A consumer advocate group on Wednesday urged President Aquino to “send a clear political signal” that he was supporting consumers and not water concessionaires Maynilad Water Services and Manila Water Co., which it accused of passing on to consumers P15.3 billion in income taxes over the past five years and other expenses, and of overcharging them in foreign exchange adjustments.
Sonny Africa, a lead convenor of the Water for the People Network (WPN), said consumers needed the assurance of “strong backing from the administration,” which he noted had “kept mum” on the issue.
“(B)ecause these two firms have high-powered lawyers, have very good accountants, etc. .., we need the strong protection of the administration. (So the administration should) send a signal to the public that ‘we will protect your interest at all costs,’” Africa said on the sidelines of the weekly Fernandina forum in San Juan City.
He issued the pronouncement after he announced his group’s “intent” to file a case against the two water concessionaires in Metro Manila before Aquino’s State of the Nation Address, for what he said were their “overstepping the boundaries of public responsibility” when they passed on to consumers expenses that he said should not have been passed on to them in the first place.
Maynilad services Metro Manila’s west zone while Manila Water delivers water to consumers in the east zone.
Presidential spokesman Edwin Lacierda said the Metropolitan Waterworks and Sewerage System (MWSS), the regulatory office, is still in the process of finalizing a study on the current practice of passing on to consumers the water firms’ income taxes.
“According to Mr. Esquivel, they have yet to finish their study,” Lacierda said, referring to MWSS Administrator Gerardo Esquivel.
Double-charging
Apart from the P15.3 billion in combined income taxes that Manila Water and Maynilad “unjustly” charged consumers from 2008 to 2012, Africa said the two firms were “double-charging consumers” in foreign exchange adjustments through the currency exchange rate adjustment “on top of” the foreign currency deferential adjustment.
Charges for donations, contributions and promotions, and P54 billion for projects which were supposed to be implemented in the last five years have also been passed on to consumers, Africa said.
He said even the cost of arbitration in court could be passed on to consumers.
“There’s a whole category of questionable passed-on charges—in terms of corporate social responsibility, operations in Vietnam—that has nothing to do with operations in Metro Manila (and that should not be charged) to consumers …. We should draw attention to the P54 billion that have been charged for projects being implemented supposedly in the last five years,” he added.
Refund
Africa said the projects were not implemented but consumers were made to pay for them.
“At the very least, consumers should be paid interest …. At best, we should get a refund for paying for projects that were promised to be implemented but were not implemented,” he said.
The WPN convenor said the issuance by Aquino of a “strong” statement in support of the consumers would also “clear the air,” considering that two high-ranking Cabinet secretaries—Rene Almendras and Rogelio Singson—are former executives of Manila Water and Maynilad, respectively.
“(If Aquino issues the statement), he would ensure that no monkey business happens (behind the scenes),” he said.
He was quick to add, however, that so far, there were no reports about Singson and Almendras intervening in behalf of the two companies.
Prejudicial
While the concessionaire agreement was agreed upon by both the government, through the MWSS, and the two concessionaires in 1997, the fact that it was used as a justification by the two firms for “overcharging” meant it was “prejudicial to the public interest,” Africa said.
Apart from this, he said the original concessionaire agreement, which was supposed to last for only 25 years (1997-2022), was extended “without the benefit of a bidding process” in October 2009 and April 2010 to 15 more years, making it enforceable until 2037.
Withdraw from contract
Given this, he said the “best option” was for the government to “unilaterally withdraw” from the contract and face the consequences. The contract has a provision for arbitration.
“Water is a service. It’s a vital public good. It should not be treated as a commodity to profit from,” he said.
He said it was “alarming” that in 2011, based on income statements published at the Philippine Exchange Commission, Maynilad had registered a 48-percent return on equity, and Manila Water, 19 percent.
These figures, he noted, were way beyond the return on equity registered by similar public service utilities, like telecommunications firms which posted a return of 16 percent in the same period.
Senate probe
In the Senate, Sen. Ralph Recto has filed a resolution directing the Senate public services committee to investigate reports that the water concessionaires were passing on to consumers their income tax payments and other expenses.
Recto’s office said the probe would be scheduled after the opening of the 16th Congress on July 22.
The resolution cited WPN’s claim that Maynilad and Manila Water were charging 14 million consumers padded fees that were used to pay a total of P15.5 billion in income taxes from 2008 to 2012.
Previous administration
Recto noted that the MWSS had already admitted that the two concessionaires’ income taxes and “other duties form part of what all consumers pay monthly.”
He said it was the previous MWSS administration that approved the inclusion of income taxes as pass-on charges.
The two companies are again petitioning the MWSS to include these taxes as pass-on charges to consumers from 2013 to 2037.
Maynilad wants a P5.83 per cubic meter increase in its basic charge while Manila Water plans to raise its rate to P8.58 per cubic meter from 2013 to 2018.
Recto said Maynilad and Manila Water had proposed a “rate rebasing” scheme based on a system imposed way back in 2008 that would require consumers to shoulder their operating expenses.
The senator said that if the MWSS agreed to the plan, Manila Water customers would shoulder P64.1 billion while Maynilad customers would spend P68.7 billion from 2008 to 2037 when their concession agreements expire.
Recto said WPN complained that a guaranteed rate of return called appropriate discount rate (ADR) was also applied on the pass-on charges of the two concessionaires as part of operation expenses.
“(This) means that Manila Water and Maynilad, apart from not paying their tax obligations, would even profit from it,” the resolution quoted WPN.
Recto said that during the last rate rebasing period from 2008 to 2012, the two companies were already given an ADR of 9.3 percent.
“An inquiry must be conducted to correct the onerous provisions in the concession agreements of the two water concessionaires, review and strengthen the regulatory powers of the MWSS and protect the welfare of consumers,” the resolution said.
Earlier, Sen. Francis Escudero noted that no government agency was monitoring water distribution unlike power that is supervised by the Energy Regulatory Commission (ERC).
“Water has no equivalent agency unlike the ERC where (companies) could justify, explain and unbundle (proposed rates),” he said in Filipino in an ambush interview last month.—With reports from Michael Lim Ubac and Cathy Yamsuan