MWSS refutes Maynilad’s compensation claim

MANILA, Philippines - The Metropolitan Waterworks and Sewerage Services (MWSS) yesterday said that the claim of West Zone water concessionaire Maynilad Water Services for a sovereign compensation has no merit even, as the Department of Finance (DOF) is now determining the veracity of the claim.

Maynilad is seeking sovereign compensation of P3.44 billion for revenue losses it claims to have incurred from January 1, 2013 to February 28 this year as a result of the postponement by the MWSS of the implementation of the increase in its basic water charge as award after its arbitration proceedings.

In a briefing at the MWSS head office yesterday, MWSS chief regulator Joel Yu said Maynilad would not incur losses because it is allowed to recover its investments for the remainder of the concession agreement through succeeding rate rebasing that would be conducted in the years 2017, 2022, 2027 and 2032.

 “From our view, there is no ground for that guarantee...It cannot be substantiated,” said Yu.

 “They need to establish the grounds like, for example, if the republic is interfering in the rate setting as provided for in the concession agreement and if the republic causes the delay in the implementation. There is nothing like that and so there is no ground,” he added. “We honored their right to dispute, we would have implemented the negative (adjustment).”

Yu said the delay in the implementation of Maynilad’s rate hike is not caused by the mere refusal of the MWWS to implement, but is due to a number of factors such as the conduct of the rate rebasing exercise itself and the arbitration proceedings.

The MWSS chief said that after both positions on the matter have been submitted, the DOF is now determining the veracity of the company’s claim.

“I’m very happy that (Finance) assistant secretary (Ma.Teresa) Habitan disclosed that they are making computations. They are now examining the claim of Maynilad, if the numbers are indeed correct,” he said.

The MWSS has put on hold the implementation of the awarded base water rate hike until the arbitration process for both metro water concessionaires-The other being Ayala-led Manila Water Company Inc.- have been completed.

Yu has said this is meant to prevent the occurrence of “inconsistencies” in the implementation of the concession agreement, chief of which is the treatment of the recovery of corporate income tax.

This has put on hold talks between the water regulator and Maynilad for the proposed three-year implementation of a 9.8 percent increase in its 2013 average basic water charge of P31.28 per cubic meter. This translates to an average increase of P3.06 per cubic meter in its basic charge.

In September 2013, the MWSS denied the petition of Maynilad and Manila Water to raise water rates in accordance to the five-year rate rebasing scheme as the two firms were supposedly unable to justify the need for higher rates based on their business and investment plans for the next five years.

In July 2013, the MWSS had passed a resolution stating metro water concessionaires could pass on corporate income tax to consumers.

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

On Dec. 29, 2014 the International Chamber of Commerce upheld the alternative rate rebasing adjustment of Maynilad which would raise its basic water charge by P3.06 per cubic meter. Of this, P2 accounts for the recovery of income tax.

Maynilad is co-owned by Pangilinan-led Metro Pacific Investments Corporation (MPIC) and Consunji-controlled DMCI-Holdings Inc.