A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 1
A Comprehensive Study on Conversion Options
for Oriental Mindoro Electric Cooperative, Inc. (ORMECO)
Moira Lee Araño-Vilan
University of Batangas
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 2
INTRODUCTION
RATIONALE
The purpose and ideal of Oriental Mindoro Electric Cooperative, Inc. (ORMECO)
like all other electric cooperatives throughout the country, is to achieve the total
electrification of the Philippines on an area coverage basis as provided for in Republic
Act 6038 and Presidential Decree 269 (1973), thus, it has the social obligation to
energize the rural countryside, even the remotest and non-viable areas, to realize the
national policies of social justice and equal access to basic power infrastructure,
economic growth and rural development.
With the enactment of Electric Power Industry Reform Act of 2001 (EPIRA)
comes the venturing clamor of converting electric cooperatives (EC) in to either stock
cooperative under the Cooperatives Development Authority (CDA), stock corporation
under the Securities and Exchange Commission (SEC) or remain as it is at present, a
non-stock, non-profit and service-oriented cooperative under the National Electrification
Administration (NEA).
This paper aims to inform the member-consumers, Board of Directors,
Management, employees and all the stakeholders of the Oriental Mindoro Electric
Cooperative, Inc. (ORMECO) in its quest towards conversion issues.
ORGANIZATION BACKGROUND
Oriental Mindoro Electric Cooperative, Inc. (ORMECO) is a non - stock, non-
profit rural electric cooperative duly organized under existing Philippine Laws and
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 3
Regulations. It was registered and incorporated with the National Electrification
Administration (NEA) on February 16, 1973 covering six (6) municipalities in the northern
part of Oriental Mindoro. The remaining nine (9) municipalities in the southern part of
Oriental Mindoro were covered by the incorporation and registration of ORMECO II on
July 15, 1997. On May 20, 1988 the two (2) coops were merged into what is known as
ORMECO, Inc. after which fourteen (14) municipalities and one city covered were
redistricted into seven (7), District I composed of Baco, San Teodoro and Puerto Galera;
District II is Calapan City; District III covers Naujan and Victoria; District IV consists of
Socorro and Pola; District V comprises of Pinamalayan and Gloria; District VI for Bansud
and Bongabong; District VII covered Roxas, Mansalay and Bulalacao. On June 26,
1988 ORMECO, Inc.’s power plant was turned over to National Power Corporation
(NPC) in compliance with a Memorandum of Agreement executed by NEA, NAPOCOR
and ORMECO, Inc.
In its 38 years of existence, ORMECO has become one of the most reliable and
trusted institutions in the Province of Oriental Mindoro. Although there were times that it
encounters different trials and hardships it was able to surpass them all through the help
and support from NEA, LGU’s, its member-consumers, BOD, management and staff.
As proof to ORMECO’s commitment to its member-consumers, the coop has
maintained its Category A+ Mega Large EC for 12 consecutive years and was consistent
awardee of EC of the Year Award (Mega-Large EC) (2008-2009), Best in Collection
Performance Award(1991, 1995-2009), General Manager of the Year Award (2008-
2009), and Special Citation for the Most Complying EC in Audit Evaluation (2007-2009)
and was also awarded Special Citation for ECs Attaining 100% Barangay Energization
(2009) in NEA Lumens Awards.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 4
With ORMECO’s present situation, still there are clamors for conversion into a
stock cooperative or stock corporation which arises from some sectors of our society
and business-minded individuals with most likely vested interest and others with untold
intentions. The basis of their clamors was on the passing of the Republic Act No. 9136
(Electric Power Industry Reform Act of 2001) Chapter VII Section 57 gives the ECs the
options to convert to either stock cooperative under the Cooperatives Development
Authority (CDA), Stock Corporation under the Securities Exchange Commission (SEC),
or remain as non-stock under NEA.
REVIEW OF RELATED LITERATURE
It was the desire of the government to effect changes and reforms in the social,
economic, and political structure of our society. Studies have shown that electric power,
wherever introduced, stimulates the growth of industry and the economy in general.
Electric Cooperatives (EC) were organized under PD 269 as non-stock, non-
profit and service-oriented cooperatives. The ECs are developmental institutions
pursuing government’s social obligation of energizing the rural countryside, even the
non-viable areas, to attain the government policies of social justice and equal access to
basic power infrastructure, economic growth and rural development.
Prior to the organization of non-stock ECs, supply and distribution of electricity
was undertaken by private corporations and companies with profit orientation. Some
LGUs also operated their own electric systems.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 5
However, electrification in the rural areas, perceived to be unviable or
unprofitable, was never undertaken.
This was the reason why these corporations registered under the Philippine Non-
Agricultural Cooperative Act supplying electric energy were converted into non-stock
cooperatives under Sec. 32 of Presidential Decree No. 269. Some LGU-operated
electric systems were also taken over by government through NEA.
With the organization of non-stock, non-profit ECs, missionary electrification was
hereby mandated through the implementation of area coverage basis. Thus, even the
unviable or unprofitable areas are now certain to experience the benefits of electricity.
LAWS THAT CREATED NEA
Republic Act 6038 (1969) - Declaring as national policy the total electrification
of the Philippines on an area coverage basis; Creating NEA as primary
agency responsible for executing the rural electrification program through the
electric cooperatives (ECs)
Presidential Decree 175 (Apr 14, 1973) - Giving authority to Dept. of Local
Government and Community Development through the Bureau of
Cooperatives Development to promote, organize, register, regulate, and
supervise all types of cooperatives.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 6
Presidential Decree 269 (1974) - Converted NEA into a government owned
and controlled corporation with a capitalization of P 1 Billion
(www.nea.gov.ph/index.php/about-us/charter/pd-269)
Presidential Decree 501 (1974) – Transferred the supervision of ECs from the
Bureau of Cooperatives Development to NEA
Presidential Decree 1645 (1979 )- Broadened NEA’s lending and regulatory
power over the electric cooperatives with a capitalization of P 5 Billion
Republic Act 9136 (2001) - Provided NEA with additional mandate to prepare
ECs to operate & compete in a deregulated environment with a capitalization of P
15 Billion
LAWS THAT CREATED CDA
Republic Act 6938 (1990) - an act to ordain a Cooperative Code of the
Philippines (http://www.bcphilippineslawyers.com/republic-act-no-6938/)
Republic Act 6939 (1990) - which created the Cooperative Development
Authority (CDA), grants the Authority the sole power to register cooperatives.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 7
Thus, NEA’s power to register ECs had been transferred to the CDA.
Republic Act 9520 (2008) - an act amending the cooperative code of the
Philippines to be known as the "Philippine Cooperative Code of 2008"
(http://www.lawphil.net/statutes/repacts/ra2009/ra_9520_2009.html)
LAWS THAT CREATED SEC
COMMONWEALTH ACT No. 83 (October 26, 1936) - an act to regulate the sale
of securities, to create a Securities and Exchange Commission to enforce the
provisions of the same, and to appropriate funds therefore.
Republic Act 8799 (19 July 2000) enacts "The Securities Regulation Code". It
contains the declaration of State policy; definitions; authority of the "Securities
and Exchange Commission"; registration of securities; regulation of pre-need
plans; repertorial requirements; protection of shareholder interests; prohibitions
on fraud, manipulation and insider trading; regulation of securities market
professionals; exchanges and other securities trading markets; registration,
responsibilities and oversight of self-regulatory organizations; acquisition and
transfer of securities and settlement of transactions in securities; margin and
credit; general provisions. Repeals the Revised Securities Act (Batas Pambansa
blg 178), as amended, and sections 2, 4 and 8 of Presidential Decree 902-A, as
amended. (78 sections; pp. 182-262)
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 8
WHAT IS THE LEGAL BASIS FOR CONVERSION OF ELECTRIC COOPERATIVES?
Republic Act 9136 (Electric Power Industry Reform Act of 2001) - Section 57
of EPIRA gives the ECs the options to convert to either stock cooperative under the
Cooperatives Development Authority (CDA), stock corporation under the Securities
Exchange Commission (SEC), or remain as non-stock under NEA.
OBJECTIVES
GENERAL
To achieve ORMECO’s member-consumers, Board of Directors, Management
and employees’ awareness towards the issues of converting ORMECO into a stock
cooperative under Cooperative Development Authority (CDA) or a stock corporation
under Securities and Exchange Commission (SEC) or to remain as a non-stock, non-
profit service oriented electric cooperative registered under National Electrification
Administration (NEA) through the support and cooperation of an active member-
consumers base.
SPECIFIC
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 9
1. To generate interest and increase awareness of member-consumers on
ORMECO’s present status particularly in its nature and accomplishments.
2. To be able to present the commonalities and differences of between a non-profit
and service-oriented electric cooperative under the National Electrification
Administration (NEA), or a stock cooperative under Cooperative Development
Authority (CDA) or a stock corporation under Securities and Exchange
Commission (SEC).
3. To encourage participation and to draw support from member-consumers on
ORMECO’S conversion issue.
INTERVENSIONS FOR IMPROVEMENTS
A. PROCEDURES/MECHANICS
Chapter III of the NEA Guidelines in the Conduct of Referendum
enumerates the procedures/mechanics, to wit:
Article 10 In-House Activities
10.1 Board Resolution scheduling the district(s) date (s), venue (s) and
time of the assembly must be passed by the Board of Directors;
10.2 Board Resolution appropriating the corresponding budget for their
Activities is imperative;
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 10
10.3 The concerned departments of the coop shall prepare and
execute the requirements set under the said Board Resolutions;
10.4 The institutional Services Department shall prepare in not less
than twenty (25) days before the General Assembly or District Meetings the
sanitized masterlist of voters in alphabetical order and classified according to
district, municipalities and barangays to facilitate registration and voting; and
10.5 The Board Member of the concerned district shall be responsible
in ensuring the success of the assembly/referendum in that district; and shall
likewise preside in the district assembly meeting/s.
Article 11 Major Activities in the Program
11.1 Determination of attendance from the registration of voters.
Only bonafide members shall be allowed to register in the
masterlist prepared by the electric cooperative.
(a) Where meetings are held simultaneously (meetings held on
the same day at various venues/barangays), the total number
of votes shall be determined on a cumulative basis;
(b) Where meetings are held sequentially (meetings held one after
the other in different days in different venues/barangays), the
same procedure in (a.1) shall be followed.
11.2 Introduction by the Presiding officer
11.3 Presentation of the issues related to conversion
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 11
(a) Presentation of the historical profile of the cooperative
(b) Presentation for the positive side/advantages.
(c) Presentation for the negative side/advantages
(d) Open Forum
11.4 Process of voting (casting of votes through secret balloting and
the subsequent canvassing of the ballots)
11.5 Declaration of the Results by the Presiding Officer
11.6 Adjournment
Article 12 Documentation
12.1 Preparation of the minutes of the meeting indication the highlights,
particularly the over-all decision of the bonafide members
(whether to convert or not to convert).
12.2 If the vote is for conversion.
(a) Certificate of Election to Convert. A Certificate of Election
to Convert shall be executed and acknowledged on behalf of
the EC by its board president or vice-president under its seal,
attested by its secretary, stating: (1) the name of the
cooperative; (2) the address of its principal office; and (3) that
the members of the cooperative have duly voted that the
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 12
cooperative converted into a stock corporation or a stock
cooperative;
(b) The board president or vice-president who executed the said
Certificate shall execute an Affidavit which shall state that the
statements in the certificate are true.
B. ACTION PLAN FOR THE REFERENDUM ON CONVERSION
Option No. 1
Convince the Board not to pass and approve any resolution to conduct a
referendum. After all, based on the guidelines Article 10, the power to schedule a
meeting for referendum is vested upon the Board.
Convince the Board not to appropriate fund for the referendum.
Option No. 2
If there is an overwhelming clamor to conduct a referendum, let the
proponents bring the matter to the General Assembly for approval.
During the assembly, utilize all the employees to vote against the move. Give
quota for every employee to bring at least ten (10) relatives or friends to vote against
the move.
In ORMECO, there are 289 employees. If these could bring at least ten (10)
for every employee, the negative votes will raise 2,890 votes. This is very difficult to
outsmart.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 13
Other than the employees, transport all the Barangay Power Association
(BAPA) Members to vote against the referendum. But before transporting the BAPA
members, there must be extensive information campaign to convince them.
Option No. 3
If the Board will pass and approve a resolution to conduct a referendum, let
the resolution be approved and confirmed by the General Assembly. When General
Assembly comes, use Option No. 2.
Option No. 4
If the General Assembly approved the resolution to conduct a referendum, we
will face the real battle of information in the coverage area.
Pre-Referendum Period
a. Consolidate all the pertinent data regarding the advantages and
disadvantages of the three options of electric cooperatives.
b. Study the effect of conversion of the electric coops that have converted
into stock cooperative.
c. If possible initiate Lakbay-Aral to the converted ECs like SORECO I,
CANORECO, NORECO II, and PANELCO I.
d. Get the data from the Cooperative Development Authority the number of
coops registered. How many are operational and non-operational. If
possible research the reasons why there were many coops that gone in
their business. (data should per region)
e. Scout potential employees to be utilized as speakers of the coop.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 14
f. Create a “Speakers Bureau” coming from the member-consumers to
campaign in favor of the coop. If possible, the member should also be an
active officer of coops registered under the CDA.
g. Conduct Training and Workshop for the “Speakers Bureau”. If possible
the seminar shall be conducted regionally so that they can learn other
ideas from sister ECs.
h. Schedule the Information Drive for the captured supporters such as
BAPA, MSEAC.
i. After conducting info drive to the captures supporters, conduct same
activity with the barangays, non-government associations, religious
organizations and other associations.
j. Initiate interviews with print media, radio hopping and other media outlets
using the speakers’ bureau.
k. Lobby with the local officials in every municipality and city or in the
province.
l. Convince the unenergized barangays and the remote barangays to pass
a resolution address to the public officials preserved the missionary
program of the coop by retaining as non-stock non-profit.
Referendum Period
a. Determine first the following:
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 15
1. What is the Name of the Game? Referendum
2. What is the Rule of the Game? Guidelines on Conversion
3. How to Win? Two Kinds of Winning:
i. Not to Get the Quorum
ii. Get the Quorum and Win the Votes
4. Since it is a Referendum, how many votes we need?
5. Who will Get that Votes?
6. How to Get that Votes?
7. What we need to Get that Votes?
8. What are our Strengths? Our Weaknesses?
9. What are the Strengths and Weaknesses of our Enemy? Know Your
Enemy.
b. Sanitize the Master List to institute “One member One Vote” and to avoid
flying voters.
c. Implement the ID System for every member-consumer to ensure true
identity in the voting.
d. Identify and assign leader and speaker bureau in every municipality and
city.
e. Conduct pulong-pulong, meeting and info drive for the member-
consumers in every barangay of the municipality.
f. List the names of the member-consumers who have attended the
information drive. They will be the first priority to be hauled or transport
during the actual referendum.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 16
Strategy in Information Battle
a. Speak on people’s language
b. Do not use highly technical language
c. Use character-strategy offense against CDA speakers
d. Cite substantial evidence or bad experiences of CDA coops that
failed. Use news reference.
e. Dictate the tempo of the campaign
f. Use guerilla technique in making leaflets and paraphernalia
Non-stock, NON-PROFIT Coop - SERBISYO ang DALA!
Stock, Profit Coop – Pakay ay GANANSYA!
Stock Corporation – pang KAPITALISTA!
Hwag Kayong Paloko! NON STOCK – NON PROFIT COOP
Tayo !
Stock at PROFIT Coop – tataas ang taripa ng kuryente!
Stock Corporation – tayong lahat mangangamote!
Non-stock, NON-PROFIT Coop – dito tayo, para sa mga
mahihirap ito!
g. Send letters to all barangay captains and member-consumers
h. Utilize the meter-readers in distributing the leaflets.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 17
i. Use the radio program in propagating the cause of the non-stock non-
profit. Invite credible people (councilor, barangay captain, religious
leaders and other key officers in the locality) to speak the missionary
spirit of the non-stock non-profit.
j. Make comprehensive primer of the three options.
k. It has been said that prophets were rejected in their own place. EC
should exchange speakers.
l. Get the capital investment of every sitio, purok, barangay, municipality
for figure presentation.
m. Highlights the bad effect of the converted coop based on the
experience of the EC converted coops.
n. Encourage all EC employee free-lancers columnist to write in their
column the ill effects of the conversion. This will be used as reference
of other coops during the campaign period.
District Assembly Prior to Referendum
a. Assigned vehicle to transport the member-consumers who will cast
their votes for the referendum.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 18
b. Prioritize the transport of the captured supporters like the BAPA,
MCEC, MEC-DEC and other organizations that manifested their
support for the non-stock non-profit EC.
c. Prioritize in giving the ID of these captured supporters.
d. Implement strictly the identification before any person can cast his/her
vote in the referendum.
e. During the District Assembly, assign spokesperson who will ask
troubled-questions to the pro-CDA speakers.
f. Design possible questions that will trap the pro-CDA speakers.
g. Hang streamers manifesting support for the non-stock non-profit EC.
h. Assign people who will distribute leaflets supporting the non-stock
non-profit EC.
i. During the presentation campaign, let the Stock Corporation and
Stock Cooperative speak first, so that they could no longer refute the
arguments of the Non-stock, non-profit stand.
Post Referendum
a. Assign person to monitor, record and document all the activity of the
Referendum.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 19
b. If the coop lost in the referendum, try to look for any possible
technicality that can be used for filing of protest against the result. If
possible, the person who will lodge the protest is not an employee.
c. If the coop won the referendum, call for a press conference to
announce the result.
d. Send the result to all public officials of the locality including the
concerned national agencies and officials.
METHODOLOGY
Table 1 - Elements of Commonalities/Differences
NON-STOCK STOCK
COOPERATIVE
STOCK
CORPORATION
Governing
Law
PD 269 as amended
by PD 1645 –
governs the
organization &
registration of
electric coops which
are non-stock, non-
profit & service
RA 6938 – The
Cooperative Code of
the Phil. Governs the
registration &
regulation of the
stock cooperatives.
The Corporation
Code or Batas
Pambansa 68
defines stock
corporation as an
artificial being
created by law which
has capital stock
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 20
oriented
cooperatives.
divided into shares
Policy
Declaration
PD 269 rationalizes
the distribution of
electricity on an area
coverage basis and
the setting up of
cooperatives for
power distribution to
attain total
electrification. NEA
extends financial,
technical and
institutional
assistance to ECs.
The Code
underscores the
principle of
subsidiarity which
means that the
cooperative sector
has primacy over the
state in initiating and
regulating within its
ranks…
The government
maintains a policy of
non-interference in
its management and
operation.
The code establishes
a new concept of
business
corporations so that
they are not merely
entities established
for private gain but
effective partners of
the National
Government in
spreading the
benefits of capitalism
for the social and
economic
development of the
country.
Governing
Body
NEA is tasked with
organizing, financing
and supervising
electric cooperatives.
Under RA 9136 or
EPIRA, NEA is
further mandated to
The CDA shall
regulate only the
internal affairs of the
converted ECs (Art.
98).
The SEC has the
absolute jurisdiction,
supervision and
control over all
corporations.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 21
act as guarantor of
ECs in operating and
competing under the
deregulated
electricity market
Capital
Sources
• government loans
• Subsidies
• Assistance in all
aspects of
operations.
• reinvestment fund
• membership fees
• Share capital of
members.
• A member can hold
a maximum of 20%
of the share capital.
• Loans and
borrowings
• Revolving capital
which consists of
deferred payments
of patronage
refunds or interest
on share capital
subsidies,
donations, grants,
aids and assistance
from local or foreign
institutions.
• Capital is
principally derived
from the contribution
of shareholders
received in
consideration for the
issuance of stock.
• Raise capital
from loans or
advances by
creditors. Gets
capital from its
profits or earnings
which are reinvested
in the business.
Democratic
Control
• The general
membership is the
• The general
membership is the
• Stockholder
who owned majority
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 22
supreme authority.
• The Board of
Directors is elected
per district.
• Observes the
one-member one-
vote policy. Proxy
voting is NOT
allowed.
supreme authority.
• Power is
distributed on a
one-member one-
vote policy
regardless of the
amount of money
they invest.
• Proxy voting
is discouraged.
of the shares of the
corporation controls
the business
• No
democratic control
vested in its
subscribers.
• Proxy voting
is allowed.
Quorum of
General
Assembly
Meetings
Coops having
less than 1,000
members: 5% of all
members present
in person
Coops having
more than 1,000
members: 5% of
all members or 100
whichever is lesser
present in person
25% of all the
members entitled to
vote.
The by-laws
may provide for a
quorum with more
or less than the
25% of all the
members entitled to
vote.
Consists of
the stockholders
representing a
majority of the
outstanding capital
stock.
A majority
vote is sufficient to
decide any
question properly
presented
Ownership
and Control
Owned by
the member-
consumers who
Real owners
are those members
who give share
The ultimate
control of the
corporation
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 23
pay P5.00
membership fee.
Power is
distributed on a
one member-one
vote policy.
The directors
are elected by the
members in the
district they
represent.
capital.
Power is
distributed on a
one-member one-
vote policy
regardless of the
amount of money
they invest.
The directors
are elected at large
by the members.
depends upon the
vote of the
stockholders.
The right to
vote is an incident
of ownership of
stock. Proxy
voting is allowed.
The Directors
are elected by the
stockholders.
Supervision
and Control
While
management is
vested in the
Board, NEA
exercises
supervision and
control over ECs.
NEA has the
right to be
represented and
participate in all
Board meetings
The CDA has no
quasi-judicial, only
conciliatory power
under Sec. 8 of RA
6939
The Board of
Directors
formulates policy
and directs the
conduct of its
business
operations.
Actual
management is
delegated to the
officers who are
responsible to the
Board.
Tax Treatment Permanently Exempt if: Corporations are
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 24
exempt from
paying income
taxes.
For a period
ending 31
December of the
30th full calendar
year after the date
of the organization
of the EC, or until it
shall become
completely free of
indebtedness
exempted from the
payment of:
A. All national
Government, local
government and
municipal taxes
and fees, and;
All duties on
imports of foreign
goods acquired for
its operations.
Transacts
business with
members
only
If transacts
business with
non-
members:
exempt from
income and
sales taxes if
it has less
than P10M
reserve funds.
exempt from all local
business taxes, fees
and charges imposed
by LGUs including
payment of Real
Property Tax
subject to all
applicable taxes,
local and national.
Purpose of Energizes Generate Operates for
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 25
Creation rural areas be it
viable or not.
Service
oriented and does
not generate profits
for their members.
Gives rural
folks the
opportunity to
meaningfully
participate in their
own development.
This will mean
lower rates that
would attract big
companies to put
up or relocate in
the rural areas thus
spurring economic
development.
profits for its
owners.
Concentrates
operation on areas
which are less
costly to energize.
This allows
stockholders to
have more returns
on their
investments.
Concentrates
on areas which are
viable.
business rather
than for service.
Poor folks in
the countryside will
have to pay the
costs to enable the
corporation to
recover the
investments made.
If they cannot
pay, there will be
no power in their
communities.
Concentrate
on areas which are
viable.
Debts Electrification
loans incurred by
the EC as of June
26, 2001 were
assumed by
Enjoys full
condonation of
loans upon
compliance with EO
119, and if
If conversion
is done within 5
years from the
completed
condonation, it shall
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 26
PSALM.
Result: Rates
reduction
commensurate to
amount of the
removed
amortization cost.
New loans
after June 26, 2001
are not included in
the loan
condonation.
conversion will be
done after 5 years
from date of loan
condonation.
If conversion
is done within 5
years from the
completed
condonation, it shall
pay to PSALM the
total debts. The
repayment cost
shall be passed on
to the consumers in
their bills
pay to PSALM the
total debts and
interests.
Conversion
can be done after 5
years so that the
corporation will not
be required to pay
PSALM.
Dividends and
Patronage
Refund or
Credit
All member-
consumers can
receive patronage
credit/refund if EC
has sufficient
margins
Paid in
accordance with
NEA guidelines.
Only those
who have share
capitals are entitled
to receive dividends
and patronage
refund based on
accumulated
margin.
If patronage
refund is based on
Stockholders
can receive
dividends based on
100% retained
earnings and shall
be distributed
proportionally to
stocks
subscriptions.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 27
Greater
advantage to
members in terms
of patronage
refund.
consumption, big
loads (commercial,
industrial) will
benefit most.
Impact on
Rates/Income
Tax
Please refer to Table 2
Table 2 - IMPACT ON RATES/INCOME TAX
EFFECT ON RATES
(Residential Class)
Non-stock EC
(NEA)
Stock EC
(CDA)
Stock
Corporation
(SEC)
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 28
Current Billing Rate (P/kwh)
Power Cost
Distribution/Supply/Metering
Universal Charge
Local Tax
VAT
Other Credits
P 4.4093
1.4493
0.0398
0.0500
0.2589
(0.4652)
P 4.4093
1.6893
0.0398
-
0.2589
(0.4652)
P 4.4093
1.6893
0.0398
0.0500
0.2589
(0.4652)
Total P 5.7421 P 5.9321 P 5.9821
Rate Increase/kwh due to:
Local Tax
Return on Rate Base
(Profit)
P 0.05
-
P -
0.24
P -
0.24
Source: Based on Misamis Oriental Electric Cooperative, Inc.’s (MORESCO) Study
RESULTS AND DISCUSSIONS
INSTITUTIONAL ASPECTS
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 29
1. Is conversion of ECs voluntary?
Yes. Section 57 of EPIRA states that ECs are given the options to
convert to either stock cooperative under the Cooperative Development
Authority (CDA), stock corporation under the Securities and Exchange
Commission (SEC). And nothing in this Act shall deprive ECs of any right or
privilege granted to them under PD 269, as amended and other existing laws.
EC conversion is optional, and needs the approval or consent of the
member-consumers. The decision to convert is best left to the judgment of the
member-consumers.
2. Why are the ECs given the option?
The EPIRA speaks about, among others privatization of the National
Power Corporation (NPC), and the National Transmission Corporation
(TRANSCO) and the infusion of private capital in the ECs. The EC consumers
can now have the choice to fully own their cooperative, thereby relieving the
government from putting up more capital to this business.
3. Are there guidelines to follow in the process of conversion?
Yes, Section 7 (c) (I), Rule 7 of the EPIRA Implementing Rules and
Regulations has vested exclusively upon NEA the duty to promulgate the
guidelines for the conduct of a referendum by the ECs in order for them to
exercise their option to convert. President Gloria Macapagal-Arroyo has also
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 30
issued Administrative Order No. 112 directing NEA to take full and sole authority
and responsibility in the conversion of ECs.
On 29 July 2004, the NEA Board of Administrators passed Resolution No.
93 approving the “Guidelines in the Conduct of Referendum by Electric
Cooperatives” (GCREC). The GCREC was published in the Official Gazette on
05 January 2005. The GCREC was further amended on October 5, 2005 to
include some relevant provisions. The amended guidelines were published in
The Manila Times on October 26, 2005.
4. What are the methods of conducting series of meetings and referendum?
For purposes of consulting the member-consumers on the conversion
issue, the series of district meetings may be undertaken:
SIMULTANEOUSLY – wherein meetings are held on the same day at
various venues; or
SEQUENTIALLY – wherein meetings are held one after the other in
different days in different venues.
In these meetings, the member-consumers shall be informed of the
positive sides/advantages, and negative sides/disadvantages of conversion so
that they could decide intelligently and objectively on the issue.
Right after the open forum, a referendum will be held wherein each
bonafide member shall cast his/her vote, through secret ballot, whether he/she
is in favor or against conversion.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 31
5. What is the Quorum requirement for Conversion?
Under the Guidelines, the required quorum and number of votes needed
for conversion:
The required quorum to conduct a valid referendum shall be at least a
majority (50% plus 1) of all bonafide members of the electric
cooperatives.
The approval of at least a simple majority (50% plus 1) of the required
quorum shall be considered a valid decision for conversion.
6. Can ECs register with CDA/SEC without conversion?
No. It is null and void because it violates Article 14 (5) of RA 6938
(Cooperative Code) which states:
“No cooperative shall be registered unless the article of cooperation
is accompanied with a sworn statement of the treasurer elected by
the subscribers showing that at least twenty five per centum (25%)
of the total subscription has been paid.”
Further, Rule 7, Section 7 (ii) (Structural & Operational Reforms Between
and among Distribution Utilities)of EPIRA Implementing Rules and Regulations
(IRR) states that:
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 32
“ (ii) ECs converted into Stock Corporation shall be registered with
the SEC in accordance with the Corporation Code, while those
converted into Stock Cooperative, shall be registered with the CDA:
Provided, however, that the ECs which opt to remain as Non-stock
Cooperatives shall continue to be registered with the NEA and shall
be governed by the provisions of Presidential Decree No. 269, as
amended.”
7. Is the provisional registration still effect until now as claimed by CDA?
No. It had already lapsed on May 4, 2000. There was no other extension
granted by CDA and NEA.
It is to be that CDA and NEA issued a Joint Memorandum Circular dated
October 1997, signed by CDA Chairman Jose C. Medina, Jr. and NEA Chairman
Francisco L. Viray and duly approved by Executive Secretary Ruben D. Torres.
The Joint Memo Circular had extended the conversion period for a period of
three (3) years, from May 4, 1997 to May 4, 2000.
Since RA 9136 (EPIRA) took effect on June 26, 2001, any move for EC
conversion should be governed by the provisions of Section 57 of EPIRA.
8. What is then the legal process of Conversion should the coop decide to
convert into stock coop under CDA or stock corporation under SEC?
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 33
Prior to registration as stock EC, the applicant EC should have already
opted first to convert from non-stock, non-profit cooperative to stock cooperative
under CDA or stock corporation under SEC. The process for the exercise of the
option to convert has been laid down by NEA in its Amended Guidelines in the
Conduct of Referendum for Conversion prior to registration with the appropriate
government agency. These guidelines were promulgated pursuant to Section 57
of RA 9136 and Subparagraph (i), paragraph ©, Section 7, Rule 7 of the
Implementing Rules and Regulations of RA 9136.
9. What should be followed before registration with CDA or SEC?
Chapter VI of the Guidelines provides that:
Within 180 days from the date of approval of the conversion to stock
corporation with SEC or stock cooperative with CDA, the EC shall file with the
SEC or CDA as the case may be the following:
Articles of Conversion
Amended By-Laws, and
Treasurer’s affidavit on the payment of subscriptions of the members or
shareholders.
The Articles of Conversion shall contain among others, the authorized
capital stock, subscribed capital stock and paid up capital stock of the EC and
the respective subscriptions and payments for subscriptions of the members or
shareholders listed in alphabetical order.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 34
The electric cooperative shall furnish the NEA Certified True Copies of
the documents. Such documents are needed before NEA would issue its
favorable endorsement.
10. Does NEA’s authority over ECs cease once registered with CDA or SEC?
ART. 132. Effects of Registration with the Authority.
(1) Upon the effectivity of this Code, electric cooperatives that are duly registered
with the Authority, and issued a certificate of registration, shall no longer be
covered by Presidential Decree No. 269, as amended by Presidential Decree
No. 1645
(2) The electric cooperatives registered with the Authority with existing loans
obtained from the NEA after June 26, 2001 shall continue to observe the
terms of such loans until full payment or settlement thereof;
(3) Except as provided in the immediately preceding paragraph, the NEA shall no
longer exercise regulatory or supervisory powers on electric cooperatives
duly registered with the Authority.
11. What are the powers of the General Assembly of a stock coop?
Article 34 of RA 6938 provides the following powers which cannot be
delegated.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 35
To determine and approve amendments to the articles of cooperation and
by-laws;
To elect or appoint the members of the board of directors, and to remove
them for cause;
To approve development plans of the cooperative; and
Such other matters requiring a two-thirds (2/3) vote of all the members of
the general assembly, as provided in this Code.
12. In a stock coop, is there a possibility that a mere resolution of the General
Assembly could help destabilized the operations of the EC?
Yes. This is what happened to CDA-registered Sorsogon II Electric
Cooperative (SORECO II). During the coop’s 18th Annual General Membership
Assembly (AGMA) on 19 July 1998, a mere motion by a consumer (which was
duly seconded) declaring vacant all the positions of the Board of Directors, as
well as the position of the General Manager, had destroyed the institutional
foundation of the coop. Because the incumbent Board and the incumbent
General Manager did not relinquish their positions even if an Interim Board of
Directors and an OIC-General Manager had already been appointed, viva voce,
by the Assembly. As a result, SORECO II was unfortunately divided into two
factions: SORECO II (Incumbents, NEA side) and SORECO II (Interim, CDA
side). Not only that the member-consumers, local officials and all sectors were
confused, the cooperative that was once very viable had collapsed.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 36
13. What is the method of electing Board of Directors in a stock
coop/corporation?
While under PD 269, Directors of non-stock EC are elected per district,
Directors of a stock EC will be elected at large; hence, is possible that most, if
not all, of the Directors will come from the same municipality/city. Some districts
will thus have no representations in the Board of Directors to detriment of the
member-consumers in the area. In the stock corporation case, Directors are
elected by the stockholders.
14. What are the powers of the Board of Directors in a stock coop?
Article 39 of RA 6938 provides that the board of directors shall “direct and
supervise the business, manage the property of the cooperative and may, by
resolution, exercise all such powers of the cooperatives as are not reserved for
the general assembly.”
Since the Code promotes the principle of subsidiarity, the Board of
Directors of stock EC has complete autonomy and independence from
government intervention. However, if this principle is not practiced rightly by the
Board of Directors who is managing the coop, it will bring about internal
squabbles among officials, employees and consumers that may disrupt the
delivery of electric service.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 37
15. In case of internal conflict, how would it be settled?
There is no immediate availability of government intervention in a stock
EC because CDA, having no quasi-judicial powers, can only mediate or
conciliate (Sec. 8, RA 6939). The settlement of Disputes on EC registered with
CDA shall be in accordance with conciliation/mediation mechanisms embodied in
the coop’s By-Laws and applicable laws. If these fail, the matter shall be settled
in a court of competent jurisdiction (Art. 121, Coop Code).
While in non-stock ECs, NEA, having quasi-judicial powers under PD 269
as amended, will use its regulatory and supervisory powers over ECs in order to
resolve immediately such internal conflict to save the coop from eventual
financial and institutional destruction.
16. What is the role of the General Manager in a stock coop?
The General Manager of a stock coop is purely a mere implementor of
whatever policy or resolution that the Board of Director will pass, even if he/she
finds that such policy or resolution is disadvantageous to the coop. If he/she
disagrees with such policy or resolution and does not implement the same,
he/she could be arbitrarily suspended or even without due process. This was
what happened to former SORECO II General Manager Joey Cubias.
Unlike in a non-tock coop, NEA has promulgated a policy that clearly
defines the specific duties and responsibilities of the General Manager and Board
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 38
of Directors. This is to avoid unnecessary interference of the Board of Directors
in the management functions of the General Manager.
FINANCIAL ASPECTS
1. Who are the “real owners” in a stock coop?
To become “real owners”, members in a stock coop must contribute share
capital in order to be entitled to the rights and privileges of a bonafide member.
Only those members who infused capital are the “real owners” who are entitled to
receive dividends or patronage refund.
2. What is the maximum amount of share capital a consumer can own?
Art. 74 of RA 6938 provides that a member can own 20% of the share
capital of the coop. Thus, it is possible that only few rich people can become
members.
It will be unfortunate for the thousands of existing member-consumers of
the EC, who cannot afford to put up share capital, because they will be
disenfranchised.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 39
3. What is the effect of conversion on loan condonation?
Section 60 (Debts of Electric Cooperatives) of EPIRA provides that:
“Within five (5) years from the condonation of debt, any
electric cooperative which shall transfer ownership or control of its
assets, franchise or operations shall repay Power Sector Assets and
Liabilities Management (PSALM) Corp. the total debts including
accrued interest thereon.”
This is also provided under Article IV of the Memorandum of Agreement
(MOA) between NEA and PSALM Corp. signed on October 3, 2003 also provides
that:
“In case of transfer of ownership or control of the EC assets,
franchise or operations within five (5) years from the affectivity of the
assumption by PSALM Corp. of the Rural Electrification Loan(s), the
particular EC shall repay PSALM Corp. the total debts including
interest thereon, assumed by PSALM Corp. as prescribed by Section
8 of EO 119 and Section 60 of RA 9136.”
4. Is there a possibility that rates will increase?
Yes. Since the member-consumers are expecting dividends (interest on
share capital) and patronage refunds, it is necessary to increase the rates to
insure that there is profit or net surplus to distribute annually.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 40
In a stock- and profit-oriented coop/corporation, the frequency of rate
increase is most probable since conversion will require the EC to have a return
on rate base (RORB) or return on investment (ROI), which could be 8% minimum
to 12% maximum, which at present is not being considered under the cash-flow
method under non-stock EC.
Further, if the condoned loans will be revoked by PSALM because of the
change of nature of EC (from non-stock to stock EC), rates will increase because
the EC shall pay PSALM Corp. the total debts including interest thereon. As a
result, the amortization cost of this loan shall be re-imposed on the rates.
5. Is the stock EC exempt from paying local taxes?
The stock ECs are tax-exempt if:
Article 61: ECs do not transact any business with non-members or the general
public.
Article 62: Accumulated reserves and undivided net saving are not more than
P10M. If more than P10M, EC shall pay full income tax (on amount allocated for
interest on capital) and sales tax (on sales to non-members.
Exempt from the payment of income and sales taxes for a period of ten
(10) years only.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 41
6. Can ECs avail of the tax exemption privileges if they opt to remain non-
stock coop?
Yes. Pursuant to Sec. 39 of PD 269, the ECs are still permanently
exempt from paying income taxes and, for a period ending on 31 December of
the 30th full calendar year after the date of the organization of the EC, or until it
shall become completely free of indebtedness, whichever event first occurs, shall
be exempt from the payment of:
(a) All National Government taxes and fees, and
(b) Of all duties or imports on foreign goods acquired for its operations.
7. Is it better to pay local taxes and remain non-stock than becoming stock
EC?
Yes. The taxes which the EC pays to the local government can be used
for the economic development of the area. Actually, the amount to be
incorporated in the rates for payment of local taxes (franchise, business and real
property) is much lower than 8-12% RORB that will be added to the rates if the
EC converts to stock coop or stock corporation.
To illustrate, based on computation, the management of Batangas II
Electric Cooperative, Inc. (BATELEC II) will have to increase P0.94/kwh (RORB
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 42
and interest on Revoked Condoned Loans), as compared to P0.03/kwh increase
for payment of Franchise (P0.014/kwh) and Real Property (P0.16/kwh) Taxes, if
the EC remains non-stock.
8. Is the 5% Reinvestment fund part of the built-in contribution of member-
consumers in a non-stock ECs?
No. The reinvestment, as part of the rates, is considered as a
contribution-in-aid of construction, and is used to cover the depreciation cost of
EC assets. It is part of the operating cost, and not considered as equity of
owners.
9. Is the Amortization Cost part of the built-in contribution of member-
consumers in a non-stock ECs?
No. It is a embedded in the rate, but it is utilized in the day-to-day
operations of the EC. It cannot be treated as equity of members for distribution.
10. Is there a need to contribute additional paid-up capital to fully comply with
the paid-up capital required under the Articles of Cooperation?
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 43
Yes. Because the reinvestment fund and paid amortization are already
fixed assets, so the coop has to raise cash to cover increases in operating cost
and for the much needed capital investment.
11. Will non-stock ECs still receive subsidies for rural electrification from the
government?
Under PD 269, NEA is mandated to extend full assistance (Financial,
Institutional and Technical) to non-stock, non-profit electric cooperatives.
12. What will happen to the existing loan of ECs with NEA once they convert?
As provided in the loan contract, the existing loans will become due and
demandable once the ECs convert to stock cooperative or stock corporation.
13. What will happen to the remaining remote unenergized barangays and
sitios once the EC becomes stock cooperative?
Since it is financially unviable to energize these barangays and sitios, it is
possible that the coop will no longer extend the lines to these areas because it
will entail millions of investment and is not a profitable undertaking. It is to be
noted that an average cost to energize a barangay and sitio is P1.2 million to
P2.0 million, and P0.3 million to P0.5 million, respectively.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 44
It is also possible that stockholders may decide to cut off the services in
the existing energized but unprofitable remote areas, especially if these areas
are hit by natural calamaties.
TECHNICAL ASPECTS
1. Can NEA withhold its technical assistance to the ECs once they convert?
Yes. Under PD 269, NEA is mandated to extend full assistance
(Financial, Institutional and Technical) to non-stock, non-profit ECs. Thus, NEA
can withhold technical assistance to stock ECs, if it needs to prioritize its
assistance to non-stock, non-profit ECs.
IMMERSION
ECs Who Conducted Referendum
Sultan Kudarat Electric Cooperative (SUKELCO) – conducted referendum on
July 24,2010. Out of 11,158 (18% of 60,450 total membership) member-
consumers who casted their votes, 6,815 (61%) favors to remain a non-stock EC
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 45
under NEA, while there are only 4,180 (37%) voted for stock cooperative under
CDA and 163 (1%) chose to be a stock corporation under SEC.
South Cotabato II Electric Cooperative (SOCOTECO II) - conducted
referendum on March 2, 2008
SOCOTECO Final and Official Referendum Result (March 02, 2008)
Districts NEA SEC CDA TOTAL
No. of Member-
Consumers
Percentage of
Participation
Gen. Santos City 1 976 28 109 1,113 30,983 4%
Gen. Santos City 21
1,342 48 98 1,488 11,117 13%
Gen. Santos City 3 1,376 68 136 1,580 25,726 6%
Polomolok 947 32 160 1,139 15,727 7%
Tupi 814 20 94 928 5,635 16%
Alabel 568 28 71 667 4,606 14%
Malapatan 919 28 79 1,026 3,479 29%
Malungon 1,551 20 45 1,616 5,228 31%
Glan 859 18 328 1,205 5,558 21%
Phase II
Kiamba
Maasim
Maitum
2,689 83 132 2,904 10,602 27%
Average
Total 12,041 373 1,252
13,666 118,661 12%
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 46
Source: National Electrification Administration Data
ECs Who Withdrew Registration with CDA
Sorsogon II Electric Coop., Inc. (SORECO II) is a CDA registered EC since
1996 issued Board Resolution No. 320, S-2010 expressing SORECO II’s
intention to convert itself from a CDA to a NEA registered coop and Board
resolution No. 321, S-2010 which is requesting nea to issue a Php 23 million
letter of guarantee to Avoitiz Power for and in behalf of SORECO II.
Peninsula Electric Cooperative (PENELCO) in Bataan issued Resolution No.
592, Series of 2008 Authorizing the withdrawal and cancellation of the Board
Resolution No. 533, S. 2007 and to Retain its Registration with the NEA with the
following reasons:
a. Failure to comply with the requirements as provided under RA 6938 and
6939
b. OGCC Opinion No. 220, Series of 2008, dated 30 Sept. 2008
Zambales II Electric Cooperative (ZAMECO II) issued Resolution No. 36,
Series of 2008 requesting for the Immediate Withdrawal and/or Cancellation of
ZAMECO II’s Registration with the CDA with the following reasons:
a. Registration was hastily initiated, facilitated and implemented by the 7
former BOD members who were removed from office by NEA
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 47
b. Did not comply with the mandatory requirements of RA 9136 (ex.
Referendum)
c. OGCC Opinion No. 220, Series of 2008
Electric Company Registered under Securities and Exchange Commission (SEC)
The Manila Electric Company (formerly known as Manila Electric Railroad And
Light COmpany) also known as MERALCO or Meralco, is the Philippines' largest
distributor of electrical power.
MERALCO is the Metro Manila's only electric power distributor and holds the
power distribution franchise for some 22 cities and 89 municipalities, including the whole
of Metro Manila and Mega Manila region. (en.wikipedia.org/wiki/Meralco)
Reaction from Stakeholders
Zambales Sangguniang Panlalawigan
Resolution No. 2008-406 : “Vehemently Denouncing the Act of the CDA
in Registering ZAMECO II as a Stock Cooperative for Non-Compliance of
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 48
Legal Requirements in Accordance with the Guidelines Before Its Actual
Conversion and Permanent Registration” (i.e. No Public Consultation, No
Referendum and No NEA Endorsement)
NEA Position on the Conversion and Registration of ECs as recently approved by
the NEA Board of Administrators (NEA-ECs: Firming Up the Road Map for Service
Excellence (2008))
ECs which have converted from non-stock to stock for profit can no longer be
extended government subsidy funds by virtue of the change of business
orientation. Stock cooperatives should raise their own capital. Government
cannot provide subsidy funds to private electric distribution utilities organized
as stock. The absence of government regulation with the non-application of
Sections 3, 5 and 7 of PD 1645 will no longer qualify them to receive subsidy
from NEA.
The Commission on Audit (COA) citing the Philippine Constitution dictates that
government funds shall be exclusively used for public purpose. NEA is used
as the implementing arm of the government, among others, in accounting for
utilization of funds, in accordance with Government Rules and Regulations.
NEA has the custodial responsibility of ensuring that public assets should not
be privately misappropriated.
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 49
Without government supervision over the ECs, the attainment of total
electrification of the country will be greatly jeopardized. NEA and the ECs are
the only identified long time partners in charge of the Rural Electrification
Program, now entering its 40th year.
Cooperative Development Authority (CDA) reaction on how to deal with converted
ECs.
“None of our CDA people has come from electric cooperatives, that’s why when
these cooperatives register with us, we will be confused and lost,” CDA
Executive Director Niel A. Santillan said. (Reference : CDA at a loss on how to
deal with co-ops - Phil. Daily Inquirer, Dec. 2, 2005)
CDA Chairman Ruben Conti said that of the estimated 28,000 cooperatives in
the country, half or about 14,000, are on the verge to collapse. (14,000 Coops
Collapsing, says official - Phil. Daily Inquirer, August 12, 2005)
Luis Manuel Corral, Secretary General of the party-list group Association of
Philippine Electric Cooperatives (APEC) admitted that despite the incentives (i.e.
tax exemptions, congressional allocations, grants, subsidies and other financial
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 50
assistance for rural electrification which can be coursed through the Department
of Energy, the Authority or local government units."), only 11 out of the 119 ECs
are registered with the CDA.
Among the ECs that signed up for CDA are Negros Occidental Electric
Cooperatives (NOCECO 2); Palawan Electric Cooperative (PALECO);
Pangasinan Electric Cooperative 1 and 2 (PANELCO); Nueva Vizcaya Electric
Cooperative (NUVELCO); Negro Oriental Electric Cooperative (NORECO 2);
Abra Electric Cooperative (ABRECO), Isabela Electric Cooperative (ISELCO);
Sorsogon Electric Cooperative (SORECO) and Quirino Electric Cooperative
(QUIRELCO).
These ECs have a total of 1.2 million member consumers.
(www.sunstar.com.ph/manila/cda-coops-sell-cheaper-electricity)
2008 Legislative investigation on high power rates of Meralco
Meralco is facing a Philippine legislative inquiry/investigation for alleged
excessive pricing. The government has considered a plan to take over Meralco, to
reduce electricity bills. Meralco and National Transmission Corporation (Transco)
blamed each other for the high power rates. Meralco also blames high power generation
costs, high transmission costs and government taxes imposed on the electricity sector
from power generation to distribution. Government Service Insurance System
(Philippines) President Winston Garcia, however, blamed Meralco's inefficiency, its
"bloated bureaucracy" and its sourcing of power from independent power producers
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 51
(IPPs) also owned by the Lopezes, and the need to amend the Electronic Power
Industry Reform Act of 2001. Oscar Lopez, said that if GSIS would buy the shares of
Meralco, they must buy in whole cash. Many businessmen also say that taking over
Meralco is not the way to reduce electrical price. It depends on the government and the
president. As other people say, this issue is only to hide the ZTE NBN scandal and other
more issues. A perceived lack of general understanding regarding the issue of system
loss, inherent in the business of utilities prompted Meralco's former holding company
First Philippine Holdings to issue advertisements explaining systems loss.
(en.wikipedia.org/wiki/Meralco)
CONCLUSIONS
After studying the facts as well as other information about the conversion of
electric cooperatives in the Philippines into a stock cooperative under CDA or stock
corporation under SEC or retain its status quo under NEA, I therefore conclude that the
outcry of some sectors of our society to change the corner-stone on which it was
founded, and convert its very nature of being a non-stock, non-profit and service –
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 52
oriented cooperative to a profit-oriented cooperative or corporation will be a threat on
ORMECO’s future and stability. Furthermore, the destiny of ORMECO, being one of the
most reliable and trusted institutions in the province and the only remaining electric
cooperative in Region IV-B under NEA with a categorization of A+ Mega Large EC relies
on the responsibility and power of its member-consumers, Board of Directors,
management and employees to fight and stand for what they think will be the best for
our cooperative. If ORMECO will be converted into either stock cooperative or stock
corporation, then the sacred goal of total electrification of the Province of Oriental
Mindoro will not be realize. It is like taking to the people residing in remote sitios/areas
their only hope to improve their lives through the benefits of having an efficient, reliable,
and affordable electric service.
RECOMMENDATION
Member-consumers cannot be expected to participate actively in EC activities
and affairs, much less cooperate, if they cannot appreciate these because of lack of
awareness and knowledge of at least the basic aspects of ORMECO operations. It is
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 53
important for ORMECO to have an active, supportive and well-informed membership
base to serve as the foundation of all its efforts towards conversion issues.
Thus, to strengthen ORMECO institution, it will entail an aggressive, sustained
and grassroots-based information and educational campaign. This will not only heighten
awareness but will ultimately work for a positive attitude and behavior towards ORMECO
developing the member-consumers’ sense of involvement.
References
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 54
2008 Legislative investigation on high power rates. Retrieved from
en.wikipedia.org/wiki/Meralco
Bueno, E. (2010). Message. ORMECO Annual Report 2010, 5
Cariño, D., (December 2, 2005). CDA at a loss on how to deal with co-ops, Philippine
Daily Inquirer
Lotilla, R., Billena, W., Khonghun, J., & Bueno, E. (2005). Amended guidelines in the
conduct of referendum,1-7
MSN/Sunnex (2010). CDA coops sell cheaper electricity. Retrieved from
www.sunstar.com.ph/manila/cda-coops-sell-cheaper-electricity
NEA Board of Administrators (2008) NEA-ECs: Firming Up the Road Map for Service
Excellence, 3-5
NEA Consumer Development & Protection Division (2007). Primer on EC Conversion
1-7
Quiros, J., (August 5, 2005). 14,000 coops collapsing, says official, Philippine Daily
Inquirer, A18
Presidential Decree 269 (1974). Retrieved from
www.nea.gov.ph/index.php/about-us/charter/pd-269
Presidential Decree 1645 (1979). Retrieved from
www.nea.gov.ph/index.php/about-us/charter/pd-1645
Republic Act 6938 (1990). Retrieved from http://www.bcphilippineslawyers.com/
republic-act-no-6938
A COMPREHENSIVE STUDY ON CONVERSION OPTIONS 55
Republic Act 9136 (2001) Retrieved from
www.nea.gov.ph/index.php/about-us/charter/ra-9136
Republic Act 9520 (2008).Retrieved from http://www.lawphil.net/statutes/repacts/ra2009/
ra_9520_2009.html