rebasing,” he said.

Kaliwa Dam is a proposed project giving Metro Manila another source of water aside from the Angat dam. The government has yet to finalize the funding source for the project.

Mr. Ty also said that some of Maynilad’s operating expenses were removed to arrive at the final rate.

Maynilad is the agent and contractor of MWSS for the west zone of the greater Manila area. It serves certain portions of Manila and Quezon City, as well as parts of Makati City.

Separately, the MWSS regulatory office approved an increase in Maynilad’s foreign currency differential adjustment (FCDA) to P0.37 per cu.m. from P0.26 for the fourth quarter of 2018.

For Manila Water Co., Inc., the agency approved an FCDA decrease to P1.56 per cu.m. from P1.58. The rate hike will start in October.

The adjustment was based on an exchange rate of P53.43 to the dollar, and P0.48 to the yen.

Mr. Ty said the reason for Manila Water’s FCDA decrease is its loan mix of 30% in dollars and 70% in yen. For Maynilad that mix is 92% and 8%, in favor of the dollar.

“The US dollar appreciated vis-a-vis the peso while the yen depreciated but minimally,” he said.

Maynilad residential customers using 10 cu.m. or less can expect an increase of P0.35 per month in their water bills. The corresponding increase for those consuming 20 cu.m. and 30 cu.m. are P1.31 per month and P2.68 per month, respectively.

For Manila Water customers, the decrease will be P0.12 for those using 10 cu.m. or less. The corresponding increase for those consuming 20 cu.m. and 30 cu.m. are P0.27 per month and P0.55 per month, respectively.

FCDA is a tariff mechanism that accounts for foreign exchange losses or gains arising from the payment of concession loans and foreign currency-denominated borrowings of the MWSS. It also factors in the loans of the concessionaires for service expansion and improvement of its services. — Victor V. Saulon