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Suspend rate hike, scrap CA with water firms, govt told

October 24, 2018

by IBON Media

The Water for the People Network (WPN) said that government should not accede to the ruling of an international arbitral court granting the Maynilad Water Systems, Inc. petition to collect its corporate income tax (CIT) from consumers.  The water rights group agreed that any impending water rate increase amid the ongoing dispute on pass-on CIT should be deferred. The group likewise urged the scrapping of the concession agreement (CA), which it said allows onerous grounds for price hikes.

The Singaporean Supreme Court finalized an International Chamber of Commerce (ICC) arbitration decision that Maynilad may recover its CIT through pass-on charges. Maynilad has demanded that the Philippine government pay Php3.4 billion in indemnification for non-recovery of its CIT for the period March 11, 2015 to August 31, 2016. This is after the Metropolitan Waterworks and Sewerage System Regulatory Office (MWSS-RO) refused to honor an arbitral decision favoring Maynilad while that for Manila Water remained pending.

As per CA with the Philippine government, both Maynilad and Manila Water took to international arbitration in 2013 to contest the RO’s rejection of their petitioned rate increases for the rate rebasing period of 2013-2018. The firms’ petitions included CIT recovery and other expenses unrelated to the delivery of water services.

For the period of 2018-2022, the MWSS Board has already approved the RO’s rate rebased tariffs, which again reportedly disallows CIT recovery. The MWSS-RO announced a staggered Php5.73 per cubic meter (cu. m.) rate increase for Maynilad and Php6.22/cu. m. for Manila Water. These are lower than the firms’ petitioned rates, wich for Maynilad still included the CIT.

The WPN urged the MWSS Board in a letter to uphold the decision to prohibit CIT recovery because it is unjust to consumers. “In the first place, it is very wrong to pass on the burden of paying the CIT to consumers,” said the group. The concessionaires are technically public utilities providing a very basic need such as water, said WPN. Aside from mandating the periodic alteration of basic charges through rate rebasing, the CA ensures the concessionaires’ steady flow of revenue and profit-making with other increases based on inflation, an environmental charge, and value added tax, noted the group.

WPN supports the MWSS-RO plan to suspend the impending rate hike this year should Maynilad insist on collecting indemnification from the government. “The amount being demanded by Maynilad alone could reach Php40 billion, tantamount to an increase of about Php5.00/cu. m. on current average tariffs. Any rate hike today is also insensitive due to the soaring prices of goods and services,” said the group. Inflation has risen to 6.7% in September from 6.4% in August.

Aside from pushing for the prohibition of the CIT and rate hike suspension, WPN stressed that strategically, government should review and repeal the CA altogether. “It is the basis of the enrichment of private water firms at the expense of consumers. Government should instead ensure control over water resources to have these safe, accessible and affordable for the public,” WPN said. ###