LEGAZPI CITY (19-Feb-2013) – A senator blaming Gov. Joey Salceda for what ails Albay Electric Cooperative (Aleco) is floating a dud insinuation, according to a lawyer here who once headed Aleco’s board of directors (BOD).
Recently, over dzMM Radio/TV, Sen. Serge Osmeña blamed Salceda for what ails Aleco as he announced that the Senate has approved an amendment to PD269, to authorize the National Electrification Administration (NEA) to replace the erring directors or governing boards of electric cooperatives, in lieu of the existing practice of “self-regulation.”
“Obviously, Osmeña is unaware of Congress’ failure to oversee the electrification program in the country. When it passed RA9136 (Electric Power Industry Reform Act, or Epira) in 2001, the electric cooperatives owed the government (through NEA) P18.1 billion in loans,” said lawyer Oliver Olaybal, who once led the fight for the survival of the presently cash-strapped cooperative as head of its elected board members.
Instead of allowing the subscribers to bail out their cooperatives through stock issuance, it (Congress) decided to let the government assume the liability through Power Sector Assets and Liabilities Management (PSALM), he added.
Hence, the government lost P18.1 billion in taxpayers’ money through erroneous legislation, Olaybal recalled.
The new “amendment” to PD269 that Osmeña announced, according to him, is redundant, because PD1645 has already authorized NEA since 1979 to replace the governing boards of electric cooperatives, including the designation of acting managers and project supervisors, he added. “And, this has worked against the interest of electric cooperatives like Aleco because outgoing NEA managers and supervisors do not render exit reports or accounting reports,” the lawyer said.
Due to this, he added, Aleco’s financial position deteriorated and operating deficits escalated, for lack of accountability by NEA.
Aleco has been under a NEA-designated project supervisor since over a decade ago and until now.
Salceda became Albay governor only in 2004 several years after Aleco’s financial status collapsed due to huge indebtedness generally blamed on corruption that saw the hands of a local politician (not Salceda) and mismanagement resulting in poor collection efficiency, high system losses and labor disputes, among others, Olaybal added.
High system losses reaching about 27 percent have been causing Aleco to loss around 25 percent of its revenues.
Olaybal said that during the early years of Salceda as the province’s chief executive, he worked on placing the cooperative under private receivership in order to bail it out from its financial woes, a measure which did not work due to oppositions from various sectors, including NEA’s old administration.
Aleco’s financial liabilities under NEA management then ballooned from less than P1 billion to an unimaginable amount of about P3.4 billion and what Salceda could do with his hands tied was to intervene every time a threat of power supply disconnection emerged.
Then finally last year, the NEA started working on the privatization of the cooperative, a move which, according to the Department of Energy (DOE) Secretary Jose Rene Almendras, is seen to finally put an end to its troubles that have been endangering its over-250,000 member-consumers with power supply cut-off.
This move, according to NEA, has been resorted to as the government could no longer bailout the ailing electric cooperative.
Aleco’s two attempts last year to undertake a negotiated bidding for a consultancy service to prepare the cooperative’s Terms of Reference (ToR) for Private Sector Participation (PSP) initiative, however, failed due to poor turnout of bidders.
For Olaybal, on the other hand, the only immediate solution to this problem of imminent power disconnection is for Aleco to file with the local commercial court a petition for corporate rehabilitation.
“This will have the following effects: a rehabilitation receiver will be appointed; creditors and power suppliers shall be prevented from taking action against Aleco, including power disconnection; and the rehabilitation receiver shall prepare a rehabilitation plan, for court approval, which shall state the strategy for capital buildup,” he explained.
Aleco, Olaybal said, has a choice between raising interest-bearing capital or interest-free capital.
The first would involve loans, but the interest charges will delay the onset of rehabilitation, and the second strategy is to raise interest-free capital, through corporate finance.
“This is the best option, because Aleco would have no obligation to pay interests,” he said.
The rehabilitation plan should involve all congressmen in the province of Albay.
These congressmen must sponsor a resolution in Congress authorizing Aleco to issue shares of stock, to be sold to Aleco members only, but limiting stock ownership on the part of one member and/or related interests, to 10 percent of the authorized capital stock.
“In this manner, Aleco will be able to generate interest-free capital of P5 billion to be used in retiring its financial obligations, as well as in modernizing Aleco by replacing its third-world multi-ground distribution system (that uses aluminum wires), to prevent common-place pilferage (through polarity reversal),” he said.
Stock issuance means that Aleco need not pay interests on its P5-billion capital buildup.
“This is the only solution to Aleco’s imminent power disconnection. The petition for corporate rehabilitation must be filed immediately,” he added. (PNA)