By BenCyrus G. Ellorin/ July 5, 2024

CAGAYAN DE ORO CITY — The Department of Justice issued a legal opinion that may support assertions by groups opposing the takeover by the Local Water Utilities Administration (LWUA) of the Cagayan de Oro City Water District.

In a seven-page legal opinion issued on June 18, 2024, the Justice Department said that based on Presidential Decree 198, LWUA can only take over local water districts when there is a “default in payment of a loan.”

The DOJ opinion penned by Undersecretary Raul T. Vasquez also told the LWUA that the power to fix water rates and charges rests in the local water district and not on the water regulator. “Hence on the query of whether LWUA has authority to determine and fix fair and reasonable rates, charges, tariffs, and other special rates and schedules, and approve rates provisionally, LWUA can merely review the same,” the DOJ said.

The full intervention was implemented on May 29, 2024. Upon “full intervention” LWUA removed the general manager (GM) and members of the five-person Board of Directors (BOD). Fermin Jarales, a community development worker and political officer was installed as Interim General Manager replacing Antonio Young.

The interim BOD is composed of Engr. Antonio Ramirez, an officer of the LWUA is the interim chairperson of the board, with interim board members Amelia de la Rosa, and lawyers Noel Bacal and Donn Kapunan. The replaced regular BOD chairperson Nelia B. Lee, vice chairperson Dixon Q. Yasay, and members Janet C. Floirendo, Rolando M. Pacuribot, and Gerry J. Cano.

DOJ GUIDANCE

The DOJ issued the opinion upon request by LWUA Administrator Jose Moises Salonga. The LWUA administrator sought the opinion and guidance from the Justice Department on the directive of President Ferdinand Marcos Jr. for the water regulator to study the possible management of the Cagayan de Oro Water District and to solve the current water supply issue in Cagayan de Oro City, and to ascertain the proper water rate for COWD to ensure that it will be able to fulfill its obligations to its consumers and bulk water suppliers.

The DOJ opinion said that under sections 36 and 61 of PD 198, “it is clear that LWUA may only take over and operate the entire facilities, systems or properties of the district when the following elements are present: (a) the local water district is in default; (b) the default is in the payment of principal or interest on its outstanding bonds or other obligations; and (c) the outstanding bonds or other obligations of the local water district are incurred to LWUA. For grounds other than that pertaining to default in payment of a loan, LWUA may NOT (emphasis supplied) intervene in the affairs of the concerned water district.”

Young and other officers of the COWD have claimed that the local water utility is diligent in paying its obligations to the LWUA. “Based on the communication of LWUA dated April 11, 2024, signed by Maria Rosan D. Perez, Acting Deputy Administrator, Finance Services, COWD has advanced payment of P609,736.55, with a loan balance of 11,920,508.35,” said Young.

Sought for comment on the DOJ opinion, Jarales did not comment. He did not reply to inquiries from CurrentPH.

Young, Cano, et al have filed a case asking the Court to prohibit LWUA’s takeover or “full interventions,” arguing among others that the water regulator’s action is ultra vires or beyond its power or legal authority.

Asked to comment on the DOJ opinion, Mayor Klarex Uy said, he would leave it to the court to decide.

CONTRACTUAL DISPUTE

Problems at the COWD stemmed from a collection by its bulkwater supplier Cagayan de Oro Bulkwater Inc. (COBI) alleged debt amounting to P479 million. This is the accumulated differential of bulk water rate adjustments in 2021 and January 2024. The 2017 contract between COWD and COBI stipulated automatic bulk water increases every three years.

COWD refuses to acknowledge the levy from COBI, saying it cannot comply with the obligations as the Covid-19 pandemic prohibited them from adjusting power rates.

When the contract between COWD and COBI took effect, the price per cubic meter of water was P16.60. Based on the automatic escalation of prices every three years in the contract, COBI raised the rates to P20.57 in 2021 and P24 starting January 1, 2024.

COBI which Metro Pacific Waters, Inc. owns gave the COWD a deadline to pay the alleged debt on April 30, 2024. When the COWD refused, COBI ordered its main supplier of treated water Rio Verde Water Consoritium Inc. to cut off the bulk water supply on May 1.

This prompted Cagayan de Oro Mayor Klarex Uy to declare the city under a state of emergency. It asked COWD to resort to emergency purchases from other bulk water suppliers should COBI cut off the water supply. COBI finally cut off the water supply around noon on May 14, 2024. But the court issued a 72-hour temporary restraining order. It was extended to another 17 days by the court which ruled that the right of the people to water should not be sacrificed because of a contractual conflict by two parties.

WRIT OF PRELIMINARY INJUNCTION

On June 3, 2024, the court issued a Writ of Preliminary Injunction, enjoining COBI and Rio Verde from cutting off water supply to COWD. The court ruled that while COBI manifested it would no longer resort to cutting off water supply to COWD, the said manifestation was contingent on future negotiations, and thus the threat of water disconnection “hangs like a sword of Damocles” over the heads of water consumers.

The COWD has contracted COBI to supply 40% of its water needs or 80,000 to 100,000 cubic meters of treated water daily. COBI however does not have its own water production and treatment facilities. It buys treated water from Rio Verde. Critics say this has relegated COBI to a water trader.

The COWD, the first water district in the country created un PR 198 in 1973 has been beset by problems like its extremely high water wastage or non-water revenue of around 50%.