Rationalizing tariffs for private water utilities under the national water resources board : final report. Vol. I. Main report. Vol. II. Revised guidelines on tariff setting and regulation

In 2002-2003, a technical assistance project was funded by the ADB to support regulatory capacity building for the institutions with water regulatory responsibilities in the Philippines. The project focused on developing regulatory guidelines and on implementing a comprehensive training course on “Fundamental Workshop on Economic Regulation for Water Utilities”. During this project the NWRB, the national body for water resource and economic regulation, approached the ADB for assistance in economic regulation, particularly in tariff setting for the private water utilities under its jurisdiction. The here presented report reflects the findings of IDP Consult, who undertook a study for a period of 6 months on pilot and demonstration activities.
The major objectives were: 1) to review and identify issues relating to the
current regulatory arrangement, particularly tariff setting, supervision and monitoring; 2) to identify ways to improve the NWRB rate setting methodology and prepare guidelines consistent with levels of service, affordability and other economic regulatory principles; and 3) to introduce institutional reforms in order to strengthen the capacity of NWRB as the economic regulator in the sector.
The methodology, structure and process of the ROI and the break-even methodology were evaluated. The major findings demonstrate that: 1) tariffs are not related to service levels; 2) tariffs are based only on one test year; 3) there is a lack or absence of an asset management plan: 4) there is no mechanism for disallowances of excess income or provisions for upward or downward adjustments; and 5) there is a lack of financial monitoring.