Capitol deal with bulk supplier unfair?: 35 million liters of water at risk

CEBU, Philippines — The Metropolitan Cebu Water District (MCWD) is at risk of losing at least 35 million liters of water per day depending on the action the Capitol would take relative to the bulk surface water supply at Luyang River in Carmen town.

Cebu Governor Gwendolyn Garcia called for a special session with the Provincial Board yesterday for the approval of a resolution which she certified as urgent.

Authored by Board Member Glenn Anthony Soco, the PB approved the resolution authorizing the governor to undertake all the necessary steps to protect the interests of the Province of Cebu in relation to the joint venture agreement dated 12 March 2012.

“The resolution is general in nature and will give her enough leeway to correct or remedy violations committed, or disadvantages it may have caused the Provincial Government in relation to the JIA (joint investment agreement) or in so far as the contract with MCWD is concerned,” Soco told The Freeman.

“As to what she will do, we cannot speculate as to the wisdom of the Governor as to what action she will take. We have full trust and confidence in the Governor that she will act on the best interest of the Province, and the Cebuanos,” added Soco.

The MCWD is saddened by the recent development about the situation that its bulk water supplier, Cebu Manila Water Development (CMWD) Inc., is in right now.

“MCWD has been preparing for the needed actions in the event of interruption of water supply from CMWD to cushion its impact to the consumers.  The water district assures that its service will continue and efforts to develop new water sources will be relentless in order to give the best service to its consumers,” said MCWD in a statement.

On March 21, 2012, a JIA was entered into by and between the PGC and Manila Water Consortium (MWC) for a joint investment through a Joint Investment Company (JICO), named Cebu Manila Water Development (CMWD), Inc., for the construction and development of water supply facilities that delivers treated bulk water, sourced from the surface water at Luyang River, Carmen, Cebu.

Soco’s resolution stated that on December 18, 2013, CMWD entered into a Bulk Water Supply Contract with MCWD, where CMWD will supply MCWD with 35 million liters of water daily at “a ridiculous, iniquitous, and fixed price of ?24.59 per cubic meter rate for a period of twenty (20) years with no escalation clause.”

“Worse, the present price of bulk water being bought by MCWD from their Lusuran, Cebu City supplier is ?65.00 per cubic meter, a stark difference from the ?24.59 per cubic meter rate which is grossly unfair and disadvantageous to CMWDI,” the resolution stated.

It further stated that “with the absurd rate of ?24.59 per cubic meter rate, CMWD’s operations for the duration of the contract will no longer be feasible.”

“Again, with the absurdly low rates, it is also no longer feasible for the CMWD to perform its contractual commitment to remit a 19.29% Project Internal Rate of Return (PIRR) to PGC, a plain violation of the terms of the JIA, to the prejudice of the Cebuanos from the Province of Cebu,” the resolution said.

The PGC, having found the Bulk Water Contract between CMWD and MCWD grossly onerous, unfair, and economically impractical, negotiated for an adjustment of the present price based on the current or prevailing procurement price of MCWD with their other suppliers.

As a result of the negotiations, on November 22, 2022, the MCWD, through lawyer Jose C. Daluz III, chairman of the Board of Directors, and Edgar H. Donoso, general manager, sent a letter patently manifesting their agreement that the price adjustment be implemented effective January 1, 2023; that the National Economic Development Authority (NEDA) shall be furnished the required documents for the price adjustment, which CMWD will consolidate; and that the monetary equivalent of the difference between the original price and the adjusted price shall be paid to the PGC.

“Regrettably, in a meeting dated 21 December 2022, the MCWD refused to honor its commitment to implement a price adjustment by 1 January 2023,” Soco said.

The PGC also discovered material violations performed by MWC in the JIA during the course of negotiations which allegedly aggravated further the situation.

On December 27, 2022, a Notice of Breach/Violation was served by the Office of the Governor to CMWD on the basis that CMWD has been supplying more than 35 million liters of water daily to MCWD in violation of the JIA which created the CMWD; and CMWD has been operating two production wells in the area, in contravention of the JIA which limited the source of water supply to the surface water of Luyang River. – JMD (FREEMAN)