Maynilad duns government for P3B

MANILA, Philippines–The Maynilad Water Services, one of two private water concessionaires in Metro Manila, is seeking P3.44 billion from the national government in compensation for 26 months’ worth of tariff increases that it said it was unable to collect from its customers because of the inaction of the government regulator, the Metropolitan Waterworks and Sewerage System (MWSS).

According to Maynilad, the amount represents revenue losses caused by the “refusal of MWSS to honor an arbitral decision ordering rate adjustments” that should have started on Jan. 1, 2013.

The company, which made the demand for compensation in two letters to the Department of Finance, Maynilad said it was incurring opportunity losses of P208 million each month.

In a phone interview, Maynilad chief financial officer Randolph Estrellado said that based on the demand for water in 2015, it should be earning an additional monthly revenue of more than P200 million had the rate hike been implemented.

When 2013 volumes are considered, the arbiters’ decision would have meant additional monthly revenues of more than P100 million, Esrellado said.

He said Maynilad was also entitled for adjustments for inflation for 2013 and 2014.

Last January, Maynilad’s major stockholders announced that an arbiter, the International Chamber of Commerce (ICC), had decided in its favor, awarding an average increase of P3.06 per cubic meter on top of the current basic rate of P31.28.

The arbitration stemmed from the MWSS Regulatory Office ordering Maynilad, in a resolution issued in September 2013, to cut its rates by P1.46 per cubic meter for the five years until 2017, or 49 centavos per year for the five years to 2017.

Maynilad said that the order was contrary to the company’s five-year business plan that requires an increase in the company’s basic charges by P8.58 per cubic meter.

The concession agreement provides, among other things, that water rates may be upwardly adjusted every five years based on a pre-agreed formula.

The company challenged the MWSS action with the ICC, arguing that its application for a water rate adjustment was valid.

Last December, the arbitration panel that heard Maynilad’s petition ruled in its favor.

The MWSS refused to comply with the decision, saying that it would wait until a similar petition filed by Manila Water with another arbitration panel was resolved.

On Tuesday, Maynilad accused MWSS administrator Gerardo Esquivel, chief regulator Joel Yu and trustee Emmanuel Caparas of trying to “cover up their serious mistakes and gross mismanagement” when the MWSS reinterpreted its contract with Maynilad.

In the September 2013 resolution, the MWSS said Maynilad should not pass on to its customers the cost of its corporate income tax, which the company said was an erroneous interpretation of the concession agreement.

Last week, Yu said the regulators have to see the Manila Water decision first before acting on Maynilad’s bid for a tariff increase, saying that both arbitration proceedings involved identical issues—whether or not the concessionaires are public utilities and whether or not they may pass on their corporate income tax to consumers.

He said that with the benefit of having examined both decisions from arbiters, the MWSS would be assured that whatever the regulator decides would be a consistent implementation of the concession agreements.