MCWD explains its side on Carmen water project

Metropolitan Cebu Water District chairman Juan Saul Montecillo wrote National Economic Development Authority director general Romulo Neri and Mayor Tomas Osmeña explaining the water district's side on the proposed Carmen Bulk Water Supply project.

In his five-page letter dated August 22, Montecillo answered all the issues and objections that Osmeña raised in his letter to NEDA last August 15 about the project.

In answer to Osmeña's question on the P200-million development cost, which he said has no basis in law, the MCWD board chairman said that there is legal justification for the payment of development cost because it is principally based on the consortium's right to receive compensation for the voluntary transfer of the water rights to the winning challenger.

"Payment of a compensation to a water permit holder has basis under the Water Code of the Philippines," he said, adding that the code said that any modification, cancellation or revocation of the water rights/permit would be subject to the requirements of the due process and just compensation.

Likewise, Montecillo said that the payment of the water rights is an essential element of the Swiss challenge process. He added that payment of development cost is one of the bid terms and conditions for the Swiss challenge and also one of the conditions on the agreement reached by the MCWD and the consortium.

On the issue of take-or-pay of 40,000 cubic meters per day, which Osmeña said would result to MCWD's bankruptcy, Montecillo explained that the take-or-pay obligation in a build-operate-transfer bulk water supply contract is consistent with the standard practice.

"Since the contract usually entails the sale of bulk water to only one buyer or customer, it is needed to ensure that the developer of the project will have secure and sufficient cash flows meet debt service obligations," the MCWD official said.

With the big demand of water in Metro Cebu, Montecillo said there is sufficient demand to receive the quantity of water that MCWD will buy from the seller, and even accept all the water from Carmen.

Montecillo also clarified that MCWD systems loss is pegged at 32 percent and not 35 percent, which is better than most of the utilities in the country, including the privately operated water systems in Manila.

And lastly, Montecillo said that the mayor's concern that the P25.55 per cubic meter price of water that Ayala consortium offered to MCWD is actually two-tiered.

This means that the price of water between 28,000 and 39,000 cubic meters would be P25.55 per cubic meter at 2007 prices, and excess water up to 46,000 cubic meters would be fixed at P12 per cubic meter. With this, the expected average tariff for treated water is P24.49, subject to adjustment for inflation.

He added that the price is not yet final since it would still be subjected to a price challenge that would allow other suppliers to bid for the project and help MCWD determine and obtain the most advantageous price proposal. - Wenna A. Berondo/LPM