By Alberto Vicente/June 13, 2024
CAGAYAN DE ORO CITY –The interim management of the beleaguered Cagayan de Oro City Water District (COWD) assures water consumers that it is not selling out to the Cagayan de Oro Bulkwater Inc. (COBI), owned by Metro Pacific Waters.
COWD Interim General Manager Fermin Jarales said they informed COBI in their meeting last Monday that they want Article 7 or the Arbitration Clause of the contract they entered with Metro Pacific Waters-owned COBI in 2017 to govern the resolution of their contractual dispute.
Jarales who was installed interim general manager of COWD last May 29, 2024, told Magnum Radyo 99.9 last Wednesday that before COBI made its presentation, he made a manifestation that their presence in the dispute resolution meeting does mean that the COWD admits the position of the COBI. According to Jarales, the interim management of the COWD reserved its position on the final collection notice of COBI amounting to P479 million. LWUA sent observers to Monday’s meeting.
The meeting of the COWD interim board last June 11, 2024, created a special committee to study whether the collection of COBI is legitimate or not. Jarales said that if the dispute resolution meetings fail, they would have to follow the arbitration procedure and go to the arbitration court in Singapore, as provided for in the 2017 contract.
The LWUA instituted a ‘full intervention’ of the COWD after President Bongbong Marcos ordered it to study ways to resolve the water crises in the city. The ‘general intervention’ resulted in the suspension of the General Manager, Antonio Young, and the five-person board of directors for six months. LWUA then appointed Jarales, a former municipal administrator of Opol, Misamis Oriental, and a development worker as interim general manager. Before implementing its ‘full intervention’ of COWD, LWUA met with Mayor Klarex Uy.
The mayor expressed his support to LWUA and at the same time expressed his expectations for the water regulator to (1) serve as an impartial facilitator of the dispute resolution between COWD and COBI; (2) ensure that there would be no more water disconnection related to the contractual dispute in the future; (3) review the 2017 COWD-COBI contract, reform the onerous provision allowing automatic escalation of bulkwater rates every three years; and (4) address the mismanagement issues at the COWD that is believed to be the cause of the very high wastage of water or non-revenue water of around 50%.
RIGHT TO WATER UPHELD
Consumers perceive COBI’s disconnection as a bullying strategy to gain leverage in the contractual dispute with COWD. Councilor Edgar Cabanlas who headed the Water Task Force organized by Mayor Uy said there is nothing in the contract that authorizes disconnection if there are contractual differences. “What we have is a collection issue for the court to decide,” he said.
Cagayan de Oro has been beset by a water crisis after COBI decided to cut off bulk water supply to COWD around noon on May 14, 2024. Water was reconnected after the Regional Trial Court issued a 72-hour temporary restraining order against COBI and RVWCI around 8 p.m. of the same day. The court agrees that the people’s right to water is supreme over contractual disputes. In an order extending to another 17 days the TRO, the RTC Misamis Oriental through acting executive judge Hon. Ana Candida Casino said “It is inconceivable to let the people who are merely caught in the middle of the two disputing entities to suffer injustice and be deprived of their water right.”
On April 30, COBI directed its supplier of treated bulk water Rio Verde Water Consortium Inc (RVWCI) to disconnect the bulk water supply to COWD, for the failure of the water utility to honor its obligation despite repeated collection notices. On June 3, 2024, the day the TRO was to expire, Judge Jeofpre Acebido who is handling the consolidated cases enjoining COBI and RVWCI from disconnecting bulk water supply to COWD ordered the issuance of a Writ of Preliminary Injunction.
In a 13-page order penned by Acebido, the court ruled that while it appreciates the manifestation of COBI to the Court it would no longer resort to disconnection of supply to COWD, as it did on May 14, in deference to the wishes of President Marcos and Mayor Uy, said, “Such promise, being made contingent upon the future negotiations between COBl and COWD, unfortunately continues to hang like the sword of Damocles over the heads of petitioners.”
CONTRACTUAL ISSUES
In 2017, COWD entered into a bulk water supply contract with COWD. The minimum contracted water is 80 million liters per day (MLD) to a maximum of 100 MLD. This covered around 40 percent of COWD water supply needs. The contract also stipulated automatic escalation of bulk water rates every three years.
The base price in 2017 was P16.60 per cubic meter of water. In 2021, COBI increased its rate to P20.57 per cubic meter, and on January 1, 2024, to P24.19. The management of COWD did not recognize such an obligation because of COVID-19, citing the force majeure provision of their 2017 contract.
The COWD argued that it cannot comply with the contractual obligation because its current water rate to end users is only P21.84 per cubic meter. The COWD, however, is paying COBI based on the 2017 rate of P16.60. The differential collected by COBI ballooned to P479 million on April 30, 2024.
Mayor Klarex Uy declared the city under a state of emergency on May 1, 2024, because of the impending water cut-off. In response to the state of emergency declaration, the City Council passed a resolution asking the COWD to resort to emergency water procurement from other bulk water suppliers.
Mayor Klarex Uy maintains that while the city does not want to intervene in the contractual dispute between COWD and COBI, he is duty-bound to protect the general welfare of the people, as provided for by the General Welfare Clause of the Local Government Code. COBI is in a peculiar situation because while it is the main bulk water supplier to COWD, it does not have water pumping and treatment facilities. It buys its bulk water from RVWCI.
