Sword of Damocles

A RECOMMENDATION of the Department of Energy (DOE) to revoke the franchises of some electric cooperatives has caused an uproar among industry stakeholders, particularly the 17 ECs cited by the agency.

The DOE’s move, however, was viewed as a wake-up call to ailing cooperatives that continue to deliver poor services.

“It’s more of a wake-up call. The market on unserved areas has been there but the ECs failed [to deliver]. ECs have been around [and are] older than Epira [Electric Power Industry Reform Act]. Access to electricity should not be denied,” commented Laban Konsyumer Inc. President Victor Dimagiba in an interview.

Energy Secretary Alfonso Cusi said the consumers deserve nothing less. The ECs, however, failed to carry out their mandate for various reasons. These include inefficient management, corruption, unnecessary political interference, as well as institutional conflicts.

“It’s been too long already. Matagal na rin deprived ang mga kababayan natin sa probinsya. [Our countrymen in the regions have long been deprived]. We can’t afford further delay. Kawawa naman ang mga tao at hanapbuhay [Let’s consider the welfare of the consumers and their livelihood],” Cusi said in a text message on Wednesday night when asked about the ongoing performance review of all ECs.

However, the Philippine Rural Electric Co-operatives Association Inc. (Philreca) said the poor performance of some ECs can be attributed to the following: the energy chief has consistently declined restoring budget cuts to the government’s sitio electrification program; he favored the entry of for-profit corporations in the electrification sector versus supporting ECs that are experiencing different kind of challenges; and, he has never engaged the ECs to any dialogue or meeting with an open mind so as to come up with solutions.

THE energy chief ordered a performance review of all ECs’ compliance with the service requirements of their respective franchises, the DOE said in its February 1 statement. 

The statement, however, did not mention anything about the recommendation of Cusi to House Speaker Gloria Macapagal-Arroyo regarding the cancellation of the franchise of 17 “underperforming, financially and technically distressed electric cooperatives.”

On January 30, the BusinessMirror reported Cusi’s recommendation letter dated January 11. On February 1, the DOE statement was issued. 

There was no mention of the recommendation in the statement because, as it turns out, the DOE recalled the recommendation letter.

“The earlier recommendation to Congress [was] withdrawn two days ago. The DOE sees the need to further evaluate and assess the present status and performance of the 17 ECs,” said DOE Undersecretary Felix William Fuentebella on February 1.

THE 17 ECs whose franchises were recommended for cancellation are Abra Electric Cooperative, Pampanga III Electric Cooperative Inc., Occidental Mindoro Electric Cooperative Inc., Oriental Mindoro Electric Cooperative Inc., Palawan Electric Cooperative, Camarines Sur III Electric Cooperative Inc., Albay Electric Cooperative Inc., Masbate Electric Cooperative Inc.,  First Catanduanes Electric Cooperative Inc., Ticao Island Electric Cooperative Inc., Zamboanga City Electric Cooperative Inc., Basilan Electric Cooperative Inc., Sulu Electric Cooperative Inc., Tawi-Tawi Electric Cooperative Inc., Maguindanao Electric Cooperative Inc. and Lanao del Sur Electric Cooperative Inc.

Cusi said his recommendation is pursuant to Section 46 of Republic Act 9136 and based on the submission of the National Electrification Administration (NEA).

Philreca said the endorsement was “done in haste” because the same endorsement was recalled.

The DOE, Philreca stressed, should have conducted an evaluation and assessment on the status and performance of these cooperatives in the first place. “While we believe that recalling and revoking the original endorsement is the right thing to do, we cannot help but express our sentiments because his [Cusi’s] actions have already caused significant damage and irreparable negative impression to the ECs.”

Philreca claimed the endorsement letter to the House of Representatives and the DOE statement were meant “to manipulate the mindset of the public for them to think that the electric cooperatives are not performing well. And with this comes the justification [for] the entry of private, for-profit and zero-experience corporations.”          

PHILRECA is hoping that Cusi would be just and fair in assessing the ECs’ accomplishments and challenges. “We hope that the DOE would see how the electric cooperatives have been operating in areas no private distribution utility has dared to enter before.”

Cusi, for the DOE’s part, gave assurances of due process for all ECs in the ongoing review.

“The review will be an inclusive process. We will ask the ECs to identify their main challenges and work with them in determining long-term and sustainable solutions. For transparency purposes, the results of the review will be made available to the public,” said Cusi.

Depending on the review’s findings, task forces may be created to assist underperforming ECs.

For nonperforming ECs, on the other hand, the DOE may recommend the cancellation of their franchises. “For those extremely dire cases, the government can no longer ignore the negative impact on citizens. Other reasonable and legal options, as provided in Republic Act 10531, or the National Electrification Administration law, must be considered,” he warned. 

He did not say when the review would be concluded. “I don’t like to preempt the findings and recommendation of the task force,” Cusi said. 

But the review, he stressed, is meant to fast-track the government’s electrification program. “The objective is to attain 100-percent electrification by 2020. One that is stable, reliable and affordable. That’s the objective and the task force knows the urgency and will not waste time,” said Cusi.

SENATE Committee on Energy head Sherwin Gatchalian agrees that the DOE should hold EC and distribution utilities accountable in their services to consumers by reviewing their technical and financial performance. 

“Panahon na rin para i-assess ng Kongreso kung dapat bang magpatuloy sa pag-operate ang mga nonperforming electric co-ops at private distribution utilities sa pamamagitan ng pagsuri sa performance ng mga ito [It’s high time that Congress assessed whether or not to allow the operation of nonperforming ECs and private distribution utilities through an objective performance review].  I believe Congress’s assessment will impose greater accountability on these underperforming distribution utilities to the benefit of the consumers,” said Gatchalian in a text message on Wednesday night.

The senator cited data from the NEA indicating there are at least seven ailing ECs, or those with D rating, and at least 10 underperforming ECs—all to the detriment of power consumers.

However, Gatchalian said the DOE should not have recommended yet any move to franchise cancellation. “To be fair to the ECs, however, the DOE should have a clear policy and procedure on the recommendation for revocation before actually submitting their recommendation to Congress.”

CUSI has, likewise, requested the NEA to submit the technical and financial performance reports of ECs for the last five years.

In addition, ECs will also be asked to submit their road maps and strategies for improving their services, operations and economic viability in the next three years. 

The NEA, a government-owned and -controlled corporation attached to the DOE, is tasked with the full implementation of the rural electrification program. 

Industry players have observed conflicting views between the DOE and NEA on certain issues. “In some instances, particularly this electrification program, they don’t sometimes share the same view,” sources observed.

When sought for comment, NEA Administrator Edgardo Masongsong said on Wednesday night that he would issue “a copy of my rejoinder to the DOE press release in the subject hopefully tomorrow or the following day. Please bear with me as the issue is sensitive.”

In his statement, Masongsong only said that the NEA “welcomes and supports” the decision of the 

DOE to withdraw its recommendation to cancel the franchises of 17 ECs.

Consistent with the NEA’s mandate under RA 10531, Masongsong said his office will conduct a thorough performance review of the ECs involved—a task regularly performed by the NEA based on set parameters or key performance standards—and submit the results of the same to the DOE and the House of Representatives for their appreciation and evaluation. The NEA is part of the task force evaluating the performance of all ECs.

PHILRECA said the partnership between the ECs and the NEA led to the successful energization of 78 provinces (100 percent); 1,475 cities and municipalities (100 percent); 36,057 barangays (99 percent); 123,198 sitios (83 percent); and 12,713 million household connections (85 percent).

It stressed that if the intention is for genuine total electrification, the best approach is still to support the ECs by rehabilitating, not disfranchising them.

“By recommending the revocation, Cusi essentially and effectively disregarded the ECs’ sacrifices during the last four to five decades where the partnership of ECs and the NEA has been successful,” said the group.

For now, ECs can only wait for the results of the review and hope that none of them will be recommended for franchise cancellation.