Higher water rates loom in Q2

Published March 8, 2021, 5:00 PM

by Madelaine B. Miraflor

There might be a slight increase in water rates during the second quarter of the year, but the Metropolitan Waterworks and Sewerage System (MWSS) won’t yet confirm which concession area, whether the east zone or the west zone, will be affected.

MWSS Chief Regulator Patrick Ty told Business Bulletin that the MWSS Board already convened to discuss the second quarter Foreign Currency Differential Adjustment (FCDA) rates.

This means that Maynilad Water Services, Inc. (Maynilad) and Manila Water Company Inc. already submitted their respective FCDA recommendations for April to June and that they’ve been approved already.

MWSS Chief Regulator Patrick Ty

“We are waiting for approval in writing before we can release them,” Ty said.

When asked if the suggested FCDA rates will result in higher water rates in the second quarter, he only said: “yes and no”. 

This means that one of the two MWSS concessionaires, either Maynilad or Manila Water, requested to implement FCDA rates that will result in an increase in their customers’ monthly billing for the upcoming quarter.

To be specific, Maynilad is the water and wastewater services provider for the 17 cities and municipalities that comprise the West Zone, while Manila Water is the water and wastewater service provider for the East Zone of Metro Manila and Rizal Province.

FCDA, on the other hand, 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.

In December last year, Ty assured customers of Manila Water and Maynilad that they won’t have to worry about any other water rate adjustment for the whole year of 2021 aside from the quarterly FCDA.

This, as both companies decided to defer their water rates adjustment under the current rate rebasing period and the annual Consumer Price Index (CPI) adjustment.

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.

Meanwhile, the CPI adjustment is the annual inflation adjustment and takes place every January.
Right now, Maynilad and Manila Water are still implementing their respective first-quarter FCDA rates,

which both resulted in lower water rates.

Manila Water currently implements 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.

As for Maynilad, it was allowed to implement 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.