through case studies of select ECs — these cases are illustrative and are not meant to be a ―test‖ of the theoretical argument. The final section presents some implications of the analysis for improving the sector.

# **2. Sector Overview**<sup>**1**</sup>

Electric cooperatives as the institutional mechanism for rural electrification in the Philippines had their genesis in the 1960s with the launch of pilot projects assisted by USAID and modeled on such initiatives in the US. With the passage of the National Electrification Act in 1969, ECs were designated the country‘s primary electricity distribution system, and the sector expanded rapidly in the 1970s with cooperatives covering all areas of the country with the exception of metropolitan Manila and Cebu, and some of the more remote islands. Presently (2010), the 119 ECs in the Philippines account for approximately 57 percent of total connections and 24 percent of total energy consumption. The majority of ECs are connected to the grid and purchase electricity from the national transmission company. Access has increased rapidly, and 97 percent of barangays and 78% of households now have electricity connections.

The legal framework for rural electrification in the Philippines is set out in the Electric Power Industry Reform Act (EPIRA) 2001, the Presidential Decree No. 269, and the Presidential Decree No. 1645 (which makes amendments to Decree 269). EPIRA stipulates that ECs can be either non-stock, non-profit cooperatives and be governed under PD 269; stock cooperatives and be governed under the Cooperative Code; or stock corporations and be governed under the Corporation Code. The vast majority of ECs —112 out of 119 as of 2008 — are non-stock and non-profit, owned by member consumers, and under the domain of PD 269. These ECs are under the domain of the National Electrification Administration (NEA) and while NEA is not a regulator in the strict sense of the word, it is tasked with providing financial and technical support to the ECs, and monitoring their performance. These non-stock ECs will be the focus of this paper.

ECs are owned by their members/consumers on payment of a nominal fee, with the members electing a board of directors who are responsible for the overall policy setting of the organization. The mode of elections is specified in guidelines issued by NEA. The board, which numbers between 5 and 15 depending on the size of the EC, is elected on the basis of one-member one vote, with a once consecutive renewable term of three years, and with a third of the board up for election each year. The geographical area of the cooperative is demarcated into districts which usually encapsulate one or more municipalities, with each director representing a district. Aside from citizenship and membership of the cooperative, the only major restriction on eligibility for standing for the board elections is that the candidate cannot be holding any elective government office except that of barangay captain.

The board, which among themselves selects a president, vice president, secretary, and treasurer, is de jure responsible for managing the overall business of the EC, and can adopt the necessary bylaws for this purpose. It is meant to be a policy-making body, with actual day-to-day management the responsibility of a general manager. The board is required to hold an annual general members meeting, with a quorum being 5% of members or a 100 whichever is less, and any additional members meetings as deemed necessary. For example, major policy decisions, such as the consolidation of two or more cooperatives, or a merger, need a two-thirds approval of the members of each of the concerned cooperatives. Similarly, the conversion of the EC into a

> 1 The description of the sector is based on data available circa 2008-09.

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