Threat of doubling water rates

My previous column entitled “Taking Water for Granted” (The Philippine Star, May 29, 2009) drew several readers’ reactions. One of them is from Roy Zosa, president of Sierra Madre Water Corp. (SMWC).

Taking exception to the prevailing view among water officials about Laiban Dam as a long term water source for Metro Manila and its environs, Zosa stated that there is an alternative to it, much better than the project which is reported to have GMA’s imprimatur for awarding to an anointed group.

What is the Laiban water project?

Surprisingly, not much is reported or written about this particular project. According to some scanty write-ups, the project involves the construction of a huge dam, 110 meters in height, somewhere in the Sierra Madre mountain range. The dam area covers 1,300 hectares and will involve the resettlement of at least seven barangays with 4,413 families.

The cost is estimated at approximately $1.2 billion with the construction period lasting six to seven years. The dam will harness the water from several rivers in adjacent areas, and is projected to provide 1,900 million liters per day for Metro Manila.

While the take-or-pay provisions and the consequent incremental costs that will be imposed on existing concessionaires are still undetermined, the consensus is that these would be significant, but not worrisome for its operators since these additional costs, of course, would be passed on completely to the end-users to maintain the viability of operations.

The alternative

In his letter, reader Zosa highlighted the features of SMWC’s bulk water supply proposal, which would make it a very viable alternative to Laiban.

Zosa wrote that the SMWC alternative could supply up to 2,000 million liters per day compared to Laiban’s 1,900 MLD. This claim of more water availability is supported by extensive hydrology studies.

Implementation of the project will be carried out on a phased basis, and the speed and timing will depend on the need for water from the two concession areas being serviced by Maynilad and Manila Water.

This flexibility would allow the delivery of much needed water in line with the growth in demand. Initial additional water, for instance, could be delivered in a much shorter period of time (approximately 24 months) compared to the more than six years completion period for Laiban, Zosa added.

Zosa pointed out that the most significant feature of the alternative being offered is its drastically lower cost compared to Laiban. Zosa warned that the cost of the Laiban project would result in more than doubling of the water rates for Metro Manila consumers.

MWSS in blinders

Roy Zosa also expressed concern about the actuations of MWSS regarding the water sourcing project considering that its magnitude and cost will be the major determinant in the increase of water rates which will ultimately be borne by consumers.

For instance, he cited that there are indications that the framework and details for the water sourcing project are being worked out by MWSS with focus only on Laiban. There are also reports that the project is being lined up for eventual award to the Cojuangco-led San Miguel Corp.

An appeal to MWSS

Zosa concluded his letter with an appeal to MWSS which is quoted below:

“We respectfully submit that given the magnitude of the project and the long term implications to the cost of water service to millions of consumers in the MWSS system, full and proper consideration ought to be made by MWSS of what is optimum long term source of water, taking into account all important and relevant considerations.

“These would include the all important (i) hydrology, (ii) technical design, (iii) construction risk and completion risk, and (iv) capital cost, operating, and delivery issues, in order to achieve and ensure the supply of water at the lowest economic cost with the least adverse environment effect in the community.

“We hope that MWSS will evaluate the various sources of supply and to establish and undertake a transparent and competitive process for its selection under the BOT Law.”

Appeal to NEDA

Roy Zosa also furnished us a copy of his letter to Secretary Recto of NEDA in which he indicated that “there are many issues related to the approach being taken by MWSS in regards to the implementation of the Laiban Dam project using the joint venture approach purportedly under RA 9184, and without public bidding ….

“I think it will be a national tragedy if such action will be taken without determining whether superior and lower cost options are available, with lesser environmental effects on the community.

“NEDA has an extremely vital role in this issue, as it has foremost as its mandate, the responsibility of setting policy for development of infrastructure projects, and evaluating and deciding on ill advised actions of government agencies, which is contrary to public interest.”

An appeal to GMA

I am not technically competent to determine which of the two projects, the Laiban Dam or the alternative proposal of SMWC, is better suited to the needs of Metro Manila water consumers.

As a consumer, however, I would expect that those experts at MWSS will demonstrate that all options have been evaluated and that the final selection and award of the project are done in the most transparent manner and not tainted with a whiff of scandal.

The $1.2-billion tag price of the Laiban project is so tempting that concerned officials can find millions of reasons to just close their eyes and merely look at short term realities. But here is where President Arroyo should act and ensure that the wrong project is not chosen because of personal gain.

Choosing the wrong project now will more than double water rates for Metro Manila consumers for decades, and is tantamount to committing the crime of “plunder” at the expense of the public. The sight of consumers suffering from too expensive water after she has gone is surely a legacy that would haunt GMA. Hence, this appeal to her sense of compassion.

Should you wish to share any insights, write me at Link Edge, 25^th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.