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As I See It

Water, power firms overcharging the public

/ 09:51 PM February 24, 2013

As we celebrate the 27th anniversary of the 1986 People Power Revolution that freed us from the shackles of a dictatorship, perhaps we should also start another revolt to free us from the shackles of greedy private corporations. I am referring to the utility companies, such as water, power, communications and toll road operators, which have been raising their rates with impunity, beyond the reach of poor consumers. Water and power rate increases have already been announced.

There are government regulatory bodies that are supposed to determine if the increases asked by the utilities are fair and justified. But the regulatory bodies have become mere stamping pads.

Why is this happening? Because of the anomalous situation where the regulators are being paid by the utility corporations they are regulating. Yes, the salaries and allowances of these regulatory bodies, such as the MWSS (Metropolitan Waterworks and Sewerage System) Regulatory Office, the Energy Regulatory Commission and the Toll Regulatory Board come, respectively, from the water concessionaires, the power distributors and the toll road operators.


The officials and employees of the regulatory bodies are government employees but their pay comes from the utilities. In effect, the utilities have become their employers. If the utility companies choose not to pay their monthly fees to the government, the regulatory bodies would not be paid. So how can these regulators(?) turn down the increases asked by their “employers”?

The regulatory bodies are supposed to be independent so that they can look at the issues objectively and decide fairly. But how can they be independent and curb the greed of the utility companies if the latter hold them by the balls? No increase, no pay—it’s as simple as that, in effect.

Look at the greed of the water concessionaires: Maynilad will raise its rate by another P10.30 per cubic meter, while Manila Water will raise its rate by P5.83 per cubic meter.

The water they are distributing is given to them by the MWSS 100-percent free. They are not paying a single peso to the MWSS for the water they are selling to the consumers.

When they took over the water distribution from the MWSS, the water was already there and the distribution networks were in place and working. All they had to do from Day One was to collect the monthly bills from the consumers. Where can you find a better deal than that?

The water concessionaires say they are improving the distribution network, fixing the leaks, putting up new dams for more water. In the first place, it is the MWSS and the taxpayers who will pay for the dams, not the concessionaires. And secondly, why are the concessionaires collecting in advance from consumers the capital they need to improve the distribution network and fix the leaks? As capitalists, they should invest capital into their project. Only when the project is already providing a service to the public do they have a right to charge them.

The Public Service Law limits the profit of utility companies to 12 percent of capital invested because utilities are monopolies given special privileges by the government. This is what is called the return on rate base. But according to Rep. Bernadette Herrera-Dy at a news forum, the concessionaires are already earning “more than 100 percent profit”!

How do they get away with this? Because they are cheating. The concessionaires have added to their capital base the assets that were already in place when they took over the concession. When you inflate the capital base, naturally the 12-percent profit based on it also increases. But those assets were put there by the MWSS, why should the concessionaires collect profit from them?


Then there is the so-called “systems loss” that is charged to you by the distributors. These are the water and electricity lost, and these amount to almost 50 percent for both water and power supply. They are the water and electricity stolen by squatters and rich consumers. Also, in the case of water, that which is lost through leaks; and in the case of electricity, the power that is lost when electricity flows through the grid from the generators to the consumers. These systems losses are charged to the consumers. In short, the consumers are paying for water and electricity stolen by others or lost because of the negligence of the distributors. In other words, since the systems losses are almost half of the total supply, the subscribers are paying double for what they are consuming.

Because the losses are being paid by the exploited consumers anyway, there is no incentive for the distributors to stop the thefts and leaks and other losses.

In the case of electricity, the power companies also charge to the consumers “systems losses” in the power plants. Some electricity is really lost through friction when the power flows through the grid from the power plants to the consumers. But a systems loss in the power plants? How can there be a loss of electricity in the power plants when they are the ones generating the power?

The system of accounting and charging the customers has been made complex by technical gobbledygooks, such as the so-called “performance-based regulation” concocted by the lawyers and which even the regulators, much less the consumers, find hard to understand. I have simplified them to be understandable to the layman as much as possible.

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TAGS: As I See It, Maynilad, MWSS, neal h. cruz, opinion, Power, public service, Public Service law, water
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