The diversity in performance of the ECs is the defining feature of the sector. Overall system losses of cooperatives have declined significantly over the past twenty years, from a national average of 25 percent in 1987 to 13.5 percent in 2008 (Figure 1, left panel) although the pace of improvement has slowed down of late. The variation around this national average is, however, considerable (Figure 1, right panel), with systems losses varying from a low of less than 7 percent for cooperatives such as Cebu III, Misamis Oriental I, and Bohol I and a high of over 23 percent for Laguna, Camarines Sur I, and Camarines Sur III. Eighteen cooperatives have losses under 10 percent while twelve have losses exceeding 18 percent. Other performance indicators, such as operating margin, repayment to NEA, and collection efficiency, paint a similar picture of great divergence around a generally improving overall national average.

**Figure 1:  System losses over time and across cooperatives**

<!-- Start of picture text --> System Losses (percent) System losses across cooperatives (2008)<br>30<br>29%<br>25 26% National average, 13.5%<br>23%<br>20<br>20%<br>15<br>17%<br>10 14%<br>5 11%<br>8%<br>0<br>1987 1990 1993 1996 1999 2002 2005 2008 5%<br>Ilocos Norte Isabela II Tarlac II Laguna Romblon Catanduanes VRESCO Camotes No Samar Misamis Or I So Cotabato I<br><!-- End of picture text --> <!-- Start of picture text --> Source : NEA<br><!-- End of picture text --> In terms of institutional indicators, overstaffing in cooperatives, a major feature of high administrative costs, has been reduced, with the consumer-to-employee ratio declining from 211 in 1998 to 350 in 2008, but remain high as ideally these ratios should be of the order of 400:1 for a dispersed rural island population and 600:1 for a compact urban population. As Figure 2, left panel shows, this ratio varies from 745 for Davao Sur to a low of 112 for Camiguin, with eight cooperatives with ratios of 200 or lower. Collection efficiency similarly varies greatly around the national average of 88%, a number that has remained stagnant over the past twenty years. That overstaffing has an effect on systems losses is suggested in figure 2, bottom panel, which shows a negative relationship between these losses and the consumer-to-employee ratio.

There are geographic and technical factors, in addition to politicization, behind this variation. The political imperative of electrification, which will be discussed in more detail below, meant that the cooperatives network was expanded to connect remote and scattered households that were commercially nonviable. Approximately 90 percent of the 7.8 million customers of the ECs are households, which accounts for the relatively low share in energy consumption, and also the relatively greater difficulty, compared to Meralco, a private utility that serves Metro Manila, for example, in improving collection efficiency. As per the Bank‘s previous sector policy note, roughly a third of the ECs are in non-viable franchise areas, either due to geographical factors such as susceptibility to natural calamities like typhoons or location in small islands or mountainous regions, or have a small, predominantly residential consumer base.

The World Bank‘s 2000 study identified political factors as the predominant reason for this diversity in performance in the economically more viable ECs. A number of the high performing ECs are characterized by professional management that has taken major initiatives to reduce 6