The Philippine government is yet to start negotiations with water concessionaires, Maynilad Water Services Inc. and Manila Water Company Inc., regarding their new concession agreements (CA) with Metropolitan Waterworks and Sewerage System (MWSS).

In a text exchange, Maynilad President and Chief Executive Officer Ramoncito S. Fernandez said the government is supposed to consult with concessionaires regarding the updated water contracts, but this is yet to happen.

“We expect that a fair and objective review will be concluded at the soonest possible time,” Fernandez further said.

For her part, Jennifer Rufo, head of corporate communications at Maynilad, said no schedule has been set yet as to when concessionaires will be consulted about their contracts.

“As for Maynilad, from what I know, there is no schedule yet,” she told Business Bulletin, adding that the state-led CA review committee is supposed to consult Manila Water first.

Manila Water officials were also sought for comments on this matter, but they are yet to reply.

In November last year, Justice Secretary Menardo Gueverra said President Rodrigo Duterte already approved the amended CA.

This was nearly a year since Duterte ordered the Department of Justice (DA) to come up with new CAs between MWSS and its concessionaires because the existing ones contained “onerous provisions” that are disadvantageous to the government and the public.

Guevarra, at the time, said the most notable onerous provisions under the CAs “were the prohibition against government interference in rate-setting and the provision on indemnity for possible losses in the event of such government interference”.

In early 2020, former MWSS Emmanuel Salamat said that he was hoping that the new contracts will be released soon because this will dictate Manila Water and Maynilad’s investment commitments.

“It should be released this year otherwise we will find it hard to implement our water projects,” Salamat told Business Bulletin.

When asked the same question last week, Fernandez also said: “uncertainties, prolonged at that, always have repercussions.”

In a separate interview, MWSS Chief Regulator Patrick Ty agreed that it would be ideal for concessionaires for the amended CA to be released soon or at least before the next rate rebasing period.

This, since the preliminary works on the next rate rebasing period are going to start in the latter part of the year, and Maynilad and Manila Water have until March 31, 2022 to submit their respective rate proposals.

Pursuant to the existing concession deals, rate rebasing is a review of water utilities’ past performance and the projection on their future cash flows.

Done every five years, the review is supposed to set the water rates at a level that would allow both Maynilad and Manila Water to recover their expenditures and earn a rate of return.

However, under the current rate rebasing period, which will end in 2022, Maynilad and Manila Water were only able to implement the first tranche of their staggered four-year rate hike.

Last year, both companies decided to defer the implementation of the second tranche of the water rate hike after being at the receiving end of Duterte’s ire. Then both companies deferred it again for this year to ease the impact of COVID-19 pandemic on the consumers.

This means that the next rate rebasing period will be crucial because whatever Maynilad and Manila Water weren’t able to recover and charge their consumers during the current one should reflect there. 

In a text inquiry, MWSS OIC Administrator Reynaldo Velasco said the consultation between the MWSS and the CA review committee is already done with regards to the new water contracts.

However, he won’t provide the changes applied in the new water contracts or whether or not they will have a new rate-setting scheme.

“Let’s just wait for the final agreement,” he said, adding that he is hopeful that the new CAs will be released by the end of this month. 

Source: Manila Bulletin (