Maynilad: Bulk of rate hike to cover tax expenses

MANILA, Philippines–About two-thirds or P2 of the impending rate hike for Maynilad Water Services Inc. will account for the recovery of income tax, the main contested issue between the company and regulators.

An appeals panel presided over by the International Chamber of Commerce recently awarded Maynilad an average increase of P3.06 per cubic meter—on top of the current basic rate of P31.28—for the five-year rate rebasing period that runs until 2017.

Maynilad’s lawyers received a copy of the decision by mail on Monday but the Metropolitan Waterworks and Sewerage System (MWSS) Regulatory Office has not received its copy.

In 2013, Maynilad proposed an average increase of P8.58 per cubic meter, which the company deemed the right amount for it to recover its investments and earn a reasonable profit.

In contrast, the MWSS-RO ordered Maynilad to reduce its basic rate by P1.40 over five years or 29 centavos a year.

In a briefing, Maynilad chief financial officer Randolph T. Estrellado said the company was willing to implement the rate hike on a staggered basis over a three-year period—at one-third or about a peso per cubic meter a year.

If the increase would be implemented fully, it would mean a hike of P12.60 in the monthly bill of a residential “lifeline” customer, or a household that uses 10 cubic meters or less.

A household that consumes 20 cubic meters a month—which represents the majority of Maynilad’s customers—would pay P50.40 more each month while those using 30 cubic meters or more will pay an additional P79.80.

“The implementation (of the rate hike) by installment would need the approval of the MWSS,” Estrellado said.

In an interview, MWSS-RO chief regulator Joel C. Yu said the arbitration rules provide for a 30-day period within which the parties were allowed to comment or “correct” the panel’s decision.

“We met halfway—they (Maynilad) asked for an increase while  we asked for a rate cut,” Yu said, noting that the arbitration panel decided on an amount that was short of Maynilad’s rate hike proposal by more than P5 per cubic meter.

However, Yu said Maynilad’s disclosure of the decision—“if true”—might mean that determining the new tariff might be close to finality, “there are legal issues that are pending in this arbitration case.”