MWSS confirms revocation of renewed water concession deal
Published Dec 11, 2019 12:00 am
By Charissa Luci-Atienza
The Metropolitan Waterworks and Sewerage System (MWSS) confirmed Wednesday that it has "revoked" board resolutions extending and renewing the government’s concession agreement with Maynilad Water Services, Inc. and Manila Water Company until 2037.
Metropolitan Waterworks and Sewerage System (MANILA BULLETIN)
Deputy Administrator for Engineering Leonor Cleofas made the confirmation during the second leg of the joint hearing of the House Commitee on Good Government and Public Accountability and the House Committee on Public Accounts on the supposed 12 onerous provisions in the concession deal.
She said the revocation of the concession agreement extension was made on December 5 during a meeting of the MWSS Board.
“The new board, based on the recent directive of the President on the Cabinet meeting, they are now revoking the board resolution adopted in 2008 and 2009,” Cleofas told the joint panel.
It was Anakalusugan Rep. Mike Defensor who initially asked MWSS to clarify if the extension of the concession agreement is scrapped.
"We want to know exactly the truth and details of the action taken by the MWSS," Defensor said.
Deputy Majority Leader and Cavite Rep. Crispin Remulla further looked into the details of the revocation of the board resolutions that prodded Atty. Howard Azardon of the Office of the Government Corporate Counsel (OGCC) to apprise the joint panel about it.
Azardon relayed to the joint panel that Board Resolution No. 2009-72 dated August 16, 2008 pertaining to the renewal and extension of the concession agreement with Manila Water Company and Board Resolution No. 2010-172 dated September 10, 2009 pertaining to the renewal and extension of the Maynilad have been revoked.
"The concessionaires are given three days from the receipt of notice to file their position on the matter so that the Board can address their concerns," he said.
Increase in water tariffs
Maynilad Water president and chief executive officer Ramoncito Fernandez and Manila Water former president Tony Aquino said they only received the notice during the joint panel hearing.
Fernandez expressed Maynila Water's "grave concern" over the MWSS' supposed "unilateral" revocation of the extension agreement.
"We would like to react that it is with grave concern that we view this action, and we believe that it is not proper to unilaterally revoke the board resolution," he said.
Fernandez said there was "formal extension agreement that was signed by "the President of the Republic of the Philippines" through the Department of Finance (DOF).
Aquino said he was one with Fernandez in expressing serious concern over the revocation of the board resolutions.
The concession agreement is set to expire in 2022.
Christoper Chuegan of the MWSS Regulatory Office told the joint panel that if the contract is cancelled, there will be "more price adjustment."
Fernandez said if the concession agreement is not extended, an increase in water tariffs is expected.
"It will go very high. The rationale of the extension at the time is to mitigate the spikes in tariff because the water concessionaires have to pour in huge investments," he said.
If the extended concession agreements are cancelled, it means that the company will either fast-track their projects in order to meet their targets or will just abandon them once their contracts expired in 2022.
Failure to fulfill their obligations will allow the Philippine government to pursue a case against Maynilad and Manila Water.
During the hearing, Deputy Speaker and Surigao del Sur Rep. Butch Pichay asked the MWSS if it could solely handle the water services should the concession agreement be abrogated.
Cleofas replied in the negative, citing they have only 100 personnel.
"So you can't live without the two concessionaires," Pichay asked.
"If there will be no concessionaires, the government should allocate funds ," he stressed.
Always a party
During the hearing, AKO Bicol Party-list Rep. Alfredo Garbin Jr. and Bayan Muna party-list Rep. Carlos Isagani Zarate asked the two water concessionaires if they are willing to amend the concession agreement.
Both Fernandez and Aquino expressed anew their readiness to sit down with the government to review the contract.
They said "total solutions" should be pursued rather than "piece-meal" approach in addressing the supposed "onerous" 12 provisions of the concession agreement.
"We are willing to sit down and cooperate," Fernandez said.
Zarate specifically asked Maynilad and Manila Water if they are willing to delete the provision on non-interference on the rate setting and rate rebasing.
"Are you willing to have this provision on non-interference be deleted?" he asked.
Both Aquino and Fernandez said the government is "always a party" in the setting of water rates.
"Setting the tariffs is not unilateral," Aquino said, explaining that the MWSS and the Regulatory Office have been consulted about the rate setting.
Fernandez agreed with Aquino, citing that Maynilad "followed the same process with that of Manila Water."
Lawyer Rosario Cuevas of the Department of Justice said the DOJ found the non-interference provision "illegal and contrary to law."
She said they submitted their final review in May, after President Duterte issued a directive to review the concession pact in April following the water crisis in Metro Manila.
"We reviewed the terms and conditions of the concession agreement. We found several onerous provisions. We also identified a provision which is illegal and contrary to the law," Cuevas said, referring to the provision of non-interference.
During the hearing, Cavite Rep. Elpidio Barzaga asked to "formalize" the water concessionaires' commitment that they would drop their almost ₱11-billion indemnification claim.
"Oral promises, most of time, are not complied, " he said.
Gabriela Rep. Arlene Brosas insisted that the water concessionaires should get legislative franchise from Congress since they are public utilities.
Aquino and Fernandez maintained that they are just "agents" of a public utility, which is the MWSS.
"Without legislative franchise, it is in violation of the Constitution," Brosas said
Cuevas, when asked to comment, said the DOJ believes that "both concessionaires are public utilities performing public service."
During the hearing, the MWSS admitted that there will be water shortages until next year, after Surigao del Norte Rep. Robert Ace Barbers asked if the public can expect there will be no water crisis.
Cleofas said the procurement of mobile water treatment facilities and deep wells is ongoing to prevent water shortages.
She batted for the completion of the "long-overdue" Kaliwa project to ensure reliable and sufficient water sources.
Lack of expertise
Meanwhile, former MWSS administrator Dr. Angel Lazaro III admits to lack expertise and knowledge when they signed the concession agreements in 1997.
Lazaro III appeared Wednesday before the Senate Committee on Public Services’ deliberation on bills seeking the creation of a single agency to handle water resources management in the country.
It was Lazaro who signed the concession agreements between the MWSS and the two water companies in February 21, 1997, two years after former President Fidel Ramos signed the National Water Crisis Act of 1995 which allowed the privatization of state-run water facilities to address the MWSS' low coverage and its millions of dollars of debts.
But he appeared to wash his hands in the crafting of the controversial contracts and clarified in the hearing how these came about.
Lazaro, an engineer, said consultants were tapped in 1996 to assist the government in drafting the concession agreements.
“I am not ashamed to admit that we were not experts on this (privatization). Because it was new then, and we were not experts,” he told the committee.
The consultants, according to Lazaro, included foreign and local lawyers, economists and representatives of the World Bank, Accra Law, National Economic Research Associates, Punong Bayan & Associates, Social Weather Stations, and public relations firms, among others.
The draft was then approved by the MWSS Board of Trustees, whose members included him and officials of the Department of Public Works and Highways (DPWH), Department of Finance (DOF) and Office of the Government Corporate Counsel (OGCC) and other presidential appointees.
After their approval, Lazaro said they forwarded the concession agreement for review of a special advisory group that was composed of members of Ramos's Cabinet, namely, the executive secretary, presidential legal counsel, Justice secretary, DOF secretary, DPWH secretary and OGCC chief.
"Ni-recommend na okay na, pinirmahan ni Presidente, saka ko pinirmahan (They recommended that it was okay, then the President signed it, and it was only after that I signed the concession agreement)," he pointed out.
“Inhinyero lang ho ako (I am just an engineer). These taxes, I'm not really sure what it means. And I guess, I can be excused for that. I don't really I know bakit nakalusot (why it was approved),” Lazaro replied.
Lazaro also admitted later that inputs from water companies were also considered in coming up with the contract, although he maintained that they had no say over its provisions.
"Nagkaroon sila ng consultation with the bidders... but was not a discussion where pinakikinggan lang 'yong mga bidders... It's a government decision. Pero nagkaaroon ng consultation, kaya yong mga bidders, nakapag-input din sila. At yong ibang mga input nila, ang alam ko, inadopt na lang ng consultants. So hindi naman ito 100 percent na ng gobyerno," he said. (With reports from Madelaine Miraflor and Vanne Elaine Terrazola)
Metropolitan Waterworks and Sewerage System (MANILA BULLETIN)
Deputy Administrator for Engineering Leonor Cleofas made the confirmation during the second leg of the joint hearing of the House Commitee on Good Government and Public Accountability and the House Committee on Public Accounts on the supposed 12 onerous provisions in the concession deal.
She said the revocation of the concession agreement extension was made on December 5 during a meeting of the MWSS Board.
“The new board, based on the recent directive of the President on the Cabinet meeting, they are now revoking the board resolution adopted in 2008 and 2009,” Cleofas told the joint panel.
It was Anakalusugan Rep. Mike Defensor who initially asked MWSS to clarify if the extension of the concession agreement is scrapped.
"We want to know exactly the truth and details of the action taken by the MWSS," Defensor said.
Deputy Majority Leader and Cavite Rep. Crispin Remulla further looked into the details of the revocation of the board resolutions that prodded Atty. Howard Azardon of the Office of the Government Corporate Counsel (OGCC) to apprise the joint panel about it.
Azardon relayed to the joint panel that Board Resolution No. 2009-72 dated August 16, 2008 pertaining to the renewal and extension of the concession agreement with Manila Water Company and Board Resolution No. 2010-172 dated September 10, 2009 pertaining to the renewal and extension of the Maynilad have been revoked.
"The concessionaires are given three days from the receipt of notice to file their position on the matter so that the Board can address their concerns," he said.
Increase in water tariffs
Maynilad Water president and chief executive officer Ramoncito Fernandez and Manila Water former president Tony Aquino said they only received the notice during the joint panel hearing.
Fernandez expressed Maynila Water's "grave concern" over the MWSS' supposed "unilateral" revocation of the extension agreement.
"We would like to react that it is with grave concern that we view this action, and we believe that it is not proper to unilaterally revoke the board resolution," he said.
Fernandez said there was "formal extension agreement that was signed by "the President of the Republic of the Philippines" through the Department of Finance (DOF).
Aquino said he was one with Fernandez in expressing serious concern over the revocation of the board resolutions.
The concession agreement is set to expire in 2022.
Christoper Chuegan of the MWSS Regulatory Office told the joint panel that if the contract is cancelled, there will be "more price adjustment."
Fernandez said if the concession agreement is not extended, an increase in water tariffs is expected.
"It will go very high. The rationale of the extension at the time is to mitigate the spikes in tariff because the water concessionaires have to pour in huge investments," he said.
If the extended concession agreements are cancelled, it means that the company will either fast-track their projects in order to meet their targets or will just abandon them once their contracts expired in 2022.
Failure to fulfill their obligations will allow the Philippine government to pursue a case against Maynilad and Manila Water.
During the hearing, Deputy Speaker and Surigao del Sur Rep. Butch Pichay asked the MWSS if it could solely handle the water services should the concession agreement be abrogated.
Cleofas replied in the negative, citing they have only 100 personnel.
"So you can't live without the two concessionaires," Pichay asked.
"If there will be no concessionaires, the government should allocate funds ," he stressed.
Always a party
During the hearing, AKO Bicol Party-list Rep. Alfredo Garbin Jr. and Bayan Muna party-list Rep. Carlos Isagani Zarate asked the two water concessionaires if they are willing to amend the concession agreement.
Both Fernandez and Aquino expressed anew their readiness to sit down with the government to review the contract.
They said "total solutions" should be pursued rather than "piece-meal" approach in addressing the supposed "onerous" 12 provisions of the concession agreement.
"We are willing to sit down and cooperate," Fernandez said.
Zarate specifically asked Maynilad and Manila Water if they are willing to delete the provision on non-interference on the rate setting and rate rebasing.
"Are you willing to have this provision on non-interference be deleted?" he asked.
Both Aquino and Fernandez said the government is "always a party" in the setting of water rates.
"Setting the tariffs is not unilateral," Aquino said, explaining that the MWSS and the Regulatory Office have been consulted about the rate setting.
Fernandez agreed with Aquino, citing that Maynilad "followed the same process with that of Manila Water."
Lawyer Rosario Cuevas of the Department of Justice said the DOJ found the non-interference provision "illegal and contrary to law."
She said they submitted their final review in May, after President Duterte issued a directive to review the concession pact in April following the water crisis in Metro Manila.
"We reviewed the terms and conditions of the concession agreement. We found several onerous provisions. We also identified a provision which is illegal and contrary to the law," Cuevas said, referring to the provision of non-interference.
During the hearing, Cavite Rep. Elpidio Barzaga asked to "formalize" the water concessionaires' commitment that they would drop their almost ₱11-billion indemnification claim.
"Oral promises, most of time, are not complied, " he said.
Gabriela Rep. Arlene Brosas insisted that the water concessionaires should get legislative franchise from Congress since they are public utilities.
Aquino and Fernandez maintained that they are just "agents" of a public utility, which is the MWSS.
"Without legislative franchise, it is in violation of the Constitution," Brosas said
Cuevas, when asked to comment, said the DOJ believes that "both concessionaires are public utilities performing public service."
During the hearing, the MWSS admitted that there will be water shortages until next year, after Surigao del Norte Rep. Robert Ace Barbers asked if the public can expect there will be no water crisis.
Cleofas said the procurement of mobile water treatment facilities and deep wells is ongoing to prevent water shortages.
She batted for the completion of the "long-overdue" Kaliwa project to ensure reliable and sufficient water sources.
Lack of expertise
Meanwhile, former MWSS administrator Dr. Angel Lazaro III admits to lack expertise and knowledge when they signed the concession agreements in 1997.
Lazaro III appeared Wednesday before the Senate Committee on Public Services’ deliberation on bills seeking the creation of a single agency to handle water resources management in the country.
It was Lazaro who signed the concession agreements between the MWSS and the two water companies in February 21, 1997, two years after former President Fidel Ramos signed the National Water Crisis Act of 1995 which allowed the privatization of state-run water facilities to address the MWSS' low coverage and its millions of dollars of debts.
But he appeared to wash his hands in the crafting of the controversial contracts and clarified in the hearing how these came about.
Lazaro, an engineer, said consultants were tapped in 1996 to assist the government in drafting the concession agreements.
“I am not ashamed to admit that we were not experts on this (privatization). Because it was new then, and we were not experts,” he told the committee.
The consultants, according to Lazaro, included foreign and local lawyers, economists and representatives of the World Bank, Accra Law, National Economic Research Associates, Punong Bayan & Associates, Social Weather Stations, and public relations firms, among others.
The draft was then approved by the MWSS Board of Trustees, whose members included him and officials of the Department of Public Works and Highways (DPWH), Department of Finance (DOF) and Office of the Government Corporate Counsel (OGCC) and other presidential appointees.
After their approval, Lazaro said they forwarded the concession agreement for review of a special advisory group that was composed of members of Ramos's Cabinet, namely, the executive secretary, presidential legal counsel, Justice secretary, DOF secretary, DPWH secretary and OGCC chief.
"Ni-recommend na okay na, pinirmahan ni Presidente, saka ko pinirmahan (They recommended that it was okay, then the President signed it, and it was only after that I signed the concession agreement)," he pointed out.
“Inhinyero lang ho ako (I am just an engineer). These taxes, I'm not really sure what it means. And I guess, I can be excused for that. I don't really I know bakit nakalusot (why it was approved),” Lazaro replied.
Lazaro also admitted later that inputs from water companies were also considered in coming up with the contract, although he maintained that they had no say over its provisions.
"Nagkaroon sila ng consultation with the bidders... but was not a discussion where pinakikinggan lang 'yong mga bidders... It's a government decision. Pero nagkaaroon ng consultation, kaya yong mga bidders, nakapag-input din sila. At yong ibang mga input nila, ang alam ko, inadopt na lang ng consultants. So hindi naman ito 100 percent na ng gobyerno," he said. (With reports from Madelaine Miraflor and Vanne Elaine Terrazola)