REACTION PAPER The two water service concessionaires of greater Manila area recovered through tariffs the sundry

expenses and income tax payments that are unacceptable to consumer welfare advocates. Based on the business plans of Maynilad Water Services Inc. and Manila Water Company Inc. (MWC), which regulators approved in 2008, operating expenses included those for advertising, training, representation, transportation and travel, and special events management.The concession agreement with the Metropolitan Waterworks and Sewerage System provides that the concessionaires may recover during the full concession term operating, capital maintenance and investment expenditures efficiently and prudently incurred. The agreement also allows the recovery of Philippine business taxes and payments corresponding to debt service on MWSS loans and concessionaire loans incurred to finance such expenditures. Maynilads business plan indicates that operational expenses (OPEX) include personnel costs; supplies; light and power used in its plants, facilities and offices; repairs and maintenance of such facilities and offices as well as vehicles and equipment; and the companys annual contribution to the maintenance and operating expenses budget of the MWSS regulatory office and corporate office. Aside from these, there are other expenses that include a performance bond premium set at $30 million in 2008, outside services, rentals, insurance, and professional fees for consultants. For the advocacy group Water for the People Network (WPN), what is most irksome is the inclusion of expenses like those for advertising, promotions and recreation. Maynilad defines this as the cost of enhancing and promoting (the companys) image; developing harmonious relations with local government units, establishing rapport with tri-media, advertisement and publication of notices in newspapers and magazines of general circulation, TV/radio broadcast, website, public consultations on ground and cost of sponsorships. This item also pertains to expenses of officers and employees while traveling on official business within the country or abroad (including the cost of airfare, hotel accommodations, and other travel-related expenses in connection with regional visits). The cost of tolls and parking expenses are also covered. Any way you look at it, the increases in water rates by the two water concessionaires, Maynilad and Manila Water, are too much and unconscionable. Imagine, Maynilad is increasing its rates by P8.25 per cubic meter, and Manila Water slightly lower. To the average household, that would be an increase of P250 a month. Thats highway robbery! Many poor families earn less or only slightly more than that. The survey results showed that a majority of Maynilad customers do not totally understand their bills and pricing structures, and they are largely clueless on how to best manage their monthly water consumption. The latter was found to be a prime concern for customers as they felt powerless in the face of rising water costs.