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Collusion in water deals

Group: Palace part of cabal A CONSUMER group on Monday accused President Benigno Aquino III and the Metropolitan Waterworks Sewerage System of conspiring with two private concessionaires to fleece the public by allowing the companies to pass on their income taxes to their customers. “The collusion is very clear. Since the day the President assumed power, the government has been coddling these two concessionaires, particularly on the onerous pass-on charges,” said Rodolfo Javellana, president of the Water for All Refund Movement. President Aquino even promoted the architect of the 2004 decision that legitimized the pass-on charges that enabled the Manila Water Co. and the Maynilad Water Systems to burden their 2.2 million customers with P15 billion in their income taxes and operating expenses since 2008, Javellana said. The official, Ramon Alikpala, who headed the National Water Resources Board at the time, convened a technical working group to settle the question of whether the two private concessionaires should be considered public utilities. To head the group, Alikpala appointed his former deputy, Eduardo Santos, who was then chief regulator of the MWSS Regulatory Office. The group later ruled that Manila Water and Maynilad were not public utilities, and therefore not covered by the 12 percent cap on their rate of return, and were not subject to scrutiny by the Commission on Audit. Santos has since been promoted to administrator of the Local Water Utilities Administration, while Alikpala is now MWSS chairman, Javellana said. As chairman of the MWSS board, Alikpala will preside over discussions to determine if the agency will uphold the June 7, 2013 ruling of acting chief regulator Emmanuel Caparas, who declared that the two concessionaires were public utilities after all, based on a legal opinion of the Office of the Government Corporate Counsel. “Will Alikpala reverse himself on this issue?” Javellana asked. “Alikpala is being given the chance to redeem himself, but we are not so optimistic about it and so we sought the intervention of the Supreme Court to end the injustices by nullifying the concession agreements {with the MWSS),” Javellana said. “We have exhausted all avenues to inform the President of these immoral and unjust actions but the pleas only fell on deaf ears,” he added. “To this day, the Palace has remained silent on this issue.” Official documents, copies of which were furnished the Manila Standard, showed that the President, 21 days into office on July 21, 2010, issued a directive to the MWSS to hold off any new ventures and loans. The President ordered the deferment of the construction of P48-billion Laiban Dam in Rizal and the 15 irrigation projects in Bulacan, but did not stop the water companies from collecting “advance tariffs” from consumers for projects that were expected to begin in 2010. “Since 2008, some P6 billion had already been collected from the consumers to fund the Laiban Dam and the 15 irrigation projects,” Javellana said. In December 2010, then MWSS-RO chief regulator Manuel Quizon ordered the concessionaires to deposit the collected funds in escrow and to refund the consumers because their concession agreements do not provide for advance collections for future projects,” Javellana said. In a Dec. 10, 2010 memorandum to the MWSS board, Quizon reported: “In 2007 and 2008 rate rebasing exercise for Manila Water and Maynilad, respectively, the Laiban Dam Project was included in their respective business plans, pursuant to the development plan for new water sources, which was approved under BOT (build-operate-transfer) dated Dec. 16, 2002. The project (phase1) construction was supposed to commence in 2010 and be completed in 2015, to be financed by a loan contracted by MWSS but shall be paid by the two concessionaires through concession fees. Per NEDA-ICC approved estimate in 2007, the project cost is P48 billion. “Considering that the projects will not be implemented as scheduled and that the concessionaires have been collecting tariff for the same, the MWSS-RO recommends to order the concessionaires to establish a trust fund or open an escrow account for collections pertaining to the said projects to be used only for the purpose for which it was established. “Order the concessionaires to refund the collected amounts in the event that the projects will not be pursued. “Include in future rate rebasing resolutions a provision that all projects which are included in the business plans of the concessionaires but are eventually not implemented, shall be subject of a downward adjustment. “And include in the proposed amendments to the concession agreement a less tedious procedure for downward adjustments for all unimplemented projects,” Quizon said. In a March 17, 2011 meeting, the board authorized Quizon to cease-and-desist orders to stop the two concessionaires from collecting advance tariffs for the Laiban dam and 15 other irrigation projects. The board also authorized Quizon to order the concessionaires to put the collected money in escrow. One week later, however, on March 24, 2011, Alikpala issued a memo directing the board to defer its action on the advance tariffs until further discussion and instructions. “The issue on the pass-on charges was never discussed again and so the concessionaires continued to bill the consumers for the unimplemented projects,” Javellana said. In April 2011, Caparas convened a new technical working group to finally settle the issue of whether or not the two concessionaires were public utilities, and eventually ruled that they were. This meant they could no longer pass on their corporate income taxes and past, present and future expenditures to consumers. The new group’s decision was affirmed by the Office of the Government Corporate Counsel, which said a Supreme Court ruling against the Manila Electric Co. in 2004 should be applied as well to the water concessionaires. Caparas ordered the two concessionaires to stop passing the charges on to consumers on June 7, 2013 but MWSS, led by Alikpala, has yet to act on the ruling. The water companies have said they will contest the decision, and pass on the costs of arbitration as well to their customers. Javellan’s group filed a petition with the Supreme Court to stop increases in the rates sought by Manila Water and Maynilad. The group also wants their contracts with the MWSS scrapped. “We demand an immediate termination of these immoral, unjust, onerous, illegal and criminal concession agreements,” Javellana said. In the Senate, the chairman of the public services committee, Ramon Revilla Jr., assured the public that his panel would act swiftly on a resolution filed by Senator Ralph Recto to investigate the pass-on charges. He said this will be his priority if he retains the chairmanship of the committee. With Macon Ramos-Araneta
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