Water, electricity rates increases considered as peso further weakens

A row of water meters (left), and a column of electricity meters in the Philippines. (Photo: Getty Images)
A row of water meters (left), and a column of electricity meters in the Philippines. (Photo: Getty Images)

With the peso hitting new lows, even reaching a P59.02 intraday trade against the dollar, Filipino consumers will have to resort to more belt-tightening measures as water and electricity rates may go up due to the weakening currency.

The Metropolitan Waterworks and Sewerage System (MWSS) mentioned that a rate hike was possible for water as the peso continues to devalue.

Meanwhile, the increase in the global prices of coal and crude oil could raise power generation cost, which is a significant component of a consumer's bill, as power producing companies import raw materials and equipment.

Water

In this March 13, 2019, photo, water drops from a faucet as residents wait for trucks bearing water to return in Mandaluyong, metropolitan Manila, Philippines. (AP Photo/Aaron Favila)
In this March 13, 2019, photo, water drops from a faucet as residents wait for trucks bearing water to return in Mandaluyong, metropolitan Manila, Philippines. (AP Photo/Aaron Favila)

MWSS chief regulator Patrick Lester Ty highlighted the possible return of the Foreign Currency Differential Adjustment (FCDA) brought upon by foreign currency losses. FCDA is a fee charged by water concessionaires like Maynilad and Manila Water to manage losses brought upon by fluctuations in the foreign exchange market. This was because such concessionaires get foreign loans to pay for expansion efforts, thereby fluctuations could make interest payments more expensive or cheaper.

The MWSS Board of Trustees (BOT) removed the FCDA in November 2021 and is taking effect until December 31 this year.

“It will have an effect definitely, but we will try our best to minimize or at least spread this increase through the next five years,” Ty claimed on Wednesday (September 28).

He added, “But in the meantime, since we are still under the original concession agreement, all the losses for foreign currency will be included during the rate rebasing that is ongoing right now and that will have an effect in the rates this coming Jan. 1, 2023.”

Rates and concessionaire performances of concessionaires are currently being reviewed by the MWSS which are considered in the adjustment of tariffs.

“We are waiting for the conclusion of rate rebasing and we will hold a series of public information drive and public consultations this October,” Ty said. “By then, we will announce the results of our rate rebasing.”

The continual depreciation of the peso is associated with the interest rate hikes imposed by the United States Federal Reserve in order to tame the rising prices in America.

Electricity

A masked environmental activist wags mock dollars bills during a protest outside the JP Morgan Chase & Co. office to urge the multi-national company to stop its funding of a coal-fired power plant in the country and other coal projects all over the world Friday, Oct. 13, 2017, in suburban Taguig city east of Manila, Philippines. (AP Photo/Bullit Marquez)
A masked environmental activist wags mock dollars bills during a protest outside the JP Morgan Chase & Co. office to urge the multi-national company to stop its funding of a coal-fired power plant in the country and other coal projects all over the world Friday, Oct. 13, 2017, in suburban Taguig city east of Manila, Philippines. (AP Photo/Bullit Marquez)

Power generation makes up around 60 percent of an electricity bill. It is the cost of power that distribution companies buy from producers.

The war in Ukraine that disrupted the global energy supply chain is a factor, among others, driving the prices of energy, according to Celso Caballero, AboitizPower Coal Business Unit president and chief operating officer.

“Currently, both gas and coal are terribly expensive,” he said, before expressing some optimism of recovery next year.

“But we expect in 2023, barring any other unfortunate events such as wars, prices should begin to temper and go back down,” said Caballero. “It would be a gradual normalization.”

Mark Ernest Famatigan is a news writer who focuses on Philippine politics. He is an advocate for press freedom and regularly follows developments in the Philippine economy. The views expressed are his own.

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