Gov’t should spare consumers from water firms’ Php82-B back charges

October 3, 2017

by IBON Foundation

As the Philippine government launches Consumer Welfare Month, the Water for the People Network (WPN) warned against impending unreasonable water rates should government yield to the monetary demands of Maynilad Water Services Inc. and Manila Water Company. The network said that the Supreme Court decision that public utilities cannot pass on their corporate income taxes as charges to consumers should apply to the water sector.

Maynilad and Manila Water customers face an Php82-billion additional burden as the private water firms took to local and international arbitration courts after their petitions for rate hikes were denied by the Metropolitan Waterworks and Sewerage Sytem (MWSS).

During the third rate rebasing or determination of indicative rates conducted in 2012-2013, Maynilad and Manila Water proposed tariffs of Php8.58/cubic meter (cu.m.) and Php5.83/cu.m., respectively, based on their past and projected expenses. Afterwards, the MWSS ordered lower tariffs after disallowing the water firms’ pass-on charges of corporate income tax and other expenses unrelated to water services such as donations and that for rest and recreation.

This July the international arbitral tribunal decided that Maynilad could demand of government Php3.42 billion for revenue losses due to the MWSS determination, while the decision on the case of Manila Water demanding Php79 billion remains pending. This is on top of other amounts which the companies wish to collect to cover for their supposed losses for not having been allowed to charge their petitioned rates. According to reports, government is studying its next move with regard to the arbitral decision on Maynilad, whose demand to charge its petitioned rate has also been recently granted by a local court.

WPN said that in light of the forthcoming rate rebasing period, Maynilad and Manila Water’s rate petitions may include the above amounts. The MWSS should stand its ground against counting corporate income taxes and expenses unrelated to the provision of water services as valid expenditures that should figure in consumers’ water bills, the network said. It also supported a resolution by progressive lawmakers invoking an SC decision in the case of the Manila Electric Company (Meralco) in 2002. According to the SC, public utilities’ corporate income taxes and expenses unrelated to utility services should not be passed on as charges to consumers. Based on this, the highest court ordered Meralco to refund the amount it overcharged  consumers for many years.

Its concession agreements with the water firms compel the government to honor financial obligations with its private partners, which result either in higher user fees or additional taxes for consumers. The concession agreements also allow the private companies to sue government through international courts when their business interests are threatened. According to WPN,  the concession agreement should be rescinded for undermining public interest in favor of corporations that have turned water services into a profit-making venture. (end)