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Volume IV,  Number 8              March 21 - 27, 2004            Quezon City, Philippines


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A Closer Look at Our Water Bills

Metro Manila consumers not only suffer poor water service, they are also forced to bear onerous monthly charges made by private water firms.

By Arnold J. Padilla
IBON Features
Posted by Bulatlat.com

Thrust to the background by the termination dispute between the Metropolitan Waterworks and Sewerage System (MWSS) and Maynilad Water Services Inc. is the latter’s overcharging case. This, however, provides a glimpse of what private water companies have been collecting from hapless and clueless consumers.

On Feb. 12, 2004, the Arbitration Panel, tasked to settle the overcharging case MWSS against Maynilad, conducted its second meeting. The dispute stemmed from Maynilad’s illegal collection of the Foreign Currency Differential Adjustment (FCDA) and the Accelerated Extraordinary Price Adjustment (AEPA).

Maynilad has been collecting P4.07 per cubic meter in FCDA since Jan. 1, 2002 and P4.21 per cubic meter in AEPA since Oct. 15, 2001. This means that the Lopez-Suez consortium has been charging P8.28 per cubic meter in illegal fees on its 5.2 million customers (or 573,194 actual water connections as of 2002) in the West Zone area. Maynilad therefore has been accumulating almost P4.8 million from the FCDA and AEPA for every cubic meter of water used from its system.

Recovery mechanisms

To protect the “commercial viability” of Maynilad and Manila Water Company Inc. (the East Zone concessionaire), the MWSS has allowed the private water firms to implement the FCDA and the AEPA. These are rate adjustment mechanisms that would enable the concessionaires to recover or compensate foreign exchange (FOREX) movement arising from MWSS loans and concession fee payments.

The FCDA is a quarterly adjustment as a percentage of the basic charge to reflect the impact of the FOREX starting on Jan. 1, 2002. The AEPA, on the other hand, is a fixed rate (P4.21 per cubic meter for Maynilad and P1 per cubic meter for Manila Water) that the concessionaires can collect from Oct. 15, 2001 to Dec. 31, 2002 only. Maynilad, however, has continued billing its consumers the AEPA even after the collection period ended.

According to the MWSS, Maynilad is not allowed to collect the FCDA and AEPA because it has stopped paying government its concession fees since March 2001. When Maynilad and Manila Water signed their Concession Agreements with the MWSS in 1997, they agreed to shoulder the debt load of the water agency through payments of the concession fees.

Anti-people pricing scheme

Among the promised benefits of privatizing the MWSS are more affordable water rates, but the overcharging dispute exposed how privatization has actually resulted in onerous charges that consumers are forced to bear. The Concession Agreement provides various means that the concessionaires can use to hike water charges, which Maynilad and Manila Water have used to the hilt. In fact, the water firms have already increased their basic rates by 226 percent (in the case of Maynilad) to 348 percent (in the case of Manila Water) from August 1997 to January 2004.

For example, as sanctioned by the Concession Agreement, the concessionaires are allowed to automatically adjust their basic charge every year to reflect the annual adjustment in the consumer price index (CPI) as computed by the National Statistics Office (NSO). CPI adjustments hiked Maynilad’s basic charge by P2.29 per cubic meter and that of Maynilad by P1.23.

The Concession Agreement also identified several grounds that could affect the operations and viability of the concessions, which Maynilad and Manila Water can cite to implement the extraordinary price adjustment (EPA). The EPA is computed by the Regulatory Office and can be implemented once a year. Under EPA, Maynilad has increased its basic rate by 66 centavos per cubic meter while Manila Water by 45 centavos.

Meanwhile, the MWSS and the concessionaires amended their Concession Agreement in October 2001. Under Amendment 1, the MWSS allowed the water firms to recover FOREX losses through the FCDA and AEPA. But despite the implementation of the FCDA and AEPA, the MWSS still allowed Maynilad and Manila Water to collect P1 per cubic meter in Currency Exchange Rate Adjustment (CERA). Historically, the MWSS used the CERA to recover FOREX losses, but with the FCDA and AEPA, the CERA no longer serves any purpose.

Finally, the Rate Rebasing, conducted in 2002 and implemented starting January 2003, also led to higher water rates for MWSS consumers. Rate Rebasing is another mechanism introduced by the Concession Agreement to allow the concessionaires to recover historical capital, operating, and investment expenditures, and review future capital, operating, and investment plans. It is exercised every five years throughout the 25-year life of the Concession Agreement. The Rate Rebasing hiked Manila Water’s basic charge by P3.13 since Jan. 1, 2003. Maynilad refused to implement its rebased rates because of their dispute with the MWSS.

Aside from these items, the 8.7 million consumers serviced by Maynilad and Manila Water also shoulder the Environmental Charge, the Maintenance Service Charge, the Sewerage Charge, and the Value Added Tax.

Making water cheap

In spite of the huge increases in water rates since privatization, Maynilad and Manila Water have been performing miserably. Their own performance reports indicate this missed service targets on water supply, sanitation, and sewer coverage, very high rate of water losses, deteriorating infrastructures, etc.

Access to safe drinking water and efficient water services does not necessarily have to be costly. Water becomes exorbitantly priced when placed in the hands of profit-seeking companies who have no concept of social service and responsibility. Water can only become cheap when people, and not private business, exercise effective control over the whole water system. IBON Features / Posted by Bulatlat.com

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