Metro water drops as dispute rages

Novaliches-Fairview residents in Quezon City find it ironic. They live around La Mesa Dam, Metro Manila’s main reservoir, but hardly get water from the tap. Since early January, weeks after private concessionaire Maynilad Water Inc. declared intent to cease operation, water spurts only two hours each dawn and dusk, from the usual four. President Arroyo had promised no service disruption while Maynilad sorts things out with the Metropolitan Waterworks and Sewerage System. But Maynilad cut supply by half supposedly due to El Niño. The US Oceanographic Service says, however, that the global weather phenomenon is about to end this month instead of the earlier forecast of July. So, what gives?

The answer lies in the quiet complex in Balara that houses both the MWSS and Maynilad. Behind its hushed walls is a raging legal battle over who should pay whom for Maynilad’s surrender of its concession.

Maynilad insists that it has been losing money all because of MWSS intransigence. It had sought permission months ago to double its charges to customers from P15.46 per cubic-meter to P34, but the latter granted only P26. It also asked for government guarantees of its multibillion-peso operating loans so it can borrow more for capital expenditures, but MWSS nixed that too. MWSS further reneged on a promise to enter into a separate agreement to fix busted sewers that Maynilad had not anticipated when it angled for the water service contract to half of Metro Manila in 1997. Now, on the fifth year of its 25-year concession, Maynilad wants out. For this, it quotes the contract, MWSS must reimburse it P19 billion in initial capital expenses and operating losses.

MWSS has a different story: It’s Maynilad that broke its promises. The firm had won the concession with a bid to charge customers only P4.96 per cu.m. When the Asian financial crisis struck months later, MWSS bent over backwards and allowed it to charge an extra currency-exchange adjustment that was not part of the bidding terms of reference. Since then, Maynilad’s total charges tripled to P15.46 per cu.m., although the terms also forbade increases within the first five years. About the latest rate increase, MWSS based the P26 on Maynilad’s 2001 business plan. It rejected a superceding 2002 plan because Maynilad had reneged on an accompanying commitment to plunk in P4 billion in fresh capital. A loan guarantee is simply out of the question, MWSS adds; only government loans may be guaranteed by the state. If Maynilad now wants to surrender its concession, MWSS says the firm is entitled to reiumbursement of only 75 percent of its initial capital, or P5 billion. But then, Maynilad hasn’ been paying for 11 months now its roughly P450-million monthly concession fee to MWSS. That’s about P5 billion by end-February, which makes them even. Maynilad, thus, is to get nothing.

Maynilad’s customers are wont to take the MWSS side. They wonder why, on the other side of town serviced by Manila Water Co., water supply is steadier but cheaper at P6.75 per cu.m., compared to Maynilad’s P15.46. This, even if MWC’s concession is mostly higher ground for which it needs to run 16 expensive pumping stations. Maynilad’s coverage is mostly lowareas for which it uses gravity for free. (MWSS allowed MWC to increase to P13, coinciding with Maynilad’s P26, starting this month’s billings.)

Could it be a question of management, customers ask. MWC’s non-revenue water (NRW) - supply lost to theft and leaks - has dropped from 36 percent in 1997 to 17 percent in 2002. Maynilad’s was 68 percent in 2001, worse at 70 percent in 2002. MWC netted P180 million last year, while Maynilad lost billions as in past years. The tendency is to compare the Ayalas who run MWC with the Lopezes of Maynilad.

Maynilad naturally resents the comparison. It says its coverage area is wider than MWC’s, and it inherited more busted mains and leaky pipes when MWSS service was privatized. This meant spending more money up front to replacement and repair. Most of MWSS loans to expand services before 1997 went to Maynilad’s zone too. The firm inherited the obligations in the form of the P450-million monthly concession fee to MWSS, which in turn goes to the banks.

Maynilad’s concession agreement mandates the settlement of any major dispute in 60 days. Since the firm sent MWSS a notice to terminate its contract on Dec. 9, who’s to pay whom should have been laid to rest on Feb. 9. But as with all Philippine legal proceedings, this one appears headed for the long haul. It took a whole year for MWSS and MWC to settle a minor dispute in 2001.

The International Chamber of Commerce has designated Allan Phillip of Denmark to head the three-man arbitration panel. Maynilad nominated Antonio Picazo as its representative; MWSS tapped retired Justice Florentino Feliciano. But Maynilad is contesting Feliciano’s presence on the grounds that, having served in the Marcos-appointed Meralco board that kicked out the Lopezes in 1973, he could be biased. Only on Mar. 20 will MWSS and Maynilad begin to argue their cases.

At the end of the day, though, customers around La Mesa couldn’t care less which side wins. All they want is water in sufficient supply for the money they pay.

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