News & Events

July 27, 2015

Manila Bulletin: Rollback of water rates nationwide demanded following ICC ruling

By Ben Rosario
June 2, 2015
The ruling of the International Chamber of Commerce (ICC) classifying private water concessionaires as “public utilities” has made mandatory the rollback of water rates in areas serviced by private firms in the country.
LPGMA Partylist Rep. Arnel Ty made this contention as he stressed that the ICC ruled that public utilities such as the Manila  Water Co. Inc. are barred from passing on to consumers their corporate income taxes.
Former and incumbent congressmen have also demanded the refund by MWC and the Maynilad Water Services Inc. of billions of pesos they collected from concessionaires to finance water and sewerage system projects that were later abandoned.
Kabataan Partylist Rep. Terry Ridon and former Rep. Bernadette Herrera Dy of Bagong Henerasyon Partylist called on government to conduct a full accounting of the MWC and Maynilad collections and move to have the money refunded to concessionaires.
The ICC ruling was contained in the decision it issued to resolve the arbitration proceedings between the MWC and the state-owned Metropolitan Waterworks and Sewerage System.
The MWC initiated the case before the Paris-based ICC after the MWSS slashed the East Zone water concessionaire’s basic charge of P25.07 per cubic meter by 29.47 percent or P7.25 per cubic meter for the rate rebasing period of 2013 to 2017.
The ICC appeals panel ruled in favor of the Philippine government by pointing out that MWC “is a public utility whose corporate income excises should be excluded from the cash flows used for the determination of tariffs.”
Ty said the ruling should be applied to all private firms running water supply systems of the public.
“We are convinced that piped-in water consumers nationwide are entitled to
refunds and lower rates, once all private suppliers, including those in the
provinces, voluntarily comply with the new ICC verdict,” said Ty.
“Otherwise, water district regulators, including those in the
provinces, should compel private distributors to immediately stop their
unfair business practice of conveying their corporate income tax burden to
consumers,” he added.
The partylist solon explained that under the ICC ruling water  contractors and providers “cannot recover their corporate income tax payments to government by charging these obligations back to consumers via higher rates.”
Manila Water has already agreed to lower its tariffs retroactively to comply with the ruling, but the MWSS’s other private concessionaire in Metro Manila and surrounding areas, Maynilad Water Services Inc., has yet to conform with the judgment.*
In a formal notice to Maynilad Water, the MWSS has already vowed to “have the issue on the recoverability of corporate income tax, along with its underlying issue pertaining to public utilities, finally resolved in a court of law,” if necessary, according to Ty.
Maynilad Water serves more than eight million consumers in 17 cities and municipalities in Metro Manila and Cavite.
Manila Water serves more than six million consumers in 23 cities and towns in the National Capital Region and Rizal.
From the original MWSS rate determination, the ICC appeals panel instead slashed Manila Water’s basic water charge by 11. 05 percent, equivalent to a decrease of P2.77 per cubic meter.
The reduction in the basic water charge would be staggered over three years. A reduction of P1.66 per cubic meter would be implemented in 2015, then P0.55 per cubic meter in 2016 and finally P0.55 per cubic meter in 2017.
The arbitration panel also ruled that Manila Water is a public utility and therefore cannot pass on its corporate income tax to consumers.
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