The seemingly gracious gesture of Maynilad Water to fly the trustees of the Metropolitan Water Works and Sewerage System (MWSS) to Hong Kong, billet them at the Four Seasons Hotel and provide them with shopping money is an act of bribery. The select journalists who went along for the junket could be called as witnesses to the crime, should a case of bribery be filed against the MWSS officials and Maynilad.
The gratuitous disclosure by one Maynilad official that Maynilad big boss Manny Pangilinan contributed P300 million to the 2010 campaign of President Benigno Aquino 3rd, and that this would incline the Aquino administration to support the company’s projects sounds like a confession. It will be music to the ears of investigators and prosecutors.
As the Age of BS Aquino 3rd rolls on, our elected and appointed officials are getting dumber and dumber, and would-be corrupters are more intellectually challenged.
By the rules and standards of ethics in government—such as those embodied in the US Ethics in Government Act—this junket was a bribe. According to the strict code of William Safire in his Political Dictionary—“something that cannot be eaten or smoked in a single day”—this is like being caught in flagrante delicto.
This incident is alarming because it has come at a time when the public is riled by a looming massive power rate hike, when the acts of public utility operators are under question, and the decisions of regulators are under fire.
Maynilad, in fact, is in the midst of an arbitration proceeding concerning a petition to increase water rates that has been turned down by MWSS.
The propriety of the Hong Kong junket is beyond debate. It was wrong for Maynilad to offer it. It was wrong for the MWSS trustees to accept it. They are called trustees for a reason; they are supposed to be guardians of the public trust. They are regulators. And now that trust has been hopelessly compromised. It is an example of what economists call “regulatory capture.”
Can the nation trust these trustees again to do right by consumers after junketing at Maynilad’s expense?
Financial plans and water rates
According to the Daily Tribune, Maynilad execs embarked on this junket freebie in order to bring to official and public attention the company’s grand financial plans for its water utility service.
Maynilad Chief Financial Officer Randy Estrellado, in a press briefing, discussed the plans of the company to upgrade and expand its service in its area of responsibility, and how the company plans to raise the money to fund the program.
Broken down, the program consists of the following:
1. The company has slated projects worth P18 billion in 2014 based on a business plan submitted to the MWSS.
2. Maynilad has also proposed P692billion in expenditures from 2013 all the way up to 2037 (this one was already turned down by the government because it would translate to an increase of P8.58 per cubic meter in charges to the public).
3. Early next year, Maynilad will sign a P6-billion loan with the Development Bank of the Philippines (DBP) and the Japan International Cooperation Agency (JICA) for a sewerage project. It is also slated to secure a loan from the World Bank for this project.
These planned investments and loans for the public utility are clearly designed to dazzle MWSS and the public into supporting the buildup with an agreement for an increase in water rates.
Maynilad’s pitch is simple. It will be spending a lot of money to improve its service, so a rate increase would be logical and well-deserved. Not so fast, gentlemen. Public Utility law is not that simple. There is a con involved here, and the public could be the loser.
Roosevelt and financial hocus-pocus
With remarkable prescience, FranklinRoosevelt, a keen student of public utility law, warned Americans about how public utility firms use financial hocus-pocus to induce the government and the public to approve higher rates for the service they provide. He wrote:
“The ferryman of old was compelled to give good service for a fair return on his labor and his property. But today the public utilities have found ways of paying to themselves inordinate and unreasonable profits and overcapitalizing their equipment by as much as ten times the sums they have put into it.
“The people of the United States were called upon to supply profits upon this amount of watered stock. It meant that someone was deriving profits from the capitalization into which they had put no substantial capital. It meant that the people had to pay these unjust profits through higher rates.
The federal trade Commission has disclosed ‘writeups’ upon which the people must pay a profit for all time . . . unless a change is made in public authority, it must be paid forever.
“Through lack of vigilance in state capitals and in the national government, we have allowed many utility companies to get around the common law, to capitalize themselves without regard to actual investment made in property, to pyramid capital through holding companies and without restraint of law, to sell billions of dollars of securities which the public have been falsely led into believing were properly supervised by the government itself.”
Roosevelt used the collapse of Insull Utilities Investment Inc. to illustrate his point.
“The crash of the Insull empire suggests that private manipulation outsmarted the slow-moving power of government. As always, the public paid and paid dearly.”
Government should inquire whether Maynilad has engaged in the practices that Roosevelt warned about. The talk about a business plan running all the way up to 2037 sounds like razzle-dazzle. And the calculation of how water rates will rise in the process is suspicious and scary.
Had the MWSS approved the Maynilad business plan, the public, even our posterity, would have been committed to paying water rates never seen in Philippine history.
This is a time when we truly need honest and dedicated officials at the helm of our public utility commissions.
This is why the Hong Kong junket is hair-raising.
(The Maynilad Water Services, Inc. clarifies that it was the Board of Directors of Metro Pacific Investments Corporation (MPIC) who went to Hong Kong—not the MWSS BOT and MWSS Regulatory Office. MPIC also invited the reporters from the Philippine Stock Exchange (PSE) and Securities and Exchange Commission (SEC) to a media briefing in Hong Kong.
In consortium with DMCI Holdings Inc, MPIC owns 83.96-percent controlling stake of Maynilad. – Editor)