Iloilo water supply woes

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Two of the country’s biggest infrastructure conglomerates have found themselves being pitted against each other for the right to provide Iloilo residents a potential solution to their current water scarcity problem.

On one side is the Metro Pacific Group through Metro Pacific Iloilo Water (MPIW), a joint venture between state-owned Metro Iloilo Water District (MIWD) and Metro Pacific Water (MPW), the wholly owned water infrastructure investments subsidiary of Metro Pacific Investments Corp. (MPIC).

MPIW distributes water for Iloilo City and other municipalities in the province of Iloilo. In 2018, MPW and the water district signed a joint venture agreement for a 25-year concession to rehabilitate, expand and improve the water distribution system and wastewater management facilities of MIWD.

MPIW and MWID currently source bulk water from Metro Iloilo Bulk Water Supply Corp. (MIB), a subsidiary of Metropac Water Investment Corp. which in turn is a wholly owned subsidiary of MPIC.

Aboitiz InfraCapital (AIC), meanwhile, is the infrastructure arm of another Philippine conglomerate Aboitiz Group and is involved in various infrastructure projects, including energy, transport, water and social infrastructure, including the Davao City Bulk Water Supply Project through subsidiary Apo Agua Infrastructure Inc., in partnership with the Davao City Water District.

Earlier this year, AIC was able to secure from the Iloilo City government an original proponent status for the Iloilo Bulk Water Supply public-private partnership project that aims to build a new facility that could supply 86 million liter per day of potable bulk water across the province. The project is now at the Swiss Challenge stage, which would allow other interested parties to submit competing bids and AIC to match the winning bid.

It envisions the development of a water intake facility, treatment systems and delivery systems, including the high-line canal to deliver treated water to treatment facilities serving Iloilo City.

According to Iloilo City Mayor Jerry Treñas, the AIC project will allow the city not only to have sufficient water supply but also a redundant system to ensure stability and reliability that would meet the city’s increasing demand for water due to its rapid development, even as he acknowledged MPW’s contribution to the city’s water security.

Citing data from MPW, Treñas said that only 27 percent of Iloilo City is connected to potable water while only 20 percent is being served 24 hours.

But AIC’s plan was earlier rejected by the National Irrigation Administration (NIA) citing conflicts with its ongoing partnership with the Asian Development Bank (ADB).

NIA said that the AIC’s unsolicited proposal would make it a middleman, sourcing raw water from the Jalaur River and selling it as treated bulk water to local water districts, including MIWD, or local government units of Iloilo through its planned bulk raw water intake facility.

It noted that AIC would be paid through government-backed Availability Payments and recoup costs by charging water districts or LGUs, potentially affecting water prices or tariffs in the region. If approved, the project would have allowed AIC to control a critical supply chain between the government-owned water source and consumers, raising concerns over pricing power and regulatory oversight, it added.

NIA emphasized that the unsolicited proposal runs counter to the PPP Code which prohibits unsolicited proposals when a comparable project is already being developed through a solicited process or in partnership with another entity.

It cited its current agreement with the ADB, which covers similar renewable energy and water infrastructure under the Jalaur River Multi-Purpose Project Phase II (JRMP II) which is one of Western Visayas’ flagship water security and irrigation programs.

The JRMP II is the first large-scale water reservoir to be constructed in the Visayas and Mindanao regions. The project is expected to deliver around 86 million liters per day of bulk water supply for Iloilo City and province.

It is claimed that AIC’s model will obligate LGUs to pay availability fees as high as P27 billion even when actual demand falls short under a 33-year concession period and that water rates under this model could reach over P41 per cubic meter or more than double the existing rate of MIW of P18 per cu.m.

NIA said that the MIWD-NIA-ADB approach offers water at a significantly lower cost, with no need for LGUs to absorb contingent liabilities or pass on inflated charges to the public.

In July, MIWD and NIA signed a memorandum of undertaking to conduct a feasibility study to assess the viability of transferring a portion of NIA’s water rights from the JRMP II to MIWD.

As planned, the state-owned Iloilo water district (MIWD) will own and manage the water supply infrastructure downstream of JRMP II using the current set up where MIB supplies water to MPIW.

Earlier, during a public hearing, MPIW chief operating officer Angelo David Berba opposed AIC’s entry into Iloilo’s water supply chain, arguing that having another private player act as a bulk water intermediary would only escalate prices.

MPIW warned that the proposed AIC project could result in domestic consumers paying double the current water rate or even higher.

Berba, which currently sources water from MIB, cautioned that AIC’s proposed rate could reach P50 per cu.m. once power costs, salaries, non-revenue water and other expenses are included so that Ilonggo consumers would likely be paying around P50.

But just recently, AIC emphasized that its bulk water supply project remains unaffected by the recently signed memorandum between MWD and NIA and that its project which has already received unanimous endorsement from the Iloilo City Council will continue as planned and is aimed at providing both immediate and long-term solutions to the city’s water challenges.

AIC noted that while MWD and NIA are set to undertake a year-long feasibility study on the potential use of water from the JRMP II, its own plans are already more advanced. It said that it already has an MOU with NIA and has submitted a concrete infrastructure development and financial plan for the use of JRMP II as a water source.

The Aboitiz-led firm likewise revealed that it is in discussions with the NIA and the Iloilo City government to secure a water permit which is a key requirement for moving the project forward.

This, it said, would immediately benefit Ilonggos who continue to bear the impact of dry taps and poor service.

AIC assistant vice president Christiane Batallones also earlier stressed that AIC should not be considered a middleman. “We’re here to help Metro Iloilo and not to broker the water supply. We are not forcing any off-takers. We are here to help to provide alternative, sustainable and redundant water supply. We are not here to compete with anyone. We are here to complement the distribution companies,” he added.

Batallones explained that bulk water rates should not be directly equated with residential water rates since other uses like those for commercial and industrial could help subsidize residential rates, adding that AIC will not earn profits beyond what is prescribed by industry benchmarks.

Safe, sufficient, reliable and affordable water supply is crucial for the sustainable development across all sectors of society and the economy. It should be sufficient to meet not only existing but future needs.

How this current debate in Iloilo ends should benefit Iloilo consumers, who deserve the best possible arrangement.

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