2019 ‘historic’ year for MWSS and water concessionaires

Published January 1, 2020, 12:00 AM

by manilabulletin_admin


What former president of Manila Water Company, Inc. (MWC) said a few months ago has turned out to be a forewarning.

In July, he said that 2019 was looking to be a historical year for his company and fellow Metropolitan Waterworks and Sewerage System (MWSS) concessionaire Maynilad Water Services, Inc. So historical year is exactly what they got, especially upon finding out that their concession agreements with the government will no longer last until 2037 and that they only have two years to fulfill their water service obligations.

Several times this year, President Rodrigo Duterte has showered MWSS and its concessionaires with verbal onslaught as they failed to quench Manila’s thirst.
His worst outbursts came as Manila Water announced that it had won an arbitration case it filed against the Philippine government before the Permanent Court of Arbitration (PCA).

If honored, the international court’s decision would have allowed the Ayala-led company to collect ₱7.39 billion from the government.

This infuriated Duterte, who accused Manila Water and Maynilad of “economic sabotage” and calling out its respective owners for “screwing” the Filipino people for staging a water crisis to jack up rates.

Manila Water is owned by the Ayala Group, while Maynilad is a joint venture between Manuel V. Pangilinan-led Metro Pacific Investments Corporation (MPIC) and DMCI Holdings, Inc. (DMCI) of the Consuji family.

To recall, Maynilad had also separately filed a case against the Philippine government over water rate adjustment a few years ago. The same court, PCA, also ruled in favor of the water utility and ordered the government to pay it as much as ₱3.4 billion.

But to appease Duterte, both Maynilad and Manila Water told the lawmakers days before Congress went on recess that they will no longer collect their respective indemnification, which stood nearly ₱11 billion combined.

“It’s really a new era,” said former Manila Water President Ferdinand Dela Cruz, who resigned in August.

Home to more than 12 million people, Metro Manila gets its water supply from the Angat-Ipo-La Mesa water system.

The 52-year-old Angat Dam currently supplies 97 percent of Metro Manila’s water needs, releasing about 4 million liters of water per day (mld), while La Mesa Dam is supposed to serve as Manila Water’s reserve.

Sometime in July, both dams almost ran out of water, forcing Manila Water and Maynilad to implement rotational water service interruption.

As this happened, Dela Cruz said it was the first time that both Angat Dam and La Mesa Dam actually reached their critical water level at the same time. He blamed this to climate change, rising demand, and the delay of new water sources.

Of the Angat Dam allocation, Manila Water gets an allocation of 1,600 mld, while Maynilad Water Services, Inc. is allowed to get the rest or about 2,400 mld.

To recall, Angat Dam also had its lowest water level in 2010, but Manila Water didn’t have to implement water supply interruption since there was enough water from La Mesa Dam at that time.

Root cause of the problem

Duterte first expressed his animosity towards Maynilad and Manila Water in March when the latter’s customers experienced low to no water supply for several days, something that has triggered public outrage.

Then another water shortage happened again in October, affecting both companies.

The dams are simply not just getting enough water due to lack of rains. And there are not enough water sources to compensate for it.

“It’s the root cause of the problem. If we will not have a new water source, there is always going to be a problem,” Manila Water Board Director Antonino Aquino said in the last congressional hearing on water supply and distribution deals.

Aquino was supposed to have retired already years ago, but the word on the street is that as early as March, when Manila Water experienced its first major water crisis, he was asked by the Ayala Group to come out of retirement.

It was in 2014 when Aquino retired from the Ayala Group after 34 years. During those years, he had had successfully led Manila Water and then later on Ayala family’s giant property arm Ayala Land, Inc.

Again, it was a historical year for the company, as Dela Cruz had put it.
Dela Cruz was actually the first one who sounded the alarm of a looming water crisis. He also warned about rotational water service interruption being the new normal as Metro Manila’s existing water sources could no longer keep up with the growing population and its rising demand.

“For the balance of the year, what we will have to deal with is continuous rotational interruption. What we really have to plan is the next summer in 2020,” Dela Cruz said.

In a congress hearing, Bayan Muna Representative Ferdinand Gaite asked Aquino and Maynilad President and CEO Ramoncito Fernandez if the “rationing of water will happen until forever” and both officials said yes but only until a new dam or a new water source goes online.

It was in the 1990s when Manila Water and Maynilad entered into a concession agreement with MWSS.
Dela Cruz pointed out that when these deals were signed, the government promised that there will be a new major water source over the next 10 years, something that didn’t happen even 22 years later.
Right now, the Duterte Administration is pushing for the Kaliwa Dam project as the biggest solution to the problem.

Kaliwa project goes left

The problem about the Kaliwa Dam is it is too controversial.

Part of the New Centennial Water Source Project (NCWSP), the ₱12-billion Kaliwa Dam is located along the provinces of Rizal and Quezon and would have a storage capacity of 600 mld.
From being a Public and Private Partnership (PPP) project, the government sometime in 2017 ordered the shift in financing for the NCWSP and awarded it to China under an Official Development Assistance (ODA) scheme. It will now be developed by China Energy Engineering Corporation (CEEC).

It’s been more than two years since the Duterte Administration first attempted to get the project started, but it just wouldn’t.

Environment groups and local government units think the project, which involves the construction of a massive dam within ancestral lands, is too destructive and would cause negative environmental impacts like flooding.
As far as the people is concerned, it is feared that a lot of Indigenous People (IP) communities will be displaced because of the project.
It is for this reason why the project still isn’t moving, even after securing its much sought Environmental Compliance Certificate (ECC) from the Department of Environment and Natural Resources (DENR).

Onerous provisions

Onerous has already become a buzzword. Lately it’s so hard to hear this word and not think about the provisions of the concession agreements of MWSS with Maynilad and Manila Water.

In his most recent tirades, Duterte particularly attacked Maynilad and Manila Water for their “onerous” deals with the MWSS. He said it almost every day.
According to him, a lot of provisions in the concession agreements of these companies are disadvantageous to the country, especially that specific provision that the government can’t interfere in the setting of water rates.

The deals also allow Maynilad and Manila Water to ask for indemnity for possible losses in the event of such government interference.

Justice Secretary Menardo Guevarra said that because of these provisions, the PCA ruled in favor of both companies.

In a hearing, Bayan Muna party-list Representative Carlos Zarate questioned the companies’ officials if they are willing to let go of thee supposedly onerous provisions in their existing contracts with the government.

They haven’t discussed it yet with MWSS, Aquino responded.

Zarate fears that if the aforementioned provisions are not stripped off the concession deals, the water utilities may still be able to purse the same case against the government once a new administration takes over.

He raised the question after the two companies waived their respective arbitral award.

From 2037, back to 2022
The worst for Maynilad and Manila Water happened when MWSS suddenly cancelled the extension of its concession agreements with these companies.

As a result, both companies will only be allowed to distribute water in Metro Manila until 2022, instead of 2037 as per their extended contracts approved by the Arroyo administration. Fernandez and Aquino both warned about the decision’s financial consequences such as exorbitant water rate increase.