power and water

In Duterte’s approved terms, government has more say in water rates

Lian Buan
'The non-interference clause, and its twin provision on indemnification for damages arising from such government interference, will have to go,' says Justice Secretary Menardo Guevarra

President Rodrigo Duterte has approved new terms and conditions that will give the government more say in setting water rates, according to Justice Secretary Menardo Guevarra who led the review.

Guevarra on Wednesday, November 11, confirmed that the result of the Department of Justice (DOJ) review, which Duterte has approved “in principle,” will remove the previous clauses that prohibited government interference in water-setting.

The concession agreements currently has a “non-interference” clause, which bars the government from interfering in the rate-setting mechanism of Manila Water, Maynilad, and the Metropolitan Waterworks and Sewerage System (MWSS).

Should the government interfere and such intervention would result in losses, the concession agreement has an indemnity clause, which compels government to pay up.

“The non-interference clause, and its twin provision on indemnification for damages arising from such government interference, will have to go,” Guevarra said.

Guevarra said Duterte approved the amendments to the contracts during a Cabinet meeting Tuesday night, November 10. 

Duterte approved “in principle the broad recommendations” to remove onerous provisions in the contract and “inclusion of new provisions that will improve the governance mechanism, foster transparency and equitability in rate setting, and reduce the government’s contingent liability,” said Guevarra during a Kapihan sa Manila Bay forum..

Guevarra said they will “soon sit down” with Manila Water and Maynilad to discuss the newly-approved amendments.

“We intend  to immediately schedule our negotiations with the two water concessionaires,” Guevarra said.

Guevarra said Duterte did not provide a deadline to the concessionaires. (READ: Legally yes, realistically no: Duterte’s powers to take over water operations)

What went before?

The DOJ led the review of these contracts after Duterte fumed at Manila Water’s arbitration win in November 2019, which entitled the water concessionaire to a P7.39-billion award for the non-implementation of rate hikes.

Both Manila Water and Maynilad said they have waived the results of their separate arbitral rulings which granted them P7.4 billion and P3.4 billion, respectively, but the DOJ went ahead with the review.

The MWSS followed suit and revoked the extension of the concession agreements, so instead of the contracts ending in 2037, they will end in 2022. 

The contracts were extended to 2037 during the Gloria Arroyo administration.

The prohibition on government interference in rate-setting was declared by the DOJ as “onerous” at the onset of its review, and forced Manila Water and Maynilad on the negotiating table. – With a report from Ralf Rivas/Rappler.com

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email lian.buan@rappler.com or tweet @lianbuan.