PROVINCIAL WATER UTILITIES

ACT OF 1973
(As Amended)

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PD 198

MALACANANG
Manila

PRESIDENTIAL DECREE NO. 198

(As Amended by Presidential Decree Nos. 768 and 1479)

DECLARING A NATIONAL POLICY FAVORING LOCAL OPERATION AND CONTROL OF

WATER SYSTEMS; AUTHORIZING THE FORMATION OF LOCAL WATER DISTRICTS

AND PROVIDING FOR THE GOVERNMENT AND ADMINISTRATION OF SUCH

DISTRICTS; CHARTERING A NATIONAL ADMINISTRATION TO FACILITATE

IMPROVEMENT OF LOCAL WATER UTILITIES; GRANTING SAID ADMINISTRATION

SUCH POWERS AS ARE NECESSARY TO OPTIMIZE PUBLIC SERVICE FROM WATER

UTILITY OPERATIONS, AND FOR OTHER PURPOSES.

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RATIONALE

 One of the pre-requisites to the orderly and well-balanced growth of urban areas is
an effective system of local utilities, the absence of which is recognized as a
deterrent to economic growth, a hazard to public health and an irritant to the spirit
and well being of the citizenry;

 Domestic water systems and sanitary sewers are two of the most basic and
essential elements of local utility systems, which, with a few exceptions, do not
exists in provincial areas in the Philippines;

 Existing domestic water utilities are not meeting the needs of the communities they
serve; water quality is unsatisfactory; pressure is inadequate and reliability of
service is poor; in fact, many persons receive no piped water service whatsoever;

 Conditions of service continue to worsen for two apparent reasons, namely: (1) that
key elements of existing systems are deteriorating faster than they are being
maintained or aplaced, and

 Local water utilities should be locally-controlled and managed, as well as have

support on the national level in the area of technical advisory services and
financing.

By Proclamation No. 1081 dated September 21, 1972, and General Order No. 1 dated
September 22, 1972, as amended, the following measures have been decreed ordered
and made as part of the law of the land:

Title 1

PRELIMINARY PROVISIONS

Section 1. Title – This Decree shall be known and referred to as the

“Provincial Water Utilities Act of 1973.”

Sec. 2. Declaration of Policy – The Creation, operation, maintenance and

expansion of reliable and economically viable and sound water supply and wastewater
disposal systems for population centers of the Philippines is hereby declared to be an
objective of national policy of high priority. For purposes of achieving said objectives,
the formulation and operation of independent, locally controlled public water districts is
found and declared to be the most feasible and favored institutional structure. To this
end, it is hereby declared to be in the national interest that said districts to the greatest
extent practicable. To encourage the formulation of such local water districts and the
transfer thereto of existing water supply and wastewater disposal systems be operated
by and through such districts be formed and that local water supply and wastewater
disposal facilities, this Decree provides by general act the authority for the formation,
thereof, on a local option basis. It is likewise declared appropriate, necessary and
advisable that all funding requirements for such local water systems, other than those
provided by local revenues, should be channeled through and administered by an
institution on the national level, which institution shall be responsible for and have
authority to promulgate and enforce certain rules and regulations to achieve national
goals and the objective of providing public waterworks services integration or joint
investments and operations whenever economically warranted and to assure the
maintenance of uniform standards, training of personnel and the adoption of sound
operating and accounting procedures.

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 Sec. 3. Definitions - As used in this Decree, the following words and
terms shall have the meanings herein set forth, unless a different clearly appears from
the context. The definition of a word or term applies to any of its variants.

(a) Act. - This Provincial Water Utilities Act of 1973.

(b) Appointing Authority. – The person empowered to appoint the members of
the Board of directors of a local water district depending upon the
geographic coverage and population make-up of the particular district. In
the event that more than seventy-five percent of the total active water
service connections of a local water district are within the boundary of any
city or municipality, the appointing authority shall be the mayor of the city or
municipality, as the case may be; otherwise, the appointing authority shall be
the governor of the province within which the district is located: Provided,
that if the existing waterworks system in the city or municipality established
as a water district under this Decree is operated and managed by the
province, initial appointment shall be extended by the governor of the
province. Subsequently appointments shall be as specified herein.

If portions of more than one province are included within the boundary of the
district, and the appointing authority is to be the governor, then the power to
appoint shall rotate between the governors involved with the initial
appointments made by the governor in whose province the greatest number
of service connections exists. (As amended by Sec. 1, PD 768).

(c) Administration. – The Local Water utilities Administration chartered in Title

III of this Decree.

(d) NEDA. – The National Economic and Development Authority. (Note: This
paragraph should properly have been deleted).

(e) Board or Board of Directors. – The Board of Directors of a district.

(f) Contracts. - All agreements, including leases, conveyances and

obligations.

(g) District. – A local water district formed pursuant to Title II of this Act.

(h) Local Water Utility. – Any district, city, municipality, province, investor-
owned public utility or cooperative corporation which owns or operates a
water system serving an urban center in the Philippines, except that said
term shall not include the Metropolitan Waterworks and Sewerage System
(MWSS) or any system operated by the Bureau of Public Works as
successor to the Wells and springs Department of the National Waterworks
and Sewerage Authority.

(i) Person. - A natural person, corporation, cooperative, partnership,

association, city, municipality or other judicial entity.

(j) Property. – All real and personal property, including but not limited to: water,
water rights, works, easements, rights of way.

(k) Street. – Includes road, alley, avenue, highway of other public way.

(l) Trustees or Board of Trustees. - The Board of Trustees of the

Administration.

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 Title II

LOCAL WATER DISTRICT LAW

Chapter 1 - Title

Sec. 4. Title. – The provisions of this Title shall be known and referred to
as the “Local Water District Law.”

Chapter II. - Purpose and Formation

Sec. 5. Purpose. – Local water districts may be formed pursuant to this

Title for the purpose of (a) acquiring, installing, improving, maintaining and operating
water supply and distribution systems for domestic, industrial, municipal and
agricultural uses for residents and lands within the boundaries of such districts, (b)
providing, maintaining and operating wastewater collection, treatment and disposal
facilities, and (c) conducting such other functions and operations incidental to water
resource development, utilization and disposal within such districts, as are necessary
or incidental to said purpose.

Sec. 6. Formation of district. – This Act is the source of authorization and

power to form and maintain a district. Once formed, a district is subject to the
provisions of this Act and not under the jurisdiction of any political subdivision. For
purposes of this Act, a district shall be considered as a quasi-public corporation
performing public service and supplying public wants. As such, a district shall exercise
the powers, rights and privileges given to private corporation under laws, in addition to
the powers granted in, and subject to such restriction imposed under, this Act. To form
a district, the legislative body of any city, municipality or province shall enact a
resolution containing the following: (As amended by Sec. 1, PD 1479).

(a) The name of the local water district, which shall include the name of the city,
municipality, or province, or region thereof, served by said system, followed
by the words “Water District”.

(b) A description of the boundary of the district. In the case of a city or

municipality, such boundary may include all lands within the city or
municipality. A district may include one or more municipalities, cities or
provinces, or portions thereof: Provided, That such municipalities, cities or
provinces, or portions thereof, cover a contigious area. (As amended by
Sec. 2, PD 768).

(c) A statement completely transferring any and all waterworks and/or sewerage
facilities managed, operated by or under the control of such city, municipality
or province to such district upon the filing of resolution forming the district.
(As amended by Sec. 2, PD 768; Sec. 1, PD 1479).

(d) A statement identifying the purpose for which the district is formed, which
shall include those purposes outlined in Section 5 above.

(e) The names of the initial directors of the district with the date of expiration of
st
the term of office for each which shall be on the 31 of December of first,
second, or third even-numbered year after assuming office, as set forth in
Section 11 hereof, (As amended by Sec. 2, PD 768).

(f) A statement that the district may only be dissolved on the grounds and under
the conditions set forth in Section 45 of this Title.

(g) A statement acknowledging the powers, rights and obligations as set forth in
Section 25 of this Title.

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 Nothing in the resolution of formation shall state or infer that the local legislative body
ahs the power to dissolve, alter or affect the district beyond that specifically provided for in
this Act.

If two or more cities, municipalities or provinces, or any combination thereof, desire to

form a single district, a similar resolution shall be adopted in each city, municipality and
province; or the city, municipality or province in which 75% of the total active service
connections are situated shall pass an initial resolution to be concurred in by the other cities,
municipalities or provinces. (As amended by Sec. 2, PD 768).

Sec. 7. Filing of Resolution. – A certified copy of the resolution or resolutions

forming a district shall be forwarded to the office of the Secretary of the Administration. If
founded by the Administration to conform to the requirements of Section 6 and the policy
objectives in Section 2, the resolution shall be duly filed. The district shall be deemed duly
formed and existing upon the date of such filing. A certified copy of said resolution showing
the filing stamp of the Administration shall be maintained in the office of the district. Upon
such filing, the local government or governments concerned shall lose ownership, supervision
and control or any right whatsoever over the district except as provided herein (As amended
by Sec. 3, PD 76).

Chapter III. Directors

Sec. 8. Number and Qualifications. – The board of Directors of a district shall be

composed of five citizens of the Philippines who are of voting age and residents within the
district. One member shall be a representative of civic-oriented service clubs, one member a
representative of professional associations, one member a representative of business,
commercial, or financial organizations, one member a representative of educational
institutions, one member a representative of women'’ organizations. No. public official shall
serve as director; Provided, however, that if the district has availed of the financial assistance
of the Administration, the administration may appoint any of its personnel to sit in the board of
directors with all the rights and privileges as pertaining to a regular member, for such period
as the indebtedness remains unpaid, in which case the board shall be composed of six
members. (As amended by Sec. 4, PD 768; Sec. 2, PD 1479).

Sec. 9. Appointment. – Board members shall be appointed by the appointing

authority. Said appointments shall be made from a list of nominees, if any, submitted
pursuant to Section 10. If no nominations are submitted, the appointing authority shall
appoint any qualified person of the category to the vacant position.

Sec. 10. Nominations. – On or before October 1 of each even-numbered year, the

secretary of the district shall contact each known organization, association, or institution being
represented by the director whose term will expire on December 31 and solicit nominations
from these organizations to fill the position for the ensuing term. One nomination may be
submitted in writing by each such organizations to the secretary of the district on or before
November 1 of such year. The list of nominees shall be transmitted by the secretary of the
district to the office of the appointing authority on or before November 15, of such year and he
shall make his appointment from the list submitted on or before December 15. In the event
the appointing authority fails to make his appointments on or before December 15, selection
shall be made from said list of nominees by majority vote of the seated directors of the district
constituting a quorum.. Initial nominations for all five seats of the board shall be solicited by
the legislative body or bodies at the time of adoption of the resolution forming the district.
Thirty days thereafter, a list of nominees shall be submitted to the provincial governor in the
event the resolution forming the district is by a provincial board, or the mayor of the city or
municipality in the event the resolution forming the adoption of the district is be the city or
municipality board of councilors, who shall select the initial directors therefrom within 15 days
after receipt of such nominations.

Sec. 11. Term of Office. – Of the five initial directors of each newly-formed district,
two shall be appointed for a maximum term of two years, two for a maximum term of four
years, and one for a maximum term of six years. Terms of office of all directors in a given
district shall be such that the term of at least one director, but not more than two, shall expire

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on December 31 of each even-numbered year. Regular terms of office after the initial terms
shall be for six years commencing on January 1 of odd-numbered years. Directors may be
removed for a cause only, subject to review and approval of the Administration. (As amended
by Sec. 5, PD 768).

Sec. 12. Vacancies. – In the event of a vacancy in the Board of Directors occurring
more than six months before expiration of any director’s term, the remaining directors shall
within 30 days, serve notice to or request the secretary of the district for nominations and
within 30 days thereafter a list of nominees shall be submitted to the appointing authority for
his appointment of a replacement directors from the list of nominees. In the absence of such
nominations, the appointing authority shall make such appointment. If within 30 days after
submission to him of a list of nominees the appointing authority fails to make an appointment,
the vacancy shall be filled from such list by a majority vote of the remaining members of the
Board of Directors constituting a quorum. Vacancies occurring within the last six months of
an unexpired term shall also be filled by the Board in the above manner. The director thus
appointed shall serve the unexpired term only. (As amended by Sec. 12, PD 768).

Sec. 13. Compensation. – Each director shall receive a per diem, to be

determined by the Board, for each meeting of the Board actually attended by him, but no
director shall receive per diems in any given month in excess of the equivalent of the total per
diem of four meetings in any given month. No director shall receive other compensation for
services to the district.

Any per diem in excess of P50 shall be subject to approval of the Administration. (As
amended by Sec. 7, PD 768).

Sec. 14. Personal Liability. - No director may be held to be personally liable for
any action of the district.

Chapter IV. The Board

Sec. 15. Organizational Meeting. – The Board shall hold its first meeting as soon
as practicable after appointment of the first directors, and not later than 45 days after
formation of the district. At said first meeting of the district Board, and thereafter at the first
meeting of each odd-numbered year, the Board shall elect a chairman, a vice-chairman, a
secretary and a treasurer. Such secretary and treasurer may, but need not be members of
the Board, and the offices of the secretary and treasurer may be held by the same person.

Sec. 16. Quorum. – A majority of the Board present in person shall constitute a
quorum for the transaction of business; Provided, however, That no resolution or motion shall
be adopted or become effective without the affirmative vote of a majority of the authorized
number of members of the Board.

Chapter V. Powers and Duties of the Board

Sec. 17. Performance of District Powers. – All powers, privileges, and duties of
the district shall be exercised and performed by and through the Board: Provided, however,
That any executive, administrative or ministerial power shall be delegated and redelegated by
the Board to officers or agents designated for such purpose by the Board.

Sec. 18. Functions Limited to Policy-Making. - The function of the Board shall
be to establish policy. The Board shall not engage in the detailed management of the district.

Sec. 19. By-Laws. – At its first meeting, the Board shall adopt, and may thereafter
from time to time amend by-laws for the operation of business and affairs of the Board and
the district. By-laws may not be amended without 30 days public notice to that effect, and a
public hearing held.

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 Sec. 20. System of Business Administration. – The Board shall, as soon as
practicable, prescribe and define by resolution a system of business administration and
accounting for the district, which shall be patterned upon and conform to the standards
established by the Administration. Auditing shall be performed by a certified public
accountant not in the government service. The Administration may, however, conduct annual
audits of the fiscal operations of the district to be performed by an auditor retained by the
Administration. Expenses incurred in connection therewith shall be borne equally by the
district and the Administration. (As amended by Sec. 8, PD 768).

Sec. 21. Depository. – The district’s depository shall be the Philippine National
Bank, unless use of such bank is impractical: Provided, however, That any and all reserves
accumulated for capital improvement may be deposited with the Administration.

Sec. 22. Contracts. – All contracts of the district shall be entered into by or
pursuant to authority of the Board: Provided, however, That the Board may by resolution
delegate and redelegate to officers or agents of the district under conditions and restrictions
as shall be fixed by the Board, the power to bind the district by contract.

Chapter VI. Officers and Employees

Sec. 23. The General Manager. – At the first meeting of the Board, or as soon
thereafter as practicable, the Board shall appoint, by a majority vote, a general manager and
shall define his duties and fix his compensation. Said officer shall serve at the pleasure of the
Board. (As amended by Sec. 9, PD 768).

Sec. 24. Duties. – The duties of the General Manager and other officers shall be
determined and specified from time to time by the Board. The General Manager, who shall
no be a director; shall have full supervision and control of the maintenance and operation of
water district facilities, with power and authority to appoint all personnel of the district:
Provided, that the appointment of personnel in the supervisory level shall be subject to
approval by the Board. ( As amended by Sec. 10,PD 768 )

Chapter VII. Powers of Districts

Sec. 25. Authorization. – The district may exercise all powers which expressly
granted by thisTitle or which are necessary implied from, or incidental to the powers and
purposes herein stated . For the purpose of carrying out the objectives of this Act, a district is
herby granted the power of eminent domain, the exercise thereof shall , however, be subject
to review by the Administration. ( As amended by Sec. 4, PD 1479 )

Sec. 26. Acquisition of Waterworks. - A distinct may purchase, construct , or

otherwise acquire works, water, water rights, land, rights and privileges useful or necessary to
convey, supply, store, collect, threat, dispose of or make other use of water for any purpose
authorized by this Title. In the acquisition of water or water rights the district shall cooperate
with existing agencies of the government of the Philippines. ( As amended by Sec. 5, PD
1479 )

Sec. 27. Sale of Water. – The district shall have the power to sell water, pursuant
to generally applicable rules and regulations, to any person for use within the district. As a
condition of such sale, the district may require the filing of a written application for service,
payment of established charges or deposits and execution of a water service contract.
A district may provide service to public faucets or hydrants provided that it shall first
have executed an application and service contract with the Government entity to establish or
maintain such faucets or hydrants within the district. The district will be paid for such service
in the same manner as regular domestic service and pursuant to the adopted rules and
regulations of the district.
Any district holding a valid Certificate of Conformance or a Conditional Certificate of
Conformance from the Administrative shall be exempt from regulation by the Public Service
Commission or its successors. ( As amended by Sec. 5, PD 1479 )

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 Sec. 28. Sewerage. – A district may require, construct, operate and furnish facilities
and services, within or without the district , for the collection, treatment and disposal of
sewerage, waste, and storm water. The district may only furnish such services outside the
district by means of facilities designed primarily to serve inside the district . Upon providing a
sewer system in any area of the district, the district may require all buildings used by human
beings to be connected to the sewer system within such reasonable times as may be
prescribed by the district, provided that the property upon which such building to be
connected stands is located within 35 meters of an existing main of the district’s sewer
system. The district may declare the further maintenance or use of cesspools, septic tanks,
or other local means of sewerage disposal in such area to be a public nuisance and, after
notice in writing of at least 10 days, deprive said property owner of any and all services
provided by the district, which sanction may be co-extensive with the period during which the
property owner persists in refusing to connect with the district’s sewer system. (As amended
by Sec. 5, PD 1479).

Sec. 29. Rights of Way. – The right of way is hereby granted to locate, construct
and maintain works of the district on any land which is now, or hereafter may be, owned by
the Government of the Philippines or by any of its political subdivisions, and/or
instrumentalities. A district may construct any works along, under or across any street,
watercourse, railway, or conduit in any manner which will afford security for life and property.
Provided, That in planning any such works, the environmental aspects shall also be
considered. (As amended by Sec. 5, PD 1479).

Sec. 30. Contracts. – A district shall have the power to enter into contracts with
any person for the purpose of performing any function of the district: Provided, That the
Board of Directors may not by contract delegate any of the discretionary powers vested in the
Board by this Title. Specifically, but without limiting said general power, a district may enter
into the following contracts:

(a) Cooperation. – Agreement with the Government of the Philippines or any of its
agencies or political subdivisions for the cooperative or joint performance of any
function of the district.

(b) In-Lieu Share. – As an incident to the acquisition of the existing water system of a
city, municipality, or province, a district may enter into a contract to pay in-lieu
share for such utility plant, an annual amount not exceeding three percent (3%) of
the district’s gross receipts from water sales in any year: Provided, however, That
no contract of this nature shall be executed during the first five years of the
existence of the district; and Provided, further, That the Board of Directors shall
determine that such contract will not adversely effect or impair the fiscal position
operations of the district as verified by the Administration. ( As amended by Sec. 11
PD 768 ; Sec. 5 PD 1479 )

(c) MWSS Agreement. – In the event the city, municipality or province has not reached
agreement with the Metropolitan Waterworks and Sewerage System pursuant to
Section 15 and 17 of R. A 6234, a district, may, with the consent of the local
government, act for and in behalf of the local interest in negotiating and executing
such contract for final settlement of the consequences of MWSS involvement in the
operation of the water system.

Sec. 31. Protection of Waters and Facilities of District. – A district shall have
the right to:

(a) Commence, maintain, intervene in, defend and compromise actions or proceedings
to prevent interference with or deterioration of water quality or the natural flow of
any surface, stream or ground water supply which may be used or useful for any
purpose of the district or be a common benefit to the lands or its inhabitants. The
ground water within a district is necessary to the performance of the district’s
powers and such district is hereby authorized to adopt rules and regulations
subject to the approval of the National Water Resources council governing the
drilling, maintenance and operation of wells within its boundaries for purposes

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 other than a single family domestic use on overlaying land. Any well operated in
violation of such regulations shall be deemed an interference with the water of the
district.

(b) Require a developer of any structure within the service areas of the district to
extend or connect its pipeline facilities to the district facilities whenever such
development or structure is within one hundred meters of existing district facilities
or whenever the district is willing to extend its facilities within one hundred meters
of said development or structure. For the purpose of this section, development
shall include the subdivision of land for any purpose other than agricultural
purpose, and structure shall mean any building or facility to be used for residential,
commercial or industrial purposes.

(c) Prohibit any person, firm or corporation from vending, selling, or otherwise
disposing of water for public purposes within the service area of the district where
district facilities are available to provide such service, or fix terms and conditions by
permit for such sale or disposition of water.

(d) Safeguard and protect the use of waters. For this purpose, any person who installs
any water connection without the previous authority from the water district
established under this Decree; tampers water meters or uses jumpers or other
devices whereby water is stolen; steals or pilfers water or water meters; knowingly
possesses stolen or pilfered water or water meters shall upon conviction, be
punished by prision correctional in its minimum period or a fine ranging from two
thousand pesos to six thousand pesos, or both. If the violation is committed with
the connivance or permission of an employee or officer of the water district, an
employee or officer shall, upon conviction, be punished by a penalty one degree
lower than prision correctional in its minimum period and forthwith be dismissed
and perpetually disqualified from employment in any utility or service company
owned or controlled by the government. (As amended by Sec. 12, PD 768).

(e) Take over the management, administration, operation, and maintenance of all
watersheds within its territorial boundaries. (As amended by Sec. 6, PD 1479).

Sec. 32. Fire protection Capacity. – The district may install and maintain pipeline
capacity and additional hydrants for fire protection purposes: Provided, That prior agreement
has been executed with the public entity having principal fire protection responsibility within
the district whereby the district will be reimbursed over the reasonable life of said facilities for
the cost of installation and operation of such fire protection capacity and facilities. (As
amended by Sec. 7, PD 1479).

Chapter VIII - Financial Provisions

Sec. 33. Receipt, Deposit and Payment of District Funds. – The treasurer shall
receive, to the credit of the district and in trust for its use and benefit, all monies belonging to
the district. All monies belonging to the District shall, where practicable, be deposited by the
treasurer in the Philippine National Bank. (As amended by Sec. 13, PD 768; Sec. 7, PD
1479).

Sec. 34. Bonds or Other Evidence of Indebtedness. – A district may borrow

money to raise funds to pay all cost of any public improvement authorized by this Title and
may issue negotiable or non-negotiable bonds, promissory notes or other evidence of
indebtedness to support such borrowings. These obligations may be secured by a mortgage,
pledge, deed or trust or any other encumbrance upon any of its then owned or after acquired
real or personal property, assets or revenues and the same shall constitute a liens as to the
principal and interest thereon, on all such property, assets or revenues. The interests on such
bonds or notes are exempt from all taxes, duties, fees, imposts or other charges of the
national or local governments. ( As amended by Sec. 14, and 15, PD 768, Sec. 7, PD 1479)

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 Sec. 35. Authority for Subsequent Borrowings. Where a water district has
borrowed money from the Administration, the district shall not borrow money or incur further
obligations from other sources without the prior written consent of the Administration. (Sec.
16, PD 768; Sec. 7, PD 1479).

Sec. 36. Default – In the event of the default by the district in the payment of
principal or interest on its outstanding bonds or other obligations, any bondholder or creditor
shall have the right to bring an action before the appropriate court to compel the payment of
such obligations. If the bondholder or creditor concerned is the Administration, it may, without
the necessity of judicial process, take over and operate the entire facilities, systems or
properties of the district. For this purpose, the Administration may designate its employees or
any person or organization to assume all powers or policy-decision and the powers of
management and administration, including but not limited to the establishment or water rates
and charges, the dismissal and hiring of personnel, the purchase of supplies, equipment and
materials and such other actions as may be necessary to operate the utility efficiently. (Sec.
16, PD 768; As amended by Sec. 7, PD 1479).

Chapter IX - Revenues

Sec. 37. Rates and Charges – Water. – A district may sell water under its control,
under schedules of rates and charges as may be determined by the Board, to any and all
water users within the district. Said schedule may provide for differential rates for different
categories of use and different quantity blocks. The district, as far as practicable, shall fix
such rates and charges for water as will result in revenues which will:

(a) Provide for reimbursement from all new water customers for the cost of installation
of new services and meters;

(b) Provide for revenue from all water deliveries and services performed by the district;

(c) Pay the operating expenses of the district;

(d) Provide for the maintenance and repairs of the works;

(e) Provide a reasonable surplus for replacement, extension and improvement; and

(f) Pay the interest and principal and provide a sinking fund for the payment of debts
of the district as they become due and establish a fund for reasonable reserves..
(As amended by Sec. 17, PD 768; Sec. 7, PD 1479).

Sec. 38. Service and Stand-By Charges – Sewer. – A district may prescribe and
collect rates and other charges for sewer services furnished. A district may also fix, levy and
collect a sewerage and wastewater service stand-by or availability charge in the event the
sewer service is available and no connections is made. Such rates and charges may be
collected with the water charges of the district. In the event of failure to pay the whole or any
part thereof, district may discontinue any and all services for which such bill is rendered,
including water, shall not be construed to prohibit the district from collecting rates and other
charges if any other lawful manner. (As amended by Sec. 18, PD 768; Sec. 7, PD 1479).

Sec. 39. Production Assessment. – In the event the Board of s district finds, after
notice and hearing, that production of groundwater by other entities within the district for
commercial or industrial uses is injuring or reducing the district’s financial condition, the Board
may adopt and levy a groundwater production assessment to compensate for such loss. In
connection therewith, the district may require necessary reports by the operator of any
commercial or industrial well. Failure to pay said assessment shall constitute an invasion of
the waters of the district and shall entitle this district to an injunction and damages pursuant to
Section 31 of this Title. (As amended by Sec. 18, PD 768; Sec. 7, PD 1479).

Sec. 40. Assessment and Stand-By Charges. - In order to obtain capital to finance
installation of sanitary sewerage, a district shall have the power to establish by resolution of

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the Board of Directors the area to be benefited from such facilities. After a hearing and upon
notice to all parties affected, the district may levy and collect assessment, or stand-by
charges based upon available capacities or upon selected characteristics of property
benefited by said improvements, as determined by the Board. Said characteristics may
include, but not limited to, the effective length of property counting upon the proposed
improvement or, in terms of the area contained within the boundary of said property. Said
assessment, if unpaid, shall be and constitute a lien on the land assessed. (as amended by
Sec. 18, PD 768; Sec. 7, PD 1479).

Sec. 41. Disposition of Income. – The income of the district shall be disposed of
according to the following priorities:

First, to pay its contractual and statutory obligations and to meet its essential current
operating expenses.

Second, to allocate at least fifty percent (50%) of the balance exclusively as a reserve
for debt service and operating and maintenance, to be used for such purposes only during
periods of calamities, force majeure or unforeseen events.

Third, to allocate the residue as a reserve exclusively for expansion and improvement
of its physical facilities. (Sec. 8, PD 1479).

Chapter X – Changes in Organization

Sec. 42. Exclusion of a Territory. – Any territory within the boundary of district
may be excluded by resolution of the Board of Directors after notice to landowners within the
territory proposed to be excluded, and upon a finding that said lands do not and will not
benefit by reason of their inclusion within the district. A certified copy of said resolution of
exclusion shall be filed in the same manner and become effective in accordance with the
provision applicable to the resolution forming the district. (As amended by Sec. 18, PD 768).

Sec. 43. Annexation and Deannexation. - The Administration may, after notice to
property owners within the territory proposed for annexation or deannexation, and following a
hearing, make finding of benefit or potential benefit, and thereafter, require filing of an
appropriate resolution in the same manner as the filing of the resolution forming a district or of
exclusion, as the case may be. (As amended by Sec. 18, PD 768).

Sec. 44. Consolidation and Joint Operation. – The Administration may require
the merger or consolidation of the facilities or operation of two or more district formed
pursuant to the levy, in the event that the Administration shall have determined, following a
hearing, that such merger or consolidation is in the best interest of the residents in the
districts involved. (As amended by Sec. 18, PD 768).

Sec. 45. Dissolution. – A district may be dissolved by resolution of its Board of

Directors filed in the manner of filing the resolution forming the district: Provided, however,
That prior to the adoption of any such resolution: (1) another public entity has acquired the
assets of the district and has assumed all obligations and liabilities attached thereto; (2) all
bondholders and other creditors have been notified and they consent to said transfer and
dissolution; and (3) a court of competent jurisdiction has found that said transfer and
dissolution are in the best interest of the public. (As amended by Sec. 19, PD 768).

Chapter XI. – Protection to Districts

Sec. 46. Exemption from Taxes. – A district shall (1) be exempt from paying
income taxes, and (2) shall be exempt from payment of (a) all National Government, local
government and municipal taxes and fees, including any franchise, filing, recordation, license
or permit fees or taxes and any fees, charges or costs involved in any court or administrative
proceeding in which it may be a party and (b) all duties or imposts on important machinery,
equipment and materials required for its operations. (As amended by Sec. 20, PD 768).

12
 Sec. 47. Exclusive franchise. - No franchise shall be granted to any person or
agency for domestic, industrial or commercial water service within the district or any portion
thereof unless and except to the extent that the Board of Directors of said district consents
thereto by resolution duly adopted, such resolution, however, shall be subject to review by the
Administration. (As amended by Sec. 20, PD 768; Sec. 9, PD 1479).

Title III

LOCAL WATER UTILITIES ADMINISTRATION LAW

Chapter I - Title

Sec. 48. Title. – This Title of the Provincial Utilities of 1973 shall be know and
referred to as the “Local Water Utilities Administration Law”. (As amended by Sec. 20, PD
768).

Chapter II - Purpose and Formation

Sec. 49. Charter. – There is hereby chartered, created and formed a government
corporation to be known as the “Local Water Utilities Administration” which is hereby attached
to the Office of the President. The provisions of this Title shall be and constitute the charter of
the Administration. (As amended by Sec. 21, PD 768).

Sec. 50. Purposes. – The Administration shall primarily be a specialized lending

institution for the promotion, development and financing of local water utilities. In the
implementation of its functions, the Administration shall, among others: (1) prescribe minimum
standards and regulations in order to assure acceptable standards of construction materials
and supplies, maintenance, operation, personnel training, accounting and fiscal practices for
local water utilities; (2) furnish technical assistance and personnel training programs for local
water utilities; (3) monitor and evaluate local water standards; and (4) effect systems
integration, joint investment and operations, district annexation and deannexation whenever
economically warranted. (As amended by Sec. 22, PD 768).

Chapter III. – Board of Trustees

Sec. 51. Composition. – The Board of Trustees of the Administration shall be

composed of a chairman and four other members, all of whom shall be citizens of the
Philippines.

One trustee at any time shall have at least ten years experience in banking, finance or
business. One trustee at any time shall possess sufficient background in the field of
economics; one trustee at any time shall have experience in management or systems
operations. Two trustees at any time shall be civil or sanitary engineers with experience
related to water supply or wastewater operations. Not more than one trustee may represent a
private investor-owned utility. No elected official shall be entitled to act as a trustee. At least
three of the trustees must be employees of the national Government.

The General Manager shall be ex-officio member of the Board. (As amended by Sec.
23, PD 768).

Sec. 52. Appointment and Term of Office. – The trustees, with the exception of
the ex-officio member, shall be appointed by the President of the Philippines. They shall
serve a term of five years each: Provided, That of the first four initially appointed, one shall
serve a term of five years, another for four years, the third for three years, and the fourth for
two years. Trustees may be removed for cause only.

13
 The incumbent trustees holding office as such upon the effectively of this amendment
shall continue to hold such office until the expiration of their original terms as defined in their
appointments. (As amended by Sec. 24, PD 768).

Sec. 53. Vacancies. – Vacancies in the Board of Trustees for any reason
whatsoever shall be filled by the President of the Philippines in like manner as in the case of
new appointments but the trustees so appointed shall serve only the unexpired portion of the
term of the trustees substituted for. (As amended by Sec. 25, PD 768).

Sec. 54. Powers. – All of the business and affairs of the Administration shall be
carried on and its powers shall be exercised by and through the Board of Trustees. The
function of the trustees, however, shall be to established policy, not to engage in the detailed
management of the Administration. (As amended by Sec. 25, PD 768)

Sec. 55. Compensation. - The Trustees shall each receive a per diem as may be
fixed by the Board of each meeting actually attended by them: Provided, That the total of such
per diem in any one month for each Trustee shall not exceed the equivalent of the per diems
for four meetings: Provided, further, That per diems in excess of three hundred pesos per
meeting shall be subject to approval of the Office of the President; and Provided, finally, That,
in addition, each Trustee shall be reimbursed his expenses incurred in connection with the
performance of his functions in such amounts as may determined by the Board of Trustees.
(As amended by Sec. 26, PD 768).

Chapter IV – By Laws

Sec. 56. By-Laws. – The board of Trustees shall adopt a code of by-laws for the
conduct of the affairs of the Administration which may be amended from time to time by the
affirmative vote of four Trustees.

Except as otherwise provided herein, the organizational structure and staffing pattern
of the Administration, the qualification of the appointive officers and employees, the powers
and responsibilities of the officers, the internal procedure of the Administration, and such
other matters relative to the organization, management and conduct of the affairs of the
Administration shall be as provided in by the by-laws: Provided, That, the appointment of and
disciplinary action against officers and employees of the Administration shall be done and
effected pursuant to guidelines established by the Board of Trustees. (As amended by Sec.
27, PD 768).

Chapter V. – Officers and Employees

Sec. 57. Officers. – The Board shall elect a Chairman from among its members.
In addition, the Board shall select a secretary and a corporate legal counsel, each of whom
shall not be a trustee. (As amended by Sec. 28, Pd 768).

Sec. 58. The General Manager and Other Employees. – The Trustees shall
select a general manager who shall not come from the appointed trustees. The general
manager shall receive compensation in an amount as may be fixed by the Board, subject to
the approval of the President of the Philippines, but in no case less than fifty-four thousand
pesos per annum. The general manager shall employ and appoint all additional personnel;
Provided, That the appointment of personnel in the supervisory level shall be subject to
confirmation by the Board.

The incumbent manager holding office as such upon the effectivity of this amendment
shall continue to hold such office unless sooner terminated by competent authority. (As
amended by Sec. 29, PD 768).

The regular professional and technical personnel of the Administration shall be exempt
from WAPCO and Civil Service rules and regulations: Provided, That the personnel shall be

14
entitled to the benefits and privileges normally accorded to government employees, such as
retirement, GSIS insurance, leave and similar matters.

Chapter Vi. - Powers

Sec. 59. General Corporate Powers. – The Administration shall have all the
powers which are expressly granted to it under this Title, or which are necessary, implied
from, or incidental to the powers and purposes herein stated.

Sec. 60. Borrowing and Security Therefor. – The Administration may borrow
funds as authorized in Section 72 of this Title, and issue as security therefor debentures or
other evidence of indebtedness constituting lien on any and all securities, covenants and
obligations of local water utilities held by the Administration as security for loans made to such
local water utilities. (As amended by Sec. 30, PD 768).

Sec. 61. Loans. - Administration may make loans from its Revolving Loan Funds
to qualified local water utilities, upon the following condition and pursuant to the following
procedures:

(a) Qualification of Borrower. – Before any loan may be granted, the local water
utility shall (1) hold a valid certificate of conformance or a conditional certificate of
conformance from the Administration, and (2) meet such other and further loan
qualification requirements as the trustees may establish;

(b) Feasibility Study. – A feasibility study which may be required by the

Administration for any proposed project for which loan funds are sought may be
undertaken by the water district, the Administration or by a consultant pre-qualified
by the Administration; (As amended by Sec. 31, PD 768).

(c) Security. – The Administration may take as security for such loans the authorized
bonds or other evidence of debt by the water district and a mortgage on its
properties; 9As amended by Sec. 31, PD 768).

(d) Loan Documents and Procedures. – The Board of Trustees shall adopt rules,
loan documents and procedures to be used in the granting of loans. Such rules
shall include provisions for security, payment and default. (As amended by Sec. 31,
PD 768).

(e) Default. – In the event of default by the local water district in the payment of
principal or interest on its outstanding bonds or other obligations to the
Administration, the latter may, without the necessity of judicial process, take over
and operate the facilities or properties of the district. For this purpose, the
Administration may designate its employees or any person or organization to
assume both the policy-making authority and the powers of management,
including but not limited to, the establishment of water rates and service charges,
the dismissal and hiring of personnel, the purchase of equipment, supplies or
materials and such other actions as may be necessary to operate the water district
efficiently. Such policy-making and management prerogatives may be returned to
the Board of Directors and the General Manager of the water district, respectively,
when all of its overdue accounts have been paid. All its reserve requirements have
been satisfied and all the causes of default have been met. (Sec. 31, PD 768).

(f) Funding of Loan. – When a loan is made to local water utility, the necessary
amount of such loan shall be programmed to assure completion of the project for
which such loan was granted. (As amended by Sec. 10, PD 1479).

Sec. 62. Regulation. – Administration shall have the power and duty to establish
standards for local water utilities and adopt rules and regulations for the enforcement thereof.
The Administration shall vigorously consult and coordinate its actions with all government

15
agencies active in the areas of public works and all other concerned agencies in the
promulgation of these standards. Said standards and regulations shall include the following:

(a) Water Quality. – Minimum drinking water standards including a uniform

testing and reporting system. Said standards shall include bacteriological,
chemical and physical parameters;

(b) Design and Construction. – Minimum criteria for the design and
construction of new or additional facilities for water supply, treatment,
transmission and distribution, and for wastewater collection, treatment and
disposal;

(c) Equipment, Materials and Supplies. – Standards for the optimum selection
and effective utilization of equipment, materials and supplies by local water
and sewer utilities;

(d) Operations and Maintenance. – Standardized procedures for operating

and maintaining equipment and facilities;

(e) Personnel. – The training of personnel who operate or manage local water
utilities. For this purpose, at least a majority of the personnel of a local water
district must have satisfactorily completed appropriate training courses,
programs or seminars conducted by the Administration, and must be holders
of a certificate of completion or competence, as the case may be, before a
certificate of conformance is issued to the water district.

For certain positions which the Administration may specify, only those persons
possessing, or in the case of subsequent appointments, only persons who will undergo
training and shall have obtained within six months, a certificate of completion or
competence, as the case may be, shall be appointed; (As amended by Sec. 31, PD
768)

(f) Organization. – Organizational and institutional criteria to assure

independent operation and funding of local water utilities;

(g) Accounting. – A uniform accounting system with uniform chart of accounts.

Said standards and regulations shall also include stipulated levels of internal
reporting to local water utility management.

Sec. 63. Rate Review. – Any publicly-owned local utility holding a Certificate of
conformance or Conditional Certificate of conformance from the Administration is hereby
declared exempt from the jurisdiction of the Public Service Commission or its successor. Any
rates or charges established by such local water utility shall be adequate to provide for:

(a) Reimbursement from all new water customers for the cost of installing new
services and meters;
(b) Revenue from all water deliveries and services performed by the district;
(c) Annual operating expense of the district;
(d) The maintenance and the repair of the works;
(e) A reasonable surplus for replacement, extension and improvement; and
(f) Payment of the interest and principal and provide a sinking fund for the payment of
debts of the district as they become due and establish fund for reasonable
resources.

The rates or charges established by such local district, after hearing shall have been
conducted for the purpose, shall be subject to review by the Administration to establish
compliance with the above-stated provisions. Said review of rates or charges shall be
executory and enforceable after the lapse of seven calendar days from posting thereof
in a public place in the locality of the water district, without prejudice to an appeal being
taken therefrom by a water concessionaire to the National Water Resources Council
whose decision thereon shall be appealable to the Office of the president. An appeal

16
to the Council shall be perfected within thirty days after the expiration of the seven-day
period of posting. The council shall decide an appeal within thirty days from perfection.
(As amended by Sec. 11, PD 1479).

Sec. 64. Technical Assistance. – Administration shall provide technical

assistance to local water utilities their boards, management, and operating personnel,
to aid in meeting the standards and criteria established by the Administration, and to
encourage the upgrading of the operations and management of such local water
utilities. Said technical assistance should consist of those matters which are practical
to finance or develop on a national basis but are beyond the capability of the individual
local water utility, as such.

Sec. 65. Training Programs.- Administration shall establish training

programs and seminars for personnel of local water utility. Programs shall include the
areas of utility management, operation, maintenance and customer service.
Administration shall have the power to issue Certificate of completion for the
satisfactory completion of a specified course of instruction. In the case of operational
personnel, Administration may conduct appropriate examinations and issue
corresponding Certificate of competence to assist local water utilities to meet the
personnel standards set pursuant to Section 62 (e) of the Title.

Sec. 66. Certificate of Conformance. –Administration may require report

from all water utilities, conduct field investigations and review all available information
to determine whether there has been conformance to its standards and procedures
established pursuant to Section 62 of the title. Upon a finding that said standards are
met, the Administration shall issue a Certificate of Conformance to any such water
utility. Said Certificate may be revoked after due notice and hearing as to any local
water utility which thereafter fails to continue conformance with such standards. A
Conditional Certificate of Conformance may be issued where procedures and practices
have been adopted to assure conformances and reasonable time schedule has been
adopted. Failure, to reach conformance as contemplated shall be cause for revocation
of such conditional certificate, without hearing or other cause.

Chapter VII. - Financial Provisions

Sec. 67. Capital Stock. – The authorized capital of the Local Water Utilities
Administration is Two Billion Five Hundred Million Pesos divided into Twelve Million
Five Hundred Thousand shares of stock with a par value of Two Hundred Pesos per
share which shall be subscribed by the National Government and opened to
subscription by private investors or government financial institutions. (Sec. 34, PD 768;
as amended by Sec. 12, PD 1479).

Sec. 68. Payment for National Government Shares. – All amounts

previously released by the National Government to the Revolving Fund of the
Administration shall be credited as payment for subscriptions to shares of stock at par
value. Whatever balance remaining of said subscription shall be paid from a continuing
appropriation which is hereby made out of any funds in the national Treasury not
otherwise appropriated, such annual appropriation to be programmed and released in
accordance with pertinent budget laws Provided, That this continuing appropriation
shall remain in force until the balance of the unpaid subscription of the government to
the capital stock of the Administration have been paid in full. (Sec. 34, PD 768; as
amended by Sec. 13, PD 1479).

Sec. 69. Operational Expenses. – The Board of Trustees is hereby

authorized to appropriate out of any funds of the Administration, such amounts as it
may deem necessary for the operational and other expenses of the Administration
including purchase of necessary equipment. (Sec. 34, PD 768).

17
 Sec. 70. Charges. – To the extent that the Administration performs services
for the benefit and at the request of a local water district or utility or a number of water
districts, utilities or organizations, it may levy fees or charges for such service
rendered.

Charges may include an assessment against water districts or utilities to finance

those functions of the Administration which are of general benefit to water district or
utilities including, but not limited to, general administration and supervision. (Sec. 34,
PD 768).

Sec. 71. Receipt and Investment of Funds. – Whenever the Administration

receives money whether as payment for subscriptions to shares of stock, principal
repayments, interest income, payment for services rendered or for any purpose
whatsoever, it shall issue its own receipts and provide for their safekeeping and
investments under policy guidelines as may be established by the Board of Trustees in
accordance with Department of finance regulations. (Sec. 34, PD 768).

Sec. 72. Domestic Borrowing Authority. – The Administration shall have

the authority to borrow money from all domestic loan sources whether government or
private Provided, That its loans outstanding from domestic sources at any one time
shall not exceed One Billion pesos. (As amended by Sec. 36, PD 768).

Sec. 73. Authority to Contract Foreign Loan. – The Administration is

hereby authorized to contract loans, credits, in any convertible foreign currency or
capital goods, and to incur indebtedness from time to time with foreign governments, or
any international financial institutions or fund sources, including supplier’s credits or
deferred payment arrangements, the total outstanding amount of which, excluding
interests, shall not exceed five hundred million US$ or the equivalent thereof in other
currencies, on terms and conditions promulgated by the Secretary of finance and the
Monetary Board for the accomplishment of its objectives; and to enter into and execute
contracts and other documents specifying such terms and conditions.

The president of the Philippines, by himself, or through his duly authorized

representative, is hereby authorized to negotiate and contract with foreign governments
or any international financial institution or fund sources in the name and on behalf of
the administration, one or several loans, for the purpose of implementing the
Administration’s program for the promotion and development of local water utilities
through the Administration’s financing or lending operations.

The President of the Philippines, by himself or through his duly authorized

representatives, is hereby further authorized to guarantee, absolutely and
unconditionally, as primary obligor and not as mere surely, in the name and on behalf
of the Republic of the Philippines, the payments of the loans, credits and indebtedness
up to the amount herein authorized, over and above the amounts which the President
of the Philippines pursuant to loan agreements entered into with foreign governments
or any international financing institution or fund sources.

The loan-credits and indebtedness contracted under this section shall be in

accord with provisions of the foreign Borrowing Act as amended. 9As amended by
Sec. 36, PD 768).

Sec. 74. Depository for Reserves. – Any local water utility which is
accumulating reserves for capital improvement may make specified time deposits of
the same to the Administration in the manner authorized for banks in handling trust
funds. Such funds shall not be used for operating purposes by the Administration. (As
amended by Sec. 37, PD 768).

Sec. 75. Control and supervision over all Releases of Appropriations

for Waterworks and Sewerage Systems. – Since the Administration is charged with
the development of local water utilities, funds from prior and future appropriations of
the National Government for waterworks and sewerage systems in cities,

18
municipalities, and provinces that are covered by duly formed water districts shall be
released directly to the Administration for the account of the water district concerned.
The Administration may, however, draw from such account fees and charges for
services rendered to the water district concerned as specified in Section 70 of this title.
(Sec. 38, PD 768).

Sec. 76. Government Assistance to Non- Viable Water Districts. – There

shall be included in the General Appropriations Act an outlay in the form of National
Government aid or subsidy to meet the financial requirements in the development of
water supply systems of water districts which are determined by the Administration to
be financially nonviable in such amount as the Administration may recommend, but not
exceeding the cost of source development and main transmission line. Releases of
such funds shall be made directly to the Administration. In the development of such
water supply systems, the Administration shall exert all efforts to bring the levels of
service within the cost repayment capacity of the beneficiaries. (Sec. 14, PD 1479.

Sec. 77. Special Projects. – Whenever required by the National

Government to provide funding requirements for the development of waterworks and
sewerage systems in municipalities, cities or provinces or portions thereof not yet
covered by a duly formed water district, an outlay shall be provided in the General
Appropriations Act, upon the request of the Administration, separate from its
capitalization, for the purpose of meeting the financial requirements of the project;
Provided, however, That in the event that funds for the project have already been
appropriated by the national Government, such funds shall be released directly to the
Administration. Expenses incurred by the Administration for the service rendered may
drawn from such account as provided in Section 70 of this Title.

Sec. 78. Exemption from All Taxes, Duties, Fees, Imposts and Other
Charges by the Government. – To enable the Administration to pay its indebtedness
and obligations, and in furtherance and effective implementation of the policies and
objectives of this Decree, the Administration is hereby declared exempt;

(a) From the payment of all taxes, fees, imposts, charges, costs and restriction
by the Government of the Republic of the Philippines, its provinces, cities
municipalities, and other government agencies and instrumentalities, and
filing and service fees and other charges or costs in any court or
administrative proceedings in which it may be a party;
(b) From all income taxes, franchise taxes and reality taxes to be paid to the
National Government, its provinces, cities, municipalities and other
government agencies and instrumentalities; and
(c) From all import duties, compensating taxes, wharfage fees on import or
foreign goods and equipment required for its operations and projects. (Sec.
38, PD 768; as amended by Sec. 15, PD 1479)

GENERAL PROVISIONS

Sec. 79. Separability of Provisions. – If any provision of this Decree, or the

application of such provision to any person or curcumstances, is declared invalied, the
remainder of the Decree or the application of such provision to other persons or
circumstances shall not be affected by such declaration. (As amended by Sec. 39, PD
768; Sec. 15, PD 1479)

Sec. 80. Effect on Other Acts. – All acts or parts of acts, decrees, general
orders, executive orders, proclamations, or rules and regulations inconsistent herewith
are repealed or modified accordingly, (As amended by Sec. 39, PD 768; Sec. 15, PD
1479)

Sec. 81 Effectivity. – This Decree shall effect immediately. (As amended

by Sec. 15, PD 1479)

19
 th
Done in the City of Manila, this 25 day of May in the year of our Lord, nineteen
hundred and seventy three.

(SGD) FERDINAND E. MARCOS

President of the Philippines

By the President:

(SGD) ALEJANDRO MELCHOR

Executive Secretary

Presidential Decree No. 768 was promulgated on August 15, 11975.

Presidential Decree No. 479 was promulgated on June 11, 1978.

Office of the President of the Philippines

Malacañang

LETTER OF INSTRUCTIONS NO. 683

ESTABLISHING BASIC POLICIES FOR

THE WATER SUPPLY SECTOR

WHEREAS, drinking water is a basic requirement to sustain life;

WHEREAS, only about 40 percent of the population of the Philippines is presently
served with public water supply systems;
WHEREAS, it is primary concern of the Government in promoting the welfare of the
people to hasten the availability of water supply services in the whole country, with special
attention to the rural areas;
WHEREAS, the approved Philippine Development Plan for 1978-1987, therefore, aims
to increase the public water supply coverage to about 85 percent of the total Philippine
population within ten years;
WHEREAS, there is a need to restructure the water supply sector so that gaps and
overlaps in responsibility will be eliminated; and
WHEREAS, it is necessary to establish certain basic policies to attain these objectives
in the most efficient manner;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by
virtue of the powers vested in me by the Constitution, do hereby order the implementation of
the following basic policies for the water supply sector;
(1) The attainment of complete coverage of water supply services for the whole country is
a declared policy of the State and shall be effected primarily through:
(a) The rationalization of the organizational structure for the water supply sector;
(b) The formation of water districts, associations, cooperatives or corporations for
the construction, operation and maintenance of water supply systems in preference to
systems directly operated and managed by local governments;
(c) The encouragement of self-help and self-reliant water supply projects.
(2) Agencies involved in water supply shall strive to attain financial independence, thereby
minimizing Government subsidy, by increasing their own internal revenue generation
capabilities and by providing services within the cost repayment capabilities of the
beneficiaries.
(3) The levels of water supply service to be developed shall vary according to technical,
economic, organizational and financial consideration. These levels of service are as follows:
Level I - Point sources (such as rain collector, wells and springs); generally for rural
areas where houses are scattered too thinly to justify a distribution system.
Level II - Communal faucet systems; generally for rural areas where houses are
clustered densely enough to justify a piped distribution system with a faucet provided
for a number of households.

20
 Level III – Individual house connections; generally for urban areas.
(4) The rationalization of the water supply sector structure shall be pursued in accordance
with the following strategies:
(a) The Metropolitan Waterworks and Sewerage System shall concentrate its
operations in Metropolitan Manila and other contiguous areas that may later be
included in its service coverage.
(b) The Local Water Utilities Administration shall promote water districts in cities and
municipalities with a population of a least 20,000 each. It will support these water
districts through institutional, technical and financial assistance.
(c) The Bureau of Public Works shall be mainly responsible for the construction of
wells and development of springs in rural areas.
(d) The Department of Local Governments and Community Development shall be
responsible for the formations of water associations and cooperatives that will operate
and maintain water supply systems for communities in the provinces covered by the
Provincial Development Assistance Program (PDAP). It shall provide institutional,
technical and financial support to these associations and cooperatives.
(e) A Task Force on Rural Water Supply under the National Water Resources Council
shall, until such time that a permanent institution of the Government to handle the rural
water supply sector is evolved, be responsible for the formation of water associations
and cooperatives that will construct, operate, and maintain water supply systems in the
rural areas of non-PDAP provinces. This Task Force shall provide technical,
institutional, and financial assistance to these associations and cooperatives. It shall
also make studies and recommendations on the appropriate institution that will
eventually be responsible for the rural water supply sector on a permanent basis. The
Task Force is hereby authorized to call upon any agency of the Government for
assistance in accomplishing its tasks.
(5) The National Water Resources Council hall be responsible for coordinating the
implementation of the above policies. It shall submit to the President of the Philippines,
periodic reports on the status of the entire water supply sector and the performance of each of
the above agencies in relation to the overall policy framework for water supply.
th
Done in the City of Manila, this 25 day of May in the year of our Lord, nineteen
hundred and seventy eight.

(SGD) FERDINAND E. MARCOS

President of the Philippines

LETTER OF INSTRUCTIONS NO. 700

PROVIDING MEASURES TO CONTROL

AND REGULATE INCREASES
IN WATER RATES

WHEREAS, there is a need to help depressed or newly formed water districts develop
their financial viability, but a the same time avoid too abrupt increases in their water rates;
WHEREAS, there is a need to prescrive certain measures whereby increases of rates
imposed by water districts are controlled or regulated;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by
virtue of the powers vested in me by the Constitution, do hereby order the implementation of
the following measures in the operation and development of water districts:
(1) The Local Water Utilities Administration (LWUA) shall:
(a) Implement a socialized pricing scheme for water districts in setting up water rates
whereby the more affluent, heavy users pay more per unit than the low-income, minimal
users of water, LWUA shall prescribe guidelines for this purpose;
(b) Provide institutional development services to water districts free of charge of
charge;
(c) Grant capital improvement loans to water districts free of charge;

21
 (d) On a case-to-case basis, defer loan amortization payments until improvement are
completed and actually in operation;
(e) Assist water districts improve their operational efficiency through skills/managerial
training and systems development;
(f) Ensure that the water rates are not abruptly increased beyond the water users
ability to pay, seeing to it that each increase if warranted, does not exceed 60% of the
current rate;
(g) Limit charges for feasibility and engineering studies to not more than 15% of the
actual construction cost of the project implemented;
(h) Require 100% metering to insure correct charging of water actually consumed
and to discourage it s wasteful use;
(i) Where indicated, consider the adoption of lower standards of service, especially
for the marginally feasible areas, to reduce project cost; and
(j) Reduce required reserves accumulation for meeting emergency and contingency
needs as will be appropriate.
(2) The National Electrification Administration and the National Power Corporation shall
study ways and means to grant special reduced electric power rates to the water districts
concerned. Where feasible, the National Power Corporation shall also determine ways by
which the water districts can directly tap the power lines.
(3) The Budget Commission shall provide in the national government annual operating
budget starting with CY 1979 such amount as shall be requested by LWUA and
recommended by the National Economic and Development Authority for the conduct of
feasibility studies for the development of waterworks systems in established water districts.
Such national government contribution shall not constitute part of LWUA’s equity not shall it
be charged against the water districts.
(4) The local government concerned shall provide subsidy for the operation of depressed
or newly created water districts. The subsidy shall initially be up to the level provided by the
local government for the operation of the system immediately prior to the formation of the
water district. The subsidy, however, shall be reduced as the water services and revenues
improve as determined by LWUA.
(5) The water district concerned shall conduct public hearings prior to any proposed
increase in water rates.

Done in the City of Manila, this 1st day of June in the year of our Lord, nineteen
hundred and seventy eight.

(SGD) FERDINAND E. MARCOS

President of the Philippines

LETTER OF INSTRUCTIONS NO. 744

RELATIVE TO RELIABLE WATER SUPPLY

AT REASONABLE RATES IN COUNTRYSIDE

TO: The Minister of Public Works, Transportation and Communications

The Chairman and Members, National Water Resources Council
The General Manager, Local Water Utilities Administration
The Chairman and General Managers of Water Districts
All Others Concerned

WHEREAS, the provision of adequate waer supply at reasonable rates is a primary

objective of the New Society;
WHEREAS, the implementation of a national program for improve water supply is the
responsibility of local organizations particularly Water Districts and local government units,
assisted by the National Water Resources Council and the Local Water Utilities
Administration;
WHEREAS, there is need to improve planning, monitoring and implementing activities
at all levels, and to reduce water rates to minimum levels;

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 NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, do
hereby order and instruct:
1. The Local Water Utilities Administration and Water Districts shall immediately review
the facilities design, implementation plan and rates and fees charged, with the objective of:
a. Reducing water rates to minimum levels;
b. Eliminating unnecessary fees and regulatory measure;
c. Implementing expansion plans in phases so as to keep in step with growth in
demand without resulting in excess capacity;
d. Reducing cost of construction to a minimum
2. The National Water Resources Council shall eliminate all unnecessary regulatory
measures and fees particularly on privately owned and dug wells.
3. The Local Water Utilities Administration and each Water Districts shall prepare a public
education program which shall concentrate on the need and methods for water conservation,
water rates, water facilities requirements and need for financing, and other related aspects of
Water District operations. They shall, in addition, prepare a comprehensive program and
system of public consultation, both formally in hearings and informally through an education
program, when considering increases in water rates, particularly at the time when Water
Districts initiate operation.
4. The Local Water Utilities Administration shall review the composition of the Board of each
Water District to make sure that consumers are properly and fully represented. It shall initiate
the necessary changes.
5. The Local Water Utilities Administration shall assess the terms of loans extended to
Water Districts, including maturity, amortization schedule, and interest rates, for the purpose
of enabling Water Districts to meet their obligations without charging excessive water rates to
consumers.
6. The Committee on National Aid to Local Government Units shall study and recommend to
the President a program for communal water pumps to serve areas not covered by Water
District or which do not otherwise have an adequate water supply. The program shall provide
for a sharing of construction cost among national and local government units, whereby the
national government shall provide counterpart funding assistance, charged to the funds
provided as Aid to local Government Units under PD No. 144

Done in the City of Manila, this 28th day of September in the year of our Lord, nineteen
hundred and seventy-eight.

(SGD) FERDINAND E. MARCOS

President of the Philippines

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