power and water

Lower rates seen in new Manila Water, gov’t deal

Ralf Rivas
The new concession agreement removes provisions which allow Manila Water to charge consumers for corporate income taxes and forex adjustments

Customers of Manila Water are expected to shell out less for their water bills, as the Ayala-led company inked a new concession agreement with the government.

In a televised briefing on Monday, April 5, Presidential Spokesperson Harry Roque discussed highlights of the deal, which no longer contains “onerous” provisions found in the old concession agreement signed back in 1997.

The new deal removes the clause which allows Manila Water to charge customers for corporate income taxes and adjustment for foreign currency differential. 

It lowers tariff increases imposed on customers, as the revised agreement reduces the inflation factor to just two-thirds of the consumer price index adjustment. For instance, if inflation for the year is 3%, only 2% is factored in the computation for next year’s increase.

The new agreement, modeled after the joint venture of New Clark City’s water and wastewater infrastructure, also imposes a cap on increases in standard rates for water and wastewater.

A tariff freeze is also set in place until December 31, 2022, to assist customers amid the COVID-19 pandemic.

In addition, the new concession agreement removes the non-interference clause which was in the old deal. This means that the government will no longer be held liable for company losses when fulfilling its regulatory functions to protect consumers.

The material government adverse action or MAGA in the new deal likewise limits actions of the executive branch, “so that the national government is not liable for things outside its control.”

Manila Water was also recognized as a public utility company. Roque said this distinction makes the company more liable to the public.

“Kapag po ikaw ay isang public utility, ito po ay isang pribilehiyo at hindi karapatan,” Roque said. (If you’re a public utility company, that is a privilege and not a right.)

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Criminal charges

The Duterte administration had started negotiations for the new deal around the time when Manila Water and Maynilad Water Services won separate arbitration cases amid a water crisis in Metro Manila.

Manila Water won P7.4 billion through a Singapore court, while Maynilad won P3.4 billion.

Justice Secretary Menardo Guevarra said there are provisions in the new deal with Manila Water which effectively waive awards from the arbitration.

The government has yet to ink a new deal with Maynilad. Guevarra said the government will likely propose the same changes made with Manila Water.

President Rodrigo Duterte wants to charge the water concessionaires for the contentious 1997 deal. (READ: Ex-MWSS chief: Water deal not ‘onerous’ in 1997)

But with the new deal removing the questionable provisions, will the government still go after those who crafted the old one?

Guevarra has no definite answer for that yet, saying it is a different matter.

“Somebody has to put up a complaint before the Department of Justice or Office of the Ombudsman. Right now, we have not heard of any party that have filed, or are thinking of filing,” he said.

Shares of Manila Water traded flat on Wednesday, gaining some 0.1%. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.