MWSS fines Manila Water P1.134 billion

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Manila Water

By Victor V. Saulon

THE Metropolitan Waterworks and Sewerage System (MWSS) has penalized Manila Water Company, Inc. with a P1.134-billion fine — consisting of a P534.05-million penalty and a P600-million fund for the development of a new water supply source — in connection with the shortage that hit much of its Metro Manila concession area last month, the regulator said in a statement on Wednesday.

MWSS Administrator Reynaldo V. Velasco said by phone that the fine is to be imposed on the Ayala-led water concessionaire for Metro Manila’s east zone, and the amount will be refunded to consumers. “Ibabawas ‘yan effective June,” he said, referring to a deduction to consumers’ monthly water bill.

Manila Water’s share price plunged 3.4% to end at P22.70 apiece on Wednesday, making it one of the session’s 20 biggest losers, according to Philippine Stock Exchange data.

The penalty was announced by MWSS Chairman Franklin J. Demonteverde and Mr. Velasco after the unanimous approval of the recommendation by the agency’s regulatory office, which invoked Article 10.4 of the concession agreement with Manila Water to come up with the appropriate penalty.

MWSS Chief Regulator Patrick Lester N. Ty did not take telephone calls on Wednesday, nor did he respond to queries via mobile phone message.

A resolution on March 26 unanimously adopted by the MWSS board directed the MWSS regulatory office to study the appropriate penalties to be imposed on Manila Water.

Separately, Manila Water President and Chief Executive Officer Ferdinand M. Dela Cruz said the company would abide by the decision of the MWSS board.

“While we are not the root cause for the inadequacy of the raw water supply coming from Angat Dam which we are mandated to treat and distribute, Manila Water, as agent and contractor of water services of MWSS, hold ourselves accountable for our inability to provide our consumers with the usual uninterrupted water service,” he said in a statement.

The penalties are on top of Manila Water’s self-imposed penalty that provided financial relief to its customers affected by the water shortage. The company placed this amount to hover just below P500 million, although the final figure will not be ready before May.

“The water shortage was an eye-opener, and sad to say, the new MWSS Board inherited this lingering problem having assumed office only in February 2017,” Mr. Velasco said in a statement.

“We are on a catch up mode and it’s only this administration under President Rodrigo Duterte that we have seriously put on track a realistic and doable water security road map to ensure adequate water supply.”

The agency said the water crisis that proved costly to the concessionaire “highlighted the lack of strategic preparedness notably on the realistic allocation of water supply to Manila Water, the development of new water supply sources and the much improvement of the Angat-Ipo-La Mesa tunnel and conveyance system.”

Mr. Dela Cruz said the company’s inability to provide its usual 24/7 water supply to some of its consumers was because the allocated water supply from Angat Dam is no longer sufficient for the total demand of east zone consumers.

He said the allocation had been unchanged at 1,600 million liters per day (MLD) since the concession started in 1997 when the customer base was only 3 million people. Company officials previously placed the current requirement at 1,750 MLD, resulting in a deficit of 150 MLD.

“Today, Manila Water serves a population of almost 7 million people whose per capita consumption has significantly increased through over two decades of economic progress in Metro Manila,” he said, adding that the company could not source more from its system losses.

Mr. Dela Cruz was referring to the water lost via transmission, which the company has been able to bring down to 12% from a high of 63% when it took over.

“Manila Water has strongly advocated for many years for the development of new water sources beyond Angat Dam, both to ensure sufficiency of water supply as well as resiliency in case of any calamity around the Angat Dam system. However, the development of new water sources is, under the Concession Agreement, ultimately the responsibility of MWSS,” he said.

The additional penalty of P600 million has also been imposed on Manila Water to be allocated in the funding of a new water source. MWSS did not disclose details of the specific project that will receive the funds.

Mr. Dela Cruz said the company’s recovery efforts had been focused on addressing the needs of customers in elevated and farthest areas of the concession “who are still inconvenienced due to the water supply shortage.”

He said as of April 23, Manila Water had made water available for at least 8 hours, at least at the ground floor level, to 99% of its customer base.

“We have narrowed the gap of our supply deficit which has been reduced to 57 million liters per day from a high of 150 million liters per day through various supply augmentation efforts,” he said.

“We reaffirm our commitment to work closely with MWSS to address the remaining water supply deficit. We continue to seek understanding from our consumers as we fine-tune our operations to spread the still limited water supply across our customer base,” he added.

Article 10.4 of the concession agreement with Manila Water states that its failure to meet any service obligation, which continues for more than 60 days, or 15 days in cases where the failure could adversely affect public health or welfare, after written notice by the MWSS regulatory office constitutes a basis to assess financial penalties against the concessionaire.

The amount of penalties is equivalent to 25% of the costs that, in the reasonable opinion of the regulatory office, the concessionaire will incur in order to meet the service obligation in question.

If the concessionaire fails to meet the service obligation within 180 days, the amount shall be equal to 50% of such costs.

Payment to the regulatory office is due within 30 days after the concessionaire’s receipt of a demand.

Penalties are not regarded as an expenditure.

Hence, they are to be rebated to customers affected by the concessionaire’s failure to meet service obligations in a manner deemed appropriate by the office.