The resolution was passed Aug. 16, or two weeks after the resignation of chief regulator Rex Tantiongco over a controversial memorandum of agreement he brokered that would have allowed Maynilad to recoup its foreign exchange losses in 18 months.
In a five-page resolution, the MWSS Regulatory Office said the planned water rate hike violates the terms of the original 1997 concession agreement the government entered into with the Lopez-controlled Maynilad, which services the western area.
"The Regulatory Office hereby gives advice to the (MWSS) to prohibit Maynilad from collecting from its members the tariff increase," Resolution No. 2001-06-001 said.
It was signed by acting chief regulator Col. Angel Efren Agustin, deputy administrator for consumer regulation. Co-signatories were deputy administrators Virgilio Ocaya (administration and legal affairs), Elena Luz Alojipan (financial regulation), and Eduardo Santos (technical regulation).
President Arroyo earlier asked the MWSS to review a Tantiongco-sponsored memorandum of cooperation between the MWSS and Maynilad allowing the latter to recover 95 percent of its foreign exchange losses since 1998 in 18 months instead of the 22-year recovery period stipulated in the concession agreement.
The memorandum would have allowed Maynilad to raise water rates by another P4.75 from the present P6.58 per cubic meter of water. Maynilad had resorted to the memorandum after Malacañang shot down an earlier petition for an automatic currency rate adjustment.
The President ordered the review after various civil society groups vehemently protested the water tariff adjustment sought by Maynilad.
Under the 1997 concession agreement, any petition for a rate increase must go through public hearings and a comprehensive review by the Regulatory Office.
Civil society groups like the Freedom from Debt Coalition, Akbayan, and Sanlakas pointed out that the proposed adjustment did not go through public consultations, much less a proper review by the Regulatory Office headed by Tantiongco.
They also said the MWSI should be made to shoulder these costs, and not the consumers, because in the first place they had anticipated these losses when they negotiated the concession agreement.
Maynilad president Rafael Alunan III wrote the Regulatory Office on July 16 offering a graduated scheme of water tariff increases over a year and a half period to recover 95 percent of the forex losses.
The rest of the losses would be recovered over the remaining 20 years of the 1997 agreement. Alunan’s proposal would have Maynilad impose three water rate increases from Sept. 1, 2001 until July 1, 2002 starting with a P2 per cubic meter hike.
MWSI inherited some $800 million in loan obligations of the MWSS from the World Bank and the Asian Development Bank. Maynilad’s total forex losses now stand at P2.468 billion.
In its resolution, the Regulatory Office said the memorandum between Maynilad and MWSS would in effect amend the terms of the original agreement. It would also violate the rates adjustment limit, which sets deadlines for allowable rates adjustment in a given year.
"As to the wisdom of any amendment to the concession agreement, the Regulatory Office leaves that to the contracting parties," the resolution said, adding it is outside its jurisdiction.
Regulatory Office members Alojipan and Ocaya have both spoken out against Tantiongco, who is also former head of the Energy Regulatory Board, accusing him of railroading the process.
The two lawyers said Tantiongco had been making decisions on his own without consulting the other members. They said their office is supposed to be collegial in nature.
"Collegial bodies are supposed to act collectively," they said in a statement, "but the chief regulator had insisted on doing things his own way.
Tantiongco in turn denied the charges, saying he was merely following the instructions of the MWSS Board of Trustees. The controversy practically forced his resignation on Aug. 1.