Manila Water ordered to pay P1.1 B for failure to provide water 24/7

Published April 24, 2019, 10:27 AM

by AJ Siytangco

By Madelaine Miraflore 

Manila Water Company, Inc.’s failure to maintain a 24-hour water service connection to its 1.2 million customers will cost the Ayala-led company a P1.134 billion as part of the penalty scheme the Metropolitan Waterworks and Sewerage System (MWSS) Board has decided to implement.

Manila Water President Ferdinand dela Cruz during a press conference at the Manila Water office in Quezon City, March 26, 2019. (Mark Balmores / MANILA BULLETIN)
Manila Water President Ferdinand Dela Cruz (Mark Balmores / MANILA BULLETIN)

Based on the recommendation of MWSS-Regulatory Office (MWSS-RO), Manila Water should pay the government P534 million in fine and an additional penalty of P600 million, which will be allocated for the funding of new water source.

While the firm accepts the penalties, its top official denied his company is the root cause of the water supply shortage almost half of Metro Manila recently experienced.

The recommendation of the MWSS-RO to impose appropriate penalties on Manila Water for its failure to comply with Article 10.4 of the concession agreement was approved Wednesday by the MWSS Board.

Under Section 10.4 of the Concession Agreement, Manila Water is required to meet its service obligations to provide 24/7 water supply to its consumers. It has failed to do so when it implemented low to no-water interruption in March after it saw its reserve water coming from La Mesa got depleted.

Right now, some Manila Water customers are still suffering from the unstable water supply.

The P1.134 penalty is on top of Manila Water’s self-imposed penalty that would cost the company as much as P500 million. It was recalled that Manila Water recently announced its voluntary and one-time bill waiver program for its consumers which began implementation in April 1.

Under the program, all consumers of the East Zone will receive a waiver equivalent to the first 10 cubic meters of their March consumption which will be reflected in their April bills.

Severely affected consumers or those consumers who experienced absolutely no-water service for at least seven days between March 6 and 31 will not be charged at all for their March consumption.

MWSS Administrator Reynaldo Velasco said the water crisis that proved costly to Manila Water highlighted the lack of strategic preparedness notably on the realistic allocation of water supply to Manila Water, the development of new water supply sources, and the much improvement of the Angat-Ipo-La Mesa tunnel and conveyance system.

“The water shortage was an eye-opener, and sad to say, the new MWSS Board inherited this lingering problem having assumed office only in February 2017. We are on a catch-up mode and it’s only this administration under President Rodrigo Duterte that we have seriously put on track a realistic and doable water security roadmap to ensure adequate water supply,” Velasco said.

MWSS Chief Regulator Patrick Ty had earlier said the MWSS is not mandated to impose fines and penalties, but there has been a firm order from President Duterte for MWSS to fix this issue and make sure somebody will be held accountable.

Because of the water shortage in the east zone concession, Duterte threatened to fire MWSS officials and terminate the concessionaires’ contracts of the government with Manila Water and Maynilad Water Services, Inc.

‘We are not the root cause’

Meanwhile, Manila Water President Ferdinand Dela Cruz said his company will abide by the decision of the MWSS to pay the financial penalty even if they are not “the root cause” of the depletion of water from Angat and La Mesa Dam.

Manila Water has an allocation of 1,600 million liters per day (MLD) from Angat Dam, which supplies 97 percent of Metro Manila’s water needs. With its demand at around 1750 MLD, it had to keep on tapping its reserves coming from La Mesa, which got depleted last month.

“We will abide by the MWSS decision to impose a penalty. While we are not the root cause for the inadequacy of the raw water supply coming from Angat Dam which we are mandated to treat and distribute, Manila Water, as agent and contractor of water services of MWSS, hold ourselves accountable for our inability to provide our consumers with the usual uninterrupted water service,“ said Dela Cruz.

“Our inability to provide our usual 24/7 water supply to some of our consumers is because Manila Water’s allocated water supply from Angat Dam is no longer sufficient for the total demand of the East Zone consumers. This raw water allocation has remained unchanged at 1,600 MLD since the concession started in 1997 when the East Zone had a population of only 3 million people,” he further said.

Today, Manila Water serves a population of almost 7 million people.

“Manila Water has strongly advocated for many years for the development of new water sources beyond Angat Dam, both to ensure sufficiency of water supply as well as resiliency in case of any calamity around the Angat Dam system,” Dela Cruz further said, pointing out that the development of new water sources is the responsibility of MWSS.

MWSS, for its part, said the root cause of the problem goes a long way, or exactly during the previous administration.

As part of its official report to the President on the water crisis, the MWSS has zeroed in on the root cause of the water supply problem that led to water shortage last March.

MWSS revealed that based on the comprehensive report of Manila Water, the company submitted as early as 2012 a proposal to build a water system facility for the East Zone, but former MWSS Administrator Gerardo Esquivel rejected the proposal.

Esquivel insisted that even without the proposed projects, “raw water supply of both concessionaires will be sufficient up to 2019 considering the expected operation of the Kaliwa Dam. However, the Kaliwa Dam Project was only signed last November 2018.

Manila Water income to go down

The other day, Dela Cruz said its water supply mess will have a “one-time hit” on the company’s bottom line.

This “one-time hit”, he said, should go up once the MWSS finalizes the penalties it should impose upon the Ayala-led company for falling short of its obligations to its customers.

“[Our profit] should go down based on what we projected for this year, not necessarily what we had last year,” Dela Cruz said after the company’s annual stockholders meeting held Monday.

Last year, Manila Water saw its net income improving only by 6 percent to P6.5 billion. This was supported largely by the steady performance of the company’s operations in Manila and then backed by the approval of its positive tariff adjustment and business plan.

Manila Water Chief Finance Officer Cecilia Cruzabra said that right now, the company is still “finalizing the numbers” at least for the first quarter of the year, but she also noted that the company’s water shortage issue also resulted to pressures on the firm’s operational expenses.

“We spent on some tankers. We are spending on deep wells too. Those will have attached expenses too,” Cruzabra said.