MANILA, Philippines—The decision of the Metropolitan Waterworks and Sewerage System allowing its two concessionaires to increase water rates, in defiance of the direct order from Malacañang, proves that its Concession Agreement with Manila Water Company Inc. (MWCI) and Maynilad Water Services Inc (MWSI) is a “betrayal of public trust,” according to an advocacy group.

The Freedom from Debt Coalition said that the rate increase clearly showed the partiality of the MWSS in ensuring profits for the two water concessionaires over and against the interests of public consumers.

“The weakness of the said agreement in protecting consumers from the profiteering motives of the two concessionaires has again become more apparent with the recent controversy surrounding MWSS' approval of water rate hikes last February 3. The said approval of water rate increases came barely three weeks after MWSS Administrator Diosdado Allado was said to have declared in previous news reports that there will be no increase in the rates in all the service areas covered by the MWSS at least for this year,” said FDC vice president Edwin Chavez.

The MWSS had reportedly approved rate increases of P2.27 per cubic meter for Manila Water and P2.81 per cubic meter for Maynilad as "automatic adjustments" based on Consumer Price Index and Foreign Exchange fluctuations.

"These mechanisms in the concession contract, which the MWSS seems bent on upholding regardless of consumer welfare, are unwarranted safety nets which only serve to ensure that the two concessionaires and their profits are safe and protected from financial risks and crisis," Chavez argued.

The existence of such provisions providing for "automatic rate adjustments" were said to take into account only the financial security of Manila Water and Maynilad.

FDC, however, stressed that the degree by which the concessionaires' financial security is protected in the contract runs contrary to the MWSS' role as a government agency that should prioritize consumer welfare over and above everything else.

"Time and again, we at FDC have demanded that a review of the concession agreement be conducted in order to lay bare the extent by which it fails to uphold consumer interests, yet here again we have another rate increase based on contractual provisions," said Chavez.

The group pointed out that the continued refusal of the state to review the concession agreement, or to terminate it altogether, only ensures that the government will keep on finding itself in situations such as the recent fiasco wherein the concessionaires will brandish the contract as their prime weapon against any government effort to intervene and act on behalf of public consumers.

MWSS over-stepping its authority

FDC also warned the MWSS against pursuing its unilateral approval of the rate increase, citing such approval as tantamount to MWSS “over-stepping its authority.” It added that MWSS should be reminded that whatever authority it bore in entering the concession agreement with the two concessionaires was authority delegated by the President as their principal.

"MWSS only acted as an agent for the President in entering these contractual agreements. Even if the contract contains provisions to the contrary, MWSS cannot go beyond the bounds of its authority as provided in its charter. MWSS Administrator Allado should probably review the MWSS charter before he makes decisions he is not in the position to make. As a lawyer, he should be well aware that the concession contract does not supervene the limitations imposed by law on MWSS through its charter," said Chavez.

Chavez further chastised Allado for warning Malacañang that a deferment of the rate increase would result in government shouldering the losses.

"It's alarming to have a government appointee such as himself discourage the government from upholding its responsibility to the people. With all the revenues that the government has collected through Metro Manila water charges, it's ironic to say the least that the MWSS Administrator himself would dissuade the government from pouring these revenues back to the consumers at a time when these consumers definitely need to see those revenues working in their favor," Chavez said.

A VAT charge of 10% has been included in Manila Water and Maynilad's billings since 1997, which was later increased to 12% in 2005. FDC data estimates that government has collected more than P3.3B in VAT revenues from Maynilad and Manila Water consumers for the period 2006-2007 alone. These estimates were based on financial statements submitted by Manila Water and Maynilad to the Securities and Exchange Commission. -30-

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