Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

RECEIVED

‘Twentieth Congress
First Regular Session

4017

HOUSE BILL NO.

EPRE
ee “oS

2
™
a

Introduced by Representative RAYMOND ADRIAN SALCEDA

AN ACT
ESTABLISHING A SPECIAL DEBT RESTRUCTURING PROGRAM FOR THE
ALBAY ELECTRIC COOPERATIVE (ALECO) AND OTHER DISTRESSED
ELECTRIC COOPERATIVES AS THE NATIONAL ELECTRIFICATION
ADMINISTRATION (NEA) MAY IDENTIFY, PROVIDING A REFINANCING
FACILITY, A TAX AMNESTY, AND FOR OTHER PURPOSES

EXPLANATORY NOTE

The Albay Electric Cooperative is financially distressed. Its arrears in the Wholesale
Electricity Spot Market stood at P656.34 million as of 30 June 2025, while other obligations
bring its total liabilities to as much as P9.9 billion. Left unresolved, these arrears will continue
to compound with penalties, prevent the cooperative from entering into stable power supply
agreements, and compromise service reliability for over 200,000 member-consumers in Albay.

Consumers will inevitably pay these obligations. The issue before Congress is whether
they do so through rolling arrears, surcharges, emergency power supply rates, and blackouts,
or through a structured refinancing program that spreads repayment thinly, lowers the cost of
capital, and compels cooperative reform.

The bill establishes a Special Debt Restructuring Facility under the National
Electrification Administration, initially capitalized at Three Billion Pesos (P3,000,000,000.00)..
Loans shall be coursed through government financial institutions at three percent per annum
below the Bloomberg Valuation rate. New refinancing agreements may only be approved
within ten years of enactment, but repayment shall continue until all obligations are fully
settled, allowing amortization over fifteen to twenty years. This ensures debts are honored in
fall while avoiding sudden bill shocks.

The measure also provides for a one-time tax amnesty on national and local arrears,
ERC approval of ring-fenced recovery charges capped to prevent sudden increases, and a
Governance Covenant with the NEA. The covenant requires the appointment of independent


directors by NEA, fit and proper standards for management, publication of audited financial
statements, escrow accounts for repayments, annual targets for collection efficiency and system
loss reduction, and compliance with Section 23 of the Electric Power Industry Reform Act on
least cost procurement through competitive selection processes.

With refinancing, the same debt load becomes affordable. At present, carrying P6.0
billion at penalty rates of twelve percent over seven years would require annual payments of
P1.315 billion, equivalent to P2.10 per kilowatt-hour or about P420 per month for a 200
kilowatt-hour houschold. Under this bill, refinancing at 3.2 percent over twenty years requires
only P0.407 billion annually, equivalent to P0.65 per kilowatt-hour or about P130 per month.
This is a monthly saving of about P290 per household.

If the full P9.9 billion is refinanced, the contrast is even starker. At twelve percent over
seven years, consumers would shoulder P2.169 billion annually, or P3.46 per kilowatt-hour,
equal to about P692 per month for a 200 kilowatt-hour household. With this bill, the same
obligation at 3.2 percent over twenty years requires only P0.678 billion annually, equivalent to
P1.08 per kilowatt-hour or P216 per month. This is a monthly saving of about P476 per
household.

‘These calculations do not yet reflect further savings from mandatory competitive
selection processes, prompt payment discounts, and system loss reduction. Competitive
bidding alone can save around P0.60 per kilowatt-hour. Prompt payment discounts and avoided
penalties add about PO.06 per kilowatt-hour. Loss reduction spreads repayments over more
billed energy, reducing the recovery charge by a further 10 to 20 percent. When these savings
are credited to the escrow, the net effect for most scenarios is either neutral or lower household
bills compared to today.

Unlike Section 60 of the Electric Power Industry Reform Act which condoned
cooperative debts outright, this measure requires full repayment of all obligations. The
appropriation is revolving, so repayments replenish the fund. The ten year approval window
disciplines the program, while the governance covenant ensures structural reforms that reduce
losses and improve collections.

Consumers of ALECO will pay these debts either way. The difference is that with this
law, they pay several hundred pesos less per month, on predictable terms, with improved
governance and reliable supply. Without it, they will continue to pay through penalties,
volatility, and poor service.

In view of these urgent needs and the demonstrable consumer savings, the passage of
this measure is earnestly sought.

RAY! ¥AN SALCEDA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Twentieth Congress
First Regular Session

House BILL No.4017

Introduced by Representative RAYMOND ADRIAN SALCEDA

AN ACT
ESTABLISHING A SPECIAL DEBT RESTRUCTURING PROGRAM FOR THE
ALBAY ELECTRIC COOPERATIVE (ALECO) AND OTHER DISTRESSED
ELECTRIC COOPERATIVES AS THE NATIONAL ELECTRIFICATION
ADMINISTRATION (NEA) MAY IDENTIFY, PROVIDING A REFINANCING
FACILITY, A TAX AMNESTY, AND FOR OTHER PURPOSES

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

SECTION 1. Short Title. This Act shall be known as the “Electric Cooperative Debt
Restructuring Act of 2025.”

SEC. 2. Declaration of Policy. It is the policy of the State to ensure reliable and
affordable electricity supply by addressing the financial distress of electric cooperatives,
beginning with the Albay Electric Cooperative (ALECO), through a refinancing program that
is fiscally responsible, time-bound, and protective of consumers.

SEC. 3. Coverage. This Act shall apply to the Albay Electric Cooperative (ALECO)
and to such other distressed electric cooperatives as the National Electrification Administration
(NEA) may identify, based on financial audits and viability tests, with notice to Congress.

SEC. 4, Refinancing Facility. There is hereby appropriated, out of any funds in the
National Treasury not otherwise appropriated, the amount of Three Billion Pesos
(P3,000,000,000.00) to be lodged under the NEA, to refinance verified obligations of covered
electric cooperatives. The Fund shall be administered as loans coursed through the Land Bank
of the Philippines (LBP), the Development Bank of the Philippines (DBP), and such other
government financial institutions or state-owned investment corporations as may be authorized
by the NEA in coordination with the Department of Finance (DOF). Loans shall carry an
interest rate of three percent (3%) per annum below the prevailing Bloomberg Valuation
(BVAL) rate for government securities of equivalent tenor. Loan repayments shall accrue back
to the Fund and may be re-lent for the same purpose until the expiration of the Facility.


SEC. 5. Recovery Mechanism. The Energy Regulatory Commission (ERC) shall
approve recovery mechanisms for borrowing cooperatives to ensure repayment of obligations
under this Act. Such recovery charges shall be capped to avoid sudden increases in retail rates,
without prejudice to existing lifeline and senior citizen discounts.

SEC. 6. Tax Amnesty. Qualified electric cooperatives availing of the Facility shall enjoy
a one-time amnesty on all national and local taxes, surcharges, penalties, and interest due as of
the effectivity of this Act. The Bureau of Internal Revenue (BIR) and the Department of
Finance (DOF) shall issue the implementing rules for this Section.

SEC. 7. Governance Covenant, The Albay Electric Cooperative (ALECO) and any
other electric cooperative availing of the refinancing facility under this Act shall enter into a
Governance Covenant with the NEA as a condition precedent to the release of assistance. The
Governance Covenant shall prescribe, at minimum, the following:

(a) Board Oversight. ~ At least two (2) NEA-appointed independent directors shall sit
on the cooperative’s Board of Directors with full voting rights for the duration of
the refinancing period, consistent with NEA’s supervisory powers under
Presidential Decree No. 269, as amended.

(b) Management Standards. — The General Manager and key officers of the cooperative
shall meet fit and proper standards prescribed by the NEA. The NEA may suspend or
remove officers who fail to meet these standards, without prejudice to its authority
under Presidential Decree No. 269, as amended.

(©) Financial Transparency. ~ The cooperative shall comply with NEA-prescribed
accounting and disclosure standards, including the quarterly publication of audited
financial statements and operational reports in a manner accessible to. member-
consumers.

(d) Collection and Systems Loss Targets. — The cooperative shall achieve progressive
annual targets for collection efficiency and systems loss reduction, as determined by
the NEA, in accordance with performance standards under Republic Act No. 9136,
otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), and rules
of the ERC.

(e) Escrow Accounts. ~ All revenues intended for debt repayment shall be deposited in
ring-fenced escrow accounts subject to NEA monitoring and audit.

(f) Procurement of Power Supply. ~ Pursuant to Section 23 of Republic Act No. 9136
(EPIRA), the cooperative shall procure power supply for its captive market in the least-
cost manner through Competitive Selection Processes (CSPs), as mandated by the
Department of Energy and subject to approval by the ERC. Compliance with these
requirements shall form part of the Governance Covenant and shall be monitored by
the NEA.

(g) Step-in Rights. ~ In case of material breach of the Governance Covenant, the NEA
shall immediately exercise its step-in rights, which may include assumption of
management control, suspension of the cooperative’s board, and the appointment of a
management team to oversee operations until compliance is restored.


SEC. 8. Transparency. The NEA shall submit a consolidated report to Congress every
six (6) months on the implementation of this Act.

SEC. 9. Effectivity of Facility. Notwithstanding existing refinancing facilities and
programs outside the coverage of this Act, the authority of the NEA to approve new refinancing
agreements under this Act shall be effective for a period of ten (10) years from the effectivity
of this Act. After such period, no new refinancing shall be granted unless renewed by Congress.
Notwithstanding this limitation, the Facility itself shall continue to operate until all obligations
contracted within the effectivity period have been fully paid and settled.

SEC. 10. Implementing Rules. Within sixty (60) days from the effectivity of this Act,
the NEA shall issue the implementing rules and regulations. The role of the ERC shall be
limited to the approval of recovery mechanisms under Section 5.

SEC. 11. Separability Clause. If any provision of this Act is declared unconstitutional,
the remainder shall not be affected.

SEC. 12. Effectivity. This Act shall take effect fifteen (15) days after publication in the
Official Gazette or in a newspaper of general circulation.

Approved,