Question & AnswerQ&A (EXECUTIVE ORDER NO. 119)
Republic Act No. 9136, also known as the Electric Power Industry Reform Act of 2001 (EPIRA), mandates the restructuring of electric cooperatives.
Section 60 of EPIRA provides that upon the effectivity of the Act, all outstanding financial obligations of electric cooperatives to NEA and other government agencies incurred for financing rural electrification shall be assumed by PSALM in accordance with the program approved by the President within one year and completed within three years.
Conditions include: (a) the loan must be duly recorded by NEA or creditors, validated by the Commission on Audit, and confirmed by the EC; (b) the loan must be audited by PSALM; (c) ERC must approve a rate reduction commensurate with savings; (d) the EC must be current with NPC payments or have a payment agreement; (e) the EC must comply with NEA policies; (f) cooperate with NEA for market deregulation preparation; (g) submit Performance Improvement or Rehabilitation Plans for NEA approval.
ERC must ensure a reduction in the rates of Electric Cooperatives commensurate with the savings from the removal of amortization payments on Rural Electrification Loans assumed by PSALM.
The assumption of the Rural Electrification Loan by PSALM will be revoked and the Electric Cooperative must repay PSALM the total loan amount including accrued interest, as provided under Section 60 of EPIRA and reiterated in Executive Order No. 119.
NEA must submit its reorganization plan within thirty (30) calendar days from the effectivity of the Executive Order.
The components include: (a) Financial, institutional, technical, and managerial restructuring of ECs; (b) Assumption of Rural Electrification Loans by PSALM; (c) Amortization payments of such loans to NEA or government agencies by PSALM; (d) Reorganization of NEA to perform additional mandates under EPIRA.
Electric Cooperatives have five (5) years from the effectivity of EPIRA to prepare to operate and compete under the deregulated electricity market, specifically for open access and retail wheeling.
Within thirty (30) calendar days from the effectivity of the Executive Order, NEA must issue guidelines for submission of these plans. These plans must cover institutional, technical, financial, and managerial reforms for achieving efficiency targets and must include preventive or disciplinary measures prior to PSALM's assumption of loans.