Peso appreciation seen pulling down water rates until 2nd quarter in 2021

Published September 16, 2020, 5:00 AM

by Madelaine B. Miraflor

The continuous appreciation of Philippine peso versus other currencies may continue to pull down water rates in Metro Manila until the first quarter of 2021.

MB File photo. (ALVIN KASIBAN)

This is because of the Foreign Currency Differential Adjustment (FCDA) tariff mechanism that Maynilad Water Services, Inc. and Manila Water Company, Inc. are supposed to implement every quarter, Metropolitan Waterworks and Sewerage System (MWSS) Chief Regulator Patrick Ty said.

The FCDA is a quarterly-reviewed tariff mechanism that allows Concessionaires to recover losses or give back gains arising from fluctuations in foreign exchange rates, as payments are made for foreign currency-denominated loans that are used to fund the expansion and improvement of water and sewerage services.

It is a corrective mechanism formulated by the MWSS-Regulatory Office (RO) to avoid under recovery or over recovery caused by forex movements.

“[As far as the FCDA is concerned] there might be another rollback until the first quarter of next year because of continuous peso appreciation,” Ty said in a virtual press briefing yesterday.

Right now, the Philippine peso remains one of the most stable currencies in Asia as the COVID-19 pandemic continues to wreak havoc in the global economy.

For his part, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said he expects peso to remain stable amid the public health crisis.  

Also yesterday, Ty announced that Manila Water and Maynilad will be implementing slight adjustments in their respective FCDA in the fourth quarter of the year, which will both result in rollback.   Manila Water was allowed to implement an FCDA of 1.17 percent of its Average Basic Charge of P28.52 per cubic meter (/cu.m) or P0.33/cu.m. This is a downward adjustment of P0.15/cu.m compared to the firm’s third quarter FCDA.

Ty said the impact of this adjustment to Manila Water customers consuming 10 cubic meters or less – except for lifeline customers who are exempted to the quarterly FCDA charges – will be a rollback of P0.78 in the monthly billing.

Those consuming 20 cubic meters per month and 30 cubic meters per month, on the other hand, will see a decline of P1.73 and P3.52 in their water bills, respectively.

Meanwhile, Maynilad will implement an FCDA of negative 0.26 percent of its 2019 Average Basic Charge of P36.24/cu.m or negative P0.09/cu.m.

Ty said this will slightly pull down the monthly bills of Maynilad customers consuming 10 cubic meters or less by P0.06, while those consuming 20 cubic meters per month and 30 cubic meters per month will pay lower by P0.24 and P0.50, respectively.  

For the third quarter of this year, MWSS-RO recommended to retain the prevailing second quarter FCDA. Hence, Maynilad and Manila Water didn’t implement any adjustment on their respective water rates from July to September. 
For next year, it is still uncertain whether Maynilad and Manila Water will finally implement their pending water rate adjustments under the five-year rate rebasing, which is a review of the water utilities’ past performance and the projection on their future cash flows.

Done every five years, the review is supposed to set the water rates at a level that will allow both Maynilad and Manila Water to recover their expenditures and earn a rate of return.

Such voluntary postponement of this particular water rates adjustment came as Maynilad and Manila Water both became the subject of President Rodrigo Duterte’s ire as well as their allegedly onerous contracts with the MWSS last year.