MWSS to review results of arbitration proceedings

MANILA, Philippines - The Regulatory Office of the Metropolitan Waterworks and Sewerage System (MWSS) formally received yesterday the results of its arbitration proceedings and would be reviewing the notice.

MWSS chief regulator Joel Yu yesterday said they received a copy of the order Wednesday afternoon through its legal counsel the Office of the Government Corporate Counsel (OGCC).

The water regulator will not likely contest the ruling handed down by the appeals panel of the International Chamber of Commerce (ICC) but would seek clarifications on the arbitral award as needed.

“We would be reviewing the decision and we would seek clarifications (with the ICC) if necessary,” said Yu.

The ICC, in a decision dated Dec. 29, ruled in favor of Maynilad’s alternative rate rebasing adjustment that would result in a 9.8-percent increase in the 2013 average basic water charge of P31.28 per cubic meter, inclusive of the P1 currency exchange rate adjustment that the MWSS incorporated into the basic charge.

This translates to an average increase of P3.06 per cubic meter.

To get the ICC to approve a rate hike, Maynilad opted to no longer pursue several water sourcing projects but maintained that it would be able to fulfill its obligations within its concession area.

Maynilad has said it is willing implement the approved increase in its basic charge on a staggered basis for three years to minimize the impact on its customers.

The staggered implementation of the increase in the basic charge would have to be approved by the MWSS board. Maynilad hopes to implement the basic charge hike beginning this year.

Yu said Maynilad has not submitted a proposal for the staggered implementation of the rate hike but the agency is open to having meetings with Maynilad.

For the meantime, Maynilad would only be implementing the MWSS-approved increase of P0.38 per cubic meter in the foreign currency differential adjustment (FCDA) component of its water billing, a rate hike granted outside of the arbitration proceedings with the ICC.

The FCDA is a tariff mechanism that allows the concessionaires of the MWSS to cope with foreign exchanges losses or gains arising from payments of foreign currency-denominated borrowings used for expansion and improvement of services. It is expressed as a percentage of the basic charge. The MWSS Regulatory office ideally reviews the FCDA quarterly.

In 2013, the MWSS rejected the applications of metro water concessionaires Maynilad and Manila Water Co. Inc. for increased base charges.

Instead of increasing water rates, the MWSS approved reductions in base water rates, which were supposed to be implemented in tranches in the next five years beginning 2014.

The MWSS board had decided to approve downward adjustment in water rates as the two firms were unable to justify the need for higher rates based on their business and investment plans for the next five years.

As provided for in their concession agreements with the MWSS, the water concessionaires have filed dispute notices before Paris-based ICC.

The concession agreement between MWSS and the concessionaires provides for arbitration to resolve disagreements that cannot be resolved through consultation or negotiation.

The arbitration panel was composed of representatives from a concessionaire, MWSS and the ICC that sat as appeals chairman.

Maynilad services the west zone of Metro Manila covering Manila (all but portions of San Andres and Sta. Ana), Quezon City (west of San Juan River, West Ave.), EDSA, Congressional, Mindanao Ave., northern part from the districts of the Holy Spirit and Batasan Hills, Makati (west of South Super Highway), Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas and Malabon, cities of Cavite like Bacoor and Imus and towns of Kawit, Noveleta and Rosario.

Maynilad is co-owned by Pangilinan-led Metro Pacific Investments Corp. (MPIC) and Consunji-controlled DMCI-Holdings Inc. – With Rhodina Villanueva