Maynilad ignoring MWSS warnings

Of what use are government regulators if regulated private utilities don’t follow them anyway? The question surfaced in the wake of billions of pesos in unauthorized charges of Maynilad Water Services Inc. to millions of consumers.

Records show that as early as the first week of March, the Metropolitan Waterworks and Sewerage System regulatory office had admonished Maynilad about its overbillings. But the utility brushed aside the warning, saying it needs the collections "to ensure that water service would not be interrupted." Just the same, supply to Metro Manila’s west zone has dropped since January to only half the usual, which already was insuffi-cient to begin with. In Quezon City’s Novaliches-Fairview belt that straddles La Mesa dam, Metro Manila’s main reservoir, water drips from the tap only two hours each at dawn and dusk, from the usual four hours. In Manila’s Tondo district farther west, there’s hardly any drop at all.

MWSS chief regulator Eduardo Santos wrote Maynilad president Rafael Alunan on March 3 to stop charging P4.21 per cubic meter in accelerated extraordinary price adjustment (AEPA) and another P4.07 per cu.m. in foreign currency differential adjustment (FCDA).

Santos reminded Alunan that Maynilad was authorized to collect the AEPA only up to December 31, 2002. He cited MWSS Board of Trustees Resolution 487-2001, which states: "Implement a rate adjustment of P4.21 per cu.m. during the period 15 October 2001 to 31 December 2002 to recover the foreign exchange losses incurred from 1 August 1997 to 31 December 2000."

Likewise, Santos said, MWSS allowed Maynilad to charge the FCDA only to recover forex losses from payment of roughly P217 million monthly concession fees. But since, citing operations losses, stopped paying concession fees since March 2001, "there are no forex losses to compensate or recover." Santos cited another item in the MWSS resolution, which defines: "The FCDA means the rate adjustment mechanism for the recovery or compensation on a current basis, subject to quarterly review and adjustment by MWSS when necessary, of accrued forex losses/gains beginning 1 January 2002, arising from MWSS loans and any concessionaire loans."

Despite the clear deadlines and conditions of the provisions, Alunan replied more than a week later that "we disagree with the suppositions in your March 3 letter. The language and intent of the provisions that you cited belie your suggestion that we should no longer be entitled to collect the AEPA and FCDA."

Alunan also said that stopping the collections would disrupt the ongoing arbitration of the the dispute between MWSS and Maynilad that led to the latter’s return of its concession last December 9. If it is proven that Maynilad incurred billion-peso losses and thus is surrendering its concession because of MWSS’s fault, the latter would reimburse it P19 billion in capital and operating expenses. If it’s proven that Maynilad was at fault, MWSS would reimburse it only P5.5 billion, or 75 percent of its initial capital. Since Maynilad has racked up P5.2 billion in arrears of concession fee payments, that would make it even with MWSS.

MWSS trustees told The STAR yesterday, however, that arbitration has not even begun because of Maynilad’s alleged delaying tactics. The concession agreement mandates a 60-day period, or up to last February 7, to settle any dispute. But Maynilad at first questioned the jurisdiction of the arbitration panel constituted by the Paris-based International Chamber of Commerce. Later, it accepted the panel chairmanship of Prof. Allan Phillip of Denmark. But it then questioned the MWSS nominee for conflict of interest since retired Justice Florentino Feliciano supposedly was a Marcos appointee to the Meralco board which, like Maynilad, is controlled by the Lopez family. MWSS quietly accepted Maynilad’s nominee, Antonio Picazo. Just to get things going, the Office of the Government Corporate Counsel suggested retired Justice Bernardo Pardo for MWSS. Only last March 20 did preliminaries begin with the submission of the parties’ financial claims. MWSS officials suspect that Maynilad is delaying the arbitration so it can collect the unauthorized charges yet not pay concession fees to MWSS.

The regulatory office also updated The STAR on the amounts that Maynilad has collected so far from customers without authorization. The FCDA charges in 2001 reached P2.1 billion, plus another P2.8 billion in 2002 and P315 million from January-March 2003. Totalling P5.2 billion, the amount is what Maynilad should have turned over to MWSS to repay loans for the west zone drawn before MWSS privatized the water service.

Maynilad collected another P326 million in AEPA from January-March 2003, not P289 million as earlier reported.

Reps. Maite Defensor of Quezon City, Del de Guzman of Marikina, Joel Villanueva and Kim Bernardo-Lokin of CIBAC, and Loreta Rosales and Mario Aguja of Akbayan have asked the House committees on economic affairs and on government enterprises to investigate the total of P5.55 billion in overbillings.

Consumer groups banded under the umbrella Bantay Tubig are also preparing a class suit to stop further Maynilad overbillings and make it refund its seven million customers. As MWSS chairman, Public Works Secretary Bayani Fernando is also contemplating criminal charges of estafa or fraud.

Villanueva earlier chided the MWSS for being "too accommodating to Maynilad at the expense of burdened consumers. MWSS is so obliging that it agreed to shoulder the concession fees which should be paid by Maynilad."

MWSS trustees say, however, that both the regulatory and corporate offices have been sending demand letters for Maynilad to pay up the concession fees and other debts, just that the private firm keeps ignoring them. Thus, the question again: What are regulators for if the regulated don’t obey them? Or better still: Who does Maynilad think it is?

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