FIFTEENTH CONGRESS OF THE)
REPUBLIC OF THE PHILIPPINES —)
Second Regular Session )

HOUSE OF REPRESENTATIVES

HB. No. ) 4 a

Introduced by Rep. Romero Federico S. Quimbo and Rep. Karlo A. B, Nograles

The scarcity of clean and safe water has become a perennial problem in the
Philippines, due to the booming population and the lack of organization in the water
industry. ‘The disparity of source and demand has led io various issues on health due
to the quality of the water. With the rapid increase in population and the depletion of
clean and safe water in the Philippines, it is imperative that true reform and not mere
added regulation be made in our water industry

The perplexed and fragmented approach in water resource and industry management
will be effectively addressed in the passage of this Bill. This Bill adopts and
institutionalizes the Integrated Water Resources Management approach. Reform and
not further regulation of the water industry is the goal of this Bill. The lack of
cohesion in management approach had caused inefficient water related programs and
activities. The presence of several government agencies involved in water and
sanitation in the Philippines has led to inconsistencies in the implementation of water
related policies. Authorities with overlapping functions; limited budget and manpower
resources are just part of the picture in this grim scenario.

The Bill renames the National Water Resources Board as Water and Sanitation
Regulatory Authority. And, through its regulatory reform, the Bill will strengthen and
restore the NWRB as the lead agency in water resource and industry management.
‘The Bill will consolidate the envisioned powers of the NWRB which were scattered
over the years by the formation of several government agencies creating pointless
divisions. The current water scenario theoretically allows the NWRB to check how
much water is being appropriated by all entities nationally. The exceptions are
supposed to be limited to waters which are used for a domestic uses by the owner of
the land over or under which the water flows’, or when the person appropriates or
uses natural bodies of water with the use of hand-carried receptacles or when
appropriation is for bathing or washing, watering or dipping of domestic or farm
animals, and navigation of watercrafts or transportation of logs and other objects by
flotation.? These exceptions, however, have led to the proliferation of single family
appropriators for water use which have not been effectively regulated by the NWRB.
‘The Water Code requires registration upon exigencies such as a water crisis only, This
introduction of regulatory reforms is consistent with the Bill’s objective to fashion

1 Article 6 of the Water Code
Asticle 14 of the Water Code


)

fimdamental structural and complementary reforms first before even considering the
need for another regulator to enter the chaotic picture,

The fragmented water district model of PD. 198 has failed to ensure that the water
located in our lakes and rivers reaches our faucets, The past 30 vears more than amply
evinces such fact. In fact, said fragmented water district model of P.D. 198 had only
encouraged the monopoly of water services providers by small operators in cahoots
with local officials monopolize water services with no incentive to provide quality
service

‘The division of the country into Provincial Water Resource Zones within which the
number of Water Service Providers will be encouraged to band together if not merge
is meant (0 restructure the industry players into a scale that is efficient and cost-
effective. This will eradicate the situation wherein several water service providers
compete over the resonrces in order to bring water to each home, without regard (0 the
depletion of such sources. This will also cut the cost of maintenance of said water
service providers since many will share said expenses for maintenance.

Achieving effective water govemance will induce investors to come in and would
facilitate the unitary approach in the operation of service providers. These provisions
Will eliminate anti-competitive practices and monopolies in the water industry. ‘The
Bill will innovate by the creation of a readily accessible, centralized and public
database of information seguding the water industry, This will contain the
performance and pricing data of service providers within the Water Resource Zone of
each province and across all provinces. This kind of information access will keep the
playing field fair and competitive and help the public check whether the provider in
their area is over-pricing them. If the relative prices of all providers in the country are
‘within reach, the public can easily compare .

All water providers are now going to be required to meet their specific targets, and the
public will know whether they do. In case they fail to meet their targets, the Bill
provides for a mechanism that authorizes their replacement, In short, this accessible
and integrated information system will be the motor for the creation of an industry
with just and reasonable rates. and more importantly, adequate and world-class
service.

The Bill aims to integrate water and sanitation. Since health and sanitation concerns
inevitably: raises the issue of the extraction, use of water and the release of polluted
Waters that have been used for health and sanitation purposes. Mindful of the effects
of the Clean Water Act, our proposal seeks to interpose the powers and authorities of
the government, as regards the water quality managemer

On the basis of the for
sought

egoing considerations, the passage of this Bill is eamestly

Rep. Romgro Federico 8. Qu

bo



FIFTEENTH CONGRESS OF THE)
REPUBLIC OF THE PHILIPPINES )
Second Regular Session )

HOUSE OF REPRESENTATIVES
o S49"
WB.Noc___ 349'7

bo and Rep. Karlo A. B, Nograles

Introduced by Rep. R

FORMS IN THE WATER INDUSTRY,

) DISTRIBUTION OF SERVICE

FOR INFRASTRUCTURE,

DEVELOPMENT OR ENT AND ECOLOGICAL

TECHNOLOG! RGANIZING THE NATIONAL WATER.

RESOURCES BOARD, CREATING LOCAL WATER SUPPLY AND

SANITATION COMPAN FE PURPOSE CERTAIN

LAWS AND FOR OTHER RELATED PURPOSES.

AN ACT INSTEFUTING RI
RATIONALIZATION, ALLOCATION Al
AREAS, PRO}

Be it enacted hy the Senate and the House of Representatives of the
Philippines in Congress assembled.

CHAPTER 1
TITLE AND DECLARATION OF POLICY

Section 1. Short Title. - This Act shall be known as the "Water Sector Reform Act of
2012" :

Section 2. Declaration of Policy. - Wis hereby declared the policy of the State:

the Philippines shall belong to the State, pursuant to the 1987
tution:

(a) that all waters
Philippine Con

(b) that the State, as owner of all waters in the Philippines, may control and
regulate the use, exploitation, development appropriation, protection and
conservation of water in order to protect and promote life. public health and
Welfare. and the environment, including imposing such conditions and
restrictions, as may be warranted, on existing holders of licenses:

(c) 10 recognize that water is a human right, and it is the obligation of the State to
ensure that there is “sufficient, safe, accessible and affordable water, without
discrimination:

(d) to ensure that all Filipinos shall have access ‘to clean, safe, affordable and
adequate supply of water.

(e) to ensure reasonable. and yet cost-reflective, prices of water which protect
both the interests of the consumers.and the service providers:


() to monitor and regulate the quality and supply of water in the Service Areas to
protect life, public health and the enviroumet

(g) to integrate the supply and distribution of water and the provision of sanitation
services in provinces or regions to ensure adequacy and efficiency in the
supply of water:

(h) to develop and maintain a centralized, comprehensive and unified data and
information base on water resources, and key industry data to ensure the
efficient evaluation, analysis, dissemination and enforcement of applicable
standards on water resource development, utilization, demand and pricing:

{i) to provide incentives to and a predictable regulatory environment for investors
in order to promote and develop the water industry and allow investors a
reasonable reluin on their investments:

(i) {0 rationalize the operation of water utilities and the grant of Public-Private
Partnership (PPP) arrangements for the provision of water and/or sanitation
services:

(k) to foster competition among existing and future Water Service Providers to
maintain price stability conducive (o a balanced and sustainable growth of the
industry

(1) to organize the Water and Sanitation Regulatory Authority in order to achieve
the foregoing Stale policies: and

(m)to monitor and regulate the sewerage service industry in relation to the proper
collection, treatment, transport and disposal of septage, sewage and
wastewater.

Section 3, Scope - This Act shall provide a framework for the restructuring and
reformation of the water industty, fiom sourcing, storage, treatment, distribution,
sewetage treatment and reuse. including the provision of incentives to promote
investment in new infiastructure for modemization of the industry and the
rationalization of the powers, duties. responsibilities and obligations of relevant
goverment agencies and Water Service Providers

Section 4, Definition of Terms, - For purposes of this Act, the tern

fa) “Authority” ~ refers to the Water and Sanitation Regulatory Authority;

(b) “Flood Control” - refers to the methods, acts, and protocols to be observed in
order to prevent and reduce the detrimental and catastrophic effects of flood
waters:

()

FRM” - refers to such acts of defining and
determining the appropriate methods, acts and protocols geared in
preventing and seducing the risk of incurring loss of both life and property
due to flood waters. 1 also includes. but is not limited to, the implementation
of precautionary measures. as well as the installation of infrastructures and



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the determination of post-flood clean-up activities in order to arrest the
residual effects of flood waters:

Integrated Water Resource Management” or “IWRM™ ~ refers to a
systematic, collaborative and multi-stakeholder process, which promotes the
coordinated development and management of water, land and related
resources within hydro geological boundaries, in order to maximize the
resultant economic and social welfare in an equitable manner and without
compromising the sustainability of vital ecosystems.

“License” ~ refers to the authority granted to a person, entity or consortium
to provide water and/or sanitation services to a particular Service Area; This
term shall include management contacts. PPP Agreements and similar
arrangements through which a person. entity or consortium is granted the
right (o provide water andor sanitation services to the Service Area

“Licensee” ~ refers to a person, entity or consortium which has been granted
a license (0 operate and provide water and/or sanitation services to, a
particular Service Area under the provisions of this Act: These terms shall
cover persons, entities or consortium who were granted the right (0 operate
and provide water and/or sanitation services through a management contract,
PPP Agreement or similar arrangement.

“Local Government Unit” ~ refers to the territorial and political subdivisions
of the Philippines as defined under the 1987 Constitution of the Philippines,
which includes provinces, cities, municipalities and harangays:

“Local Water Dis refers to distri
Presidential Decree No. 198. as amended:

is created pursuant ‘Title I of

“Local Water Supply and Sanitation Company” or “LWSSC” ~ refers to a
government-owned and controlled corporation which shall have supervision,
control and jurisdiction over all waterworks and sewerage systems in a
designated PWRZ which shall be created pursuant to the provisions of this
Act:

LAVUA™ — refers to the Local Water Utilities Administration created
pursuant to Presidential Decree No. 198, as amended;

“NWRB™ ~ refers to the National Water Resources Board created pursuant to
Presidential Decree No. 424, as amended:

“NEDA® ~ refers to the National

-onomie and Development Authority:

Private Sewerage System™
and controlled by private

refers {0 a sewerage system owned, operated
atities:

Provincial Water Resource Zone” or “PWRZ™ ~ refers to the (erritories and
boundaries of which shall be equivalent to the areas comprising each
existing province created under Republic Act No. 7160 and other laws, with
Metro Manila. the autonomous regions, special economic zones and other
special areas considered as separate PWRZs.



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“Public-Private Partnership Agreement” or “PPP Agreement” ~ refers to
management contracts. concession agreements or other similar arrangements
between the government and a private person or entity for the provision of
water and/or sanitation services in a patticular Service Area pursuant to the
provisions of this Act

“Public Sewerage Systenv” ~ refers to a sewerage system owned, operated
and controlled by the National or Local Government:

Relevant Information” ~ refe formation or data conceming the Water
Industry and Water Service Providers essential to its effective monitoring
and regulation, and the introduction and maintenance of effective
competition, such as but not limited to pricing, performance. quality. of
service, area of coverage. and water quality

“River Basin Cluster” ~ refers to a grouping of PWRZs and/or portions
thereof primarily based upon the proximity of PWRZs and/or portions
thereof {0 the major river basins. subject rules to be promulgated by the
Authority:

‘River Basin Organization” or “RBO” _ refers to organizations which plan,
coordinate and monitor activities within an RBC:

ervice Aren” ~ refers to a province, region or geographic area identified
and designated (o a Licensee to provide and operate water and/or sanitation
services:

“Septage” — refers to the shudge produced on individual on-site wastewater
disposal systems, principally septic tanks and cesspool:

“Sewage” ~ refers to waler-bome human or animal wastes, excluding oil or
oil waste, which are removed from residences, buildings, institutions,
industeial and commercial establishments together with such groundwater,
surface water and storm water, as may’ be present, including such waste from
vessels. offshore structures. other receptacles intended to receive or retain
waste or other places or the combination thereof.

“Sewers” — refers to pipes or such other civil works or structures which are
built and constructed to treat. carry, transport and dispose sewage.

“Sewerage System” ~ refers. but is not limited (0 any system or network of
pipeline, ditches. channels or conduits including pumping stations, lift
stations and force mains, service connections including other constructions.
devices, and appliances appurtenant thereto, which includes the collection,
transport, pumping and treatment of sewage to a point of disposal:

“Sewerage Service Provider” — refers 10 a person, entity or consortium
engaged in the business of collecting, treating. transporting and disposing of
wastewater, sewage and septage. including maintaining and operating
sewerage systems. and who are required to register with and secure a license



from the Authority before they may conduct their business or operations in a
particular Service Area:

(2) “Tarilt™ refers to an amount which may be charged by Licensees or Water
Service Providers for the supply of water and/or sanitation services within
their Service Area:

(aa) “Wastewater” ~ refers to waste in liquid state containing pollutants,

e Provider” or “WSP” — refers to a person, entity or
consortium engaged in the business of allocating, collecting, treating,
supplying and distributing water to the public. The term includes Local
Water Districts. Water Utilities owned and/or operated by Local Government
Units, Rural Waterworks and Sanitation Associates, Barangay Waterworks
and Sanitation Associations. Local Water Cooperatives and Local Water
Supply and Sanitation Companies (LWSSC):

(bb) “Water Servi

(cc) “Water Supply System™ —refers to the whole of a system incorporating
public mains, pipes. chambets. treatment plants, pumping stations, service or
balancing reservoirs or any combination thereof and all other structures.
installations, buildings, equipment and appurtenances used, and the lands
where the same are located for the storage, abstraction, collection,
conveyance. treatment, distribution and supply of water: and

(dd) “Water Supply Services” - means the treatment of water abstracted from
watercourses and the distribution and supply of treated water to consumers
and includes the operat maintenance of a water supply system.

CHAPTER IL
REFORM IN THE WATER SERVICES INDUSTRY.

Section 5. Organization of the Worer Industry. — The organization of the water
industry shall be accomplished in order to introduce higher efficiency. enhanced
private sector participation, consumer protection, competitive pricing, greater
innovation and improving access to safe water, incorporating for these purposes.
Integrated Water Resources Management thrust in every activity: For this purpose,
any law to the contrary nowwithstanding, regulatory power over all WSPs shall be
exclusively lodged in the Authority. The NWRB. the LUA and other similar
agencies and offices, shall cooperate with the Authority to ensure the immediate and
smooth consolidation of regulatory functions: Provided that, the LWUA may, with
respect to Local Water Districts with remaining financial obligations to it, institute
temporary monitoring systems to ensure the compliance with such outstanding
obligations only until they are satisfied; Provided fusther, that the enforcement of such
systems shall be with the supervision of the Authority

Section 6, Provincial Water Resource Zones and River Basin Clusters. ~ There are
hereby created Provincial Water Resource Zones (PWRZs), the territories and
boundaries of which shall be equivalent to the areas comprising each existing
province created under Republic Act No. 7160 and other laws, with Metro Manila, the
autonomous regions. special economic zones and other special areas considered as
separate PWRZs; Provided that the Authority may redefine or modify the geographic



boundaries of a PWRZ, based on the existence of special geographic conditions, the
location of water sources or other circumstances which warrant such redefinition of
bounclaties.

iples of Integrated Water Resources Management, PWRZs
and/or portions thereof shall be grouped into River Basin Clusters (RBCs) for
purposes of water resource management applying the river basin/watershed approach
to ensure rational, efficient and ecologically sustainable allocation of water within the
RBC, The grouping of PWRZs and/or portions thereof into RBCs shall primarily be
based upon the proximity of PWRZs and/or portions thereof to the major river basins,
subject rules (0 be promulgated by the Author

Consistent with the p

Subject to the provisions of Presidential Decree No. 1067, otherwise known as the
Water Code of the Philippines. the Authority shall exercise power and authority over
water resources. and if applicable, existing water ulilities and providers within the
PWRZ and RBCs. In the case of Metro Manila and special economic zones, the
Metropolitan Waterworks and Sewerage System (“MWSS") and the appropriate
special economic zone authority. respectively. shall continue (o exercise jurisdiction
and authority

Section 7. Amalgamation of Existing WSPs. - The creation, selection or assignment of
WSPs which shall service a PWRZ. shall be subject to the provisions of this Act. The
number of WSPs servicing each PWRZ shall be determined and limited by the
Authority created hereunder for the purpose of achieving economies of scale,
effective competition and efficiency of service: Provided thal, in no case shall the
number of WSPs be reduced fo an extent where it will result in anti-competiti
practices :

For this purpose. within two (2) years from the passage of this Act, the LWUA shall

cause and implement the amalgamation of WSPs within each PWRZ, into one or more

LWSSCs, in accordance with the rules and regulations that the Authority shall

promulgate. The Authority shall exercise overall supervision over the amalgamation

process and shall develop the necessary rules and guidelines during the transition

period fo ensure that there shall be no diminution of service levels and quality for
onsumers

The Authority shall provide technical support and training to. WSPs and their
personnel in order to aid them during the amalgamation process. Where applicable,
personnel of existing WSPs that will be amalgamated shall, subject to the provisions
Of this Act, be absorbed by the resulting LWSSC to the extent that itis
administratively viable. Provicied, that the rights accorded (o such personnel pursuant
(o civil service laws shall not be impaired

Subject to the application of Section 2-4 of this Act on amalgamation of water assets,
an existing and operating WSP shall. upon approval by the LWUA and the
Authority, have the option to provide, operate and maintain the Water Supply System
and/or Sewerage System in its current area of operation within a corresponding
PWRZ, upon the showing that the WSP meets financial and operational benchmarks,

cluding capital investments, price levels, service quality, customer satisfaction,
profitability. productivity gains, expansion of basic services. subsidies, functioning,
of new and existing markets, and other performance metrics set by the Authority. In
such cases. the License covering the PWRZ. or a portion thereof, as defined and



contemplated in this Act may be granted to the WSP itself. Provided that in addition
to the mandatory clauses and provisions for Licerises granted under this Act, said
License shall expressly: state that the failure of the WSP to comply with the
Authority's standards for two (2) years shall be a ground to automatically: cancel the
License without need of judicial recourse. The WSP shall be monitored and
supervised by the Authoriiy in all aspects of its operation necessary to ensure
compliance with the provisions of this Act and the rules to be issued by the
Authority thereunder.

An existing and operating WSP may, upon approval of the LWUA and the Authority
and upon compliance with financial and operational benchmarks to be set by the
‘Authority, act as the lead entity in the amalgamation process and constitute itself
into the LWSSC that will exercise jurisdiction over the PWRZ or a portion thereof.
Said resulting LWSSC shall be subject to the authority and jurisdiction of the
Authority herein created

All employees and personnel, if qualified, of existing WSPs in a particular PWRZ
shall be given preference in the hiring of personnel by the LWSSC or subsequent
Licensee in the said PWRZ. All displaced or separated personnel from the service as a
result of the aforesaid amalagamation of WSPs shall be entitled to separation pay and
other benefits in accordance with existing laws, lations,

Seetion 8. Creation of a Unified Database for Water Industry. - In furtherance of the
policies set forth in this Act, all information regarding the water industry, WSPs.
including the rights and contracts involved in the ulilization of water resources shall
be lodged with the Authority. It shall be the Authority's duty to receive and
consolidate basic data, to act as a central registry: or central repository of information,
and to provide access to reliable. standardized information on the water industry and
WSPs,

‘or this purpose, the Authority shall assume the power: authority and responsibility of
creating and maintaining a unified, publicly accessible, computerized and centralized
database of all relevant information as defined in this Act. including but not limited to,
the use of benchmarking techniques to process information related to pricing,
petlormance, quality of service. and coverage targets of all WSPs within and across
PWRZs

WSPs, their subsidiaries and affiliates. and other entities that provide water services
are required to submit Relevant Information on a regular basis to the Authority

‘The Authority may request and collect data from other offices and agencies in the
government in order (0 ensure the timeliness. accuracy and relevance of the database
It shall be. the duty of the government official receiving such request from the
Authority to facilitate the transfer of requested information at the soonest possible
lime. subject only to the restrictions on confidentiality, as implemented by other laws
oF valid agreements.

‘The Authority shall. on a quarterly basis, issue a consolidated report containing the
performance. pricing and quality data gathered fiom WSPs. Each report shall contain
graphical representations of the above data reflecting the relative performance of
WSPs within a PWRZ and actoss PWRZs. The public shall have, asa matter of right,
ready and immediate access to Relevant Information possessed and collected by the


Authority. In order (o encourage effective competition and consumer participation, the
‘Authority shall ensure that online access to data pertinent to the monitoring of the
water industry is free and open. For non-web based requests, the Authority is
empowered to charge reasonable fees to recoup costs incurred in producing copies for
the requesting party.

Any provision of law notwithstanding. the functions of the LWUA related fo data and
information gathering. evaluation, inspection, and analysis of the water industry and
WSPs are hereby transferred to the Authority. The LWUA shall, within six (6) months
from the passage of this Act. transfer to the Authority all accumulated data and
information, including methodologies and best practices in generating the same,
relating to the water industry and WSPs. Both entities shall coordinate in order to
ensure a smooth transmission of functions and the integrity of accumulated
information

A continuing nationwide educational campaign shall be developed and undertaken by
the Authority to promote the benefits of a unified information system to the economy’,
to create awareness on the rights of consumers: and to brief consumers of other
related information. .

Section 9, Declaration of the Water Industry as a Priority Investment Sector. - The
Water Industry is hereby declared a priority investment sector that will regularly form
part of the country’s Investment Priority Plan, unless declared otherwise by law

Section 10, Incentives for Investment in the Water Industry. - LWSSCs, WSPs,
Licensees, developers and operators of water industry facilities formed and organized
under this Act shall, upon certification by the Authority, in consultation with the
Board of Investments. be entitled to the following incentives:

(a) Income Tas Holiday (ITH) ~ For the first ten years (10) of its commercial
operations, the duly registered developer or operator shall be exempt from
income taxes levied by the national government

Additional investments in the project shall be entitled to additional income tax
exemption on the income attributable to the :nvestment

(b) Duty-free Importation of Machinery, Equipment and Materials ~ Within the
first ten (10) years upon the issuance of a certification by the Authority; the
importation of machinery and equipment, and materials and parts thereof,
including control and communication equipment, shall not be subject to tariff
duties: Provided. however, that the said machinery, equipment, materials and
paris are directly: and actually needed and used exclusively in the facilities for
processing, distribution and delivery of water to the point of use and covered
by shipping documents in the name of the duly registered operator to whom
the shipment will be directly delivered by customs authorities: Provided,
further. that endorsement of the Authority is obtained before the importation
of such machinery. equipment, materials and parts are made.

Endorsement of the Authority must be secured before any sale, transfer or
ition of the imported capital equipment. machinery or spare parts is

made


When the aforementioned sale, transfer or disposition is made under any of the
conditions provided for in the foregoing paragraphs aller ten (10) years from
the date of importation, the sale, transfer or disposition shall no longer be
subject to the payment of taxes and duties:

{c) Special Realty Tax Rates on Equipment and Machinery. — Any law to the
contrary: notwithstanding. realty and other taxes on civil works, equipment,
machinery. and other improvements of a registered WSP actually and
exclusively used for WSP facilities shall not exceed one and a half percent
(1.5%) of their original cost, less accumulated normal depreciation or net book
value

(d) Net Operating Loss Carry-Over (NOLCO). ~ The NOLCO of a WSP during
the first three (3) years fiom the start of commercial operation which had not
been previously offset as deduction from gross income shall be carried over as
a deduction from gross income for the next seven (7) consecutive taxable
years immediately following the year of such loss: Provided. however, that
operating loss resulting fiom the availment of incentives provided for in this
Act shall not be entitled to NOLCO:

{e) Accelerated Depreciation, ~ If. and only if, a WSP fails to receive an ITH.
before full operation, it may apply for Accelerated Depreciation in its tax
books and be faved based on such: Provided, that if it applies for Accelerated
Depreciation, the project or its espa shall no longer be eligible for an
TIL Accelerated depreciation of plant, machinery, and equipment that are
reasonably needed and actually used for the exploration, development and
utilization of water resources may be depreciaied using a rate not exceeding
vice the rate which would have been used had the annual allowance been
computed in accordance with the rules and regulations prescribed by the
Secretary’ of the Department of Finance and the provisions of the National
Internal Revenue Code (NIRC) of 1997, as amended. Any of the following
methods of accelerated depreciation may be adopted:

nsion

(i) Declining balance method: and

(ii) Sum-oF-the years digit method

(1) Tax Credit on Domestic Capital Equipment and Services. — A tay credit
equivalent to one hundred percent (100%) of the value of the value-added tax
and custom duties that would have been paid on the machinery, equipment.
materials and parts. had these items been imported. shall be given to a WSP
who purchases machinery. equipment, materials, and parts from a domestic
manufacturer for purposes set forth in this Act. Provided, that prior approval
by the Authority was obtained by the WSP: Provided. further, that the
acquisition of such machinery. equipment, materials, and parts shall be made
within the validity of the WSP"s contract, license or other agreement to service
as a PWRZ.

The availment of incentives under this Act shall be regulated by the Authority
Should an existing WSP be entitled fo incentives under another law, the WSP shall be
Fequired fo state whether it prefers to adopt the incentives laid out in this Act in lieu of



other incentives under other laws. Such statement shall be in a publié document
addressed to the Authority for its approval

CHAPTER.
RS AND RIVE

1
BASIN ORGANIZATIONS,

RIVER BASIN CLUST

Section 11. RM Principles in River Basin Clusters, ~ Principles of Integrated Water
Resources Management (IWRM) shall be adopted as the strategy for the management
and administration of the River Basin Chisters (RCs) defined pursuant to Section 6
of this Act. ‘The appropriation and utilization of water in RBCs for domestic,
municipal. irrigation, power generation, fisheries. livestock raising, recreational and
other purposes shall be in accordance with IWRM principles including the following
(a) Fresh water, a resource which is limited and vulnerable, is vital in the
sustenance of life. progress and development:
(b) Water, capable of being appropriaied to various uses, possesses economic
value and thus should be considered an economic good: and
(c) A collaborative multi-stakeholder approach shall be utilized in the
development and management of water resources

‘The Authority, in collaboration with the-DENR and other relevant agencies. shall
promulgate rules and regulations to implement the foregoing policies.

Section 12. Creation and Composition of River Basin Organizations. - The Authority
shall create River Basin Organizations (RBOs) for each River Basin Cluster (RBC)
which shall be composed of

(a) One (1) representative for each LWSSCs within the RBC.

(b) One (1) representative for each provincial or cily government within the
RBC:

(c) Two (2) representatives fiom the private sector appointed by the Authorit
The private sector representatives must have recognized competence in the
relevant fields in the water and sanitation industry and shall be
knowledgeable principles of Integrated Water Resource Management; and

(d) Other multi-sectoral members and key stakeholders in the water industry
0 be determined by the Authority

Seetion 13. Functions of River Basin Organizations. ~The River Basin Organizations
shall have the following functi

(a) To plan, coordinate and monitor all activities within the river basin located in
the RBC:

{b) To engage in Flood Risk Mar went (FRM) with respect to the RBC;



(6) To create a special task force in extreme cases of disasters brought about by
flood waters in coordination with the respective LGUs where the RBCs are
located:

(d) To formulate Integrated Water Resources Management (IWRM) policies and
plans and recommend the same for the approval of the Authority;

(e) To set-up efficient assessment procedures of available water in different
sectors (ie commercial, municipal. agricultural) in order to achieve supply
optimization, including. but not limited to water balances, wastewater reuse,
and environment impacts of distribution and use options:

ion and

(1) To oversee and coordinate the implementation, promotion, revi
enhancement of the IWRM Plan: and

(g) To secure funding sources to support the identified projects and programs for
the river basin within the RBC.

Section 14, Integration of Piaming. Management, Rehabilitation and Development of
River Rasins. ~ Adopting the river basin or watershed approach to water resource
management, the Authority shall integrate and rationalize the planoing, management.
rehabilitation and development of river basins. including but not limited (o river basin
infrastructure development, flood control, environmental protection and integrated
water resources management. The Authority shall coordinate initiatives, programs and
projects of local government units, non-government organizations and other entities
concerning the development and rehabilitation of river and catchment basins. In order
to create an effective policy environment for the management of river basins, the
Authority shall harmonize, consolidate and enhance all relevant river basin policies,
rules and regulations.

ensure that an equitable access to waler withir: an RBC, the Authority shall set
guidelines in the effective and efficient water allocation and distribution. ‘The
Authority shall identify the character of the water available in the various river and
catchment basins and shall ensure the effective water distribution in accordance with
the needs of the different sectors found in the RBC.

In order to prevent and reduce the dire effects of food waters, the Authority shall
make disaster awareness and preparedness a priority, and will develop measures (0
ensure that the methods used flood control will effectively minimize the damage
brought about by flood water The Authority shall also focus on “post-flood’

activities such as clean-up, restoration and renovation of infrastructures that were
affected by the Mood waters

Section 15. River Basin Database Management, ~The Unified Database for the Water
Industry created pursuant to Section 8 of this Act shall also serve as the central river
basin database 10 which all River Basin Organizations. government agencies and other
organizations with relevant mandates and developmental initiatives within the river
basins are required to regularly submit their updated databases for integration and
consolidation,



Section 16. River Basin Conservation, Protection and Rehabilitation. — The
Authority, in coordination with the River Basin Oiganizations, the DENR and other
appropriate agencies involved in river basin management, shall undertake river basin
conservation, protection and rehabilitation and shall adopt appropriate soil and water
conservation, and protection measures to safeguard the hydrological integrity of river
basins and help sustain the protection of water for various purposes and uses.

APTER IV
CREATION OF LOCAL WATER SUPPLY AND SANITATION COMPANIES:

Section 17. Creation of Local Niner Supply and Sanitation Companies. ~ There are
hereby created government-owned and -controlled corporations to be known as the
LWSSC which shall have supervision, control and jurisdiction over all water and
sanitation systems within the PWRZs created pursuant to this Act and take ownership
of all assets of WSPs within such PWRZs.

Water and sanitation systems in Metro Manila and in all special and economic zones
shall remain under the supervision, control and jurisdiction of the MWSS and the
appropriate special/economiic zone authority, respectively:

Section 18. Purpose and Objective, Domicile and Term of Existence. ~ The principal
purpose of the LWSSCs is to manage. operate and maintain the water and sanitation
systems with a PWRZ. and, subject to rules and guidelines to be promulgated by the
Authority, to enter into PPP Agreements with eligible persons or entities

Fach LWSSC shall have its principal office and place of business within its
jurisdictional area in its designated PWRZ.

LWSSCs shall exist for a period of fifty (50) years from its organization and
establishment, unless otherwise provided by law

Section 19, Powers and Finctions of the Local Water Supply and
Companies. ~The LWSSCs shall have the following powers and functions:

(a) To construct, maintain, and operate dams, reservoirs, conduits,
aqueducts. {unels. purification plants, water mains, pipes, fire hydrants,
hydraulic structures, pumping stations, machineries and other waterworks
for the purpose of supplying water to the inhabitants of its territory, for
domestic and other purposes: and to purify. research and develop, regulate
and control the use, as well as prevent the wastage of water:

(b) To construct, maintain, and operate such sanitary sewerages, as may be
necessary. for the proper sanitation and other uses of the areas comprising
the PWRZ and to make sure that such sanitary sewerages are capable of
accommodating the regular to heavy flow of rain water:

(c) To acquire. purchase, hold, transfer, sell, lease, rent, mortgage,
encumber. and otherwise dispose of real and personal property, consistent
with the purpose for which the LWSSC is created and reasonably required
for the transaction of the lawful business of the same:



(d) To construct works across, over, through and/or alongside, any stream,
water-course. canal, ditch. flume, street, avenue, highway or railway.
whether public or private, as the location of said works may require
Provided, that, such works be constructed in such manner as to afford
security {0 life and property and so as nol to obstruct traffic: Provided.
further, that the stream, water-course, canal, ditch, flume. street, avenue,
highway or railway so crossed or intersected be restored without
unnecessary delay (0 ils former state. Any person or entity whose tight
may be prejudiced by said works shall not obstruct the same; however. he
shall be given reasonable notice before the construction and shall be paid
just compensation. ‘The LWSSC shall likewise have the right to locate.
construct and maintain such works on, over and/or through any street,
avenue, or highway and land and/or real rights of the Republic of the
Philippines or any of its branches, agencies and political subdivisions upon
due notice to the office. or entity concerned, subject solely to the condition
that the street, avenue, or highway in which said works are constructed be
restored without unnecessary delay to its former state unless otherwise
agreed upon by the LWSSC and the office or entity concerned:

(e) To exercise the right of eminent domain for the purpose for which the
LWSSC is created:

(f) To sue and be sued.

(g) To adopt and establish the policies and goals as may be necessary’ or
proper for the orderly conduct of its business or operations:

(h) To borrow money and incur such Hiabilities, including the issuance of
bonds. securities or other evidences of indebtedness utilizing its assets as
collateral and/or through the guarantees of the National Government:
Provided, Wowever, that all such debts or borrowings shall have been paid
of before the end of its corporate life.

(i) To approve. regulate, and supervise the establishment, operation and
maintenance of waterworks within its jurisdiction operated for
commercial, industrial and governmental purposes and to fix just and
equitable rates or fees that may be charged (o customers thereof:

(i) Yo establish,
system with

operate and maintain the waterworks and sewerage
isdiction:

i

(k)'To approve and regulate the establishment and construction of
waterworks and sewerage systems in privately owned subdivisions within
its jurisdiction

(1) To have exclusive and sole right (o test, mount, dismount and remount
water meters within its jurisdiction;

(m)To enter into PPP Agreements with persons or entities to operate and
maintain water and sanitation systems within the PWRZ, subject to the
provisions of this Act


(n) To exercise primary and exclusive jurisdiction over disputes between
WSPs. or between customers and WSPs, within an LWSSC, where such
cases involve contesting rates. levels and quality of service. fees. fines
and penalties imposed in the exercise of an LWSSC's powers, functions
and responsibilities, as set forth herein: and

(0) To compel # PPP pariner or WSP to submit required documents and
information through subpoena duces tecum in the conduct of inquiry or
investigation of possible violations of the Act or other related issuances
and rules,

Section 20. Composition. Qualificarion, Appointment and Tenure of the Board of
Trustees, ~ The corporate powers and functions of the LAVSSC shall be vested in and
exercised by a Board of Trustees composed five (5) members, to wit

{a) One (1) member who shall be appointed by the Provincial Governor:

(b) One (1) member who shall be nominated by the League of Cities or
Municipalities covering the jutisdictional area of an LWSSC:

(c) One (1) member representing the private sector who shall be appointed
by the President of the Philippines:

(a) One (1) ex-officio member representing the Department of Finance, as
nominated by the Secretary of Finance: and

(c) One (1) ex-officio member representing the NEDA, as nominated by:
the Director-General

The member representing the private sector shall act av Chairman, The Chairman and
the members of the Board, except the ex-officio members. shall serve for a term of
three (3) years, except that the members initially appointed shall serve, as designated
in their appointments. one for one year. one for two years and one for three years.
Provided, that, any person chosen to fill a yacaney shall serve only for the unexpired
term of the member whom he succeeds,

No person shall be appointed as a member of the Board unless he is a Filipino citizen,
of good moral character and of recognized competence in relevant fields in the water
industry or in civil engineering and/or sanitary engineering. business management,
economics, finance, and fav, with at least five (5) years of actual and distinguished
expetience in their respective fields of expertise

The Authority shall issue guidelines on the appointment process for the Board of
Trustees of the LWSSCs to facilitate the completion of the board compositions,

Section 2. Meetings of the Board: Quorum, Required Votes. - The Board of Trustees
shall. immediately after its organization, adopt rules and procedures in the conduct of
its meetings, A majority of the Board shall constitute a quorum for the transaction of

business and the affirmative vote of three shall be required for. the adoption of any
action,



Section 22. LIVUA as a Specialized Lending Instintion. ~ After the completion of the
amalgamation process in accordance with Section 7 hereof. the LUA shall function
solely as a specialized lending institution which shall provide financial services to
qualified local water ulilities. LWSSCs, Licensees and Water Service Providers.

CHAPTER Y

ECONOMIC POLICY AND REGULATIONS.

Section 23. Operation of a Water Supply System and or Sewerage System. ~ The
function and responsibility of providing. operating and maintaining a Water Supply
System and/or Sewerage System in a PWRZ shall fall upon the LWSSC concemed. In
the case of special and economic zones and Metro Manila, the special/economic zone
authority. or MWSS. respectively. all of which shall be subject to guidance from the
Authority

Subject to the provisions of this Act and the rules to be promulgated by the Authority.
an LWSSC may enter itvlo a PPP Agreement with a person or entity for the provision,
operation and maintenance of a Water Supply System and/or Sewerage System ina
PWRZ: Provided that an LWSSC which opts to provide water and/or sanitation
services in a PWRZ. shall comply with performance standards which shall be
determined and monitored by the Authority within a period of three (3) years.
LWSSCs which fail fo attain such performance standards within the aforesaid period
shall be mandated to enter into a PPP Agreement with eligible persons or entities in
accordance with rules to be determined by the Authority

Section 24. Amalgamation of Water Assets. ~ Within the periods provided herein. the
LWUA shall, under the supervision of, and based on the rules promulgated by, the
Authority. cause the amalgamation of assets of WSPs pertaining to water supply and
sanitation within a particular PWRZ. ‘This is to ensure a unified and comprehensive
Water Supply System and/or Sewerage System tha shall supply water and sanitation
services to the entire PWRZ concemed. As much as possible, a single, unified and
comprehensive Water Supply and/or Sewerage System shall cover all aspects of such
systems, including water resource development, treatment, storage, distribution and
reuse, For this purpose. the initial sum of (en million pesos (Php10,000,000,00) shall
be appropriated to facilitate the amalgamation process and this amount shall be
charged against proceeds from PPP or other arrangements which may be entered as
regards these assets.

the Authority: shall guide the LWUA and the WSPs concerned fo ensure an efficient,
smooth and orderly amalgamation of operations and assets, WSPs undergoing
amalgamation may, subject to existing laws, enter into such arrangements that will
facilitale the management or temporary ownership of their assets pending
amalgamation.

‘The assets of the amalgamated WSPs within a PWRZ shall, subject to just
compensation, be transferred to and held by the, LWUA: Provided that the
Management and ownership of the LWUA over such assets shall be transferred to the
appropriate LWSSC upon the completion of the amalg process. as determined
by the Authority, In the case of special and economic zones and Metro Manila, the
entily exercising jurisdiction over such areas will exercise the aforementioned
authority: For this purpose. the LUA is empowered to acquire, sell. dispose,



contract, change and transfer ownership or control of assets. rights and contracts
conceming WSPs and its assets. The LWUA shall, in the exercise of this
responsibility defer to the guidelines promulgated by the Authority concerning the
amalgamation process.

Section 25. Licensing. Each LWSSC is empowered and encouraged to enter into a
partnership with a qualified Licensee for the provision, operation and maintenance of
the Water Supply System and/or Sewerage System for ils respective PWRZ, through
the issuance of a License, the execution of a PPP Agreement, or any other similar
arrangement: Provided that such partnership shall be made in accordance with the
rules and regulations fo be promulgated by the Authority on the matter, as well as the
provisions ef Republic Act No. 9184, The LWSSC shall secure the endorsement of the
Provincial Government for any partnership under this section

Section 26. Qualifications of Licensee, - Licensees must meet the following
qualifications:

(a) Must be a citizen of the Philippines or corporations or associations organized
under the laws of the Philippines at least sixty percent of the capital stock of
which is owned by such citizens:

(b) Minimum paid-up capitalization of one million pesos (Php 1,000,000,00):

(c) Established track record to be defined by the Authority, and

(A) Any other quali

ations that the Authority may deem appropriate

Section 27. Rights and Duties of Licensees. ~ Licensees shall have the duly to ensure
that ils activities are conducted so as to further the public interest and, in particular,
that they

(a) foster the maintenance and development of efficient, coordinated, and
economic cooperation of their activities:

(b) give priority to FRM and propose measures towards the end of developing the
methods of flood control:

(c) ensure that their Water Supply and/or Sanitation Services are provided in a
diligent, conscientious and workmanlike manner, in accordance with
applicable laws and the standards and practices generally: accepted in the
Philippine and international water supply and/or sanitation industry; and

(@) comply with drinking water quality requirements.

Licensees shall, to the extent allowed by law and specified in the License, have the
right to acquire of lease land and lay or repair water or sewerage mains and other
relevant facilities in public ways, when required fo fulfill their obligations. In as far as
laying or repairing of water or sewerage mains are concemed. the same shall be done

expeditiously and efficiently to avoid contributing to the risk of damage brought about
by flood waters.



Subject to any condition imposed by the Authority, a Licensee may disconnect the
supply of piped water services and/or smitation services to a customer if such
customer defaults in the payment of amount(s) due to that Licensee in respect of water
supplied or sanitation services provided, or for acts of pilferage pursuant to Sections
8, 9, 10, and LI of Republic Act No. 8041. otherwise known as the “National Water
Crisis Act of 1995.” :

Section 28. Mandatory Provisions. Any License issued under this Act shall include
provisions on the following matters:

(a) Incentives and disincentives for Licensees:
(b) Severance of affected emplovees and personnel:

nism in accordance with the Section 32 of this Act:

(c) Dispute resolution mecl

(d) Transferability of License.
case of failure to meet the standard set by the Authority

yement Contract, PPP Agreement or award in
and

(e) Any other provision the Authority or the LWSSC shall deem appropriate to
achieve the stated objectives of this Act

Section 29, Non-Derogation; Effect on Existing Licenses and Similar Arrangements.
Except for what is provided for in Section 7 hereof on the amalgamation of WSPs,
nothing in this Act shall be construed as to derogate any rights arising from existing
Licenses, management contracts, concession agreements and similar arrangements,

Section 30. Revision and Subrogation Mechanisms. ~ Vhe Authority shall have the
power to revise the terms of a License in the event of the Licensee's failure to meet
the quality standards set by the Authority within a period of two (2) years from the
start of its operations after observance of due process. This right includes the right to
replace the current Licensee with another qualified Licensee

Section 31, Mechanism for Seuing Tariffs, Rates and Other Charges.The Authority.
shall formulate an objective, rational and transparent mechanism for fixing and
adjusting Tariffs, rates and other charges imposed by Licensees which (i) allows the
economic viability: of the provision of water and/or sanitation services:(ii) grants the
Licensees a reasonable retum on investments:(ii) encourages the inflow of
investments in the water sector. promotes efficiency and continuous improvement in
Water systems and facilities: (i\) ensures affordable and reasonable rates and fees for
the average consumer: and (1) protects the welfare of consumers.

‘The aforesaid mechanism for fixing and adjusting VariffS, rates and other charges
shall apply conventional and internationally accepted rate-setting methods and shall
consider the following factors. among others

(a) Rational and prudent operating costs of providing water and/or sanitation
services, including a reasonable rate of return on investments.

(b) Costs of debt in domestic and international markets and the cost of equity for
Uulility businesses in the Philippines and abroad andl


(c) Service quality and performance of a Licensee based on key indicators, such
as, but not limited to. water quality. availability, unaccounted for water (or
hon-revenue waler). service coverage, including incentives for Licensees
which achieve specified levels of performance benchmarked against existing
industry data, and disincentives for Licensees which fail to attain the same.

Any escalation on Tariffs, rates and other charges shall be primarily: based upon the
level of compliance with key performance metrics which shall reflect current industry
standards maintained and updated in the Unified Database for the Water Industry, as
set forth in Seetion & of this Act

Section 32, Arhirration. - All disputes, controversies, or disagreements between
LWSSCs and licensed WSPs or private sector partners, except where such involve an
allegation of a criminal act, arising out of, in connection with or in relation to a PPP
Agreement executed pursuant to this Act, which cannot be amicably settled or
resolved through mutual consultations or negotiation among the parties, shall be
finally settled by domestic arbitration in accordance with Republic Act No. 876
(Arbitration Lay), as amended, and Republic Act No.9285 (Allemative Dispute
Resolution Law of 2004), as amended, The decision of the arbitrators shall be final
and conclusive on the patties.

An Arbitration Clause reflecting the foregoing policy shall be included in all PPP

Agreements executed pursuant (0 this Act

Section 33, Lifeline Rate. - In line with the policy of granting universal access to
water services. more particularly to the marginalized sector, the Authority shall
establish a socialized pricing mechanism. This will enable the setting of a lifeline rate
of a targeted subsidy on the basic water consumption of low-income market end-users
who cannot afford to pay at full cost and ensure that the overall tariff rate supports the
Viability of the Licensees, as described in Section 31 of this Act, The Authority; after
due notice and hearing. shall determine the level of basic water consumption and the
discount rate.

Section 34, Missionary Mater Services. ~'Vhe Authority shall encourage and promote
missionary water services or the provision of water services 10 remote, rural and
unviable areas that do not have sufficient or adequate access to water with the end in
view of elevating water services in such areas (o a viable and sustainable level
Missionary water service initiatives shall be funded from the revenues from water
ervices provided in missionary areas and from such charges which may be collected
from all consumers within a PWRZ. subject to implementing regulations which shall
be determined and formulated by the Authority

Section 35, Hater Crisis Provision. — The Autborit~ shall adopt a proactive approach
to avert a water crisis by initiating water conservation efforts and water use efficiency.
incentivizing the use of efficient water distribution systems, utilizing imegrated,
systematic and predictive water management and monitoring systems, encouraging
the financing. consttuction. improvement and operation of water facilities, and
analogous efforts and initiatives in order to increase water supply and improve water
quality, The Authority shall create plans and programs, and issue rules and regulations
to accomplish the foregoing



In the event the President of the Philippines determines that a water crisis. is
impending. Congress may, through a joint resolution, authorize the employment of
emergency mieasures to increase water supply under such terms and conditions as it
may approve. and reorganize the Joint Executive-Legislative Water Crisis
Commission created pursuant to Republic Act No. 8041, otherwise known as the
“National Water Crisis Act of 1995”. to exercise the powers and perform the functions
stated in the said fav

CUAPTER VI
ORGANIZATION

Section 36, The Authority. ~ ‘There is hereby created and established an independent
Authority to be named the Water and Sanitation Regulatory Authority, hereinafer
referred to as the “Authority”, which shall be organized within one hundred eighty
(180) days upon effectivity of this Act, primarily from but not limited to the NWRB
and similar government agencies, offices or bureaus tasked with the allocation,
distribution and preservation of water as a valuable resource.

‘The Authority shall be placed under the administrative supervision of the Office of
the President

Section 37. Powers and Functions of the Authority. ~Vhe Authority, pursuant to
Section 5 of this Act, shall exercise (o the exclusion of other agencies, regulatory
power over all WSPs and for this purpose shall have the following powers and
functions:

(a) Evaluate, review. monitor, examine and approve all
applications for the appropriation, and use of waters, development
of sewerage systems and treatment of wasteyvater,

(b) Formulate policy directions, strategies and targets to meet the
goals and objectives for water sourcing. supply. allocation,
distribution. including preservation, wastewater treaiment and
sewerage development and septic management

(c) Issue and promulgate rules, regulations and guidelines, as
may be necessary. (0 implement and enforce its powers and
functions under this Act:

() Set and enforce just and reasonable technical criteria, methods.
standards. benchmarks and other measurements of service:

(e) Primary jurisdiction in matters relating to the appropriation,
utilization. exploitation, development, control and conservation,
protection of all waters. as well as proper disposal and/or treatment
Of sewage. seplage and wastewater in the country. including
autonomous regions:

(Manage, adimi

er and operate all watersheds:


(g) Establish rules and regulations to monjtor, avoid and provide
remedies for any abuse or anti-competitive or discriminatory act or
behavior by or against any participant in the water supply and
sanitation industry:

(h) Adopt and require that books, records and accounts be kept
and maintained in accordance with the prescribed uniform
accounting system.

G)_ Fix and determine proper and adequate fees for services;
(i) Fix and determine proper and adequate rates of depteciation of

properties and equipment used in water supply and. sanitation
industry:

(k) Impose and collect annual levies determined, as a percentage
Of gross revenue accruing in relation to the licensed activities, and
reasonable fees and surcharges as may de necessary for achieving
the purposes. powers and funetions of the Authority:

(0. Require the submission of reports, documents, testimony and
other Relevant information as set forth in this Act, through
subpoena ad testificandum or duces tecum if necessary

(m) Determine and require the monitoring and submission of such
data, statistics and other information from public and_ private
entities and any or all licensees, as may be necessary, for the
effective and efficient exercise of its duties. functions, powers and
responsibilities:

(0) Investigate, mom proprio or upon complaint in writing, any
matter concerning the operation of the service, and require that
service be provided in proper and suitable manne:

(0) Impose penalties and fines against any Licensee or against its
owners, directors, officers. agents or representatives for any
violation of this Act or of the license, order, rule regulation or
requirement issued by the Authority

{p) Require any Licensee to pay the actual expenses incurred by
the Authority: in any: investigation, if it shall be found that a
Licensee violated any provision of this Act or of the license, order.
tule regulation or requirement issued by the Auth

(q)_Advise. apprise and coordinate with other relevant agencies
of the national or local government on any matter relating to
water supply and sanitation industry:

(1) Deputize agents. whether from the public or private sector, to
assist in the performance of any of the powers and functions of
the Authority E


(5) Upon appeal and after due hearing. appoint an interim or
temporary management committee (0 ensure continuity of service
in case a Service Provider Licensee fails to meet conditions of the
license:

(0 Appoint, hire and maintain adequaté staff and personnel,
advisers, and/or consultants, with suitable qualifications and
experience. as necessary:

(u) Exercise exclusive appellate jurisdiction over appeals from LWSSC
decisions and resolutions regarding contesting rates, levels and quality of
service, fees. fines and penalties imposed in the exercise of an LWSSC's
Powers, functions and responsibilities, as set forth herein where said
cases involve disputes between WSPs, or between customers and WSPs,
an LWSS'

(1) Exercise primary and exclusive jurisdiction over disputes between
LWSSCs and between customers and LWSSCs regarding contesting
rates, levels and quality of service, and such other matters relative to the
exercise of the powers and responsibilities of LWSSCs: and

(4x) Such other incidental powers and functions as may be necessary to
alain the objectives of this Act

Section 38,Niier Resource Regulation ~ When exercising its water resource
regulation functions, the Authority shall be guided by the provisions of Presidential
Decree No. 1067, otherwise known as the Water Code of the Philippines, on
Appropriation of Waters, resolution of cases arising from water use. including
conflicts between water users. as well as any other applicable provisions of the Water
Code and other relevant laws or government issuances,

Section 39. Composition. — All the powers of the Authority: shall be vested in and
eveicised by a Board of Oflicers, a collegial body of nine (9) members. Seven (7)
twembers shall be full-time employees of the Authority: composed of a Chairperson
ams (4) Officers. appointed by the President of the Philippines. Each member,
imehudie the Chairperson shall concurrently head and serve the following
Departments of the Authority: (1) Administration: 2) Registry; (3) Tariff: (4)
gineering and Infrastructure Development; (5) Environmental and Consumer
Protection, (6) Audit and Finance; and (7) Legal “and Enforcement. While the
Femaining (00 (2) officers shall be ex-officio members representing the Department of
Finance and the National Economic Development Authority NEDA") nominated by
the Secretary and the Director-General, respectively

Section 10. Common Qnalifications for Concurrem and I:x-Officio Officers. Each
OMficer, including the Chaiperson must be citizens and residents of the Philippines, at
least thirty five (35) years of age, and of good moral character, recognized integrity
and competence in the field of law, business, commerce. finance, accounting or public
aduinistration, water or utility economics. management, physical or engineering
services, fiydrology ied services. with at least three (3) years actual and
distinguished experience in their respective fields of expertise.



Section 41. Special Qualifications for Concurrent Officers. — In addition to the
qualifications enumerated. the Chairperson, who shall concurrently head the
Administration Department shall be a member of the Philippine Bar with at least ten
(10) years experience in the active practice of law: The Officer who shall concurrently
head the Legal and Enforcement Department shall be a member of the Philippine Bar
with at least ten (10) vears experience in the active practice of law: while the Officer
who shall concurrently head the Audit and Finance Department shall be a certified
public accountant with at least (10) fen years experience in active practice. Additional
requirements and qualifications for the officers, including the Chairperson, may be set
forth under the Implementing Rules and Regulations to be promulgated upon creation
and formation of the Authority in conformity with this Act

Section 42, Prohibition and Disqualification. — The Chairperson and Officers of the
Authority or any of their relatives within the fourth civil degree of consanguinity or
alfinity, legitimate or common law, shall be prohibited from holding any interest
whatsoever, either as investor, stockholder, officer or director, in any company or
entity engaged in the business of transmitting, generating. supplying or distributing
any form of water and must, therefore, divest. through sale or legal disposition, any
and all interests in the water sector upon assumption of office

Section 43. 7erm, ~ The Chairperson and Concurrent Officers of the Board shall be
entitled to a term of seven (7) years; Provided, however. that among the Officers first
appointed upon creation of the Authority, the Chairperson shall serve for a period of
seven (7) yeats, three (3) Officers shall serve for five (5) years and the remaining
three (3) Officers shall serve for four (4) years without reappointment, Provided,
further, that any member whose term has expired, as specified herein, shall serve as
such until his successor shall have been appointed and qualified; Provided, moreover,
that any appointment to fill a vacaney in the Authority arising from death, removal.
retirement or resignation shall be made only for the unexpired term: Provided, finally,
that in no case shall any member serve For more than seven (7) years in the Authority

-Officio Officers of the Authority shall serve at the pleasure of the appointing
power, But in no case shall ex-officio member serve for more than seven (7) years in
the Authority. £x-Officio Ollicets shall participate in the activities of the Authority to
the extent that the participation is not incompatible with their respective positions
with the Department of Finance or NEDA. as the case may be.

Section 44, Security of Fenure. ~ Concurrent Officers of the Authority shall enjoy
Security of tenure and shall not be suspended or removed from office except for just

Section 45. Board Meetings. ~ The Board shall meet at least once a week, or as often
as may be necessary upon the call of the Chairman of the Board or by a miajority of
the Board of Officers to ensure performance of its functions, subject to hol
calamities. emergencies or supervening events

Section 46. Quorum. - The presence of at least five (5) Officers of the Board shall
constitute a quorum. which shall be necessary for the transaction of any business. The
affirmative vote of a majority of the Officers present in a quorum shall be adequate
for the approval of any resolution, decision or action.



Section 47, Administrative Function. - The Chairperson. shall concurrently head the
‘Administrative Department and shall exercise direct executive control and supervision
of the internal operations of the Authority. its Officers, staff and personnel, agents and
representatives. The Chairperson is also authorized to represent the Authority in all
dealings and transactions with other offices, agencies, and instrumentalities of the
Government and with all persons and other entities, private or public, domestic or
foreign

Section 48, The Regisirar ~ ‘There is hereby created and established the Water
Industries and Sewerage Registry, headed by a Registrar, tasked with implementing
the unified database relerred to in Section 8 of this Act. The Registrar, shall conduct
appropriate research and comprehensive studies to provide the necessary technical
inputs to facilitate the Authority in the conduct of its functions

Section 49, Hfficient Database Management, Confidentiality and Non-Disclosure. ~
The Registrar, as custodian of vital information necessary for the development of the
water and sanitation industry, shall develop cost-effective methods and systems for
data accumulation and dissemination while ensuring confidentiality. of sensitive
information, ‘To this end. the Authority shall establish and issue such rules and
guidelines, as may be necessary, to regulate disclosure of information, establish
standards, and enforcement of fines and penalties that would be imposed foi any
violations as set forth in this Act.

Section 50, Fiscal Anionomy and Responsibilin:- The Authority: shall enjoy fiscal
autonomy, subject to regular audits by the Commission on Audit, The amount of thirty’
million pesos (Php 30.000,000,00) is hereby allocated from the existing budget of the
NWRB for the initial operation of the Authority. Any balance shall initially be sourced
fiom the Office of the President of the Philippines. Thereafter, the annual budget
certified by the Authority, through its chairperson, as necessary to defray its expenses,
shall be provided for in the regular or special appropriations and shall be released
automatically and regularly: ‘To ensure the fiscal independence of the Authority, the
Officer and concurrent head of the Finance Department, shall be primarily responsible
for the preparation and disbursement of the budget of the Authority

Section $1. Compensation and Osher Emoluments. ~ The compensation of the
Officers of the Authority and its staff shall be exempt from the coverage of Republic
Act No. 6758, otherwise known as the “Salary Standardization Act”; Provided, that
the salaries of the Authority and its staff shall conform, as closely as possible, to the
principles of R.A. 6758,

For this purpose, the schedule of compensation of the Authority's officers and
employees shall be submitted for approval of the President of the Philippines, ‘The
compensation schedule shall be implemented within six (6) months from the
effectivity of this Act and maybe upgraded by the President of the Philippines, as the
need arises: Provided further, thal in no case shall the compensation of the Authority:
and its stafT be upgraded more than once a year.

Pertinent civil service laws. rules and regulations of the Philippines shall be
applicable to the Authority

Section 52. Board Per Diems and Allowances. - ‘The Officers of the Board shall
receive per diem for each regular or special meeting of the Board actually attended by


them, and, such other allowances as the Board may prescribe, upon approval of the
Secretary of Finance, and in conformity with existing and future legislation.

Section 53. Favironmental and Consumer Protection. ~ A qualified Officer of the
Board, shall concurrently head a deparinent that shall address environmental and
consumer concems in connection with applications, rights, licenses. concessions.
programs, activities, investments and projects approved by or pending with the
Authority

Section 54, Technical Competence, ~ Pursuant to the recommendations of the NEDA.
the Authority shall effectively undertake its vital and comprehensive functions by
enhancing its technical competence through continuing education and tigorous
taining programs in the following areas: arbitration, dispute resolution,
benchmarking, evaluation of technical performance and compliance monitoring,
service and performance standards, performance-based rate-setting reform,
environmental standards. fiscal responsibility. profitability and such other areas as
will enable the Authority to adequately: perform its duties and functions

Section 55. Realignment and Supervision of Existing Water Services Related
Agencies, ~ ‘The Authority shall have primary jurisdiction in matters relating (6 the
appropriation, utilization. exploitation, development, control and conservation,
protection of all waters, as well as proper disposal and/or treatment of sewage,
Seplage and wastewater in the country. including autonomous regions.

Pursuant to this mandate, all existing government agencies, bureaus or offices shall, as
far as practicable, be realigned with and fall under the supervision and control of the
Authority, Within ninety (90) days from the creation of the Authority’s Board and
assumption of a majority of its Officers. the fatter shall closely coordinate with
representatives from the Department of Environment and Natural Resources,
Department of Interior and Local Government. Department of Health, Cooperative
Development Authority, Laguna Lake Development Authority and other relevant
government agencies or offices to implement an effective realignment of functions
and transition of resources.

All government employees and personnel displaced or separated from the set vice as a
result of the restructuting of realignment of or abolition of government offices, shall
be entitled to separation pay’ and other benefits in accordance with existing laws, rules
or regulations, Displaced or separated employees and personel. if qualified, shall be
given preference in the hiring of other government agencies or instrumentalities,

Section 56. Reportorial Requirements, ~ ‘The Authority shall submit an annual report
(6 the the President of the Philippines. Congress and to such other agencies as may be
tequired by law before the end of April of each year. An annual report containing but
hot limited to the following matters: licenses issued, investments obtained, incentives
granted, disputes resolved. revenue generated, cost saved, and such matters relevant to
the perfomance of its functions. The Authority shall make copies of such reports
available to any interested party upon payment of a charge which reflects the printing
costs,

The Authority shall adopt its intemal rules of procedures: conduct hearings and
receive (estimonies, reports and technical advice: iavite or summon by subpoena ad
festificandum any public official. private citizen or any other person to testify before



il, oF require any person by subpoena dices recim to produce before it such records.
reports, documents or other materials as it may require to attain the purposes for
which it is created and fo make an accurate and comprehensive report to the President
and Congress. Any public official or private citizen or entity who willfully and
deliberately refuses without just cause to extend the support and assistance required
by the Authority to effectively attain its objectives shall be punished as set forth in
this Act

CHAPTER VIL
WATER SUPPLY SYSTEM AND SEWERAGE SYSTEM

Section 57. Construction of Sewerage System. — The simultaneous construction of a
sewerage system with the water supply system is encouraged. A water services
provider licensed in a service area shall, subject to the approval of the Authority, be
given an optional license (0 construct and maintain a sewerage system in the same
service area,

Section 88. Hand Over of Winter Supply System and Sewerage System. - (a) Subject to
Subsections (a) and (e), a developer of a new development which is within a service
licensee's water supply distribution area or sewerage services area, as the case may
be, shall, upon the issuance of the certificate of coimptiance of the water supply
system or sewerage sistem or part of the systems by the Authority, hand over the
Water supply system or sewerage system or part of the systems within the
development to the water distribution licensee or the service licensee providing
sewerage services, as the case may be, at no cost, for the purposes set out in
Subsection (¢):

(b) The service licensee shall accept the water supply system or sewerage system or
part of the systems, as the case may be. aller the service licensee is satisfied that the
water supply system or the sewerage system or part of the systems meets the
requirements set out in the approved plans and specifications and standards:

(c) Upon the water supply system or the sewerage system or part of the systems being
haniled over to the service licensee. the service licensee shall operate and maintain
such system:

(d) The developer shall provide or canse the owner of she land to provide the service
licensee access to the walter supply system and sewerage system or part of the systems
for the purposes of operating and maintaining such system: and

(e) The Authority may exempt any developer from the requirements of this section if
the developer can establish that he has the sufficient financial. operational and
echnical capacity to construct. maintain and operate the water supply system or
sewerage system. The Authority shall regularly: assess the developer's water supply
system or sewerage and may revoke any exemption upon notice and hearing,

Section 59. Power 1 Require Premises to he Conmected to Sewerage System. - (a)
The Authority may direct the owner in writing. or if the owner cannot, with
reasonable diligence, be traced. the occupant, of any premises not connected to a
public sewerage system, to construct or install for the premises, within the period
specified in the notice. a private connection pipe of such material or size and at such



°

level as to enable the premises to be properly and effectively: connected to any
sewerage system located within thirty meters from the boundary of the premises, and

(b) If the owner or occupant to whom a direction under Subsection (a) has been issued
fails to comply with the direction within the period specified in the notice. the
Authority or any person authorized by the Authority may construct or install the
private connection pipe or cause the pipe to be constructed or installed and recover the
expenses incurred in the construction and installation of such pipes from the owner or
occupant

Section 60. Power to Reqtire Developer to Connect Development to Public Sewerage
Svstem — (a) The Authority may direct the developer of any development not
connected to a sewerage system. to construct or install for the development, within the
period specified in the notice, a connection pipe of such material or size and at such
evel as to enable the development to be properly and effectively connected to the
sewerage system, and

(b) IF the developer to whom a direction under Subsection (a) has been issued fails to
comply with the direction within the period specified in the notice, the Authority or
any person authorized by the Commission may construct or install the connection pipe
or cause the pipe (0 be constructed.or installed and secover the expenses incurred in
the construction and installation of such pipes fiom the developer.

Section 61. Power so Install or Consirnet Private Sewerage System or Septic Tanke -
(a) The Authority may direct in yriting the owner of any premises, or if the owner
cannot, with reasonable diligence. be traced. the occupant of the premises, to install ot
construct a private sewerage system or septic tank for the premises, as the Authority
deems necessary in accordance with guidelines provided for in the Implementing
Rules and Regulations; and

(b) The cost of the construction or installation of the private sewerage system or septic
ank shall be borne by the owner of the premises, or if the owner or cannot, with
reasonable diligence, be traced, the occupant

Section 62. Power fo Require Private Sewerage System to he Put in Proper Order. -
(a) If the Authority is satisfied that: (i)a private sewerage system, septic tank,
individual internal sewerage piping or common intemal sewerage piping on any
premises or which serves any premises: or (bJa private connection pipe connecting
any premises to a sewerage system, is defective or is not properly maintained or is in
heed of repair. the Authority may issue a notice (0 the owner, of occupant of such
premises or the person responsible for the private sewerage system, septic tank,
individual internal sewerage piping. common intemal sewerage piping or private
connection pipe to have such private sewerage system, septic tank, individual internal
sewerage piping. common internal sewerage piping or private connection pipe
repaired or put in proper order within the period specified in the notice:

(b) IF the Authority is satisfied that, due to any obstruction, any premises on which a
septic tank is situated does not have adequate access for the purpose of desludging the
septic tank, the Authority may issue a notice (0 the owner or occupant of such
premiises to remove such obstruction within the period specified in therein:



(c) If the person to whow a notice issued under Subsection (a) or (b) fails 10 comply
therewith within the period specified. (i) the Authority or any person authorized by the
Authority may. at the expiration of such period, do the work requised in the notice and
may recover the expenses inicurred in doing so fiom the owner, oF occupant: or (ii) the
Authority may direct the service licensee in that sewerage services area to manage
and operate the private sewerage svslem, septic tank, individual internal sewerage
piping. common internal sewerage piping or private connection pipe. as the case may
be, for such period, as the Authority may decide, and to charge the owner, or occupant
for services rendered by thal service licensee: and

(d) For the purposes of Subsection (c\ii), the owner and occupant of the premises
shall grant the service licensee access to the private sewerage system, septic tank,
individual intemal sewerage piping, corimon initenal sewerage piping or private
connection pipe. as the case may be, for the purposes of operating and maintaining the
private sewerage system, septic tank, individual internal sewerage piping, common
internal sewerage piping or private connection pipe, as the case may be.

Section 63. Duty fo Operate and Maintain Private Sewerage System - (a) The owner
‘oF occupant of any premises having a private sewerage system or seplic tank shall: (i)
grant the service licensee or permit holder adequate access to the septic tank for the
purpose of enabling the septic tank to be serviced and deshudged; (ii) cause the private
sewerage system. septic tank, the private connection pipe. individual internal
sewerage piping, common internal sewerage piping and all accessories thereto to be
50 Maintained and kept so as not to be a nuisance or so that it may not be harmful to
health: (iii) cause the septic tank to be destudged and, in the case of a private
sewerage system, to be serviced or maintained by a service licensee or permit holder
at such intervals and in such mmamer as may be prescribed: and (iv) grant the service
licensee or permit holder adequate access to the private sewerage system for the
purposes of enabling the private sewerage system to be inspected, serviced or
maintained, (b) The owner or occupant of any premises. as the case may be, shall be
solely responsible for the maintenance, refurbishment or replacement of the individual
internal sewerage piping or the common internal sewerage piping

Section 64. Contract for Provision of Sewerage Services. ~'Vhe owner or occupant of

ny premises to whom seneraye services is provided shall be deemed, upon the
provision of sewerage services to that premises, to have contracted with the service
licensee providing sewerage services for the provision of sewerage services

CHAPTER VIE
DEVELOPMENT OF EFFICIENT, ECOLOGICAL AND SUSTAINABLE,
TECHNOLOGIES AND ENVIRONMENTAL PROTECTION

Section 65, Incentives for Integration of Wastewater Treatment Collection Facilities
in Water Supply and Sewerage Systems. - An incentive scheme is hereby provided for
the purpose of encouraging WSPs to integrate westewater Geatmenticollection and
treatment facilities in their water supply and sewerage systems.

Section 66. Zax and Dnity b:xemption of Donations. Legacies and Gifis. ~ All legacies.
gifls and donations to providers of water supply and sanitation services for the support
‘and maintenance of the program for effective water quality: management shall be



exempt from donor's tay and shall be deductible from’ the gross income of the donor
for income tax purposes

Imported articles donated to, or for the account of any provider of water supply and
sanitation services specifically for the exclusive use of the provider in its water
quality management programs shall be exempted from the payment of customs duties
and applicable intemal revenue taxes

Wastewater treatment and/or installation of water pollution control devices shall be
classified as pioneer and preferred areas of investment under the Board of
Investments annual priority plan and shall enjoy the applicable fiscal and non-fiscal
incentives, as may be provided for under the Omnibus Investment Code, as amended

Section 67. Financial Assistance Program, - Government financial institutions such
as the Development Bank of the Philippines, Land Bank of the Philippines,
Government Service Insurance System, and such other government institutions
providing financial services shall, in accordance with and to the extent allowed by the
enabling provisions of their respective charters or applicable laws, accord high
priority 10 extend financial services to providers of water supply and sanitation
services engaged in sewage collection and treatment facilities.

Section 68. Avuilability of Technologies Developed Under the Incemive Schemes of
the Clean Water Act. ~ Vo the extent that thes do not duplicate the incentives provided
under this Act, technologies. projects, processes and techniques in water quality
management developed under the incentive schemes of Republic Act No. 9275, or the
Philippine Clean Water Act of 2004, shall be made available to providers of water
supply and, sanitation services that will integrate the said technologies, projects,
processes and techniques in their water supply and sewerage systems free of
applicable taxes

Section 69. Environmental Protection. ~ Pauticipants in the provision of water supply
and sanitation services shall comply with all environmental laws, rules, regulations
and standards promulgated by the Department of Environment and Natural Resources
including. in appropriate cases, the establishment of an environmental guarantee fund

CHAPTER TL
PS AND PENALTIES

INI

Section 70, Prohibited Acts. - ‘the following acts shall be penalized by suspension or
tevocation of the violator's license or other right to the use of water and/or a fine of
Not exceeding One Million Pesos (Php 1.000,000.00), in the discretion of the
Authority

(a) Non-compli

with reper

les and requirements:

(b) Refusal to sub

permit

samnination;

(6) Falsification or tanyesin
the fiscal and non-fis.

aor official records to avail of
ines ves provided-under this Act:



(a) Non-compliance with the established guidelines and _ standards
promulgated by the Authority:

(e) Appropriation of subterranean oF ground water for domestic use by an
overlying landowner without registration required by the Authority:

(0) Failure to comply with any of the terms or conditions in a water permit ot
a water rights grant:

(g) Unauthorized use of water for a purpose other than that for which a
license, right or permit or concession was granted:

(hb) Construction or repair of any hydraulic work or structure without duly
approved plans and specifications, when required.

(i) Failure to install a regulating and measuring device for the control of the
volume of water appropriated, when required:

(i) Unauthorized sale, tease, or transfer of water and/or water rights:

(k) Failure to provide adequate facilities to prevent or control diseases when
required by the Authority in the construction of any work for the storage,
diversion, distribution and wlilization of water, and

() Violation of or non-comp!
Authority

ice with any’ crder, rule or regulation of the

Section 71. Fines and Penalties. ~ Any violation of the mandatory provisions of this
Act shall be punishable by imprisonment of six (6) vears and/or fine not exceeding
‘one million pesos (Php 1,000,000.00). In the case of juridical persons, the President,
the Chief Executive Officer and other responsible corporate officers shall be held
liable for any violation of this Act committed by the juridical person, duough its
employees, agents and representatives

CHAPTER X
TRANSETORY AND FINAL PROVISIONS,

Section 72. Staniory Consiruction. - This Act shall, unless the context indicates
otherwise. be construed in favor of the establishment, promotion, preservation of
competition and people empowerment so that the widest participation of the people,
whether direct or indirect, is ensured.

Section 73. Implementing Rules and Regulations. - The Board shall, in consultation
with relevant public and private stakeholders within the water services industry,

promulgate the Implementing Rules and Regulations (IRR) of this Act within six (6)
months from the effectivity of this Act

Section 74, Injunction and Restraining Onder. - The implementation of the provisions

of this Act shall not be restrained or enjoined except by an order issued by the
Supreme Court of the Philippines


Section 75. Separability Clause. - If for any reason, any provision of this Act is
declared unconstitutional or invalid, the other parts or provisions hereof which are not
affected thereby shall continue to be in full force and effect.

Section 76, Applicability and Repealing Clause. The applicable provisions of
Presidential Decree No. 1067, otherwise known as the “Water Code of the
Philippines”, Republic Act No, 8041, othermise known as the “National Water Crisis
Act of 1995”, Act No. 4062, otherwise known as the “Water Power Act”. Republic
Act No. 6234, as amended, creating the MWSS. Presidential Decree No 198, as
amended, creating the LWUA, Republic Act No. 7160, otherwise known as the “Local
Government Code”, and Republic Act No. 10149 otherwise known as the “GOCC
Governance Act of 2011” shall continue to have full force and effect except in so far
as inconsistent with this Act

All laws, orders. rules aiid regulations, or portions thereof, inconsistent with this Act
are hereby repealed or modified accordingly

Section 77. :ffectivity Clouse. ~ This Act shall take effect on the fifteenth day
following its publication in at least {%.0 (2) national papers of general circulation

Approved,