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COWD AND ITS WATER SUPPLIER(S)

Using publicly available sources, this report is a comprehensive overview of what transpired in the past leading into the present predicament of water supply in Cagayan de Oro.

Since December 2004, the Rio Verde Water Consortium Incorporated (RVWCI) has been supplying bulk water to the Cagayan de Oro Water District (COWD). However, issues with the contract started to arise in June 2007 when COWD identified irregularities such as unauthorized changes to the pricing formula and water delivery point by RVWCI.

These discrepancies prompted a lawsuit between COWD and RVWCI, which was eventually dismissed on December 21, 2017, resulting in the termination of their bulk water delivery contract.

Also, in December 2016, a graft charge was filed before the Office of the Ombudsman against then-Palawan Governor Jose Alvarez, who also served as president of RVWCI, for an alleged anomalous deal with COWD.

Citing inconsistencies found in a Commission on Audit report, Palawan resident Michelle Fox accused Alvarez, four RVWCSI officials, and five COWD officials of bribery and violating procurement laws in relation to a 2004 agreement. Notably, RVWCSI was granted the contract despite being rated “non-responsive” by the bids committee, and the water district’s approval of an expensive amendment to the original project.

On October 23, 2018, Alvarez was indicted along with former COWD officials namely Francisco Mendez, board chairman; Sarah Borja, treasurer; Raymund Java, secretary; Sandy Bass Sr., assistant secretary, and Gaspar Gonzales Jr., general manager – and Lorenzo Jamora, former Local Water Utilities Administration (LWUA) chairman. MPW and COBI to the Rescue During the legal dispute between COWD and RVWCI, MetroPac Water Investments Corporation (MPW), a water and wastewater infrastructure investment firm, entered the picture.

On December 22, 2014, RVWCI entered a partnership with MPW with the intention of selling Water Assets to the latter, who will manage and maintain the facility while sharing earnings with RVWCI. MPW invested P1.4 billion in RVWCI. The joint venture, once envisioned as a solution to provide safe and reliable water to the residents of Northern Mindanao city, has now developed into a bitter legal dispute over the contract.

LEGAL TURMOIL

Amid the ongoing legal dispute between COWD and RVWCI, MPW established Cagayan de Oro Bulk Water Inc. (COBI) in 2017 to provide bulk water to the distributor while awaiting RVWCI’s conditions precedent for MPW to manage the Water Assets. However, this transfer never materialized.

Under MPW’s joint venture agreement with COWD, the latter was given two seats on COBI’s Board of Directors, which allowed the water district to access information about COBI’s operations and finances.

On October 30, 2017, COBI and COWD signed a Bulk Water Supply (BWSA) Agreement for the supply of treated water. COBI sources its water supply from the Water Assets that RVWCI continues to manage.

Following the COBI-COWD BWSA agreement, COBI invested in and built the East Pipeline at Brgy. Indahug, Cagayan de Oro, and the Camaman-an Reservoir, providing an extra 20 million liters of water per day to be supplied to the distributor using the East Delivery Point.

‘Force majeure’

Under the agreement, the bulk water rate upon commencement was P16.00 per cu.m., with a scheduled increase to P16.60 and succeeding increases to be automatically implemented thereafter every three years based on a parametric formula that accounted for inflation. An increase from P16.00 per cu.m. to P16.60 per cu.m. took effect in July 2021.

Following the scheduled increases, COBI’s updated bulk water rate of P20.57 per cu.m. took effect on January 1, 2021. Despite the contractual obligation to pay the adjusted rates, COBI said COWD continues to pay them the outdated rate of P16.60 per cu.m.

COWD cited force majeure in a letter dated May 11, 2023, citing the financial impact of COVID-19. This resulted in P479 million in payables to COBI as rates climbed to P20.57 per cu.m. between 2021 and 2023 and P24.19 starting in 2024. COBI’s ultimatum The breaking point came on December 15, 2023, when COBI threatened to cut off COWD’s water supply unless outstanding receivables were paid within 30 days. In their response dated December 23, 2023, COWD said that it was unable to pay the updated bulk water rate because of its status as a government-owned corporation and financial challenges encountered during the pandemic.

In a January 12, 2024 online meeting between COBI and COWD, the water district reiterated its financial constraints, invoking force majeure. In a news release dated January 15, 2024, COWD expressed optimism for a peaceful resolution while highlighting how important Cagayan de Oro City’s water supply is.

On January 16, 2024, COBI rejected COWD’s force majeure claim due to lack of substantiation, reiterating its threat to cut off the water supply if payments were not made.

On January 25, 2024, top management from COBI and COWD did a courtesy call with Cagayan de Oro City Mayor Rolando “Kalrex” Uy, where it was clarified that COWD is slowly paying its bills by installment. During the meeting presided over by Uy, COWD and COBI reached an agreement to enter a public-private partnership, which is viewed as a solution to COWD’s financial problem.

RVWCI and COBI Joint Decision

Upon request from the LWUA, the deadline was again moved to April 30. According to COBI, a crucial meeting scheduled weeks ago with COWD involving representatives from the LWUA, MPW, the Office of Congressman Lordan Suan and COBI was held on April 30th.

However, only one COWD director was present, thereby not reaching a quorum to provide a needed resolution. This prompted RVWCI and COBI to jointly decide to cut off the water supply. CDO LGU Intervention The local government declared a state of emergency to prevent COBI from cutting off the water supply.

On May 1, 2024, a special session held by the city council passed Resolution No. 14922-2024, which allowed for the hiring of four independent water firms to address the state of emergency. In response, COBI maintained its call for COWD to fulfill its contractual obligations.

COBI Responds

Despite repeated demonstration of COWD’s defiance to adhere from the contract agreements, and the LGU’s various resolutions related to the water supply predicament, COBI stated in an official statement:

“At this point, we are still open for an immediate and swift resolution of unsettled accounts. We encourage COWD to work with us to ensure a secure water supply for all Cagayanons.”

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