Law Summary
Challenges Facing Electric Cooperatives
- ECs face issues like poor governance, low collection efficiency, high system losses, and unresponsive rate methodologies.
- Early detection and intervention are necessary to maintain continuous and reliable electric service.
- NEA formulates operational and financial parameters to ensure EC efficiency and viability.
Objectives of Classification Guidelines
- Establish standards for categorizing ECs based on financial, technical, and institutional performance.
- Detect adverse financial conditions early to trigger intervention.
- Implement preventive, remedial, and mitigating measures before cooperatives become ailing.
- Provide alternatives for ailing ECs to recover or restructure.
Policy Framework
- NEA shall continuously assess EC performance.
- Financial, institutional, and technical assistance will be provided as necessary.
- Step-in rights may be exercised when conditions demand intervention.
Assessment Parameters and Standards
- Cash General Fund: Must cover at least one month of power and non-power costs.
- Collection Efficiency: Minimum 95%.
- Accounts Payable (Power): Current or restructured but current.
- Profitability: Must be positive.
- Net Worth: Must be positive.
- System Loss: Should not exceed 13%.
Classification of Electric Cooperatives
Green ECs:
- Comply with all parameters, requiring minimal NEA intervention.
Yellow ECs:
- Do not meet one or more standards; placed on watchlist.
- Criteria include negative net worth for three years, 90-day arrears on power payments, inability to provide service due to inefficiencies, or failure to meet other operational standards.
Red ECs:
- Officially declared ailing ECs by NEA after due process.
NEA Interventions by Classification
Green ECs:
- Periodic monitoring via quarterly reports and cash flow analysis.
Yellow ECs:
- Actions may include monitoring, FIT assistance, special audits, roundtable assessments.
- May require Operation Improvement Plans (OIP) and performance contracts.
- Possible designation of Administrator or General Manager when EC interests demand.
Red ECs:
- Strict monitoring with monthly reports.
- Appointment or assignment of administrators and management teams.
- Partnership with private sector investors under various contract frameworks (e.g., joint ventures, management contracts).
- Structural reforms including conversion to stock cooperatives or corporations.
- Legal actions such as insolvency or bankruptcy proceedings if operation cannot continue within 180 days.
Reporting and Compliance Guidelines
- ECs must submit Monthly Financial & Statistical Reports and Monthly Engineering Reports promptly.
- A composite group within NEA reviews operational performance using 5-year historical and 10-year projected data.
- Assessment outcomes guide intervention recommendations, approved by the NEA Administrator.
- Recovery efforts (OIPs) may last for up to one year before declaring an EC ailing.
- OIPs may include debt repayment, capital and operating expenditure plans, system loss reduction, collection improvement, and manpower reorganizations.
- Failure to improve within 180 days from OIP implementation triggers ailing classification.
Intervention Flexibility and Emergency Provisions
- NEA interventions may be adjusted based on events such as force majeure or calamities.
- Performance standards enforcement includes submission of quarterly compliance reports to DOE and Joint Congressional Power Commission (JCPC).
Roles and Responsibilities
- NEA is responsible for policy implementation and submitting compliance reports to DOE and JCPC.
Effectivity and Filing
- Guidelines take effect 15 days after publication in a newspaper of general circulation.
- Copies are filed with the University of the Philippines Law Center as per Presidential Memorandum Circular.