Maynilad seeks 4.19% increase in water rate

MAYNILAD Water Services Inc. is asking the Metropolitan Waterworks and Sewerage System (MWSS) to allow it to catch up on pent-up inflation adjustments while the two parties continue to tussle on the implementation of an arbitration panel ruling.

Company chief financial officer Randolph Estrellado said via text message that Maynilad was seeking an inflation adjustment of 4.19 percent to cover the tariff increases it was entitled to but had not been able to implement.

The 4.19-percent inflation adjustment translates to an increase of an average of P1.31 per cubic meter, with other rate components such as the basic charge on “status quo.”

“That is to catch up on the CPI (consumer price index) adjustment of 2.5 percent for 2014 and 4.9 percent for 2015 that we are entitled to, less the 3.2 percent provisional adjustment we got in 2013,” Estrellado said, citing rounded numbers.

For lifeline consumers of 10 cubic meters a month, the increase in monthly all-in bill is P4.45 to P125.82 a month from P121.37 a month. Most residential customers consume 20 cubic meters a month. For them, the increase will be P16.84 to P447.70 a month from P430.86 a month.

“We are merely enforcing a right we are entitled to and still preparing our official reply to their re-interpretation of the Appeals Panel decision on our rebased tariff, which we do no accept and will not implement,” Estrellado said in a text message.

The MWSS’ directors are scheduled to meet today and may or may not approve Maynilad’s proposed inflation adjustment, which is expected to be taken up in the meeting.

Officials of Maynilad said they hoped the regulators would approve at least the inflation adjustment, which would also diffuse the impact on consumers instead of a full-blown implementation of the basic rate adjustment plus inflation adjustment.

Maynilad rejects the MWSS’ proposal to partially implement the rate awarded to the concessionaire by the ICC Appeals Panel following arbitration proceedings with the International Chamber of Commerce (ICC).

MWSS wants to increase Maynilad’s water rates by only P0.64 per cubic meter, including provision for foreign exchange adjustment called Cera (Currency Exchange Rate Adjustment), instead of the P4.06 per cubic meter awarded to Maynilad.

If Maynilad’s basic rate would increase by only P0.64 per cubic meter, the inclusion of other components would result in an overall increase of P1 per cubic meter.

In December 2014, the ICC Appeals Panel upheld Maynilad’s alternative rate rebasing adjustment, inclusive of the P1 Cera that the MWSS incorporated into the basic charge.

The panel also said Maynilad was entitled to include corporate income tax in its cash flow as part of its concession agreement with MWSS.

However, MWSS deferred the implementation of the awarded rate hike and said it would wait for the results of arbitration with Ayala-led Manila Water Co. Inc., the other water service provider in Metro Manila.

Manila Water lost its arbitration case. The Appeals Panel that ruled on its case disallowed the inclusion of corporate income tax in its cash flow.

MWSS now wants to take out corporate income tax in Maynilad’s rate as well. The regulator announced last week, “The Regulatory Office resolved to implement an adjustment with respect to the other items not related to CIT.”

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.

The water services concessionaire is asking the government to compensate it for the deferment of the arbitral award. That is, P3.44 billion for missed revenue from January 2013 to February 2015. That claim would increase by about P208 million a month for every month that MWSS does not fully implement the arbitral award.

“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,” Estrellado said.

That arbitral award, Estrellado noted, is final and binding, and the government itself waived its right to appeal when it subjected the dispute to arbitration.

“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 national government must step in to correct the situation,” Estrellado said.

To explain MWSS’ decision to partially implement the court decision for Maynilad, chief regulator Joel C. Yu said 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.

Maynilad services customers in the West Zone which covers parts of Manila, Pasay, Parañaque, Caloocan, Muntinlupa, Las Piñas, Valenzuela, and parts of Makati and Quezon City, including the municipalities of Navotas and Malabon.

Its franchise area also covers Cavite City, and its municipalities of Bacoor, Imus, Kawit, Noveleta, and Rosario.