Uncooperative

Last week, a regional trial court in South Cotabato issued a 72-hour temporary restraining order (TRO) halting the scheduled plebiscite among members/consumers/owners of the South Cotabato II Electric Cooperative (Socoteco II). The plebiscite was hoped to clear the way for completing a joint venture agreement between the local power distributor and Ignite Energy Holdings. Executive Judge Allan Edwin Boncavil of the 11th Judicial Region issued the restraining order Sept. 4. The first leg of the plebiscite was originally scheduled for Sept. 5 and 6. The process is put on hold until the legal issues raised against the proposed joint venture are cleared. The issues raised and the manner they might be resolved will have bearing for other electric cooperatives considering taking in corporate joint venture partners. Power distribution in about 40 areas nationwide is done through the electric cooperative arrangement. Over the past years, the weaknesses of the cooperative arrangement became more evident. There are wide variances in the quality of management among these cooperatives. Most of them desperately need to upgrade their facilities to deliver better service. Most cooperatives do not have the capital required to modernize power distribution. The most obvious solution is to seek joint venture partnerships with large companies with much more financial muscle. Modernizing electricity distribution nationwide is an urgent development matter. As our economy modernizes, power demand rises. Investments depend on the reliability and quality of power distribution in localities served by cooperatives. Spotty power distribution raises costs for consumers. In many localities, power costs are significantly higher. Electricity is expensive in this country. It is a hindrance to our industrialization. Sadly, power is even costlier in poorer localities desperately seeking more investments. Because of aging or obsolete equipment, for instance, systems losses among the electric cooperatives is much higher than in the well-developed regions. This adds to the inequality across regions. Taking on joint venture partners, as the Socoteco II case illustrates, is not as simple as it seems. Cooperative by-laws and National Electrification Administration (NEA) need to be complied with. These by-laws and regulations protect members/consumers/owners of cooperatives. Under Republic Act 10531, the NEA holds the legal mandate to create and enforce strict governance rules. These rules require all electric cooperatives to use open, fair and competitive bidding for all their purchases and contracts. NEA Resolution No. 88, Series of 2002, provides guidelines governing private sector participation in electric cooperatives. This resolution explicitly mandates competitive public bidding for joint ventures and partnerships. Last July, around 10,000 members/consumers/owners of Socoteco II signed on to criminal and administrative charges against officials of this particular cooperative as well as officials of the NEA. The charges were brought before the ombudsman. Among the complainants are civil society groups such as Bantay Kuryente Consumer Watch Inc. Members of the clergy have joined opposition to the proposed joint venture with Ignite Power. The complainants allege irregularities in the process. The deal was negotiated without transparency and without conducting the mandatory competitive bidding set by NEA. The complainants allege that the Terms of Reference governing the proposed joint venture was prepared and approved by officials of the cooperative even before the technical working group tasked with drafting them was constituted. They also allege that NEA officials improperly classified the cooperative as 'ailing.' The improper classification allowed the NEA to expand its role in crafting the joint venture agreement. NEA, it is claimed, gave the cooperative board conditional approval for resolutions advancing the joint venture. The members/consumers/owners of the cooperative were not consulted while joint venture negotiations were in progress. They learned of the status of negotiations only through media reports and not from official disclosures from officials of the cooperative. The Diocese of Marbel called on the flock to unite in prayer and reflection on the terms of the proposed joint venture. They are demanding sincere public consultations on the matter, especially as the proposed joint venture will give Ignite Power a 70 percent stake in the merger. The original members/consumers/owners will end up holding only a 30 percent minority position. The fear here is that the original stakeholders and the community will completely lose control of decision-making over a utility so vital to their lives. The electric cooperative will therefore be effectively privatized. Last Aug. 29, thousands of citizens held a prayer rally for truth and accountability in the proposed joint venture. They fear, beyond the legal issues, the deal runs counter to the common good of the community. Two days before this rally, Rep. Shirlyn Bañas-Nograles filed House Resolution 1401 directing the House committee on energy to investigate the conditional joint venture agreement between Socoteco II and Ignite Power. The same resolution calls for the deferment of the plebiscite. A congressional hearing will assess compliance with laws, transparency, accountability and protection of shareholder interests. The judge, meanwhile, will have to decide on issuing an injunction on the joint venture process. With mounting public pressure, it is clear the completion of the joint venture process will require much more time. Socoteco II is not the only electric cooperative seeking partnership with corporate entities. But it is likely the resolution of this deal will provide a template for other similar arrangements in other areas. All the other deals must be more transparent and accountable.