I. The MWSS Regulatory Office. Role Function Structure. Legal Framework Reasons for Privatization Objectives of Privatization

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1 Regulatory Office JORGE C. MATEO Dept. Manager, Water Quality Control TECHNICAL REGULATION October 23, 2007 Sulo Hotel, Quezon City OUTLINE I. The MWSS Regulatory Office Creation Role Function Structure II. The MWSS Privatization Legal Framework Reasons for Privatization Objectives of Privatization

2 OUTLINE II. III. The MWSS Privatization, cont d. MWSS Service Area Concession Agreement Public-Private Partnership Rate Rebasing OUTLINE IV. MWCI s Plans & Programs Sewerage Sanitation V. MWSI s Plans & Programs Sewerage Sanitation

3 The MWSS-Regulatory Office Creation The Regulatory Office was created by virtue of the Concession Agreement between MWSS and the two Concessionaires: Manila Water Company Inc. (MWCI) and Maynilad Water Services Inc. (MWSI). The MWSS-Regulatory Office Role of MWSS-RO Protect consumers from unreasonable pricing & poor services Encourage firms to invest and operate efficiently and prudently Regulation To balance the interest of stakeholders

4 The MWSS-Regulatory Office Monitoring Functions of MWSS-RO Compliance with drinking water and wastewater quality standards Water supply, sewerage and sanitation development, programs and projects vis-à-vis required population coverage and required year to attain targets Repair and Maintenance of Assets Non-revenue Water Reduction Targets Collection Efficiency Target Customer Service Standards Operational Cost Efficiency Conduct Water Sampling Monitor Maintenance e.g. Leak Repair Monitor CAPEX e.g. Pipe Laying (infrastructure dev t proper) The MWSS-Regulatory Office Determining Functions of MWSS-RO To evaluate and determine the reasonable water rates to be imposed by the concessionaires i that t will cover necessary capital investments and expenditures of the concessionaires for them to smoothly operate the water system and provide the necessary services to the customers Water Rate Evaluation & Review Public Consultation

5 The MWSS Privatization Legal Framework Republic Act 8041 Or The Water Crisis Act The need for the Government to adopt urgent and effective measures to address the nationwide water crisis which adversely affects the health and well-being of the population. The MWSS Privatization Reasons for the privatization Pressing Needs Improve Water Delivery Expand Coverage Develop New Water Sources Requirement Huge Investment Answer Privatization

6 The MWSS Privatization Objectives of the Privatization Improve water service in terms of availability, pressure and quality Expand water, sewerage and sanitation services coverage Promote customer satisfaction and increase operational efficiency Eliminate fiscal burden on Government The MWSS Privatization August 1, 1997 East Zone West Zone

7 WEST ZONE East Zone West Zone Land Area: 1,400 sq km 540 sq. km Service Area: 23 cities/ 17 cities/ municipalities municipalities Total Population: 5.3 Million 7 Million Population Served: 4.5 Million 5.1 Million Water Production: 1,500 mld 2,230 mld EAST ZONE The MWSS Privatization Concession Agreement MWSS Charter MWSS Service Obligations Concession Agreement Necessary Costs And Expenses PUBLIC

8 The MWSS Privatization Public-Private Partnership Concessionaires to operate the MWSS water and sewerage system/facilities Ownership of assets retained by MWSS All assets including those acquired assets during the concession shall be reverted to MWSS Rate Rebasing The Rate Rebasing Concept Review Evaluation Revalidation Capital Investments Operating Expenses Income Water, Sanitation & Sewerage Services

9 Rate Rebasing Regulatory Focus of the 2008 RR Expansion Programs Level of Services Improved water services/new Water Service Connections Improved Sewer & Sanitation services/ New Sewer Connections Environmental Compliance Maintenance & reliability Reasonable Water Rates Consultation The Stakeholders MWSS LGUs & OTHER RELATED GOVT AGENCIES REGULATORY OFFICE CONSUMING PUBLIC / NGOs CONCESSIONAIRES

10 SEWERAGE MWCI Sewerage Access to Sewerage System Comparison among Cities in Asia % Manila Dhaka Delhi Phnom Penh Kuala Lumpur Hong Kong Ho Chi Minh Shanghai Source: Water For All 2006 (Sector Profile, ADB)

11 Sewerage Service Coverage ~ 3% ~ 10% ~ 30% ~ 63% PICTURES Sewer Coverage Communal Septic Tanks Catchments for Combined sewage-drainage treatment Sewerage - Accomplishments Package WwTPs in Operation 31 WwTPs in operation 80 MLD sewage treatment capacity 10% sewer coverage Magallanes WwTP BEFORE Guadalupe Bliss Total Capacity = 40,851 m 3 /d Population served = 1.5M Magallanes WwTP AFTER

12 Sewerage - Accomplishments Package WwTPs in Operation UP Fisheries Kalayaan Pag-asa Sikatuna Philam A. Luna Belarmino Total Capacity = 22,244 m 3 /day Population served = 136,210 Palosapis Heroes Hill Sewerage - Accomplishments Package WwTPs in Operation Karangalan Villages 1 to 9 Total Capacity = 6,833 m 3 /day 8 9 Population served = 42,000

13 Sewerage - Accomplishments Package WwTPs in Operation Maharlika Village Bagong Lipunan Condominium Centennial Village Lakeview Manors Fortville Total Capacity = 4,761 m 3 /day Population served = 30,597 Sewerage Plans Combined Sewer System

14 CAPEX SUMMARY (in million pesos) TOTAL RELIABILITY ,678 3,804 EXPANSION 1, ,101 41,518 46,554 TOTAL 2,126 1, ,187 44,196 50,358 CAPEX SUMMARY- RELIABILITY (in million pesos) TOTAL Sewerage ,657 2,731 A. Improvement of Existing WwTPs ,245 B. Improvement of Existing Sewer Network C. Regular Sewer Service Connections D. Upgrade of Communal Septic Tanks (CSTs) E. Information & Education Campaign F. Right of Way Sanitation ,022 1,073 G. Replacement of vacuum desludging tankers ,022 1,073 TOTAL ,678 3,804

15 Sewerage Plans & Programs A. Improvement of Existing WwTPs Components Details Cost 1. Replacement & Rehabilitation of Electro- Mechanical Equipment, Critical spares 2. Civil Works 3. Phased Upgrade/Expansion 3.1 Capacity Enhancement 3.2 Upgrade for new legislation 3.3 SCADA & Instrumentation 5-yr program of 31 WwTPs plus contingencies Painting, laboratories, lighting, drainage, others 5-yr program of 31 WwTPs plus contingencies For population growth Nutrient removal Efficiency Improvement Total (MPhP/yr) 150 MPhP 30 2 MPhP/yr MPhP 20 TOTAL 52 Sewerage Plans & Programs B. Improvement of Existing Sewer Network Upgrade/replacement of ~50yr old sewer pipes with history of breakages in anticipation i of increased sewage volume Summary (in million pesos) Improvement of Existing Sewer Network TOTAL Assumptions Cost of replacement per linear meter (lm) Roxas District (6700 lm) = Ph 7,000 (soft pavement) Kamuning (1900 lm) = Ph 9,000 (hard pavement) South Triangle (2000 lm) = Ph 7,000 (soft pavement) Sta. Ana (1000 lm) = Ph 7,000 (soft pavement) ** replacement activities to be phased to avoid massive inconvenience to public.

16 Sewerage Plans & Programs C. Regular Sewer Service Connections Regular sewer service connection program for establishments Summary (in million pesos) Regular Sewer Service Connection Details TOTAL Year Sewer Connection Program (per annum) Regular Karangalan Program Village Unit cost per connection (PhP) Total Cost (per annum) (MPhP)* , , , Remarks Additional connections in Karangalan with the commissioning of STPs Projected new connections with sewer network expansion in Makati CBD, Quezon City, etc. Sewerage Plans & Programs D. Upgrade of Existing Communal Septic Tanks Address environmental for communal septic tanks; meet regulatory standards on wastewater treatment Components STPs Flow (m 3 /day) Remarks Road 5 East Avenue Regional STP 9,500 Accept flows from Mapagmahal, Anonas, Rimas & East Ave CST Sct. Santiago Mapagmahal East Ave Rimas Matiwasay Kamias Anonas Road 5 STP 2,600 Transfer Scheme Stand alone facility Matiwasay 990 Transfer to UP STP Scout Santiago 23,00 Transfer to Heroes Hill STP

17 Sewerage Plans & Programs D. Upgrade of Existing Communal Septic Tanks Details Year Road 5 STP East Ave STP Matiwasay & Scout Santiago Total Cost (MPhP) Remarks Road 5 STP expected to be started in Q4 of Total Cost MPhP 64 MPhP 593 MPhP 16 MPhP 673 * Costs based on MTSP FS Sewerage Plans & Programs E. Right-of-way (ROW) Existing Facilities Address safety requirements for communal septic tanks and other facilities Summary (in million pesos) TOTAL Right-of-way Details Year Affected Families Cost (MPhP)* Remarks Road 5, East Avenue, Scout Santiago, Matiwasay Rimas-Proj 2, Anonas, Kalantiaw-Proj Mapagmahal, Sanghio-Kamuning Roxas-Proj 1: Waling-Waling/Everlasting (5 CSTs) Roxas-Proj 1: Azucena/Champaca/Camia (4 CSTs) Roxas-Proj 1: Violeta/Umbel/Gumamela (4 CSTs) Total *Includes: Compensation, Administrative costs, Site security

18 Sewerage Plans & Programs F. Information and Education Campaign (IEC) Increase public awareness on wastewater issues and catalyze appropriate action/participation i Summary (in million pesos) TOTAL Information and Education Campaign Details Components Cost (MPhP) Cost (MPhP) Year 1 Year 2 1. Research and Concept Development Print Radio & TV Collateral Development & Production Community Groundwork 3 3 Total SANITATION MWCI

19 Sanitation Population Served thru Desludging of Septic Tanks population in thousands 5,000 5,000 4,000 ~ 20% coverage to date 3,000 2,000 1,044 1, Sanitation Construction of Septage Treatment Plant (SpTP) San Mateo SpTP Completion date: May 2007 FTI SpTP Completion date: April 2007 Pinugay SpTP Completion date: 1 st Qtr. 2008

20 Sanitation Desludging Trucks number of desludging trucks Sanitation Plans & Programs Sanitation Master Plan Vacuum Truck Replacement Ensure reliability and efficiency of sanitation services by replacing trucks when asset life is over (7-year cycle) Details Year Number for Replacement Total Cost (MPhP) * Remarks 10 m 3 5 m 3 3 m ,022.0 Vacuum Trucks Unit Costs (MPhP)*: Total 10m ; 5m ; 3m 3 : ,073.0 * Unit cost based on MTSP FS Replacement of MSSP Trucks Regular replacement every 7 years

21 Sewerage & Sanitation Revised Targets -RR2003 CITY/ MUNICIPALITY 2001 Actual National Capital Region (NCR) Mandaluyong Makati (Part) Quezon City (Part) Pasig San Juan Sewerage 0% 05% 0.5% 4% 10% 15% Sanitation 0% 99.5% 96% 90% 85% Sewerage 22% 40% 38% 28% 23% Sanitation 0% 60% 62% 72% 77% Sewerage 0% 13% 20% 16% 17% Sanitation 3.19% 87% 80% 84% 83% Sewerage 0% 9% 10% 12% 14% Sanitation 1.20% 91% 90% 88% 86% Sewerage 0% 0% 0% 18% 41% Sanitation 0% 100% 100% 82% 59% Sewerage 0% 5% 25% 26% 20% Taguig Sanitation 0% 95% 75% 74% 80% Marikina Sanitation 0% 100% 100% 100% 100% Pateros Sanitation 0% 100% 100% 100% 100% Sewerage & Sanitation Revised Targets -RR2003 CITY/ MUNICIPALITY 2001 Actual RIZAL Antipolo Sanitation 0.54% 100% 100% 100% 100% Cainta Sanitation 0.18% 100% 100% 100% 100% Rodriguez Sanitation 0% 100% 100% 100% 100% San Mateo Sanitation 0.65% 100% 100% 100% 100% Taytay Sanitation 0% 100% 100% 100% 100% Municipal Run Water System Angono Sanitation 0% 100% 100% 100% 100% Binangonan Sanitation 0% 0% 0% 100% 100% Cardona Sanitation 0% 0% 0% 100% 100% RIZWADA Baras Sanitation 0% 0% 0% 100% 100% Jala-jala Sanitation 0% 0% 0% 100% 100% Morong Sanitation 0% 0% 0% 100% 100% Pililia Tanay Teresa Sanitation Sanitation Sanitation 0% 0% 0% 0% 0% 0% 0% 0% 0% 100% 100% 100% 100% 100% 100%

22 Sewerage & Sanitation KPI Targets -RR2003 S1 Sewerage + Sanitation Sewerage Connections* RR (Conn) 26,799 27,019 27,239 27,459 27,680 37,900 S2 S3 Sanitation no. of septic tanks 2003 RR (Septic Tanks Wastewater Effluent Standards 49,000 49,000 53,000 56,000 59,000 64, RR 100% 100% 100% 100% 100% 100% In Summary % of the population served today 30% in 5 years time 63 % in 15 years time 100% covered every five-seven years Invested PhP 28 billion, Will invest PhP 45 billion, Republic Act 9275 Strong support

23 SEWERAGE MWSI Sewerage Service Coverage North Caloocan Novaliches Water & Sewer Service Coverage (as of December 2006) Valenzuela Commonwealth Number of Number of Malabon- Navotas t Quirino Accts. Sewer Accts. Dagat-dagatan Quezon City Sewerage System South Communal System1 North Caloocan 53,714 Caloocan 2 Novaliches 48,696 Roosevelt Tondo Sta. 3 Commonwealth 52,498 Cruz Sampaloc Central Manila 4 Valenzuela 42,476 Sewerage System South Manila 5 Malabon 49,494 1,779 6 Quirino 42,166 2,148 Pasay Makati Magallanes 7 South Caloocan 63, Isolated System 8 Roosevelt 50,994 1,654 Imus - Bacoor Paranaque 9 Tondo 44,442 10, Sta. Cruz 34,187 19, Sampaloc 46,099 7, South Manila 27,264 8, Pasay / Makati 42, Paranaque 37, Imus 42, ,006 51,346 As of Dec. 2006: 10%

24 Sewerage Service Coverage Central Manila Sewerage System Tondo Pumping Station Port Area Station Tondo Sta. Cruz T 6 7 Sampaloc 5 Port Area 4 Luneta 2 MANILA BAY 3 Paco Malate SOUTH MANILA 1 Sta. Ana Covers 2,620 hectares 7 Lift Stations 430 MLD sewage treatment capacity service connections Rehabilitated under MSSP-4 (PhP 592M) Sewerage Service Coverage Central Manila Sewerage System Covers 2,620 hectares 430 MLD sewage treatment e capacity service connections Rehabilitated under MSSP-4 (PhP 592M) Tondo Pumping Station Port Area Station LIFT AND PUMPING STATIONS 1 Sta. Ana LS 2 Paco LS 3 Malate LS 4 Luneta LS 5 Port Area LS 6 Sta. Cruz LS 7 Legarda LS T Tondo Sewage Pumping Plant

25 Sewerage Service Coverage Dagat- Dagatan Sewerage System Covers 332 hectares 26 MLD sewage capacity 2,300 service connections Rehabilitated under MSSP-2 (PhP 213M) Sewerage Service Coverage Dagat- Dagatan Sewage and SEPTAGE Treatment Plant ISO 9001 & certified

26 Sewerage Service Coverage Quezon City Communal System Project 8 Project 7 Imhoff Tank Covers 11 hectares Sewage treatment capacity 1,300 cmd Service connections 1,700 Sewerage Service Coverage Quezon City Communal System Project 7 Covers 99 hectares Capacity 1,610 cmd Service conn 2,100

27 Sewerage Plans & Programs Year 2007 A. Plant operation Components Total (MPhP/yr) 1. Efficient & safe collection, treatment & disposal of sewage 2. Compliance with regulatory standards 3. Maintenance of ISO 9001 & Certification Dagat- Dagatan Sewage Treatment Plant Tondo Pumping Station & Lift Stations Sewerage Plans & Programs Year 2007 B. Maintenance of sewer network Components Details Cost Total (MPhP/yr) 1. Implement new sewer connections 2. Repair of sewer lines 3. Maintenance of sewer appurtenances 3. Clearing of informal settlers in 4 of the QC communal systems (PhP 1.6M) TOTAL

28 Sewerage Plans &Programs C. Monitoring of 2006 and 2007 projects implementation 2007 CAPEX Priority Projects Year 2007 Cost 1. Prototype t treatment t t To start t later part of plant for sewage and 2008; expected septage at Proj 7 operational in Repair of force main at Dagat- Dagatan 3. Rehabilitation of old building at Dagat- Dagatan (PhP 40M) (PhP 44M) (PhP 12M) 4. Repair of sewer line along Taft Avenue crossing Pres. Quirino Project 7 Imhoff Tank Dagat- Dagatan Old Office Building Sanitation Service Coverage Valenzuela North Caloocan Novaliches Malabon- Navotas Quirino South Caloocan Roosevelt Tondo Sta. Cruz Sampaloc South Manila Pasay Makati Imus - Bacoor Offered Sanitation Services Population Served (Percentage) Commonwealth Manila 24,771 15% Quezon City 61,083 39% As of Dec. 2006: 26 % Paranaque Caloocan 29,547 28% Malabon 12,356 33% Navotas 959 5% Valenzuela 14,891 33% Las Pinas 4,906 31% Makati 1,426 16% Muntinlupa 158 3% Paranaque 11,913 35% Pasay City 5,485 18% Bacoor 1,961 20% Cavite City 658 8% Imus - 0% Kawit - 0% Noveleta - 0% Rosario - 0% Overall- 170,114 26%

29 SANITATION MWSI Sanitation Septage collection, treatment and disposal VTU Raw Septage Septage Treatment Plant Processed Septage Dagat-dagatan Sewage Treatment Plant CREEK Biosolids SEPTIC TANK Desludging Equipment Processed Septage MDU Biosolids (On-site septage processing) Land Application As Soil Conditioner & Other BeneficialUses No. of Units Vacuum Tankers 25 Mobile 7 Dewatering Units Septage Treatment Plant 1

30 Sanitation Plans &Programs Year 2007 Implement the sanitation program and meet 2008 target SANITATION - Accomplishment vs. Target 250, , ,169 NO. OF SEPTIC TANKS 150, ,000 70, ,539 90, ,749 50,000 31,540 38,600 39,185 57,253 - As of Target No. of ST 31,540 7,060 31,939 30,000 42,210 54,420 Actual No. of ST Desludged 31,540 7,645 18,068 33,123 Target No. ST, Cumm. 31,540 38,600 70, , , ,169 Actual No. of ST Desludged, Cumm. 31,540 39,185 57,253 90,376 YEAR Target No. of ST Actual No. of ST Desludged Target No. ST, Cumm. Actual No. of ST Desludged, Cumm. Sanitation Programs Year 2007 Implement the sanitation program and meet 2008 target 1. Implement the sanitation program and meet 2008 Concession target 2. Operation of septage treatment plant 3. Monitoring of 2006 and 2007 CAPEX Projects/ Implementation Details Desludging of 42,210 septic tanks (~55,000 accounts) Estimated revenues from desludging requests Parking area for 20 trucks at DDSTP Purchase of 5 vacuum pumps Cost PhP 740,000 (PhP 1.6M) (PhP 2M)

31