MWSS revokes contract extension of Maynilad, Manila Water

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The Metropolitan Waterworks and Sewerage System (MWSS) confirmed Wednesday that it had cancelled the resolution extending the concession agreements with firms Maynilad Water Services Inc. and Manila Water Company Inc.

Metro Manila (CNN Philippines, December 10) – The Metropolitan Waterworks and Sewerage System (MWSS) confirmed Wednesday it had cancelled the resolution extending the concession agreements with Maynilad Water Services, Inc. and Manila Water Company, Inc.

During the resumption of the House joint hearing on the issues surrounding both water companies, MWSS Deputy Administrator Leonor Cleofas said that the board of directors had revoked on December 5 the contracts of Maynilad and Manila Water to 2037. The contracts will now expire in 2022.

"During the December 5 board meeting, the board tackled, [based on the directive of the President] and the Cabinet meeting...first was the onerous provisions and second, was [the decision] to rescind the memorandum of agreement on the extension of concession agreements," Cleofas told lawmakers in a public inquiry held by the House committees on good government and public accountability.

Chris Chuegan, MWSS acting deputy administrator for financial regulation area, noted it is likely that the concession can be rebidded or be up for bidding to other potential operators.

"If the contract will be cancelled by 2022, there will no longer be a price adjustment..hindi po clear kung tataas po ang presyo dahil pag natapos ang kontrata pwedeng ipa-rebid or magkaroon ng bagong bidding wherein new operators will come in. Wala nang pagkakataon para magrecompute kasi tapos na po yung huling rate rebasing which is 2018," Chuegan said.

[Translation: If the contract will be cancelled by 2022, there will no longer be a price adjustment. It is not clear if the price will increase because once the contract is over, this can be rebidded or it can be up for bidding where new operators will come in. There is no chance to recompute because our rate rebasing was finished last 2018.]

But for the water firms, the spike in water rates will likely go "very high" due to the revocation.

"We are still computing but definitely it will go very high because the rationale of the extension at the time was to mitigate the spike in tariffs," said Maynilad President Ramoncito Fernandez.

"Kailangan rin pong ma-recompute sapagkat hindi po naayon sa previous discussions (the rates also need to be recomputed because these are not in line with the previous discussions)," Manila Water board member Tony Aquino said, adding that they have crafted an initial spending plan based on the extended contract.

Concession deals were supposed to expire in 2022 under the original agreement but these were extended to 2037 during the term of then President Gloria Macapagal-Arroyo.

Fernandez, however, said that the revocation of the board resolution counts as a "grave concern," especially since they were only notified about the decision Wednesday morning.

"Ngayong umaga lang po namin tinanggap 'yang board resolution (We only received the board resolution this morning) but we would like to react that it is with very grave concern that we view this action and we believe also that it is not proper to unilaterally revoke the agreement," Fernandez said.

MWSS, on the other hand, admitted that they can't do without both water firms as they only have a hundred employees who could take over the job.

Meanwhile, Malacañang acknowledged it has received the letters from Maynilad Chairman Manuel V. Pangilinan and and Manila Water Chairman Fernando Zobel de Ayala,

In a statement Wednesday, Presidential Spokesperson Salvador Panelo said the letters stated both companies would "revisit the concession agreements for amendments or revisions of the provisions which are onerous to the government and ultimately, their consumers."

It also confirmed that Manila Water and Maynilad would no longer pursue their claims against the government.

"The Chief Executive will read the letters of Maynilad and Manila Water before the public for transparency and to show that all the steps being undertaken by the government in resolving this issue with the two Metro Manila water concessionaires are aboveboard and legitimate," the statement read.

It added the President would speak with all lawyers involved in crafting the water deals and figure out how "onerous" provisions were included.

Duterte previously said he was not willing to compromise over such provisions.

Justice Secretary Menardo Guevarra previously bared that the extension of the contracts to 2037 before the expiration of the agreement in 2022 were found "irregular" since it will be 12 to 13 years before its original expiration.

Officials of Maynilad and Manila Water have reiterated that they are willing to sit down with the government to amend the concession agreement.

On Tuesday, both firms have agreed not to impose a price hike originally set for January 2020.

Maynilad and Manila Water also said they will no longer demand from the government a ₱10.8-billion compensation in line with the ruling of the Singapore Permanent Court of Arbitration in November.

CNN Philippines' Xianne Arcangel and Glee Jalea contributed to this report.