Manila Water CEO Jose Rene Almendras should not just apologize for "angering President Duterte" over the water company's demand for government to pay the P7.8 billion awarded to it by the Permanent Court of Arbitration in Singapore as "compensation for losses the company allegedly incurred when it was not allowed by the MWSS to raise tariffs from June 2015 to November 2019."
That award was not only undeserved but unconscionable. The former Ayala official-turned-Aquino Cabinet member-back as Ayala official and his board should, in fact, move with all deliberate speed to submit to a reformation of their contract (together with its twin, Maynilad) before the government proceeds to take over their operations and perhaps even file criminal charges against them for a host of violations of law and actions detrimental to the public interest.
And, let me remind Almendras and his ilk, before the President invites them to that well awaited "one-on-one" meeting, possibly in Malacañang. Or maybe even the AFP or Army headquarters to "make it easier for these denizens of the water sector residing in the upscale villages in Makati and Mandaluyong to attend" as was the buzz over social media lately. But that is another story.
For now, let's focus on two of the more onerous contract provisions mentioned by Justice Secretary Meynard Guevarra whose department actually saw 12 such egregious ones in the agreements signed by the Ramos administration in 1997.
One such provision is the "prohibition on government interference in rate setting" which virtually gives carte blanche power to the concessionaires to impose whatever rates suits them every "rate rebasing" period, which in the original contract was five years but by some secret resolution passed by previous MWSS boards was tweaked to every three years.
In fact, MWSS sources told us that there were times when new charges were incorporated even as the previous rates were still subsisting. No wonder we have all kinds of fees and charges tucked into the water bills of millions of consumers in the ever-expanding franchise area. We have the basic charge which, by the way, has increased so many times since 1997 it should not be called a basic charge anymore. Consumers have been asking why this continues to be increasing at all as it is supposed to be the base amount which every household or establishment within the franchise area, whether using any water or not, be charged with.
And this is just one of the ever-escalating costs from an environmental charge to a sewage fee to FCDA (foreign currency adjustment) to maintenance and service fee and the all "encompassing-if-all-else-fails other charges." What these "other charges" consist of, only the likes of Almendras know and, of course the MWSS regulator, Patrick Ty, if he even cares. For all intents and purpose, the MWSS Board is out of the loop except if members decide to take a step further and do something for the public. Sad to say that has never happened at all except during the time of Gerry Esquivel who tried to put some sense into the whole affair. That is why we have cases such as the ones brought by the concessionaires before the international tribunal which, if one merely gloss over the contract provisions and not get deeper into the entire enchilada, we will always stand to lose.
Given all these, it is really time for this provision to go. But will the concessionaires even relent? If we go by Almendras' and Maynilad president Ramoncito Fernandez' statements yesterday, it looks like they will not.
Coupled with that onerous item is the injunction that "government will indemnify the concessionaires for possible losses incurred in the event of any government interference." This is the double whammy people have been talking about. After banning government from even participating in any form of "rate rebasing," the concessionaires have now doubled up and further insulated themselves from any kind of losses, real or otherwise. Grabe.
Meanwhile, Almendras had the gall to insist in open session before the Senate Committee on Public Services chaired by Senator Grace Poe that they were only getting a 7-percent return on their investments. Talaga naman.
What the other onerous provisions are, we will soon see as the secret contracts are being released on the President's order.
Indeed, there is a host of provisions as well as policy interpretations made by previous administrations which need reformation. But even before that proceeds, the administration has to make certain assertions to clear the path for decidedly better contract terms.
First, are the concessionaires public utilities as provided for under the law? This is critical since under existing laws the rate of return for public utilities is pegged at 12 percent only. If they are not—as they claim they are merely "agents and/or contractors"—then what law applies to their contracts? Just the concession agreement?
Then, if it is the concession agreement, there should be a definitive statement about their income tax. This is critical since in their rebasing computations the concessionaires almost always claim exemption from any income tax payments. Or, recovery from income tax expenses, as has been the case before we questioned this practice before the courts. We note that from 2008 to 2012 alone they passed on to consumers some P15.3 billion in corporate income tax payments.
Finally, there is also the questioned formula and payments through consumer fees of "capital expenditures" and "operational expenditures." These twin planned expenditures are submitted to the MWSS and pre-approved for implementation without the benefit of counter checking and actual verification of claimed expenses before they are transformed and passed on into additional charges to the suffering consumers of these companies' expanding franchise areas. These are just for starters. If only for all of these highly disadvantageous provisions inimical to the public interest the contract should really be reformed to the core.
Otherwise, the administration should be ready to take over water service operations.