Water rate hike rejection sends wrong signal – Wallace

MANILA, Philippines - The rejection of the proposed rate hike of metro water concessionaires by the Metropolitan Waterworks and Sewerage System  (MWSS) sends a negative signal to investors, according to business consultancy group Wallace Business Forum.

In a report titled 8 Glasses A Day, the consultancy group said that if the rate rebasing is upheld, it would slow down the development of the local water sector.

“Here is a proven success story being threatened by changes that, if upheld, could do not only the concessionaires, but the general economy, great harm by the negative signal it will send to potential investors. If these changes are sustained it will put participation by the private sector in PPP (Public-Private Partnership) at huge risk,” the group said.

The group argued that the concession agreement stipulates that rates for water and wastewater services provided by concessionaires should be set at a level that would permit concessionaires to recover investments within their 25-year term.

The group said consumers  must shoulder higher water cost if they want services to be improved.

“There is understandable sympathy for those with little money who have to struggle to pay for water, and everything else, but the reality of it is we must have water and providing it costs money. And, sadly, whether you like it or not we must pay what something costs, not what we can afford,” the group said.

The consultancy group noted that Metro Manila water rates are already the lowest compared to 14 metropolises in the country.

The group said that prior to privatization, informal settlers would purchase water from vendors at P30 per drum. Today, the comparable warter prices are P1.70 to P4 per drum for the East Zone and P2 to P5 per drum in the West Zone.

“The Philippines is lagging behind in attracting investment. One of the reasons is changes of policy from one admin to the next, or even within an admin. This included contracts. Even if the public were suffering from an unfairly high tariff, but that’s what the contract allowed. That must be sacrosanct,” said the group.

Average basic water rates are suppose to go down next month after the MWSS Regulatory Office denied the petitions filed by water concessionaires Manila Water Co. Inc (East Zone) and Maynilad Water Services (West Zone)  to hike rates.

The MWSS board has approved a 29.47 percent downward adjustment on Manila Water’s 2012 average basic water charge of P24.57 per cubic meter, which would be implemented in five equal tranches of  -5.894 percent per year. Manila Water proposed a basic rate increase of P5.83 per cubic meter.

The board has likewise approved a negative adjustment of 4.82 percent on Maynilad’s 2012 average basic water charge of P30.28 per cubic meter, which would be implemented in five equal tranches of -0.964 per charging year. Maynilad requested for an P8.58 per cubic meter rate hike for 2013 to 2018.

MWSS acting chief regulator Emmanuel Caparas said the board decided to approve the downward adjustment in water rates as the two firms were unable to justify the need for higher rates based on their business and investment plans for the next five years.

The MWSS maintained that during the entire rebasing process, the MWSS Regulatory Office adhered to the Concession Agreement and followed the law.

Both concessionaired are seeking arbitration before Paris-based  International Chamber of Commerce (ICC) to challenge the rate rebasing.