CDO lawmakers ask court, PCC to look into water district deal with firms

Dec. 07, 2017
Cagayan de Oro Water District

Cagayan de Oro Water District (COWD) general manager Rachel Beja has assured the city’s consumers there is no rate increase following the joint venture agreement the utility signed with MetroPac Water Investments Corp. (Jigger J. Jerusalem/

CAGAYAN DE ORO CITY – Three city councilors here have asked a local court and a national government office to hold the contract between the Cagayan de Oro Water District (COWD) and MetroPac Water Investments Corp. (MetroPac) from being implemented until they can ascertain there are no questionable items in the deal between the two firms.

COWD went into a joint venture agreement (JVA) with MetroPac last year after the water utility and its bulk water supplier, Rio Verde Water Consortium Inc. (Rio Verde), decided to cut short their 25-year contract due to a series of disallowance notices from the Commission on Audit (COA).

Although it has no facilities here, MetroPac has promised to provide the bulk water to COWD.

Under the JVA, MetroPac presented three options to COWD, namely: to purchase water from an existing facility, to lease a treatment facility where it can produce water, and to build its own facility or buy an existing one.

The annulment of the COWD-Rio Verde contract is now pending at the Regional Trial Court Branch 38 awaiting decision.

Rio Verde was contracted by COWD in 2007 to provide the water district with up to 120 million liters a day (MLD), although the district obtains only an average of 40 MLD from the bulk water supplier.

From the start, said COWD general manager Rachel Beja, the deal with its bulk water supplier has been red-flagged by COA as the agency continues to issue disallowance notices to the utility.

Beja, who was appointed as general manager in 2011, said the brunt from the deal with Rio Verde in the past years was passed on to the present management.

In the COA report posted in its website, the agency has recommended that COWD will discontinue purchasing the bulk water supply from Rio Verde as it was declared as “non-responsive bidder” and therefore not allowed to do business with the water district.

“The District (COWD) continued to make payments to Rio Verde Water Consortium, Inc. (RVWCI) for bulk water purchases in the amount of P143,050,356,08 from January to December 2014 without valid basis as the said entry was declared as non-responsive bidder by the District’s Bids and Awards Committee and despite the standing Notices of Disallowance of prior years for similar transactions with the same entity,” reads a part of the COA report.

Lawyer James Judith, the legal counsel of city councilors Teodulfo Lao Jr., Enrico Salcedo and Reuben Daba, said they have employed a two-prong approach in addressing the issues now hounding the COWD and its transactions with Rio Verde and MetroPac.

Lao is the committee chairman of public utilities, Salcedo heads the cooperative committee, and Daba chairs the social services.

First, Judith said, they wrote the Phil. Competition Commission (PCC) on Nov. 15 asking it to investigate the COWD-MetroPac JVA. It alleged that “there is the apparent cartelization of the local water industry between the two companies in the purpose of maintaining the desired water rate to their advantage at the rate of P16.35 per cu. m. [cubic meter], thus P5.90 per cu. m. higher than the COA disallowed rate of P10.45 cu. m. and restricting competition for that matter.”

The councilors noted that there may be “collusion” between MetroPac and Rio Verde to “jack up the water rate and restrict the competition.”

They also alleged that COWD and MetroPac did not submit for review and approval to PCC the Bulk Water Supply Agreement (BWSA) the two companies signed.

Judith said they also asked the RTC Branch 38 Judge Emmanuel Pasal to allow the councilors to intervene in the COWD-Rio Verde case as they wanted the court not to decide the annulment proceedings just yet.

Lao said they want Rio Verde to remain as the COWD’s bulk water supplier until the utility’s JVA with MetroPac could be thoroughly scrutinized and ensure that the deal will not put the city’s 93,000 water consumers at a disadvantage.

“MetroPac submitted an unsolicited proposal to COWD and then the BWSA was awarded to them. That sounds like a done deal,” Lao said.

He said they see the JVA as “disadvantageous” since it was not published in local and national papers.

At the very least, Lao said, a public notice should have been published in all the Cagayan de Oro-based papers since it’s the city’s residents who are the end-users of the water deal COWD made with MetroPac.

But Beja said there were other players who expressed their interest when MetroPac submitted its unsolicited proposal to COWD in 2015. The proposal mainly offered a joint venture with COWD.

Following MatroPac’s submission, a “Swiss Challenge” was declared in 2016 prompting other water-provider companies such as Mactan Rock Industries Inc. and Manila Water Co. Inc. to declare their intent, she said.

She added Mactan Rock and Manila Water did not push through with their intent to join the bidding lprocess during the pre-bid conference.

In October of this year, COWD and MetroPac formalized the joint venture agreement and the subsequent creation of Cagayan de Oro Bulk Water Inc. (COBI), which is seen to provide 100 MLD to the utility’s consumers.

Under the JVA, MetroPac gets to own the 95 percent of COBI, while the measly remainder is owned by COWD. The undertaking is said to be worth P2.8 billion.

According to a report, MetroPac received the notice of award for the bulk water supply project on March 23, which will have a lifespan of 30 years, and renewable for another 30 years.

In a previous interview, Beja has assured the water district will not have the same problems it is experiencing with Rio Verde, saying that although under the JVA COWD will pay MetroPac P16 per cu. m., the utility will not pass it on to its customers.

But with or without the bulk water supply from MetroPac, Beja said the next water rate increase may take effect two years from now.

At present, a residential consumer pays P218 for the first 10 cu.m., or 10,000 liters of water, or 2 sentimos per liter.

“We cannot just increase the water rate. We have to present our financial report to the public and LWUA [Local Water Utilities Administration], which approves the water rate adjustment,” Beja said.

For his part, Councilor Salcedo said a number of cooperatives are willing to manage the COWD operations with an initial capital of P2.8 billion. These cooperatives have a combined asset of at least P40 billion.

COWD board chairman Eduardo Montalvan, in an interview, said the agreement between COWD and MetroPac will not hinder the utility from going into a contract with other water providers.

Montalvan said the COWD-MetroPac joint venture will not be exclusive as the water district is still allowed to obtain water source from other suppliers.

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