‘CLASH OF THE TITANS’: Public Trapped in Corporate Clash over Water in Iloilo

By Francis Allan L. Angelo

Residents of Iloilo City and province find themselves caught in the middle of a looming water crisis, a “clash of the titans” between corporate interests and historical inefficiencies, as revealed by a comprehensive report from the Institute of Contemporary Economics (ICE), an Iloilo-based think tank.

The public bears the brunt of an escalating supply shortfall, inadequate infrastructure, and a regulatory framework that has failed to keep pace with the urgent demand for this vital resource.

The water supply system in Iloilo City has a long and complex history, marked by various administrative changes and challenges.

Established in 1926 under Commonwealth Act No. 3222, the waterworks system was initially managed by the provincial government. In 1955, control was centralized under the National Waterworks and Sewerage Authority (NAWASA), an era many trace to the decline of Metro Iloilo’s water system.

NAWASA was eventually abolished in 1971, replaced by the Metropolitan Waterworks and Sewerage System (MWSS), and by 1978, the Metro Iloilo Water District (MIWD) took over operations.

A significant shift occurred in 2016 when MIWD entered a joint venture with MetroPac Water Investments Corporation (MPW) to form the Metro Iloilo Bulk Water Supply Corporation (MIBWSC).

This arrangement had the effect of separating water production and supply from the distribution component, which remained with MIWD.

In 2018, MIWD further partnered with Metro Pacific Water (MPW) to form Metro Pacific Iloilo Water (MPIW), which began commercial operations in 2019, focusing on the rehabilitation, expansion, and improvement of the water distribution system and wastewater management facilities.

Iloilo City currently faces significant challenges in meeting its water supply needs, with a substantial gap between demand and available supply.

The current sourcing methods, which include surface water and groundwater, are insufficient to meet the growing needs of the population.

MPIW is only able to source 60 to 80 million liters per day (mld) for its customers. The Metro Iloilo Bulk Water Supply Corporation (MIBWSC), despite an initial promise of 170 mld, appears to be capable of delivering only 30 to 50 mld, a significantly lower amount. This shortfall necessitated an additional supply agreement with FloWater Resources for 30 mld of bulk water.

Based on a base assumption of 150 liters per person per day, the estimated domestic water demand for Iloilo City and its coverage areas is 153 mld.

NON-REVENUE WATER

Factoring in a 30% non-revenue water (NRW) rate, the total required supply to meet demand climbs to 219 mld. This results in an approximate supply shortfall of 139 mld, representing a staggering 63% of the required amount.

A comparative analysis of Metro Pacific Iloilo Water (MPIW) and Laguna Water, chosen for demographic and commercial similarities, reveals significant differences in their performance metrics, particularly in connection growth and NRW reduction.

These metrics highlight the challenges faced by MPIW in expanding its service, even acknowledging that its first three years of operation were severely affected by pandemic-related restrictions.

During its first five years of operations, Laguna Water increased its connections by 272.4%, while MPIW only achieved a modest 12.1% growth.

In 2024, MPIW was only able to install 2,271 new connections in a coverage area with approximately 200,000 households needing to be served. In terms of annual growth in new connections, MPIW has shown single-digit growth in its first five years, whereas Laguna Water reached as high as 57.6%.

Non-revenue water (NRW) is a critical performance indicator, representing water produced but lost before reaching customers due to physical losses like leakages, apparent losses from illegal connections, and unbilled authorized consumption.

MPIW has been able to reduce NRW in its coverage area from 56% in 2019 to 39% in 2024, a significant reduction beneficial to consumers.

However, an NRW of 39% is still significantly worse than industry peer averages, which typically range from high single digits to low teens. As an example, Laguna Water was able to reduce its NRW to 18% by the end of its fifth year of concession.

MPIW’s coverage rate is only 26% at the end of 2024, meaning 74% of households in its concession area still lack access to its services, according to the report.

This is considered “quite low and unacceptable for a highly urbanized city and its metro area,” especially since the increase in coverage remained basically unchanged between 2023 and 2024.

The ICE report added that the water distribution utility “should be asked to do more”.

PRICING

The regulatory framework governing water pricing in the Philippines is outdated and has contributed significantly to the financial struggles of water districts.

Water tariffs are regulated by the Local Water Utilities Administration (LWUA), but many districts have not adjusted their rates in over five years.

The average water price in Iloilo is PHP 24.51 per cubic meter, which is significantly lower than the global average of PHP 124.23.

MPIW’s implied tariff is PHP 20.00 per cubic meter with maximum consumption at the minimum charge.

The Institute of Contemporary Economics emphasizes the need for higher tariffs to ensure sustainable water supply and infrastructure.

Among the 22 water districts in Iloilo, the average period since the last tariff adjustment is 16 years.

Only two of these districts have received approval for tariff increases in the last five years. The Ajuy Water District serves as a glaring example, having not implemented an increase in 29 years. This failure to enact water tariff increases has resulted in “wildly uneconomical tariff rates which do not reflect the reality of current costs”.

Consequently, service delivery to consumers in many water districts has collapsed.

The Ajuy Water District, for instance, has a minimum charge of PHP 80 per consumer, translating to PHP 8 per cubic meter assuming 10 cubic meters of consumption, and has only 313 connections, representing a coverage rate of just over 2% for an area with about 13,000 households.

The 2022-23 Audit Report for Ajuy Water District revealed continuous operating losses, accumulating unpaid salaries and benefits, and limiting its ability to expand and develop.

The district received a PHP 4.9 million cash infusion from the National Government in 2023 to survive.

FAILURE

ICE argues that LWUA “shoulders a significant amount of responsibility for the virtual collapse of our water districts” due to its “utter failure” to fulfill its charter’s purpose by not quickly reviewing and approving applications for water tariff adjustments.

The systematic underpricing of water, a global trend, engenders wasteful use and inhibits the urgent need for conservation measures for this increasingly scarce resource.

Ngozi Okonjo-Iweala, Director General of the World Trade Organization and co-chair of the Global Commission on the Economics of Water, said that “the global water crisis is a tragedy but is also an opportunity to transform the economics of water and to start by valuing water properly so as to recognize its scarcity and the many benefits it delivers.

The ICE report suggests that government policy must decide whether to let market forces dictate water prices or subsidize them to keep them affordable for consumers.

The report acknowledges a recent resolution by the National Water Resources Board (NWRB) to regulate the price of bulk water, but cautions that this “could very well be a step in the wrong direction”.

A balance must be struck between keeping water affordable and acknowledging that water, as a resource, needs to be valued realistically. This complex balancing act may require policy direction from higher levels of government.

Unlike most other resource markets where market forces determine prices (like oil, subject to supply interventions), water, as a basic human need, can no longer be seen as a free resource where its price is solely dictated by extraction and distribution costs.

Government, as a matter of policy, will have to decide whether to allow market forces to determine water’s natural price or to subsidize the price consumers pay.

Preserving the status quo in water pricing is a “recipe for disaster,” condemning people to costly alternatives like bottled and trucked water. It also perpetuates the unchecked extraction of groundwater, exacerbating environmental damage such as saltwater intrusion and land subsidence, which is already observed and progressively worsening in coastal areas of Iloilo City, Leganes, and Oton.

Ultimately, while improvements are needed from water distribution utilities in terms of efficiency and coverage, much of the issue stems from the sheer availability of water itself and a collective failure to recognize its boundaries.

Without these crucial steps, Iloilo’s residents face a future of relying on expensive bottled water (costing thousands of pesos per cubic meter) or water trucks (PHP 150 to PHP 250 per cubic meter), while the “titans” continue their battle over a shrinking and essential resource.

The proposed PHP 40 per cubic meter rate from Aboitiz InfraCapital is seen as “more than reasonable” in this context.

NEW SOURCES

New water supply projects are expected to improve the situation in Iloilo City. A new desalination plant is projected to deliver 66.5 mld by 2027.

The Jalaur Multipurpose Project (JRMP) is expected to produce 86.4 mld within the next two years.

While it is assumed that all production from the desalination plant will go to MPIW/MIWD, the allocation of JRMP water remains unanswered, as there are 21 other water districts in the province that will also be lobbying for their share.

Even assuming MIWD/MPIW receives 48% of the JRMP water production (42 mld) based on demand, this would bring the total supply to MPIW to 188 mld, still leaving a supply gap of 31 mld below the estimated demand for its coverage area.

If allocation were based on population, MIWD/MPIW would receive only 34% of JRMP water production.

WHAT’S AHEAD?

The problem of water supply in Iloilo has a long history of neglect, formally acknowledged in the 1998 NWRB Water Resources Management Plan, which identified Metro Iloilo as a highly urbanized water constraint area and called for a Groundwater Management Plan.

The plan, released only in 2013, highlighted continued damage to groundwater ecosystems due to weak implementation of policies, outdated data, unregulated utilization, seawater intrusion, land subsidence, and lack of monitoring.

Without intervention, the risk of running out of water remains a pressing concern.

The ICE report emphasizes the critical need for regular monitoring and updated data on water resources to ensure withdrawals do not exceed replenishment.

ICE recommended transparent reporting from MIWD and MPIW on their joint venture milestones. It urged aggressive fixes for NRW and rapid connection roll-outs to maximize any new supply.

Most critically, it advocated for realistic, inflation-indexed tariffs that reflect water scarcity, while simultaneously urging for targeted subsidies to protect vulnerable households.

Finally, ICE stressed the full enforcement of groundwater limits and protection of coastal wetlands to avert an irreversible water crunch.