LWUA warns of legal action vs. defiant MCWD board

THE chief of the Local Water Utilities Administration (LWUA) has warned of legal action against the management and three board members of Metropolitan Cebu Water District (MCWD) for continuing to defy the agency’s partial intervention in the water distributor’s operations for a period of six months beginning March 15, 2024.

“There will certainly be a legal corrective action, thus we warn the MCWD management to reconsider its actions following its suspended board. Ultimately, there are consequences to this unnecessary and unlawful defiance to their regulator,” LWUA Chairman Ronnie Ong said in a statement sent to SunStar Cebu on Thursday, April 4, 2024.

LWUA lawyers from Metro Manila went to MCWD’s office in downtown Cebu City on Wednesday afternoon, April 3, to serve the final demand notice to board chairman Jose Daluz III, and his two allied directors Jodelyn Mae Seno and Miguelito Pato.

LWUA has ordered Daluz, Seno and Pato to vacate the premises of MCWD’s office and cease usurping the authority of the interim board that it had appointed.

Insubordination

The agency also ordered MCWD general manager Edgar Donoso and assistant general manager for finance Pia Mae Barnido to provide explanations as to why they should not face sanctions for serious dishonesty, grave misconduct, gross neglect of duty, gross insubordination and conduct prejudicial to the best interest of the service.

“LWUA only has the public interest, specifically the Cebuano public interest, in mind. What we cannot understand really is, who and what is the Suspended MCWD Board and MCWD Management protecting?” Ong said.

“How can a water district even say that they are doing this for the benefit of the public by fighting against both their regulator, LWUA, and their city government, despite the lawfulness of the partial intervention as already even supported by the OGCC (Office of the Government Corporate Counsel)? Time and time again they retract their public statements to work with LWUA, and accept the partial intervention,” he added.

Different interpretations

The OGCC’s opinion has been interpreted differently by LWUA and MCWD.

The LWUA, in a statement issued on Tuesday, April 2, said the OGCC’s opinion affirmed the legality of its partial intervention.

The OGCC said the LWUA is authorized to intervene in the operations and management of a water district, including policy-making. However, this power is subject to limitations imposed by its charter.

In a statement dated March 26 and signed by Solomon Hermosura, government corporate counsel, and Owen Vidad, the officer-in-charge who handles the legal affairs of water districts, the OGCC explained that before the LWUA can intervene, it must establish that the water district has defaulted on its loan and it has provided the water district with an opportunity to remedy the default.

For MCWD’s part, it said LWUA failed to establish loan default and provide MCWD with the due process, as required by Presidential Decree (PD) 198, also known as the Provincial Water Utilities Act of 1973.

Citing the OGCC’s opinion, MCWD said LWUA’s power to intervene in water district operations is not absolute and must be exercised with caution within the limits imposed by PD 198.

Finding fault

MCWD, in a statement Thursday, said LWUA had never sent a notice regarding loan default nor provided remedies to cure the default, but implemented an outright takeover last March 15.

“Since no loan default has been established, there should be no takeover implemented, and no policy-making or management prerogatives should be returned to the Board of Directors and the General Manager, as these functions have always remained within their authority,” MCWD said.

“LWUA is clearly engaging in fault-finding in the guise of regulation, swaying public perception and insisting on its own interpretation of the law, duly expanding its powers granted by PD No. 198 and going beyond its primary purpose as a specialized lending institution,” it added.

In an earlier report, LWUA said the MCWD had defaulted on its loan, adding that the water district violated the terms of its Financial Assistance Contract (FAC).

It cited the MCWD’s failure to address high non-revenue water (NRW) that resulted in an annual loss of revenue of at least P117.759 million annually. This violated the agreement that both parties signed under Article IV, Section 7 of the existing FAC, it said.

LWUA Administrator Jose Moises Salonga said in a statement Thursday that in an MCWD resolution in 2014, aside from its FAC, the water district agreed to reduce the NRW from 23 percent in 2014 to only 15 percent in 2023 to avoid millions in revenue losses.

Yet, Salonga said, MCWD incurred P117.76 million in losses on NRW in 2023, reducing its income to just P48.5 million in that year. / EHP, AML