MWSS defers action on water rate hike petition of Maynilad

MANILA, Philippines - The Metropolitan Waterworks Sewerage System (MWSS) yesterday said it would not take further actions on proposed water rate adjustments in Metro Manila until the arbitration process for both metro water concessionaires have been completed.

This puts on hold talks between the water regulator and West Zone water concessionaire Maynilad Water Services for the proposed three-year implementation of the increase in basic charges awarded by the International Chamber of Commerce (ICC) in its arbitration proceedings.

MWSS chief regulator Joel Yu said this is meant to have room for harmonization of the arbitration results in accordance to the concession agreement.

“We would not be making any pronouncements as regards tariff adjustments for Maynilad and Manila Water until after the arbitration for both concessionaires have been concluded,” Yu told reporters yesterday.

“We find it more prudent to wait for the conclusion of the arbitration with Manila Water before making any tariff adjustments because we don’t want any inconsistencies in the way we conduct our regulatory mandate as defined in the concession agreement,” he added.

Yu said the arbitration proceedings between the government and East Zone water concessionaire Manila Water is expected to be concluded in about three weeks.

Should the ICC arbitration panel rule in favor of Manila Water’s petition for rate hike and recovery of income tax – same as Maynilad’s petition – the MWSS would implement the ruling.

Should the ICC rule against Manila Water’s petition, Yu said the MWSS would seek a “remedy” to harmonize the arbitration award to regulation.

Yu said the MWSS, in particular, is wary of inconsistencies in the recovery of income tax, a key point of contention between the government and the water concessionaires.

“There are certain cost items that are common to the two concessionaires. On top of the list is the treatment of the corporate income tax. It cannot happen that one concessionaire would be allowed to recover the corporate income tax and the other would not,” he said.

In September 2013, the MWSS denied the petition of Maynilad and Manila Water to raise water rates in accordance to its five-year rate rebasing scheme.

In July 2013, the MWSS passed a resolution stating metro water concessionaires cannot pass on income tax to consumers.

This prompted Maynilad and Manila Water to seek arbitration as provided for in their concession agreement. 

On Dec. 29,the ICC upheld the alternative rate rebasing adjustment of Maynilad allowing it to raise its basic water charge by P3.06 per cubic meter. Of this, P2 accounts for the recovery of income tax.

Maynilad, however, expressed disappointment over MWSS’s decision.

“This is disappointing. MWSS lost its case against Maynilad but is saying in effect that its compliance will depend on the outcome of its arbitration with Manila Water which is completely separate and independent, although the issues are similar,” said Randy Estrellado, chief financial officer of Maynilad.

“If Manila Water loses, does that mean our win will no longer matter? This possibility alone of opposite arbitral results shows the two cases are independent of each other,” he said.

But MWSS, Estrellado said, claimed this would make the consumers confused since a Manila Water loss would mean a rate reduction.

“In the first place, it was MWSS that started it all. They confused us by changing the rules midstream, hence our recourse to arbitration. But is its fear of consumer confusion a valid reason to ignore a perfectly legal decision?,” he asked.

The arbitral decision is supposed to be final and executory. “MWSS has no choice but to approve the new water rates.  But without the MWSS board approval, we cannot publish them before implementation,” he said.