Question & AnswerQ&A (NEA)
RA 10531 mandates the NEA to strengthen electric cooperatives (ECs), help them become economically viable, and prepare them for implementing retail competition and open access.
NEA exercises step-in rights to intervene in the EC operations at least one (1) year prior to being categorized as ailing EC, based on financial and operational parameters set forth in the IRR of RA 10531.
The objectives include formulating standards for classifying ECs based on financial, technical, and institutional performance; early detection of adverse financial conditions; instituting preventive and remedial measures before an EC is declared ailing; and implementing alternative options for ailing ECs.
Parameters include Cash General Fund (at least one month power and non-power cost), Collection Efficiency (95%), Accounts Payable-Power (current/restructured-current), Profitability (positive), Networth (positive), and System Loss (13%).
ECs are classified as Green (meet all standards), Yellow (fail any parameter and considered watchlist), and Red (declared ailing EC by NEA after due process).
An EC has negative net worth for the last three years, has 90 days arrearages in power purchase, unable to provide service due to inefficiencies, unable to perform distribution obligations, failed other operational standards, or unable to meet Wholesale Electricity Spot Market prudential requirements.
NEA monitors and assesses EC operations based on quarterly reports and cash flow templates but generally requires less intervention for Green ECs.
Measures include monitoring, providing financial, institutional, and technical assistance, conducting roundtable assessments and special audits, monitoring Operation Improvement Plan implementation, and designating an Acting General Manager (AGM) or Power Superintendent (PS).
NEA may strictly monitor operations, appoint a PS or AGM or assign persons to the Board, enter into partnerships with private sector investors under various contractual frameworks, and if necessary, institute structural reforms or legal actions such as foreclosure, insolvency, or bankruptcy proceedings.
OIP is a remedial plan submitted to NEA that may include debt repayment, capital and operating expenditures plans, system loss reduction, collection efficiency improvement, and manpower reorganization to resolve operational and financial issues.
The OIP is set aside and becomes inoperative; NEA may then declare the EC as ailing and take further interventions as for Red ECs.
ECs must submit Monthly Financial and Statistical Reports (MFSR), Monthly Engineering Reports (MER), and other relevant reports within prescribed periods for NEA's review and assessment.
NEA submits quarterly compliance reports to the Department of Energy (DOE) and the Joint Congressional Power Commission (JCPC).
NEA may appoint an AGM and/or PS when the interest of the EC and the recovery program require it pursuant to PD 269 as amended by PD 1645 and RA 10531.
NEA may institute structural reforms such as converting the EC to a stock cooperative or stock corporation, or pursue legal actions like extrajudicial foreclosure, insolvency, or bankruptcy proceedings.