By BenCyrus G. Ellorin/ July 19, 2024

CAGAYAN DE ORO CITY — The supposed ‘full intervention’ of the Local Water Utilities Administration (LWUA) in the Cagayan de Oro Water District (COWD) may have been incomplete.

To maintain the operations of the water district, the regular general manager and the majority of the Board of Directors forced their way back into the padlocked office of the General Manager. The outspoken interim general manager has been scarce to the public and the media since Monday.

CurrentPh got hold of a copy of the Commission on Audit (COA) letter addressed to General Manager Antonio Young dated July 4, 2024, on the disbursement of monies by the COWD after the appointment of Interim General Manager Fermin Jarales. Young had asked the COA if Jarales could be the official signatory of Disbursement Vouchers and Checks.

According to the letter signed by Florita K. Kionesala, State Auditor V COWDs Supervising Auditor, “only permanently appointed officials shall be designated as disbursing officers” as provided for in Section 4.1.4 of COA Circular no. 97-002. LWUA’s takeover of the COWD is only good for six months.

Young told CurrentPH that since LWUA’s moved for the ‘full intervention’ of the COWD, which has been widely construed as a takeover, he remains the primary signatory of COWD’s disbursement vouchers and checks.

That is why despite the cease-and-desist order from the interim Board of Directors appointed by LWUA, the former general manager continued to perform his functions as banks have not acknowledged the supposed new signatories. “The operations of COWD could have been paralyzed, and I could be held liable for dereliction of duty had I ceased to function as general manager,” said Young.

The COA letter he said affirmed his position. Thus, after three days of absence from the COWD office, Young regained control of his office which was believed to have been locked by Jarales. The majority of the regular Board of Directors supported Young’s actions.

CurrentPH sought Jarales’s comments on the recent development at the beleaguered water distribution utility but has not responded as of this writing. He was however quoted in the Mindanao Gold Star Daily as saying, “That’s ransacking.”

The COA letter and the reoccupation of the general manager’s office by the regular general manager are yet another blow to the “full intervention” of the LWUA on the COWD. Earlier, on June 18, 2024, the Dept. of Justice issued a legal opinion saying that the LWUA can only take over “(a) if the local water district is the default; (b) the default is in the payment of principal or interest on its outstanding bonds or other obligations, and (c) the outstanding bonds or other obligations of the local water district are incurred to LWUA.”

Young and the majority of the regular Board of Directors, namely Nelia Lee, chairperson, and members Dr. Gerry Cano and Janet Floirendo have asserted that the COWD has not been in default in any of its financial obligations to LWUA. Thus the takeover was ultra vires or beyond the legal powers of the government agency.

Young and the majority of the regular BOD filed a case for prohibition before the Regional Trial Court of Cagayan de Oro – Misamis Oriental branch 38. They submitted the DOJ opinion to bolster their assertion that the take over of “full intervention” by the LWUA last May 29, 2024, was illegal as it does not conform with the provisions of PD 198 or the law that created the government financing agency of water districts throughout the country on July 12, 2024.

Judge Emmanuel P. Pasal, presiding judge of RTC Branch 38 has reserved a ruling on the legality of the LWUA takeover after trial of the case filed by Young, et al for Prohibition. Pasal wrote in his order dated June 11, 2024, that “Whether LWUA has the power under PD 198 to take over the operations of COWD is a matter that could be properly resolved after trial.”

The Office of the Government Corporate Council (OGCC) which represented the interim management of the COWD asked the court for 10 days or until July 22, 2024, to comment on the DOJ opinion. The court set the next trial on August 6, 2024. The OGCC is in a peculiar situation as it is an agency under the DOJ.

WHAT HAPPENED BEFORE

LWUA’s takeover came after President Bongbong Marcos ordered, during his visit to the city on May 16, 2024, the agency to study the possibility of taking over the management of the COWD to ensure that the right of Kagayanons to water is protected.

CurrentPh transcribed the portion of the President’s speech with the supposed LWUA order:

“Akin ding inatasan ang LWUA na pag-aralan ang posibleng pamamahala (emphasis supplied) nito sa COWD upang sa lalong madaling panahon mapag-aralan ang solusyon sa situation sa supply ng tubig sa inyong lugar. Hindi lang sa supply nga tubig pati na ang pagtukoy ng angkop na water rate at pagtupad sa mga obligasyon nito sa mga consumer at mga supplier. Hindi natin hahayaan na mapagkaitan ang mga taga Cagayan de Oro ng kanilang karapatan na magkaruon ng sapat, malinis, ligtas na supply ng tubig.”

The DOJ issued the opinion upon request by LWUA Administrator Jose Moises Salonga. The LWUA administrator sought the opinion and guidance from the Justice Department on the directive of President Ferdinand Marcos Jr. for the water regulator to study the possible management of the Cagayan de Oro Water District and to solve the current water supply issue in Cagayan de Oro City, and to ascertain the proper water rate for COWD to ensure that it will be able to fulfill its obligations to its consumers and bulk water suppliers.

CONTRACTUAL DISPUTE

Problems at the COWD stemmed from a collection by its bulkwater supplier Cagayan de Oro Bulkwater Inc. (COBI) alleged debt amounting to P479 million. This is the accumulated differential of bulk water rate adjustments in 2021 and January 2024. The 2017 contract between COWD and COBI stipulated automatic bulk water increases every three years.

COWD refuses to acknowledge the levy from COBI, saying it cannot comply with the obligations as the Covid-19 pandemic prohibited them from adjusting power rates.

When the contract between COWD and COBI took effect, the price per cubic meter of water was P16.60. Based on the automatic escalation of prices every three years in the contract, COBI raised the rates to P20.57 in 2021 and P24 starting January 1, 2024.

COBI which Metro Pacific Waters, Inc. owns gave the COWD a deadline to pay the alleged debt on April 30, 2024. When the COWD refused, COBI ordered its main supplier of treated water Rio Verde Water Consoritium Inc. to cut off the bulk water supply on May 1.

This prompted Cagayan de Oro Mayor Klarex Uy to declare the city under a state of emergency. It asked COWD to resort to emergency purchases from other bulk water suppliers should COBI cut off the water supply. COBI finally cut off the water supply around noon on May 14, 2024. But the court issued a 72-hour temporary restraining order. It was extended to another 17 days.

Furthermore, the court ruled that the right of the people to water should not be sacrificed because of a contractual conflict between two parties.

WRIT OF PRELIMINARY INJUNCTION

On June 3, 2024, the court issued a Writ of Preliminary Injunction, enjoining COBI and Rio Verde from cutting off water supply to COWD. The court ruled that while COBI manifested it would no longer resort to cutting off water supply to COWD, the said manifestation was contingent on future negotiations, and thus the threat of water disconnection “hangs like a sword of Damocles” over the heads of water consumers.

The COWD has contracted COBI to supply 40% of its water needs or 80,000 to 100,000 cubic meters of treated water daily. COBI however does not have its own water production and treatment facilities. It buys treated water from Rio Verde. Critics say this has relegated COBI to a water trader.

The COWD, the first water district in the country created un PR 198 in 1973 has been beset by problems like its extremely high water wastage or non-water revenue of around 50%.