THE Office of the Government Corporate Counsel (OGCC) has issued an opinion favoring the complete takeover of the Cagayan de Oro City Water District (COWD) by the Local Water Utilities Administration (LWUA). This move is set to address multiple operational and financial issues within the COWD.
The OGCC’s opinion, dated July 30, 2024, responds to several letters from COWD officials requesting clarification on the legal grounds for LWUA’s intervention.
These requests were made by COWD’s In-House Legal Counsel, Atty. Angeli D. Avenido, and General Manager Engr. Antonio B. Young through letters sent on 17, 19, and 29 May 2024.
On May 17, 2024, the LWUA Board adopted Resolution No. 34, Series of 2024, which approved the full intervention in COWD.
The resolution includes the appointment of an Interim Board of Directors and an Interim General Manager to oversee the district’s operations.
This decision is based on COWD’s failure to meet specific performance standards outlined in the Financial Assistance Contract (FAC) signed in 1986.
The resolution cites COWD's high Non-Revenue Water (NRW) level of 49.19% as of December 2023, significantly above the required maximum of 20%.
An audit for CY2022 estimates that COWD lost P765.278 million in revenue due to an average NRW rate of 50.02%. Despite these issues, COWD is not in default concerning its financial obligations to LWUA.
The intervention aims to address several key areas: 1. Developing short-term and long-term solutions for water supply issues, 2. Efficiently operating COWD’s facilities and systems,
3. Resolving irregularities and problems in COWD’s accounts and obligations, and 4. Implementing measures to address all violations and causes of default.
As of May 29, 2024, LWUA has taken over COWD’s operations. This has led GM Young and other COWD Board members to file a “Petition for Prohibition” with an urgent application for a Status Quo Ante Order to halt LWUA’s intervention.
However, their application was denied by the Regional Trial Court (RTC) of Cagayan de Oro City.
Subsequently, they filed a Manifestation of Withdrawal of their Motion for Reconsideration dated 24 July 2024.
The OGCC has previously issued opinions supporting LWUA’s authority to intervene in local water districts under certain conditions.
The current situation with COWD is distinguished by LWUA’s assessment of COWD’s compliance with the FAC. The FAC allows LWUA to take various remedial measures upon any event of default, not limited to non-payment issues.
The OGCC concludes that COWD, GM Young, and the COWD Board of Directors should comply with the LWUA Board Resolution.
They should allow the Interim Board of Directors and Interim General Manager appointed by LWUA to perform their duties. The OGCC emphasizes the following points:
1. LWUA’s intervention is justified based on the FAC and aligned with its regulatory powers.
2. The intervention enjoys the presumption of regularity unless proven otherwise.
3. The legal question regarding LWUA’s intervention is now before the judiciary, and until resolved, the current status quo should be maintained.
The OGCC’s opinion underscores the need for compliance and cooperation from COWD’s management to ensure the district's efficient operation and service delivery.
The takeover by LWUA is seen as a necessary step to address longstanding issues and improve water supply services for the residents of Cagayan de Oro City.
The opinion was signed by Government Corporate Counsel Solomon M. Hermosura and Government Corporate Attorney Owen M. Vidad, Officer-In-Charge of Team 4 - Environment & Water.
