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Philippines Water Action: Rationalizing Tariffs for Private Water Utilities under the National Water Resources Board

Philippines Water Action: Rationalizing Tariffs for Private Water Utilities under the National Water Resources Board

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Published by: adbwaterforall on Oct 18, 2012
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Country water actions are stories that showcase water reforms undertaken by individuals,communities, organizations, and governments in Asia-Pacific countries and elsewhere.
Country Water ActionsPhilippines: Rationalizing Tariffs for Private Water Utilities under the NationalWater Resources Board
September 2005
 The Philippines’ National Water Resources Board—thecountry’s apex body—underwent organizationalrestructuring and reforms. It now boasts of a new tariff setting methodology to improve the economic regulation of private water utilities and provide reasonably priced waterfor consumers.
The prospect for reasonablypriced water in the Philippineshas just significantly improved.The Philippines' National WaterResources Board (NWRB)approved the proposed 5-yearReturn on Investment (ROI)method as its new tariff settingmethodology to improve theeconomic regulation of privatewater utilities under its jurisdiction. An average ROI,computed by dividing the totalrevenue requirements for 5-years with the 5-year totalconsumption, is an addedfeature that will lessen the impact of price increases thatcould affect consumers.This new methodology was one of the outcomes of thePilotand Demonstration Activity (PDA) on Rationalizing Tariffs forPrivate Water Services under the NWRB in 2004. The PDAspecifically aimed to:Improve NWRB rate setting methodology andregulatory supervision of its clients.Introduce/Identify reforms to strengthen NWRBeconomic regulation.Encourage stakeholder participation in problemanalysis and formulation of recommendations toensure its acceptability.
Among several regulatory institutions in the Philippines,NWRB is the only national regulatory body for waterresourceS and economic regulation. Its functions and dutiesinclude:supervision and control of all waterworks utilities, andtheir franchises and other propertiesregulation and setting of water rates to be chargedby waterworks operators NWRB grants Certificates of Public Convenience (CPCs) tooperators of waterworks systems, which permit them tooperate and maintain waterworks supply services andimpose penalties for violations of rules and regulationsrelative to it. It also regulates and fixes water rates to becharged by waterworks operators except those falling underthe jurisdiction of other agencies. It can impose and collectsupervision and regulation fees from its clients.The PDA's Institutional Assessment points out some of theNWRB's limitations that both affect and result from itsextensive mandate:An estimated 1800 potential clients have not yet beenmaximized. NWRB has issued only 327 CPCs in 2004.Tariff approval system is not efficient.NWRB's annual accomplishment from year 2000-2003shows declines in approved permits and resolvedwater use conflicts. Verification of operation of utilitieswithout CPCs, and monitoring of water utilitiesoperations and testing of water meters alsodecreased.NWRB personnel are few and inexperienced in utilityoperations. They lack important field equipment.NWRB also lacks focus and continuity in leadershipand an inadequate operational budget set byCongress.
Among the PDA'srecommended reforms isthe recomputation of NWRB's tariff settingmethodology. The newReturn on Investment(ROI) method aims toimprove the economicregulation of private waterutilities under NWRB's jurisdiction.NWRB's current ROI methodology is based on a "one yeartest period" and raises many issues among private waterutilities and consumers that are not addressed, such as:Tariffs are not related to service levelsLack of business/asset management plansUse of assumptions which distort calculationsNo conscious effort to discourage excessiveconsumptionNo differential pricing for different connectionsize/metersRate structuring for the different consumption blocksnot rationalizedLong tariff review process 

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