# 3.3.2 Institutions

The two Philippine utilities are compared to two utilities from Vietnam (the Northern Power Corporation [NPC] and the Hochiminh City Power Corporation [HPMC]); two from Colombia (EPM and CODENSA); two from Peru (Luz del Sur and Hidrandina); as well as the average of all utilities included in the Rethinking study. It is important to note that BENECO is an EC and is mandated by the government to operate without profit, while MERALCO is privately owned. Moreover, they are designed to serve very different consumer profiles so that direct comparison of performance may not be appropriate.

On **corporate governance** MERALCO scored 100 percent, satisfying all criteria that apply to a private company, while BENECO scored 67 percent.<sup>14</sup> MERALCO outperformed all the other utilities in the sample, but BENECO performed less well than some comparators, although still above the average for the study (table 7).

**Table 6: Corporate governance of utilities in the Philippines and comparators, 2015**<sup>**15**</sup>

||**Col**|**ombia**|**Pe**|**ru**|**Philip**|**pines**|**Vie**|**tnam**|**International**|
|---|---|---|---|---|---|---|---|---|---|
||**EPM**|**CODENSA **|**Luz del Sur**|**Hidrandina **|**MERALCO **|**BENECO**|**NPC**|**HCMPC**|**benchmark**|
|**Corporate Governance**|**76%**|**96%**|**85%**|**40%**|**100%**|**83%**|**8%**|**8%**|**62%**|
|_Accountability_|_75%_|_92%_|_92%_|_58%_|_100%_|_67%_|_17%_|_17%_|60%|
|_Autonomy (SOEs)_|_78%_|_100%_|_78%_|_22%_|_100%_|_100%_|_0%_|_0%_|63%|

Note: Scores based on index developed for the Rethinking Power Sector Reform Project. For more details go to project website at http://www.esmap.org/rethinking_power_sector_reform Table 8 shows that on the overall **financial discipline** indicator MERALCO scores 71 percent (above the average level but below the scores for Luz del Sur, and the two Colombian utilities), while BENECO scores 53 percent. MERALCO lacked the ability to issue new bonds, while BENECO, given its cooperative nature, does not incorporate a number of good practices related to raising capital (as did the Vietnamese utilities). Both utilities failed to cost the PSO and BENECO was not required to meet financial performance targets set by shareholders.

**Table 7: Utility management index of utilities in the Philippines and comparators, 2015**<sup>**16**</sup>

||**Col**|**ombia**|<br>**P**|**eru**|**Philip**|**pines**|**Vie**|**tnam**|**International**<br>|
|---|---|---|---|---|---|---|---|---|---|
||**EPM**|**CODENSA **|**Luz del Sur**|**Hidrandina **|**MERALCO **|**BENECO**|**NPC**|**HCMPC**|**benchmark**|
|**Utility Management**|**83%**|**43%**|**85%**|**70%**|**81%**|**68%**|**65%**|**65%**|64%|
|_Financial Discipline_|_76%_|_69%_|_86%_|_65%_|_71%_|_53%_|_53%_|_53%_|59%|
|_Human Resource_|_86%_|_60%_|_90%_|_71%_|_79%_|_86%_|_50%_|_50%_|62%|
|_Information and Technology_|_87%_|_0%_|_80%_|_73%_|_93%_|_67%_|_93%_|_93%_|71%|

Note: Scores based on index developed for the Rethinking Power Sector Reform Project. For more details go to project website at http://www.esmap.org/rethinking_power_sector_reform

> 14 Because BENECO is a non-stock cooperative there are no shareholders. The consumer owners pay equal membership fees but there are no capital shares.

> 15 For details on the corporate governance index, see the annex.

> 16 For details on the utility management index, see the annex.

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