Maynilad mulls staggered increase

MANILA, Philippines - West zone water concessionaire Maynilad Water Services is willing to implement the approved increase in its basic charge on a staggered basis over three years to minimize the impact on customers, its chief finance officer said yesterday.

The water firm won the arbitration proceedings against the Metropolitan Waterworks and Sewerage System (MWSS) before the International Chamber of Commerce (ICC).

The ICC, in a decision dated Dec. 29, ruled in favor of Maynilad’s alternative rate rebasing adjustment that would result in a 9.8-percent increase in the 2013 average basic water charge of P31.28 per cubic meter, inclusive of the P1 currency exchange rate adjustment that the MWSS incorporated into the basic charge.

This translates to an average increase of P3.06 per cubic meter.

“Despite the two-year delay in the implementation (of the increase in basic charge), we are willing to stagger (the implementation) in three years,” Maynilad chief finance officer Randolph Estrellado said in a briefing.

He said the staggered implementation of the increase in the basic charge would still have to be approved by the MWSS board. The company hopes to implement the basic charge hike in three equal tranches beginning this year.

For the meantime, Maynilad would only be implementing the MWSS-approved increase of P0.38 per cubic meter in the foreign currency differential adjustment (FCDA) component of its water billing, a rate hike granted outside of the arbitration proceedings with the ICC.

The FCDA is a tariff mechanism that allows the concessionaires of the MWSS to cope with foreign exchanges losses or gains arising from payments of foreign currency-denominated borrowings used for expansion and improvement of services. It is expressed as a percentage of the basic charge. The MWSS regulatory office ideally reviews the FCDA quarterly.

Estrellado said that in coming up with an alternative business proposal during the arbitration process, Maynilad opted not to pursue several water sourcing projects but maintained that it would be able to fulfill its obligations within its concession area.

“We will make sure that in the next five years, our service obligations in our concession area would be met,” he said.

Assuming that the hike in the base rate would be implemented in a single tranche, household lifeline consumers using 10 cubic meters per month would experience a daily increase of P0.42 in the basic charge component of their water bill totaling P12.60 per month. Including all the charging components of the water bill – using the current FCDA – lifeline consumers would pay P127.17 per month, up from P120.15 per month.

Households consuming 20 cubic meters per month would experience a daily increase of P1.68 per cubic meter in the basic charge component of their water bill totaling P50.40 per month. Monthly all-in charges would thus rise to P476.79 per month from P426.25 per month.

In 2013, the MWSS rejected the applications of metro water concessionaires Maynilad and Manila Water Co. Inc. for increased base charges.

Instead of increasing water rates, the MWSS approved reductions in base water rates, which were supposed to be implemented in tranches in the next five years beginning 2014. – With Rhodina Villanueva