February 20, 2015
MAYNILAD CALLS ON PHILIPPINE GOVERNMENT UNDERTAKING FOR MWSS’ REFUSAL TO IMPLEMENT ARBITRAL DECISION FOR RATE ADJUSTMENTS FOR RATE REBASING PERIOD COVERING 2013-2017
Maynilad Water Services, Inc. invoked today (February 20) a Philippine government undertaking to pay it for losses caused by the refusal of MWSS to implement rate adjustments, notwithstanding Maynilad’s having won in the arbitration with MWSS almost two months ago. In a letter to the Department of Finance, Maynilad said the refusal of MWSS to implement the new rates has resulted in very significant amounts of lost revenues to the company for the last two years, and continues to cause opportunity losses of at least Php208 Million for every month of delay.
Maynilad has expressed regret that it has come to this point, but claims that it was constrained to take this difficult step only after its pleas for the implementation of the Appeals Panel’s decision that was issued in December 2014 were repeatedly rebuffed by the current MWSS administration.
MWSS had informed Maynilad that it is holding back to ‘first ensure’ that Manila Water gets a ‘similar ruling’ from a ‘different’ panel but expressed the possibility of a Manila Water loss, which would result in a downward adjustment in the rate of Manila Water. “MWSS and the Regulatory Office never once told us that they would refuse to honor and implement the arbitral award unless it is consistent with the outcome of another arbitration where we are neither a party, nor have we played any part whatsoever,” Randy Estrellado, Maynilad’s Chief Finance Officer, said.
The two concessionaires operate independently of each other and are assigned their own service areas in Metro Manila and their surrounding municipalities.
Maynilad and Manila Water sought separate arbitration last year after the current MWSS administration rejected and re-interpreted unilaterally the compensation scheme which the government itself defined and promised the two concessionaires in the concession agreements (CA) that had been in effect for 17 years, when water service was privatized and finally improved.
MWSS, in its re-interpretation, claimed the two concessionaires were not its agents but are actually public utilities and must therefore, based on the Meralco decision, not be allowed to include their corporate income taxes in their rates.
According to the decision, which upheld the position of Maynilad, the CA explicitly and clearly defined the concessionaires as agents, and even said that the MWSS, in its case against the Freedom from Debt Coalition, admitted as much.
This being so, the decision said the Meralco ruling does not apply, adding that “it is normal business practice to factor in one’s corporate income tax in the price of one’s goods and services.”
What were calm waters before and an oft-cited global model of a very successful public-private sector partnership had turned unnecessarily turbulent. Worse, the same officials now refuse to honor a perfectly legal decision on a baseless pretext that it doesn’t want to confuse its consumers.
Going by the position of MWSS, the question we ask is: If Manila Water loses, will MWSS continue not to implement our rate adjustment?
While MWSS is the only government entity involved, the whole country would be affected especially in light of this administration’s efforts to attract foreign investors.
It is also chilling in the sense that MWSS positions itself above the law all for a populist stance.