2.3 National Electrification Administration (NEA)

Creation of the National Electrification Administration [NEA]

The National Electrification Administration (NEA) was created on August 4, 1969 by virtue of Republic Act 6038 that boldly declared as a national policy objective the total electrification of the Philippines on an area coverage basis. In the same year, USA granted the first loan for RE program in the amount of $3.5 Million which financed the two (2) pilot projects.

Mandate

NEA was created primarily to attain total electrification on an area coverage basis through the ECs. This means that electric service should be extended to all households within the franchise area of the utility including the thinly populated areas.

The area coverage concept was tested and proven effective in the case of MORESCO and VRESCO that were officially energized in 1971. With the success of these two initial projects, 36 others were organized and energized.

In 1972, an initial loan of $20 million was granted by the USAID to the Philippine government with the latter providing a counterpart fund. The loan was used to finance the foreign material requirements of the 36 ECs.

With the proclamation of Martial Law on the same year, two electrification decrees were issued. They were Presidential Decree (PD) No. 40 which stipulated the basic policies of power development programs on an integrated basis and the Letter of Instruction No. 38 which directed NEA to establish procedures for the integration of small private and municipal system into the ECs.

The implementation of R.A. 6038 and the decrees mentioned made a great impact on the lives of the EC member-consumers. The use of electric energy that replaced hand labor and animal power made them more productive and effective as workers. Likewise, the implementation of the area coverage concept by non-profit ECs proved that financial capability was feasible with cost and production kept over time.

Transformation of NEA

Inspired by this developments then President Marcos issued PD 269 on August 6, 1973 which transformed NEA into a corporation wholly-owned and controlled by the government with borrowing authority and corporate powers and increased its capitalization to P1 Billion to further strengthen and enable the ECs to become effectively established and operationally viable.

The most significant among these powers were its regulatory function with regard to rate fixing and the authority to grant and revoke franchises. The latter was formerly vested in the old Congress that granted hundreds of franchises to interested groups, the essence of which stood in the way to a meaningful electrification program.

In 1974, an additional $18 million loan was granted to NEA by the USAID. At this stage, 7 ECs including VRESCO and MORESCO were able to complete their backbone systems.

In 1975, NEA received its third USAID loan worth $20 million. Also acquired was $2.3 million World Bank loan for the development of small industry projects in the energized areas and an $18 million loan from a consortium of French banks.

In 1976, a fourth USAID loan in the amount of $20 million was approved. At this period, the Philippines was clearly leading the electrification efforts among the developing countries with 63 ECs organized covering 414 towns and 3,843 barangays energized with 486,000 rural household connections.

The government’s confidence in NEA and the ECs ability to serve the intents of the program was further addressed by the issuance of PD 1645 in 1975 which broadened NEA’s lending and regulatory powers and raised its capital stock to P5 billion. NEA was empowered to invest and/or grant loans for the development of power generation industries or companies, including dendro-thermal and mini-hydro power plants and associated facilities such as alcogas and tree plantations, water-impounding reservoirs and feeder roads.

With a radical change in the form of government in 1986 under the leadership of then President Corazon C. Aquino, the Ministry of Energy was abolished and the rural electrification sector shifted gears. Line expansion, systems rehabilitation and institutional development became the priorities in this phase. During the period 1985-1989, NEA was able to organize 117 ECs servicing 2.8 million households.

By 1988, NEA embarked on a new corporate thrust from the broad “total electrification on an area coverage basis” to “to function as an interested lender in order to promote total electrification through viable ECs that provide reliable service towards countryside development”.

The last year of the Aquino administration was punctuated by power crisis. This became a national concern which was inherited by President Fidel V. Ramos when he assumed office in 1992. Under his helm, the Department of Energy was created on December 9,1992 by virtue of RA 7638. Subsequently, the Electric Power Crisis Act of 1993 or RA 7648 was also enacted on April 2,1993. Under these laws, the power sector was institutionalized and effective measures were adopted to address the electric power crisis which almost crippled the national economy at that time.

In the same year, NEA focused on the following programs:

* rehabilitation of lines
* line expansion
* energization of isolated islands
* improvement of collection efficiency
* decreasing the ECs system loss
* upgrading the ECs to higher categories
* increasing loan releases to ECs
* improving the ECs viability

Towards the end of year 2000, NEA focused on the establishment of quality services for its internal and external clients.

NEA as an organization was able to qualify as ISO 9001 certified in 2001.Based on records, it was the first GOCC to secure such kind of prestigious certification. It meant the installation of a Quality Management System (QMS) which would create a competitive advantage for the Agency in terms of achieving better results, higher efficiency and productivity at a minimal cost and of course providing the best services to its primary clientele, the 119 ECs.

New Role of NEA Under the EPIRA

It also authorized the transfer of the franchising functions of NEA to Congress, after five years from the date of the effectivity of the law and the transfer of rate functions to the Energy Regulatory Commission. However, it provided additional mandate to NEA to act as guarantor for purchases of electricity in the Wholesale Electricity Spot Market (WESM) by an electric cooperative or small distribution utility to support its credit standing. It increased the capitalization of NEA from P5 billion to P25 billion. Under the said Act, NEA maintains to provide financial, institutional and technical assistance to the ECs.

The same Act also called for the restructuring of the ECs. Hence, Executive Order (EO) No.119 was promulgated to this effect. Among others, it provided guidelines on the assumptions by the Power Sector Assets and Liabilities Management (PSALM) Corporation of rural electrification loans incurred by the ECs for the purpose of financing the rural electrification program.

One of the conditions was the submission by category A+, A and B ECs of Performance Improvement Programs (PIP). Likewise category C, D, & E ECs were also required to submit Rehabilitation and Efficiency Plan (REP). These plans were reinforced by the submission of various plans such as Global Competitiveness Plans, Accelerated Recovery Plan and Survival Plan.

Consequently, NEA had monitored closely the performance of the 119 ECs nationwide to prepare them to operate and compete under the deregulated market and to strengthen their technical and managerial capability and financial viability.

On ailing ECs, management options and special strategies were applied. One of these was the so called Task Force “Kapatid”. It is composed of engineers and linemen from neighboring ECs tasked to assist in the upgrading/rehabilitation of electricity distribution lines. This task force was utilized in Aklan, Basilan, Masbate and Lanao del Sur.

For ECs whose financial deficiencies have been well pronounced, NEA was forced to take over to sustain the delivery of reliable service to the member-consumers.

Presently, NEA as an organization is undergoing a facelift to enhance its corporate image and to improve the delivery of quality services to the ECs, notwithstanding the presence of a lean workforce.

The New NEA

The new NEA is a revitalized corporation focused on strengthening its partners in the rural electrification program, the electric cooperatives, by ensuring that they become more efficient, reliable and globally competitive.

In line with this, the NEA Board of Administrators unanimously approved NEA’s new mandate, vision and mission statements and corporate credo on June 28, 2004. The redefined M-V-M and corporate credo puts a face to the new and reengineered NEA as a result of the EPIRA and reflect the agency’s enhanced role in the power industry. The said statements and credo were formulated to serve as guiding philosophy for NEA as its gears towards global competitiveness in partnership with the electric cooperatives.

--from the National Electrification Administration (NEA) Website

Back to Table of Contents

2.3 National Electrification Administration (NEA)

Imaginet Company News