Arbitration body to Manila Water: Cut basic water charge
Arbitration body to Manila Water: Cut basic water charge
The Ayala-led company is a public utility and therefore cannot pass on its corporate income tax to consumers, the arbitration panel rules

MANILA, Philippines – Manila Water Company Incorporated of the Ayala Group lost its in its arbitration proceedings against the Metropolitan Waterworks and Sewerage System (MWSS) after it was ordered to cut its basic water charge.

In September 2013, water regulator MWSS ordered the company to cut its rates by P1.45 ($0.03) per cubic meter. But the water firm, including Maynilad, said they will pursue legal options to assert the provisions in their contracts regarding rate-rebasing.

Thus Manila Water disputed the rate reduction before the International Chamber of Commerce (ICC).

The ICC appeals panel though slashed Manila Water’s basic water charge by 11.05%, equivalent to a decrease of P2.77 ($0.0623) per cubic meter.

 The basic water charge reduction would be staggered for 3 years.

A reduction of P1.66 ($0.037) per cubic meter would be implemented this year; P0.55 ($0.012) per cubic meter in 2016; and P0.55 ($0.0124) per cubic meter in 2017.

Manila Water is a public utility and therefore cannot pass on its corporate income tax to consumers, the arbitration panel also ruled.

Public utility?

Manila Water president and Chief Executive Officer Gerardo Alblaza Jr said Tuesday, April 21 that while the while the arbitration decision resolved specific issues raised by Manila Water, the company though is deeply concerned that it ruled the utility firm as a “public utility.”

Ablaza said the ruling differs significantly from the government’s original representation during the 1997 bidding for private sector participation in the operation of MWSS.

“That Manila Water will be an agent and contractor of MWSS which will continue to be the public utility. This decision fundamentally changes the concession agreement,” he added.

Ablaza said Manila Water will study the implications of the arbitral ruling on the treatment of corporate income tax.

“We’ll actively work with the government toward ensuring the sustainability of excellent service to east zone consumers under this new arrangement,” Ablaza said.

Manila Water provides water and wastewater services in the east zone of Metro Manila covering Makati, Mandaluyong, Pasig, Pateros, San Juan, Taguig, Marikina, and parts of Manila and Quezon City, as well as Rizal province. It also has projects through subsidiaries in Laguna, Pampanga, Boracay, and Cebu.

Meanwhile, west zone concessionaire Maynilad Water Services Incorporated  secured a favorable ruling from the appeals panel.

The ICC appeals panel upheld Maynilad’s alternative rate rebasing adjustment, which would result in a 9.8% increase in the 2013 average basic water charge of P31.28 ($0.71) per cubic meter.

This is inclusive of the P1 ($0.0223) Currency Exchange Rate Adjustment that the MWSS incorporated into the basic charge, translating to an average increase of P3.06 ($0.069) per cubic meter in its basic charge.

Maynilad was also allowed to recover its corporate income tax. In an earlier briefing, Maynilad said the provision for income tax recovery would make up P2 ($0.045) of the average increase in basic water charge.

Maynilad is co-owned by Pangilinan-led Metro Pacific Investments Corporation (MPIC) and Consunji-controlled DMCI-Holdings Incorporated.

Conflicting decisions

Because of these conflicting decisions on Manila Water and Maynilad, the MWSS would bring the decision to court.

“There is a need to settle this,” said MWSS Chief Regulator Joel Yu.

Yu added that the MWSS legal counsel will determine the proper court but Yu is hoping the matter will go directly to the Supreme Court.

“It will be very soon as there is a sense of urgency,” he added.

Maynilad services the west zone of Metro Manila covering Manila (all but portions of San Andres and Sta Ana); Quezon City (west of San Juan River, West Ave.) EDSA, Congressional, Mindanao Ave, northern part of the districts of Holy Spirit and Batasan Hills; Makati (west of South Super Highway); Caloocan; Pasay; Parañaque; Las Piñas; Muntinlupa; Valenzuela; Navotas; and Malabon, cities of Cavite like Bacoor and Imus and towns of Kawit, Noveleta, and Rosario. –

US$1 = P44.23

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