DOE backs down on franchise revocation
posted 10-Feb-2019  ·  
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As the First Catanduanes Electric Cooperative, Inc. (FICELCO) and 16 other cooperatives forged a united front against their possible privatization, the Department of Energy (DOE) blinked last week and recalled its earlier recommendation for the House of Representatives to cancel the franchise of the “ailing” cooperatives.

In a Jan. 30, 2019 letter to House Speaker Gloria Macapagal-Arroyo, Energy Secretary Alfonso Cusi expressed his sincere apology in recalling its Jan. 11 recommendation that set off alarm bells among officials and consumers of the 17 cooperatives., most of which are from Bicol and Mindanao.

“While the DOE is not backing down on its campaign against of underperforming, financially and technically distressed electric cooperatives, we deem it imperative to conduct further evaluation and assessment on the status and performance of these electric cooperatives,” he stated, adding the NEA report that was the basis for the DOE recommendation was conducted in 2018.

Cusi said the department has received reports and information from the cooperatives that they have already addressed the issues against them.

“If indeed there have (been) rectifications of the identified issues, they may no longer be a basis for our recommendation,” he informed GMA. “Hence, while awaiting submission of proof/compliance by these electric cooperatives, we deem it prudent to hold, in the meantime, our recommendation.”

“Our position remains that the franchise, while conferring authority to operate a public utility, should not be used to justify inefficiency as the DOE will not hesitate to invoke Section 46 of the EPIRA if only to protect the greater interest of the public,” Cusi concluded. .

Last week, FICELCO and 16 other electric cooperatives were rattled after receiving from the 1st Consumers Alliance for Rural Energy, Inc. (1-CARE) partylist representative a copy of the DOE recommendation.

The DOE recommendation, Cusi said, was pursuant to Section 45 of Republic Act 9136 and based on the submission of the National Electrification Administration (NEA) of “underperforming, financially and technically distressed electric cooperatives.”

“The Department of Energy is likewise drafting a policy recommendation, for the consideration of Congress, to adopt a process of competitive selection for the grant of franchise to potential applicants,” the energy secretary had stated.

FICELCO and the other coops - Abra Electric Cooperative (ABRECO), Pampanga III Electric Cooperative, Inc. (PELCO III), Occidental Mindoro Electric Cooperative, Inc. (OMECO), Oriental Mindoro Electric Cooperative, Inc. (ORMECO), Palawan Electric Cooperative, Inc. (PALECO), Camarines Sur III Electric Cooperative, Inc. (CASURECO III), Albay Electric Cooperative, Inc. (ALECO), Masbate Electric Cooperative, Inc. (MASELCO), Ticao Island Electric Cooperative, Inc. (TISELCO), Zamboanga City Electric Cooperative, Inc. (ZAMCELCO), Davao del Norte Electric Cooperative, Inc. (DANECO), Basilan Electric Cooperative, Inc. (BASELCO), Sulu Electric Cooperative, Inc. (SULECO), Tawi-Tawi Electric Cooperative, Inc. (TAWELCO), Maguindanao Electric Cooperative, Inc. (MAGELCO), and Lanao del Sur Electric Cooperative, Inc. (LASURECO) – were taken aback by the development as they were not informed of the recommendation by NEA, which supervises all ECs.  It is claimed that NEA officials, including FICELCO project supervisor Orlando Andres, have denied making the recommendation.

Ironically, Sec. 27 of the same law that vested exclusively on Congress the power to grant franchises in the transmission and distribution of electricity also states that “ all  existing  franchises  shall  be  allowed  to  their  full  term.”

FICELCO’s 50-year franchise was granted by NEA on June 6, 1979 and would expire on June 5, 2029, more than 10 years in the future.

Targeted coops unaware of DOE action

“We were not informed,” FICELCO General Manager Raul Zafe told the Tribune last Thursday (Jan. 31, 2019). “The cooperatives concerned should have been given the chance to explain individually why their franchises should not be revoked.”

Surmising that the DOE action was based on the adverse NEA audit report in 2016 as well as the Catanduanes grid’s situation in 2017 after the National Power Corporation’s termination of the lease of the genset operated by Catanduanes Power Generation, Inc. (CPGI) led to daily brownouts, the GM said the energy department must have been unaware that the situation had been corrected with NPC’s operation of the 3.6-megawatt genset by itself.

“We are current in the payments of our power bills, debt amortizations and obligations to suppliers,” Zafe stated, describing as “a big lie” the DOE claim that FICELCO is “underperforming, financially and technically distressed.”

On the technical side, the only problem that is being corrected by the cooperative is its high Systems Loss of 14%, which is over and above the systems loss cap of 12% mandated by NEA.

“We have been implementing our Systems Loss Reduction Program since January 2019 in an effort to bring down the systems loss,” the GM reported.

“It is not reasonable to lump FICELCO with the other ailing cooperatives,” he said.

According to the 2017 Electric Cooperative Overall Performance Assessment finalized by NEA in September 2018, FICELCO garnered a total score of 92.50% in four key performance standards, even attaining perfect ratings in financial and technical standards.

Together with the EC classification rating of 75%, the island’s cooperative had a total score of 89% for its 2017 performance, good enough for Category “A” rating.

In contrast, of the other 16 cooperatives in Sec. Cusi’s “hit list”, only Palawan Electric Cooperative (PALECO) has a similar rating at Category “AA.”

Two electric cooperatives were categorized as “B” while seven were “C” and six were at the lowest category “D.”

Privatization would mean higher power rates

On the possibility that cancellation of the cooperative’s franchise would lead to its ownership by a private company, GM Zafe said that if FICELCO is privatized, its more than 50,000 consumers will have to bear higher power rates, as there would be an inevitable increase in the cost of operating the grid.

The company’s cash operating budget would have to include a provision for profit margin of 12 percent maximum, he said.

As the government will no longer grant a subsidy, the electrification of sitios will not be undertaken since it would not be profitable, or the company could simply pass the cost to local government units, the GM added.

While the FICELCO Employees Union’s Collective Bargaining Agreement (CBA) provides that all personnel will be absorbed in case of a takeover by a private firm, Zafe expressed doubt this would happen, citing his experience with the NPC.

When the state-owned power firm was reorganized decades ago, some of its personnel transferred to the National Grid Corporation of the Philippines (NGCP), a privately-owned entity. Despite assurances as to their security of tenure, the veteran NPC personnel were eased out one by one on the pretext of subpar performance, it is claimed.

GM Zafe disclosed that the management and board will seek the help of political leaders as well as the Sangguniang Panglalawigan and Sangguniang Bayans to oppose the DOE recommendation and any move in the House of Representatives on the issue.

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