Law Summary
Reform Objectives and Policies
- Improve investor confidence in water supply and sewerage sector.
- Rationalize allocation of scarce financial resources through classification and graduation.
- Allow freedom of choice in financing among WSPs.
- Increase participation of LGUs, GFIs, PFIs in financing.
- Stimulate improved service and financial self-sustainability.
- Encourage self-sufficiency initiatives: amalgamation, private sector participation, cost-recovery tariffs, resource pooling.
- Grant incentives to improve and graduate WSPs.
- Educate consumers on treating water as an economic good.
- Establish independent economic regulator for the sector.
Definitions
- WSPs: include WDs, LGU-run utilities, various waterworks and sanitation associations.
- Amalgamation: consolidation or joint operation of multiple WSPs into a WD.
- Classification: categorization into non-creditworthy, pre-creditworthy, semi-creditworthy, creditworthy.
- Cost-Recovery Tariff: tariff covering capital and operational costs.
- Graduation: progression through creditworthiness levels based on financial/operational indicators.
- GFIs: government-owned financing banks including DBP, LBP.
- LGUs: provinces, cities, municipalities, barangays.
Oversight Committee Establishment and Composition
- Created for coordinating and overseeing implementation of financing and regulatory reforms.
- Chaired by DOF, vice-chaired by NEDA.
- Members: DBM, DILG, OP, LWUA; representatives preferably at Undersecretary level.
- GFIs and MDFO serve as resource persons.
Oversight Committee Functions
- Formulate IRR of the Order.
- Review LWUA rationalization plan and recommend to President.
- Oversee WSP classification criteria and classification audit.
- Prepare action and incentive plans for financing reforms.
- Submit quarterly reports to LWUA’s attached agency.
- Review LWUA charter and propose amendments.
Technical Secretariat and Expenses
- Technical Secretariat under DOF manages data on WSP classification and evaluation.
- Members and Secretariat may receive honoraria/reimbursements as allowed by law.
LWUA Reorganization and Functions
- LWUA transferred from DPWH to OP until moved to DOF after reform approval.
- LWUA Board includes representatives of the attached agency.
- LWUA to review and rationalize structure and operations, focusing on WSPs broadly.
Water Development Group (WDG)
- Handles institutional development and classification of WSPs.
- Classifies WSPs for financing eligibility; subject to Oversight Committee review.
- Develops and monitors graduation plans for WSPs:
- Cost-Recovery Tariffs
- Amalgamation and private sector participation
- Management improvements
- LGU/WSP resource pooling
- Consumer education
- Provides technical assistance within value thresholds.
- Submits quarterly activity reports to Oversight Committee and DOF.
Water Development Financier (WDF)
- Strengthens LWUA lending functions rooted in sound banking principles.
- Enhances loan collection and payment systems.
- Maintains separate accounting for existing and new loans under reforms.
- Develops and submits lending policies within 90 days for Oversight Committee approval.
Technical Assistance Group (TAG)
- Continues LWUA’s technical assistance programs.
- Provides project-related assistance to GFIs, creditworthy, semi-creditworthy, pre-creditworthy, and non-creditworthy WSPs under specified conditions and value thresholds.
LWUA Rationalization and Transfer to DOF
- LWUA to submit rationalization plan within 30 days.
- Oversight Committee to evaluate plan within 30 days and submit to President.
- Upon approval, LWUA transferred to DOF.
- At least three trustees of LWUA must be national government employees.
- DOF guaranteed representation in LWUA Board of Trustees.
Financing Policies and LGU Roles
- LGUs encouraged to provide financial/operational support and invest in WSPs.
- LGUs are responsible for WSPs within their jurisdictions.
- Creditworthy WSPs may source financing at commercial rates from GFIs, PFIs.
- Semi-creditworthy WSPs eligible for concessional financing from LWUA-WDF and others.
- Pre-creditworthy and non-creditworthy WSPs eligible for grants and concessional financing; LGU support encouraged.
- Multiple financing sources accessible: GFIs, PFIs, MDFO, LGUs.
- Incentives to encourage WSP graduation.
Role of Financial Institutions
- Classification of WSPs determines financing eligibility but does not guarantee financing.
Final Provisions
- IRR to be developed within 90 days and published per law.
- Oversight Committee dissolved 3 years after LWUA rationalization approval; functions passed to DOF.
- Violations subject to disciplinary actions and penalties per IRR and laws.
- Severability clause: invalid provisions do not affect the rest.
- Repeal/modification of inconsistent orders and regulations.
- Effective upon publication in Official Gazette or newspaper of general circulation.