November 4th, 2011
The newly organized Directors of Electric Cooperative in Region VIII or DIRECTOR-8 through its Chairperson Reynaldo Galapon told member-consumers to take caution about the move to register Electric Cooperatives (ECs) with the Cooperative Development Authority (CDA) due to possible adverse impacts on rates and viability.
Chair Galapon said that registration with the CDA should be studied carefully and seriously. “We should not look only into the provision of the new law that promise ‘juicy’ things to members, we should consider the general effects to our cooperatives as a public electric distribution utility.
A similar move for the conversion was initiated in the 1990’s after the Cooperative Code was passed but a huge majority of the consumers opted to maintain the non-stock status of ECs. According to Chair Galapon, “The bases of the proponents for conversion during that time are substantially the same with what they are using now as stated by Mr. Celestial of NASECORE on the March 11, 2011 issue of the Leyte Samar Daily Express.”
This new call to convert ECs into stock cooperatives under CDA triggered by passage of R.A. No. 9520 or the Philippine Cooperative Code of 2008. The law has a provision that electric cooperatives registered with the National Electrification Administration (NEA) may choose to register with the Cooperative Development Authority (CDA).
“The call for conversion made by NASECORE is in fact misleading because the cooperative is now service-oriented cooperative and is being controlled and owned by member-consumers.” said Dir Monsueto Delovino, Vice Chairman for Education and Ethics of Director-8 and SAMELCO II BOD Member.
NASECORE is a national association pushing for electricity reforms. It cites what it calls “control” of ECs by member-consumers as main reason for their position favoring conversion.
“The consumers are already controlling their ECs in two modes: directly, by electing their representative to the Board of Directors, by passing resolutions during General Membership Assembly meetings, and by voting during a referendum. Indirectly, by managing the business of the cooperative through their district representatives in the Board of Directors” added Vice-Chair Delovino.
Conversion proponents announce that if converted, cooperatives will be tax exempt and entitled to congressional allocations as well as other financial grants. Calling it “misinformation”, DIRECTOR-8 Vice Chairman for Finance Carlito Suba-an said that “RA 9520 expressly stated that tax exemption applies only to transactions of the cooperative with its own members, but does not totally exempt the cooperative from taxes and other government fees.” He added that “The promise of congressional fund remains to be seen.”
At present, the ECs already avail of grants from the National government and loans from the National Electrification Administration.
“Our serious problem now is power. EPIRA Law has restructured the power industry, and its promise of reasonable, affordable and reliable power has not been realized.” Chair Galapon said.
DIRECTOR-8 considers the ECs as the last bastion for residential electricity consumers and missionary electrification in this open market where private investors control the price of power. “This is where we should focus on; this is where; this is where we should work on.” Vice Chair Delotavo said.
The issue of converting the ECs “only sows division in our ranks and derails our effort in securing and protecting the rights of consumers for an affordable and reliable power,” Chair Galapon added.
BILECO Board President and DIRECTOR-8 Member Melchor C. Durango Jr. also noted that changing the EC charter to CDA under the present laws will only benefit the few and derail the true essence of Rural Electrification. “Only member-consumers who are willing to put in paid-in capitalization will continue to become members of the EC. Members with big paid-in capitalization receive higher dividends, members with higher electricity consumption benefits from higher patronage refund.”
He added that once conversion is effected electricity rates is projected to go up to integrate provisions for dividends, patronage refund and franchise tax having migrated from Cash Flow (for non-stock, non-profit EC) rate methodology to Return on Rate Base mechanism (for stock, profit-oriented EC) of determining its electricity rates. In effect, electrifying the remaining sitios will be put on hold to maximize the earning capacity of the newly converted EC.
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