First of two parts
IN my Aug. 12 column (“Comparing apples to sardines”), I took the National Electrification Administration (NEA) and the Philippine Rural Electric Cooperatives Association Inc. (Philreca) to task for attempting to contrive a controversy with news that a number of co-ops have lower electric rates than Meralco, the nation’s largest distribution utility (DU). While it is true that some electric cooperatives (ECs) have lower rates than Meralco, that factoid is irrelevant, as there are too many significant differences between ECs and DUs to make any sort of comparison meaningful.
Pointing that out drew a quick response from Philreca. In a simpering, 1,300-word rebuttal dated Aug. 13, the cooperative association expressed how its feelings were hurt, declared that the intent of the original news — which was, I found out later, based on a media interview with NEA administrator Antonio Almeda — was not to start a debate, but simply to acknowledge the good performance of ECs, and took special exception to ECs being described as “sardines,” which completely missed the point of that simile.
It is no coincidence that the NEA leadership’s effort to burnish the performance of ECs, with the help of Philreca, comes just as Congress is starting deliberations on the 2026 budget. The NEA is asking for P6.4442 billion for fiscal 2026, which is about P600 million, or roughly 10 percent higher than its allocation in the 2025 budget. What Congress ought to be doing instead of deciding whether or not NEA needs more money, however, is deciding whether or not it, and the ECs it oversees, should even continue to exist. There is a strong case to be made that they should not, and that as long as they continue to do so, at least under the current framework, economic growth will continue to be constrained and unbalanced throughout the country.
There are three big issues that must be addressed. First, the question of whether or not ECs are still a relevant business model should be critically examined. Second, the NEA has drifted from its original mandate, and is no longer productively serving its intended purpose. Third, the current framework for EC regulation, in particular the way rate-setting and approval of capital expenditure budgets are handled, leads to an environment that retards growth by discouraging any sort of industrial investment in areas served by ECs.
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The first question is the broadest one, and the answer to it is “no.” I have written about this in the past, but it is even more relevant now that the NEA is trying to convince Congress to throw good money after bad in order to perpetuate a system that has outlived its usefulness. Electric cooperatives were a product of the Depression era in the US during the 1930s, and the reason they were developed was to bring electrification to rural areas that were unprofitable from the point of view of private-sector distribution utilities, because they would require a large amount of investment in infrastructure relative to the number and type of customers available. The Philippines was in a comparable situation when ECs were first developed here in the 1960s, and in fact, the environment did not really begin to change until about 10 years ago.
Once the situation did begin to change, however, it changed very rapidly. Rural areas with low numbers of customers and low customer density are not as unattractive as markets as they once were, thanks to energy policy that increasingly encourages the development of renewable and small-scale generation, evolution of the energy market, and rapid advances in energy technology, especially in renewables. For smaller energy firms, the smaller markets match their scale, so the “cooperatives must exist because rural electrification is unprofitable” assertion is no longer valid.
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But with Philreca, and to some extent the NEA as well, zealously defending the ECs’ turf, a great deal of potential investment is shut out, even when the ECs’ customers — or “member-consumer-owners,” in the pretentious language of Philreca press releases — are the ones actively pressing for an upgrade from the unreliable and overvalued services their EC provides. A good example of this is in Batangas, where customers of both of the province’s electric cooperatives (Batangas Electric Cooperative 1 and 2) have been trying to have Meralco come into their service areas in some fashion, only to be stymied by the ECs’ claiming their franchises are divine monopolies. There are a number of other areas in the country where the same battles are being fought, with different ECs and prospective DUs — in the Davao Region, the Bicol Region, Mindoro and Surigao, to name a few examples.
Philreca and NEA would undoubtedly vehemently argue that ECs are still relevant and the best business model for the areas they serve, but in fact, not even the law is on their side in that assertion. It is just simply being ignored, which is perhaps the most important reason Congress should examine the NEA’s budget proposal with a microscope. I’ll pick up the discussion there on Thursday.
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Bluesky: @benkritz.bsky.social
