ERC requires all electric cooperatives to get operating licenses

All electric cooperatives are now required to secure operating licenses from the Energy Regulatory Commission (ERC), a move that potentially encroaches upon the powers of the National Electrification Administration (NEA). The ERC last month approved the rules governing the issuance of a certificate of public convenience and necessity (CPCN), a working permit for all power distribution utilities (DUs) and the state-run transmission company. By requiring the ECs to secure the permit, the ERC effectively displaced the NEA as their regulator. Under Presidential Decree (PD) no. 269, all activities of electric cooperatives fall under the administrative regulation of NEA. "We are under the NEA [National Electrification Administration]. We may apply for rate increases at the ERC, but our administration, our registration, are overseen by NEA," said Dory Jane Canones, finance officer of the Iloilo Electric Cooperative, Inc. III. "I don’t know about the new [CPCN rules], and we haven’t been briefed. Right now we just apply for a certificate of registration with the NEA." NEA chief Edita S. Bueno said her agency will clarify with the ERC how the rules will be implemented. "There might be problems. ECs already have franchises, so I don’t see the purpose (of asking for an operating license)," she said. "But perhaps the ERC has a very good reason for this." The NEA, however, maintains it has the right to supervise rural electric cooperatives, in line with the government’s aim to come up with uniform rules that will enable it to provide electricity to all parts of the country. There are two special types of ECs. However, each is governed by separate government bodies: cooperative-type ECs, which are overseen by the Cooperative Development Authority, and stock-type ECs, which are regulated by the Securities and Exchange Commission. A source said the new regulations do not necessarily weaken NEA’s powers. "The ECs just have to register with the ERC, that’s all. NEA will still oversee the operations of some 130 ECs." An ERC official added, "The rules just aim to ’professionalize’ the ECs. More stringent rules will ensure our power utilities provide quality service and affordable rates." The ERC codified the CPCN rules to support the Electric Power Industry Reform Act, since the issuance of a CPCN is still governed by a prewar law, Commonwealth Act No. 146, commonly known as the Public Service Act. The CPCN has been issued by the ERC and its predecessors, namely the Public Service Commission and the Energy Regulatory Board, to DUs like the Manila Electric Co. and electric cooperatives, as well as the National Transmission Corp. "The rules aim to one, ensure the quality, reliability, security, and affordability of the supply of electric power; two, accelerate the country’s total electrification program; and three, protect the public interest, as it is affected by the rates and services of electric utilities and other producers of electric power," said ERC Chairman Rodolfo B. Albano, Jr., in an earlier statement. In the final rules, only majority-owned Filipino corporations are allowed to apply for the certificate, in observance of the constitutional provision of a 40% foreign ownership cap for utility companies. They must also independently secure a franchise from Congress to conduct business within a specified area. CPCNs are valid only for the term of the same franchise. Other documents like proposed tariff rates, technical information and the firm’s financial information, are still required by ERC for both new and renewal applications. The ERC even takes a step further by requiring the names and addresses of personnel responsible for the design, installation, maintenance, and repair of equipment, and the description of any negotiations with telephone or cable television utilities on the joint use of pole lines. Failure to submit any of the required data is ground for the denial of application. The CPCN application fee is P10,000 per utility including general supervision fees. Larger utilities, mostly private DUs like Meralco, pay only a P700 fee but separately pays annual supervision fees of P1 for every P100 in paid up capital stock. - Maria Kristina C. Conti, BusinessWorld