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Rate hike for Maynilad customers approved: Looming increase in water rates to burden consumers more

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Amid soaring prices, the MWSS Board of Trustees has given the nod to higher water rates for Maynilad Water Systems Inc.

This and impending Manila Water Company, Inc. rate increases are bound to burden consumers anew, said water rights group Water for the People Network (WPN).

WPN urged the Metropolitan Waterworks and Sewerage System-Regulatory Office (MWSS-RO) to suspend the hike so as not to aggravate the difficulty of millions of low-income families in spending for their basic needs.

Approved by the MWSS Board is a Php5.73/cubic meter (cu. m.) hike for Maynilad as proposed by the MWSS-RO.

Meanwhile, the proposed increase for  Manila Water rates is Php6.26-Php6.55/cu. m.), which is set for deliberation within the month.

These figures are the supposed results of the rate rebasing process.

Every five years, government determines new water rates according to its review of the water companies’ petitioned rates vis a vis their past and projected expenses throughout the concession period.

Purportedly in consideration of consumers’ inflation woes, the MWSS-RO proposed for the increases to be collected in tranches, starting in October.

Maynilad’s approved rate hike schedule begins at a weighted average of Php0.90/ cu. m.

Manila Water’s rate hike begins at a weighted average of Php1.50.

WPN however said that regardless of the scheduled tranches, any addition to current expenses further constricts spending for poor households.

This includes millions of families whose incomes already fall way below the Php995 Family Living Wage (FLW) for a family of five. The daily minimum wage in the National Capital Region (NCR) totals Php512.

MWSS-RO computes that this October, the bills of households covered by Maynilad will increase by a net amount of Php6.53 for households consuming average 15 cu. m. per month and a net amount of Php13.68 for households consuming average 25 cu. m. per month.

For Manila Water customers consuming the same average volumes of water, rates increase by a net amount of Php9.68 and Php20.30, respectively.

Aside from the basic charge, however, WPN noted that the all-in tariff includes other fees such as the foreign currency differential adjustment (FCDA), environmental charge, and the value-added tax (VAT).

All-in tariffs are already at Php48.03/cu. m. for Maynilad and Php36.40/cu. m. for Manila Water as of July 2018.

The MWSS-RO claimed that Maynilad’s approved rate hike is much lower than the company’s Php11.00 petitioned increase, as is the RO’s recommended increase for Manila Water compared to the latter’s Php8.30 proposed hike.

This supposedly reflects the MWSS’ prohibition of the inclusion of the water firms’ corporate income tax and expenses unrelated to water services such as donations and recreation.

WPN however said that the agency’s refusal to publicly show the documents proving this–prior to the approval of the MWSS Board–underscores that the rate rebasing process lacks transparency and authentic public consultation.

During the 2013 rate rebasing process, public clamor versus the discovered inclusion of such items in water bills led to the MWSS-RO’s rejection of the water concessionaires’ petitioned rates.

Thus, per their concession agreement (CA) with the government, Maynilad and Manila Water subsequently appealed to international arbitration courts to demand compensation for lost revenues.

The courts have ruled twice in favor of Maynilad. Manila Water, which the international courts have turned down, has a pending case.

Consumers face more tariff increases in the future, WPN said, because of government’s privatization of water despite its being a public utility.

The group challenged the MWSS-RO to spare consumers of additional fees by stopping the hike.

WPN also stressed the urgency of scrapping the CA, reversing water privatization and instituting strong government regulation over all public utilities. #

Group to MWSS: Show us the numbers

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The Water for the People Network (WPN) expressed dismay that the Metropolitan Waterworks and Sewerage System – Regulatory Office (MWSS-RO) would not readily reveal the numbers involving water companies’ petitions for tariff increases in public consultations that the MWSS-RO itself convened this week.

The group said that by doing so, the government agency effectively hindered the consumers’ right to know.

Instead of genuinely consulting the people, it seemed to be conditioning the public to blindly accept the impending water rate hikes based on the petitions of the Manila Water Company (Manila Water) and Maynilad Water Services Inc. (Maynilad), said the group.

The WPN is composed of groups and individuals promoting people’s control over water services and resources.

A concession agreement (CA) between government and water concessionaires warrants the rate rebasing process every five years.

The process pertains to the determination of new tariffs based on the Manila Water and Maynilad’s past and future expenses, as well as a rate of return that will allow the firms to recover their investments.

The MWSS-RO has conducted public consultations before and during the past rate rebasing periods purportedly to grasp the public pulse with regard to the implementation of new tariffs.

The private companies’ petitions have historically been approved, resulting in water rates increasing manyfold through the years, except during the 2013 rate rebasing period.

In September 2013, the MWSS prohibited Maynilad and Manila Water to collect their corporate income taxes and company incentives such as recreation and travel expenses through pass-on charges.

The rate rebasing results reflected amounts lower than both companies’ petitioned rates.

Teddy Casiño, WPN spokesperson, said, “Show us the numbers. If water regulators truly prioritize public interest and want consumers involved in the rate rebasing process, they should make information in Maynilad and Manila Water’s petitions readily available to the public. Otherwise, these public consultations are a PR gimmick.”

During this period’s rate rebasing public consultations, water regulators and the consultants they hired to review water concessionaries’ proposals were reluctant to share pertinent details such as the rate increases requested and basis for the rates such as company earnings, expenditures, and future expenses.

They were also hesitant to answer if questionable charges prohibited in the 2013 rate rebasing process were also included.

WPN said that without vital rate rebasing information from the MWSS-RO, water consumers will be left in the dark and made vulnerable to the water companies’ onerous fees.

The group urged water regulators to uphold their mandate to protect public interest and ensure that Maynilad and Manila Water will not pass on unwarranted expenses to already burdened water consumers. #

Stop water rates hikes until onerous fees resolved – WPN

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Advocacy group Water for the People Network (WPN) is appealing to the Metropolitan Waterworks and Sewerage System – Regulatory Office (MWSS-RO) to halt the ongoing rate rebasing process that is expected to raise water rates in Metro Manila and its environs, saying the basis for determining future water rates remains unresolved.

Concessionaires Maynilad and Manila Water continue to contest the MWSS-RO’s 2013 decision to prohibit water companies from passing on their corporate income tax and other questionable expenses to consumers.

Both companies took to international arbitration to protest government’s denial of their petitioned rate hikes, with Maynilad demanding government to pay Php72 billion in lost revenues and Manila Water demanding Php10 billion. Both cases are still pending in the courts.

WPN said that pending resolution of both controversies, any rate rebasing scheme would be conjectural and would burden the public with unjust and unnecessary increases in the midst of soaring prices.

“With continued lack of transparency in the rate rebasing process and petitions, water companies could make another attempt to pass on questionable charges to consumers through their water bills,” said former party list representative Teddy Casiño, a convenor of the WPN.

For the 2018-2022 rate rebasing period, Maynilad is seeking an estimated Php12 per cubic meter increase, while Manila Water is seeking and Php8 per cubic meter increase.

Rate rebasing pertains to the periodic computation of water rates based on government’s review of the concessionaires’ petitioned new tariffs.

The latter supposedly covers the companies’ past and projected expenses and a guaranteed rate of return.

However, due to water consumers and advocates’ clamor during the rate rebasing process in 2013, previous water regulators disallowed corporate income tax and other expenses unrelated to the delivery of water from being computed into the water bill.

Casiño said that since 1997 when water utilities were privatized, basic or average water tariffs have soared by as much as 596 percent under Maynilad and 970 percent under Manila Water, contrary to the promise of affordability.

Studies also showed urban poor families end up shelling out thousands of pesos beyond their means for either fetched water from the community pump or sub-meter water access in the absence of direct water connections.

“WPN hopes that the government will look upon the rate rebasing petitions with public interest foremost in mind,” Casiño said. He added that the network will guard against the inclusion in the bill of the Php82-billion uncollected funds which both private companies have pleaded international arbitration courts to demand from the government.

According to Casiño, government’s accession to the companies’ demands would certainly entail higher user fees. “This will double the burden on poor Filipinos who are already struggling with price hikes due to the new taxes,” he said.

Casiño challenged the government to not allow companies to impose onerous fees for profit. # (ibon.org)

On Consumer Welfare Month: 20 years of MWSS privatization, 20 years of violating the people’s right to water

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By Water for the People Network–The 20th anniversary of the privatization of the Metropolitan Waterworks and Sewerage System (MWSS) in August was considered a milestone by privatization proponents. The MWSS has often been used to showcase the supposed benefits of turning over water supply services to private corporations. But the start of government-declared Consumer Welfare Month is an opportune time to note that two decades of MWSS privatization has harmed the interests of the consumers and the general public. While ensuring huge profits for Manila Water Co. Inc. and Maynilad Water Services Inc., it has violated the people’s right to water, the various ways by which are listed below:

  1. MWSS privatization has resulted in soaring water rates as private concessionaires rake in massive corporate profits

Between August 1997 and August 2017, the basic tariff of Manila Water has soared by 969 percent. The basic tariff of Maynilad, meanwhile, has ballooned by 596 percent. The all-in tariff, which counts the basic tariff plus add-on charges, for Manila Water has increased by 762% during the same period. For Maynilad, it has jumped by 548 percent.

This translated to enormous profits with a combined accumulated income of Php94.5 billion from 2000 to 2015. Such soaring rates and massive profits for Manila Water and Maynilad were made possible by the concession agreements (CA) they signed with MWSS. Tariffs reflected the impact of inflation, adjustments in the foreign exchange rate, and the concessionaires’ petitioned basic charge which would allow them to supposedly implement their business plan and achieve a guaranteed rate of return in the succeeding five years.

Privatization guaranteed the profits of Manila Water and Maynilad not only by allowing them to pass on all the risks of running a business to the consumers. Privatization also legitimized the collection from the consumers of onerous and questionable charges by MWSS concessionaires.

During the last rebasing in 2013, it was exposed that Manila Water and Maynilad had been including questionable items in their application for new rates. As in previous rebasing exercises (2002 and 2007), they passed on to clueless customers the costs of their corporate income tax (CIT), unimplemented projects, advertising, donations, and recreation.

  1. MWSS privatization has seriously undermined the power and mandate of government to regulate the private concessionaires to protect public interests and welfare

The last rebasing also exposed a key feature of MWSS privatization which is how the power of the state to regulate businesses to protect public interest is greatly undermined. When the Regulatory Office (RO) prohibited the concessionaires from passing on their CIT and other questionable charges to the consumers, Manila Water and Maynilad promptly challenged the decision through international arbitration. This is a mechanism provided by the CA to settle disputes between the concessionaires and MWSS on the interpretation and implementation of the contracts’ provisions, including on the setting of rates. It is a secretive and undemocratic process that includes only representatives of MWSS and the concessionaires and without any public participation. It is being chaired by an unaccountable foreign third party that also represents big business interests.

Filipino taxpayers now face the possibility of shouldering as much as Php82 billion in additional burden if the concessionaires are able to secure favorable decisions from international arbitration. Already, the arbitration panel that heard Maynilad’s case ordered government to pay Php3.4 billion. These amounts represent the supposed losses of the concessionaires when the RO disallowed the continued collection of the CIT and other questionable charges. As stipulated in the CA, government has committed to pay for these supposed losses through what is called sovereign guarantee.

As early as 1998 or a year into privatization, Manila Water had already sought international arbitration to compel the RO to increase the firm’s rate of return contained in its original bid. Aside from the arbitration mechanism, concessionaires also resort to blatant arm-twisting to force favorable decisions from government. In 2001, the original investors of Maynilad blackmailed government to amend the CA to allow it to increase rates or else it would terminate the contract.

  1. MWSS privatization has further weakened the people’s right to water amid questionable claims by the concessionaires of improved water services

The soaring water rates and onerous charges being imposed by Manila Water and Maynilad have effectively marginalized poor households from enjoying the right to access water for domestic use. Amid depressed wages and chronic unemployment, water services along with other basic daily necessities, have put increasing pressure on ordinary families’ budgets.

While both concessionaires claim almost universal water supply coverage, poor communities in their service areas do not enjoy the same quality of service that well-off customers like richer households and commercial areas have. Instead of individual connections, poor communities have to make do with bulk meter connections. Aside from compromising the safety and quality of water, it is also not unusual that the water supply in these poor communities is not available 24/7.

Based on the latest available data, the number of persons per connection for Manila Water is seven, and nine for Maynilad, indicating the prevalence of bulk connections – mainly among urban poor communities – in the MWSS concession areas. Thus, while the concessionaires claim outstanding performance (which the RO apparently could not even independently verify), the truth is that many households, in particular the poor, are not individually connected to the water supply system, which is supposed to be the standard. The poor also end up paying more as block tariff rates apply on these bulk connections.

Aside from universal and 24/7 supply coverage, the concessionaires also promised to provide improved sewerage coverage, which they substantially failed to do amid limited investments despite skyrocketing water rates. In their original service targets, Maynilad committed to achieve 31% sewerage coverage by 2016 and 52% for Manila Water. As of December 2013 – the latest available data – Manila Water has only achieved 12% and Maynilad, 11 percent.

  1. MWSS privatization has deepened corporate and foreign control over vital infrastructure and key services in the country

From the onset, MWSS privatization has been an agenda of big corporate and foreign interests.  Foreign creditors World Bank, Asian Development Bank (ADB), and Japan Bank for International Cooperation (JBIC) pushed for the privatization of MWSS, which then owed them some US$800 million in debt. The World Bank’s International Finance Corp. (IFC) served as government consultant in MWSS privatization and designed the concession agreement.

The IFC is now an investor in Manila Water, raking billions of profits from a contract it designed itself. Manila Water is led by Ayala Corporation and United Kingdom (UK)-based United Utilities. Aside from the IFC, other foreign investors include Japanese giant, Mitsubishi Corp. as well as First State Investments of the UK, Singapore-based global fund manager Aberdeen Asset Management plc, and US-based equity mutual fund Smallcap World Fund Inc.

Meanwhile, Maynilad is currently controlled by Manny V. Pangilinan through the Metro Pacific Investments Corp. (MPIC) and DMCI Holdings of the Consunji family. MPIC , of course, is backed by  Indonesia’s Salim group. Other foreign interests in Maynilad are MCNK JV Corp., a unit of Japanese giant Marubeni Corp., and Lyonnaise Asia Water Limited, a unit of French firm Suez, one of the world’s largest water companies.

Water privatization is being challenged worldwide – from France where some of the first water privatization took place and where the world’s largest water firms are based – to Jakarta, Indonesia which privatized its water system the same year as Metro Manila and used the same model.

Water privatization must be reversed. There is no way out of the trap of exorbitant water rates and unreliable service for the poor unless the concession agreements with Manila Water and Maynilad are junked and the operation of the water supply system is taken over by a reformed public sector. # (Ibon.org)