THE topic of privatization of electric cooperatives has been growing in volume over the past year, particularly in the last couple of months. Davao Light and Power Co. has been in the process of absorbing the failing Northern Davao Electric Cooperative (Nordeco) since last year. Elsewhere in Mindanao, a fight has broken out over the effective privatization of the South Cotabato Electric Cooperative 2 (Socoteco 2), involving distribution giant Meralco, an upstart distribution utility (DU) backed by uber-oligarch Enrique Razon and opposing political factions within the co-op. Meralco is also involved in discussions (or heated arguments, as the case may be) along with other parties over stepping into the business of Batangas Electric Cooperative 2 (Batelec 2) and possibly its neighboring co-op, Batelec 1. More recently, what is arguably the country’s worst co-op — although there are contenders for that dubious title — the Albay Electric Cooperative (Aleco), has also landed on the privatization radar.
How the relevant parties handle the Aleco situation can be considered a good test of the country’s intentions toward development of a more modern, secure and sustainable energy sector, and whether or not progress beyond an inefficient, costly, Third World system is an actual objective.
The current furor over Aleco arose at the end of last month, when Albay Gov. Noel Rosal expressed alarm over the co-op’s massive debt — estimated to be about P5.7 billion, but probably somewhat higher than that (my sources say the figure might be closer to P10 billion) — and floated the idea of private enterprise interceding in some manner. What form that intervention would take was not specified, but there are several options.
One is to effectively kill off the co-op by Congress’ granting a private DU an overlapping franchise, such as in the case of Nordeco. Another is for a private DU to take over by an infusion of a controlling amount of capital, such as what is intended with Socoteco 2. Another is to oblige the co-op to enter into a concession agreement with a private DU, similar to the arrangement the National Transmission Corp. (Transco) has with the National Grid Corp. of the Philippines (NGCP), or what public water districts do with private concessionaires. Meralco was not mentioned by Governor Rosal, and has not been by anyone else to this point, but it is implied that it would be a player in any effort to privatize Aleco, particularly if the chosen mode is a service provider-type arrangement; Meralco has a very successful contract (through a subsidiary in which it has a controlling stake) of that sort with the Pampanga 2 Electric Cooperative (Pelco 2), which has made that co-op one of the best-performing in the entire country.
Aleco has been here before; in fact, it has been in this regrettable position for more than three decades. The National Electrification Administration (NEA) first intervened to temporarily take over the failing co-op in 1993, long before the current legal and regulatory framework governing the energy sector was ever conceived. The disastrous state of Aleco and its inability to provide anything even remotely resembling adequate electric service blew up again in late 2012, with NEA again briefly intervening until a 25-year concession agreement with San Miguel Global Power Corp. subsidiary Albay Power and Energy Corp. (APEC) was signed by Aleco in 2014. That was a complete disaster; service and operating improvements did not happen, and the co-op sank further into debt, and so in 2022, the contract was terminated.
All of this was noted in a resolution filed in the House by Albay 2nd District Rep. Carlos Andes Loria (House Resolution 108), and subsequently approved in August of last year, calling on the House energy committee to conduct hearings “on the operational failures of the Albay Electric Cooperative Inc.” No particular conclusion from that inquiry has emerged, but Governor Rosal’s recent comments might imply that the House is favorably disposed toward some sort of drastic action, if such would actually require legislative approval.
One thing that must be emphasized is that there is no question that Aleco is a terribly run, failing business that is falling far short of its service obligations to its customers. According to the NEA’s compliance report as of the end of 2025 (I intentionally bypassed the assessments for this year, as the impact of the Middle East war has skewed things for everyone), Aleco is one of only eight — out of a total of 121 cooperatives — to have a “red” status, failing on 10 out of 14 of the NEA’s performance indicators. Its working capital fund is only about 10 percent of its working capital requirement; its collection efficiency is a surprisingly high 94 percent, but that is still below standard; it is delinquent in its payment obligations to both its generation suppliers and the NGCP; its financial results for the fourth quarter of 2025 were a loss of more than P226 million; its net worth has steadily declined quarter after quarter, reaching negative P2.6 billion at the end of last year; and in terms of actual service, it runs a system loss percentage of more than 21 percent.
Obviously, immediate intervention of some kind is needed, and the most expedient intervention — despite the poor showing of the San Miguel unit a few years ago, although that did not seem to make much of a dent in Ramon Ang’s undeserved aura of infallibility — would be the entry of some competent private distribution entity. Meralco is an obvious candidate, but it need not be the only one; any DU that could provide a sensible plan (except for APEC, I guess) should be given a fair chance to make its pitch.
Unfortunately, the spanner in the gears in all of this is, unsurprisingly, the electricity consumer advocacy, which considers privatization as being uniformly evil. Last year, after Representative Loria’s resolution was approved by the House, the Philippine Movement for Climate Justice issued a tart statement decrying the idea of privatization, saying “privatization is often marred by corporate greed and business-as-usual interests that prioritize profit over public service,” and instead calling on Albay local government officials to “reform” the co-op, as if that is something they actually can do (spoiler alert: no, they can’t). More recently (July 30), the Partners for Affordable and Reliable Energy (PARE) issued a statement arguing that privatization of Aleco should be a “last resort,” asserting that more could be done by responsible agencies (the NEA, ERC, the Department of Energy) to enforce proper management and accountability in the existing structure. A big part of PARE’s argument is that privatization didn’t work the first time (referring to the APEC debacle), and so there is no strong evidence at this point that it is a good solution.
What is frustrating about these points of view is that, functionally and legally, electric co-ops should not even exist in the Philippines at this point; since I know I will get questions about that, I’ll get into it more in my next column. Second, very few, if any practical alternatives to “the evils of privatization” are ever offered by those who oppose it on mostly classist grounds. Privatization is bad, but there is hardly any corresponding call for the leadership of the co-op to get its act together and do business properly. Since many co-ops actually do business properly, that oversight is inexcusable.
ben.kritz@manilatimes.net
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