Water rates to decline in Q1 2021

Published December 2, 2020, 12:45 PM

by Madelaine B. Miraflor

Except for the quarterly Foreign Currency Differential Adjustment (FCDA), customers of Manila Water Company Inc. and Maynilad Water Services Inc. won’t have to worry about any other water rate adjustment for the whole year of 2021.

This was according to Metropolitan Waterworks and Sewerage System (MWSS) Chief Regulator Patrick Ty, who announced on Wednesday that Manila Water and Maynilad will even adjust their water rates lower for the first three months of next year because of FCDA.

In a virtual briefing, Ty said that the MWSS Board of Trustees already approved the first quarter FCDA for 2021, and that based on their respective proposals, Manila Water and Maynilad’s tariff adjustments under this mechanism will both result in lower water rates from January to March of next year.

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 (MWSS RO) to avoid under-recovery or over-recovery caused by forex movements.

Manila Water, which provides water and wastewater services for the East Zone concession area, will implement an FCDA of 0.66 percent of its 2021 Average Basic Charge of P28.52 per cubic meter or P0.19 per cubic meter. This is a downward adjustment of P0.14 per cubic meter from the previous FCDA of P0.33 per cubic meter.

Because of this, its residential customers consuming 10 cubic meters or less (except lifeline customers who are exempt from the quarterly FCDA charges) are expected to have a decrease on their monthly bills of P0.76 per month.

Those consuming 20 cubic meters per month and 30 cubic meters per month are expected to have their bills go down by P1.69 and P3.45 respectively.

Meanwhile, Maynilad, which serves the West Zone concession area, will apply an FCDA of negative 0.39 percent of its 2021 Average Basic Charge of P36.24 per cubic meter or negative P0.14 per cubic meter. This is also a downward adjustment of P0.05 per cubic meter from the previous FCDA of negative P0.09 per cubic meter.

As a result, Maynilad’s residential customers consuming 10 cubic meters or less are expected to see their monthly bills go down by P0.05.

Ty said that because both companies decided to defer their water rates adjustment under the current rate rebasing period and the annual Consumer Price Index (CPI) adjustment, Maynilad and Manila Water rates will only change throughout 2021 during the quarterly FCDA.

Done every five years, rate rebasing is a review of water utilities’ past performance and the projection on their future cash flows.

It is supposed to set the water rates at a level that would allow both Maynilad and Manila Water to recover their expenditures and earn a rate of return.

For 2020, Maynilad and Manila Water also volunteered to defer the implementation of the next tranche of annual rate hike approved under the current rate rebasing period, which started in 2018.

Their decision came as both companies were being scrutinized by no less than President Rodrigo Duterte for their allegedly onerous contracts with MWSS.

The CPI adjustment, on the other hand, is the annual inflation adjustment and takes place every January.

Maynilad provides water and wastewater services to residents in most parts of Manila; northern and western parts of Quezon City; western parts of Makati; and the Cities of Caloocan, Pasay, Parañaque, Las Piñas, Valenzuela, Muntinlupa, Navotas, and Malabon in Metro Manila.

It also serves the Municipalities of Meycauayan and Obando in the Province of Bulacan; and the Cities of Cavite, Bacoor and Imus, and Municipalities of Kawit, Noveleta, and Rosario in the Province of Cavite.

Meanwhile, Manila Water caters to the East Zone concession area covering the Cities of Makati, Mandaluyong, Pasig, Pateros, San Juan, Taguig and Marikina.

It is also in charge of the southeastern parts of Quezon City, and Sta. Ana and San Andres in Manila. In the Province of Rizal, MWCI services the City of Antipolo and Municipalities of San Mateo, Rodriguez, Cainta, Taytay, Teresa, Angono, Baras, Binangonan, and Jala-jala.