MWSS seeks clarity over quarterly tariff adjustment

Published June 3, 2021, 4:19 PM

by Madelaine B. Miraflor

The Metropolitan Waterworks and Sewerage System-Regulatory Office (MWSS-RO) is still clarifying with the government panel that revised concession agreements between MWSS and water concessionaires if the foreign currency differential adjustments (FCDA) can still be implemented for the third quarter this year.

In a text exchange, MWSS Chief Regulator Patrick Ty said it is not yet clear whether or not the FCDA adjustments for the third quarter and fourth quarter of this year can still be applied amid the issuance of the revised CAs (RCA) between the government and its two concessionaires, Maynilad Water Services Inc. and Manila Water Company, Inc.

“That is being clarified right now. I wasn’t part of the negotiations for the RCAs so I need to seek guidance first,” Ty told Business Bulletin.

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

Business Bulletin learned that both Maynilad and Manila Water already submitted their respective FCDA applications for July to September period.

This was later confirmed by Ty. “We have computations just in case,” he said.

For her part, Jennifer Rufo, head of corporate communications at Maynilad, said in a text message that the company submitted an application for a downward adjustment for third-quarter FCDA.

This means that in case the RCA review panel confirms that FCDA can still be applied despite the new CAs, Maynilad customers will receive lower rates in the following months.

“RCA effectivity is six months from signing [of CA] after compliance with all the conditions precedent. Until then, we follow the usual processes unless advised otherwise by the MWSS RO,” Rufo said.

Manila Water’s Group Head for Corporate Strategic Affairs Jeric Sevilla also told Business Bulletin that Manila Water’s submission of FCDA “is aligned with the current guidelines while certain conditions on the Revised Concession Agreement are still being complied with to have the new provisions fully implemented”.

“We are still waiting for the response from the MWSS RO,” he said.

It was just on May 19 when the RCA between MWSS and Maynilad Water has been released.

By signing the RCA, Maynilad will now impose a tariff freeze until 31 December 2022, and will also formally forego collecting the P3.4 billion compensation that the Philippine government must pay the company based on the decision of Permanent Court of Arbitration in Singapore.

This, while Manila Water’s RCA with MWSS came out more than a month ago. The company will also implement a tariff freeze until Dec. 31, 2022.

The RCAs were the outcome of a thorough review and negotiations conducted by a government review panel led by the Department of Justice (DOJ) based on an order from President Rodrigo Duterte in December 2019.