July 12, 2012

HON. FELICIANO R. BELMONTE, JR. SPEAKER OF THE HOUSE OF REPRESENTATIVES Batasan Complex, Diliman, Quezon City Subject: OPPOSITION TO HOUSE BILL 6214 Dear Speaker Belmonte: In behalf of the members of the Association of Philippine Electric Cooperatives (APEC), I would like to respectfully advance our vigorous opposition to House Bill 6214 or the proposed National Electrification Administration Reform Act of 2012, based on the following grounds: A. House Bill 6214 is Unconstitutional 1. House Bill 6214 violates Article XII, Section 15 of the 1987 Constitution which bestows a specific mandate to only one government agency to supervise cooperatives in the Philippines, thus, Section 15. The Congress shall create an agency to promote the viability and growth of cooperatives as instruments for social justice and economic development. (underscoring supplied) Any law in contravention of this Constitutional edict is indubitably unconstitutional, and Congress is duty-bound not to consider, much more, enact any bill that would be in violation of the Constitution. In fact, Congress fulfilled its Constitutional mandate in 1990, and passed Republic Act 6939 to create the Cooperative Development Authority (CDA). The title itself of RA 6939 leaves no room for further interpretation of the Constitutional edict that there shall be only one regulatory and supervisory agency for cooperatives -and that is the CDA, thus:

Rm-S 519 House of Representatives, Batasan Hills, Quezon City Trunklines: 931-5001 loc. 7297 / Telefax: 931-6055

An Act Creating the Cooperative Development Authority to Promote the Viability and Growth of Cooperatives as Instruments of Equity, Social Justice and Economic Development, Defining its Powers, Functions and Responsibilities, Rationalizing Government Policies and Agencies with Cooperative Functions, Supporting Cooperative Development, Transferring the Registration and Regulation Functions of Existing Government Agencies on Cooperatives as such and Consolidating the same with the Authority, Appropriating Funds Therefor and for other purposes, (underscoring supplied) The fulfillment of its Constitutional mandate was further enunciated by Congress in the Declaration of Policy of RA 6939, thus, Section 1. Declaration of Policy. - It is hereby declared the policy of the State to promote the viability and growth of cooperatives as instruments of equity, social justice and economic development and to create an agency, in fulfillment of the mandate in Section 15, Article XII of the Constitution (underscoring supplied) The Constitutional mandate, from which CDAs sole authority over cooperatives emanates, was further clearly spelled out by Congress under Section 9 of RA 6939, thus, Sec. 9. Power to Register Cooperatives. The power to register cooperatives shall be vested solely on the Authority. The functions of the following departments and agencies relating to the registration of cooperatives as such are hereby transferred to the Authority: (a) The Department of Agriculture; (b) The Bureau of Agricultural Cooperatives Development; (c) The Department of Transportation and Communications; (d) The Sugar Regulatory Administration; (e) The National Electrification Administration; and (f) Any other pertinent government agency. The accompanying authority of CDAs power to register any type of cooperative is its power of administrative regulation, which includes monitoring and supervision, over all types of cooperatives, including electric cooperatives. No other government agency may administratively regulate, monitor and supervise cooperatives, except the CDA. Absent this authority of administrative regulation over cooperatives, no government agency may administratively takeover the management of any cooperative, and any justiciable issue or controversy must be addressed and resolved primarily in accordance with the cooperatives by-laws, secondarily with CDAs rules and regulations, and ultimately with such competent courts of jurisdiction. In addition, Section 17 or the Transitory Provisions of RA 6939 clearly provided a directive to all cooperatives registered with NEA under PD 269 as amended by PD 1645, thus, Provided, further, That cooperatives created under Presidential Decree No. 269, as amended by Presidential Decree No. 1645, shall be given three (3) years within which to qualify and register with the Authority: Provided, finally, That after these cooperatives shall have qualified and registered, the provisions of Sections 3 and 5 of Presidential Decree No. 1645 shall no longer be applicable to the said cooperatives. In 1993, in recognition of, and in deference to, the Constitutional mandate of CDA as well as in compliance with the aforesaid Section 17 of RA 6939, NEA itself registered with CDA almost all of the 119 electric cooperatives under its jurisdiction.

Because of its recognition of CDAs regulatory authority over cooperatives as shown by its compliance with RA 6939s Transitory Provisions, NEA is, thus, perpetually barred and estopped from seeking any similar administrative authority over electric cooperatives from Congress and, unless the Constitution is changed or amended, Congress is Constitutionally mandated and obligated not to legislate in favor of NEA or any other government agency such administrative powers over electric cooperatives. 2. House Bill 6214 violates Article II Section 10, and Article XIII Section 2 and Section 15, of the 1987 Constitution, thus: Article II (Declaration of Principles and State Policies). Section 10. - The State shall promote social justice in all phases of national development; Article XIII (Social Justice and Human Rights). Section 2. - The promotion of social justice shall include the commitment to create economic opportunities based on freedom of initiative and selfreliance. (Role and Rights of People's Organizations) Section 15. - The State shall respect the role of independent people's organizations to enable the people to pursue and protect, within the democratic framework, their legitimate and collective interests and aspirations through peaceful and lawful means. (underscoring supplied) House Bill 6214 is replete with dictatorial provisions that nullify the Constitutional guarantee on social justice as they stifle the cooperative member-consumers freedom of initiative and self-reliance and the democratic framework to enable the people to pursue and protect their legitimate and collective interests. This is not surprising, because a substantial part of House Bill 6214 was merely lifted verbatim from Presidential Decree 1645, a repulsive dictatorial, martial law decree. The authors of House Bill 6214 did not even bother to edit out the words decree, Prime Minister and National Assembly before printing its working copy, thus, betraying their eager intent to secure, in effect, a Congressional affirmation of an accursed martial law decree which has long been targeted for repeal by the democratic, pro-people leaders of the incumbent Congress. While House Bill 6214 professes to promote, encourage and assist public service entities, particularly cooperatives, its martial law provisions nonetheless allow limited, if no, room for autonomy, self-regulation, and freedom of initiative and self-reliance and instead clearly disregards the democratic framework contemplated and afforded to cooperatives, including electric cooperatives, under Section 15 of Article XIII of the 1987 Constitution. Unless all of the provisions on management takeover, step-in rights and replacement of employees and/ or directors are expunged from House Bill 6214, its present form is acutely antithetical to the 1987 Constitution. Aside from being patently unconstitutional, these provisions are likewise an abuse of government authority because, in the case of financial institutions, not even the Bangko Sentral ng Pilipinas (BSP), which supervises and regulates multi-billion-peso universal banks, including those with multi-billion-peso loans with the BSP, is authorized by the fit3

and-proper rule of existing banking laws to appoint or designate a replacement for any bank director or officer who has been removed for any commission or omission of an act which render him unfit for the position. The BSP merely disqualifies bank directors and officers while the banks still exercise the ownership right to search for and nominate their replacements. Similarly, Philippine banking laws do not authorize the BSP to takeover the management of ailing banks but empowers it to place them under conservatorship, receivership or involuntary dissolution. The authorities and powers that shall accrue to NEA under House Bill 6214 are both excessive and inordinately abusive, not unlike the internationally-condemned dictatorial takeover of privately-owned enterprises by the ousted Marcos dictatorship in the 70s, the era when PD1645 was conceived and born. B. House Bill 6214 Negates Universally-Accepted Cooperative Principles 1. House Bill 6214 violates the Cooperative Principles of Democratic Member Control, and Autonomy and Independence. House Bill 6214 does not make co-op board members or directors and officers accountable to the People they serve, namely, their member-consumers. Instead, their allegiance and loyalty will dwell with NEA and its almighty officials and employees. This is contrary to the cooperative principle of democratic member control, where cooperatives, as democratic organizations, are controlled by their members who actively participate in setting their policies and in making decisions. Since the directors and officers are, themselves, members and co-owners of the cooperatives they serve, their allegiance and loyalty shall expectedly rest in the protection and promotion of their fellow-members rights and interests, including the safeguarding of their hard-earned share capital contributions and other funds. In the event that these directors and officers betray their oath of service to their cooperatives, the member-consumers are guided by their by-laws on how to discipline and chasten the proven miscreants. In the same context, House Bill 6214 works against the salutary cooperative principle of Autonomy and Independence. Under this principle, cooperatives, being autonomous, self-help organizations, are controlled by their members. This means that if they enter into agreements with other organizations, including the government, or raise capital from external sources, they shall do so on terms that ensure democratic control of their members and maintain their cooperative autonomy. House Bill 6214, however, focuses primarily on investment recovery and the repayment of loans by electric cooperatives, regardless if these accrue to the benefit of memberconsumers. Contrary to the universally-practiced cooperative principles, House Bill 6214 does not concern itself with, and only grudgingly pays a mere passing attention to, the improvement of the quality of life of electric cooperatives member-consumers. In fact, House Bill 6214 creates the impression that NEA itself is asking to be given the implicit authority to manage and operate, albeit indirectly, the electric cooperatives which shall merely serve as NEAs tools and obediently play the role of front-borrowers 4

from banking and financial entities and whose directors and officers shall essentially serve only as NEA agents and employees. C. Stripped of the Unconstitutional Provisions Contained in House Bill 6214, NEA Assumes the Role of a Mere Lender/ Re-Lender and Technical Support to Electric Cooperatives If the unconstitutional provisions of House Bill 6214 were to be deleted, the remaining authorities and powers of the resultantly reformed NEA would be as a mere Lender/ Re-Lender of loans to the electric cooperatives. Even then, NEA shall fail in this role because the bureaucratic layer it creates between the electric cooperatives and the actual loan originators adds an expensive five percent (5%) to the base loan interest rates imposed on electric cooperatives. This, in fact, has been a persistent complaint against NEA because loan interest rates jump to a high 12% from the original 5.5% or 7% imposed by banks and other financial institutions. The additional five percent (5%) rate is added-on or passed-on and represents an unnecessary, nay unwelcome, burden to the electric cooperatives and their memberconsumers who have been straddled with spiraling power rates for decades now under NEA rule. Furthermore, without the unconstitutional provisions of House Bill 6214, NEA is left only with the technical support role of a department or office under CDA. Actually, this is where NEA really belongs -- to provide CDA with technical back-up to further develop electric cooperatives. Again, NEA shall predictably fail in this role, because it has already miserably failed to deliver the mandate bestowed upon it by Article VII Section 58 par (a) and (b) of Republic Act 9136 or the EPIRA law, thus, To prepare electric cooperatives in operating and competing under the deregulated electric market within five (5) years from the effectivity of this Act, specifically in an environment of open access and retail wheeling; and To strengthen the technical capability and financial viability of rural electric cooperatives It has been 11 years since the enactment of EPIRA in 2001, but more than 75% of NEAregistered electric cooperatives still struggle financially and are on the brink of collapse. Perhaps, if NEA just focused on the delivery of its current mandate under EPIRA, instead of moving heaven and earth to be given expanded powers, though unconstitutional, NEA shall have successfully contributed to the long-term stability and sustainability of the countrys power supply and, thus, be widely commended for this feat. D. House Bill 6214 is Out-of-Sync with the Democratic Tenets of President Aquino Mr. Speaker, the widely-popular incumbent President of our Land, His Excellency Benigno Simeon Aquino III, was elected on democratic, pro-poor issues. He bears the name of his father, Ninoy, who is still idolized by millions for giving up his life in the name of democracy and in pursuit of the Peoples right to be freed from the stranglehold of dictatorial rule. President Aquino has repeatedly vowed to continue his late mothers legacy as Asias Icon of Democracy, and his siblings vow to make him live up to his promise till the end of his term in 2016.

And yet, Mr. Speaker, the House leadership which staunchly allies with the Presidents democratic ideals appears to be supporting House Bill 6214 despite its fetid and rancid provisions. We live in different times, Mr. Speaker, and the People now invariably watches our every move in Congress. We, in the Association of Philippine Electric Cooperatives, vow to spur an expansive public debate on House Bill 6214 and seek a public accounting of the actuations of all those who shall support this at the expense of the poor and marginalized member-consumers of electric cooperatives, especially those who have been, and are still being, deprived of their right to assume genuine ownership and control of their electric cooperatives. We cannot compromise democracy in exchange for personal gain. Ipaglalaban po namin ang pobreng si Juan Pasan-Cruz, buhay man ang kapalit. Thank you and more power! Very truly yours,

PONCIANO D. PAYUYO

Copy furnished: 1) Senate President Juan Ponce Enrile 2) Sen. Teofisto L. Guingona III Vice-Chairman, Joint Congressional Power Commission 3) Sen. Francis G. Escudero Member, Joint Congressional Power Commission 4) Sen. Miriam Defensor-Santiago Member, Joint Congressional Power Commission 5) Sen.. Gregorio B. Honasan II Member, Joint Congressional Power Commission 6) Sen. Loren B. Legarda Member, Joint Congressional Power Commission 6