Registered With The CDA*
*Paper Mr. Pete Ilagan, President of NASECORE, Inc. presented during the Consumers Watch held on November 22, 2005 at Governor Corazon L. Cabagnhot Training Center, Kalibo, Aklan.
Electric Cooperatives (ECs) have been under the direct control and supervision of NEA under PD 269, as amended by PD 1645, for more than 30 years now with the role of providing financial, institutional, and technical assistance. In view of this and in anticipation of the implementation of open access and retail competition, we believe that the independence and autonomy of the electric cooperatives are not only necessary but long-overdue.
ECs will never grow to become a viable business organization if it will continue to be dependent upon NEA. In truth and in fact, this relationship between NEA and the electric cooperatives only served the interest of NEA which have outlived its very purpose and that of the electric cooperatives. The relationship has become one that provides mutual protection.
While NEA has the powers under PD1645, amending PD269, to control and supervise the ECs, it does not have the capability to do so, thus allowing the EC management to run the electric cooperatives like it is their own. Unless, consumers take the initiative to come out and formally file a complaint against the management of an EC, NEA does not take the initiative to take action against EC irregularities discovered through the regular management and financial audit conducted by NEA.
A case in point was the complaint of the Castillejos Consumers Association of Zambales which filed a complaint against the Board of Directors and GM of Zameco II. The complaint was based on the management and financial audit of NEA of the subject EC and yet it was the consumers and not NEA that filed the complaint. Another instance is the case filed by Mr. Pete L. Ilagan in 2004 against the Directors and some Managers of Leyte II Electric Cooperative in Tacloban City for allowing the construction of a new building worth Php Twelve Million Five Hundred Thousand Pesos without any Board Resolution authorizing such construction. Again, it was a consumer that took the initiative to expose the irregularity and not NEA.
The respective position paper of NEA and the Philippine Association of Rural Electric Cooperatives (Philreca) will attest to the observation and conclusion that NEA will never let go of the “goose that lays the golden egg” and electric cooperatives will not welcome CDA registration because it will open them to the members’ scrutiny which will help curb irregularities and mismanagement.
Thus, registration with the Cooperative Development Authority is necessary in order to make electrc cooperatives prepare for the advent of open access and retail competition.
Hereunder are some reason and advantage why we want ECs to be registered with the CDA:
1. CDA registration of ECs will make electric cooperative autonomous and independent like any regular business organization. As such, an environment will be in place where its management will have to start to learn to deciding what is best for its member-owners and how it can comply with the mandate of the EPIRA on distribution utilities which will remain as regulated businesses. The EC management can come up with new policies that will shape its new character and it to operate viably in a restructured power industry;
2. CDA registration will grant ECs local tax and import tax exemptions. This will be a factor that can keep rates from rising;
3. It will allow the introduction of a new culture where the member-owners will have easy and open access to the records of the ECs, thus allowing transparency. This will also allow member –owners to have a say in the policy-making role of the Board of the Directors which can be ventilated during the general assembly. This well help discourage people from seeking position as Directors once they know that there will be transparency and accountability.
4. It will introduce a paradigm shift that will compel the EC management to learn to recognize that they are accountable to the member-owners of the coop. General assemblies of CDA registered cooperative present major plans and projects, like expansion projects, of the coops during general assemblies for discussion and approval by its member-owners. This is not done in the NEA registered EC general assemblies. Policies of ECs come through NEA resolutions.
5. CDA registration will have the effect of immediately recognizing the joint ownership of the EC by its member-owners who can provide the much-needed capital build up for the EC in order to comply with the EPIRA mandate for the distributors to upgrade their respective system in order to provide safe, reliable, quality and efficient service. This is in line with the provision under Section 2 (d) which seeks to enhance the inflow of private capital and broaden the ownership base of the power generation, transmission, and distribution sectors;
6. CDA registration will allow cooperatives to identify and access various sources of capital, including donations, and financing for its additional capital requirements. Under PD 269, as amended by PD 1645, ECs seeking to obtain loans outside of NEA will have to ask the latter’s approval before it can avail financial assistance from other lending institutions.
7. It will free electric cooperatives from the dictates of NEA and pressure and threats from politicians especially in the acquisition of equipments and appointments/ employments in the coop. This decision should be left entirely to the EC management who should be made accountable to its member-owners;
8. Systems loss will be easier to address if the consumers are made to understand that they are the joint owners of the EC and collections effort will, likewise be improved. Politicians will naturally shy away from interfering if government control is removed from the ECs;
We support the mandatory registration of ECs with the CDA in the Enrile Bill on the following grounds;
1. The current provision under Section 57 of the EPIRA giving option to the electric cooperative to be registered with the CDA or as a stock corporation to be registered under the SEC will never work. Consider this: In 1990, upon the passage of the Cooperative Code of the Philippines, NEA and CDA within a three (3) year transition period. NEA being the one exercising control and supervision of all ECs took the lead in the preparation of the Omnibus Rules and Regulations for the Registration of electric Cooperatives with the CDA (ORREC). During this time, the ECs enjoyed a provisional registration with the CDA allowing them to enjoy the benefits, like local and import tax exemptions.
Unfortunately, the three (3) year transition period had lapsed and the ORREC was approved for implementation only in 1996. However, this ORREC which was prepared mainly by NEA directed the 114 ECs under it through a Memo to conduct their respective referendum and ask the consumers to choose either “to convert from a non-stock, non-profit electric cooperative into a stock and profit oriented electric cooperative or NOT.
This question was not contemplated upon in Section 122 of the Cooperative Code of the Philippines (RA6938) where it states, “Electric Cooperatives shall be covered by this Code.” And prior to the referendum, NEA and the EC management came out with a position paper rejecting the ECs registration with the CDA. In fact, out of the 114 electric cooperatives under it, records show that only 28 ECs conducted its own referendum and only one had a quorum. This only shows that NEA prepared an ORREC that ensure that not a single electric cooperative will be registered with the CDA.
Consider also the provision of Section 57 of EPIRA that gives option to electric cooperatives. Four years had passed since the passage of EPIRA and yet not a single electric cooperative had its referendum to ask its member-consumers of their individual option. We suggest that Senate Committee on energy and the JCPC look into this to find out the reason why?
2. The use of the ECs under NEA of the word “cooperative” makes the management liable under Artcle 124 of the Cooperative Code which prohibits the use of the word” cooperatives” unless duly registered as a cooperative under the Cooperative Code of the Philippines. The officers and directors shall, upon conviction, each suffer a penalty of imprisonment for one (1) year and a fine not exceeding One Thousand Pesos (1,000.00) or both at the discretion of the court.
3. NEA does not have the capability to provide the technical, institutional and financial capabilities as shown by the condonation of more than PhP eighteen billion (P18B) of electric cooperatives debt under the EPIRA. The preference of cooperatives to remain under NEA is a clear proof of NEA’s failure to develop the management of ECs to become mature and self-reliant. We can only liken this attitude of EC management opting to remain with NEA to a thirty-year old son who, after getting a college degree, still wants to remain much dependent upon all his needs from his father. With this set-up, ECs will never be prepared for the entry of competition. /MP
ECs will never grow to become a viable business organization if it will continue to be dependent upon NEA. In truth and in fact, this relationship between NEA and the electric cooperatives only served the interest of NEA which have outlived its very purpose and that of the electric cooperatives. The relationship has become one that provides mutual protection.
While NEA has the powers under PD1645, amending PD269, to control and supervise the ECs, it does not have the capability to do so, thus allowing the EC management to run the electric cooperatives like it is their own. Unless, consumers take the initiative to come out and formally file a complaint against the management of an EC, NEA does not take the initiative to take action against EC irregularities discovered through the regular management and financial audit conducted by NEA.
A case in point was the complaint of the Castillejos Consumers Association of Zambales which filed a complaint against the Board of Directors and GM of Zameco II. The complaint was based on the management and financial audit of NEA of the subject EC and yet it was the consumers and not NEA that filed the complaint. Another instance is the case filed by Mr. Pete L. Ilagan in 2004 against the Directors and some Managers of Leyte II Electric Cooperative in Tacloban City for allowing the construction of a new building worth Php Twelve Million Five Hundred Thousand Pesos without any Board Resolution authorizing such construction. Again, it was a consumer that took the initiative to expose the irregularity and not NEA.
The respective position paper of NEA and the Philippine Association of Rural Electric Cooperatives (Philreca) will attest to the observation and conclusion that NEA will never let go of the “goose that lays the golden egg” and electric cooperatives will not welcome CDA registration because it will open them to the members’ scrutiny which will help curb irregularities and mismanagement.
Thus, registration with the Cooperative Development Authority is necessary in order to make electrc cooperatives prepare for the advent of open access and retail competition.
Hereunder are some reason and advantage why we want ECs to be registered with the CDA:
1. CDA registration of ECs will make electric cooperative autonomous and independent like any regular business organization. As such, an environment will be in place where its management will have to start to learn to deciding what is best for its member-owners and how it can comply with the mandate of the EPIRA on distribution utilities which will remain as regulated businesses. The EC management can come up with new policies that will shape its new character and it to operate viably in a restructured power industry;
2. CDA registration will grant ECs local tax and import tax exemptions. This will be a factor that can keep rates from rising;
3. It will allow the introduction of a new culture where the member-owners will have easy and open access to the records of the ECs, thus allowing transparency. This will also allow member –owners to have a say in the policy-making role of the Board of the Directors which can be ventilated during the general assembly. This well help discourage people from seeking position as Directors once they know that there will be transparency and accountability.
4. It will introduce a paradigm shift that will compel the EC management to learn to recognize that they are accountable to the member-owners of the coop. General assemblies of CDA registered cooperative present major plans and projects, like expansion projects, of the coops during general assemblies for discussion and approval by its member-owners. This is not done in the NEA registered EC general assemblies. Policies of ECs come through NEA resolutions.
5. CDA registration will have the effect of immediately recognizing the joint ownership of the EC by its member-owners who can provide the much-needed capital build up for the EC in order to comply with the EPIRA mandate for the distributors to upgrade their respective system in order to provide safe, reliable, quality and efficient service. This is in line with the provision under Section 2 (d) which seeks to enhance the inflow of private capital and broaden the ownership base of the power generation, transmission, and distribution sectors;
6. CDA registration will allow cooperatives to identify and access various sources of capital, including donations, and financing for its additional capital requirements. Under PD 269, as amended by PD 1645, ECs seeking to obtain loans outside of NEA will have to ask the latter’s approval before it can avail financial assistance from other lending institutions.
7. It will free electric cooperatives from the dictates of NEA and pressure and threats from politicians especially in the acquisition of equipments and appointments/ employments in the coop. This decision should be left entirely to the EC management who should be made accountable to its member-owners;
8. Systems loss will be easier to address if the consumers are made to understand that they are the joint owners of the EC and collections effort will, likewise be improved. Politicians will naturally shy away from interfering if government control is removed from the ECs;
We support the mandatory registration of ECs with the CDA in the Enrile Bill on the following grounds;
1. The current provision under Section 57 of the EPIRA giving option to the electric cooperative to be registered with the CDA or as a stock corporation to be registered under the SEC will never work. Consider this: In 1990, upon the passage of the Cooperative Code of the Philippines, NEA and CDA within a three (3) year transition period. NEA being the one exercising control and supervision of all ECs took the lead in the preparation of the Omnibus Rules and Regulations for the Registration of electric Cooperatives with the CDA (ORREC). During this time, the ECs enjoyed a provisional registration with the CDA allowing them to enjoy the benefits, like local and import tax exemptions.
Unfortunately, the three (3) year transition period had lapsed and the ORREC was approved for implementation only in 1996. However, this ORREC which was prepared mainly by NEA directed the 114 ECs under it through a Memo to conduct their respective referendum and ask the consumers to choose either “to convert from a non-stock, non-profit electric cooperative into a stock and profit oriented electric cooperative or NOT.
This question was not contemplated upon in Section 122 of the Cooperative Code of the Philippines (RA6938) where it states, “Electric Cooperatives shall be covered by this Code.” And prior to the referendum, NEA and the EC management came out with a position paper rejecting the ECs registration with the CDA. In fact, out of the 114 electric cooperatives under it, records show that only 28 ECs conducted its own referendum and only one had a quorum. This only shows that NEA prepared an ORREC that ensure that not a single electric cooperative will be registered with the CDA.
Consider also the provision of Section 57 of EPIRA that gives option to electric cooperatives. Four years had passed since the passage of EPIRA and yet not a single electric cooperative had its referendum to ask its member-consumers of their individual option. We suggest that Senate Committee on energy and the JCPC look into this to find out the reason why?
2. The use of the ECs under NEA of the word “cooperative” makes the management liable under Artcle 124 of the Cooperative Code which prohibits the use of the word” cooperatives” unless duly registered as a cooperative under the Cooperative Code of the Philippines. The officers and directors shall, upon conviction, each suffer a penalty of imprisonment for one (1) year and a fine not exceeding One Thousand Pesos (1,000.00) or both at the discretion of the court.
3. NEA does not have the capability to provide the technical, institutional and financial capabilities as shown by the condonation of more than PhP eighteen billion (P18B) of electric cooperatives debt under the EPIRA. The preference of cooperatives to remain under NEA is a clear proof of NEA’s failure to develop the management of ECs to become mature and self-reliant. We can only liken this attitude of EC management opting to remain with NEA to a thirty-year old son who, after getting a college degree, still wants to remain much dependent upon all his needs from his father. With this set-up, ECs will never be prepared for the entry of competition. /MP
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