The LWUA Primer (revised)

A faucet in every home. A glass of clean and safe drinking water in every dining table. A population untouched by water-borne diseases. Visions struggled for by the Filipino people – both government and the governed — for our country’s provincial cities and communities.

But while early water supply development efforts expended by the government were genuine, these simply did not take off as expected. Earlier approaches were centralized, thus, responsiveness to local conditions or developments suffered.

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Then, in the early 70s, a change in provincial water supply development strategy was put into place. Presidential Decree No. 198, also known as “The Provincial Water Utilities Act of 1973,” was signed into law on May 25, 1973.

That law created the Local Water Utilities Administration or LWUA in the national level and provided for the establishment of Water Districts in provincial cities and municipalities. Thus would be put into motion a development partnership called the “LWUA-Water District Concept” that would revolutionize water supply provision in the countryside. In 1987, LWUA’s mission and area of responsibility was expanded to include provision of Level II service (communal faucet system) through the Rural Waterworks and Sanitation Associations (RWSAs) in areas where Level III systems (individual household connection) were not feasible.

What is LWUA?

The Local Water Utilities Administration, more commonly referred to as LWUA, is a government-owned and controlled corporation (GOCC) with a specialized lending function mandated by law to promote and oversee the development of water supply systems in provincial cities and municipalities outside of Metropolitan Manila. It is run by an Administrator, also the Chief Executive Officer, under the guidance of a five-man Board of Trustees where the Administrator is an ex-officio member.

What is a Water District (WD)?

A water district is a local corporate entity that operates and maintains a water supply system in one or more provincial cities or municipalities. It is established on a local option basis and, like LWUA, is classified as a government-owned and controlled corporation or GOCC. A WD is run by a five-man Board of Directors through a General Manager.

As a lending source, what makes LWUA advantageous over other sources?

LWUA is the only lending institution – whether in the public or private sector — with the financial, technical and institutional development competence to enable a water district’s water supply project to generate return-on-investments.

LWUA treats countryside water supply development not simply as a financial venture, nor as a mere waterworks construction project, but as a comprehensive development endeavor that factors in the community’s economic and cultural nuances, among other things, to assure residents of a water supply service that is both reliable and lasting. LWUA’s comprehensive expertise has been responsible for turning Philippine countryside water supply development into the working model for Asia that it is today. Water Districts benefit from this comprehensive expertise through LWUA’s various assistance programs.

In what aspects of water supply development is LWUA the acknowledged expert?

LWUA is the only Philippine water supply institution with full expertise in developing Level III (individual household connection) water supply systems. Its competence spans the financial, technical, institutional development and regulatory aspects of water supply development. It is also an expert in developing Level I (communal well) and Level II (communal faucet) systems. This expertise is often availed of by other government institutions involved in the development of these water supply systems.

What is LWUA’s financial expertise?

LWUA since 1973 has been financing water supply projects through funds secured from national government subscriptions, bilateral and multilateral fund sources, and from internally-generated funds and second generation funds. Recently, government and private financing institutions have been tapped as new fund sources. Traditionally, these sources are inaccessible to water districts. LWUA then allocates and relends these funds to water districts at competitive terms. Some funds, meanwhile, are extended as grants. Under recent enhancements to its charter, LWUA is also tasked to assist water districts graduate into creditworthy status and access non-traditional sources of funds.

The LWUA know-how also includes the determination and implementation of socially responsive and financially viable water rates, and tariff review to determine its adequacy to meet WD expansion needs.

What types of loans are open to Water Districts?

LWUA offers four loan windows to water districts (check out www.lwua.gov.ph for details).

  • Loan Window 1 is open to Level III (individual household connection) and Level II (communal faucet) projects intended for the comprehensive development, repair or rehabilitation of new or existing water supply systems with interest rates ranging from 8.5-15 % p.a. and a 25-year repayment scheme that includes a 4-year grace period. Available loan is from 40-100 % of project cost.
  • Loan Window 2 is open to projects intended to generate new service connections or for watershed management, and to special loans intended for emergency purposes. Available loan is from 50-100 % of project cost and interest rates are based on prevailing applicable rates.
  • Loan Window 3 is open to projects intended to enhance water supply facilities or commercial operations. Maximum loan available is set to 100% of project cost while the repayment period is either the equivalent to the life of asset acquired or repayment period contracted with the fund source.
  • Loan Window 4, also called the Project Development and Efficiency Improvement Fund (PDEIF), is intended for project development and for efficiency improvement activities such as non-revenue water reduction. The former is available to all water districts and is offered at 6.56 % annual interest, the latter only to “semi-creditworthy” and “pre-creditworthy” water districts at interest rates of 8.2-8.7 % p.a.
  • Special Loan Window is the latest lending facility of LWUA. It is intended for water district expansion projects, well drilling and development of water sources. Maximum loan amount is P10 million and carries a 7.5% p.a. interest rate for a 10-year loan and 9% p.a. for a 15 to 20-year loan.


What is LWUA’s technical expertise?

LWUA’s teams of engineers and technicians have undergone extensive studies and trainings both here and abroad, and have gained an unequalled competence in water supply and sanitation development through actual experiences in the field. Their expertise includes all phases of planning, design, construction supervision, and operations and maintenance supervision, including identification and development of water sources and systems efficiency improvement.

What is LWUA’s institutional development assistance program?

With the overall success and sustainability of a water district in mind, LWUA extends institutional development assistance in the form of advisory and managerial services; transfers policy-making, managerial and technical competence to the pertinent WD personnel through training interventions; designs and provides water districts with commercial practices systems for a smoother commercial operation.

How is a Water District formed?

A duly-organized water district is formed through the following process:

One: LWUA conducts preliminary talks and consultations with interested local government entities.

Two: The local government conducts public hearings to arrive at a consensus on whether to form a water district or not.

Three: The local legislative body (the Sangguniang Bayan/Lungsod or Sangguniang Panlalawigan, as the case may be) secures nominations for candidates for the water district board of directors from business, civic, professional, education and women sectors of the community concerned.

Four: The Sanggunian secretary collates all nominations and forwards the same to the appointing authority.

Five: The Mayor or Governor appoints the directors.

Six: The local legislative body deliberates and enacts a resolution to form a water district stating therein the name and terms of office of the duly appointed board of directors.

Seven: The Mayor or Governor approves resolution, submits the same to LWUA.

Eight: LWUA reviews the resolution to determine compliance with Presidential Decree No. 198 (Provincial Water Utilities Act of 1973) and LWUA requirements.

Nine: If the resolution complies with requirements, LWUA issues a Conditional Certificate of Conformance (CCC), a water district is born and becomes eligible to avail of LWUA’s comprehensive assistance program.

Why do consumers pay for water?

Water is considered an economic good, and thus, has a price. Water users pay for the services extended by the WDs in bringing water to their respective homes, keeping that water safe, and providing that water whenever it is needed. Sustained water service depends on the consistent payment by the consumers of their water bills.

How are water rates determined and implemented?

A water district’s water rate is determined by the following factors:

  • cost of systems expansion
  • operation and maintenance cost
  • number of connectors
  • debt service needs of the water district
  • ten percent reserves
  • operating efficiency

Water rates are implemented only after they are presented in a public hearing and after review and approval by LWUA.
To ensure that the average water user in the province can afford the water service provided by the water district, water rates are set through a socialized pricing scheme. Big water users such as industries and commercial establishments are charged higher rates which, in effect, subsidizes the smaller but more numerous water consumers. In addition, a lifeline rate ceiling is also set, equivalent to 5% of the annual income of the low income group.

How do water supply programs benefit very poor families?

While every effort is made to ensure that water service reaches the most number of families, there are still those who can’t afford this basic need. LWUA, in partnership with WDs nationwide, also implements Level I water system projects or point source development such as shallow wells, deepwells and spring systems as well as Level II projects or communal faucets where the standard Level III systems are not feasible.

What benefits does a community derive from an efficient water district?

A community or group of communities served by an efficient water system benefits from the following:

  • Improved health and sanitation. Water users are provided with a first line of defense against water-borne diseases since only disinfected and potable water is made available to every water consumer’s home.
  • Better standard of living. A water district frees water consumers from the time- and effort-consuming chore of fetching water from unsafe community wells. With more time on their hands, water users are able to pursue productive endeavors or engage in leisurely activities.
  • Fire protection. The community is provided with a reliable fire-fighting capability.
  • A helping hand during inopportune times. Since a WD is community-based and service-oriented, it becomes another of the community’s reliable partners during social activities or, more importantly, during calamities.
  • More responsible citizens. The professional and businesslike operation of a water district encourages the formation and development of positive consumer values among its clients. The culture of paying for every drop of water consumed is reinforced and develops a sense of conservation for a natural resource. Discipline, too, is upheld since consumers are made to understand that they have to pay their dues on time. Majority of active water districts nationwide boasts of a high collection efficiency without the need for bill collectors.
  • More development projects for the community. A water district frees the local government from the problems of operating and maintaining the community’s water system, and from subsidizing the operations of a utility. This enables the concerned local government to direct its efforts and resources to other equally urgent projects such as roads and school buildings.
  • More economic opportunities. An efficient water system in a community attracts more investors and stimulates commercial activities.
  • Additional jobs and better economic opportunities become available to residents.
  • Higher land values. The price of real estate properties in a community increases once a Level III (individual household connection) water system becomes accessible.