MWSS water rate rollback: Tentative, partial and inadequate

September 19, 2013

by superadmin

IBON Features | COMMENTARY | By Sonny Africa | The MWSS unfortunately basically still operates within the bounds of the defective anti-consumer concession agreements with liberal rate-setting schemes, business-biased dispute settlement, and weak regulation

The MWSS decision is welcome in being the first rollback since privatization in 1997. If implemented, it should give consumers some relief. The decision however is by no means final with the water firms already publicly declaring that they will bring their complaint on the decision to international arbitration as provided for in the concession agreement. In any case, the rollbacks are still not enough to make water in Metro Manila more affordable for the majority of poor and low-income consumers. The MWSS decision also does not appear to sufficiently tackle some 16 years now of expensive and overpriced water from the two concessionaires.

This situation most of all stems from how the government has, since 1997, limited its power over vital water services and, conversely, increased the power of private firms. Water privatization turns over control of the public welfare to big primarily profit-seeking corporations.

The MWSS unfortunately basically still operates within the bounds of the defective anti-consumer concession agreements, which in turn merely reflect the basically defective water privatization framework of the Ramos government. It was the Ramos administration which signed the agreements, which is now being continued by the current Aquino administration. The agreements are pro-concessionaire with liberal rate-setting schemes, business-biased dispute settlement, and weak regulation by the State of water services.

The arbitration process the firms want to enter into according to the concession agreement is tilted in favor of the concessionaires. The three-person appeals panel for a major dispute such as this is composed of one member designated by MWSS, another by the concessionaire, and a chairman mutually acceptable to both but designated by the International Chamber of Commerce. This pertains to two out of three members with a strong tendency to defend private profits even at the expense of the public welfare.

Moreover, the concession agreement includes a waiver of the right to appeal which prevents the parties from bringing arbitration decisions before any court or regulatory body. The costs of dispute settlement will also be passed on to consumers with the concessionaires’ share of costs treated as expenditures that can be added to water rates. The last major dispute in 2003, between MWSS and Maynilad, cost at least Php110 million.

Meanwhile, water remains unaffordable even with the proposed Php7.24/cubic meter rollback for Manila Water (reducing the basic charge from an average of Php24.57/cubic meter in 2012 to Php17.33/cubic meter) and the Php1.46/cubic meter rollback for Maynilad (from an average rate of Php30.28/cubic meter to Php28.82/cubic meter). As it is, water in Metro Manila takes up anywhere from 7-22% of the household budget of poor households. Aiming to reduce this to the United Nations Development Program (UNDP)-recommended standard of 3% of household expenses implies, as a rough approximation, that water rates should be at least halved or a reduction of at least Php12-15/m3 by the water concessionaires.

It is also not certain that any marginal rate reduction now will be maintained. The water firms cut rates by half in 1997 to stem public protest and facilitate the transition to privatized water but they started to increase rates rapidly starting in 2001. They are now some 550% (Maynilad) and 860% (Manila Water) more expensive than in 1997 and have outpaced inflation by 3-4 times.

Aside from being expensive, water is also still not available to everyone in Metro Manila especially among the water service areas’ poorest. The water firms committed to providing universal coverage after 10 years yet this has still not happened. The concessionaires’ claims of 95% (Maynilad) and 99% (Manila Water) coverage are bloated and based merely on the laying of water lines in communities and not on whether residents are actually connected or sub-connected.

The two water concessionaires have failed to provide affordable water to Metro Manila and have failed to ensure universal water coverage after 16 years. This is more than enough reason for the government to reassess Manila water privatization. The experience affirms the error of the decision to privatize water and then merely regulate it — weakly at that — while pointing to how water should have remained public with the government taking decisive efforts to improve services.

The recent MWSS decision, while welcome, falls far short of what is needed to ensure that the right to water is enjoyed by everyone. The rollback should be much higher taking into account the past 16 years of overpricing and unaffordable water. This can be established upon a public accounting of water rates since 1997. The private water firms also need to be put under stronger regulatory control under a quasi-judicial body that evaluates petitions for rate hikes, monitors water services, and conducts genuine public hearings on these. The long-term perspective needs to be of public ownership and control of the essential public service of water. This can begin with the takeover of the worst performing of the two concessionaires which also gives the government vital experience in providing water services.###