THE Metropolitan Waterworks and Sewerage System Regulatory Office (MWSS RO) is reviewing guidelines for carrying out foreign currency differential adjustments (FCDAs), which it charges water concessionaires in Metro Manila.
The FCDA is authorized by its amended revised concession agreements (RCA), chief regulator Patrick Lester N. Ty said, adding that the review is being conducted with the assistance of the Department of Finance (DoF). The final guidelines are subject to approval by the MWSS Board of Trustees.
Once the guidelines are approved, the concessionaires — Manila Water Co., Inc. and Maynilad Water Services, Inc. — will submit their FCDA proposals for review and recommendation by the MWSS RO and subsequently for board approval.
The FCDA will be adjusted and reviewed quarterly by the MWSS RO with the approval of the board.
“We will ensure that these guidelines are geared towards further protecting and safeguarding the welfare and interests of the public by ensuring that there are no over or under collections,” Mr. Ty said at a public consultation on Tuesday.
The FCDA is a tariff mechanism that accounts for foreign exchange losses or gains arising from the payment of concession fees and foreign-currency denominated borrowings contracted by the MWSS.
Among the key features of the FCDA guidelines is a provision barring concessionaires from “recover(ing) twice for the same amount of payment for the MWSS loans.”
“If the first FCDA results in an FCDA greater than 10% of the basic charge, the MWSS RO shall have the option to extend the recovery of the first FCDA for up to two years,” according to the MWSS RO.
The FCDA was temporarily halted when the MWSS and water concessionaires signed the amended RCA in May 2023, pending the creation of new guidelines.
“The FCDA is being implemented (as) part of the RCA, as amended… This could result in a rollback or an increase in water bills, so it will depend on how foreign currency moves,” Mr. Ty said.
Maynilad has said that the FCDA was reinstated under the amended RCA because “the government took into consideration the need to cushion the impact on concession fees and loans of foreign exchange movements.”
The amended RCA introduced a modified FCDA for concession loans obtained after June 29, 2022, but “only for extraordinary movements of the exchange rate.”
The FCDA, Mr. Ty said, is not likely to produce a clear-cut outcome because the peso has strengthened against the yen but weakened against the dollar.
“Since the water concessionaires pay for the foreign-denominated debt of MWSS via the concession fees, the FCDA would allow for the recoverability of forex gains or losses from paying those inherited loans,” according to Maynilad.
Asked to comment, Dittie L. Galang, head of Manila Water’s corporate communications said: “We will observe the process for now. As always, we will abide by the provisions of the RCA, as enforced by the MWSS-RO.”
Amendments to the RCA were signed on May 10, 2023 and took retroactive effect with a June 29, 2022 start date. These are intended to align some of the RCA provisions with the revised implementing rules and regulations of the Build-Operate-Transfer Law. — Sheldeen Joy Talavera
