Manila Water recognized as public utility, tariff freeze until end-2022 in new concession deal with PH gov't

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Metro Manila (CNN Philippines, April 6) — Among the features of the government’s revised concession deal with Manila Water Inc. is its recognition as a public utility, Presidential Spokesperson Harry Roque said on Monday.

“’Pag ikaw po ay isang public utility, ito po ay isang pribilehiyo at hindi karapatan,” said Roque during a virtual briefing, saying this allows the concessionaire to be “more accountable” to government and the public.

[Translation: Your status as a public utility is a privilege and not a right.]

The agreement was modeled after the New Clark City joint venture agreement of the Bases Conversion and Development Authority for the development of water and wastewater infrastructure in the city, as advised by the Asian Development Bank.

In a disclosure to the local bourse Monday, Manila Water said the deal confirms the concession shall continue until July 31, 2037.

Justice Secretary Menardo Guevarra confirmed in end-March that the Metropolitan Waterworks and Sewerage System inked the agreement on behalf of the government. 

Roque said the deal also saw the removal of government non-interference clauses, which means authorities will no longer be liable when exercising its regulatory functions to protect consumers.

Also taken out in the new deal is the national government’s performance undertaking for future debt.

Wala na po yung provision na bagamat pribado ang mga kompanyang nagbibigay ng tubig…yung mga pagkakautang nila ay magiging pagkakautang pa ng ating gobyerno,” he explained.

[Translation: The provision that says the loans of water companies will also become the government’s debt even if they’re private firms has already been removed.]

The MWSS Regulatory Office must also review and approve all debts and expenditures of the concessionaire under the revised deal.

All fully recovered assets will be transferred immediately to the government to ensure no double payment will happen at the end of the contract, Roque said during the presentation.

Any Material Government Adverse Action has also been limited to the executive branch’s actions so that the national government will not be held liable for things outside its control.

Eh kung nademanda po ang mga water concessionaire at nagkaroon ng desisyon ang ating hukuman, eh bakit naman kinakailangang gobyerno ang managot dun kung meron naman talagang pananagutan ang mga concessionaires?” said Roque.

[Translation: If the water concessionaires are sued and the court already has a decision on it, why should government be held accountable for it if concessionaires really have liability?]

Consumers, meanwhile, will not be charged for the concessionaire’s corporate income tax unlike in the previous deal, Roque said. There will also be a tariff freeze until Dec. 31, 2022, which Manila Water said aims to “align with the government’s program to assist the disadvantaged sector and to contribute to the recovery of the economy post-COVID 19.”

Tariff adjustments for inflation will only be 2/3 of the consumer price index, unlike in the older deal which features a 100% inflationary impact. “Instead of a market-driven appropriate discount rate, Manila Water shall now be limited to a 12% fixed nominal discount rate,” he further explained.

The foreign currency differential adjustment was also removed under the new agreement, which would lead to much lower tariff hikes and protect the consumer from possible surges due to foreign exchange movements.

President Rodrigo Duterte previously ordered a review of the government's concession agreements with both Manila Water and Maynilad after finding what he described as "onerous" provisions in the old contracts.

The concessionaires earlier drew Duterte's ire after an international tribunal directed the government to pay them over ₱10 billion due to rejected water rate hikes in 2015. Eventually, both concessionaires said they will no longer ask for the refunds.

Guevarra said during the briefing that negotiations with respect to the government’s new concession agreement with Maynilad will commence “immediately.”

While the government would be proposing essentially the same terms and conditions in the deal with the East Zone concessionaire, Guevarra also acknowledged that Maynilad is differently situated from Manila Water, and that there may be several discussions on the possible modification of the terms and conditions of the deal.

In an email to CNN Philippines on Tuesday, Maynilad said it welcomes the opportunity to sit down with authorities to begin discussions on the revised agreement.

“Although we appreciate and support the objectives that government has expressed to justify the amended contract, because Maynilad is differently situated compared to Manila Water, we do not expect to have exactly the same terms,” Maynilad added.