COWD cannot grant bulk water price increase due to legal issues

Nov 3, 2017

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The Cagayan de Oro City Water District has clarified that there are legal issues which constrain them from granting price adjustments to bulk water supplier Rio Verde Water Consortium Inc.

“It is not an issue whether or not COWD can afford a price increase in bulk supply, but rather it is a legal concern that restricts COWD to accommodate the price increase demand of RVWCI,” said COWD General Manager Rachel M. Beja in an email to this writer in response to Rio Verde’s notice of a price increase from P10.45 per cubic meter (m3) to P16.35/m3 effective 01 November 2017.

COWD GM Rachel Beja stresses a point during an SP Utilities Committee public consultation on the water supply situation in COWD's West Service Area (CIO photo by Nic Anches)

COWD GM Rachel Beja stresses a point during an SP Utilities Committee public consultation on the water supply situation in COWD’s West Service Area (CIO photo by Nic Anches)

The utility’s bulk water supplier earlier warned COWD it might be forced to shut down its operations should the water utility continue sitting on its requests for price adjustments made over the last 10 years.

Rio Verde Vice President Joffrey E. Hapitan argued in a follow up letter to their notice of price increase that COWD has publicly admitted it can afford to absorb the price adjustment petitioned by Rio Verde without passing it on to water consumers since it has increased its water tariffs during this period.

COWD has two notices of price increases covering the period 2011-2014 posted in its official website: The first dated Nov. 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.

However, Beja clarifies that the price adjustments were long overdue and did not include a provision to accommodate price adjustments in the price of bulk water it was purchasing from Rio Verde.

“The water rate adjustments that were approved by the Local Water Utilities Administration (LWUA) in 2011 but were only implemented in full by COWD last May 2014, were intended to cover the inflation rates since 2007 and to cover the rehabilitation cost for some of the aged pipelines and facilities of COWD,” Beja said in response.

“Such water rate adjustment did not take into consideration possible increases in the bulk water supply price, precisely because, legally, we knew we had to wait until the fraud audit report would be resolved.  COWD had made this clear during the consultations and public hearings conducted prior to LWUA approval,” she added.

The LWUA is the government agency charged with the regulation of the operations and water tariffs of all water districts in the country.

In fact, Beja said that despite receiving LWUA approval for two more tranches of rate adjustments in its water tariffs, COWD elected to defer these.

“Moreover, in that 2011 LWUA-approved water rates adjustment, 2 more tranches of increases at 10% each were scheduled for implementation in 2014 and 2017, but COWD opted not to implement as scheduled,” Beja added.

In spite of this deferment, Beja affirmed that COWD remains financially stable even without implementing the last 2 tranches of increases.

She further explained that COWD water tariffs differ from COWD’s main service areas to those in Youngsville Subdivision in Opol, Misamis Oriental, due to additional costs incurred in serving that area.

“Systems similar to Youngsville where water needs intermediate boosting facility due to challenging elevation of the area are charged with an additional P2.00 per cubic meter of water consumption to cover pumping costs,” Beja explained.

 

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