Electric Distribution Companies and Electric Cooperatives and their Responsibilities and

Obligation to the General Public: A study on How they Maintain Facilities and Operation

as well as Required Diligence at all times and after Calamity

Mary Joy L. Buar

September 24, 2021

Introduction

Electric distribution firms play an important role in both residential and industrial

settings. Because of the impact of privatization policies on developing countries,

benchmarking of electric distribution businesses in the energy sector has become a highly

studied subject in recent years. Electric distribution networks are important components

of electricity distribution systems. This network's long-term planning is critical. The

demand and technical requirements related to load, and energy resources must be met.

(Shahnia et al. 2018). For most of its history, vertically integrated utilities have dominated

the electric business. As the electric business becomes more deregulated and

competitive, these utilities are being reformed. Some vertically integrated utilities have

sold their generation assets and are now operating as electricity distribution firms (Faruqui

& Seiden, 2001, p. 54). Electric distribution companies are concerned about cost-

effectiveness. While under pressure from customers and authorities to improve

distribution system reliabilities, electric distribution companies are attempting to

undertake distribution reliabilities projects as cost-effectively as feasible (Zhou & Spare,

2007, p. 1-5). The power system is used to generate, transmit, and distribute electric

power from the generation system to the consumers. They are crucial because they

transport electricity from distribution substations to end-users (Shahnia et al. 2018). The

Philippines has been undergoing a significant restructuring of its power business since

the passage of the Electric Power Industry Reform Act (EPIRA) in 2001 (Bautista &

Valderrama, 2012, p. 19). The Electric Power Industry Reform Act (EPIRA) is one of the

significant pro-market reforms adopted in the Philippines to attain dependable and

competitively priced power.

 From a vertically integrated, heavily publicly owned utility corporation, the industry

was envisioned to be broken down into its basic components, with a deregulated and

effectively privatized generation and supply sectors. Despite reform efforts through the

EPIRA enactment, electricity rates in the Philippines remain among the highest in Asia, a

cause of concern for sectors in the country attempting to compete with their regional

competitors. In the Philippines, power distribution is a regulated industry in which a

franchise covering a specific geographical area grants the right to distribute electricity.

MERALCO, the Philippines' major electricity distributor, has the distribution franchise for

Metro Manila and the urban and rural areas surrounding the capital. The MERALCO

franchise region encompasses around a fourth of the total population of the Philippines

(Bautista & Valderrama, 2012, p. 19).

Responsibility

Republic Act. No 9136 otherwise known as “Electric Power Industry Reform Act”

Section 9, Lay down the functions and responsibilities of National Transmission

Corporation (TransCo).

Section 9. Functions and Responsibilities. - Upon the effectivity of this Act, the TRANSCO

shall have the following functions and responsibilities:

(a) Act as the system operator of the nationwide electrical transmission and sub

transmission system, to be transferred to it by NPC;

(b) Provide open, equal and non-discriminatory access to its transmission system to all

electricity users;
(c) Ensure and maintain the reliability, adequacy, security, stability and integrity of the

nationwide electrical grid in accordance with the performance standards for the operation

and maintenance of the grid, as set forth in a Grid Code to be adopted and promulgated

by the ERC within six (6) months from the effectivity of this Act;

(d) Improve and expand its transmission facilities, consistent with the Grid Code and the

Transmission Development Plan (TDP) to be promulgated pursuant to this Act, to

adequately serve generation companies, distribution utilities and suppliers requiring

transmission service and/or ancillary services through the transmission system: Provided,

That TRANSCO shall submit any plan for expansion or improvement of its facilities for

approval by the ERC;

(e) Subject to technical constraints, the grid operator of the TRANSCO shall provide

central dispatch of all generation facilities connected, directly or indirectly, to the

transmission system in accordance with the dispatch schedule submitted by the market

operator, taking into account outstanding bilateral contracts; and

(f) TRANSCO shall undertake the preparation of the TDP. In the preparation of the TDP,

TRANSCO shall consult the other sectors of the power industry such as the generation

companies, distribution utilities, and the electricity end-users. The TDP shall be submitted

to the DOE for integration with the Power Development Program and the National Energy

Plan, provided for in Republic Act No. 7638 otherwise known as "the Department of

Energy Act of 1992".

A generation company may develop and own or operate dedicated point-to-point limited

transmission facilities that are consistent with the TDP: Provided, That such facilities are
required only for the purpose of connecting to the transmission system, and are used

solely by the generating facility, subject to prior authorization by the ERC: Provided,

further, That in the event that such assets are required for competitive purposes,

ownership of the same shall be transferred to the TRANSCO at a fair market price:

Provided, finally, That in case of disagreement on the fair market price, the ERC shall

determine the fair market value of the asset.

Also, under P.D 269, National Electrification Administration (NEA) was created.

They were given sole control over the electric cooperatives, as well as the ability to

abolish, alter, and amend their franchise. Additional responsibilities include training

Electric Cooperatives to compete in a deregulated energy market, developing their

technical capabilities, and improving their financial sustainability as electric utilities

through enhanced regulatory rules. In the Philippines, the geographic area franchise

model is used, which requires franchise holders to connect all houses and other potential

consumers in their franchise areas, unless doing so would jeopardize the financial viability

of the distribution utility.

Safe and Secure facilities, Infrastructure, Installations and Electrical lines

Provide safe and healthy working conditions for its employees and stakeholders in

order to prevent accidents, injuries, and other work-related illnesses, and to take action

and responsibility for climate change. They must improve and execute health and safety

measures in all aspects. Within the organization, long-term health and safety procedures

should be implemented. Their program should be in line with Department of Labor and

Employment (DOLE) requirements for incident reporting and recording basic

occupational safety and health training for safe installations. Accidents occur but they can
be prevented by the use of installations, equipment and working practices (Madden,

2017).

Responsibility after a calamity

Preparing for a major storm or natural disaster is critical to ensuring the safety of

the general public and company employees. Understanding the significance of creating

a pre-disaster implementation plan for a utility company, as well as the role supply chain

management plays in the process, can be the key to a successful restoration effort. After

the storm passes, utility companies must rebuild and restore power to the affected

hospitals, businesses, and communities. The highest priority areas would be identified

with a predetermined plan, leaving no doubt as to where to begin focusing efforts. The

first priority would be to restore power to critical services such as hospitals, fire stations,

and emergency response centers. Going without power for an extended period of time in

these areas would have serious consequences for many people's lives. Plans for severe

storms must consider not only what will happen after the storm has passed, but also what

will happen in the days ahead. Long before a storm is predicted, utility companies should

have a plan in place and be practicing and preparing. Everyone in the company, from

customer service to linemen, should know what to do in the event of a storm.

I. Storm Restoration Process

One of the steps taken by electric companies to prevent injuries and fires is to ensure

that power is no longer flowing along the lines. The restoration process follows a set of

priorities.
 i. Power Plants. Damage to the primary source of power production is assessed and

repaired.

ii. Transmission Lines. Repairs are being made to high-voltage transmission lines

that serve thousands of customers across large areas.

iii. Substations. In order for power to reach local distribution lines, it was brought

online.

iv. Emergency Responders. Emergency services and facilities that are critical to

public health and safety, such as hospitals, police and fire stations, water

reclamation plants, and communication systems, have been restored.

v. Large Service Areas. Crews are dispatched to repair lines in order to restore

service to the greatest number of customers in the shortest amount of time. Service

lines to neighborhoods, industries, and businesses are being restored in a

systematic manner.

vi. Individual Homes. After major repairs are completed, service lines to individual

homes, small groups, and customers are restored (EEI, 2016)

Restoring power after a major incident is a difficult task that must be completed safely

and quickly. A quick restoration process necessitates extensive logistical knowledge, as

well as skilled workers and specialized equipment. Electric companies start preparing for

weather-related events long before the event occurs, with company-wide plans and drills

involving nearly all employees.

Roles and Responsibilities of Electric Cooperative Boards

ENABLING SUCCESSFUL ELECTRIC COOPERATIVE DEVELOPMENT

 • Tariff Rate Regulation

The role of the regulator is to strike a balance between the consumer's desire for

the lowest possible price and the owner's desire to maximize profit. A consumer-

owned electric cooperative exists to provide low-cost service with no profit margin.

• Services

responsibility to consumers to ensure that utilities meet basic service standards

such as quality (voltage), reliability (outages), and public safety.

• Service Territories

Grant monopoly status to electric distribution utilities within defined service

territories. It is recommended that preferential rulemaking be used to protect the

interests of rural utilities.

• Financing

In terms of financing, cooperatives are generally unaffected by regulatory

considerations. Electric cooperatives, on the other hand, have a key provision for

returning operating surpluses (also known as "capital credits") to members. This

important function which, among other things, reminds consumers that they are

also owners must be included in a cooperative's charter, policies, and procedures.

The company should provide best value in energy, products and services.

Level of Diligence Required of Electric Distribution Companies and Electric

Cooperatives.

Department of Energy (DOE), on their Distribution Services and Open Access

Rules (DSOAR) in duty to avoid and mitigate damages, states that the use of

extraordinary diligence is a must to avoid or mitigate damages or losses suffered.

 In the case of Manila Electric Company v. Matilde Macabagdal Ramoy on March

4, 2008, Meralco cause injury to Ramoy contrary to the public policy as discussed.

Meralco being a vital public utility is expected to exercise utmost care and diligence in the

performance of its obligation. The Court emphasized in Samar II Electric Cooperative,

Inc. v. Quijano that:

“Electricity is a basic necessity the generation and distribution of which is imbued with

public interest, and its provider is a public utility subject to strict regulation by the State

in the exercise of police power. Failure to comply with these regulations will give rise to

the presumption of bad faith or abuse of right”

"... considering that electricity is an agency, subtle and deadly, the measure of care

required of electric companies must be commensurate with or proportionate to the

danger. The duty of exercising this high degree of diligence and care extends to every

place where persons have a right to be" (Astudillo vs. Manila Electric, 55 Phil. 427).

The duty of exercising this high degree of diligence and care extends to every place

where persons have a right to be. The poles must be so erected and the wires and

appliances must be so located the persons rightfully near the place will not be injured.

Particularly must there be proper insulation of the wires and appliances in places where

there is probable likelihood of human contact therewith. (20 C. J., pp. 320 et seq.; San

Juan Light & Transit Co. vs. Requena [1912], 224 U. S., 89.)

Failure to exercise utmost care and diligence in the performance of its obligation to its

customer, is tantamount to bad faith (G.R. No. 158911)

References

• 20 C. J., pp. 320 et seq.; San Juan Light & Transit Co. vs. Requena [1912], 224 U.

S., 89.

• Astudillo vs. Manila Electric, 55 Phil. 427

• Bautista, C., & Valderrama, H. A. (2012). Efficiency Analysis of electric

cooperatives in the Philippines. Philippine Management Review, 19.

• Department of Labor and Employment (DOLE) https://www.dole.gov.ph/

• Faruqui, A., & Seiden, K. (2001). Tomorrow's electric distribution

companies. Business Economics, 36(1), 54-54.

• G.R. No. 144474, April 27, 2007, 522 SCRA 364.

• Id. at 375-376.

• Madden, J. M. (2017). Electrical Safety and the Law. Routledge.

• NEA, Presidential Decree No. 269. Retrieved from:

https://www.nea.gov.ph/ao39/about-us/charter/pd-269

• RA. 9136, An Act Ordaining Reforms in the Electric Power Industry, Amending for

the Purpose Certain Laws and for other Purposes. Retrieved from:

https://www.lawphil.net/statutes/repacts/ra2001/ra_9136_2001.html

• Roles and Responsibilities of Electric Cooperative Boards: Guide for Electric

Cooperative Development and Rural Electrification. Retrieved from:

https://www.nrecainternational.coop/wp-

content/uploads/2016/11/Module3RolesandResponsibilitiesofElectricCooperative

BoardsofDirector
• Shahnia, F., Arefi, A., & Ledwich, G. (Eds.). (2018). Electric distribution network

planning. Springer.

• Zhou, Y., & Spare, J. H. (2007, June). Optimizing reliability project portfolios for

electric distribution companies. In 2007 IEEE Power Engineering Society General

Meeting (pp. 1-5). IEEE.