The decision of the Metropolitan Waterworks and Sewerage System (MWSS) to remove the Foreign Currency Differential Adjustment (FCDA) from the water bills will have a different impact on the respective customers of Manila Water Company, Inc. and Maynilad Water Services, Inc.
Unfortunately, it will result in an upward adjustment on the monthly bills of Maynilad customers, but the MWSS RO made sure that the adjustment will not happen until 2023. For Manila Water it will result in reduction in water rates.
In a statement, MWSS Regulatory Office (MWSS RO) said the MWSS Board of Trustees (BOT) has already approved its recommendation to remove the FCDA from customer bills under Manila Water and to convert the FCDA in customer bills under Maynilad into “Transitory Adjustment” beginning November 18 this year when the Revised Concession Agreements (RCA) of Manila Water and Maynilad take into effect. The RCAs provide for the imposition of a tariff freeze until 31 December 2022 and the removal of the FCDA.
For East Zone Concessionaire Manila Water, the removal of the currently implemented FCDA – which is equivalent to 0.84 percent of the 2021 Average Basic Charge of P28.52 per cubic meter (cu.m) or P0.24 per cu.m – from customers’ bills will result in the decrease of Standard Rates for water and sewerage services.
For average households consuming 10 cubic meters (cu.m) per month, the estimated impact would be P1.26, while there will be no adjustments for lifeline customers. For customers consuming 20 cu.m per month and 30 cu.m per month, they would save around P2.79 and P5.79, respectively.
For West Zone Concessionaire Maynilad, the removal of the currently implemented FCDA – which is equivalent to negative 0.55 percent of the 2021 Average Basic Charge of P36.24 per cu.m or negative P0.20 per cu.m – from customers’ bills will result in the increase of Standard Rates for water and sewage services.
MWSS RO said that in order to protect customers from such an increase and retain the Concessionaire’s current rates, the FCDA will be converted into “Transitory Adjustment” in the customers’ bills from 18 November 2021 to 31 December 2022.
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 RO to avoid under-recovery or over-recovery caused by forex movements.
The Cash Flow effect of the FCDA removal will be considered in the calculation of the Opening Cash Position of the Concessionaire in the 5th Rate Rebasing Exercise, which is an audit of the water utilities' past performance and projection of their future cash flows.
Done every five years, the current rate rebasing period will end in 2022. It is supposed to set the water rates at a level that would allow both Maynilad and Manila Water to recover and earn a rate of return from the investments they spent for their respective water projects.
"This is to protect the public and ensure that there will be no increase in their water bill until 2023," MWSS Chief Regulator Patrick Ty said in a text exchange.
Manila Water provides water and wastewater services to residents of the Cities of Makati, Mandaluyong, Pasig, San Juan, Taguig, and Marikina; and Municipality of Pateros. It is also in charge of the southeastern parts of Quezon City, and Sta. Ana and San Andres in the City of Manila. In the Province of Rizal, it services the City of Antipolo, and Municipalities of San Mateo, Rodriguez, Cainta, Taytay, Teresa, Angono, Baras, Binangonan, Jalajala, Cardona, Morong, Pilillia, and Tanay.
Maynilad, on the other hand, provides water and wastewater services to residents in most parts of the City of Manila; northern and western parts of Quezon City; western parts of Makati City; and the Cities of Caloocan, Pasay, Parañaque, Las Piñas, Valenzuela, Muntinlupa, Navotas, and Malabon in Metro Manila. It also serves the Municipalities of Kawit, Noveleta, and Rosario, as well as the Cities of Bacoor, Cavite, and Imus in the Province of Cavite.