THE Metropolitan Waterworks and Sewerage System (MWSS) is evaluating its options, including returning to negotiations, should the Supreme Court (SC) decide in favor of Metro Manila’s two water concessionaires that their corporate income tax (CIT) is an expense that can be passed on to consumers.
“If they win the case, then they (water concessionaires) can claim CIT,” MWSS Chief Regulator Patrick Lester N. Ty told reporters on Friday when his office announced in a press conference an increase in the rates imposed by the two companies starting next month until end-2022.
“They might ask for an EPA (extraordinary price adjustment) or we can negotiate that it be tackled in the fifth rate rebasing or as an expiration payment,” he said, referring payment for uncollected advances by the end of the water concession in 2037.
On Thursday, the MWSS board had approved a new base rate for east zone concessionaire Manila Water Co., Inc. ranging from P6.22 to P6.50 per cubic meter (/cu.m.) for the fourth five-year regulatory period starting this year to 2022. It will add to the current P24.82/cu.m. average basic water charge imposed by the Ayala-led company.
“We removed the CIT. We also removed some of the expenses that were disallowed,” Mr. Ty said in a phone interview on Thursday.
Earlier this month, MWSS approved a rate of P5.73/cu.m. in the water tariff for Metro Manila’s west zone under Maynilad Water Services, Inc. The rate hike will add to the current average basic water charge of P32.48/cu.m.
Maynilad asked for a rebased rate of P11.04 while Manila Water asked for P8.30.
Mr. Ty said the reason for the wider variance between what Maynilad asked for and what was granted is because the lower courts had sided with the company on the CIT case. MWSS had questioned the decision, leading to the case reaching higher courts, apart from an arbitral panel in Singapore, which ruled in Maynilad’s favor.
The rate increases for both companies will be staggered, with the biggest hike implemented in 2020 and 2021. No rate installment will be imposed in 2019, Mr. Ty said, to soften the impact of other expected inflationary pressures at the start of that year.
For Manila Water, the staggered rate hike will be P1.46 on Oct. 1, 2018; P2.00 on Jan. 1, 2020 and another P2.00 on Jan. 1, 2021; and between P6.22 and P6.50 on Jan. 1, 2022.
Mr. Ty said the MWSS corporate office has yet to approve Manila Water’s proposed new water source for the medium term, thus the “conditional” approval for the range of water rates for 2022.
For Maynilad, the staggered rates for 2018, 2020, 2021 and 2022 are P0.90, P1.95, P1.95, and P0.93, respectively.
Starting next month, its residential consumers using less than 10 cu.m. will see a net increase in their monthly bill of P2.40, while the median rate increase for the 10-to-20 cu.m. consumers will be P6.53. The rate hike for those using more than 20 up to 30 cu.m. will be P13.68.
For Manila Water, the corresponding net increase for the three consumer segments are P5.68, P9.13 and P19.13, respectively.
Mr. Ty said another big factor for the lower granted rebased rates for the water companies was the removal of the concession fees for the construction of the Kaliwa dam, which is supposed provide another water source for the country’s capital aside from Angat dam.
“That expense, should it push through, should be tackled in the fifth rebasing period,” he said.
He said delivery of the project is scheduled in 2023, while repayment of the loans to build it is expected in 2026. He said it would be premature to add the fees in the new rates because of uncertainties, including the source of funding, which is official development assistance (ODA) from China. Financing has yet to be finalized while the awarding of the project to a Chinese company may happen towards the end of the year, he said.
Between this year and 2022, the Supreme Court decision could still result in changes in the water rates, he said.
“It can issue a decision anytime,” Mr. Ty said.
Sought for comment, Manila Water Chief Operating Officer Geodino V. Carpio said in a text message: “We have not yet received the official communication from MWSS so [we] cannot comment yet.”
On the Supreme Court’s final decision, Maynilad Chief Operating Officer Randolph T. Estrellado said in a text message: “As of today, we have not received any decision from the SC about our arbitral award.” — Victor V. Saulon