Extension of gov't concession deals with Manila Water, Maynilad mulled

Published September 1, 2021, 5:50 PM

by Vanne Elaine Terrazola

Lawmakers on Wednesday, September 1, raised the possibility of extending the validity of the government’s agreements with Manila Water Company and Maynilad Water Services Inc. up to 2046.

Senator Grace Poe (Office of Sen. Grace Poe/MANILA BULLETIN File Photo)

During the Senate Committee on Public Services’ hearing on the franchise applications of the two Metro Manila Water concessionaires, Senator Grace Poe, committee chairperson, noted the disparity between the effectivity of the revised concession agreements and the proposed validity under the franchise bills.

“The revised concession agreement effectively extends the concession until 2037. On the other hand, the proposed bills grant the 25-year franchise, which, if approved this year, will end in 2046,” Poe said as she asked resource persons about its repercussions.

Senate Majority Leader Juan Miguel Zubiri also raised the same concern. Citing his experience with his power firms in Bukidnon province, he said extending the validity of the concession deals would result in the reduction of rates and “huge savings” for consumers.

“The longer the contract is, the easier you can structure your loans, and therefore, your rates can go much lower. And we do that in the power industry,” Zubiri said.

“In this case, wouldn’t it be more practical if we grant them the 25-year franchise, ay sabay na rin natin ‘yong 25-year concession? And I believe — and we can ask the concessionaires — it would bring down the rates dramatically. They can stretch now the payment terms and definitely it would be more advantageous to our consumers. That makes perfect sense to me,” the senator added.

Manila Water and Maynilad officials confirmed Zubiri’s statements.

“We totally agree with Senator Zubiri that if we may be able to extend the concession agreement to coincide with the franchise expiry, that will redound to the benefit of the consumers for a lower tariff. A longer recovery period translates to lower tariff. So we fully support that,” said Donato Almeda, Manila Water’s chief regulatory officer.

“We support the possibility to synchronize the life of our concession in the franchise. This will be definitely for the benefit of our customers as this will smoothen the required tariff adjustments to recover the long-term investments…Addresing the synchonization will definitely redound to the benefit of our customers,” Maynilad president and chief executive officer Ramoncito Fernandez also affirmed.

The water concessionaires estimated a reduction of 35 percent in the tariffs to be paid by their consumers if the validity of the concession agreements would be aligned with the franchise.

In applying for the franchise renewal, they proposed that the Metropolitan Waterworks and Sewerage System (MWSS) be given the authority to extend the concession agreements.

The MWSS said it does not object the extension as long as the provisions of the revised concession deals will remain.

“It would be, off hand, advantageous if there is a unanimity in the period of the franchise and the revised concession agreement,” MWSS legal services manager Augustine Vestil told the Senate panel.

“In principle, we will not be objecting to [setting] a same period for the franchise to be granted and the revised concession agreement…We merely wanted to emphasize that the participation of government, not only as regulator but as an agency which will ensure that standards are followed, [and] should not be set aside,” he pointed out.

Government Corporate Counsel Elpidio Vega also welcomed the proposed extension. He cited possible problems “with regards to the regulation the control, the approval of the rates” if the varying dates of validity are not reconciled.

President Duterte in 2019 ordered the review of the government’s concession deals with Manila Water and Maynilad due to their “onerous” provisions that supposedly put the country at a disadvantage.

In the hearing, officials said the revised agreements have already addressed the disadvantageous provisions. They also assured senators that safeguards were also in place to protect consumers.

Poe later ordered the creation of a technical working group to finalize the provisions of the franchise bills before the approval of the Senate public services panel.

“We want to make sure that there is certainty of contracts. It’s difficult to change goalposts in the middle of the game,” she said.

“Above all, we must take into account the needs of our consumers,” Poe pointed out.