Maynilad in uproar over MWSS decision

MANILA, Philippines–The Metropolitan Waterworks and Sewerage System (MWSS) stood its ground on its decision to partially implement an international court ruling on the water rate of Maynilad Water Services Inc.

In response, Maynilad said MWSS’ way of “routinely ignoring and reinterpreting its contract” created unnecessary risks for the Philippines’ economic, investment and job creation goals.

“There is no reward for MWSS’ stance, which is an all-downside proposition, with the whole country paying the price. When government officials seek new foreign investments, they will have to explain why a valid contract and a final and binding arbitral award were not respected by a government agency,” Maynilad CFO Randy Estrellado said.

That arbitral award, he added, is final and binding, and the government itself has waived its right to appeal.

“This is Section 12.5 of our concession agreement. This again is another clear proof that MWSS does not honor its contract. We have a runaway regulator and the … government must step in to correct the situation,” he said.

MWSS said that on Dec. 29, 2014, an international arbitration panel ruled that Maynilad could include corporate income tax (CIT) in its rates. The panel approved a P4.06 per cubic meter hike from the 2012 average basic charge of P30.28 per cubic meter.

However, with the recent conclusion of a separate arbitration case with Manila Water Co. Inc., which lost its argument for including CIT in its rates, MWSS said it decided to only partially implement the international court’s ruling on Maynilad.

When asked to explain the MWSS’ decision to only partially implement the court decision for Maynilad, chief regulator Joel C. Yu said that his office “has the moral and the legal obligation to uniformly apply the General Rate Setting Policy under the Concession Agreements.”

However, Estrellado said the rule of law must prevail, not the whim of a few persons.

“It was on a whim that this present issue on water rates started, with our contract being questioned and reinterpreted 17 years following its signing, and after we have fulfilled the MWSS mandate to improve the delivery of water services in the West Zone. It must end with respect for the law and contracts,” Estrellado said.

The partial implementation translates to an adjustment of P0.64 per cubic meter, or 2.11 percent of Maynilad’s 2012 average basic charge of P30.28 per cubic meter, the regulator said.

The CIT represents P3.42 per cubic meter of the P4.06 per cubic meter tariff adjustment awarded to Maynilad by the Appeals Panel, MWSS said.

Incorporating the annual inflation adjustment for 2014 and 2015, and the provisional 3.2 percent adjustment in 2013, the average basic charge of Maynilad is estimated to increase by P2 per cubic meter, or 6.39 percent, of the prevailing basic charge of P31.25 per cubic meter.

However, MWSS said it would also discontinue the Cera (Currency Exchange Rate Adjustment), which covers foreign exchange fluctuations, of P1 per cubic meter. With Cera factored out, Maynilad’s average water charge hike would be reduced to a net increase of P1 per cubic meter.