Banking on the possibility of an extension of their concession agreement and expansion of their franchise area, both the Ayala-led Manila Water Co. Inc. (MWCI) and Consunji-led Maynilad Water Services Inc. (MWSI) have postponed the implementation of their rate adjustments, the central planning agency said.

Director General Ralph Recto of the National Economic and Development Authority (Neda)  said the MWCI’s rate hike should have been implemented on January 1, 2009, but due to the possibility of being granted a longer concession agreement, both firms decided to move their rate adjustments to February 1, 2009.

Recto said the postponement of the hike will also give MWCI and MWSI room to study the prospects of the extension and expansion of the coverage of their concession agreement.

“In effect that’s a self-imposed deadline [February 1] on the [part of] MWCI to come back probably to the Cabinet or maybe to work out details with the concessionaires on the possibility of extending their concession agreement, maybe even expanding the franchise and ensuring that tariff rates will not increase,” Recto said.

However, Recto said that extending the franchise agreement and expanding the utilities’ coverage will require performance indicators for all concessionaires, in this case, MWCI and MWSI.

Both firms, Recto said, must ensure that more people have access to safe drinking water and that other pertinent details of their services are working properly.

“That’s included in the pump-priming,” Recto said, alluding to the freeze on water rates. “The other is for the private sector to have confidence to invest particularly in water, which is a vital infrastructure and social component; and the ones who will benefit the most would be the poor and the vulnerable sector if they have more water connections.”

They can help create more jobs, said Recto. He noted that MWCI and MWSI on average spend P5 billion a year for capital expenditure. If they expand and extend the concession agreement, Recto said there may be no need to increase rates.

He expects the water utilities to spend another P10 billion to P15 billion each this year, which can help prime the economy.

“The government cannot do it alone. As I said, government is only 20 percent of the economy roughly. The private sector is 80 percent,” Recto said.

MWCI president Antonino Aquino confirmed Recto’s announcement and said the postponement of the rate adjustment also meant that they were amenable to the suggestion to extend the concession agreements of water utilities for another 10 years.

The current concession agreement given to utilities is between 15 and 25 years but with an extension, a franchise agreement could take as long as 35 years.