Water concession agreement should be reviewed

A House committee hearing on the water crisis has revealed serious problems in Metro Manila’s water system.

Metropolitan Waterworks and Sewerage System (MWSS) administrator Reynaldo Velasco says short-term solutions are coming.

Kaliwa Dam, which will supply 600 million liters a day (MLD), will begin construction in July and is expected to be finished in three years.

Wawa Dam in Montalban, Rizal province, will be rehabilitated by a joint venture between Manila Water Co. Inc. and Enrique Razon’s group.

A total of 101 deep wells will be activated by Manila Water for an additional 100 MLD while the Cardona water treatment plant, which can supply 30 MLD, is expected to start operating this month.

Manila Water president Ferdinand de la Cruz has apologized to the public for the shortage and says he is ready to resign if it leads to that.

MWSS chief regulator Patrick Ty was admonished many times for his inconsistent responses on penalties and fines that could be meted on Manila Water for its contract violations.

A painful but unavoidable fact under the concession agreement is that consumers whose taps went dry will still have to make “minimum payments” on their water bills.

Also, the continued collection of sewerage fees was highlighted despite the concessionaires’ failure to deliver promised facilities.

There is an urgent need to review/revise the existing concession agreement on water supply in Metro Manila.

Partylist Rep. Lito Atienza revealed that the agreement was an executive contract in 1997 between President Fidel Ramos and MWSS.

Congress did not have a hand in the agreement which has been in effect for the past 22 years.

Ty’s admission that his office could not impose administrative fines on the concessionaires for any violation is just unbelievable. Penalties are imposed but government decisions are almost always immediately brought to arbitration in Singapore.

I tend to believe that there is a very serious weakness of regulation in the concession contract.

IBON Foundation reported that Manila Water’s water rates increased by a whopping 879 percent from 1997 (P4.02/cu. m.) to the first quarter of 2019 (P39.34/cu. m.).

Maynilad registered an increase of 574 percent in its water rates between 1997 (P7.21/cu. m.) and the first quarter of this year (P48.57/cu. m.).

From 2007 to 2017, Manila Water’s net income increased from P2.4 billion to P5.78 billion. (Last year’s net income was P6.8 billion, up by six percent).

During the same period, Maynilad’s net income went up from P1.38 billion to P6.8 billion.

If IBON’s numbers are accurate, why is this happening? Perhaps this may be the most relevant question even if it should have been asked 22 years ago.

Are Maynilad and Manila Water, both concessionaires, actually “public utility companies?”

This is very important because there is a whale of a difference between a concessionaire and a public utility, specifically on the allowed net income for such companies.

Public utilities like Meralco are restricted to a return of investment (ROI) rate of only 12 percent every year. But the financial numbers are showing that the water concessionaires are making so much more.

For comments and suggestions, please e-mail [email protected].