Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City. Metro Manila

Fifteenth Congress
Second Regular Session

HOUSE BILL NO. 5244

Introduced by: Hon. Erico B. Aumentado, Hon. Teddy Brawner Baguilat, Jr.,
Hon, Tomas V. Apacible, Hon. Mark Llandro Mendoza, Hon. Salvador
Cabaluna HI, Hon. Michael Angelo Rivera, Hon. Rodel Batocabe, Hon.
Christopher Co, Hou. Alfredo Garbin, Jr., Hon. Homer Mercado, Hon,
Sharon Garin, Hon. Eulogio Magsaysay, Hon. Arnel Ty, Hon. Raymond
Democrito Mendoza

EXPLANATORY NOTE

This bill aims to strengthen the National Electrification Administration in order to allow
the agency to carry its mandate of bringing the blessings of energization to all puroks and public
schools in the rural areas through the electric cooperatives as NEA’s implementing arm.

For, indeed, power has become indispensable in the economic development of the

countryside especially in the light of the government's drive for poverty reduction.

The eiectric cooperatives — under the umbrella of the Philippine Rural Electrification
Cooperatives Association Inc. (PHILRECA) — have extended electricity services even to
missionary or not economically viable areas in the name of public service. To date, PHILRECA
has serviced 9,000,000 households or 45,000,000 members when translated at five persons per

household all over the country.

Among the salient amendatory features in this bill are the following, to wit:

1 Increase of NEA’s capitalization from FIVE BII.LION PESOS (P5,000,000,000)
to FIFTEEN BILLION PESOS (P15.000,000,000).


3. Expanded enforcement of regulatory and supervisory function of NEA; and

4. Strict adherence to the rule on conflict of interest and the Anti Graft and Corrupt
Practices Act to ensure transparency and accountability in NEA’s transactions and
conduct of its manpower as the mechanism to follow the righteous path of governance.

In light of the foregoing, it is most respectfully urged of the Honorable House of
Representatives to approve of this Bill.

wer Aiilhe’ APACIBLE
!ESt Dyer,
1* District, Batangas

REP. CHRISTOPHER CO
Ako Bi list

3 QW
REP. GARIN REP. HOMER MERCADO
AAM is 4-UTAK Partylist
REP. EULOGIO MAGSAYSAY REP. RAYMOND DEMOCRITO
AVE Partylist MENDOZA

TUCP Pastylist


Republic of the Philippines
HOUSE OF REPRESENTATIVES

‘Quezon City, Metro Manila

Fifteenth Congress
Second Regular Session

Introduced by: Hon, Erico B. Aumentado, Hon. Teddy Brawner Baguilat, Jr.,
Hon. Tomas V, Apacible, Hon, Mark Llandro Mendoza, Hon. Salvador
Cabaluna I, Hon. Michael Angeto Rivera, Hon. Rodel Batocabe, Hon.
Christopher Co, Hon. Alfredo Garbin, Jr., Hon. Homer Mercado, Hon.
Sharon Garin, Hon. Eulogio Magsaysay, Hon. Arnel Ty, Hon. Raymond
Democrito Mendoza

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress
assembled

HOUSE BILL Ni

5244

AN ACT
PROVIDING FOR MEASURES TO STRENGHTEN THE NATIONAL
ELECTRIFICATION ADMINISTRATION, AMENDING PD 269, PD 1645 AND
OTHER RELATED LAWS, AND FOR OTHER PURPOSES.

CHAPTER I - POLICY AND DEFINITIONS
Section 1. Title. - This act shali be known as the “Revised Charter of the National

Electrification Administration of 2011”. [1 shail hereinafter be referred to as the Act.

Section 2. Declaration of Policy. — It is hereby declared the policy of the State to

energize the rural areas to spur the economic development therein. Towards this end, the State

shal! empower and strengthen the National Elecwification Admi

ration to pursue this program
and bring eleciricity - through the electric cooperatives as its implementing arm — to the

countryside even in the missionary or economically unviable areas,

Section 3. Definitions. As used in this ACT, the following words or terms shall have the

following meanings, unless a different meaning clearly appears from the context:

a) “NEA” shall mean the National Electrification Administration.

b} "ELECTRIFICATION BOARD" shail mean the Board of Administrators of NEA:
¢) “ADMINISTRATOR” shall mean the Administrator of NEA, all as provided for
in this ACT.

a.) “ELECTRIC Cooperative’ SHALL MEAN AN ELECTRIC DISTRIBUTION
UTILITY ORGANIZED AND REGISTERED PURSUANT TO RA 6038, PD
269, AS AMENDED.


e)

£)

£)

hy

aD)

k)

“Public service entities” shall mean (1) an ELECTRIC COOPERATIVE, (2) the
NPC, and (3) iocal governments and privately-owned public service entities in

operation which fumish and are empowered to furnish retail electric service.

“Person” shall mean any natural or juridical person, firm, association, cooperative,
corporation, business trust, partnership, the Nafional Goverment or any political
sub-division, agency or instrumentally thereof.

“Service” shali mean electric service, either at wholesale or retail, including the

furnishing of any auxiliary or related service.

“Dependable and adequate service” shall mean service that, consistent with
normal standards and levels of service based upon good utility management and
operating practices, is sufficient in quantity. having regard for the demands for
service currently existing and reasonably anticipated within the foresccable future,
that is accessible on a constant and continuous basis except for outages
occasioned by the need for normal repair, maintenance, construction or renovation
work or by acts beyond the reasonable ability of the public service entity to

prevent or control.

“Franchise Are:

shall mean refers to a geographical area exclusively assigned or
granted (o a distribution utility for distribution of electricity.

“Area coverage” shall mean dependable and adequate service that, on the basis of
reasonable and standard extension and service policies, rates, charges and other
terms and conditions, will be or is being made available to all persons within the
affected area as above defined who request such service and are able and willing
to abide by and comply with all reasonable and standard terms and conditions.
regardless of the relative location of such persons within the affected area or of
their ptoximity to existing or proposed service facilities: Provided, ‘That the
financial feasibility of the public service entity’s catire operation is not thereby

impaired.

“Interest rate pet centumn per anguot” shalll mean an interest rate that is accrued
solely upon the unpaid bulance of any loan principal which has actually been
advanced to a borrower and upon any interest payment which has become due or
been deferred and has not been paid by the borrower; computed on an annual
basis.


Ly

P)

re)

ny

1)

“Loan” shall mean a loan the total principal amount of which, as and when
required for application to the purposes thereof, that is, at the time of the making

thereof, assured from funds that are or will become available therefore.
“NEDA” shall mean National Economic and Development Authority or any
successor instrumentality that may hereafter be established (o perlorm the same or
substantially similar function;

PC” shall mean National Power Corporation;

S” shall mean National Economic and Development Authority-Foreign

“Franchise” shall mean the privilege extended to a DISTRIBUTION UTILITY to
operate an electric system for service to the public at retail within a described
geographic area, whether such privilege had been granted by the Congress or
NATIONAL ELECTRIFICATION COMMISSION.

“Board” shall mean the board of directors of an ELECTRIC cooperative.

“Houschold” shall mean a dwelling capable of receiving service safely, including

apartments and other dwelling combinations.

“SMALL POWER UTILITIES GROUP” or “SPUG" refers to the functional unit

of NPC created under Republic Act No. 9136; to pursue missionary electrification

functions.

"MISSIONARY ELECTRIFICATION’ refers to the provision of basic electricity
service in unviable areas with the ultimate aim of bringing the operations in these

areas lo viability levets.

"GUARANTEE" a written pledge by NEA to take on the debi obligation of

electric cooperatives if the latter defaulis on the payment of obligations.

CHAPTER H - THE NATIONAL ELECTRIFICATION ADMINISTRATION

Section 4. NEA Authorities, Powers and Directives. The NEA is hereby authorized,
empowered and directed to promote, encourage and assist ELECYRIC COOPERATIVES to the


end of achicving the objective of making service available dhroughoul the nation on an area

coverage

basis as rapidly as possible. THEREBY MAKING MISSIONARY

ELECTRIFICATION ITS PRIMORDIAL CONCERN; and for such purpose it is hereby,
without limiting the generality of the foregoing and in addition to other authorizations, powers

and directives established by this ACT, specifically authorized. empowered and directed:

a)

by

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dy

©)

f)

8)

h)

To have a continuous succession under its corporate name until otherwise
provided by law;

To prescribe and thereafter to amend and repeal its by-laws not inconsistent with
this ACT;

To adopt and use a scal and alter it at its pleasure;

‘To suc and to be sued in any court: Provided. That NFA shall. unless it consems

otherwise, be immune to suits for acts ex delicti;

To make contract of every ame and nature and to execute all instruments
necessary or convenient for the carrying out af its business;

To make jouns to ELECTRIC COOPERATIVES, for the construction or
acquisition, operation and maintenance of generation, transmission und
distibution facilities and all related propertics, equipment, machinery, fixtures,
and materials for the purpose of supplying arca coverage service, and thereafter to

make loans for the restoration. improvement or enlargement of such facilities;

To promote, encourage ELECTRIC COOPERATIVES and LOCAL
GOVERNMENT. UNITS in planning, developing. coordinating, establishing,
operating, maintaining, repairing and renovating facilities and systems to supply
area coverage service, and for such purpose to furnish. technical,
INSTITUTIONAL and professional assistance and guidance.

To approve or disapprove any loan from other lenders to public service entities
which at the time are borrowers from NEA under sub-paragraph (£) of this section,
and thereafter, pursuant to Section 11 (b) to disapprove advances of loans from
other lenders;


aD)

k)

m.)

TO GUARANTEL THE TRANSACTIONS FOR ELECTRIC COOPERATIVES
CONSISTENT WITH THE PROVISIONS OF THIS ACI AND SUBJECT TO.
THE POLICY PROMULGATED BY THE E!.ECTRIFICATION BOARD;

To so cooperate, coordinate and exchange such information, studies and reports
wilh, and to seek such cooperation and coordination from, other departments,
agencies and instrumenialities of the National Government, as will most

effectively conduce to the achicvement of the purposes of this ACT;

To borrow funds from any source, private or government, foreign or domestic,
and not inconsistently with section 8, to issue bonds or other evidences of
indebtedness therefor and to secure the tenders thereof by pledging, sharing or

subordinating one or more of the NEA‘s own loan sccurities;

To receive from ELECTRIC Cooperatives all articles of incorporation,
amendments, consolidation. merger. conversion and! dissolution, and all
certificates of changes in the location of principal offices and of elections to
dissolve, and, upon determining that such arc in conformity with this ACT to
certify the same, to file them in the records of the NEA, and to maintain a registry
of such filings the provisions of Act No. 1459, as amended, to the contrary
notwithstanding;

To acquire, by purchase or otherwise (including the rigbt of eminent domain,
which is hereby gramed to the NFA, to be exervised in the manner provided by
law for the institution and completion of expropriation proceedings by the
Nutional and focal governments) real and physical propertics, together with all
appurtenant rights, easements, licenses and privileges, whether or not the same
has already been devoted to the public use of generating, transmitting or
distributing electric power and energy, upon NEA's determination that such
acquisition is necessary to accomplish the purposes of this ACT and, if such
properties has already been devoted to the public usc described in the foregoing,
that such use will be better served and accomplished by such acquisition;
Provided, that the power herein granted shall be exercised by the NEA solely as
agent for and on behalf of one or more public service entities which shall timely
receive, own and utilize or replace such properties for the purpose of furnishing
adequate and dependable service on an area coverage basis, which entity or
ion shall become,
borrowers frum the NLA under sub-paragraph (f) of this section; and Provided

entities shall then be or jn connection with the acqui



a.)

Pp.)

farther, that the costs of such acquisition. including the cost of any eminent
domain proceedings, shail be bome. either directly or by reimbursement to the
NFA, whichever the NEA shall elcet, by the public service entity or entities on
whose bebalf the acquisition is undertaken; and otherwise to acquire, improve,
hold, transfer, sell, lease, rent, mortgage. cneumber and otherwise dispose of
property incident to, or necessary. convenient or proper to carry aut, the purposes

1
for which NEA was created: :

At Ieast annually, not later than June 30th. to report to the President on the status
of electrification of the Philippines, including a comprehensive reporting of loans
made, loan funds advanced, loans secured from other sources and the advances
thereof, the names and locations of the borrowers, the number of services
contemplated by such loans, the number actually receiving service as a result of
such Joans, the number of electrified and the remaining number of unelectrified
households throughout the Nation, the amounts of usage by consumers, Joan and
other uctivities programmed for the ensuing year, and all such other information
and data as will accurately reveal the progress being made toward the achievement
of the purposes of this ACT; and to publish such report for disscmination to and
use by other interested departments, agencies and instrumentalities of the National
Government and by borrowers under this ACT;

‘To exercise such powers and do such things as may be necessary to carry out the
business and purposes for which the NEA was established, or which from time to
time may be declared by the LLECTRIFICATION BOARD to be necessary
useful, incidental or auxiliary 10 accomplish such purposes: and generally, to

exercise all the powers of a corporation under the Corporation Code of the
Philippines insofar as they are not inconsistent with the provisions of this ACT.

To invest and/or grant loans to ELECTRIC COOPERATIVES for
ELECTRIFICATION PURPOSES AND for the development and utilization of
renewable energy sources and other altemative sources of energy, power
generation industries and/or companies, including but not limited to dendro-
thermal and mini hydro power plants, solar and wind cnergy and associated
facilities; provided, that such investment and loans shall be limited to specific
percentage of total requirements as may be determined by the
ELECTRIFICATION BOARD.


q.)

nr)

‘To organize wholly- or partly-owned companies and subsidiaries for the purpose
of operating power gencrating and distribution systems and other related
activities; and

To organize wholly- or partly-owned subsidiaries, for the purpose of

manufacturing materials and equipment for the power generating systems.

Section5. Composition, Function and Term of the Electrification Board.

a)

b)

For the purpose of administering the provisions of this ACT, there is hereby
established a public corporation to be known as the National Electrification
Administration. All of the powers of the corporation shall be vested in and
exercised by an ELECIRIFICATION ROARD, which shall be composed of a
Chairman and four (2) members, one of whom shall be the Administrator as ex-

officio member.

‘he three other members shall be appointed by the President of the Philippines to
serve for a fixed term of (7) years. Provided, that the terms of the first appointees
shall be seven years for one member and three years for the two other members,
respectively, and that the term of the ex-officio member shal! be co-terminus with
his term as the Administrator.

All vacancies, except through expiration of the terms, shall be filled for the
unexpired term only. The Chairman and every member of the Electrification
Board shail be entitled to a per diem approved by the GOVERNANCE
COMMISSION FOR GOCCs (GCG) for each meeting actually attended by them.

MEMBERS - (u) the Secretary of the Department of Lnergy, shall be ex-officio,
the Chairman of the Electrification Board. Whenever the Secretary of Energy is
unable to attend a meeting of the Board, he shall designate an Undersecretary as
alternate;

i, the Administrator of the National Electrification | Administration, shalt
serve as cx-offi

member of the Electrification Board;

ii. one (1) member who shall be a professional clectrical engineer;

one (1) member who shall be a lawyer; and


c)

ad)

iv. one (1) member with a background in business, economies or finance.

Mectings, Quorum. The Flectrification Board shall meet regularly at least twice a

month and as often as the exigencies of the agency’s affairs demand.

The presence of at least three members shall constitute a quorum which shall be
necessary for the transaction of any business. The affirmative vote of a majority of
the members present shall be necessary for the approval of any resolution,
decision or order, except when a greater vote is required as sometimes hereinafer
provided, In the absence of the Chairman or his designated alternate at a Board
meeting duly called, the Administrator as ex-officio member shall preside.

Electrification Board Committees. THE FLECTRIFICATION BOARD STIALL
HAVE THREE COMMITTEES NAMELY: 1) BOARD GOVERNANCE
COMMITTEE 2) CREDIT AND RISK MANAGEMENT COMMITEE: AND
3) AUDIT COMMITTEE. THE COMMITTEES SHALL BE COMPOSED OF
‘THE MEMBERS Of' THE BOARD. TIIE CHAIRMAN OF WITCH SHALL BE
ELECTED FROM AMONG THEMSELVFS.THE ELECTION BOARD SHALL.
HAVE ‘TLE FOLLOWING FUNCTIONS:

1. To implement the provisions and purposes of this ACT;

To formulate and adopt policies and plans, and to promulgate cules and
regulations, for the management, operation and conduct of the business of the
NEA THAT WILL STRENGTHEN THLE INSTITUTIONAL AND
TECHNICAL CAPABILITY AND FINANCIAL VIABILITIES OF
ELECTRIC COOPERATIVES: .

3. To adopt and, as may be necessary from time to time, to amend annual
budgets for the NEA’s borrowing and lending programs and for the agency's
administration;

4. To cstablish policies and guidelines for employment, on the basis of merit,
technical competence and moral character. and, upon the recommendation of
the Administrator, to onganize ot reorganize NEA’s staffing structure, to fix
the salaries of personnel and to define their powers and duties;


5. To authorize the NEA Administrator to designate, subject to the confirmation
of the ELEC PRIFICATION BOARD, AN ACTING GENERAL MANAGER
AND/OR PROJECT SUPERVISOR, AND AN INDEPENDENT DIRECTOR,
for an ELECTRIC Cooperative where vacancics in the said positions oceur

and/or when the interest of the Electric Cooperative and the program so
requires, and to prescribe the functions of said Acting General Manager and/or
Project Supervisor, AND INDEPENDENT DIRECTOR which powers shall
not be nullified, altered or diminished by any policy or resolution of the Board
of Directors of the Electric Cooperative concemed;

6. On the zecommendation of the Administrator, appoint, fix the remunerations
and other emoluments, and remove personnel of the National Electrification
Administration, subject to the pertinent civil service laws, rules and
regulations; Provided, That the Electrification Board shall have exclusive and
final authority to promote, transfer, assign or reassign personnel of the
National Electrification Administration and these personnel actions are

inary; Provided,

further, That the Flectrification Board may delegate such authority to the

deemed made in the interest of the service and not} di

Administrator under such guidelines as it may determine.

©.) Adopt an annual budget for and authorize such expenditures by the National
Flectrification Administration as ure in the interest of effective administration and

operations of the National Flectrification Administration;

f.)  Indemnify its members and other officials of the National Electrification
Administration, including personnel of the departments performing supervision
and examination functions against all costs and expenses reasonably incurred by
such persons in connection with any civil or criminal action, suit or proceedings to
which he may be, or is, made a party by reason of the performance of his
functions or duties, unless he is finally adjudged in such action or proceeding to
be liable for negligence or misconduct;

Section 6. The NEA Administrator. The management of NEA shall be vested in the
Administrator who shall be THE CHIEF EXECUTIVE OFFICER. HE/SHE shall be a person of
known integrity, competence and experience in technical and executive fields related to the
purposes of this AC

The Administrator shall have the following powers and duties:


a) To exccute and administer policies, plans and programs, the rules and regulations,
approved or promulgated by the Board of Administrators;

b.) To submit for the consideration of the Board of Administrators such policies,
plans and programs as he deems necessary to carry out the provisions and
purposes of this ACT: and

ec) To direct and supervise the operation and internal administration of the NEA and,
I . .
for this purpose, to delegate same of any of this powers and duties to subordinate .
officials of the NEA;

Section 7. Capital Stock. THE AUTHORIZED CAPITAL STOCK OF NFA SHALL BE
INCREASED TO FIFTEEN RII.LION PESOS (P15B) DIVIDED INTO ONE HUNDRED
FIFTY MILLION SHARES WITH A PAR VALUE OF ONE HUNDRED (P100.00) PESOS
RACH, WHICH SHARES ARE NOT TO BE TRANSFERRED, NEGOTIATED, PLEDGED,
MORIGAGED, OR OTHERWISE GIVEN AS SECURITY FOR PAYMENT OF ANY
OBLIGATION.

THE SUM SHALL BE WHOLLY SUBSCRIBED BY THE GOVERNMENT OF THE.
PHILIPPINES AND PAID FROM A PORTION OF THE PROCLLDS OF FEES DERIVED
FROM PETROLEUM SERVICE CONTRACTS, INCLUDING BUT NOT LIMITED TO
THAT OF MALAMPAYA NATURAL GAS PROJECT, AT A PERCENTAGE TO BE
DETERMINED BY ‘IHL DEPARTMENT OF ENERGY, AND BY DIRECT
APPROPRIATION OF THE CONGRESS OF THE PHILIPPINES FOR ANY BALANCE
THEREON. lf NECESSARY.

Section8. TRANSFER OF SPUG FUNCTIONS. YHE NEA SHALL ASSUME. THE
FUNCTIONS OF THR SPUG ENUMFRA{ED IN SECTION 70 OF FPIRA. THE
MISSIONARY ELECTRIFICATION FUNCTION SHALI. CONTINUE TO BE FUNDED
ROM THE REVENUE SALES IN MISSIONARY AREAS AND FROM THE UNIVERSAL.
CHARGE TO BE COLLEC!uD FROM ALL ELECTRICITY END-USERS AS
DETERMINED BY THE ERC. TO ENSURE THE FINANCIAL VIABILITY OF NEA. ERC
SIIALL DETERMINE AND RELEASE OF UNIVERSAL CHARGE TO NEA ON A
QUARTERLY BASIS.

Section 9. Loan and GUARANTEE Standards. In making a loan AND/OR
GUARANTEE authorized in Section 4, the ELECTRIFICATION BOARD is hereby authorized,
empowered and directed:


a)

b)

©)

dy

e)

fy

Section 10. Contracting Indebtednes

i}

Before making such loan or GUARANTEE, to determine and certify that (1) the
project or projects being financed thereby are financially feasible for the
purpose of, and will result in, area coverage in the arca or areas to be affected
thereby; BFPICIENT AND RELIABLE SERVICR, AND REASONABLE
PRICE OF ELECTRICITY IN A DEREGULATED POWER
ENVIRONMENT (2) funds are or will be avuiluble for such loans or
GUARANTEE to the borrower on the schedule contemplated by the Joan or
GUARANTEF agreement; and (3) in the NEA"s judgment the security for suck
loan is reasonably adequate and the principal of and interest upon such loan will
be repaid on schedule and within the time agreed;

‘To require that such loan or GUARANTEE be seif-liquidating within a term to
be fixed by the NEA:

To impose upon the loan or GUARANTEE principal and interest charge or
GUARANTEE FFE to be fixed by the NEA;

‘To fix the schedule for repayment of the principal of and the interest upon such
Joan in instalments recurring not more than every quarter, which instalments
may be in unequal amounts and larger in the later years of the Joan term than in
the earlier years;

‘Yo roquire in the Joan or GUARANTEE. agreement that the borrower's rates,
charges, rules and regulations, policies and ail other terms and conditions
affecting its extension and furnishing of service shall be such as to assure
achievement of the loan or GUARANTEF. purposes, and

Subject to the foregoing. to establish und require compliance with such
procedures, rules and regulations as the ELECTRIFICATION BOARD may
determine to be necessary or appropriate to assure that the purposes of such loan
or GUARANTEE will be timely achieved and that the loan or GUARANTEE
agreement and the provisions of this ACT will be complied with.

: Conditions, Privileges; Exemptions, Sinking

Fund, Guarantees. Whenever the ELECTRIEICATION BOARD determines that to accomplish
the purposes of Chapter I of this ACT it is necessary to contract indebtedness, it shall by @
resolution, adopted by the affirmative votes, of at least three members, sp declare and authorize

the NEA’s execution or issuance of and establish the terms and conditions to be contained in,


such bonds, loan agreements or other evidences of indebtedness necessary therefor. Such

resolution shall become valid and effective upou approval by the President of the Philippines

upon recommendation of the Secretary of Finance.

1)

2)

3)

4)

Such bonds or other evidences of indebtedness (a) shall be in registered form and
transferable at the BANGKO SENTRAL NG PILIPINAS (BSP); (b) shall not be
sold at less than par value; (c) shail be payable ten years or more from date of
issue, as may be determined by the Secretary of Finance before their issuance, but
shall be redeemable, upon the election of the ELECTRIFICATION BOARD, after
five years from such date of issue: and (d) shall bear interest at an annual rate to
be determined before their issuance by the Secretary of Finance in consultation
with the Monctary Board of the BANGKO SENTRAL NG PILIPTINAS (BSP)
before date of the issuance and both the principal and imerest shall be payable in
legal tender of the Philippines:

The bonds or other evidences of indebtedness shall be exempt from the payment
of all taxes by the Republic of the Philippines, or by any authority, branch,
division, political subdivision thereof. which facts shall be stated upon their face;
and they shall be receivables as sccurity in any transaction with the National
Government or any of its branches, subdivisions, instrumentalities und its owned
or controlled corporations in which a security is required.

The sinking fund shall be established by the National Electrification
Administration in such manner that the total anual contributions thereto, accrued
at such rale of interest as may be determined by the Secretary of Finance in
consultation with the Monetary Board, shall be suflicient to redeem at maturity
the bonds issued under this subsection. The sinking find shall be under the
custody of the BANGKO SENTRAI. NG PILIPINAS (BSP); whicb shall invest
the same, subject lo the approval of the ELECTRIFICATION BOARD and the
Secretary of Finance in consultation with the Monetary Board; provided, that the
proceeds thereof shall accrue to the NEA.

The Republic of the Philippines hereby guarantees the payment by the NEA of
both the principal and the interest of the bonds or other evidences of indebtedness,
and shall pay such principal and interest in case the NEA fails to do so; and there
are hereby appropriated out of the general funds in the National Treasury not
otherwise appropriated the sums necessary to make the payments so guaranteed;
Provided, that the sums so paid by the Republic of the Philippines shall be


refunded by the NEA; and Provided, further. that the NEA, to assure such
refunding, shall establish such reserves or sinking funds and comply with such
other restrictions and conditious as the Secretary of Hinanee may prescribe and
establish for that purpose.

i

5.) With respect to foreign indebiedness to be incurred by the NEA, sueh may be
contracted, in the form of loans, credits, convertible foreign currencies, or other
forms of indebtedness, from foreign governments or any international financial
institution or fund source, including foreign private lenders. The total outstanding
amount of such indebtedness, exclusive of interest, shal! not exceed eight hundred
million United States dollars (U.S.§ 800M) or the equivalent thereof in other
currencies. The President of the Philippines, by himself or through his duly
authorized representative, is hereby authorized to negotiate and to so contract with
foreign governments or any international financial institution or fund source in the
name and on behalf of the NEA; and is further authorized fo guarantee, absolutely
and unconditionally, ax primary obligor and not merely as a surety, in the name
and on behalf of the Republic of the Philippines, the repayment of any
indebtedness thereby contracted and the payment thereon of any due interest
charge, up (o the limited amount authorized by the foregoing, which shall be over
and above the amounts which the President is authorized to guarantee under R.A.
6142, and also to guarantee the performance of all or any of the obligations
undertaken by the NEA in the territory of the Republic of the Philippines pursuant
to loan agreements entered into pursuant to this sub-paragraph (5). Any
indebicdness contracted under this sub-paragraph (5) and the payment of the
Principal thereof and of any interest or other charges thereon, as well as the
importation of machinery, equipment, materials, supplics and service by the NEA,
paid from the proceeds of any such contracted indebtedness, shall also be exempt

from ail direct and indirect taxes, fees, imposts, other charges and resirictions,
inctuding unport restctions, by the Kepublic of the Philippines, or by any

authority, branch, division or political subdivision thereof,

Section 11. Authority t0 Extend Loans and Release or Subordinate Securities.
Whenever in its judgments such is necessary ot desirable to achieve the purposes of this ACF.
and particularly if such is necessary to make or keep a project operationally viable, the
ELECTRIFICATION BOARD is hereby authorized and empowered (a) by agreement with the
borrower, to extend the time of payment of principal or interest, or both, beyond the loan
agreement term of any loan made by the NEA under this ACT, or to defer, for not in excess of
seven years, the time when the repayment schedule for principal or interest, or both, shall begin,


or to reschedule payments of principal or interest, or both, or when more of the foregoing is
sufficient, to compromise any amount owing by a borrower to the NEA Subject to provision of
existing laws; and (b) upon the NEA’s determination that such is necessary or desirable for the
purpose of enabling a borrower to accomplish the purposes for which it has already reecived a
NEA loan and that such will not result in any diminution of the socurity of, or of the ability of
the borrower to repay, any outstanding indebtedness of the borrower below the level of such
security and ability were additional borrowings from another lender noj undertaken, to release
any after-acquired property clause contained in any lien the NEA holds on a borrower's
properties to, or to share any such lien on a co-equal basis in proportion to their respective foans
with, or fo subordinate any such lien in favor of, any other lender of funds to a public service
entity or to the NEA for relending to public service entities for the purposes for which loans are
authorized under this ACT.

Section 12. Enforcement OF LOAN REMEDIES. \f any ELECTRIC COOPERATIVE.
which has borrowed funds from the NEA, or from any other lender with the NEA’s required
prior WRIT
notice from the NEA, to comply with any other term or condition of the loan agreement or of any
LOAN POLICIES pronnilgated by the NEA, the ELECTRIFICATION BOARD is hereby
authorized and empowcred in ils discretion to do any, or a combination of the following:

IN approval, shall default in its principal or interest payments, or shalt fail, after

a) Refuuse to make, or approve any new loan to the borrower or to release funds to
implement loans that ]LAVE OTHER WISE BFEN approved;

bh)  WITHOLD NEA ADVANCES. OR WITHOLD APPROVAL OF ADVANCES
OR FUND RELEASES ON BEHALF OF ANY OTHER LENDER WITH
RESPECT TO WICH THE NFA HAS SUCH POWER RELATIVE TO
LOANS MADE;

¢)  Withhold any technical, INSTITUTIONAL or profess
being furnished or that might be furnished te the borrower;

ional assistance otherwise

4) Foreclose any mortgage or deed of trust or other security held by the NEA on the
properties of such borrower, in connection with which the NEA, may, subject to
any superior or co-cqual rights in such lien held by any other lender; (1) bid for
and purchase or otherwise acquire such properties; (2) pay the purchase price
thereof and any costs and expenses incurred in conncetion therewith out of the
revolving fund; (3) accept title to such properties under its name; and (4) even

prior to the institution of fireclosure proceedings, operate of lease such properties


e)

i}
for such period, and in such manner as may b deemed necessary or advisable to
protect the investment therein, including the improvement, maintenance and
rehabilitation of systems to be foreclosed, but the NEA ‘shall, within five years
after acquiring such properties in foreclosure proceedings, sell the same for such
consideration as it determines to be reasonable and upon such terms and
conditions as it determines most conducive to the achievement of the purposes of
this ACT;

Take any other remedial measure for which the loan agreements may provide.

No cooperative shall borrow money from any source without the ELECTRIFICATION
BOARD's prior approval; Provided, That the ELECTRIFICATION BOARD may, by appropriate

rule or regulation; grant general permission to cooperatives to secure short-term toans not

requiring the encumbering of their real properties or of a substantial portion of their other

properties or assets.

SECHON 13. ENFORCEMENT OF REGULATORY AND SUPERVISORY
FUNCTIONS.

a)

b.)

3)

IN THE EXERCISE OF {1S POWFR OF SUPERVISION AND CONTROI.
OVER ELECTRIC COOPERATIVES, THE NEA IS EMPOWERED TO ISSUE
ORDERS, RULES AND REGULATIONS AND MOTU PROPIO OR UPON
PETITION OF THIRD PARTIFS, TO CONDUCT INVESTIGATIONS,
REFERENDA AND OTITER SIMILAR ACTIONS IN ALL MATTERS
AFFECTING SAID ELECTRIC COOPERATIVES;

THE NEA SHALI. CONTINUE TO EXCERCISE REGULATORY AND
SUPERVISORY FUNCTIONS ON ALL ELECTRIC COOPERATIVES
ORIGINALLY REGISTERED UNDER PD 269, NOTWITHSTANDING THEIR
REGISTRATION WITH THE COOPERATIVE DEVELOPMENT
AUTHORITY (CDA) OR SECURITIES AND EXCHANGE COMMISSION
(SEC).

IN THE EXCERCISE OF ITS REGULATORY AND SUPERVISORY
FUNCTIONS, THE ELECTRIFICATION BOARD SHALL TAKE
PREVENTIVE ANDYOR DISCIPLINARY MEASURES INCLUDING BUT
NOT LIMITED TO SUSPENSION AND/OR) REMOVAL AND
REPLACEMENT OF ANY OR ALL OF THE MEMBERS OF THE BOARD OF


DIRECTORS, OFFICERS OR EMPLOYEES OF THE ELECTRIC
COOPERATIVE, AS THE ELECTRIFICATION BOARD MAY DEEM FIT
AND NECESSARY AND 10 TAKE ANY OTHER REMEDIAL MEASURES
AS THE LAW OR THE LOAN AGREEMENT MAY PROVIDE.

Section 14. Conflict of Interest. ALL OFFICERS AND EMPOYEES OF NEA SHALL
BE BOUND BY RA 6713 OTHERWISE KNOWN AS THE. CODE OF CONDUCT AND
ETHICAL STANDARD FOR PUBLIC OFFICIALS AND EMPLOYEES AND RA 3019
OTHERWISE KNOWN AS YH ANTI GRAFT AND CORRUPT PRACTICES ACT.

Section 15. Exemption From Al Taxes, Duties, Fees, Imposts and Others Charges by
Government and Governmental Instrumentalities. Tae NEA shall devote all its cetums from its
capital investments as well as excess revenues from its operation tw attain its objectives. To
enable the NEA to pay its indebledness and obligations and in furtherance and effective
implementation of the policy enunciated in this ACT the NEA is hereby declared exempt.

CHAPTER IU - ELECTRIC COOPERATIVES

Section 16. Purpose, ELECTRIC Cooperatives organized and registered under PD 269
are non-stock, non-profit in nature which shall exist for the purpose of operating an electric
distribution system within its franchise arca.

Section 17. Powers. An FLECTRIC cooperative is hereby vested with all powers
necessary or convenient fur the accomplishment of its corporate purpose and no enumeration of
particular powers hereby granted shall be construed to impair.any gener§l grant of power herein
contained, nor to limit any such grant to a power or powers of the Same class as those so
enumerated. Such powers shall include but not be limited to. the power:

a) — Tosue and be sued in its corporate name;

b) To have existence for a period of fifty years from the date of registration and may
be extended for periods not exceeding fifty ($0) years in any single instance by an
amendment of the articles of incorporation, in accordance with this
ACT: Provided, That no extension can be made earlier than five (5) years prior to
the original or subsequent expiry date/dates unless there are justifiable reasons for
an earlier extension as may be determined by NEA;

©.) To adopt a corporate seal and aiter the same;


dy

fy

B)

n)

To generate, manufacture, purchase, acquire, accumulate and transmit electric

power and energy, and to distribute, self, supply and dispose of eleciric energy.

To assist persons to whom service is or will be supplied by the ELECTRIC
cooperative in wiring their premises and in acquiring and installing electrically
powered-appliances, equipment, fixtures and machinery for agricultural,
commercial and indusiriat uses by the financing thercof or otherwise, and in
conneetion therewith to wire, or cause lo be wired, such premises, and to
purchase, acquire, Jease as lessor or lessee. sell, distribute, install and repair such

electrically-powered appliances, equipment, fixtures and machinery;

To assist persons to whom service is or will be supplied by the ELECTRIC
cooperative in constructing. equipping. maintaining and operating etectric cold
storage or processing plants, by the financing thereof or otherwise:
|

To construct, purchase, lease as lessee. or otherwise acquire, and to equip,
maintain, and operate, and to sell, assign. convey, lease as lessor, mortgage,
pledge, or otherwise dispose of or encumber, electric transmission and distribution
lines or systems, electric generating plants. lands, buildings, structures, dams,
plants, and equipment, and any other real or personal property, tangible or

intangible, which shall be deemed necessary, convenient or appropriate to

accomplish the purpose for which the cooperative is organized;

To purchase, lease as lessev, or otherwise acquire, and to use, and exercise and to
sell, assign, convey, morlgage, pledge or otherwise dispose of or encumber

franchises, rights, privileges, licenscs and easements;

To borrow money and otherwise contract indebtedness, and to issue notes, bonds,

and other evidence of indebtedness, and to secure payment thercof by mortgage,
pledge, or deed of trust of, or any other encumbrance upon, any or ail of its then
owned of after-acquired real or personal property, assets, franchises, or revenues;
Provided, that any borrowing from, or any encumbering of its properties as
security in favor of, any lending sources other than the NEA shail require the prior
approval of the NEA Administrator and his certification that such is in furtherance
of the purposes and is consistent with the provisions of this ACT, and that such
borrowing and/or encumbering will not diminish the security of, or of the ability
of the cooperative to repay, any then-outstanding indebtedness of the cooperative


to the NEA or any other lending source below the level of such security and
ability were such additional borrowing not being undertaken;

3) To construct, maintain and operate electric transmission and distribution lines
along, upon, under and across publicly owned lands and public thoroughfares,
inchiding, without limitation, alt roads, highways, streets, alleys, bridges and
causeways; Provided, that such shall not prevent or unduly impair the primary
public uses to which such lands and thoroughfares are othérwise devoted;

k.) To exercise the power of eminent domain in the manner provided by law for the
exercise of such power by other corporutions constructing or operating electric

generating plants and cicctric transmission and distribution lines or systems:

15) To become a member of other cooperatives or Corporations or to own stock

therein, provided such ELECTRIC cooperatives or corporations are engaged in a
business or activities of the cooperative, its members, its directors, or its

employees;

m.) ‘Lo conduct its business and exercise its powers within or without the province or

provinces in which its supplies servi

1.) To adopt, amend and repeai by-laws;

©.) To fix, maintain, implement and collect rates. foes, rents, tolls, and other charges
and terms and conditions for service; Provided, that by appropriate rules and
segulations the NEA shall require that such shall be in furtherance of the purposes
and in conformity with the provisions of this ACT;

p.} IN OFF GRID SYSTEM, TO OPERATE POWER PLANTS WITHIN THEIR
RESPECTIVE FRANCIISE AREA; and

q.) To do and perform any other acts and things, and to have und exercise any other
powers which may be necessary, convenient or appropriate to accomplish the

purpose for which the cooperative is organized.

Section 18. Name. The name of a cooperative shall include the words “Electric” and
“Cooperative”, and the abbreviation “Inc.”. The name of a cooperative organized under this ACT
shall be distinet from the name of any other cooperative already organized or converted under


this ACT. The foregoing requirement shall not apply to uny cooperative which becomes subject
to this ACT by complying with the provisions of Section 3).

Section 19. Incorporators. Vive or more persons, including cooperatives, may organive a
cooperative in the manner hervinafier provided.

Section 20. Articles of Incorporation. The articles of incorporation of a cooperative shall
recite that they are executed pursuant to this Act and shalll state: (a) the name of the cooperative:
(b) the address of its principal office; (c) the names and addresses of the incorporators; and (d)
the names and addresses of its original directors, who shall constitute the board unti] the first
election of the board by the members; and may contain any other provisions net inconsistent
with thiy Act that are deemed necessary or advisable for the conduct of its business. Such articles
shall be signed by each incorporator and acknowledged by at Icast two of the incorporators (or
on their behalf, if they are cooperatives). ft shall not be necessary to recite in the articles of
incorporation the purpose for which the cooperative is organized or any of its corporate powers.

Section 21. By-Laws. Unless reserved to the members in the articles of incorporation, the
power to adopt and thereafter (o amend or repeat by-laws shall vest in and be exercised by the
board, the affirmative votes of a clear majority of all directors in office, after due notice to all
directors, being requisite for such purpose. The by-laws shull set forth the basic rights and duties
of members and directors and may contain any other provision for the regulation and
management of the affairs of the cooperative not inconsistent with its articles of incorporation of
this ACT.

Section 22. Members, Lach incorporator of a cooperative shall be a member thereof, but
any other person may become a member thereof unless such other person agrees to use services
furnished by the cooperative when made available by it. Membership in a cooperative shall not
be transferable, except as provided in the by-laws. The by-laws may prescribe additional
qualifications and limitations with respect to membership.

The provision of any law or regulation to the contrary notwithstanding, an officer or
employee of the government shall be eligible for membership in any cooperative if he meets the
qualifications therefore and he shail not be precluded from being elected to or holding any
Position therein, or from receiving such compensation or fee in relation thereto as may be
authorized by the by-laws; Provided, that elective officers of the goveinment, except Punong
Barangays and Barangay Kagawad, shall be ineligible to become officers and/or directors of any ”
cooperative. For this purpose, individual permission need not be obtained from the proper head
of office; Provided, however, (hat this authority shall not be constnicd as a permit to the


government officer or employee concemed to devote official time to the affairs of the

cooperative

Section 23. Meetings of Members .

a)

by

©)

dy

co)

An annual meeting of lhe members of a cooperative shall be held at such time and
place as shall be provided in the by-laws;

Special mectings of the members may be called by the President, by the board, by
any three directors or, unless a smaller number or percentage be prescribed in the
by-laws, by not less than 100 members or five per centum of all members,
whichever shall be the lesser.

Except as otherwise provided in this Act and unless otherwise provided for in the
by-laws, written or printed notice stating the time and plave of each meeting of the
members and, in the case of special meetings, the purpose or purposes for which
the meeting is called, shall be given to each member, cither personally or by mail,
not less than ten days nor more than twenty- five days before the date of the
meeting. If mailed, such notice shall be deemed to be given when deposited in the
Philippine mail with postage prepared, addressed to the member at his address as
it appears on the records of the cooperative.

Unless the by-laws prescribe the presence of a greater or lesser percentage ot
number of the members for such purpose. a quorum {or the transaction of business
at all meetings of the members of @ cooperative having not more than 1,000
members shall be five per centum of all members, present in person, and of a
cooperative having more than 1,000 members shall be five per centum of all
members or 100, whichever is lesser, present in person. If less than a quorum is
Present at any meeting, a majority of those present in person may adjourn the
meeting from time to time without further notice.

Each member shall be entitled to one vote of cach matter submitted to a vote at a
meeting of the members. Voting shall be non-cumulative and in porson, but, if the
by-laws so provide, may also be by mail or by proxy.

Section 24, Waiver of Notice. Any person entitled to notice of a meeting may waive

notice in writing either before or after such meeting; however, his attendance shall constitute a

waiver of notice of such meeting, unless such person participates therein solely to object to the
transaction of any business because the meeting has aot been legally called or convened.


Section 25. Board of Directors.

a.) The business of a cooperative shall be managed by a board of vot less than five
directors, each of whom shalt be a member of the cooperative or of another which
is a member thereof. The by-laws shall prescribe the number of directors, their
qualifications other than those prescribed in this Act, the manner of holding
meetings of the board and of electing successors to directors who shall resign, die
or otherwise be incapable of acting. The by-laws may also provide for the removal
of directors from office and for the election of their successors. Directors shall not
receive any salarics for their services as such and, execpt in emergencies, shall not
reccive any salaries for their services to the cooperative in any other capacity
without the approval of the members. The by-laws may, however, prescribe a
fixed fee for attendance at each mecting of the board and may provide for
reimbursement of actual expenses of such attendance and of any other actual

I
expenses incurred in the due performance of a director's daties.

b} The directors of a cooperative numed in any articles of incorporation,
consolidation, merger or conversion shall hold office until the next annual
meeting of the members and until their successors are clected and qualify. At each
annual meeting of, in case of failure to hold the annual meeting as specified in the
by-laws, at a special meeting called for that purpose, the members shall elect
directors to hold office until the next annual meeting of (he raembers, except as
otherwise provided in this ACT. Each director shall hold office for the term for

which he is elected and until his successor is elected and qualifies.

©.) Instead of electing all the directors annually. the by-laws may provide that each
year half of them or one-third of them, or @ number as near thereto as possible,
shall be clected on a staggered term basis to serve five-year terms.

.) A majority of the board of directors in office shall constitute a quorum.

©.) The board shall excrcise all of the powers of a cooperative not conferred upon or
reserved to the members by this Act or by its articles of incorporation or by-laws.

Section 26. Districts. ‘The by-laws may provide for the division of the territory served or
to be served by a cooperative into two or more districts for any purpose, including, without
limitation, the nomination and election of directors, The by-laws shall prescribe the boundaries


of the districts, or the manner of establishing such boundaries, the manner of changing such
‘boundaries, and the manner in which such districts sha!l function.

Section 27. Officers. The officers of a cooperative shall consist of a president, vice
president, secretary and treasurer, who shall be elected annually by and [rom the board. When a
person holding any such office ccases to be a director, he shall ipso facto cease to hold such
office. The offices of secretary and of treasurer may be held by the same person. The board may
also clect of appoint such other officers, agent, or employees as it deems necessary or advisable
and shall prescribe their powers and dutics. Any officer may be removed from office and his

successor elected in the manner prescribed in the by-laws.

Section 28. Amendment of Articles of Incorporation. A cooperative may amend iis
articles of incorporation by complying with the following requirements; Provided, however, that
a change of location of principal office may be effected in the manner set forth in Section 28
The proposed amendment shall be presented to a mecting of the members, the notice of whic
sball set forth or have attached thereto the proposed amendment or an accurate summary thereof.
If the proposed amendment, with any changes, is approved by the affirmative vote of not less
than two-thirds of the total votes cast thereon at such meeting, articles of amendment shall be
executed and acknowledged on bebalf of the cooperative by its president or vice-president and its
seal shall be affixed thereto and attested by its secretary. The articles of amendment shall recite
that they are executed pursuant to this Act and shall state: (1) the name of the cooperative; (2) the
address of its principal office; and (3) the amendment to its articles of incorporation

The president or vice-president executing such articles of amendment shalt make the
annex thereto an affidavit stating that the provisions of this section with respect to the

amendment set forth in such articles were duly complied with.

Section 29. Change of Location of Principal Office. A covperative may, upon

authorization of its board or members, change the location of its principal office by filing a

certificate reciting such change of principal office, executed and acknowledged by its president
or vice-president under its seul attested by its secretary. in the place provided for in Section 34.

Section 30. Consolidation. Any two or more cooperatives (cach of which is hereinafter
designated a “consolidating cooperative”) may consolidate into a new cooperative (hereinafter

designated the “new cooperative”), by complying with the following requirements:

a) The proposition for the consolidation of the consolidating cooperatives into the

new cooperative and proposed articles of consolidation to give effect thecto shall


b)

be submiticd to a meeting of the members of cach consolidating cooperative, the
notice of which shall have atiached thereto a copy of the proposed articles of
consolidation or an accurate summary thereof.

If the proposed consolidation and the proposed articles of consolidation, with any
amendments, ate approved by the affirmative vote of not less than two-thirds of
the total votes cast thereon by cach consolidating cooperatives voting thereon at
each such mecting, articles of consolidation in the form approved shall be
executed and acknowledged on behalf of cach consolidating cooperative by its
president or vice-president and its seal shail be aflixed thereto and attested by its
secretary. The articles of consofidation shall recite that they are execuled pursuant
to this Act and shall state: {1) the name of cach consolidaling cooperative and the
address of its principal office; (2) the name of the new cooperative and the address
of its principal office; (3) a statement that each consolidating cooperative agrees to
the consolidation; (4) the names and addresses of the directors of the new
cooperative; and (5) the terms and conditions of the consolidation and the mode of
carrying the same into effect, inctuding the manner in which members of the
consolidating cooperatives may or shall become members of the new cooperative:
und may contain any other provisions not inconsistent with this Act that are
deemed necessary or advisable for the conduct of the business of the new
cooperative. The president or vice-president of each consolidating cooperative
executing such articles of consolidation shall make and annex thereto an affidavit
stating that the provisions of this section with respect to such articles were duly
complied with by such cooperative.

Section 31. Merger. Any one or more cooperatives (cach of which is hereinafter

designated a “merging cooperative”) may merge with onc or more other cooperatives by

complying with the following requirements:

a)

b)

‘The proposition for the merger of the merging cooperatives into the surviving
cooperative and proposed articles of merger to give ¢lffect thereto shall be
submitted to a meeting of the members of each merging cooperative and of the
surviving cooperative, the notice of which shall have attached thereto a copy of
the proposed articles of merger or an accurate summary thereof:

If the proposed merger and the proposed articles of merger, with any amendments,
are approved by the affirmative vote of not less than two- thirds of the total votes
cast thereon by each cooperative voting thereon at each such meeting, articles of


merger in the form approved shall be executed and acknowledged on behalf of
cach such cooperative by its president or vice-president and its seal affixed thereto
and attested by

Is secretary. The articles of merger shall recite that they are
exceuted pursuant to this Act and shall state: (1) the aame of cach merging
cooperative and the address of its principal office: (2) the name of the surviving
cooperative and the address of its principal office; (3) a statement that each
merging cooperative and the surviving cooperative agree to the merger (4) the
names and addresses of the directors of the surviving cooperative, and (5) the
terms and conditions of the merger and the mode of carrying the same into effect,
including the manner in which members of the merging cooperatives may or shall
become members of the surviving cooperative and may contain any other
provisions not inconsistent with this Act that are decmed necessary or advisable
for the conduct of the business of the surviving cooperative. The president or vice-
president or cach cooperative exceuling such articles of merger shall make an
annex thereto an aiTidavit stating that the provisions of this section with respect to

such articles were duly complied with by such cooperative.

Section 32. Effect of Consolidation or Merger.

a)

b)

In the case of consolidation, the existence of the consolidating cooperative shall
cease and the articles of consolidation shall be deemed to be the articles of
incorporation of the new cooperative; and in: the case of merger, the separate
existence of the merging cooperatives shal! cease and the articles of incorporation
of the surviving cooperative sball be decmed to be amended to the extent, if any,
that changes therein are provided for in the articles of merger;

All rights, privileges, immunities und franchiscs and all property, real and
tions for membership, all debts due
on whatever account and all ather chooses in action of cach of the consolidating or

personal, including without limitation appli

merging cooperatives shall be deemed to be transferred (o and vested in the new

or surviving cooperative without further act or deed;

‘The new or surviving cooperative shall be responsible and liable for all liabilities
and obligations of each of the consolidating or merging cooperatives, and any
claim existing or action or proceeding pending by or against any of the
consolidating or merging cooperatives, be proscculed as if the consolidation or
merger had not taken place, but the new or surviving cooperatives shall be
substituted in its place; and



d) Neither the rights of creditors nor any liens upon the property of any such

cooperatives shall he impaired by such consolidation or merger.

Section 33. Dissolution. A cooperative may be dissolved in the following manner: The
proposition to dissolve shall be submitted to the members of the cooperative at any annual or
special meetings, the notice of which shal! set forth such proposition. The members at any such
meeting shall approve, by the aflirmative vote of not less than a majority of all members of the
cooperative, the proposition that the cooperative be dissolved (hereinafter designated the
“certificate”) shall be xccutcd and acknowledged on behalf of the cooperative by its president or
vice-president under its scal, attested by its secretary, stating: (1) the name of the cooperative; (2)
the address of its principal office; and (3) that the members of the cooperative have duly voted
that the cooperative be dissolved. Also. an affidavit, made by its resident or vice-president
executing the certificate, shall state that the statements in the certificate are true. Upon the filing
of the certificate and affidavit as provided for in Section 34, the cooperative shall cease to carry
on its business except to the extent necessary for the winding up tlicrcof, but its corporate
existence shall continue until artictes of dissolution shall have been filed. The board shall
immediately cause notice of the dissolution proceedings to be mailed to each known creditor of
and claimant against the cooperative and to be published once a week for two successive weeks
in a newspaper of general circulation in the territory in which the /principal office of the
cooperative is located. The board shalt wind up and scttle the affairs of the cooperative, collect
sums owing to it, liquidate its property and assets, pay an discharge its debts, obligations and
Kiabilities, other than those patrons arising by reason of their patronage, and do all other things

required to wind up its business: and, ufter pay

¢ oF discharging or adequately providing for the
payment or discharge ofall its debts, obligations and liabilities, other than those to patrons
arising by reason of their patronage, shall distribute any remaining sums and/or unliquidated
assets, first, to patrons for the pro rata return of all amounts standing to their credit by reason of
their patronage; second, to members for the pro rala repayment of membership fees: and third, to
patrons for the amounts of any outstanding contributions in aid of construction they have made.
Any sums and/or unliquidated assets then remaining shall be distributed in such manner as
provided in the cooperative’s articles of incorporation or by-laws, which may provide for
distribution of such sums or assets on a patronage basis to persons who were members in one or
more prior years or for transfer thereof to a new cooperative to succeed the one being dissolved.
‘The board shall thereupon authorize the execution of articles of dissolution, which shall be
executed and acknowledged on behalf of the cooperative hy its president or vice- president, and
its seal shall be affixed thereto and attested by its secretary.

The articles of dissolution shall recite that they arc executed pursuant to this Act and shall
state: (1) the name of the cooperative; (2) the address of its principal office; (3) the date on which


the certificate of election to dissolve was filed; (4) that there are no actions or suits pending
against the cooperative; (5) that all debts, obligations and liabilities of the cooperative have been
paid and discharged or that provision to the extent possible has been makie therefor; and (6) that
the provisions of this section have been duly complied with. The president or vice-president
executing the articles of dissolution shall make the annex thereto an alfidavit stating that the

statement made therein are truc.

Section 34. Filing of Articles and Certificates. Articles of incorporations, amendment,
consolidation, merger, conversion, or dissolution and certificates of changes in the location of
Principal offices and of elections to dissolve, when executed and acknowledged and
accompanied by such affidavits as may be required by applicable provisions of this ACT, shall
be presented to the Administrator for filing in the records of his office. if he shall find that such
conform to the requirements of this Act, he shall so certify and shall {ile such in the records of
his office. Upon such certification and filing, the incorporation, amendment, consolidation,

merger, conversion, dissolution or certificate provided for therein shall be in effect.

‘Section 35. Non-profit, Non-discriminatory, Area Coverage Operation and Service. A
cooperative shall be operated on a non-profit basis for the mutual benefit of its members and
patrons; shall, as to rates and services make or grant no unreasonable preference or advantage to
any member or patron nor subject any member or patron to any unreasonable prejudice or
disadvantage: shal} not establish or maintain any unreasonable difference as to rates or services
either as between localities or as between classes of service; shall not give, pay or receive any
rebate or bonus, directly or indirectly, or mislead its members in any manner as to rates charged
for its services: and shal} furnish service on an area coverage basis; Provided, that for any
extension of service which if treated on the basis of standard terms and conditions is so costly as
to jeopardize the financial feasibility of the cooperative’s cntire operation, the cooperative may
require such contribution in aid of construction, such facilities extension deposit, such guarantee
of minimum usage for a minimum term or such other reasonable commitment on the part of the
person to be served as may be necessary and appropriate o remove. such jeopardy, but no
different in standard rates for use of service shall be imposed for such purpose.

The by-laws of a cooperative or its contracts with members and patrons shall contain
such reasonable terms and conditions respecting membership, the furnishing of scevice and the
disposition of revenues and receipts as may be necessary and appropriate 10 establish and
maintain its non-profit, cooperative character and to ensure compliance with this section, No
bona fide applicant for membership on non-member patronage who is able and willing to satisfy
and abide by all such terms and conditions shall be denied arbitrarily, gapriciously or without
good cause.


Section 36. Dispusition of Property.

4) The board of a cooperative shall have full power and authority to authorize the
execution and delivery of a morigage or a deed of trust, or the pledging or
encumbcring otherwise, of any or all of the property, assets, rights, privileges,
licenses, franchises and permits of the cooperative, whether acquired or to be
acquired, and whenever situated, as well as the revenues therefrom, all upon such
terms and conditions as the board shall determine, to secure any borrowing by or
indebtedness of the cooperative;

b.) A cooperative may not otherwise sell, lease or. except by consolidation or merger,
‘otherwise dispose of the property (other than merchandise and property which
shall represent not in excess of ten per centum of the value of the cooperative’s
total assets, of which in the judgment of the board are not necessary or useful in
operating the cooperative) unless such sale, lease or, except in the case of
consolidation or merger, other disposition is (1) authorized by the affirmative vote
of not less than a majority of all members of the cooperative and (2) consented by
the NEA and any other lending source which then holds a lien on any of the
cooperative’s properties.

Section 37. Non-Liability of Members for Debts of Cooperative. No member shall be
liable or responsible for any debts of the cooperative and the property of the members shall not
be subject 1o execute therefor.

Section 38. Limitation af Actions. No ction or suit may be brought against a
cooperative, or against any agent, servant or employee thercof. by reason of the maintenance of
electric transmission or distribution lines, or any related equipment, facilities or machinery, or
any real property afier the expiration of a period of five (5) years of continuous maintenance of
such lines or related equipment facilities or machinery. !

Section 39. Assistance to Cooperatives; Exemption from Taxes; Imposts, Duties, Fees;
Assistance from the National Power Corporation. Pursuant to the national policy declared in
Section 2, it is hereby declared that the following assistance to cooperative is necessary and

a) Provided that it operates in conformity with the purposes and provision of this
ACT, and provided further, that it actually provides electricity services to unviable
areas as determined and certified by NEA, an electric cooperative shall be


permanently exempt {om paying (1) income taxes, and all National Government,
local government and municipal taxes and fees, including any franchise filing,
recordation, ficense or permit fees or taxes und any fees, charges, of costs
involved in any court or administrative proceeding in which it may be a party, and
(2) duties or imposts on foreign goods acquired for its operations; Provided, that
the ELECTRIFICATION BOARD shall atter consultation with the Bureau of
Internal Revenue, promulgate rules and regulations for the proper implementation

of the tax exemption provided for in this ACT.

b.) TO AVAIL OF PREFERENTIAL RIGHTS GRANTED TO COOPERATIVES
UNDER REPUBLIC ACT NO. 7160. OTHERWISE. KNOWN AS THE LOCAT.
GOVERNMENT CODE, AND OTHER LAWS;

e.) ELECTRIC COOPERATIVES SHALL BE ENTITLED TO CONGRESSIONAL
ALLOCATIONS, GRANTS. SUBSIDIES AND OTHER FINANCIAL
ASSISTANCE FOR RURAL ELECTRIFICATION PURPOSES.

da) ALL SUBSIDIES, GRANTS, AND OTHER ASSISTANCE SHALL FORM
PART OF THE DONATED CAPITAL AND FUNDS OF THE ELECTRIC
COOPERATIVES, AND AS SUCH, IT SLLALL NOT!BE SOLD, TRADED
NOR BE DIVIDED INTO SHARE HOLDINGS AT ANY TIME; THESE.
DONATED CAPITAIVFUND SHALI. BE VALUATED FOR THE SOLE
PURPOSE OF DETERMINING THE EQUITY, PARTICIPATION OF TUE
MEMBERS; PROVIDED THAT IN CASE OF DISSOLUTION OF THE

CYRIC COOPERATIVE, SAID DONATED CAPITAL SHALL BE

SUBJLCT TO ESCHEAY.

Section 40, Additional Regulation of Cooperatives by the NEA. in addition to the other
ways in which cooperatives are subject to regulation by the NFA as provided in this Act, the
NEA, on its own motion or upon complaint but only after affording opportunity for bearing to all
interested parties, is empowered to and shall (1) require a cooperative to extend or improve
service upon the NEA’s determination that such should be done in furtherance of the purposes of
this Act and that such may reasonably be done without undue impairment of the feasibility of the
cooperative’s operation and financial condition; and (2) require a cooperative to cease and
correct any practice or act which the NEA determincs to be in violation of the provisions of
Section 35, and in connection with such authorily it may require a cooperative to file with the
NEA, and to make accessible to any person upon request therefor, copies of all rates, changes,
contract forms, fee or deposit schedules, by-laws, and service rules and regulations.


Section 41. Parties and Intervenors in NEA’s Proceedings. Public service entities or any
other interested person may invoke the NHA’s exercise of its powers and authorities provided for
in Section 43, 44, 45, 46 and 47 by filing verified applications or complaints with the NEA, and
the NEA, on its own motion solely, may institute proceedings in connection with all maters
coming under its jurisdiction as provided for in said sections. {n any proceeding conducted by the
NEA, including proceedings (o establish NEA rules and regulations, all persons having
substantial interest therein shall, upon petition therefor, be permitted by the NEA to intervene as
full parties, and the NFA, in its discretion, may permit persons having an insubstantial interest
therein to intervene as a full party or on such limited basis as the NEA may prescribe.

Section 42. NEA Rules and Regulations. The NEA shail cstablish appropriate rules and
regulations to carry oul the provisions of this Chapter iV, including rules for the conduct of NEA
investigations, proceedings and hearing; and shall timely publish the same when adopted or
amended to the end that all persons affected thereby shall be given reasonable notice thereof.

Section 43. Notice.

a) With respect to any NFA proceeding, investigation or hearing (including such as
are for the purpose of establishing NEA rules and regulations) which may
substantially affect the rights or interests of any person or persons (including the
general public or the National Government or any department, agency,

instrumentality of political subdivision thercof, if such be the case) , the NEA

shall cause timely notice in writing to be furnished to, or served upon, or
appropriately published to such person or persons to the end of affording them
reasonable opportunity, as a party or otherwise, directly 10 participate, or
otherwise to have their pos

ions, views and interests adequately presented to or

represented. in such proceedings, investigation or hearing.

b) Upon the completion of any such proceeding, investigation or hearing, the NEA
shall cause timely notice of any order issuing thereupon to be furnished to, or
served upon, or appropriately published to any person or persons (including the
general public or the National Government or uny department, agency.
instrumentality or political subdivision thereof, if such be the case) who will be
directly affected thereby. Si

ch notice shall be supplementary to, not in conflict
with or in lieu of, the notices and services otherwise provided for in this Chapter.

Section 44. Hearings Conducted by the Electrification Board or any Member Thereof.
NEA hearings pursuant to this Chapter may be conducted by the Flectrification Board en bane or


by any one or more members thereof, as the Board of Administrators may decide; Provided, that
the Advaisistrator sball preside when the Ulectrification Boards its on banc; Provided, further.
that all hearings shall be of record; and Provided finally, that findings, determinations, orders and
rulings based upon such hearings shail require the affirmative majority of all the members of the

Electrification Board upon the certification, to Sccome a part of such findings, determinations
and orders, on the part of any member of the Board who was abseni [rom the hearings that he has
ead the record of the same.

Section 45. Compensation. The members of the Flectrification Board and other hearing
officers as the Electrification Board may designate shalt be entitled to per diem for each hearing
actually conducted or attended by them in such amount as may be fixed by the President of the
Philippines.

Section 46. Hearing Rufes; Contempt. All hearings and investigations conducted by the
NEA shall be governed by rules adopted by the NEA, and in the conduct thereof the NEA shall
not be bound by the technical rules of legal evidence: Provided, That the NEA or such member
of the Electrification Board when conducting a hearing, may summarily punish for contempt by
a fine not exceeding FIFTY THOUSAND pesos (P511,000.00) or by imprisonment not exceeding
ten (10) days, or both, any person guilty of misconduct in the presence of the hearing or so near
the same as to interrupt the hearing, proceeding, session or investigation including cases in which
@ person present at a hearing, proceeding, session or investigation refuses 1o be swom as a
witness or to answer as such when lawfully required to do so. To enforce the provisions of this
section, the NEA, or such member thereof, may, if necessary, request the assistance of the
municipal police for the execution of any order made for said purpose.

Scetion 47. Subpoenas; Contempt.

a) The NEA may issue subpoenas and subpoenas duces tecum, for witness in any
maticr of inguiry pending before it, and require the production of all books,
Papers, tariffs, contracts, agrcements, and all other documents which it may deem
necessary in any proceeding. Such process shall be issued under the seal of the
NEA, signed by one of the members of the NEA Electrification Board, and may
be served by any person of fill age, or by registered mail. In case of disobedience
to such subpoena, the NEA may invoke the aid of the Supreme Court, or of any
Regional ‘Irial Court of the Philippines in requiring the attendance and testimony
Of witnesses und the production of books, papers and) documents under the
provision of this Chapter, and the Supreme Court, or any Regional Trial Courtof
the Philippines within the jurisdiction of which such inquiry is carried on, may, in



b)

©)

ay

.)

f)

case of contumacy of refusal to obey a subpocna, issue to any public service entity
subject to the provisions of this Act. or to any person, an order requiring such
public service entity or person to appear before the NEA and produce books and
papers if so ordered und give evidence touching the matter in question: and any
failure to obey such order of the Court may be punished by such court as contempt

thereof.

Any person who shall neglect or refuse to answer any lawful inquiry or produce
before the NEA books, papers, tariffs, contructs, agreements, and documents, or
other things called for by the NEA if his power to do so, in obedience to the
subpoena or lawful inquiry of the NEA, upon convietion thereof by a court of
competent jurisdiction, shall be punished by a fine not exceeding ten thousand
pesos (P10,000.00} or by imprisonment not exceeding one year, or both in the
discretion of the court;

Any NEA Board Member shall bave the power to administer oaths in all matters
under the jurisdiction of the NEA;

Any person who shall testify falsely or make any fulse affidavit or oath before the
NEA or before any of its members shall be guilty of perjury, and, upon conviction
thereof in a court of competent jurisdiction, shall be punished as provided by law;

Witnesses appearing before the NEA in obedience to subpoena or subpoena duces
tecum shall be entitled to receive the same fees and milcage allowance ac

witnesses attending Courts of First instance in civil cases;

‘Any person who shall obstruct the NIA or any member of the NEA Board while
engaged in the discharge of official duties, or who shall conduct himself in a rude,
disrespectful or disorderly manner during any NEA‘ Bourd meeting, upon
conviction thereof by a court of competent jurisdiction, shall be puntished for each
offense by 2 fine not exceeding ten thousand pesos (P10,000.00), or by
imprisonment not exceeding six months. or both, in the discretion of the court.

Section 48. Testifying. No person shall be excuscd from testifying or from producing any

book, document, or paper in any investigation or inquiry by or upon the hearing, before the NEA

when ordered to do so by the NEA, except when the testimony or evidence required of him may
tend to incriminate him. Without the consent of the interested party, no member or employee of


the NEA shall be compelied or permitted to give testimony in any civil suit to which the NEA is
not a party, with regard to secrets obtained by him in the discharge of his official duty.

Section 49. Depositions. ‘The NEA may, in any investigation, proceeding or hearing, by
its order in writing, cause the deposition of witnesses residing within or without the Philippines
to be taken in the manner prescribed by the Rules of Court. Where witnesses reside in places
distant from Manila and it would be inconvenient and expensive for them to appear personally
before the NEA, the NEA may, by proper order, commission any clerk of the Regional Trial
Court, judge of the municipal trial court, municipal circuit trial court of city court of the
Philippines to take the deposition of witnesses in any case pending before the NEA. It shall be
the duty of the official so commissioned to designate promplly a date or dates for the taking of
such deposition, giving timely notice to the parties, and on said date to proceed to take the
deposition, reducing it to writing. After the depositions have been ‘taken, the official so
commissioned shall certify to the depositions taken and forward them as soon as possibie to the
NEA. it shall be the duty of the respective parties to furnish stenographers for taking and
transcribing the testimony taken. In case there are no stenographers available, the testimony shall
be taken in long hand by such person as the clerk of court of the Regional Trial Court, the
‘municipal trial court, nzunicipal circuit trial court of city court judge may designate. The NEA
may also commission a notary public to take the depositions in the same manner herein provided.

The Board may also, by proper order, authorize any of the attomeys of the legal division
or division chiefs of the NEA to hear and investigate any case filed with the NEA or any matter
within the jurisdiction of the NIA and in connection therewith to receive such evidence as
maybe material thereto. At the conclusion of the hearing or investigation, the attorncy or division
chief so authorized shall submit the evidence received by him for the Electrification Board to
enable the latter to render its decision.

Section 50. Fines and Penatties. - ‘(he fines and penaltics that shall be imposed by NEA.
or the Electrification Board for any violation of or non-compliance with this Act or its IRR shall
range from a minimum of Fifty thousand pesos (P50,000.00) to a maximum of Five million
pesos (P5,000,000.00).

Section 51. Punishable Offenses. — ‘Whe following acts shall be prohibited:

a) Non-compliance with the orders, rules, regulations, memorandum,
guidelines and other issuances of NEA;



b.) _ Falsification or tampering of public documents and official records to avail

of the fiscal and non-fiscal incentives provided under this Act; and

<.) Non-compliance with established guidelines that NEA will adopt in the
implementation of this Act.

Section 52. Penalty Clause. Any person who wilfully commits any of the prohibited acts
enumerated under this Act, shall be imposed with the penalties provided herein. Any person,
who wilfully aids or abets the commission of a crimne prohibited herein or who causes the

commission of any such act by another shall be liable in the same manner as the principal

Section 53. Service. Every order made by the NEA shall be served upon the person or
public service entity affected thereby within ten (10) days from the time said order is filed, by
personal delivery or by ordinary mail, upon the counset of record of, in case there be no counsel
of record, upon the party interested; and in case a certified copy is sent by registered mail, the
registry mail receipt shall be prima facie evidence of the receipt of such order by the public

service entity in due course of mail.

Section 54, Reconsideration. Any interested party may request the reconsideration of any
order, ruling, or decision of the NEA by means of a petition filed not later than fifteen (15) days
after the date of the notice of the order. ruling, of decision in question. The grounds on which the
request for rcconsideration is based shall be clearly and specifically stated in the petition. Copies
of said petition shall be served on all parties interested in the mutter. It shall be the duty of the
NEA to decide the same within thiny (30) days, cither denying the petition or revoking or
modifying the order, ruling, ot decision under consideration. If no petition for reconsideration is
filed, no review by the Supreme Court as hereinafter provided shall be allowed.

Section 35. Court Review. — NOTWITHSTANDING ANY LAW TO THE
CONTRARY, THF SUPREME COURT IS HEREBY GIVEN EXCLUSIVE JURISDICTION
TO REVIEW ANY ORDER. RULING. OR DECISION OF THE NEA AND TO MODIFY OR
SET ASIDE SUCH ORDER, RULING, OR DECISION WHEN IT CLEARLY APPEARS
THAT THERE WAS NO EVIDENCE BEFORF THE NEA TO SUPPORT REASONABLY
SUCH ORDER, RULING, OR DECISION, OR THAT THE SAME IS CONTRARY TO LAW,
OR THAT IT WAS WITHOUT THE JURISDICTION OF THE NEA. THE EVIDENCE
PRESENTED TO THE NEA, TOGETHER WITH FHE RECORD OF THE PROCEEDINGS
BEFORE THE NFA, SHALL BE CERTIFIED BY THE NEA TO THE SUPREME COURT.
ANY ORDER, RULING, OR DECISION OF THE NEA MAY LIKEWISE BE REVIEWED
BY TIIE SUPREME COURT UPON A WRIT OF CERTIORARI IN PROPER CASES. THE


. 1

PROCEDURE FOR REVIEW, EXCEPT AS HEREIN PROVIDED, SITALL BE PRESCRIBED
BY RULES OF TH: SUPREME COURT. ANY ORDER, OR DECISION OF THE NEA MAY
BE REVIEWED UPON THE APPLICATION OF ANY PERSON OR PUBLIC SERVICE
ENTITY AGRIEVED THEREBY AND WHO WAS A PARTY IN TLE SUBJECT
PROCEEDING, BY CERTIORARI IN APPROPRIATE CASES OR BY A PETITION FOR
REVIEW. WITICH SHALL BE FILED WITHIN THIRTY (30) DAYS FROM THE
NOTIFICATION OF THE NEA ORDER, DECISION, OR RULING ON
RECONSIDERATION. SAID PETTIION SHALL BE PLACED ON FILE IN THE OFFICE OF
THE CLERK OF THE SUPREME COURT WHO SHALT. FURNISL COPIES THEREOF TO
NEA AND OTHER INTERESTED PARTIES.

Section 56. NEA Counsel. The chief of the legal division or uny other attorney of the
NEA shall represent the same in all judicial proceedings. 1 shall be the duty of the Solicitor
General to represent the NEA in any judicial proceeding if, for special reasons, the

administrators shal] request his intervention.

CRAPTER IV - TRANSITORY PROVISIONS,

Section 57. Existing NEA Continued.

a.) The existing Board of Administrators of the NEA and the Administrator thereof
shall be the FLECTRISICATION BOARD and Administrator provided for under
this ACT, and their respective terms shall be and continue as already established.

b.) Any preference to the NEA in any existing law or in any exccutive order or
proclamation of the President shall. with respect to any duty or function assumed
by the NEA pursuant to said ACT, be deemed hercafler to have reference to the
NEA established under this ACT;

©.) The properties, assets, rights, chooses in action, obligations, liabilities, records
and contracts of the NEA are hereby transferred to and are vested in, and assumed
by the NEA established under this ACT;

d.) ALL EXISTING PERSONNEL OF NEA SHALI, CONTINUE 10 BE
EMPLOYEES THEREO!, WITHOUT DEMOTION OR DIMINUTION ON
RANK;


CHAPTER V - GENERAL PROVISIONS

Section 58. dmplementing Rules and Regulations. The Secretary of the Department of
Energy. in coordination with the National Electrification Administration shall come up with an
Implementing Rules and Regulations (RR) of this Act within ninety (90) days from its
enactment. The IRR shall be reviewod every five (5) years to suit it to the needs of time.

Section 59. Separability Clause. Wf any part or section of this Act is declared
unconstitutional, such declaration shail not affect in any manner other parts or sections of this
Act.

Section 60. Repealing Clause. — Alt laws, decrees, proclamations, issuances, or
ordinances that are contrary to or inconsistent with the provisions of this Act are hereby
amended, repeated or modified accordingly.

Section 61. Effect on Other Acts. Ail acts or parts of Acts inconsistent herewith are
repealed or modified accordingly.

Section 62. Effectivity Clause. This Act shall take effect fifteen (15) days after its
publication in at least two (2) newspapers of general circulation.

Approved.