New concession deal with Manila Water ‘advantageous’ to consumers

MANILA – The revised agreement with water concessionaire Manila Water Company, Inc. is “advantageous” to the government and consumers, Malacañang said Monday.

Presidential Spokesperson Harry Roque made this remark after Justice Secretary Menardo Guevarra announced on March 31 that the government’s revised agreement with Manila Water has been signed.

“Isang revised concession agreement ang nabuo na nagbibigay ng mas magandang serbisyo ng tubig sa Metro Manila at advantageous sa pamahalaan at consumers (The Revised Concession Agreement will provide better water service to Metro Manila and is very advantageous to the national government and consumer),” he said in a Palace press briefing.

Roque pointed out that the new concession deal is proof that Duterte has the Filipino people’s best interests at heart.

“Patunay ito ang interes ng mga Pilipino ang nasa isip at puso ng ating Presidente (This is proof that the President keeps in mind and heart the interest of the Filipino people),” he added.

Roque noted that the agreement is modeled after the New Clark City joint venture agreement of the Bases Conversion and Development Authority (BCDA) as advised by the Asian Development Bank (ADB).

Among the salient points of the new concession deal that benefits the government is the removal of government non-interference clauses which means that the government will no longer be liable when fulfilling its regulatory functions to protect the consumer.

The new concession deal also recognizes that Manila Water as a public utility, which makes it more accountable to the government and the public.

It also removes the addition of provisions that unduly compromise medium- and long-term government liabilities (contingent liabilities), such as the following:

— Removal of the national government’s performance undertaking for future debt and requires that all debt;

— All debt and expenditures of the concessionaire must be reviewed and approved by the regulatory office;

— All fully recovered assets are immediately transferred to the government to ensure there is no double payment at the end of the contract; and

— Material Government Adverse Action (MAGA) is limited only to actions of the Executive so that the National Government is not liable for things outside of its control.

As for the consumer, the new concession agreement states that corporate income tax cannot be charged to the consumer, unlike the previous concession agreement.

It also indicates that there is a tariff freeze until Dec. 31, 2022.

The tariff adjustment for inflation will only be two-thirds of the consumer price index, unlike the previous contract which had a 100 percent inflationary impact.

The new concession deal also removes the Foreign Currency Differential Adjustment (FCDA) which will result in much lower tariff increases and protect the consumer from possible tariff spikes because of foreign exchange movements.

Meanwhile, Roque assured that a new concession deal with Maynilad Water Services, Inc. would be taken up next.

Efforts to revise the concession deals came after President Rodrigo Duterte threatened to revoke the contracts with the two water concessionaires and fire MWSS officials when water service interruptions hit Metro Manila and nearby areas in 2019.

Duterte subsequently ordered the Department of Justice to review and remove onerous provisions in the deals and discuss proposed revisions to the existing contracts.

In the same virtual presser, Guevarra said negotiations on the other concession agreement with Maynilad will start immediately.

“We will be proposing essentially the same terms and conditions as those that were contained in the revised agreement with Manila Water,” he said. “But of course, we recognize the fact na (that) differently situated ang Maynilad compared to Manila Water so there will be probably a lot of discussions also with respect to possible modification of the terms and conditions.”