The travails of MCWD: Conclusion

By: Fernando Fajardo - CDN Digital | November 06,2019 - 08:00 AM

Basing on previous discussions, we can conclude that MCWD have not been performing well to meet its objectives given the following considerations, among others:

1.     MCWD is able to meet only just about half or 55 percent of the total demand for water in its franchised area that covers eight of the 13 local government units in Metro Cebu;

2.     Presently, many of those served by MCWD are dissatisfied of its service due to low water pressure or complete disappearance of water supply for hours or even for days, the reason why the MCWD Board was dismissed recently;

3.     Non-revenue water is very high at about a fourth of the total water produced or procured by MCWD;

4.     MCWD’s great reliance for its water supply on ground water is unsustainable due to the current high extraction rate, which is very much in excess of nature’s recharging rate, leading to more salt water intrusion;

5.     Finally, MCWD’s promise to develop surface water to augment its supply, while long been proposed and studied, remain to be done.

With regard to the last point, MCWD had previously indicated that it would start using surface water from Mananga Dam beginning in 2021 with a capacity of 80,000 cubic meters per day. It is not forthcoming at all because of MCWD’s failure to pursue the project in the last five years in the absence of an updated study and lack of concrete timetable for its implementation.

It is high time that MCWD creates its own project development unit that will be tasked to review and update all past and existing studies of proposed water supply projects using surface water. The idea is to fast track the implementation of the most easily doable project, such as the Mananga Dam previously reckoned with funding from the national government, through either the budget or foreign loan, or be undertaken by the private sector through PPP.

Such type of undertaking is already being pursued by the national government in the case of the proposed Kaliwa Dam to meet the growing demand for water in Metro Manila. There is no reason, therefore, why the national government will not pursue the same thing to meet the growing demand for water in Metro Cebu, which is the second biggest metropolitan area in the country next to Metro Manila.

Another issue hounding MCWD is the growing competition within its franchised area coming from private sector water providers who are allowed by the National Water Resource Board (NWRB) to extract water from underground based on the ruling of the Supreme Court in MCWD vs. Aldala that a franchise granted to MCWD is not an exclusive right.

To avoid similar problems in the future, MCWD must now prepare in detail its expansion plans to serve more areas within its franchised area for submission to the NWRB as basis for the its decision to give or not to give the clearance to any private sector who wants to extract and provide water to the people in any part of its franchised area that it is still unable to serve presently. The objective is to prevent the NWRB from giving the right to extract water to any applicant water supply provider that may compromise the MCWD’s expansion plans.

In addition, when a private sector provider is given approval by NWRB to extract and provide supply water in areas not yet served by MCWD, it is also suggested, based on prior right of the MCWD, that such undertaking is done through PPP that will allow eventually the MCWD to take over and run the project after a certain agreed period stipulated in the PPP contract or earlier than the agreed period with compensation to the remaining investment of the private sector that is not yet recovered.

The issue of high level of water loss or non-revenue water is also worth looking into because it is one of the main reasons why the MCWD water tariff is very high. Water loss is part of the water produced by MCWD on its own or procured from private suppliers, which is subsequently lost or unaccounted for in the system because of leakage or theft.

In general, the target is to bring down water loss to 10 percent of the water produced or procured. Any reduction in water loss will redound to a similar or proportionate increase in the revenue of the MCWD. The increase in revenue can be transferred eventually to the water users through reduction in the water rates.

Given that only less than 60 percent of the population within its franchised area is served by MCWD, there is now a question whether MCWD as a government-owned and controlled agency has the capability to meet its assigned tasks of giving safe and adequate water supply efficiently and profitably in all parts of its franchised area in the near future given the continued growth and development of Metro Cebu.

So far, MCWD is able to increase its population served by about 2 percent only a year. This is lower than the overall rate of growth of the population in Metro Cebu.

Is the problem about incentive? One theory in economics is that public entities has less motive to be efficient compared with the private sector in the absence of profit incentives and lack of accountability. I hope this does not apply to MCWD.

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