OpinYon # 29. March 7, 2011




                                                 LESSONS FROM AGUSAN

The struggle for power reform in Agusan Del Norte marks a milestone on March 16, 2011, when a consumer initiative to assert lawful ownership over their Electric Cooperative is decided in a referendum, a feat Meralco customers dream to do someday.

I got sent by Ike Seneres, a Brod and fellow columnist in OpinYon, the position paper of the People’s Movement for Socio-Economic Development, a group convened by Roberto Rosales and based in Butuan City, and I was quite impressed with what they have been able to do in Mindanao. Even more remarkable are their plans for their members.

Under that People’s Movement, ACOA or the Alliance for Consumer Ownership of ANECO, also chaired by Mr. Rosales, is spearheading the referendum.

Like Meralco customers, consumer-members of the Agusan Del Norte Electric Cooperative (ANECO) suffer high and oppressive rates resulting from mismanagement and utility abuse. In both cases, structural and policy flaws, compounded by antiquated martial law decrees, spotty implementation and regulatory failure, make those abuses possible.

While not exactly the same in all aspects, ANECO being a Rural Electric Cooperative (REC)) and Meralco a Private Distribution Utility (PDU), their captive customers insist that the same rules of equity and fairness, reasonableness and prudence, should apply in rate-setting.

In both cases, too, recognition of capital contribution and capital expense as consumer equity is a common cause.

ANECO OWNERSHIP. On February 14, 2011, the current management of ANECO got a unique Valentine Greeting from ACOA. Said ACOA in its General Notice:” … for lack of logistical and funding support from the Board of ANECO … (we) will conduct (on March 16, 2011) a member-consumer initiated referendum pursuant to the provisions of RA 9520…”

The referendum is ACOA’s ticket out of the clutches of the National Electrification Administration (NEA) and into the arms of the Cooperative Development Authority (CDA), perhaps a case of jumping from the fire into the frying pan. My first and only encounter with CDA many years back was hardly inspiring, but time may have been a good teacher and CDA might be in better shape today.

In any case, NEA is not a tough act to follow. Definitely not!

RURAL ELECTRIFICATION. The country’s over 100 REC’s were created by Marcos under martial law powers in 1973, when he issued PD 269 creating NEA and placing the REC’s under its absolute and full control. While a cooperative in name, the RECs were hardly so in terms of ownership and operations. The power to hire and fire REC managers resided solely in NEA, and the funding of RECs through loans was also controlled by NEA. The power to hire and fire and the power of the purse left the RECs at the mercy of NEA.

Patronage capital, the essential and defining characteristic of a cooperative, was not recognized. Worst yet, centralized procurement of poles and other supplies, pegged against loans that coop members had to pay, led to unwanted and expensive inventories, driving rates to the roof.

In fact, imprudent borrowings led to a P18Billion write-off of REC debts in 2001 under RA 9136 or the Electric Power Industry Reform Act (EPIRA), a generous gesture to allow RECs to start with a clean slate, but with taxpayers paying the cost as government absorbed those debts.

The rural electrification program, however, for all its run-away cost and imperfections, brought electricity and progress to the countryside, reaching 98% coverage at the barangay level. In fact, according to ACOA, the RECs have built a combined asset base of P200 Billion, a very potent springboard for economic mobilization in the countryside.

This potential will be unleashed, ACOA says, when people in the countryside are economically empowered by giving them management and control of the RECs..

THE STOCK OPTION. Consumer-members of ANECO seek empowerment via their option to convert ANECO into a stock cooperative under RA 6938 or the CDA Law of 1990 and RA 9520 or the Cooperative Act of 2008.

Early liberation from NEA should have been possible under RA 6938 but ambiguities in that law and its implementing rules made CDA registration near-impossible. The rules on the call for and count of a referendum were impractical and unrealistic.

Under RA 9520, a petition by at least 300 members per district is sufficient for the call of a referendum on the stock option, curing the built-in imperfection of the original law. A 20% vote is sufficient to carry the stock option and CDA registration.

The benefits from CDA listing are many, principal of which is the exemption from taxes, including VAT, and the privilege to carry on business as a coop.

Mr. Rosales minces no words in summing up the disadvantages: non-implementation of all the exemptions by not registering with CDA is an act of great social injustice to the REC members. We agree fully, Mr. Rosales, Sir.

What I like best from the Movement’s plans, however, is the filing of estafa cases against ANECO management for collecting loan payments after the write-off of the P18Billion loans of RECs under EPIRA. What loans could those members be amortizing if those loans had already been absorbed by the government, they ask.

In fact, Mr. Rosales is right in insisting that the condoned loans be considered and credited as equity of the consumer-members, just like Meralco customers insist that capital equipment acquired from their rate payments be credited as consumer equity in Meralco.

We wish ACOA all the luck and all the best, as we watch developments in Butuan with keen interest. There are many lessons to be learned from this Movement, especially in what they have achieved.

MERALCO UPDATE. Meanwhile, we ask Meralco customers to be keenly aware of the underpinnings of Meralco’s aggressive campaign to go into generation. There are legal, policy, operational and practical issues that must be addressed here.

Meralco’s public statements on its generation projects cite a P45 Billion capital expense program now under review by the Energy Regulatory Commission (ERC), a clever juxtaposition to blur the line between generation and distribution. Nice try, but this only highlights the fact that a PDU may only go into generation, if at all, under the most rigorous oversight.   Let us not forget that a PDU or Meralco can only charge us for costs that are necessary in providing us the service, i.e. distribution, NOT GENERATION. How then, are they going to book the power plant investment?

Moreover, this P45 Billion capex has already been reduced by ERC to P34 Billion, an amount we are even contesting and certainly not conceding as Gene Lualhati says this should only be P1.0 Billion, based on market growth and Meralco’s own historical costs.  (I hope players and advisors in the stock market are properly apprised that Meralco’s claims with ERC are under serious challenge. Or are they that sure that no challenge at ERC can ever be serious?)

Meralco is already defending the P34 Billion capex at the ERC hearing, yet it continues to claim to the rest of the world the P45 Billion in the original application. What gives?                                Anyway, this is a whole bag of issues we will tackle in our coming columns                                         Email crsng_47@hotmail.com for comments, concerns and suggestions.


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