Definitions of Key Terms
- "NEA": National Electrification Administration with a governing Board of Administrators.
- "Cooperative": Corporation organized under this Act or converted from Philippine Non-Agricultural Cooperative Act.
- "Public service entities": Cooperatives, local government units, or privately owned regulated entities supplying electric service.
- "Service": Electric service at wholesale or retail, including auxiliary services.
- "Area coverage": Making dependable and adequate electric service available to all persons within the franchise area under reasonable conditions without impairing financial feasibility.
- Other terms cover loan definitions, interest rate, government institutions, and cooperative character.
Organization of the National Electrification Administration (NEA)
- NEA governed by a Board of Administrators: Chairman, three members appointed by the President with Commission on Appointments' consent, and an ex-officio Administrator.
- Board members serve six-year terms; Administrator appointed for six years, removable only for cause.
- Board empowered to promulgate rules, organize the NEA staff, and supervise the Administrator.
- Administrator is the CEO responsible for implementing programs.
Powers and Functions of the NEA Board
- Promote and assist public service entities, particularly cooperatives, to achieve electrification objectives.
- Make loans for construction, acquisition, restoration or enlargement of electric facilities.
- Provide technical assistance without charge.
- Serve as agent for cooperatives and local governments in securing non-NEA loans.
- Accept and certify cooperative articles of incorporation and amendments.
- Coordinate with government agencies including the National Power Corporation.
- Report annually to the President and Congress on electrification status and loan activity.
Loans from Government Institutions and Terms
- GSIS, SSS, and Development Bank of the Philippines authorized to make loans to public service entities upon Administrator’s certification and NEC approval.
- Loans secured by first liens and subject to conditions regarding terms, interest rates (not exceeding 6% or prevailing lowest rate), repayment schedules, and aggregate loan limits.
- Advance schedules and repayment may be deferred up to seven years upon approval.
Establishment of NEA Revolving Fund
- Revolving fund consists of government appropriations, reparations funds, loan repayments, share of franchise taxes, and other sources.
- Fund used exclusively for loans and authorized acquisitions, subject to Congressional approval.
- Annual reporting on fund status required.
Loan Standards and Conditions
- Loans must finance financially feasible projects attaining area coverage.
- Loan terms between 25 and 35 years, with interest not exceeding 3% per annum.
- Borrowers’ rates and service terms must ensure loan objectives and require NEA approval.
- NEA may set higher rates or different terms for funds from special sources.
Loans for Electric-Related Purposes
- Loans can finance wiring of premises and acquisition of electric appliances for consumers served by cooperative borrowers.
- Total loans for these purposes capped at 10% of the revolving fund.
- Individual borrower loans under this provision limited to 10% of their total loans.
Extension and Modification of Loan Terms
- NEA authorized to extend payment periods, defer repayments, reschedule loans, or compromise amounts to maintain viability.
- May release, share, or subordinate liens to other lenders under conditions preserving security and repayment capacity.
Enforcement and Remedies
- NEA can deny new loans, withhold fund advances, technical assistance, or foreclose on security upon borrower default.
- NEA can operate or lease foreclosed properties for up to five years to protect investments.
- Mandatory NEA approval needed before borrowers can dispose of or encumber assets.
- Cooperatives require prior approval before borrowing.
NEA Staffing and Administration
- NEA to maintain necessary technical and administrative staff.
- Administrator appoints personnel subject to Board approval and existing laws.
Execution of Public Works and Administrative Expenses
- NEA executes all authorized electrification public works.
- Administrative expenses appropriated annually by Congress.
Conflict of Interest and Penalties
- Prohibitions against NEA officials and employees participating in matters where they have personal interest.
- Restrictions on government officials' financial obligations related to NEA loans.
- Penalties include fines, imprisonment, and removal from office for violations.
- Prohibition on fees or commissions for obtaining loans.
- Sanctions for providing false information in loan applications.
Supervision and Coordination
- NEA under supervision of the Office of the President.
- Major NEA actions require Presidential approval.
- Power Development Council created for integrated electrification and power development planning and coordination.
Electric Cooperatives: Organization and Powers
- Electric cooperatives may be organized or converted under the Act as non-stock, non-profit membership corporations.
- Powers include: suing and being sued, generation and distribution of power, assisting consumers in wiring and appliance acquisition, property acquisition and disposition, borrowing, exercising eminent domain, and more.
- May supply up to 10% of service to non-members under certain conditions.
Cooperative Corporate Governance
- Name must include "Electric Cooperative, Inc." and be distinct.
- Minimum five incorporators required.
- Articles of incorporation must list key details; purpose and powers need not be recited.
- By-laws regulate membership rights and corporate governance, adopted and amended by the board.
Membership and Meetings
- Members must agree to use cooperative services; membership non-transferable except as provided.
- Government employees generally eligible for membership except elective officials (except certain barangay officials).
- Annual and special meetings governed by by-laws with notice and quorum requirements.
- Voting generally one member, one vote; proxy or mail voting allowed if by-laws permit.
Board of Directors and Officers
- Board comprises at least five members, all must be cooperative members.
- Directors serve fixed terms, with provisions for staggered terms.
- Board manages cooperative business and may remunerate directors only with member approval.
- Officers include president, vice-president, secretary, treasurer, elected annually by the board.
Territorial Districts
- By-laws may divide service area into districts for governance and director elections.
Amendments, Consolidations, and Mergers
- Amendments to articles require two-thirds member approval.
- Consolidations and mergers require two-thirds approval from each cooperative's members and formal articles filing.
- Rights, assets, liabilities transfer to new or surviving cooperative without impairing creditors.
Conversion of Existing Cooperatives
- Corporations under Philippine Non-Agricultural Cooperative Act supplying electric energy may convert by two-thirds member and stockholder approval.
- Converted entity wholly subject to this Act.
Dissolution Procedure
- Dissolution requires majority member approval.
- Formal filing of certificate and articles of dissolution.
- Obligations to creditors to be satisfied; remaining assets distributed to patrons and members.
Filing Requirements
- Articles and certificates related to incorporation, amendments, consolidation, merger, conversion, dissolution, and office changes filed with NEA Administrator.
- Certification and filing effectuate legal changes.
Non-Profit, Non-Discrimination, and Service Requirements
- Cooperatives operated on a non-profit basis for members' mutual benefit.
- Prohibited from discriminatory rates or rebates.
- Must provide service on an area coverage basis, allowing reasonable conditions to maintain financial feasibility.
- Applicant access to service cannot be arbitrarily denied.
Property Disposition and Liability
- Board may encumber property by mortgage or deed of trust without member approval.
- Sales or dispositions (except minor assets or mergers/consolidations) require majority member and NEA consent.
- Members not liable for cooperative debts; member property not subject to execution.
Limitation on Legal Actions
- Legal actions based on maintenance of electric facilities barred after five years of continuous maintenance.
Assistance, Tax Exemptions, and NPC Support
- Cooperatives exempt from income tax permanently.
- Additional exemptions from national and local taxes, fees, and duties for up to 30 years or until debt-free.
- NPC required to give preference and support to cooperatives and refrain from competing within franchise areas unless authorized.
Regulation by Public Service Commission and SEC
- Public Service Commission empowered to grant/revoke cooperative franchises, require service improvements, and prohibit discriminatory practices.
- Cooperatives exempt from Securities Act provisions on issuance of notes, bonds, and membership certificates.
- Cooperatives generally exempt from other regulation by the Public Service Commission.
Transitory Provisions
- Repeal of Republic Act No. 2717; dissolution of previous Electrification Administration.
- Transfer of assets, liabilities, personnel, and ongoing projects to NEA.
- Continuation of ongoing projects subject to economic feasibility.
Separability and Effectivity
- Invalid provisions do not affect the remainder of the Act.
- Conflicting laws repealed or modified.
- The Act takes effect upon approval.