ILECOs grapple with debts despite top ratings

By Joseph Bernard A. Marzan

In an industry where performance and efficiency are paramount, the Iloilo Electric Cooperatives (ILECO) I, II, and III are standing out for their high standards.

But amidst these accolades lies a pressing concern: the significant debts each cooperative holds.

Antonio Mariano Almeda, the NEA Administrator, lauded the Iloilo Electric Cooperatives (ILECO) I, II, and III for achieving the highest performance standards set by the National Electrification Administration (NEA), awarding them the ‘Triple A’ (AAA) category—the highest NEA performance designation.

Speaking to Daily Guardian on Air, Almeda cited their January to February fact sheets, noting ILECO III’s 100 percent collection efficiency and 97 percent for both ILECO I and II.

Collection efficiency is crucial as it measures the co-ops’ ability to collect dues from consumers—a key indicator of financial health.

In terms of system losses—revenue that could not be accounted for—ILECO II reported 10.31 percent, ILECO I had 7.67 percent, and ILECO III had the lowest at 4.95 percent.

While these figures are indicative of operational efficiency, they also highlight the lost revenue that could have otherwise bolstered their financial standings.

Presidential Decree No. 269 and other relevant laws require electric cooperatives to submit periodic reports to NEA, which in turn evaluates their adherence to rules and categorizes them accordingly.

The recently issued NEA Memorandum No. 2023-21 sets forth the latest assessment policies.

These evaluations hinge on financial (40 percent), institutional-governance (20 percent), technical (20 percent), and electrification level (20 percent) parameters.

Almeda disclosed significant outstanding loans earmarked for capital expenditures: ILECO I with P12.4 million, ILECO II with P36.2 million, and ILECO III with P52 million.

These loans, obtained through the NEA, are meant to bolster the cooperatives’ capital to satisfy their consumers’ electricity needs, with emphasis on substation operations to ensure a consistent supply and minimize fluctuations.

“The ILECO cooperatives are supposedly implementing capital expenditures as we call it to be at par with the demands of electric consumption of its member-consumer-owners. They need substation operations [and] assistance to have a steady supply and eliminate fluctuations. That is where it usually goes,” Almeda said.

Despite the loans, cooperatives draw revenue from distribution charges paid by their member-consumer-owners (MCOs), alongside NEA’s financial assistance.

ILECO II’s Technical Manager Una Padilla previously mentioned to Daily Guardian an allocation of P200 million for their capital expenses.

Almeda explained the breakdown of an electric bill, highlighting that distribution charges finance the cooperatives’ operating costs and a reserved reinvestment fund, which is supplemented by NEA loans if necessary.

“When you look at an electric bill, there is a generation charge, being paid to power suppliers, transmission charges paid to the NGCP as the main transmission operator, and the distribution charge is what goes to the electric cooperatives,” he narrated.

The NEA chief explained that aside from operational expenses, a portion of the distribution charges also go into the cooperatives’ reinvestment.

“[Distribution charges] are what the electric cooperatives where they get their periodic operating expenses, salaries and wages for personnel, and a portion of that is what is called the restricted fund which they have to set aside. This is their reinvestment fund. This is what they use to add substations, and if that is still lacking, they can secure loans from the NEA,” he said.

‘COOP IN NAME ONLY’

On the topic of cooperatives’ self-description as ‘in name only,’ Almeda clarified the distinct nature of these entities compared to typical cooperatives, which often provide credit and dividends.

The NEA was established to oversee the cooperatives as part of the Rural Electrification Program under Ferdinand Marcos Sr.’s regime, tasked with supporting these entities both financially and institutionally.

The electric cooperatives are provided financial, institutional, and legal support by the NEA, and are mandated to periodically report to the agency on their operations.

“What the 121 electric cooperatives need is one regulating agency, of which [NEA] is. [NEA] implements sitio electrification, downloading funds to the electric cooperatives. The electric cooperatives are being supported by the government to implement the rural electrification program,” he explained.

In previous Daily Guardian on Air broadcasts, the ILECO I and II stated that they were ‘cooperatives in name only’ under the NEA and not the Cooperatives Development Authority (CDA).

Engr. Padilla of ILECO II said that their cooperative has previously asked their MCOs on whether to stay with the NEA or move to the CDA, and their results showed that the MCOs wished to stay with their current regulator.