Changes in Cagayan de Oro water deal with Pangilinan group sought

CAGAYAN DE ORO, Philippines – The Cagayan de Oro Water District (COWD) has sought amendments to its 2017 contract for the supply of water with a company controlled by the Metro Pacific group of business tycoon Manny V. Pangilinan, saying some of its provisions were to blame for the situation they were in now.

Pangilinan’s Cagayan de Oro Bulk Water Incorporated (COBI) has given the COWD only until March 31 to pay a disputed debt of over P400 million, representing the increase in the former’s rates in 2021. 

COWD has refused to acknowledge the increase and debt, invoking a force majeure provision in their contract because 2021 was part of the COVID-19 pandemic period.

Engineer Antonio Young, COWD general manager, said they wrote to COBI on Wednesday, March 13, proposing to discuss with the firm “problematic provisions” in the contract, to ensure a “continuous partnership.”

The contract was signed in 2017, long before Young became the COWD’s general manager.

The COWD, in the letter, sought to address COBI’s notice of water disconnection to the water district.

According to Young, among the provisions they want to amend is the implementation of frequent water rate increases, saying that these should be “contingent” to the rate adjustments of COWD. 

“This is to keep pace, to prevent the bankruptcy of the water district,” Young told a fact-finding committee organized under the Cagayan de Oro Special Task Force for Water Supply and Distribution.

Under the COWD-COBI agreement, the supplier can adjust the rates every three years based on the average consumer price index. 

Young said they could not easily implement a rate adjustment, considering the lengthy procedure they need to follow, which includes the conduct of public hearings and getting the approval of the Local Water Utilities Administration (LWUA). 

Serious questions have been raised on the COWD-COBI contract after the supplier increased its rates in 2021, from P16.60 to P20.57 per cubic meter. 

On January 1, COBI increased its rates again to P24.19 per cubic meter. That, too, was not acknowledged by the COWD.

The COWD said it has continued to pay COBI P16.60 per cubic meter.

Only a court order, according to Young, can compel the COWD to acknowledge and pay the disputed debt.

He said the COWD has no legal basis to pay COBI more than the P16.60 rate.

The COWD said it also wanted to amend a contract provision where COWD needs to pay COBI for their water bills within 10 days from the date of receipt of billing.

Young said the COWD would need more time given the processes it follows. The COWD said a 60-day period would be reasonable.

The COWD is a government-owned and -controlled corporation, subject to the state’s accounting and audit rules. 

Young said they also want to rid the contract of the provision about the imposition of a penalty of 6% interest per year for COWD’s delayed payments of COBI’s billings, saying it is not allowed in government transactions. 

Also, the COWD sought to change the arbitration clause in the 2017 contract so disputes could be settled in Philippine courts. The contract provides for a costly arbitration in Singapore, based on the rules of the Singapore International Arbitration Centre. 

Lawyer Roberto Rodrigo, COBI legal counsel, told the ad hoc committee on March 7 that they were open to negotiations “to settle the issue amicably” with COWD. – Rappler.com