In reference to a recently-concluded audit of the condonation policy for loans of the ECs with National Electrification Administration (NEA), it was recommended that an additional R14.279 million shall be included in the total amount of EC loans to be written off.

This brings to R13.571 billion the total of EC loans to be condoned. The original audit report has recommended condonation of about R13.557 billion worth of coop loans; instead of the original estimate of R18 billion.

It was emphasized that the total worth of loans for condonation only included the country’s 118 electric cooperatives; since San Jose Electric Cooperative, Inc. (SAJELCO) in Nueva Ecija had no outstanding rural electrification loan with NEA.

On the housewiring loans, it has been clarified that after discussions with NEA, it was agreed upon that such shall be treated as components of rural electrification; thus, they shall be part of the loan condonation program.

Housewiring loans were previously considered as social program loans, hence, they were originally excluded from the condonation arrangement.

PSALM has been required under Section 60 of the Electric Power Industry Reform Act (EPIRA) to assume all outstanding financial obligations of electric cooperatives to NEA and other government agencies for the purpose of financing rural electrification program.

The condonation shall benefit consumers as electricity rates are expected to be reduced commensurate with the amounts condoned and assumed by PSALM.

Section 6 of the amended guidelines for the implementation of the reduction in rate of the electric cooperatives due to the condonation of debts requires PSALM to issue a certification that "it has undertaken an independent audit, verified the purposes for which the debts have been incurred and confirmed that the amount applied are true and correct."

Said policy has been primarily lined up among the measures that will initially provide relief to the sagging financial performance of majority of the country’s electric cooperatives.

Just recently, the Department of Energy (DoE) has also unveiled another measure that will salvage the ailing operations of the coops; through its proposed "investment management contract" or IMC.

The IMC, according to Energy secretary Vincent S. Perez, is aimed at providing the much-needed help from the private sector to the electric cooperatives whose performance have been flagging; despite some initial reforms already carried out for the industry.

Through Department Circular No. 2004-06-007, the energy department laid down that the IMC shall serve as one of the measures to help ECs improve their efficiency of service, reduce systems losses and eventually lower their costs to consumers.

As set forth, the IMC would be a contract between a willing electric cooperative and an investor; from which the latter will infuse risk capital and provide management expertise.

In view of this development, the energy department has clarified that the proposed management contracts would not in any way redound to a takeover of the EC; nor does it constitute a form of privatization.

Through this initiative, Perez emphasized that the ECs under IMC will be able to obtain financing from the Local Government Unit Guarantee Corporation or LGUGC.

The DoE has appointed LGUGC to manage a credit guarantee program designed to enhance the credit worthiness of the ECs. With a funding by the Global Environment Facility and the World Bank, the program aims to provide partial credit guarantees to local Philippine banks (financial institutions) for loan to ECs or investor-operators. (MMV)