By Mike Baños
The Cagayan de Oro City Water District (COWD) is actively seeking an acceptable compromise with its majority partner regarding the price of bulk water it sources from their joint venture company.
Engr. Antonio Young, COWD General Manager
During a media press conference held 16 January 2024 at the COWD Board Room, Engr. Antonio Young, COWD General Manager, said the dispute arose when COWD requested a deferment of the scheduled rate increases for the bulk water supplied by majority partner Cagayan de Oro Bulk Water Inc. (COBI).
COBI is a joint venture created on August 14, 2017 between Metro Pacific Water which holds a 95 percent equity, and COWD 5 percent. The joint venture is envisioned to provide 100MLD of bulk water to the water district for the next 30 years, renewable for another 20 years, as well as construct transmission lines, and rehabilitate COWD’s Camaman-an Reservoir to supply the COWD, which currently has more than 100,000 service connections.
COBI
The JV Corporation now supplies 60 MLD of treated water to the western sector of Cagayan de Oro City, and 40 MLD to the eastern sector of the city. Since December 31, 2017, COBI has been supplying water to the western parts of the city, marking the end of the decade-old relationship between COWD and Rio Verde Water Consortium Inc. which used to sell at P10.45 per cubic meter.
However, Rio Verde still retains ownership of the 100MLD water treatment plant in Baungon, Bukidnon, and supplies COBI with treated bulk water at P13.00 per cubic meter. In turn, COBI sells the water supplied to COWD according to a schedule of bulk water rates stipulated in its Bulk Water Supply Agreement (BWSA) starting at P16.60 with a proviso for a rate adjustment every 3 years based on the average Consumer Price Index of the previous three years.
Metro Pacific Water
Rate Row
The present row arose when COBI increased its rate from P16.60 to P20.57 per cubic meter in 2021 as scheduled in the BWSA with COWD. COBI sent COWD a billing dated December 15, 2023 in the amount of P437,057,627.52 warning it be paid within 30 days from receipt, otherwise delivery of further bulk water would be suspended.
However, the COWD invoked the Force Majeure Event clause in the same document during a January 12, 2024 meeting of its board of directors, citing the adverse effects of the global pandemic and requesting a deferment of the scheduled increase.
Thus, COWD continued paying COBI P16.60 per cubic meter for the period 2020-2023, with the P2.97 difference between this and the P20.57 charged by COBI since 2021 constituting the bulk of the P437-M bill.
Young added that they already settled their September and October 2023 bills last December, and will settle their November bill received mid-December, before the end of January 2024.
Unless the row is amicably settled within 20 business days, the case will proceed to mandatory arbitration as specified in the BWSA. Meantime, COWD has requested the Cagayan de Oro City LGU for assistance in settling the dispute.
Force Majeure & the CPI
Force Majeure Events as defined in the BWSA between COBI and COWD includes epidemics, quarantine, closing of harbors, docks, canals or other assistance to or adjuncts of shipping or navigation, rationing or allocation, whether imposed by law, decree or regulation by, or by compliance of industry at the insistence of, any government, or any other event, matter or thing, not within the reasonable control of the Party affected, all of which were experienced by the COWD and its concessionaires in its service areas during the recent global pandemic.
Young said they invoked the Force Majeure Event clause in the BWSA since the CPI on which the step increases in the bulk water rates are based was adversely affected by the global pandemic.
Aside from the issues COWD were subjected to like not being allowed to cut non-paying customers and collecting from them, the Consumer Price Index for Cagayan de Oro for 2020-2023 abnormally increased during the pandemic period because of the complications arising from the decreased productivity arising from work shutdown and layoffs of consumers, decreased purchasing power of the concessionaires (all commercial, industrial and residential were affected), the drastic reduction in the flow of goods due to mandatory health protocols.
The Consumer Price Index (CPI) for All Income Households by Commodity Group (2018=100) from January 2018 to December 2023 from the Philippine Statistics Authority Region X (PSA-X) show that the average consumer price index for all items rose from 105.7 in 2020, to 109.5 (2021), and further to 116.1 (2022). The Housing, Water, Electricity, Gas and Other Fuels Commodity Group likewise rose from 109.5 (2020) to 110.4 (2021) and 116.2 (2022).
Inflation in the fourth quarter of 2022 averaged 7.5 percent, higher than the 4 percent posted in 2021, and well above the Bangko Sentral ng Pilipinas’ target range of 2 to 4 percent. On an annual basis, inflation rate accelerated from 3.9 percent in 2021 to 5.8 percent in 2022.
Higher prices of food (+6.1%) and transport commodities (+14.7%) buoyed inflation in 2022. All provinces, except Lanao del Norte, recorded higher inflation rates, year-on-year.
Rio Verde Water Consortium Water Treatment Plant
Business Closures
Furthermore, the Department of Labor and Employment (DOLE-X) recorded the total number of permanently closed businesses to 148, displacing 1,815 workers for the period July 2020-December 2021 alone. Cagayan de Oro City recorded the most number of affected establishments (mostly micro scale) at 110 (74%) and workers at 1,331 (73%) across the region. Wholesale/Retail, Accommodation, and Other Services were the most affected in terms of economic impact.
By the end of 2021, a total of 2,052 establishments had temporarily ceased operations, affecting 36,084 workers. Cagayan de Oro City accounted for almost half of the closed businesses due to the concentration of industries in highly urbanized city.
Retrenchment / Reduction of Workforce
Over the course of the pandemic, 857 businesses opted to reduce their workforce to save on operational costs. This affected 10,564 workers from July 2020 to December 2021. Cagayan de Oro City was the center of retrenchment with 444 (52%) establishments affecting 5,078 (48%) workers. The industries that reduced the most number of workers were Construction, Other Services, Accommodation, Administrative Support, and Financial.
Gross Regional Domestic Product
From 2010 to 2019, the Gross Regional Domestic Product (GRDP) was growing at an average of 6.4 percent from 2010 to 2019. However, when the global pandemic stuck in 2020, it caused massive disruption to people’s lives and economies. Strict community quarantines were imposed, which restricted the movement of people, goods, and services. This led to a P36 billion drop in household spending of Region X or an average of P9.6 million per day.
Camaman-an Reservoir
As expected, the pandemic severed the region’s growth momentum as the economy contracted by 5.2 percent in 2020. The steepest contraction was recorded in the services sector at nine percent, owing to output declines in the hard-hit sectors: accommodation and food service activities (-49.6%) and transportation and storage (-39.5%). Wholesale and retail trade which accounted for 26.8 percent of the regional economy contracted by 5.7 percent.
Although the industry sector had a smaller contraction (-1.9 percent), the construction subsector declined by 21.7 percent as several infrastructure projects were suspended or regulated in the first part of the year amid community quarantine.
2020 Provincial Labor Statistics
The socioeconomic effects of COVID-19 pandemic led to the record-high unemployment figures in the last 15 years. In 2020, annual unemployment across all provinces and highly urbanized cities (HUCs) except Lanao del Norte, increased with Misamis Oriental (including Cagayan de Oro City) registering the highest rate at 8.4 percent.
Camaman-an Reservoir 2
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