MANILA, Philippines – Ayala-led Manila Water Co. Inc. has lost in its arbitration proceedings against the Metropolitan Waterworks and Sewerage System (MWSS) after the appeals panel ordered Manila Water to cut its basic water charge.

In September 2013, the MWSS slashed the East Zone water concessionaire’s basic charge of P25.07 per cubic meter by 29.47 percent, a reduction of P7.25 per cubic meter for the rate rebasing period of 2013 to 2017.

This prompted Manila Water to dispute the rate reduction before the International Chamber of Commerce (ICC).

From the original MWSS rate determination, the ICC appeals panel instead slashed Manila Water’s basic water charge by 11. 05 percent, equivalent to a decrease of P2.77 per cubic meter.

The reduction in the basic water charge would be staggered over  three years. A reduction of P1.66 per cubic meter would be implemented in 2015, then P0.55 per cubic meter in 2016 and finally P0.55 per cubic meter in 2017.

The arbitration panel also ruled that Manila Water is a public utility and therefore cannot pass on its corporate income tax to consumers.

“While the arbitration decision resolved specific issues raised by Manila Water, we are deeply concerned about the finding that Manila Water is a public utility,” said Manila Water president and CEO Gerardo Ablaza Jr.

“This ruling differs significantly from government’s original representation during the 1997 bidding for private sector participation in the operation of MWSS – that Manila Water will be an agent and contractor of MWSS which will continue to be the public utility. This decision fundamentally changes the concession agreement,” he added.

Ablaza said the company would study the implications of the arbitral ruling on the treatment of corporate income tax.

“We will study the full implications of now being characterized as a public utility. We will actively work with the government towards ensuring the sustainability of excellent service to East Zone consumers under this new  arrangement,” said Ablaza.

West Zone concessionaire, Maynilad Water Services Inc., on the other hand, secured a favorable ruling from the appeals panel.

The ICC appeals panel upheld Maynilad’s alternative rate rebasing adjustment which would result to a 9.8 percent increase in the 2013 average basic water charge of P31.28 per cubic meter inclusive of the P1.00 currency exchange rate adjustment that the MWSS incorporated into the basic charge.

This translates to an average increase of P3.06 per cubic meter in its basic charge.

Maynilad was also allowed to recover its corporate income tax. In an earlier briefing, Maynilad said the provision for income tax recovery would make up P2 of the average increase in basic water charge.

Because of these conflicting decisions, the MWSS would bring the decision to a court of law, in an attempt to harmonize the differences.

“The MWSS will bring the decision to a close by bringing it to the appropriate court of law. There is a need to settle this,” said MWSS chief regulator Joel Yu.

“Our legal counsel will determine (the proper court), but I hope it will go directly to the Supreme Court. It will be very soon as there is a sense of urgency,” he added.

Maynilad services the West Zone of Metro Manila covering Manila (all but portions of San Andres and Sta. Ana), Quezon City (west of San Juan River, West Ave.), EDSA, Congressional, Mindanao Ave., northern part from the districts of the Holy Spirit and Batasan Hills, Makati (west of South Super Highway), Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas and Malabon, cities of Cavite including Bacoor and Imus and towns of Kawit, Noveleta and Rosario.

Maynilad is co-owned by Pangilinan-led Metro Pacific Investments Corporation (MPIC) and Consunji-controlled DMCI-Holdings Inc.

Ayala-led Manila Water, on the other hand, services the Metro Manila East Zone concession area that covers parts of Quezon City and Makati, the southeastern parts of Manila, Taguig, Pateros, Marikina, Pasig, San Juan, Mandaluyong, and Rizal province.

Source: http://www.philstar.com/business/2015/04/22/1446347/manila-water-loses-rate-arbitration-case-told-slash-charges