Regulator thumbs down water concession extension

Higher rate adjustments loom
 
THE Regulatory Office of state-run Metropolitan Waterworks and Sewerage System (MWSS-RO) has thumbed down proposals for the extension of the concession contracts for the East and West zones.

Estrella Zaldivar, MWSS Regulatory Office (MWSS-RO) deputy administrator for legal affairs, said the regulator deemed as too early any extension of the separate 25-year contracts of Manila Water Co. Inc. and Maynilad Water Services Inc.

“In so far as the MWSS-RO is concerned, our stand as of now is that entertaining talks on extending their concession agreement is too premature,” she said.

Manila Water and Maynilad, which handle the East and West zones, respectively, of the MWSS concession area, both sued for a contract extension as early as 2007.

Zaldivar said that both utilities cited their proposed increase in tariff rates and the impact these would have on their customers should these be collected over a shorter period of time as their main arguments for calling for a contract extension.

Extending both utilities contracts was also one of the options the MWSS considered in February this year when it came up with a resolution pertaining to tariff mitigating measures.

At present, MWSS’ concessio­naires are allowed to recoup their investments in their respective franchise area from their customers through adjustments in their tariff rates over a five-year regulatory period.

But officials from both conces­sionaires said that with the huge investments required to improve their water and wastewater facilities, they would need more time to recover these from consumers so as not to significantly jack up rates.

Manila Water plans to spend P187 billion, while Maynilad has set aside P178 billion for their respective capital expenditure projects over the next 15 years.

The new owners of Maynilad, which was saddled with heavy losses because of the 1998 Asian financial crisis, is practically starting from scratch, with only 15 years left remaining in its contract.

The DMCI-Metro Pacific Investment Corp. consortium won the bidding for the government’s majority stake in Maynilad in late 2006 after the Lopez group gave up the utility due to an impasse with regulators over rate adjustments.

“They were very much aware of that when they participated in the bidding. It’s only for the remaining period of 15 years. They cannot at the end of the day complain that they will just be able to recoup their investments for a period of 15 years,” Zaldivar said, referring to the new Maynilad owners.

“There was a lull in the implementation of capex projects that they were supposed to implement because of their financial difficulties when they went into rehab mode. There were some deferments in some capex projects to give way to the payment of debts,” she said.

In any event, the MWSS-RO official said Maynilad still has to “show that they will perform well in the performance of their targeted service obligations.”

She said this “may be an incentive for MWSS-RO to consider in deciding to extend their contract.”

In the case of Manila Water, Zaldivar said that while the Aya­la-led company has performed well in the East Zone, the regulator still needs more time to ascertain that extending the utility’s contract would be in the best interest of consumers.

“In so far as the Manila Water is concerned, you know for a fact that they have performed but we have to see to it that ultimately it will be the customers who will be greatly benefited and not just their profits,” she said. –Euan Paulo C. Añonuevo, Reporter, Manila Times