DOJ opinion triggers louder protests vs LWUA takeover in Cagayan de Oro

CAGAYAN DE ORO, Philippines – A legal opinion from the Department of Justice (DOJ) about the contentious takeover by the Local Water Utilities Administration (LWUA) of the Cagayan de Oro Water District (COWD) triggered stronger protests in Cagayan de Oro on Friday, July 5.

A street demonstration outside the COWD office on Corrales Avenue became louder, with protesters, citing the DOJ’s legal opinion, calling on the LWUA and the interim officials it installed to leave the water district immediately.

The June 18 legal opinion, signed by Justice Undersecretary Raul Vasquez, cited sections 36 and 61 of the Provincial Water Utilities Act of 1973, noting that the LWUA can only take over a water district’s management and operations if the latter defaults on its payments to the regulatory body.

“For grounds other than that pertaining to default in the payment of a loan, LWUA may not intervene in the affairs of the concerned water district,” a part of the opinion read.

Fermin Jarales, COWD interim general manager, said they would continue to perform the tasks given to them by LWUA, asserting that the takeover was lawful and in line with PD 198.

Jarales pointed out that a regional court has dismissed a petition with a prayer for a status quo ante order filed by Young and three sidelined COWD board members.

“DOJ opinions, like OGCC opinions, are directory and provide guidance to the party seeking them. They are open to differing interpretations and have persuasive rather than binding effects,” Jarales said.

“At the end of the day, DOJ opinions take a backseat to court rulings. In this case, the court has preliminarily determined that LWUA’s takeover is valid and in accordance with the law,” he added.

The DOJ clarified that the legal views it provided were only based on the questions raised by LWUA Administrator Jose Moises Salonga, who sought the legal opinion. It said the Office of the Government Corporate Counsel (OGCC) has primary jurisdiction over the queries.

One question raised was whether the LWUA can intervene after an assessment shows mismanagement, incompetence, and irregularities in the water district.

Following the takeover of the COWD in May, LWUA Chairman Ronnie Ong told Rappler that the primary basis for the takeover was the high non-revenue water (NRW) of the water district.

Ong said it constituted a default, explaining that addressing NRW is part of a financial assistance contract (FAC) with LWUA.

“They borrowed money from LWUA, and part of the condition is to address NRW. That’s one of the reasons they applied for a loan. The FAC requires them to reduce their NRW to 20%,” Ong said.

As of 2023, COWD’s NRW was 49.08%, reduced by just over 8% from 57.67% in 2019.

Earlier, Engineer Antonio Young, COWD’s sidelined general manager, said their existing loan with LWUA, which had a remaining balance of P11 million as of May, was not part of their NRW reduction program. He said the loan was used to establish certain facilities.

The DOJ, however, pointed out: “A local water district’s failure to perform or a violation of any of its obligations to LWUA covered by the OGCC-approved Financial Assistance Contract (FAC), or violation of any term, covenant, promise, or condition thereof, or any rule, regulation, or standard promulgated by LWUA, may not be considered a ‘default’ under Section 36 of P.D. No. 198, as amended, to warrant a takeover by LWUA.”

However, the justice department upheld that LWUA has the authority to issue guidelines, policies, and standards for water districts to follow.

The DOJ also stated that the water district’s policy-making body, not the LWUA, determines the water rates and charges.

The LWUA takeover followed a brief water supply crisis in Cagayan de Oro, which resulted from an unresolved debt dispute between the COWD and its bulk water supplier, the Manny V. Pangilinan-controlled Cagayan de Oro Bulk Water Incorporated. The decision, made by the LWUA board, came a day after President Ferdinand Marcos Jr. directed the regulator to study the possibility of a takeover. – Rappler.com