Water users saved from paying P3.4B

WHILE millions of Metro Manila households will pay more for their water supply starting next month, official incompetence or corruption may have inadvertently spared half of them the burden of paying some P3.42 billion uncollected rate increases.

The new rate hikes taking effect Aug. 13 in the service areas of Maynilad Water Services Inc. (west sector) and Manila Water Co. Inc. (east sector) have been approved by the Metropolitan Waterworks and Sewerage System to recover losses from foreign currency differential adjustments (FCDA) on their loans.

In a related development, the MWSS was ordered Monday by an arbitration tribunal to reimburse P3.42 billion to Maynilad. The amount represents rate increases that the firm missed collecting from March 2015 to August 2016 because the government withheld approval of periodic rate increases dating back to 2013 that are provided in its 25-year concession contract.

The arbitration initiated by Maynilad may be one ironic instance when lapses, incompetence, ignorance or even corruption of officials blocking utility rate increases benefited lowly Filipino consumers by having the government absorb the heavy burden in the end.

Being the losing party in the arbitration, the MWSS/government – not the water consumers – will have to pay the P3.42 billion to Maynilad in a manner to be negotiated with the private firm now holding the upper hand.

It is anybody’s guess how the government would try to recover that loss from consumers or taxpayers. It could, for instance, grant an accommodation to Maynilad and allow it to include corporate taxes in its operating expenses, and have another item to justify higher water rates.

But any attempt to pass on to the public the cost of the arbitration award could trigger a class suit. It is difficult enough explaining to consumers why they were excluded in the first place from the arbitration hearings  in Singapore when they were the real parties in interest.

As for the newly approved rate increases based solely on FCDA, for Maynilad they are: P0.13 more/cubic meter for consumption of 10 cu.m. or less each month; P0.48 more/cu.m. for 20 cu.m. or less; and P0.99 more/cu.m. for 30 cu.m. or more. For Manila Water, the monthly rate increases are: P1.46 for consumption of up to 10 cu.m.; P3.24 for an average use of 20 cu.m.; and P6.61 for 30 cu.m.

Low-income households consuming 10 cu.m or less are exempt from the rate increase and will continue to pay only P79.81 per month.

Maynilad Water, a private water concessionaire with the biggest customer base in the country, serves Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas, Malabon, and certain portions of Manila, Quezon City, Makati, and Cavite.

On the other hand, Manila Water serves the east zone that includes parts of Makati, Mandaluyong, Pasig, Pateros, San Juan, Taguig, Marikina, most parts of Quezon City, portions of Manila, and several towns in Rizal.

• Better skip Phl courts, seek arbitration?

THE DEFEAT of the government in the MWSS-Maynilad arbitration recalls a number of such cases where the Philippine government had consistently not fared well. Some previous setbacks:

+ The contract for the Laguna Lake P18.7-billion dredging project was signed with a Belgian firm during the term of then President Gloria Arroyo. Her successor Noynoy Aquino unilaterally annulled it before the contractor could begin working. The Philippines lost in the arbitration – ending up paying big bucks for nothing. 

+ The NorthRail project linking Manila and Clark Freeport was launched with a $500-million loan from the China Eximbank under a contract also signed during the Arroyo administration, but similarly cancelled by President Aquino. The Philippines had to pay back the loan, without anything to show for it, otherwise it would be in default with disastrous effects on its credit rating. The Chinese contractor initiated arbitration and the tribunal ruled the Philippines liable.

+ In another arbitration, a foreign investor attached or levied on Philippine consular offices in the United States. The Philippine government had to scrounge for funds. End result: State financing firms/banks provided the money and the government became the controlling interest in the MetroRail Transit Line 3.

+ In the construction of NAIA Terminal-3, its builder Philippine International Air Terminals Co. (Piatco) that was being booted out sought arbitration to protect its rights under a 25-year concession contract to build and operate NAIA-3. Its German partner Fraport AG also sought separate arbitration in the US. The noisy dispute was settled only after the Philippines paid Piatco P3 billion.

The case that the Philippines filed with the UNCLOS permanent court of arbitration at The Hague on South China Sea issues was different in at least two aspects: (1) the Philippines won, but (2) there was no enforcement mechanism (and political will) to back it up, factors that have diminished the value of that victory.

In two arbitration cases cited above, there is an enforcement mechanism: the New York Convention of 1958 which binds all signatories – among them the Philippines – to enforce arbitral awards rendered in Convention countries. The Philippines happens to have assets in other countries where the awards (or decisions) may be enforced.

In the MWSS case, Maynilad wisely side-stepped the legal rigmarole in local courts and initiated proceedings in the arbitration tribunal of the International Chamber of Commerce in a bid to enforce the Philippine government’s sovereign guarantee.

And Maynilad won. Note that an arbitral award takes effect the moment it is issued. If it wants, the winner can file a petition to enforce in any country or countries where the loser has leviable assets.

* * *

ADVISORY: Postscript archives can be accessed at www.manilamail.com. Follow us on Twitter as @FDPascual. Email feedback to [email protected]