• Dry as well as dark

    Ben D. Kritz

    Ben D. Kritz

    (Part Two of Two)

    Coming as it does from a company that somehow manages to translate lower sales and higher costs into bigger profit margins, the unpalatable choice between higher electric bills or occasional power outages being offered to its customers by Meralco (see Tuesday’s column) would be insulting enough on its own, but this summer is accompanied by an extra indignity—the prospect of widespread water shortages.

    As The Manila Times has been diligently reporting for the past week or more, the supply of water in three major reservoirs—Angat, Ipo, and La Mesa—has been disappearing at an alarming rate.

    The level of the Angat reservoir is dropping by 18 to 30 centimeters per day, which is obviously bad news for the 90 percent of the customers of Metro Manila’s two water concessionaires Maynilad and Manila Water who are supplied by that reservoir.

    It is a problem that potentially affects areas far outside the metropolis as well, as the reservoirs are the major source of irrigation water for farms in Central Luzon.

    And just as with the provision of electricity by Meralco, the management and distribution of the vital and threatened utility commodity of fresh water is handled in the most opportunistic and exploitative way possible by the enterprises granted a monopoly over it. In September of last year, both Manila Water and Maynilad were stunned by a brassy move on the part of the normally-compliant Metropolitan Waterworks and Sewerage System (MWSS) when the two companies’ applications for rate hikes—P5.83 per cubic meter for Manila Water, and a whopping P8.58 per meter for Maynilad—were not only rejected, but answered with an order from the regulator to reduce existing rates.

    In the course of the uproar that followed, titillating details of the malfeasance of both companies, in particular the Ayala-led Manila Water, were revealed, which included passing charges to consumers for such things as foreign currency adjustments, corporate income tax liabilities, and flowers and gifts for corporate visitors. In response to the MWSS decision, both companies promptly filed for arbitration through the International Chamber of Commerce (ICC) and imposed the rejected rate increases anyway, reasoning that it was appropriate to do so while waiting for a decision from the arbitration panel; the latest news is that decision might be rendered sometime in June or July.

    Most of the attention of the media fell on Manila Water, whose attitude towards what items could be characterized as costs of delivering service seemed a little more cavalier than that of Maynilad, but the latter should not have largely escaped scrutiny. Much like Meralco – in fact, in a manner which actually makes Meralco look like a bunch of amateurs – Maynilad has enjoyed remarkably healthy returns during the time period coinciding with the presidency of B.S. Aquino 3rd, returns that belie its claims that financial circumstances necessitate jacking up its base rate for water supply to customers by 28 percent. In 2009, Maynilad reported a net margin of 32.8 percent; by 2010 that had jumped to 39.7 percent, and in 2011 the company hit a high point of 42.6 percent. 2012’s margin was down a little at 40.2 percent, which may have prompted the scramble to increase billing rates.

    What is particularly disturbing about Maynilad, however, is that the company is apparently clueless or otherwise unconcerned that the commodity they deliver – at inflated prices and a level of efficiency roughly half that of the lowest acceptable standards for municipal water systems anywhere else in the world – is not only barely sufficient in ‘normal’ years, but will be in critically short supply very soon this year. For the past two years, Maynilad has pursued a massive expansion project to connect the outer parts of its franchise area in Cavite, potentially adding a couple hundred thousand new customers, which is pretty much the exact opposite of what would be a sustainable strategy to manage a finite water supply.

    We have a hard time imagining that the noticeable increase in the perceived oppression of utility customers since Aquino took office is coincidental, but it might be. In the case of Meralco and Maynilad, there seems to be a more likely culprit: Anyone who read even a little of my fellow columnist Bobi Tiglao’s extensive exposé of the investments of Indonesian magnate Anthoni Salim, which appeared in several installments in the wake of the Meralco rate crisis beginning in December of last year (to refresh your memory, you can find an archive of these at his website, http://www.rigobertotiglao.com/category/manila-times-columns), would not be surprised to learn this plunderer of critical Philippine services – electricity, water, telecommunications, highways, hospitals, and media outlets – is a common link between the woes suffered by Meralco and Maynilad customers. Salim’s Metro Pacific vehicle owns approximately 51.3 percent of DMCI-MPIC Water Co., Inc. (a joint venture with the Consunji-led DCMI Holdings), which in turn owns about 92 percent of Maynilad; Metro Pacific also has a direct stake in Maynilad of about 5.2 percent.

    As long as an Administration that pleads helplessness to look out for the interests of a population facing a dark, dry, and expensive summer in the face of “market forces” remains in office, there seems little chance that the two pieces of legislation that are the root causes of the dire circumstances for the Philippines’ utility infrastructure – the Electric Power Industry Reform Act (Epira) of 2001, and the Water Crisis Act (RA 8041) of 1997 – will be seriously addressed. But they need to be addressed, and soon; the longer present circumstances are allowed to fester, the more drastic the solutions to them will have to be.



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