RSakai Presentation

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1. Concession Framework

2. Concession Agreement Framework

3. MWSS Service Area4. The Concessionaires

5. Regulatory Framework

6. MWSS Regulatory Office

7. Performance-Based Evaluation

8. Tariff Setting

9. Efficiency Gains

10. Improving Operational Efficiencies: Best Regulatory

Practices

11. Regulatory Challenges

12. Open Forum

Presentation Outline



Before Aug. 1, 1997 Sinc e Aug. 1, 1997

MWSSCharter

MWSSCharter

PUBLIC PUBLIC

ConcessionAgreement

ReimbursementCost + ADR

Servic eObligations

MWSS MWSS

Concession Framework



Concession Agreement Framework

Asset Management Obligations

“operate,

maintain

and

renew”

Meet Service Obligations

“provision of water supply &

sewerage services”

Expenditures prudently and

efficiently incurred



MWSS

Service Area

EAST ZONE

WEST ZONE

West Zone East Zone

Land Area

(sq. km)540 1,400

Service Area 17 Cities /

Municipalities

23 Cities /

Municipalities

Total (2007)

Population

8 M 6 M

Population

Served:

1997 =

2007 =

4.3 M

5.60 M

2.00 M

5.40 M

Water

Production

2,400 MLD 1,600 MLD

House

Service

Connection

(2007

Approx.

700,000 Approx

610,000



The Concessionaires

EAST ZONE: 1997

• Ayala (Philippines)• United Utilities (UK)

• Bechtel (USA)

• Mitshubishi (Japan)

WEST ZONE: 1997

• Benpres Holdings (Philippines)

• Lyonnaise des Eaux (France)

2006

•Ayala (Phil)

•United

Utilities

(UK)•Mitsubishi (Japan)

•BPI Capital

•IFC

•MWCI Employees/Public

2006 (Bidding of

MWSS rights &

obligations)

• MWSS = 84%

• ONDEO = 16%

2007 ‐ present

DMCI and MPIC



Regulation

Protect consumersfrom high prices &

poor services

Regulatory Framework

To balance the interest of stakeholders

Provide incentives

to firms to invest,be efficient & earn

profit



Created by virtue of the Concessionaire Agreement (CA)

MWSS Regulatory Office (MWSS RO)

Functions Details

Monitoring Compliance to water and waste water quality

standards

Population Coverage

Asset Management

NRW

Collection Efficiency

Operational Cost

Customer Service Standards

Determining CPI, EPA, Rate Rebasing, FCDA

Early Termination Amount Assessment of Penalties



Performance Based Evaluation

Service Obligations

Key Performance

Indicators (KPIs)

• Water Service (6)

• Sewer/Sanitation (3)

• Customer Service (5)

Business Efficiency

Measures (BEMs)

• Income (2)

• OPEX (3)

• CAPEX (3)

• NRW (1)

Tariff



Tariff Setting

Inflation Annual Adjustment for inflation

Extraordinary Price

Adjustments

Annual adjustment for events

beyond control

Rate Rebasing Every five years with full review

of business plan

Foreign Currency

Differential Adjustment

Quarterly review & adjustment,

covers eligible loans in foreign

currency

Formula-driven adjustments

RAL (%) = “C” (%) ± “E” (%) + “R” (%)



Efficiency Gains

DescriptionPre Privatization

POST PRIVATIZATION

2007

1997 MWCI MWSI Combined

Service Population 11.80M 5.70M 8.20M 13.90M

Population Served 6.30M 5.40M 5.60M 11.00M

Water Sources Angat (97%)

+ deepwells (3%)

Angat (97%)

+ deepwells (3%)

Angat (97%)

+ deepwell (3%)

Angat (97%)

+ deepwells (3%)

Treatment Plants 3 2 2 4

House Service Connections 0.76M 0.61M 0.70M 1.31M

Water Distributed 3,000mld 1,600mld 2,400mld 4,000mld

Water Availability 67% 94% 85% 89%

Non-Revenue Water 61% 30% 65% 51%

Staff/1000 Connection 9.8 1.5 2.2 3.7

Concessionaire’s Performance



PAWS Survey

(Transparency, Accountability, Result-oriented)

Efficiency Gains



0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

MWSI 7.21 7.21 8.23 8.63 14.27 19.9219.92 19.9230.19 32.5132.99 31.69

MWCI 4.02 4.02 4.37 4.55 6.32 9.37 13.88 14.0118.64 19.8420.68 24.48

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

All–in Water Tariff at Php per cubic meter



Improving Operational Efficiencies:

Best Regulatory Practices

1. Solid Public‐Private‐LGU‐NGO Partnerships

2. Strengthening the accountability of Concessionaires

• Business Plan

• Aligning the investment plan with the interests of MWSS and

consumers

• Levels of service = tariff

3. Establishment of KPIs(14) and BEMs (9)

• Reward and Penalty (e.g. NRW, OPEX)

4. Establishment of CAPEX Monitoring Manual



5. Flexibility in amending the Concession Agreement (e.g.

FOREX losses/gains, water connection charges, rationalization of

sewer/sanitation charges)

6. Conduct of Public Assessment for Water Services

(PAWS)

7. Creation of Project Management Committee (PMC)8. Staggering of rates

9. Transparency in the regulatory process

10. Avoidance in micro‐managing the Concessionaires



1. Sustaining the gains of privatization

2. Scaling up sewerage/sanitation investments

3. Developing new water sources

Regulatory Challenges



Thank You

RSakai Presentation

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