FASTLANES: NEA electric cooperatives are not genuine

QUEZON CITY (MindaNews / 19 Aug) – This is a proverbial elephant in the room.

Over 120 electric cooperatives around the country are only cooperatives by name.

Presidential Decree 269, promulgated in 1973, created the National Electrification Administration for rural electrification nationwide.

PD 269 defines electric cooperatives to mean “a corporation organized under Republic Act No. 6038.” This corporate nature of electric cooperatives has been retained in Republic Act 10531 or An Act Strengthening the National Electrification Administration, Further Amending for the Purpose Presidential Decree no 269.

Electric cooperatives do not recognize and exercise universally accepted cooperative principles which are considered part of Philippine laws through Philippine Cooperatives, RA 6938 as amended by RA 9520 of 2008.

The seven cooperative principles are (1) voluntary membership; (2) democratic member control; (3) members’ economic participation; (4) autonomy and independence; (5) education, training and information; (6) cooperation among cooperatives; and (7) concern for community.

The Cooperative Development Authority (CDA) as the regulatory agency of Philippine cooperatives ensure that cooperatives follow these seven principles.

Among the cooperative principles not followed by electric cooperatives created by the National Electrification Administration (NEA) is autonomy and independence and democratic control of members.

The general assembly of a genuine cooperative elects the members of the Board of Directors (BOD). Then the BOD serves as policy-making body, including the organization of the cooperative management team headed by a general manager. The management team overseas the day-to-day operations of the cooperative.

While the general assembly elects the BOD of NEA electric cooperatives, the NEA appoints the general manager. This incongruous practice results in a powerless BOD. In NEA cooperatives, the general manager can ignore policy decisions of the board. In truth and practice, the NEA becomes a very powerful voice, as it can dictate the general manager or otherwise, it can exercise its power to hire and fire.

To correct this social wrong, as the original author of the Cooperative Code of the Philippines, Senator Nene Pimentel, calls it, electric cooperatives should register with the CDA – for the CDA to exercise its regulatory powers over these juridical persons.

Thus section 57 of the Energy and Power Industry Reform Act (Epira) or Republic Act 9136 of 2001 provides for the conversion of electric cooperatives into either stock cooperative under the CDA or stock corporations under the Corporation Code.

But like other Philippine laws, this provision of the law was not implemented to the letter.

Of the 140 electric cooperatives nationwide, only 13 converted into stock cooperatives and registered with the CDA. There are still many electric cooperatives who want to convert, but arm-twisting by hands not so unseen have made the conversion processes difficult, like the one being experienced by the Davao del Norte Electric Cooperative (Daneco) and the Agusan del Norte Electric Cooperative (Aneco.)

The First Bukidnon Cooperative (Fibeco) is biting the bullet and would hold a referendum on August 29, 2015 whether to register with CDA, convert into corporation or remain with NEA.

Note that the third option is not in the Epira. The NEA option was inserted in RA 10531 or the law that amended the NEA law (PD 269).

The third option would perpetuate what Senator Nene Pimentel called a social wrong.

The Fibeco referendum is an important exercise as it would test the constitutionality of RA 10531 should the CDA or the Corporation Code prevail, these cooperatives would still be required to submit reportorial requirements to the NEA for purposes of regulation.

Something is not very sound with this law, which was crafted in 2012 to make it more difficult to convert electric cooperatives into genuine cooperatives.

The truth however remains that for electric cooperatives to become genuine, they have to practice cooperative principles. By doing so, they put the power of this important utility in the hands of the people – the consumer owners – and then enjoy some of the privileges afforded genuine cooperatives like tax exemption.

Converting to genuine stock cooperatives has become too difficult because of the callousness of some government agencies created under the cloud of dictatorship to adhere to democratic principles.

In fact, the Supreme Court in a July 23, 2003 ruling in Philreca (Phil. Rural Electric Cooperative Association) vs Bureau of Local Government Finance (BLGF) has ruled that these NEA electric cooperatives cannot enjoy the privilege of tax exemption as they are not genuine cooperatives because they do not practice cooperative principles as provided for in our laws.

Philreca had questioned the collection of local government taxes, invoking the privilege of tax exemption of cooperatives. They said levying taxes on electric cooperatives violates the equal protection clause of the Constitution.

But the Supreme Court thinks otherwise, it ruled that because NEA electric cooperatives do not practice cooperative principles as provided for in RA 6938 or the Cooperative Code of the Philippines, and thus they cannot enjoy the privilege of tax exemption.

(The author, a Mindanawon, works in the office of the chairman of the Cooperative Development Authority. Comments can be sent to