PRIMER ON THE PROPOSED LEGISLATION

FOR THE CREATION OF AN ELECTRIC COOPERATIVES

DISASTER MANAGEMENT FUND
INTRODUCTION:

PHILRECA, as the Association of electric cooperatives (ECs) throughout the country, appreciates the important initiatives
in both the Senate and House of Representatives in addressing vital issues in the electric power industry. We fully support
the initiatives in both chambers of Congress in the creation of an Electric Cooperatives Disaster Management Fund.

The Philippines is located in what is known as the “Typhoon Belt” with an average of twenty (20) typhoons striking the
country each year. In fact, in the last decade, the Philippines has been consistently ranked in the top five (5) most disaster-
prone countries in the world.

The frequency of disasters/calamities (natural or man-made) that affects the different parts of the country every year creates
significant uncertainty and severe financial struggle not only to the affected ECs but also to its member-consumers. These
disasters not only ultimately adversely affect the national government’s economic development agenda, but also translate
to higher electricity rates for the ECs member-consumers who were directly hit by the calamity.

While historically, the government has provided grant funds or subsidies to ECs for the rehabilitation/restoration of their
calamity damaged infrastructures, such funding is not guaranteed and generally the release of which is significantly delayed.
Over the past 14 years (2004-2017) the national government has provided a total of Php 5.59 Billion to around 75 ECs
which were damaged by calamities, but in each case the decision to provide the funding was made after the fact and only
upon a long process of approval by the President.

4th Floor CASMAN Bldg., 1198 Quezon Avenue, Quezon City, Philippines
Telephone Nos. 374-2538 / 374-1198 / 374-1199 / 372-4913 Fax No. 374-2513
Email: philreca1979@gmail.com
Presented below are a few Frequently Asked Questions concerning these pending bills in Congress:

FREQUENTLY ASKED QUESTIONS:

Historically, How much were given to ECs as grants in the form of Calamity Assistance/Subsidy?

Over the past 14 years (2004-2017) the national government has provided a total of Php 5.59 Billion to around 75 ECs
which were damaged by calamities, but in each case the decision to provide the funding was made after the fact and only
upon a long process of approval.

Year Calamity Grant Calamity Loan Total

2004 - 14,504,680.21 14,504,680.21
2005 - 23,125,182.26 23,125,182.26
2006 212,648,279.27 30,820,607.88 243,468,887.15
2007 619,593,760.87 - 619,593,760.87
2008 198,131,373.46 223,003,108.48 421,134,481.94
2009 46,159,566.05 83,109,086.55 129,268,652.60
2010 34,726,446.57 12,911,602.23 47,638,048.80
2011 40,111,497.72 1,724,615.73 41,836,113.45
2012 28,684,802.73 - 28,684,802.73
2013 462,195,590.88 218,726,953.73 680,922,544.61
2014 3,568,829,361.01 109,635,279.06 3,678,464,640.07
2015 94,544,687.57 300,829,913.10 395,374,600.67
2016 282,979,024.23 603,194,589.53 886,173,613.76
2017 - 127,021,911.68 127,021,911.68
Total 5,588,604,390.36 1,748,607,530.44 7,337,211,920.80
Table 1: Calamity grants extended by the National Government to ECs
historically from 2004 up to 2017 compared with amount of Loans obtained
by ECs
From the table presented above, it can be observed that ECs loans are substantially smaller than the grants extended by
the national government for the restoration and rehabilitation of damaged facilities due to a calamity. ECs carefully consider
the question of whether or not to enter into a loan agreement with the NEA since this will subject their member-consumers
to a corresponding increase in electricity bills payment in order to pay for the amortization of the loans. This in effect doubly
burdens the ECs member-consumers.
What is the process of conversion of a calamity loan from NEA into a Calamity Assistance/Subsidy?
1. Affected Electric Cooperatives (ECs) submit to the National Electrification Administration (NEA) a Board Resolution
requesting for Calamity Assistance/Subsidy, Pictures of Damaged Facilities, and Estimated Cost;
2. NEA consolidates the ECs request for Calamity Assistance/Subsidy;
3. NEA sends a Memorandum to the Department of Energy (DOE) requesting for an endorsement to the National
Disaster Risk Reduction Management Council (NDRRMC) and sends a Letter to the NDRRMC requesting for
Calamity Assistance/Subsidy;
4. NDRMMC through its regional offices assess the extent of damage and conducts a Post Disaster Needs Assessment
(PDNA);
5. NDRMMC based on its assessment results recommends to the Office of the President (OP) approval of the subsidy;
6. Upon approval, the OP will issue a Memorandum to NDRRMC communicating the approval;
7. NDRMMC transmits the approval of OP to the Department of Budget and Management (DBM) for release of
fund/appropriation to NEA;
8. DBM will issue a Special Allotment Release Order(SARO) while the issuance of the Notice of Cash Allocation (NCA)
is subject to the submission of the programs of work by the affected ECs;
9. Once submission is completed, the programs of work will be transmitted by NEA to DBM for the issuance of a NCA.
Correspondingly, the cash allotment for calamity assistance will be transferred to NEA’s account; and
10. NEA will immediately start downloading the fund to ECs with complete documentary requirements and/or conversion
into subsidy of loan released to the ECs.
How long do Calamity Stricken ECs receive loan proceeds from NEA?
Usually, affected Electric Cooperatives (ECs) receive loan proceeds for damaged infrastructures restoration or rehabilitation
after a calamity within 5 to 7 days after the submission of a Board Redsolution to the National Electrification Administration
(NEA) a requesting for Calamity Assistance/Subsidy, Pictures of Damaged Facilities, and Estimated Cost.
How long does it take for these loan proceeds to be converted into Calamity Assistance/Subsidy?
It usually takes more or less 2 years after NEA consolidates the ECs request for Calamity Assistance/Subsidy and sends a
Memorandum to the Department of Energy (DOE) requesting for an endorsement to the National Disaster Risk Reduction
Management Council (NDRRMC) and after NEA sends a Letter to the NDRRMC requesting for Calamity Assistance/Subsidy
before the Calamity Assistance/Subsidy is released.
Is there a corresponding adverse rate effect to the member-consumers of the affected ECs if the calamity loan will
not be converted into subsidy?
Yes, the member-consumers will have to bear higher electricity bills in order to pay off the loan used for the rehabilitation
or restoration of their ECs’ damaged facilities plus the interests related to the loan. A simulation of the increase in electricity
bills when ECs are adversely affected by calamities is provided below:
One
(1)
ANNUAL Year QUARTERLY
EST. KWH CALAMITY NO. OF INT. Grace WITH CAP.
EC TYPHOON SOLD LOAN YEARS RATE Period INT. TOTAL AMORTIZATION Php/KWH

KAELCO 2016 Lawin 55,044,000 40,681,764.70 10 3.25% 1 42,003,922.05 55,655,196.72 1,357,443.82 0.1011

SORECO I 2016 Nona 116,820,000 55,673,113.09 10 3.25% 1 57,482,489.27 76,164,298.28 1,857,665.81 0.0652
CASURECO
IV 2016 Nina 93,708,000 62,293,513.18 10 3.25% 1 64,318,052.36 85,221,419.37 2,078,571.20 0.0909

ORMECO 2016 Nona 582,216,000 189,204,000.00 10 3.25% 1 195,353,130.00 258,842,897.25 6,313,241.40 0.0445

BATANELCO 2016 Ferdie 17,808,000 34,068,007.72 10 3.25% 1 35,175,217.97 46,607,163.81 1,136,760.09 0.2617

CAGELCO I 2017 Lawin 500,469,372 59,802,652.86 5 3.25% 1 61,746,239.08 71,780,002.93 3,418,095.38 0.0287
Table 2: A simulation of the rate effect on ECs member-consumers due to the amortization of the calamity loan proceeds ECs received
from NEA.
NEA allows a grace period of 1 year before payments be made to amortize the loan, nevertheless, interest is capitalized
with the borrowed amount from the release of the loan proceeds which will be amortized quarterly up to usually 10 years.
This means, for example, that a household which consumes 100 KWH monthly, will pay the corresponding peso values
every month until the expiration of the loan contract:

CONSUMER
CONSUMPTION
EC TYPHOON Php/KWH If 100 KWH
Then Peso:
KAELCO 2016 Lawin 0.1011 10.11 PHP
SORECO I 2016 Nona 0.0652 6.52 PHP
CASURECO IV 2016 Nina 0.0909 9.09 PHP
ORMECO 2016 Nona 0.0445 4.45 PHP
BATANELCO 2016 Ferdie 0.2617 26.17 PHP
CAGELCO I 2017 Lawin 0.0287 2.87 PHP
Table 3: Shows the monthly peso value which will be passed on to
member-consumers with 100 KWH monthly electricity consumption.

Will there be an improvement in the delivery of electric service by affected ECs once this bill becomes law?
Yes, the bill as it is presently crafted sets aside a portion of the fund dedicated to disaster resiliency efforts of ECs which
are located in areas where calamities usually occur. This funding for resiliency efforts will strengthen the ECs and
communities they serve to be better prepared to cope with and anticipate the challenges arising from calamities.
Will Congress have to find new sources of funding in order to create this ECs Disaster Management Fund?
No, Congress will merely streamline the process of allocating the funds which historically are used for ECs restoration and
rehabilitation after a calamity. However, this time, a portion will be allocated for disaster preparedness and mitigation as
well as for capacitating ECs to be more responsive for calamities which may occur.
CONCLUSION:

After a calamity, it was recognized that without electricity, very little rescue and relief efforts can take place. Without
electricity, health conditions quickly deteriorate since there is a lack in water, food, and other basic services. Civil unrest
also follows due to a lack of communication, coordination, and monitoring on the part of law enforcement agencies. Indeed,
the effective immediate supply of electricity after calamities and the recognition of quick efforts for restoring electricity after
a calamity should both be considered as high priority. In this regard, PHILRECA strongly supports the ECs Disaster
Management Fund since it provides a quick and efficient solution in addressing the perennial problem of lack of
preparedness after a calamity.