Last year, Maynilad donated P2 million and potable water to victims of typhoon Pablo in Mindanao. The West zone concessionaire of the Metropolitan Waterworks and Sewerage System (MWSS) also donated P1.82 million to help construct 1,500 houses for informal settlers in Parañaque. Meanwhile, Manila Water has been funding the Manila Water Foundation which had a budget of P14.82 million in 2012. The East zone concessionaire’s foundation implements livelihood programs, community disaster relief operations and even researches.

There is no issue with profitable companies like Manila Water and Maynilad being “charitable” and donating funds for mass housing and disaster relief. I can even forgive them for staging such acts of supposed kindness to boost their corporate image and reap brownie points in the process. But what is unforgiveable is when these pa-pogi campaigns worth hundreds of millions of pesos by the billionaire-owners of the concessionaires are still being charged to us, poor consumers. What is even more revolting is that they even profit financially from their purported acts of altruism.

These highly questionable expenses have been included in the calculations of Manila Water and Maynilad’s current basic rate hike proposals of P5.83 per cubic meter (cu. m.) and P8.58, respectively.

P279-M in donations, advertising

The various donations made by the MWSS concessionaires do not come from the pockets of Manny Pangilinan, the Consunjis and the Ayalas. They collect it from us through our monthly water bills. We don’t just pay for their income tax; we also pay for their charity work. Also part of their pa-pogi campaigns is advertising and promotion, the costs of which are also passed on to consumers. All in all, Manila Water and Maynilad passed on not less than P279 million of their advertising and promotion expenses and donations from 2008 to 2012.

Like the estimated P15.31 billion in passed-on income tax during the same period, the costs of advertising, promotion and donations have been inserted in the basic charge being imposed by Manila Water and Maynilad as recoverable costs under their operational expenses (Opex). While the amount pales in comparison with the huge sum of income taxes passed on to consumers, it is nonetheless as unconscionable and unjust. And again, like the income tax, the MWSS concessionaires did not simply pass on these expenses but even gained profits through a guaranteed rate of return on their recoverable expenses.

Out of the P279 million, advertising and promotion expenses of Manila Water represent P97 million, and for Maynilad, P140 million, based on documents from the MWSS – Regulatory Office (MWSS-RO). Maynilad also listed P42 million in donations that they included in their Opex while there’s no available data for Manila Water and probably tucked the said item under “Other expenses”. The regulators should conduct a further audit on this; they can begin with the annual budget of the Manila Water Foundation.

(See images below)

What exactly are advertising and promotion expenses? Maynilad described the said item, thus: “This pertains to the cost of enhancing and promoting the image of Maynilad, developing harmonious relations with different local government units, establishing rapport with tri-media, advertisement and publication of notices in newspapers and magazines of general circulation, TV/Radio broadcasts, website, public consultations on ground and cost of sponsorships. It also includes athletic, recreational and annual cultural celebrations.” Clearly, such expenses do not have anything to do with the provision of water services and passing the costs to us is blatantly anomalous and unreasonable.

Arbitration costs, too

The MWSS-RO has already declared that they will disallow the income taxes and donations as Opex items that Manila Water and Maynilad can recover from consumers. This is welcome news. Sadly, under the Concession Agreements entered into by MWSS with the concessionaires, the MWSS-RO has no real power to impose its decisions like real regulators. Manila Water and Maynilad can question the decisions of the MWSS-RO through the process of arbitration.

(Download a copy of the Concession Agreement and related documents here)

Under Article 12.2 of the Concession Agreement, all disagreements, disputes, controversies or claims that cannot be resolved through consultation and negotiation shall be settled through arbitration proceedings. The arbitration will be presided by a three-member panel composed of one representative each from the MWSS-RO, the concerned concessionaire and a chairman who shall be jointly appointed by the regulators and the concessionaire.

Meanwhile, Article 12.6 of the Concession Agreement states that the “Costs incurred by the Appeals Panel in connection with any proceeding (including the fees and expenses of panel members and legal, economic or technical consultants retained by the Appeals Panel), shall be apportioned between the parties as the Appeals Panel shall direct and the Concessionaire’s share of such costs shall be treated as an Expenditure”. (Emphasis added)

In other words, Manila Water and Maynilad can recover their expenses in the arbitration proceedings by passing on the costs to consumers as part of their expenditure. Since 1997, there have been three arbitration proceedings with the total expenses reaching more than P140 million. (See Table)

It is important to emphasize that the MWSS-RO is just merely a creation of the Concession Agreement and is in fact being funded by Manila Water and Maynilad. The Concession Agreement’s Article 11.2 mandated the MWSS to allocate a portion of the concession fees paid by the concessionaires to fund the operation of the RO.

PPP contract

The Concession Agreement is a form of a public-private partnership (PPP) or privatization contracts that the MWSS entered into with the concessionaires in 1997 and will expire in 2037. The framework and model of setting water rates that allowed Maynilad and Manila Water to pass on highly questionable charges to consumers including their past and future expenses covering income tax, projects (many of which have never been implemented), as well as advertising, promotion and donations, among others.

Shall the 14.2 million consumers of Manila Water and Maynilad suffer 24 more years before our policy makers or Malacañang rescind this patently onerous and anomalous PPP contract? (End)