President Rodrigo Duterte is upset over a dozen onerous provisions of the 1997 concession agreement for water services for Metro Manila and parts of Luzon.
The contracts between the Metropolitan Waterworks and Sewerage System (MWSS) and the two water companies, Manila Water Company Inc. (Manila Water) and Maynilad Water Services Inc. (Maynilad), resulted to billions of pesos in losses on the part of the government.
This was revealed yesterday by Justice Secretary Menardo Guevarra who led the Department of Justice (DoJ) review of the water concession agreements entered into by MWSS with Manila Water and Maynilad during the term of former President Fidel V. Ramos.
“Upon instructions of the President, the DoJ reviewed the 1997 water concession agreements of the MWSS with the Maynilad and Manila Water and found a dozen provisions that were deemed onerous or disadvantageous to the gov’t and the consuming public,” Guevarra declared.
He said that the President would be making a public statement regarding the matter soon.
The 25-year contracts with Manila Water and Maynilad provided the private consortia will supply water, manage the distribution system, and improve and expand the east zone concession area.
Manila Water’s franchise area spans Mandaluyong, Marikina, Pasig, Pateros, San Juan, Taguig, Makati and parts of Quezon City and Manila. It also services Antipolo City and the Rizal towns of Angono, Baras, Binagonan, Cainta, Cardona, Jala-Jala, Morong, Pililla, Rodriquez, Tanay, Taytay and San Mateo.
Maynilad’s assigned areas are Manila (except San Andres), Pasay, Parañaque, Caloocan, Muntinlupa, Las Piñas, Valenzuela and parts of Makati and Quezon City, including the municipalities of Navotas and Malabon. Its franchise area also covers Cavite City, and its municipalities of Bacoor, Imus, Kawit, Noveleta and Rosario.
No less than the President ordered the review of the contracts following the massive water shortage that hit Metro Manila last April.
“However, the matter was not included in the Cabinet agenda till last November and again last night for updates. Meantime, the recent arbitration award to Manila Water came about. That’s why there was an impassioned discussion (on Monday) night,” Guevarra said.
“PRRD (Mr. Duterte’s initials) was visibly upset, if not angered, and we’re expecting him to make a public statement on the govt’s intended course of action,” he added.
Guevarra said that the DoJ review showed several provisions of the concession agreements between MWSS and Manila Water and Maynilad were disadvantageous to the government.
The justice chief said most notable among the unfair stipulations were the prohibition against government interference in rate-setting and the provision on indemnity for possible losses in the event of such government interference.
“Due to the twin provisions, the government was ordered by the Singapore arbitration court to pay Maynilad about P3.6 billion and, recently, Manila Water P7.4 billion as compensation for losses and damages,” noted Guevarra.
The DoJ also found the extension of the contracts up to 2037 as irregular, considering that the extension was granted 12 to 13 years before the original expiration of the 25-year concession agreements in 2022.
It will be recalled that the Permanent Court of Arbitration (PCA) in Singapore ruled in favor of Ayala-led Manila Water and directed the Philippine government to pay the company P7.39 billion for the non-implementation of rate hikes.
In a disclosure to the Philippine Stocks Exchange last 29 November, Manila Water said the tribunal ordered the payment to represent the company’s losses from 1 June 2015 to 22 November 2019, as well as the amounts paid to the PCA and 85 percent of other claimed costs.
Previously, the President lashed at Ayala-led Manila Water and the Manny Pangilinan-owned Maynilad for collecting services they never rendered to millions of their customers in the capital region.
Mr. Duterte, in an exclusive interview by Daily Tribune last July, said that the public can sue the two water companies for plunder for their failure to provide services, particularly the establishment of treatment plants, they charge.
In October, the President threatened that the government can take over operation of the water companies if they continue to fail to address water supply shortage.
Up to now, some areas under Maynilad are experiencing water supply interruption daily.
Last August, the Supreme Court slapped massive fines on MWSS, Manila Water and Maynilad for non-compliance with the Clean Water Act. The SC imposed about P2 billion in fines for each.
Both Manila Water and Maynilad, however, threatened to pass on the penalty by floating the possibility of a 780 percent rate increase.