The Cabildo of Lanzarote hosted the celebration of the Extraordinary and Urgent Assembly of the Water Consortium that the President of the Institution, Oswaldo Betancort, convened last Friday, after receiving from the Legal Services the preliminary report that he commissioned a few months ago to monitor the degree of compliance with the concession contract for the supply, sanitation and reuse services of the islands of Lanzarote and La Graciosa. This document leaves no doubt that there are causes subject to serious sanctions and even that could lead to the contractual termination due to essential and very serious breach of its obligations by the contractor, subject to the issuance of the appropriate reports that support such a decision; a process that begins now.
The members of the Assembly, among whom were present several first mayors and representatives of the Mayors of the seven municipalities of the Island, have learned firsthand this global preliminary report, the most complete ever prepared on a public contract to defend the general interests of the population of Lanzarote and La Graciosa in terms of water.
“We are going to continue working rigorously because water has no political color, and I assure you that future actions or relevant reports that the Consortium executes will be communicated by this presidency, because that was the commitment of transparency that we acquired when the citizens placed us at the head of the Cabildo”, commented the island president at the meeting this Wednesday before adding that “this has only just begun”, in reference to the new resources that his government is dedicating to demand compliance with these contracts with Canal Gestión. Precisely, the vice president of the Consortium, Councilor Domingo Cejas, clarified that when they arrived at the entity, “beyond the manager, the Consortium did not even have an engineer.”
Both Domingo Cejas and Oswaldo Betancort have thanked the collaborative spirit of the members of the Assembly, after the technician responsible for the concession contract detailed the steps followed before providing a diagnosis for which she initially requested a legal-technical and an economic report referring to the payment of the company's tax bonus fee.
The preliminary report describes breaches of the essential obligations provided for in the Particular Administrative Clauses, and therefore very serious infractions, observing irregularities in the payment of fees and also breaches in the Service Exploitation Plan and the Organization and Management plan of the Service offered by the contractor, among others.
After the presentation, the majority of the members of the Assembly agreed on the need to be diligent in the steps to follow now to put together a possible file for termination of the contract with the operator.
The unacceptable losses in the network
The contract with Canal Gestión that resulted after the tender for the integral water cycle service in Lanzarote and La Graciosa emphasizes that a central objective of the same was the need to stop the large and unacceptable water losses in the network. In 2013, the start date of the contract, there were almost 60% losses and the contractor was then entrusted to reduce them to 30% (half). Specifically, in 2013 there was an index of 57.64% in losses, and 10 years later, in 2023, it has been 54.83%. That is, in ten years the loss index of the water network of Lanzarote and La Graciosa has not been reduced even by 3%.
According to the figures put on the table of the Assembly this same day, the year in which the losses in the network were most reduced was in 2018, when it was 51.82%, the lowest figure in the historical series. And the highest figure occurred in 2021, when water losses skyrocketed to an index of 61.38%.
Precisely this is one of the obvious breaches of the essential obligations in which the company has incurred. In this regard, there was already a report issued by the Technological Institute of the Canary Islands (ITC) and the company Trama Canarias, requested in October 2018 and issued on July 31, 2019, in which it is stated that there was no procedure for the detection of leaks. Among other reasons because for a network of more than 2,000 km, the human resources allocated are 5 people –a manager and 4 operators- which are clearly insufficient.
So already in 2019 it is established as necessary to have the supply sectorized and remotely managed, to plan the actions and know the percentage of losses. The company then stated that the sectorization and remote management “was in the process of implementation”. Five years later, everything remains the same.
Another serious anomaly argued by the Legal Services of the Cabildo of Lanzarote affects the services of sanitation, which has been dismantled as such by the company. It must be remembered that the concession to the operator includes the management and exploitation of the public services of water supply, reuse and sanitation.
Sanitation, therefore, is not an ancillary service to the contract. Article 289 of the TRLCSP 2011, relating to subcontracting, establishes: “In the public service management contract, subcontracting may only fall on ancillary services”; and this is reflected in clause 36 of the PCAP. Therefore, the subcontract in this area is a habitual and irregular practice that the current managers of the Cabildo consider as a serious breach of another essential obligation.
Effective control of the investments made
The Assembly of the Consortium has learned that, within these essential breaches, there is also the chapter of executed investments. A clarifying fact is that in 2023, the current Government group in the Cabildo confirmed in its reports that of the 57,558,419 million committed in investments, only just over 4,276,668.25€ had a definitive resolution, between approved and rejected definitively, with the rest pending to be completely reviewed.
The report that has been analyzed by the Consortium Assembly carries out a study of the investment lots delivered by the concessionaire, pointing out not only that the investments have not been made within the 5-year period, but that there have been modifications in the Investment Plan offered by the concessionaire not approved by the contracting body and, specifically, of investments aimed at reducing losses in the network and non-invoiced water.
The report requested by the person responsible for the contract considers it necessary to carry out a thorough analysis of verification of the investments made and their adaptation to the Investment Plan offered by the concessionaire, which ratifies the breach of the concessionaire and, where appropriate, the degree of the same.
In addition, Councilor Domingo Cejas has spoken of the penalty files, those that have been opened in recent years with the aim of sanctioning serious incidents in the service. “The preliminary report indicates the existence of a total of 18 sanctioning files opened since 2018 by the Consortium to the contractor. Two of them were resolved favorably to the public entity by the courts (one initiated in December 2018 for lack of maintenance in the EBAR Playa Blanca, and another for unjustified delay in the modernization of the container park, opened on 01/17/2019)”.
The Cabildo achieves the payment of the Variable Canon C
On the other hand, one of the important issues addressed in the global report of the Legal Services of the Cabildo of Lanzarote are the settlements of the fees, specifically, the Annual Variable Canon C of tax bonuses for the operator. This is set as a percentage of the income obtained in respect of subsidies to capital and exploitation. The contract signed with the concessionaire finally includes a Canon C of 6%.
The concessionaire had not made any income in relation to Canon C, relating to bonuses and exemptions, tax deductions that have been applied as a result of the activity carried out. However, the analysis of the Annual Accounts of the entity Canal Isabel II S.A. in the Mercantile Registry from 2013 to 2022 shows that tax deductions have been applied in the Canary Islands for the activity carried out in the concession. According to the Annual Accounts and applying the 6% Canon, 833,000 euros of principal would correspond to the Consortium, which have not been paid plus the late payment interest.
Thanks to the procedures carried out in recent months by the Corporation, as of July 30, 2024, Canal Gestión Lanzarote presents, for the first time in the life of the Concession, the settlement of Canon C.
Permanent cuts in supply
The lack of execution of investments planned in the offer of the concessionaire of the concession, the breach of the deadline in the execution of the agreed investments and the breach of the service exploitation plan has resulted in the breach of clause 16 section 7 of the Technical Specifications, that is, the one that imposed that the water produced and not invoiced could not exceed 30%.
But what is more, precisely, and given that the losses exceed 50% of the water produced, a serious disruption of the service has been generated for years.
The president of the Consortium has also mentioned today the intervention of the current management of the Consortium to achieve greater transparency in the announcement of these supply cuts to the population, making public in advance interruptions in the service that until a few months ago were not communicated.
And as for the investments that have been executed from the entity, and specifically, the commitment to allocate about 90 million euros during the coming years to strengthen the integral water cycle, Oswaldo Betancort has recalled that for decades there has not been an adequate and planned investment to strengthen infrastructures and networks. He stressed that these investments and projects “continue and will continue to come from the Water Consortium”, adding that there are currently more than 120 project and works files that will go ahead with the help of a Consortium that is launching Statutes and a new managing director”. And he stated: “I have never said that I was going to give 90 million euros to anyone”.
Technical reports will continue to support decisions
Likewise, the island official has stated that he will continue working “rigorously”, respecting the legal deadlines and supporting his decisions with documentary arguments. “I will keep the population promptly informed of all of this. As we have always done: working from silence and perseverance. Or have the mayors of Lanzarote ever had on the table of the Assembly of the Water Consortium a document of the size of the one we have presented today, and with such technical-legal depth?... Well, I will tell you that this is only achieved by working more hours”.
Finally, looking to the future and considering possible scenarios in this matter, and in the face of a possible termination of the concession of the integral water cycle, Oswaldo Betacort has stressed that “the provision of the service is completely assured because the legislation requires it”.
However, in this administrative process that the Cabildo of Lanzarote has begun, it is essential to have the investments actually made in these years well reviewed and informed because the Administration may have to reimburse or restore them to the concessionaire. It is also true that the Administration could claim the damages caused by the breach of obligations by the concessionaire, being able to seize the guarantee. (article 225.3 TRLCSP and article 271 section 4 of the TRLCP 2011). In this case, the guarantee amounts to 8 million euros in accordance with clause 6 of the contract.
“But this scenario is only hypothetical and today it is premature. In any of the variables that we can handle, in all of them we have absolute confidence on the part of the Cabildo of Lanzarote in the capacity and responsibility of the workers of the contractor”, the president concluded.
