On Wednesday, September 1, lawmakers raised the possibility of extending the validity of the government’s agreements with Manila Water Company and Maynilad Water Services Inc. until 2046.
During the Senate Public Services Committee hearing on the franchise applications of the two Metro Manila Water concessionaires, Senator Grace Poe, chair of the committee, noted the disparity between the effectiveness of the revised concession agreements and the proposed validity under franchise bills.
“The revised concession contract effectively extends the concession until 2037. On the other hand, the bills grant the 25-year franchise, which, if approved this year, will end in 2046,” Poe said. by asking resource people about its repercussions. .
The leader of the Senate majority, Juan Miguel Zubiri, also raised the same concern. Citing his experience with his power companies in Bukidnon province, he said extending the validity of concession agreements would result in lower tariffs and “huge savings” on water bills.
“The longer the contract, the easier you can structure your loans, and therefore your rates can drop a lot. And we are doing it in the electricity sector, ”Zubiri said.
“In that case, wouldn’t it be more practical to give them the 25-year franchise, ay sabay na rin natin ‘yong, the 25-year franchise?” And I think – and we can ask the dealers – that would reduce rates considerably. They can now extend payment terms and that would certainly be more advantageous for our consumers. It seems perfectly logical to me, ”added the senator.
Manila Water and Maynilad officials confirmed Zubiri’s statements.
“We fully agree with Senator Zubiri that if we can extend the concession contract to coincide with the expiration of the franchise, it will benefit consumers for a lower rate. A longer payback period translates into lower prices. So we fully support this, ”said Donato Almeda, Regulatory Director of Manila Water.
“We support the possibility of synchronizing the life of our dealership in the franchise. It will certainly be in the interest of our customers as it will allow to smooth the price adjustments necessary to recover long-term investments… Addressing synchronization will certainly be beneficial for our customers ”, also affirmed the President and CEO of Maynilad , Ramoncito Fernandez. .
Water concessionaires have estimated a 35 percent reduction in tariffs payable by their consumers if the validity of concession agreements were aligned with the franchise.
In requesting the renewal of the concession, they proposed that the metropolitan water and sewer network (MWSS) be authorized to extend the concession contract.
The MWSS has said it does not oppose the extension as long as the provisions of the revised concession agreements remain in force.
“It would be advantageous from the outset if there was unanimity in the period of the franchise and the revised concession contract,” Augustine Vestil, director of legal services at MWSS, told the Senate committee.
“In principle, we will not oppose [setting] the same period for the granting of the franchise and the revised concession contract … We simply wanted to underline that the participation of the government, not only as a regulator but as an agency which will ensure compliance with standards, [and] should not be put aside, ”he stressed.
Government enterprise legal adviser Elpidio Vega also welcomed the proposed extension. He mentioned possible problems “with regard to regulation, control, approval of tariffs” if the varying validity dates are not reconciled.
President Duterte ordered in 2019 the revision of the government’s concession agreements with Manila Water and Maynilad because of their “onerous” provisions which would have disadvantaged the country.
At the hearing, officials said the revised agreements had already taken into account the disadvantageous provisions. They also assured senators that safeguards were also in place to protect consumers.
Poe then ordered the creation of a technical working group to finalize the provisions of the franchise bills before approval by the Senate Utilities Panel.
“We want to make sure there is contract certainty. It’s hard to change the goal post in the middle of the game, ”she said.
“First and foremost, we have to take into account the needs of our consumers,” said Poe.
SUBSCRIBE TO THE DAILY NEWSLETTER
CLICK HERE TO JOIN