Water rates to be cut, but not by much

MANILA, Philippines–Clients of Manila Water Co. Inc. and Maynilad Water Services Inc. are set to enjoy reductions in their respective water bills but to a lesser degree than expected.

An arbitration panel ordered Manila Water to implement rate cuts, although smaller than what the Metropolitan Waterworks and Sewerage System (MWSS) originally wanted, chief regulator Joel C. Yu said in a phone interview.

As for Maynilad, the company was granted an increase in the basic charge, but the discontinuance of rates to make up for foreign exchange fluctuations lowered the overall water charge, Yu said.

Manila Water and Maynilad are being asked to provide a schedule of rate reductions in line with the results of arbitration, MWSS said.

“The schedule they submit will be reviewed and then submitted for approval to the board of trustees, and then published before implementation. The earliest could be around mid-May,” Yu said.

By then, he added, the actual impact on monthly bills for Manila Water and Maynilad would be known.

Manila Water confirmed in a statement that an appeals panel ordered a reduction in its basic charge—11.05 percent, or P2.77 per cubic meter, would be cut from the P25.07 per cubic meter rate in the 2013-2017 rate rebasing period.

As a result, there would be a decrease in the basic charge of P1.66 per cubic meter in 2015, a decrease of P0.55 per cubic meter in 2016, and a decrease of P0.55 per cubic meter in 2017.

However, there would be an adjustment for inflation, which had been suspended since 2013. A consumer price index (CPI) adjustment of 4.19 percent would be made to the basic water charge in 2015, equivalent to P1.08 per cubic meter.

“With the CPI, which had been suspended since 2013, factored in, the all-in rate for 2015 would be P0.63 per cubic meter,” Yu said.

The all-in rate for 2016 and 2017 will depend on the CPI for those years, he said.

As for Maynilad, while the basic charge increased to P83.14 per cubic meter from P78.15 per cubic meter, the discontinuance of Cera (currency exchange rate adjustment) lowered the water charge from P89.05 per cubic meter to P84.10 per cubic meter.

The all-in rate could be about P1 per cubic meter for 2015, Yu said.

In 2013, the government rejected the applications of Maynilad and Manila Water to increase base rates. This prompted the water concessionaires to bring their cases for arbitration before the International Chamber of Commerce’s ICC.

Manila Water had a mixed reaction to the ruling, saying that, while it resolved issues raised by the Ayala-led company, the finding that it was a public utility was a source of concern.

“This, in our view, fundamentally changes the concession agreement which characterizes the company as an agent and contractor of MWSS. This was the government’s representation during the 1997 bidding for private sector participation in the operation of MWSS,” Manila Water president and CEO Gerardo C. Ablaza Jr. said.

Manila Water will study the full implications of the ruling, Ablaza said.

In September 2013, MWSS rejected Manila Water’s request for an increase of P5.83 per cubic meter, as well as its alternative proposal of P3.60 per cubic meter, and ordered it to lower its rates by P7.24 per cubic meter for the 2013-2017 rate rebasing period.

The water services provider contested the rate-reduction order and filed a dispute notice before the International Chamber of Commerce.

Also, Maynilad was not happy with the MWSS’ move. The company wants the full force of a ruling made on Dec. 29, 2014, when a court upheld the alternative rebasing adjustment of Maynilad for an average increase of P3.06 per cubic meter.

That should be a 9.8 percent increase in the 2013 average basic water charge of P31.28 per cubic meter.

At the time of the decision, MWSS had said it would wait for the ruling on Manila Water’s case before implementing any adjustment.

“We plan to oppose MWSS’ proposal to only partially implement the appeals panel decision when it is already final and executory. We will proceed with the arbitration in Singapore,” Maynilad CFO Randolph T. Estrellado said in a text message.