Coverage and Scope of the Restructuring Program
- Applies only to outstanding financial obligations by electric cooperatives (ECs) incurred specifically for financing the Rural Electrification Program
- Rural Electrification Financing includes loans/grants for construction, acquisition, operation, maintenance, upgrading, restoration, and expansion of power facilities in rural areas
- Program components:
- Financial, institutional, technical, and managerial restructuring of ECs
- Assumption by PSALM of Rural Electrification Loans (RELs)
- Amortization of payments to government agencies for RELs assumed by PSALM
- Reorganization of National Electrification Administration (NEA) for expanded mandates
NEA Reorganization Plan
- NEA must submit a reorganization plan within 30 days from the Executive Order’s effectivity
- Plan to detail NEA's redefined institutional, technical, and financial functions under EPIRA
- DOE and Department of Budget and Management (DBM) to approve plan and allocate funds
- DOE to monitor plan implementation and report to the Office of the President
Electric Cooperative (EC) Restructuring
- NEA required to submit an action plan within 30 days to:
- Prepare ECs to compete in a deregulated electricity market
- Strengthen ECs’ technical, managerial, and financial capabilities
- Ensure compliance with Executive Order provisions
Conditions for Assumption of Rural Electrification Loans by PSALM
- Loans must be:
- Recorded in NEA or creditor agencies’ books
- Validated by the Commission on Audit
- Confirmed by the EC as outstanding and due
- PSALM to audit loans according to accepted accounting standards
- Energy Regulatory Commission (ERC) approval required for rate reduction reflecting savings from loan amortization removal
- ECs must be current in payments to the National Power Corporation (NPC); arrears require a payment arrangement prior to assumption
- ECs must comply with NEA policies and cooperate with deregulation preparation efforts
- NEA Board to issue guidelines for Performance Improvement Programs (PIP) or Rehabilitation and Efficiency Plans (REP) within 30 days
- ECs to submit PIP/REP within 30 days of guideline issuance for NEA approval
Rate Reduction Requirements
- ERC to ensure EC rates are reduced commensurately with savings from loan assumption by PSALM
- NEA to assist ECs in rate formulation and ERC application processes
Assumption and Payment Procedures
- PSALM assumes RELs upon EC compliance with stipulated conditions
- EC ceases liability to NEA or other agencies upon assumption
- Contracts to be executed for payment of assumed loans
- Security interests (mortgages) tied to loans not to be released without PSALM’s consent
Revocation and Repayment Provisions
- Assumption revoked if EC:
- Fails to maintain compliance
- Transfers ownership/control of assets, franchise, or operations within five years
- EC must repay PSALM the total assumed loan plus interest upon revocation
- Loans or financing agreements allowed with NEA consent for operational improvements, barring asset/franchise/operation transfer
- DOE and NEA to issue guidelines protecting member-consumers in such loan agreements
Separability Clause
- Invalidity of any provision does not affect the validity of remaining provisions
Effectivity
- Executive Order effective 15 days post-publication in at least two general circulation newspapers