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Manila Water to pay P1.13B in penalties

/ 05:30 AM April 25, 2019

MANILA, Philippines — Cracking the whip, the government on Wednesday slapped Manila Water Co. Inc. with P1.13 billion in penalties for the water shortage in large areas in Metro Manila and parts of Rizal province last month that left customers fuming and President Rodrigo Duterte threatening to fire officials of the regulatory agency.

The penalties are on top of about P500 million that Manila Water estimates would be the cost of its self-imposed bill waiver program that is being implemented this April.

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On the day the regulator Metropolitan Waterworks and Sewerage System (MWSS) announced the penalties, Manila Water shares  sank 3.4 percent to P22.70, a recognition that the company’s future income will be dented.

The drop in the company’s share price contrasted with the Philippine Stock Exchange index’s increase, however, small at 0.36 percent.

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Manila Water said it would abide by the sanctions that the MWSS board had approved.

“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 the MWSS, hold ourselves accountable for our inability to provide our consumers with the usual uninterrupted water service,” said Manila Water president Ferdinand dela Cruz.

Based on its financial performance over the past nine years, Manila Water can absorb the penalties and rebate.

Between 2010 and 2018, Manila Water netted a total of P46.53 billion in profits, or a yearly average of P5.17 billion, from its operations in the east zone, one of the two concession areas in Metro Manila.

Last year alone, the company earned a net income of P6.52 billion, its biggest during the period.

In a statement, the MWSS said the penalties consisted of a fine of P534 million and P600 million to be spent on developing a new water source that Manila Water will not be allowed to recover from customers through rate increases.

The fine is for not meeting service requirements—that supply be available to customers 24 hours every day at a pressure of 7 psi (pounds per square inch).

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Ample power

Sen. Risa Hontiveros said the penalty was “clear proof that government regulatory agencies have ample power to compel concessionaires of public services to effectively serve the public’s needs and penalize them when they fail to do so.”

Reelectionist Sen. Grace Poe, who led the Senate inquiry into the water service interruptions, wondered whether Manila Water would be penalized continuously as long as service interruptions persisted.

Neri Colmenares, Makabayan senatorial candidate, said consumers hit hardest by weeks of water shortage should be the first to benefit from the penalties.

“It is the consumers who suffered from the lack of water since March and continue to suffer,” Colmenares said in a statement.

Apology, early retirement

Amid the public outcry over the water shortage, the Zobel brothers of the Ayala group of companies issued an apology late last month.

“[W]e take responsibility for our own shortcomings in the company,” said Jaime Augusto Zobel, chair of the Ayala group and vice chair of Manila Water, and his brother Fernando, who serves as Manila Water chair.

The fallout from the water shortage led to the early retirement of Manila Water chief operating officer Geodino Carpio.

Aquino administration blamed

The MWSS imposed the penalties on Manila Water even as it pinned the blame on the previous administration for the water shortage.

In its statement, the agency said its management during the Aquino administration did not approve a Manila Water proposal to build facilities that would have added by 2019 about 600 million liters daily (MLD) to the company’s supply.

It said the company proposed in 2012 to build a facility for the east zone, Manila Water’s concession area, that would have provided it 2,222 MLD by this year.

The volume was meant to meet a demand of 1,705 MLD plus a buffer of 23 percent over peak demand.

“However, (then MWSS) Administrator Gerardo Esquivel rejected the proposal and (instead approved a plan that would give Manila Water by 2019) 1,636 MLD for a demand of 1,408 MLD with zero buffer for peak demand,” the agency said.

When Manila Water announced “operational adjustments” that left some areas without water for several days last March, the company said customer demand had outstripped the 1,600 MLD supply from Angat Dam by an average of 150 MLD.

Demand exceeds supply

Dela Cruz said raw water allocation from Angat Dam had remained unchanged at 1,600 MLD since the company’s concession started in 1997 when the east zone had a population of 3 million people.

The company now serves almost 7 million people whose per capita consumption has significantly increased, said the Manila Water president.

“We cannot source any more from our system losses (water that does not produce revenue because of pipe leaks or illegal connections), which have already been brought down to 12 percent from a high of 63 percent when we inherited the east zone concession of Metro Manila in 1997,” he added.

Dela Cruz said the company had strongly advocated for the development of new water sources to ensure sufficient supply and resiliency in case of a calamity in the Angat Dam system.

“However, the development of new water sources is, under the concession agreement, ultimately the responsibility of MWSS,” he said. —Reports from Ronnel W. Domingo, Miguel R. Camus, Marlon Ramos and Melvin Gascon

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