Water rate hike stopped, as Maynilad eyes case against MWSS

Published by rudy Date posted on January 16, 2009

Maynilad Water Services Inc. is mulling legal remedies in order to push through with its botched rate hike this year.

In a press conference Thursday, Rogelio Singson, Maynilad president, said the company may exhaust legal actions to compel the Metropolitan Waterworks and Sewerage System (MWSS) to grant its mandated rate hike.

“We have [a] legal remedy, but hopefully we don’t go to that,” he said.

He added that the company was considering going through arbitration as provided for under its concession contract with the MWSS, which had flip-flopped on its decision approving a tariff adjustment for Maynilad and Manila Water Co. Inc. its concessionaires for the West and East Zone of Metro Manila and its outlying provinces, respectively.

The MWSS earlier approved a rate increase for both, in line with their rate rebasing exercises—a scheme prescribed by regulators that reviews the utilities’ spending program and the needed tariff adjustments for its implementation over a five-year period.

Singson said there may have been a violation in the utilities’ contract with the MWSS after the latter announced that there would be no rate increase this year, since it has already approved their tariff adjustments under their respective rate rebasing.

Manila Water’s rate rebasing was approved last year, allowing it to increase its rates by about P5 a cubic meter. For this year, the Ayala-led water utility’s mandated increase is about P6 a cubic meter.

Maynilad rate

On the other hand, Maynilad’s rate rebasing was only approved this year, after it was delayed because of the turnover to its new owners, the DMCI-Metro Pacific consortium, in late 2006.

The MWSS’ regulatory office in December 2008 had approved an average increase of P10.20 a cubic meter for the utility for 2009.

“There was an agreement that was resolved—prices, all the conditions, capital expenditure or capex program—they reviewed it, and they reduced it. It was just a matter of implementing the adjustment. So everything has been resolved. There were board resolutions that were provided,” the Maynilad president said.

Singson added that the MWSS’ decision to hold the company’s rate increase caught them by surprise as both parties were holding talks only for the possible staggering of its adjustment and not shelving it completely.

He said that without its rate hike the company would be hard pressed to implement much-needed capital projects this year, because it would have to cut programmed spending from about P8 billion to only P5 billion.

“The impact for Maynilad is P3 billion that means a reduction of 25 percent of our revenues,” Singson explained.

As a result, Maynilad would be compelled to cut back on its investments, daily services and expansion of water connections in its franchise area, he added.

Millions not served

At present, Maynilad serves the water needs of about 6 million customers, but the president said the number of its potential customers stands at 9 million, meaning there are still 3 million households or establishments in the utility’s concession without tap water.

Singson said without the company’s rate increase, these customers would have to continue to bear with more expensive water deliveries because they would not be able to extend their pipe network to them.

He added that the full impact of the P10.20 a cubic meter, or P130 a month average increase approved by the MWSS is not reflective of its face value as it is “socialized.”

At most, low-income households with an average consumption of 10 cubic meters a month, which represents 20 percent of Maynilad’s customers, would only have to shell out about P1.13 a day for the increase.

The bulk of the utility’s customers—those who consume 30 cubic meters a month—at around 60 percent of its customer base, would have to pay an additional P4.71 a day.

In contrast, water deliveries for areas without water connections have to pay P1,200 to P1,500 per month for low-income households consuming up to 10 cubic meters. For middle-income households, consumers would have to shell out P3,000 to P4,000 per month for water delivery. –Euan Paulo C. Añonuevo, Reporter, Manila Times

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