Second of 2 parts

APART from the energetic but not particularly sophisticated smear campaign the Northern Davao Electric Cooperative is waging against Aboitiz Power subsidiary Davao Light and Power Co. to try to prevent the latter from absorbing much or all of Nordeco’s franchise area, and with it, their long-suffering customers, the coop and its backers have found a legal defense as well. It has actually worked once so far, and unless lawmakers, who are generally not the smartest people in the room even on a good day, find a different approach to the ongoing second try to expand DLPC’s coverage area, it probably will again. There is, however, a quick and secure solution to the problem Nordeco has become.

As noted in the first part of this story on Thursday, last year President Marcos Jr. vetoed a bill that would have modified DLPC’s franchise, expanding it to cover most of the area now covered by Nordeco, plus small areas of other neighboring co-ops. In vetoing the bill, Marcos provided an explanation that is virtually impossible to refute under current law. The bill presented to him by Congress would, he said, result in “apparent overlap and possible infringement into the subsisting franchise, permits and contracts previously granted to [Nordeco],” amounting to a “prohibited collateral attack” on its franchise.

Well, yes, that is a problem. The Non-Impairment Clause (Article III, Section 10) of the 1987 Constitution prohibits otherwise valid contracts — in this case, presumably Nordeco’s contracts with various suppliers and others — from being altered or canceled by subsequent laws. In addition to that, Section 27 of the Electric Power Industry Reform Act (Epira) of 2001 (RA 9137) provides that “all existing franchises (at the time the law went into effect) be allowed to their full term.” As I said on Thursday, considering what was given to him for his signature, the President really had no choice but to reject it.

Unfortunately, this seems to be one of those all-too-frequent occasions when Congress needs to have the same lesson repeated to them multiple times before they finally catch on. At the moment, there are a total of four bills pending before the House Committee on Legislative Franchises (HBs 5077, 6740, 6995 and 7047), all fundamentally the same as each other and the same as the bill vetoed by President Marcos last year. If these do not get lost in the House’s mountain of paperwork and a consolidated version actually makes it to the President’s desk, it is almost certain that he will feel compelled to veto it again.

There is, however, a simpler, faster and legally unassailable way to achieve the intended result and more directly address the problem Nordeco has become, which is for Congress to simply revoke its franchise. Why that has not already been done or at least seriously discussed is a mystery, because there is ample evidence that the co-op is failing to meet reasonable standards of service or business performance.

Apart from frequent, hours-long power outages in its service area, Nordeco is a poor performer according to the standards set for electric cooperatives by the National Electrification Administration (NEA). The NEA publishes a performance report on the co-ops across the country every quarter; the most recent report, covering the first quarter of this year, was published on August 30.

The NEA report assesses co-ops on seven standards of financial, technical and institutional performance, each of which has several sub-indicators, and then assigns each co-op to one of four categories depending on how well they meet the benchmarks. “Green” co-ops are doing well, achieving or exceeding the benchmarks for all seven standards. “Yellow-1” co-ops are those that fail to comply with three or fewer of the standards but meet the others. “Yellow-2” co-ops are those that fail on four or more standards but have not yet been declared “ailing” by the NEA; in general, this means they do manage to meet at least one or two of the benchmarks.

“Red” co-ops are complete basket cases, failing every indicator and being declared “ailing,” needing immediate intervention by the NEA.

Nordeco falls into the “doing pretty badly, but not quite a total failure yet” Yellow-2 category; what’s more, at a time when the electric cooperatives collectively are improving — the number of “Green” co-ops increased by 17 between Q1 of 2022 and Q1 of 2023 — Nordeco is getting worse, slipping from Yellow-1 to Yellow-2 between the last quarter of last year and the first quarter of this year. Where the co-op is failing is in “results of financial operations,” i.e., its net of revenues minus costs and expenses, which was a deficit of almost P1.5 million for the quarter (that was an improvement, however, as Nordeco had been in the hole for over P405 million the previous quarter); collection efficiency of 70.37 percent against a minimum standard of 95 percent; system loss of nearly 13 percent; and having the status of its payables to generation companies listed as “restructured — arrears,” which means, in layman’s terms, that the co-op had previously run into trouble paying its bills, renegotiated more manageable payment arrangements, and then blew it with them, too.

There are indeed other electric cooperatives in as bad or worse shape than Nordeco — 17 of them, in fact — but that does not mitigate its poor performance; the responsible authorities should take a hard look at them as well and give serious consideration to drastic intervention. Supplying electric power to homes, businesses and institutions cannot be a “learn as you go” kind of business, and especially not under the conditions of a franchise that confers a legal monopoly.

Energy security is the paramount goal, and energy security, as I have said many times and will keep repeating until everyone understands it, means energy that is accessible, reliable, affordable and sustainable. And it has to be that way from the source to the last meter of wire that brings it into your home; if any link in that chain is weak, everything falls apart. A franchise confers as much responsibility as rights, and one cannot claim the latter without meeting the former.

If it were up to me, and sometimes I wish it were, I would inform Nordeco that, since there is a substitute that is demonstrably capable of providing service that meets or exceeds the standards that apply to everyone, whereas Nordeco is not, they have 90 days to turn themselves into a “green” co-op. Figure it out or hit the sidewalk, because it’s not about what’s best for Nordeco but for the consumers without whom Nordeco would have no reason to exist in the first place.