MWSS-Mla Water arbitration nearing conclusion – official

MANILA, Philippines - The Regulatory Office (RO) of the Metropolitan Waterworks and Sewerage System (MWSS) said the agency’s arbitration with Manila Water Co. Inc. (Manila Water) is nearing its conclusion.

Chief regulator Dr. Joel Yu said the confidentiality rules governing arbitration proceedings are still in force and that the agency would continue to respect them.

He added MWSS would make proper disclosure to the public as soon as a final arbitral award is received.

As to the arbitration with Maynilad Water Services, Inc. (Maynilad), Yu maintained that MWSS-RO has suspended the implementation of the water tariff adjustment notwithstanding the release of the final arbitral award to ensure “just and equitable” water rates for the consumers.

Yu expressed concern over remarks that the arbitration between MWSS and Manila Water has no bearing on Maynilad, which insists on implementing the arbitral award in its favor. “The plain fact of the matter is that both arbitrations involve identical issues – whether or not the concessionaires are public utilities, and whether or not they may pass on their corporate income tax or CIT to the consumers. These are highly critical issues that impact significantly on the rates of both concessionaires.”

He added “Maynilad’s new rate rests on the finding that it is not a public utility and that its CIT is a recoverable expense that may be passed on to consumers.

“On the other hand, a contrary finding in the other arbitration case will lead to the opposite result. Simultaneously enforcing these contradictory rulings will immediately give rise to an absurd scenario, where Metro Manila’s West Zone consumers are forced to bear the burden of Maynilad’s CIT, while East Zone consumers are relieved of a similar burden altogether. This will not only invite severe criticism from all sectors of civil society, but worse, may cause chaos. No responsible regulatory agency of government can or should allow that.”

According to Dr. Yu, the brewing controversy is not a simple case of enforcing an arbitral award that favors a private concessionaire. “As a regulatory agency, MWSS must always be mindful of its duties and obligations under its charter, primary of which is to determine and implement water rates that are just and equitable.”

On Maynilad’s accusations of bad faith, Yu said that MWSS takes the matter very seriously. He described the current stalemate with Maynilad as “a very sensitive and challenging situation that confronts the concession, and one which requires the parties to come together and rise above personal interests to achieve a fair, lawful and lasting solution that will benefit all stakeholders.”

Reacting to Maynilad’s claims of lost revenue from January 2013 to January 2015 and monthly loss of P208 million resulting from the non-implementation of the arbitration award in its favor, the chief regulator said that the same cannot be substantiated.

Yu explained, “Under the concession agreement, the rate for water is set at a level that will permit Maynilad to recover its investments not immediately, but over the full term of the concession, or until 2037. Between now and then, the rate will be reviewed at least four times during the rate rebasing exercises scheduled in the years 2017, 2022, 2027 and 2032. In other words, assuming there is in fact a shortfall in Maynilad’s recovery of its investments, the same will be addressed by way of a rate adjustment in a future rate rebasing exercise. There is no lost revenue, in effect. That is the model under the concession agreement and we are faithfully observing it.” – With Czeriza Valencia