Manila Water wants to be compensated for rate tweak

Manila Water Co. Inc. is seeking compensation for financial losses that will result from water rate reductions initiated by the regulator.

The Ayala-led company disclosed to the Philippine Stock Exchange that it filed a Notice of Claim with the Department of Finance (DOF), asking the government to indemnify losses it would incur from 2015 to 2037 estimated at over P79 billion.

The DOF confirmed via text message that it received Manila Water’s request.

“The Department of Finance has just received a copy of the notice today. We will review the documents carefully, consistent with our mandate in the DOF,” according to the Finance department.

Recently, an Appeals panel upheld the position of the Metropolitan Waterworks and Sewerage System (MWSS) when it declared Manila Water to be a public utility.

The decision changes the fundamental character and rate of return of Manila Water.

The water services provider said the decision was inconsistent with the original intent of its 1997 concession agreement (CA) with the government, when it invited private firms to invest in the water sector under MWSS’ purview.

“We now claim against this primary obligation of the national government to account for the impairment caused by this change,” Manila Water president and CEO Gerardo C. Ablaza Jr. said.

When the water distribution service was privatized in 1997, Manila Water said, the government asserted that the MWSS would remain the public utility and Manila Water would be a mere agent and contractor.

The contractual arrangement “assured Manila Water of a rate of return comparable to similar infrastructure concessions. These contractual provisions were guaranteed by the national government, as primary obligor, by way of its Letter of Undertaking executed in line with the CA,” Manila Water said.

Still, Manila Water said it would implement the water rate reductions as ordered by the Appeals panel.

“While we are pursuing our claim on the national government, we are committed to implementing the new rates set by MWSS,” Ablaza said.

Manila Water will implement a reduction of 11.05 percent on the average basic charge of P25.07 per cubic meter, equivalent to a decrease of P2.77 per cubic meter.

Also, a 4.19-percent adjustment for inflation will also be made on the basic water charge in 2015, equivalent to P1.08 per cubic meter. Annual CPI (consumer price index, to account for inflation) adjustments will continue to be made consistent with the CA.

MWSS’ other concessionaire, Maynilad Water Services Inc., earlier won its arbitration case, but the regulator deferred implementation of its new water rate. This prompted Maynilad to seek compensation of P3.44 billion for missed revenues from January 2013 to February 2015.