LWUA intervention in Cebu
AS if the prospect of faucets running dry due to prolonged drought wasn’t worrisome enough, customers of the Metro Cebu Water District (MCWD) are now witnessing a tug-of-war between the Local Water Utilities Administration (LWUA) and the MCWD. The appointment of MCWD directors has long been politicized by City Hall, with incumbent directors still serving their five-year terms, evicted and replaced when the city has a new mayor. This practice has obviously not helped MCWD improve its services. Both the Department of the Interior and Local Government and the Office of the Government Corporate Counsel have emphasized that the power of local chief executives is limited to appointing, not removing, directors.
Last Sept. 28, 2023, the LWUA board headed by chairman Ronnie Ong passed a resolution for an intervention in MCWD. This included a suspension of the incumbent MCWD board members. The resolution was never implemented because then LWUA administrator Vicente Homer Revil objected. On Oct. 31, 2023, three of the five MCWD directors were “removed” by Cebu City Mayor Michael Rama and “replaced” with his men. LWUA did not formally approve these appointments, and the “removed” directors continued to perform their functions as directors and officers.
Then last February President Ferdinand Marcos Jr. suddenly replaced Atty. Revil with Atty. Jose Moises Salonga. A month later, Salonga informed MCWD that LWUA would take over the water district’s policymaking authority in accordance with the September 28 resolution. The directors were told to step aside to give way to three LWUA officials.
Salonga and LWUA chairman Ong explained the intervention with MCWD’s high non-revenue water (NRW) rate, its request for a 70 percent water rate increase, and alleged violations of government procurement laws. These are supposedly violations of the Financial Assistance Contract entered into by MCWD and LWUA in 2015 and constitute the legal basis for LWUA’s intervention.
The acceptable NRW rate is 20 percent. MCWD’s NRW rate was 31 percent as of April 2023, according to MCWD itself. The Commission on Audit found that MCWD’s NRW rate deteriorated from 25.26 percent in 2020 to 32.67 percent in 2022. As a result, estimated revenue losses ballooned to P173 million in 2022. Typhoon Odette, which struck Cebu on Dec.16, 2021, was partly to blame for this massive loss, MCWD told CoA. The NRW even soared to 49 percent in January 2022. The water district ended the year with a measly P15 million net income.
High NRW means that precious water is being produced but not paid for. According to LWUA chairman Ong himself, about 244 (46 percent) of the Philippines’ 532 water districts have NRW rates higher than 30 percent (GMA News, Aug. 29, 2023). Zamboanga City Water District, while still having a net income, registered a 61.6 percent NRW in 2022. This represented a potential sales value of P493 million.
Cagayan de Oro Water District in 2022 suffered an estimated revenue loss of P765 million due to a 50 percent NRW. The water district had a negative income of P32 million in 2022, up from a P31.7 million loss in 2021. An ongoing dispute over water rates with one of its main suppliers is threatening the supply of water to thousands of consumers. No, it’s not being taken over by LWUA.
MCWD’s request for a whopping 70 percent water rate increase was another red flag for LWUA. But Davao City Water District in 2021 was granted a 60 percent rate increase. The increase is being implemented on a staggered basis, with the first tranche — 30 percent — having been implemented in August 2022. The next 20 percent will take effect this year, and the remaining 10 percent next year.
MCWD’s proposed 70 percent rate hike was a factor for “intervention,” while DCWD secured a 60 percent increase without drama.
Incidentally, DCWD, the biggest water district in the country, registered a 36 percent NRW rate in 2022. But unlike MCWD, whose net income continues to shrink, DCWD has sustained its earnings.
As for the violations of conditions of the 2015 financial agreement contract, the MCWD management says its attention was not called and that due process was not afforded before the takeover. LWUA, for its part, says it has heard all sides. The outstanding balance is reportedly P13 million — small when seen against MCWD’s P1.8 billion annual revenues — and the loan matures in 2044.
As for questionable contracts and transactions, by all means, they should be investigated. As one veteran media man whispered to me, explaining why people are fighting over MCWD: It’s about the contracts, not the honorarium. Is LWUA expecting to find the proverbial can of worms?
LWUA doesn’t seem to be in the habit of taking over water districts, especially large ones operating within highly urbanized cities. LWUA may or may not have the law on its side, but its mode of intervention is highly disruptive, affecting MCWD’s daily operations and confusing the public.