Can BENECO Resist Another Takeover Attempt?

This weekend, Girlie and I went up to Baguio City, upon invitation of BENECO, the Benguet Electric Cooperative, to speak at the annual assembly of their MSEAC (Multi-Sectoral Electrification Advisory Council).

“Talk to them about the plan to organize the ECAP – Electric Consumers Advocacy of the Philippines,” suggested Leo, who is in charge of consumer education and development. We met in Toledo City, where I was a resource person at the convention of the National Solidarity of Unions and National Solidarity of Associations of the electric cooperatives.

I did speak about ECAP to around 170 participants, roughly half of whom were MSEAC members from Baguio City and 13 towns covered by the franchise of BENECO. The other half were leaders of barangay-based RECA – rural electrification consumers association, and pastors of small religious congregations.

But as usually happens when I get invited to speak at gatherings, I end up learning a lot, more than I have been able to teach them.

In this case, I learned about the recurring struggle of BENECO to maintain its character as a “non-stock non-profit” electric coop against those who want it to be a “for profit” corporation or coop. This has crystallized in the rallying cry, “Serbisyo, hindi negosyo!”

 What I found instructive is that the story of BENECO is but a variation of a pattern that seems to repeat itself across all the electric cooperatives – the struggle to preserve the original mission of rural electrification against the threat of corporate takeover and the shift to profit as the primary motive.

Like all the 119 electric cooperatives in the Philippines, BENECO was organized in the 1970s, after R.A. 6038 declared “total electrification on an area basis” as national policy, and created the National Electrification Administration or NEA to lead its implementation.

NEA adopted the strategy of organizing “non-stock non-profit” electric cooperatives as the main vehicle for rural electrification, in partnership with NEA.

Earlier, outside Metro Manila and other major cities, electric distribution was in the hands of private corporations or local governments. These were limited to households and institutions in the town centers, since they were the only ones who could afford to pay, and also because the corporations and local governments had limited capital to expand. There were also a few small stock-for profit electric cooperatives, but they had the same limited resources and reach.

When the NEA started organizing the new non-stock non-profit electric cooperatives or ECs, they set out to extend electric service, first to all the towns, and then to all barangays in their franchise areas. In most places, the ECs built the distribution system from scratch.

But in those areas where there were pre-existing inadequate systems, the ECs took them over. Of course they had to compensate the owners, but this was implemented during the martial law years, and I imagine that not everyone was a willing seller.

By the end of this year, 40 years after the passage of R.A. 6038 in 1969, the ECs and NEA expect to extend electric lines to the remaining barangays without electricity. Of course this does not mean that all households will have connections; this depends on their interest and capacity to pay. But so far, 8,200,000 households are being served by ECs. And after the barangays, there are thousands of sitios and puroks that await.

When I last spoke with General Pedro Dumol, the first NEA Administrator (1969-1985) he said that “rural electrification” may not be an accurate name anymore. After all there are many urban centers and town centers that are within the ECs franchise areas. In fact, without the greater number of connections and heavier loads in these urban and town centers, the ECs would find it difficult to give quality service to the rural and remote communities who would be considered “non-viable” from a business point of view.

BENECO is a dramatic case in point. Baguio City represents 80% of its load, and presumably also sales. The adjacent town of La Trinidad consumes another 12% of the electricity it distributes. The rest of the 12 towns under its franchise consumes the remaining 8%.

The situation is not as lopsided in other ECs, but generally, they would have significant areas within their franchise which are quite “viable” from a business point of view.

That makes them attractive targets to two sets of interests: 1) Those who don’t believe in subsidized service, and 2) Those who believe that once foundations have been laid through public funds and institutions, privatization should happen to insure continued viability. Of course there is not much talk about the profits that will go to whoever takes over. The emphasis is on the greater efficiency of private ownership and management.

I didn’t have time to hear the full story of BENECO’s struggles, but two episodes stand out.

The first happened soon after EDSA 1986. Since the rural electrification program was identified with the deposed Marcos regime, the thrust of “de-Marcos-ification” was used by government officials and corporate leaders close to the new government to move against some ECs.

Without any consultation and warning, BENECO was turned over by NEA to the management of the Aboitiz Group of companies. Most of BENECO’s management and staff resisted the attempted physical takeover, and I was told stirring stories of the stand-off, until the NEA-Aboitiz agreement was declared illegal.

The second happened just a few years ago, soon after the passage of EPIRA. This law allows a EC to choose to convert itself from a non-stock non-profit coop supervised by NEA to either 1) a stock for-profit coop registered with the CDA or 2) a stock for profit corporation registered with the SEC.

A group interested in taking over the management of BENECO launched a campaign to convert it to a stock for profit coop, and managed to have a resolution passed at the AGMA (Annual General Membership Assembly) to call for a referendum. Ironically, the same group asked for a TRO so they could have more time to campaign before the referendum could be held.

Fortunately, the majority of the member-consumers voted to maintain BENECO as a non-stock non-profit coop. Part of the reason is that once converted to a stock for profit coop, BENECO will be vulnerable to a corporate takeover. Although the coop law puts a 20% limit to the stocks any individual can own, there are cases of corporations using proxies to acquire majority of the coop’s shares.

At the meeting of the MSEAC and the other consumer organizations, the BENECO staff were asked if that is the end of such attempts. Unfortunately, the answer is no. If another group succeeds in passing another resolution at the AGMA for a referendum to convert BENECO into a stock coop or corporation, BENECO has to comply, even if it has to spend millions of its own resources to hold such a referendum.

That is one of the reasons, though not the main reason, why the ECAP is being organized. Even without any threats to the original mission and character of the ECs, member consumers should organize to safeguard their rights, and increase their capability to hold the EC accountable to delivering quality service. 

Earlier, Fr. Silva has encouraged and supported the formation of unions and associations among the EC employees, as a check and balance to management and the Board of Directors. A well-informed and vigilant organization of member-consumers is another check and balance mechanism.

The draft declaration of ECAP says that rural electrification is not just about bringing electricity to communities. Electrification is supposed to stimulate community development. And through the organization of coops, electrification seeks to empower the people in the communities.

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2 Comments on “Can BENECO Resist Another Takeover Attempt?”

  1. Renne Gumba Says:

    I hope we can talk about a broader mass base for ECAP. Best wishes from Bicol. Patuloy din ang aming pagkilos at pag-aaral dito, lalo na sa usapin ng mga konsumidor. Maganda kung mapag-uugnay natin ang mga kilusan ng mamamayan para sa pangagnalaga ng kooperatiba ng kuryente.

  2. Reggie Muggs Says:

    it is interesting to compare the cost of electricity in the Philippines to the US. I am wondering if Govt Subsidies play into the numbers.

    For example, I see from Beneco website, that low usage residents only pay about 6cents US per KWh. Here in California, we pay 11cents.

    Is the Philippine Govt subsidizing the Utility companies and/or the Power Generation companies in order to keep these prices low?
    Or… do these prices reflect the actual costs to generate the power by the varous players and still make a profit?

    I also look at the WESM data. this is supposed to be a free market spot market mechanism to match producers or electricity with buyers. If I read the numbers correctly, the producers are selling the energy at approx 8 US per Khw during peak times (example is Oct 27). again I am interested to know if these independent power producers are really able to sell at that price and make a profit or are they being subsized.


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