The country’s largest water concessionaire Maynilad Water Services Inc. has asked the government to consider allowing a provisional water tariff increase to stagger the impact of rate adjustment needed to cover the indemnity claim already won through an arbitration process.
Last September, the Regional Trial Court (RTC) in Quezon City confirmed the decision of an international arbitration panel awarding Maynilad about P3.4 billion in indemnity for the non-implementation of tariff rate increases under its concession. The government, however, is still appealing this in court.
Jose Ma. Lim, president of Maynilad’s parent firm Metro Pacific Investments Corp., said in a recent briefing that he and Maynilad president Ramoncito Fernandez had initiated discussions with the Department of Finance (DOF) to explain their proposal.
“We have basically asked them to consider updating the ruling to take into account that time has already run from time of the ruljng to the end of September, the time we saw them…Secondly, we asked them to consider provisional increase or adjustment in the rate so that there are no further claims on government,” Lim said.
He said that the DOF was now reviewing the matter, which would still be subject to further meetings.
When asked how much provisional increase in tariff was proposed by the group, Lim said the group was still in the process of selling the idea to the government.
“It’s just a concept of provisional adjustment because the government has formally contested the RTC ruling on the implementation of the arbitral ruling. What we’re saying is even when it’s under protest or under appeal, allow a provisional adjustment so that the public is shielded from further claims,” Lim said.
Randy Estrellado, chief financial officer of Maynilad, added: “What we’re trying to communicate to them is: the more they hold the balance of what we already won, which is something they know, it will just increase the need for higher tariffs in the rate rebasing. It will be good if they are able to separate the mistake in the past versus what has to be done with the rate rebasing they are handling. We’re hoping that they get the message.”
Rate rebasing is the process of adjusting water rates every five years. The adjustment is based on the performance, expenses, earnings, unrecovered investments and service improvement plans of the water concessionaires.
Rate rebasing enables the gradual increase of water rates despite the massive, accelerated investments of the water concessionaires. This is because the process is based on a cash flow analysis or the examination of money inflows and outflows, through which the government ensures that the water concessionaires are not over-accumulating profits and losses. It also guarantees that full recovery of the concessionaires’ expenses and profits will only be possible when the concession agreement ends in year 2037.
In the last 10 years through 2016, Maynilad had spent P65.22 billion in capital expenditures, mostly to improve improving source and quality of bulk water and upgrading the distribution network.
Moving forward, Estrellado explained that bulk of the capital spending would go to improving water source, noting that Maynilad was working closely with government.
Maynilad has earlier warned of a looming water crisis if the Kaliwa dam won’t be competed by 2024. In the business plan submitted by Maynilad to the government, if there’s no significant progress in the construction of Kaliwa dam by 2021, the water concessionaire would start making plans to build a third water treatment plant in Putatan.