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Rio Verde to shut down its operations

UNLESS the Cagayan de Oro City Water District implements the proper pricing, Cagayan de Oro’s sole bulk water supplier warned over the weekend that they may be forced to shut down its operations.

Last Thursday (October 26, 2017), Rio Verde Water Consortium, Inc. (Rio Verde) served a notice to COWD declaring it was increasing the selling price of its bulk water to the utility from P10.45 to P16.35 per cubic meter of treated water (or per million liters, MLD).

In a follow up letter to COWD dated October 28, 2017, a copy of which was furnished to this paper, Rio Verde Vice President Joffrey E. Hapitan warned that the price increase was based on necessity and equitable grounds as explained in their notice of price increase.

“Rio Verde has been experiencing financial debacle for many years because COWD did not implement the provisions in the Bulk Water Supply Agreement (BWSA) related to volume and water price increases.”

“The company has had to comply with several legislated wage increases and prices of chemicals and operating supplies aside from many other legitimate expenses to maintain its facility in top shape which has unavoidably increased the cost of operations many times over.”

“It reiterated that the financial debacle Rio Verde has experienced has been worsened further by the accidental damage recently to its underwater pipe crossing the Cagayan River, attributed to the combined forces of earthquakes and flooding.”

“COWD’s continued refusal to accept and heed Rio Verde’s fair and reasonable request for price increase will unavoidably result to disruption and stoppage of bulk water supply. COWD will need to be ready to take full responsibility for the ensuing repercussions,” Hapitan cautioned.

In its response letter dated October 27, 2017, a copy of which was furnished to this paper, COWD General Manager Rachel M. Beja expressed surprise upon receipt of the notice of price increase, since both parties were already working on a Compromise Agreement which remains to be decided by the courts.

“We regret to inform you that, like in the previous years, COWD can only sustain disbursements of P10.45 for payment of your bulk water supply due to apparent legal constraints,” Beja said in her letter.

“We believe you understand the very reason why we cannot further implement the next two phases of our contract, including the possible water price adjustments, as provided for in Article 9 of the Supplemental Agreement signed on January 21, 2005,” she added.

Beja attributed COWD’s inability to comply with the terms of the contract with the Commission on Audit (COA) Fraud Audit Report, COA disallowances, and the nullification case pending in the courts.
The COWD is referring the notice of price increase to its Statutory Counsel, the Office of the Government Corporate Counsel, for appropriate action.

The Office of the Government Corporate Counsel (OGCC) is the principal and statutory law office of government-owned-and-controlled corporations (GOCC’s), such as the COWD.

Rio Verde had previously served COWD a Notice of Increase in bulk water price rates March 1, 2007, barely three months after it started operations, as provided under the terms of the BWSA. Rio Verde said the increase to P11.55 per cu.m. was constrained by “extraordinary increase in power rates and extraordinary inflation.”

This, as well as a subsequent notice for a further adjustment dated 15 March 2011 to P13.461 per cubic meter as provided in the BWSA were not implemented by COWD, citing certain disparities in the model agreement and the signed BWSA on 03 August 2007.

Hapitan argued in his follow up letter that COWD has publicly admitted it can afford to absorb the price increase petitioned by Rio Verde without passing it on to water consumers.

“It is noteworthy that recently, COWD made a public announcement that it is financially capable of absorbing the P16.35/m3 bulk water price without the need of increasing its water tariff for the consumers. COWD has likewise openly declared that is has signed a bulk water agreement with Metro Pacific Water Investments (MWIC) for P16.35/m3 bulk water price,” Hapitan explained in his letter.
“It is definitely unjustified for COWD to refuse the long overdue, reasonable and necessary price increase being asked by Rio Verde,” he added. “It is thus imperative for COWD to issue a Purchase Order at the new rate of P16.35/m3 effective November 1, 2017 to enable Rio Verde to sustain the operation of its water treatment facility.”

“We have been selling our bulk water to COWD for the same price for the last 10 years already,” Hapitan stressed. “Under the terms of our original BWSA, P16.35 should have been the current price by which COWD would have already been buying water from us at this time.”

COWD has posted two notices of price increases covering the period 2011-2014 posted on its official website: The first dated November 1, 2013 brought the minimum charge for the first 10 cu.m. of residential and government accounts from P168 to P184.80, while another dated May 1, 2014 increased the minimum charge further to P218.40 for COWD’s Main Service Area and to P238.40 for Youngsville Subdivision, Opol, Misamis Oriental.

The latter post further explained that this was the last tranche of the 30% rates adjustment approved June 17, 2011 per LWUA-BOT Resolution #84 effective May 1, 2014. The COWD assured its concessionaires lately it will not implement another round of rate increases during the next two years.

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