By Victor V. Saulon, May 22 2019; Business World

Image Credit to Business World

THE METROPOLITAN WATERWORKS and Sewerage System’s Regulatory Office (MWSS-RO) has issued a notice of service obligation failure to Maynilad Water Services, Inc. for not meeting requirements under its concession agreement, the chief regulator said on Tuesday.

In a press conference, MWSS-RO Chief Regulator Patrick Lester N. Ty said the notice was sent to Metro Manila’s west zone concessionaire on Monday afternoon, and Maynilad said it had received the letter.

Saying that Maynilad has “until Monday to explain why they should not be penalized,” Mr. Ty explained that “[b]ased on our computation, based on our monitoring, nag-reach na sila ng (they failed to meet service obligations for) 15 days.”

Mr. Ty said his office invoked Article 10.4 of the concession agreement — which provides that failure to meet any service obligation for more than 60 days, or 15 days “in cases where the failure could adversely affect public health or welfare”, will subject concessionaires to penalties — as more than 15 days had lapsed since MWSS-RO alerted Maynilad of the complaints.

“Last April 30, 2019, we issued a letter to [Maynilad] to call their attention to the large number of complaints we received regarding water service interruptions and low water pressure in large portions of the west zone concession area, specifically in the consumers living in the south,” Mr. Ty said.

He said water service interruptions and low water pressure continued to affect the company’s concession area even after its attention was called.

“It is for this reason that we have given [Maynilad] five days upon receipt of the said notice to… explain why they should not be penalized under Article 10.4 of the [concession agreement],” Mr. Ty said.

“If found liable, we will recommend to the MWSS Board of Trustees that fines and penalties should be imposed.”

Sought for comment, Randolf T. Estrellado, Maynilad’s chief operating officer, said the company has received the notice which, he argued, lacked basis.

“We received the notice of service obligation failure yesterday [Monday] in relation to the service interruption due to the algal bloom in Laguna Lake and given five days to respond. We believe there is no basis for the imposition of the penalty, as the service interruption did not last for 15 days and only affected 12% of Maynilad’s customer base,” he said.

“To mitigate the impact of this emergency service interruption, we implemented rotational supply interruptions and also deployed mobile water tankers and stationary water tanks, even as we intensified treatment interventions to address the challenging raw water quality.”

Mr. Ty said he did not want to pre-judge Maynilad and declined to comment on the company’s explanation. “I want to listen to their official explanation first on the notice that I sent to them before I will comment because I want to double check everything first,” he said.

Metro Pacific Investments Corp., which has majority stake in Maynilad, is one of three Philippine units of Hong Kong-based First Pacific Company Ltd., the others being Philex Mining Corp. and PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls.

In the same press conference, Mr. Ty said his office will implement the bill rebates for customers of east zone concessionaire Manila Water Co., Inc. starting June 2019, which reflects consumption in May.

“This is a result of the penalty that the MWSS Board of Trustees imposed to Manila Water under Section 10.4 of the concession agreement, for their inability to meet its service obligation of providing 24/7 water supply to all their consumers,” he said.

The penalty, amounting to a total of P1.13 billion, consists of P534 million as rebate to customers and P600 million for development by Manila Water of a new water source. All active accounts as of March 31, 2019 of Manila Water will get a rebate.

“Of all these accounts, we further identified those that were severely affected and they will enjoy a P2,197.94 rebate each,” Mr. Ty said, adding that the rebate is on top of the 10 cubic meter (cu.m.) consumption that will be received by all customers.

He said more than 140,000 accounts would receive the rebate based on the list of 45 barangays identified by Manila Water when it offered its own one-time bill waiver program in April.

Mr. Ty said Manila Water had accepted the penalties imposed by the regulatory office. “The P534 million plus the P600 million, they are not contesting that anymore. They already wrote a letter that they are accepting it,” he said.

He said another assessment, to take place by August or September, will decide whether more penalties would be warranted should Manila Water continue to fail to meet its service obligation.

Sought for comment, Manila Water said it would comply with the bill rebates for its customers.

“We will coordinate with the Regulatory Office and will implement as prescribed this June,” Nestor Jeric T. Sevilla Jr., Manila Water head of corporate strategic affairs, said in a mobile phone message.

Mr. Ty said that, in all, the penalty imposed on Manila Water — including the cost of its voluntary bill waiver and minimum charge waiver — would amount to P1.6 billion. He said the amount excludes lost business because of the water shortage.

The east zone concessionaire has been experiencing a water supply deficit since March 6, although it has now brought down the shortfall. The deficiency came about as water demand reached 1,750 million liters per day (MLD) while supply remained at 1,600 MLD. A planned new water treatment plant failed to meet its target launch in late 2018 because of technical issues.