COWD-Rio Verde to terminate Bulk Water Supply Agreement

Oct 12, 2017

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Signing of Compromise Agreement follows

After an often rocky relationship, the Cagayan de Oro City Water District and its bulk water supplier Rio Verde Water Consortium, Inc. are calling it quits.

CDO Volunteer Fire Brigade serves residents in PAGIBIG Citi Homes at Opol, Misamis Orientla.l. Until the present water shortage is addressed, this be a common sight in COWD's service areas.

CDO Volunteer Fire Brigade serves residents in PAGIBIG Citi Homes at Opol, Misamis Orientla.l. Until the present water shortage is addressed, this be a common sight in COWD’s service areas.

 

In a letter addressed to COWD General Manager Rachel M. Beja dated 08 August 2017, Rio Verde management presented its Counter Compromise Agreement acceptable to its shareholders.

COWD forwarded this to the Office of the Government Corporate Counsel (OGCC), its statutory counsel, for legal review before this shall be submitted to the court for decision,” Beja noted.

The “Agreement Nullifying the Bulk Water Supply Agreement (BWSA) and Settling the Disputes by and Between the COWD and Rio Verde Water Consortium, Inc. (RVWCI)” was earlier discussed by the two parties in letters dated January 4, 2017 and April 5, 2017, discussing the terms of the Compromise.

Rationale for BWSA termination

In order to enable COWD to purchase bulk water from other sources and supply the needed volume of potable water to the inhabitants of Cagayan de Oro City and its environs; and for Rio Verde to maximize the capacity of its water production facilities, both parties have agreed to bring their Disputes to a close by mutually terminating the BWSA, dated December 23, 2004 and the Supplemental Agreement, dated January 21, 2005 effective upon the promulgation of the courts of its judgement based on the Rio Verde constructed a P1.-Billion Water Treatment Plant in Bgy. Pualas, Baungon, Bukidnon starting in 2004 and started delivery of 40,000 cu.m. of bulk water to the COWD in 01 January 2007.

Cagayan de Oro Volunteer Fire Brigade members sacrificed their family day last October 8 to distribute water to PAGIBIG Citi Homes residents in Malanan, Opol, Misamis Oriental

Cagayan de Oro Volunteer Fire Brigade members sacrificed their family day last October 8 to distribute water to PAGIBIG Citi Homes residents in Malanan, Opol, Misamis Oriental

 

Although the Bulk Water Supply Agreement signed by both parties provided for the escalation of both the volume and prices of the bulk water delivered to the COWD, these never happened and led to a series of suits and counter suits by both parties which are generally perceived to have resulted in the deterioration of water service in the COWD’s West Service Area.

Compromise Agreement

Thus, in order to set aside the differences and allow the delivery of bulk water badly needed by the COWD to address increased demand in the West Service Area, the two parties have agreed to terminate the original BWSA and instead sign a Compromise Agreement which would allow them to continue doing business and thus, help improve water supply service in the COWD West Service Area.

Members of the Cagayan de Oro Volunteer Fire Brigade help distribute water to waterless residents in PAGIBIG CIti Homes at Malanan Opol, MIsamis Oriental Oct. 7, 2017 (photo supplied)

Members of the Cagayan de Oro Volunteer Fire Brigade help distribute water to waterless residents in PAGIBIG CIti Homes at Malanan Opol, MIsamis Oriental Oct. 7, 2017 (photo supplied)

Among the terms of the latest version of the Compromise Agreement are the following: both parties agree to drop all disputes against each other and terminate the proceedings involving them, as well as mutually pre-terminate the BWSA, dated December 23, 2004 and the Supplemental Agreement, dated January 21, 2005, from which the Disputes arose, which shall be deemed cancelled, revoked, and legally terminated upon the signing of the Compromise Agreement.

Upon the execution of the Compromise Agreement, both Parties shall sign and execute a Joint Motion to Dismiss the pending Disputes with Prejudice to be filed with Branch 38 of the Regional Trial Court of Cagayan de Oro City and the Supreme Court for the immediate termination and dismissal of the Disputes with prejudice.

If for any reason, additional documents or acts need to be executed or performed in order to implement the terms and intention of this Agreement, the Parties hereby agree to execute such documents and perform such acts in the soonest possible time.

The Parties agree that should any portion of this Agreement be found to be illegal or unenforceable, that provision may be severed from this Agreement and the remaining provisions shall be given full force and effect.

The Disputes

 Rio Verde completed the construction of its treatment plant on December 2006 and commenced supplying 40,000 cubic meters (cu.m.) of potable bulk water into the water system of COWD on January 1, 2007, which was confirmed by COWD with a System Completion Certificate on July 17, 2007.

CDO Volunteer Fire Brigade serves residents in PAGIBIG Citi Homes in Opol, Misamis Oriental last 08 Oct 2017. (CDOVFB photo)

CDO Volunteer Fire Brigade serves residents in PAGIBIG Citi Homes in Opol, Misamis Oriental last 08 Oct 2017. (CDOVFB photo)

 

Starting March 1, 2007, Rio Verde formally served COWD a Notice of Increase in water price rates, as provided under the terms of the BWSA, raising the price of treated water from ₱10.45 per cubic meter to ₱11.55 per cubic meter, invoking extraordinary increase in power rates and extraordinary inflation.

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

Thus, on 25 November 2011, Rio Verde filed a Petition to Compel Arbitration against COWD before the Regional Trial Court of Cagayan de Oro City, which was granted by the RTC Branch 38 on 03 March 2012, in Special Proceedings Case No. 2011- 190, which further mandated COWD to submit to arbitration pursuant to the arbitration clause in the BWSA.

“Prior to this date, sometime in 2009, the BWSA had been a subject of an investigation by the COA fraud investigation unit,” Beja noted. “Thus, COWD had been constrained to proceed with the implementation of the further terms of the BWSA.”

Although COWD filed a Motion for Reconsideration, this was denied on May 3, May 2012.

On 05 July 2012, COWD filed a Petition for Certiorari with Prayer for TRO and/or Writ of Preliminary Injunction before the Supreme Court, entitled: “Cagayan de Oro City Water District vs. Hon. Emmanuel P. Pasal, etc. and Rio Verde Water Consortium, Inc. (G.R. No. 202305), which remains pending as of press time.

Then on 05 June 2014, COWD filed a complaint for Nullification of Contract against Rio Verde before the RTC of Cagayan de Oro City, Branch 38, docketed as Civil Case No. 2014-141.

 

“This was upon receipt of the final report of the COA fraud investigation unit sometime in 2013, which recommended among others, the nullification of the BWSA,” Beja noted.

 

Rio Verde filed its Answer (With Special/Affirmative Defenses and Counterclaim) on 04 September 2014 and the case remains under mandatory court mediation.

 

Joint Venture Initiative

COWD General Manager Rachel Beja disclosed during the latest city council public consultation that COWD is entering into a joint venture agreement with Metropac Water Investments Corp, (MWIC) to supply up to 100,000 cu.m. of treated bulk water daily to COWD to address the increased demand in its East and West Service Areas.

Residents of PAGIBIG Citi Homes in Opol, MIsamis Oriental line up for water distributed by the CDO Volunteer Fire Brigade 08 Oct 2017. (CDOVFB photo)

Residents of PAGIBIG Citi Homes in Opol, MIsamis Oriental line up for water distributed by the CDO Volunteer Fire Brigade 08 Oct 2017. (CDOVFB photo)

 

The new JV firm is exploring three options by which the requirement could be addressed: purchasing bulk water from an existing water treatment plant; outright purchase of an existing water treatment plant or constructing a new treatment plant, which in the case of Rio Verde took 3 years to complete.

The only existing bulk water facility at present which can supply the increasing water needs of the COWD is the Rio Verde bulk water treatment plant in Baungon, Bukidnon which can deliver up to 100,000 m3/day and has a design capacity of 150,000 m3/day.

The termination of the BWSA indicates that the first option to purchase treated bulk water from an existing facility could be the quickest fix to the present crisis given the long-term nature of the outright purchase of an existing plant and construction of a new one.  However, even that would be imperative upon the soonest signing of the Compromise Agreement by the two parties which remains pending until now.

The P2.8-Billion JV project of COWD with MWIC involves the construction of new water transmission lines and the rehabilitation of the Camaman-an Reservoir, and will also later involve the delivery of treated bulk water to service the requirements of COWD’s West Service Area, which still relies on deep wells for a portion of its water supply.

To implement the project, the JV firm has the option of sourcing its treated bulk water either through the purchase of an existing facility, building a new one, or buying its supply from an existing facility.

The subsequent transmission phase calls for the construction of transmission lines and rehab of the Camaman-an Reservoir, and supply of 40 MLD to eastern sector within 12 months. COWD currently serves a population of 700,000 residents with approximately 85,000 service connections.

Road Map for Sustainability

A 3-stage road map to ensure a sustainable water supply was presented by  Joselito D. Velasco, senior manager, MPW Public-Private Partnerships .

For Stage 1 covering the delivery of 60MLD to the West Service Area, the road map foresees putting COWD’s Calaan-an production deep wells on standby and its Balulang wells and booster pumping station to be operated intermittently.

For Stage 2, 60 MLD will be delivered to the West Service Area and 20ML to the East Service Area which will place some of COWD’s wells and booster  pumps in Macasandig on intermittent operation, while bringing water to Upper Gusa and Upper Carmen, and all elevated subdivisions through the installation of additional transmission lines and starting service to Indahag  through a sub-system.

By Stage 3, 60 MLD will be delivered to the West Service Area and 40MLD to the East, further reducing ground water extraction by placing COWD production wells in Agusan and Tablon on standby and further reducing the operations of the Macasandig wells and booster station.

“Some of the wells, yes, they may be used as standby/back-up wells but not our booster pumping stations,” Beja noted. “They will continue to operate even with the joint venture.”

The water supply situation in COWD Service Areas have been further aggravated by ongoing repair works and upgrading being implemented by the water district under its Non-Revenue Water (NRW) reduction program and regular repairs and maintenance programs since some of COWD’s pipelines have aged since it has started serving public over 44 years ago. (photos courtesy of the Cagayan de Oro Volunteer Fire Brigade)

 

 

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Disclosure: The author is a former media consultant of RVWCI but has had no relations with them for the last five years, pecuniary or otherwise.

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