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Sharp Edges

Provisions of water concession agreements raise a lot of issues

/ 04:01 AM December 10, 2019

President Duterte’s vicious tirade against the alleged “onerous” 1997 water concessionaire contracts of Maynilad and Manila Water opened a Pandora’s box on the failure of previous administrations to protect consumer interest.

At the start, Maynilad’s basic charge for the west zone was only P7.21 per cubic meter while Manila Water billed P4.02 per cubic meter in the east zone. Today, these basic charges have jumped by over 402 percent for Maynilad at P36.24 per cubic meter and over 609 percent for Manila Water at P28.52 per cubic meter.

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Maynilad says it spent P180 billion for the improvement of water facilities aside from shouldering the debt of the Metropolitan Waterworks and Sewerage System (MWSS). For its part, Manila Water says it also spent billions in improving water availability from 26 to 99 percent in its area.

Many years ago, consumers were paying for add-ons like the foreign currency differential adjustment (FCDA) rate, environmental charge (20 percent of water charges: basic plus FCDA), sewer charge (20 percent of basic for commercial and industrial customers), value-added tax (VAT), MSC (maintenance service charge for the water meter) and for capital investment projects such as the previously scrapped Laiban/Wawa Dam projects.

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MWSS regulators have since limited the additional charges to only four, namely, environmental charges, FCDA, MSC and VAT.
But numerous questions remain unanswered.

First, why do Maynilad and Manila Water avoid being called “public utility companies” when they are managing “public water.” They say they are “mere agents”of the MWSS which they point to as the “public utility.”This interpretation allows them to pass on to consumers their business expenses, including corporate income taxes. Unfortunately, the “legal interpretation”is still pending today in the Supreme Court.Second, the “mere agents”explanation allows these companies to increase their return on investment to more than 12 percent (an imposition on public utility companies such as Meralco). Is water owned by the state not a “public utility?”

Third, why were these water concession contracts extended in 2009 by 15 years by then President Gloria Macapagal-Arroyo or exactly 13 years before these were set to expire in 2022? Why the rush? Because of the extension, the contracts are now valid until 2037.

Fourth, why is it that in the concession agreement, the national government or even Congress can’t interfere in water rate increases or the “yearly rate rebasing?”Politics or playing it safe?

Fifth, why did the concession agreement assign exclusively to the MWSS Regulatory Office the burden of overseeing the concessionaires’ operations? After all, the regulatory office is purely recommendatory and unable to impose fines and penalties on erring concessionaires.

Were there public hearings before these rate increases took effect?

Sixth, why did both water companies fail to build adequate “sewerage facilities”in the last 22 years? In fact, the Supreme Court, by a 14-0 vote, fined each of them P921,464,184, on top of a daily fine of almost P322,102 subject to a 10-percent increase every two years.

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Lastly, why did the original and extended concession agreements allow “government guarantees”for both Maynilad and Manila Water?

These are serious questions up for discussion. But technically, what we really need now is a truly independent water regulatory agency to take care of our water while also looking after the welfare of consumers.

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TAGS: Jake J. Maderazo, Manila Water, Maynilad, Sharp Edges, water concession agreements
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