By Luz Balisong, BENECO

In a dialogue attended by BBECCE Chair Prof. Federico Balanag, RCDC OlC-Chair Mr. Peter Dumaguing, businessman Jack Dulnuan and retired banker Tolentino Opiniano, BENECO General Manager Gerardo P. Verzosa stated that BENECO is not actually against the conversion into a stock cooperative. He emphasized, however, that it is not the opportune time to convert considering the conflicting issuances of NEA and CDA. Issues raised by the group were exhaustively discussed in the dailies, in the information drive, TV shows and radio broadcast. But we must point out the following:

First, on the issue of the amortization payments. GM Verzosa cited an earlier opinion from the NEA that there is no legal basis to consider it as share capital of the member-consumer. In fact, there is a proposal to amend the Cooperative law for a provision to address this concern. Dumaguing cited Memorandum Circular No. 2006-06 dated May 18, 2006 as basis for claiming that the amortization payments can be considered as share capital. Looking closely, he said Memorandum refers to equity contributions in their amortization and not share capital, as manifested. Equity is the “residual interest in the assets of an entity that remains after deducting its liabilities.” The Circular never mentioned that the amortization payment would be the member-consumers’ share capital. Rather, it stated that it would form part of the equity contribution.

Second, on the issue of tax relief. While Revenue Memorandum Circular No. 48-91 pursuant to Article 61 and 62 of the Coop Code provides tax relief for cooperatives for a period of 10 years from registration, PD 269 under which electric cooperatives are created are permanently exempt from income tax. On the issue of the condoned loans, while Section 6 of the same Memorandum Circular explicitly stated that registration with CDA does not mean change of ownership which will mean revival of the condoned loans, Legal Advisory No. 11 of NEA states otherwise.

It is for these reasons that the BENECO Board and Management have staunchly stood by its position that it is not yet the opportune time to convert. It is very evident that CDA and NEA have conflicting issuances. Unless these two agencies resolve their differences, any electric cooperative will always be on a quandary who it will follow. It must be emphasized that both CDA and NEA will have supervision over electric cooperatives. In the middle of the jurisdictional conflict between NEA and CDA, who are greatly affected? It is not NEA, nor CDA, but rather the member-consumers. Hence, the BENECO Board and Management plead with all the groups to set aside personal differences and politics and work for the benefit of the member-consumers instead.

Third, on the issue of “ownership” by the member-consumers. A study made by World Bank Lead Energy Specialist Bernard Tenenbaum noted that “in their in-depth study and analysis of the operations of the Philippine electric cooperatives, it was established that since the approach of managing them “tend to be relatively fragile and isolated,” they have turned out “susceptible to local corrupting influences.” Tenenbaum cited one of the dilemmas of electric cooperatives is “self-regulation” which “thrives among electric cooperatives because they are normally run by owner-consumers who are bestowed with the right to vote on matters relating to their operations and could be first to oppose price adjustments as they do not want to be saddled with paying higher electricity rates.” As a consequence, most of the Philippine electric cooperatives are financially weak resulting to its inability to extend service to new users. According to the World Bank, corruption in community-based rural electrification organizations can only be overcome if the government is able to support a strong and central entity “to impose serious economic and governance standards in return for subsidies.”

The said article is in consonance with the argument being presented by the BENECO Board and Management in its information drive. The CDA has no teeth to sanction erring Members of the Board or Management. Thus, we emphasize that the Coop Code must first be amended before we think of conversion to suit the operations of a highly technical electric industry.

On the issue on whether to convert BENECO into a stock cooperative or maintain its status as non-stock, non-profit under NEA, BBECCE Chair Balanag stated in his open letter that “we are of the opinion that the general manager and employees are efficiently doing their job.” Under the leadership of GM Verzosa, BENECO recovered from its Php 32 million arrears from NPC and the systems loss of as high as 38.40%, and improved its collection efficiency. The BENECO Board and management have and will always be thinking of the welfare of the member-consumers. It will always consider what is best for the cooperative, as it has done in the past, and conversion to a stock cooperative is not one of them. Since the electricity industry is imbued with public interest, we cannot afford to gamble or engage in trial and error lest we become one of the “weak link” in the power sector. #