EXECUTIVE ORDER NO. 119
EXECUTIVE ORDER NO. 119 -
RESTRUCTURING PROGRAM FOR ELECTRIC COOPERATIVES
WHEREAS,
the Congress or the Philippines enacted Republic Act No. 9136,
otherwise known as the “Electric Power Industry Reform Act of 2001”
(EPIRA), for the purpose of restructuring the electric power industry,
including the restructuring of electric cooperatives (ECs);
WHEREAS, Sec. 60 of EPIRA provides:
“Sec.
60. Debts of Electric Cooperatives. — Upon the
effectivity of this Act, all outstanding financial obligations of
electric cooperatives to NEA and other government agencies incurred for
the purpose of financing the rural electrification program shall be
assumed by the PSALM Corporation in accordance with the program
approved by the President of the Philippines within one (1) year from
the effectivity of this Act which shall be implemented and completed
within three (3) years from the effectivity of this Act. The ERC shall
ensure a reduction in the rates of electric cooperatives commensurate
with the resulting savings due to the removal of the amortization
payments of their loans. Within five (5) years from the condonation of
the debt, any electric cooperative which shall transfer ownership or
control of its assets, franchise or operations shall repay PSALM Corp.
the total debts including accrued interest thereon.” (Emphasis
supplied);
WHEREAS, Rule 31 of the Implementing Rules and Regulations of EPIRA, as
approved by the Joint Congressional Power Commission (JCPC) and
promulgated by the Department of Energy (DOE), reiterates that said
outstanding financial obligations of ECs shall be assumed by the Power
Sector Assets and Liabilities Management Corporation (PSALM) in
accordance with the program approved by the President of the
Philippines;
WHEREAS, Rule 31 of the Implementing Rules and Regulations of EPIRA
likewise defines the outstanding financial obligations which shall be
assumed by PSALM as those incurred by ECs ‘for the purpose of financing
the Rural Electrification Program’;
WHEREAS, the assumption by PSALM of such outstanding financial
obligations of ECs shall result in the reduction in the rates of ECs
commensurate with the resulting savings due to the removal of the
amortization payment on said loans;
WHEREAS, Sec. 58 of EPIRA mandates the National Electrification
Administration (NEA) to strengthen the technical capability and
financial viability of rural ECs as electric utilities, and to prepare
said ECs to operate and compete in the deregulated electricity market,
specifically in an environment of open access and retail wheeling;
WHEREAS, the assumption by PSALM of the outstanding financial
obligations of ECs incurred for the purpose of financing the Rural
Electrification Program entails substantial government support that
must come hand in hand with meaningful and lasting reforms, both
mandated and self-imposed, among the ECs, for the purpose of achieving
reliable, secure and cheaper electricity for all consumers,
particularly in the rural areas, in line with the declared policies in
EPIRA;
WHEREAS, DOE, Department of Finance (DOF), NEA and PSALM, have
recommended a program for the restructuring of ECs through the
assumption by PSALM of the outstanding financial obligations of ECs
incurred for the purpose of financing the Rural Electrification
Program, with a view to reducing the spiraling cost of electricity
(hereinafter referred to as the “Program”);
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the
Philippines, by virtue of the powers vested in me by law and upon the
recommendation of DOE, DOF, NEA and PSALM, do hereby order:
Section 1. Declaration Of Policy. — The Program
adheres to the following declared policies in EPIRA:
a.
To ensure and accelerate the total electrification of the country;
b. To ensure
the quality, reliability, security and affordability of the supply of
electric power;
c. To ensure
transparent and reasonable prices of electricity in a regime of free
and fair competition and full public accountability to achieve greater
operational and economic efficiency and ensure the competitiveness of
Philippine products in the global market;
d. To
encourage the efficient use of energy and other modalities of demand
side management; and
e. To protect
the public interest as it is affected by the rates and services of
electric utilities and other providers of electric power.
Sec. 2. Coverage. — As specified under Sec. 60
of EPIRA, the Program for PSALM to assume the outstanding financial
obligations incurred by ECs covers only those obligations incurred for
the purpose of financing the Rural Electrification Program. The
Implementing Rules and Regulations of EPIRA, as approved by JCPC and
promulgated by DOE, defines “Financing for Rural Electrification” as
referring to loans and grants extended to ECs, for the construction or
acquisition, operation and maintenance of distribution, generation, and
subtransmission facilities for the purpose of supplying electric
service, and those loans for the restoration, upgrading and expansion
of such facilities, in areas which are considered rural at the time of
the grant of such loans (hereinafter referred to as “Rural
Electrification Loans”).
Thus, the Program shall comprise the following:
a.
Financial, institutional, technical and managerial restructuring of
ECs, pursuant to Sec. 58 of EPIRA;
b. Assumption
by PSALM of Rural Electrification Loans, pursuant to Sec. 60 of
EPIRA;
c.
Amortization of payments to NEA and/or other government creditor
agencies for Rural Electrification Loans assumed by PSALM, pursuant to
Sec. 60 of EPIRA; and
d.
Reorganization of NEA to enable it to perform its additional mandates
under Sec. 58 of EPIRA, and in accordance with Sec. 5(a)(5) of
Presidential Decree No. 269, as amended by Presidential Decree No. 1645.
Sec. 3. NEA Reorganization Plan. — In order to
better achieve the objectives of EPIRA and to suit the organizational
staffing pattern of NEA to its additional mandates therein, NEA shall
submit, within thirty (30) calendar days from the effectivity of this
Executive Order, a reorganization plan containing NEA’s redefined
institutional, technical and financial functions for the approval of
DOE and the Department of Budget and Management (DBM).
Upon approval of NEA’s reorganization plan, DBM shall release the
necessary funds to implement the reorganization plan.
DOE shall monitor the implementation of NEA’s reorganization plan and
shall submit a report thereon to the Office of the President.
Sec. 4. EC Restructuring. — Within thirty (30)
calendar days from the effectivity of this Executive Order, NEA shall
likewise submit to DOE a plan of action: (a) to implement and comply
with Sec. 58 of EPIRA, specifically to prepare ECs to operate and
compete under the deregulated electricity market, and to strengthen the
technical and managerial capability and financial viability of rural
ECs; and (b) to ensure full compliance with Sec. 5 of this Executive
Order.
Sec. 5. Assumption Of Rural Electrification Loans.
— To ensure that the implementation of the Program is in accordance
with law which requires that only Rural Electrification Loans shall be
assumed by PSALM, and to further protect consumer welfare, the
assumption of Rural Electrification Loans shall be effective upon
compliance with the following terms and conditions:
a.
Each Rural Electrification Loan must be (a) duly recorded in the books
of NEA and/or the corresponding creditor government agencies; (b)
validated by the Commission on Audit; and (c) confirmed by the
concerned EC as due and outstanding.
b. Each Rural
Electrification Loan shall be audited for verification purposes by
PSALM, in accordance with generally accepted accounting and auditing
practices.
c. ERC shall
have approved the reduction in the EC’s rates commensurate with the
resulting savings due to the removal of the amortization payments on
the Rural Electrification Loan/s. At all times, the assumption by PSALM
of the Rural Electrification Loan/s shall take effect only upon such
ERC approval, given that all other terms and conditions stated herein
have been complied with.
d. Each EC
must be current and continue to be current in the payment of its
obligations to the National Power Corporation (NPC) to be eligible for
the assumption by PSALM of its Rural Electrification Loan/s.
In the event that an EC is not
current in the payment of its obligations to NPC, such EC must first
submit to NEA a duly executed agreement with NPC, containing a
sustainable payment arrangement acceptable to NPC, before such EC may
be eligible for the assumption by PSALM of its Rural Electrification
Loan/s.
e. Each EC
shall at all times comply with all NEA policies governing the EC’s
relationship with NEA, pursuant to Presidential Decree No. 269, as
amended by Presidential Decree No. 1645, and its implementing
guidelines, rules and regulations.
f. Each EC
shall cooperate with NEA in order for NEA to effectively prepare them
for operating and competing under the deregulated electricity market
within five (5) years from the effectivity of EPIRA, specifically in an
environment of open access and retail wheeling, as envisioned and
mandated under Sec. 58 of EPIRA.
g. Within
thirty (30) calendar days from the effectivity of this Executive Order,
the NEA Board shall issue guidelines for the submission by ECs of a
Performance Improvement Program (PIP) and/or a Rehabilitation and
Efficiency Plan (REP). Consistent with Section 10 of Presidential
Decree No. 269, as amended by Presidential Decree No. 1645, said
guidelines shall include preventive and/or disciplinary measures, as
may be warranted, prior to the assumption by PSALM of the Rural
Electrification Loan/s of the concerned EC.
The PIP and/or REP shall cover
institutional, technical, financial and managerial reforms, including
financial restructuring, needed to achieve prescribed levels of
efficiency, including but not limited to, system losses, collections,
electric and customer service, cost control, tariff rate
competitiveness, and adequacy in capital and/or financing structure.
The PIP and/or REP shall provide for specific yearly targets and shall
cover at least the five(5) year period prescribed under Sec. 60 of
EPIRA.
h. Within
thirty (30) calendar days from the issuance of such PIP/REP guidelines,
each EC shall submit its PIP and/or REP for NEA’s approval. NEA shall
approve or disapprove the PIP and/or REP of each electric cooperative
within the period prescribed in its guidelines.
Sec. 6. Reduction in EC Rates. — Pursuant to
Sec. 60 of EPIRA, the ERC shall ensure a reduction in the rates of
ECs commensurate with the savings due to the removal of the
amortization payments on their Rural Electrification Loan/s assumed by
PSALM pursuant to this Executive Order. For this purpose, NEA shall
assist ECs in their rate formulation and application to ERC.
Sec. 7. Assumption and Payment by PSALM of Rural
Electrification Loans. — Pursuant to Sec. 60 of EPIRA, PSALM shall
assume all Rural Electrification Loans upon compliance by the concerned
EC with Sec. 5 of this Executive Order, and thereupon, such EC shall
cease to be a debtor of NEA or of other creditor government agencies.
Thereafter, PSALM and NEA or other creditor government agencies shall
enter into contracts and/or agreements, necessary and proper, to
undertake the payment of the assumed Rural Electrification Loans
through an amortization schedule to be agreed upon between PSALM on the
one hand, and NEA or other creditor government agencies, on the other.
Where necessary, such contracts and/or agreements may include mutual
stipulations on the modification and/or amendments of existing
contracts of mortgage and other security between ECs and NEA or other
creditor government agencies. Provided, however, That any such
contracts of mortgage and other security with respect to the Rural
Electrification Loans assumed by PSALM shall not be released by NEA
and/or other creditor government agencies without the written consent
of PSALM.
Sec. 8. Revocation. — The assumption by PSALM of
the Rural Electrification Loan/s of an EC shall be revoked for failure
to continually comply with Sec. 5 of this Executive Order or if
within five (5) years from the assumption by PSALM of the Rural
Electrification Loan/s, an EC transfers ownership or control of its
assets, franchise or operations, as provided under Sec. 60 of EPIRA.
Upon revocation, such EC must repay PSALM the total Rural
Electrification Loan/s, including interest thereon, assumed by PSALM;
Provided, however, That with the consent of NEA, an EC may enter into
loan or financing agreements to allow fibility in sourcing funds and
improvement of management system for needed rehabilitation and
modernization programs: Provided, further, That such loan or financing
agreements shall not involve any permanent transfer or control of the
assets, franchise and operations of such EC; Provided, finally, That
DOE and NEA shall jointly issue the necessary guidelines to protect the
member-consumers of ECs in situations involving such loan or financing
agreements.
Sec. 9. Separability Clause. — In the event that
any of the provisions of this Executive Order is declared
unconstitutional with finality by a court of competent jurisdiction,
the validity of the other provisions shall not be affected by such
declaration.
Sec. 10. Effectivity. — This Executive Order shall
take effect on the fifteenth (15th) day from the date of its
publication in at least two (2) newspapers of general circulation.
DONE in the City of Manila,
this 28th day of August, in the year of our Lord, Two Thousand and Two.
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Since 19.07.98.