“Unjust and immoral pass-on charges manifest the failure of the Concession Agreement between Metropolitan Waterworks and Sewerage System (MWSS) and water concessionaires Maynilad and Manila Water to provide affordable water rates to the consuming public.” – Bayan Muna House Resolution No.39
By RONALYN V. OLEA
MANILA – Legislators vowed to conduct an investigation on how water companies set their water rates.
In a forum organized by the Water for the People Network (WPN), August 14, legislators expressed support for House Resolution No. 39 filed by Bayan Muna seeking to look into the process of determining the rates of water concessionaires Maynilad and Manila Water.
The resolution states that “unjust and immoral pass-on charges manifest the failure of the Concession Agreement between Metropolitan Waterworks and Sewerage System (MWSS) and water concessionaires Maynilad and Manila Water to provide affordable water rates to the consuming public.” The concession agreement was signed in 1997.
Among the charges being shouldered by consumers are the corporate income tax payments and operating expenses of the water companies, unimplemented projects, company sports activities and trips abroad. WPN reported that Maynilad and Manila Water have been passing on their P3.1 billion (US$71 m) annual income tax payments to consumers, for a total of P15.3 billion (US$350 m) from 2008 to 2012. Unimplemented projects amounting to P54 billion (US$1.22 b), meanwhile, have also been passed on to consumers, the group said.
House Minority Floor Leader Ronaldo Zamora said Congress can review the contracts between the MWSS and the two water companies. This is contrary to a recent statement by Senator Juan Ponce Enrile questioning the authority of Congress to look into the concession agreements.
“Are contracts inviolable?” Zamora asked. “We want to see if requirements for a good contract were met,” he said, referring to the concession agreements.
Zamora said that while the public is not a party to the concession agreements, consumers have the right to participate. “Contracts should not violate public policy,” he said.
Both water companies have cited the concession agreements as basis for setting their water rates.
Under the concession agreements, Maynilad and Manila Water are allowed to recover costs incurred in operations and maintenance, investments, and concession fees payment, over and above the rate of return. Every five years, the companies undertake the tariff-setting mechanism called as “rate rebasing.”
Bayan Muna Rep. Neri Javier Colmenares said transactional politics were at play during the signing of the concession agreements.
“What kind of contract will allow a private company to expand [its operations] using people’s money?” Colmenares, also senior deputy minority leader, said.” It seems we, the consumers, are the capitalists but we do not get any share in the profits.”
According to former Bayan Muna Rep. and WPN convenor Teddy Casiño, the net income of Maynilad from 2007 to 2011 stood at P17.1 billion (US$391 m) while Manila Water raked in some P16 billion (US$366 m) in the same period. He added that the return on equity for Maynilad is at 48 percent and 19 percent for Manila Water. The figures, Casiño pointed out, are greater than the rates of return of power, telecommunications and real estate development companies.
Rate rebasing not transparent
Meanwhile, lawyer Jun Francisco lamented that the process of rate rebasing is not at all transparent.
“It is difficult to access documents regarding the rate rebasing process,” Francisco said during the forum.
The two companies already submitted their five-year plan and proposed rate hikes to the MWSS-Regulatory Office. The regulatory agency is reviewing the plan to determine whether the proposed rate adjustments are justified. Renato Reyes Jr., secretary general of Bagong Alyansang Makabayan (Bayan), said the MWSS is expected to issue its decision on rate rebasing soon.
Francisco said the process is not open to public scrutiny. He is hopeful, however, that the MWSS would come up with a decision favorable to consumers. “The public can pressure MWSS to do what is right,” he said.
Estimated rate hike for Manila Water’s basic charge is P5.83 cubic meter and P8.58 for Maynilad. Including other charges, Manila Water consumers consuming 30 cubic meter per month needs to shell out P234.30 (US$5.35) more. Maynilad consumers with the same consumption have to pay an additional P342.30 (US$7.83) in their monthly bill.
Francisco said the water companies are planning to seek arbitration to question the MWSS-RO decision to remove the corporate income tax from the pass-on charges.
Under the concession agreements, all disagreements, disputes, controversies or claims that cannot be resolved through consultation and negotiation shall be settled through arbitration proceedings. The arbitration will be presided by a three-member panel composed of one representative each from the MWSS-RO, the concerned concessionaire and a chairman who shall be jointly appointed by the regulators and the concessionaire.
Article 12.6 of the Concession Agreement further states that the “Costs incurred by the Appeals Panel in connection with any proceeding (including the fees and expenses of panel members and legal, economic or technical consultants retained by the Appeals Panel), shall be apportioned between the parties as the Appeals Panel shall direct and the Concessionaire’s share of such costs shall be treated as an Expenditure.” This means that the cost of arbitration proceedings shall also be passed on to consumers.
Francisco said they would consider filing a petition before the Supreme Court to question the “unjust” charges.
Colmenares underscored the importance of congressional inquiry in gathering pertinent data. The resolution is pending with the Committee on Government Enterprises and Privatization.
Casiño blamed privatization as the culprit behind the skyrocketing water rates. “It is time to reverse the policy of privatization,” he said.
Gabriela Women’s Party Rep. Emmi de Jesus agreed, saying that privatization has transformed water into a commodity. “Sadly, water has become a commodity and there are companies amassing huge profits from commodification of water,” De Jesus said.