CREATING THE "NATIONAL ELECTRIFICATION ADMINISTRATION" AS A CORPORATION, PRESCRIBING ITS POWERS AND ACTIVITIES, APPROPRIATING THE NECESSARY FUNDS THEREFOR AND DECLARING A NATIONAL POLICY OBJECTIVE FOR THE TOTAL ELECTRIFICATION OF THE PHILIPPINES ON AN AREA COVERAGE SERVICE BASIS, THE ORGANIZATION, PROMOTION AND DEVELOPMENT OF ELECTRIC COOPERATIVES TO ATTAIN THE SAID OBJECTIVE, PRESCRIBING TERMS AND CONDITIONS FOR THEIR OPERATIONS, THE REPEAL OF REPUBLIC ACT NO. 6038, AND FOR OTHER PURPOSES.

• Number: Presidential Decree No. 269
• Sections: 69

Preamble

WHEREAS, it is the desire of the Government to effect

changes and reforms in the social, economic, and political structure of our

society;

WHEREAS, detailed studies have clearly emphasized the very

close correlation between consumption of energy and gross national product.

Electric power, wherever, introduced, stimulates the growth of industry and the

economy in general;

WHEREAS, electrification of the entire country, one of the

primary concerns of the Government in order to bring about the desired changes

and reforms, can be hastened by rationalizing the distribution of

electricity;

WHEREAS, rationalization, which implies the adoption of all

measures necessary to obtain the maximum benefit at the minimum expense, can be

achieved by:

Establishing island grids and integrating power generating systems.

Consolidating electric distribution franchise systems. The existence of

small franchise systems impede the progress of total electrification, as such

small and isolated systems are antithetical to the economies of scale.

Implementing the area coverage concept, which will allow the construction of

lines to thinly settled areas which are most costly to electrify,

provided that the losses from these lines can be reasonably absorbed by

the more profitable lines;

WHEREAS, under Republic Act No. 6038, dated August 4, 1969,

Presidential Decree No. 40 and Letter of Instruction No. 38, both dated November

7, 1972, the National Electrification on an area coverage basis; to set up

cooperatives for the distribution of power; and to determine privately-owned

public utilities which should be permitted to remain in operation; and

WHEREAS, to attain total electrification in the most

effective and efficient manner, there is a need to further strengthen and make

more flexible the organizational structure of the National Electrification

Administration by converting it into a corporation, wholly-owned and controlled

by the Government possessed with borrowing authority and corporate powers;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Republic of the Philippines, by virtue of the powers vested in me by the

Constitution as Commander-in-Chief of all the Armed Forces of the Philippines,

and pursuant to Proclamation No. 1081, dated September 21, 1972, and General

Order No. 1, dated September 22, 1972, as amended, do hereby repeal Republic Act

No. 6038 and do hereby decree, order and make as part of the law of the land the

Charter of the National Electrification Administration, which reads as

follows:

Section 1 Title.

SECTION 1. Title. — This Decree shall be referred

to as the "National Electrification Administration Decree."

Section 2 Declaration of National Policy.

SEC. 2. Declaration of National Policy. — The total

electrification of the Philippines on an area coverage basis being vital to the

welfare of its people and the sound development of the Nation, it is hereby

declared to be the policy of the State to pursue and foster, in an orderly and

vigorous manner, the attainment of this objective. For this purpose, the State

shall promote, encourage and assist all public service entities engaged in

supplying electric service, particularly electric cooperatives, which are

willing to pursue diligently this objective.

Because of their non-profit nature, cooperative character and the heavy

financial burdens that they must sustain to become effectively established and

operationally viable, electric cooperatives, particularly, shall be given every

tenable support and assistance by the National Government, its instrumentalities

and agencies to the fullest extent of which they are capable; and, being by

their nature substantially self-regulating and Congress having, by the enactment

of this Decree, substantially covered all phases of their organization and

operation requiring or justifying regulation, and in order to further encourage

and promote their development, they should be subject to minimal regulation by

other administrative agencies.

Area coverage electrification cannot be achieved unless service to the more

thinly settled areas and therefore more costly to electrify is combined with

service to the most densely settled areas and therefore less costly to

electrify. Every public service entity should hereafter cooperate in a national

program of electrification on an area coverage basis, or else surrender its

franchise in favor of those public service entities which will. It is hereby

found that the total electrification of the Nation requires that the laws and

administrative practices relating to franchised electric service areas be

revised and made more effective, as herein provided. It is therefore

hereby declared to be the policy of the State that franchises for electric

service areas shall hereafter be so issued, conditioned, altered or repealed,

and shall be subject to such continuing regulatory surveillance, that the same

shall conduce to the most expeditious electrification of the entire Nation on an

area coverage basis.

Section 3 Definitions.

SEC. 3. Definitions. — As used in this Decree, the

following words or terms shall have the following meanings, unless a different

meaning clearly appears from the context;

(a) "NEA" shall mean the National Electrification Administration, "Board of

Administrators" shall mean the Board of Administrators, and "Administrator"

shall mean the Administrator, all as provided for in this Decree.

(b) "Cooperative" shall mean a corporation organized under Republic Act No.

6038 or this Decree or a cooperative supplying or empowered to supply service

which has heretofore been organized under the Philippine Non-Agricultural

Cooperative Act, whether converted under this Decree or not.

(c) "Public service entities" shall mean (1) a cooperative, (2) the NPC, and

(3) local governments and privately-owned public service entities in operation

which furnish and are empowered to furnish retail electric service.

(d) "Person" shall mean any natural person, firm, association, cooperative,

corporation, business trust, partnership, the National Government or any

political subdivision, agency or instrumentality thereof.

(e) "Service" shall mean electric service, either at wholesale or retail,

including the furnishing of any auxiliary or related service;

(f) "Dependable and adequate service" shall mean service that, consistent

with normal standards and levels of service based upon good utility management

and operating practices, is sufficient .in quantity, having regard for the

demands for service currently existing and reasonably anticipated within the

foreseeable future, and that is accessible on a constant and continuous basis

except for outages occasioned by the need for normal repair, maintenance,

construction or renovation work or by acts beyond the reasonable ability of the

public service entity to prevent or control.

(g) "Area" shall mean (1) the geographic area franchised to a public service

entity or (2) any lesser geographic area for the furnishing of retail service to

which a public service entity pursuant to this Decree borrows, or may apply to

borrow, funds from the NEA, or may otherwise secure loans with the approval of

the NEA, to finance the acquisition or construction and operation, maintenance

or renovation of service facilities.

(h) "Area coverage" shall mean dependable and adequate service that, on the

basis of reasonable and standard extension and service policies, rates, charges

and other terms and conditions, will be or is being made available to all

persons within the affected area as above defined who request such service and

are able and willing to abide by and comply with all such reasonable and

standard terms and conditions, regardless of the relative location of such

persons within the affected area or of their proximity to existing or proposed

service facilities: Provided, that the financial feasibility of the

public service entity's entire operation is not thereby impaired.

(i) "Interest rate per centum per annum" shall mean an interest rate that is

accrued solely upon the unpaid balance of any loan principal which has actually

been advanced to a borrower and upon any interest payment which has Become due

or been deferred and has not been paid by the borrower, computed on an annual

basis.

(j) "Loan" shall mean a loan the total principal amount of which, as and when

required for application to the purposes thereof, is, at the time of the making

thereof, assured from funds that are or will become available therefor.

(k) "NEDA" shall mean National Economic and Development Authority or any

successor instrumentality that may hereafter be established to perform the same

or substantially similar function; "NPC" shall mean National Power Corporation,

and "NEDA-FS" shall mean National Economic and Development Authority-Foreign

Source.

(l) "Board of Power and Waterworks" shall mean Board of Power and Waterworks

or any successor board, agency or instrumentality that may hereafter be

established to perform the same or substantially similar functions.

(m) "Franchise" shall mean the privilege extended to a person to operate an

electric system for service to the public at retail within a described

geographic area, whether such privilege had been granted by the Congress, by a

municipal, city or provincial government or, as herein provided, by the

NEA.

(n) "Non-profit" shall mean that a cooperative shall not engage in business

for the purpose of making a profit for itself or its patrons, but it shall not

mean that a cooperative may not account on a patronage basis to its patrons for

any receipts in excess of its expenses in relation to its operations in serving

such patrons or in relation to investment of any of its surplus funds pending

their use by the cooperative or their refund to patrons; nor shall it mean such

excess receipts may not be refunded to its patrons, or may not be converted into

patron-furnished capital subject to later redemption and retirement by the

cooperative.

(o) "Board" shall mean the board of directors of a cooperative.

(p) "Household" shall mean a non-seasonal dwelling, capable of receiving

service safely, including apartments and other dwelling combinations.

(q) "Congress" shall mean the President during his exercise of Martial Law,

or the National Assembly under the new Constitution of 1973, whichever is the

case at any given time.

(r) "President" shall mean the President of the Philippines during the

existence of Martial Law, or the Prime Minister when the National Assembly comes

into existence.

Section 4 NEA Authorities, Powers and Directives.

SEC. 4. NEA Authorities, Powers and Directives. —

The NEA is hereby authorized, empowered and directed to promote, encourage and

assist public service entities, particularly cooperatives, to the end of

achieving the objective of making service available throughout the nation on an

area coverage basis as rapidly as possible; and for such purpose it is hereby,

without limiting the generality of the foregoing and in addition to other

authorizations, powers and directives established by this Decree, specifically

authorized, empowered and directed:

(a) To have a continuous succession under its corporate name until otherwise

provided by law;

(b) To prescribe and thereafter to amend and repeal its by-laws not

inconsistent with this Decree;

(c) To adopt and use a seal and alter it at its pleasure;

(d) To sue and be sued in any court: Provided, That NEA shall,

unless it consents otherwise, be immune to suits for acts ex delicti;

(e) To make contract of every name and nature and to execute all instruments

necessary or convenient for the carrying on of its business;

(f) To make loans to public service entities, with preference to

cooperatives, for the construction or acquisition, operation and maintenance of

generation, transmission and distribution facilities and all related properties,

equipment, machinery, fixtures, and materials for the purpose of supplying area

coverage service, and thereafter to make loans for the restoration, improvement

or enlargement of such facilities: Provided, That the public service

entity applying for a loan, if neither a cooperative nor a local government,

must be in operation at the time of application;

(g) To promote, encourage and assist public service entities and government

agencies and corporations having related functions and purposes, with preference

to cooperatives, in planning, developing, coordinating, establishing, operating,

maintaining, repairing and renovating facilities and systems to supply area

coverage service, and for such purpose to furnish, to the extent possible and

without charge therefor, technical and professional assistance and guidance,

information, data and the results of any investigation, study, or report

conducted or made by the NEA;

(h) To approve or disapprove any loan from other lenders to public service

entities which at the time are borrowers from NEA under sub-paragraphs (f) or

(i) of this Section, and thereafter, pursuant to Section 10 (b) to disapprove

advances of loans from other lenders;

(i) To make loans for the purpose of financing the wiring of premises of

persons served or to be served as a result of loans made under sub-paragraph (f)

of this Section, and for the acquisition and installation by such persons of

electrically-powered appliances, equipment, fixtures and machinery of all kinds

for residential, recreational, commercial, agricultural and industrial uses,

such loans to be made directly (1) to public service entities which have

received loans under sub-paragraph (f) of this Section, which entities shall in

turn relend such funds to persons served or to be served by them, or (2) to any

person served or to be served by public service entities which have received

loans under sub-paragraph (f) of this Section: Provided, That at no

time shall the total loans made under this sub-paragraph (i) to a public service

entity and/or to persons served or to be served by such entity exceed

twenty-five (25%) per centum of the outstanding loans to such entity made under

sub-paragraph (f) of this Section;

(j) To so cooperate, coordinate and exchange such information, studies and

reports with, and to seek such cooperation and coordination from, other

departments, agencies and instrumentalities of the National Government,

including the NPC, as will most effectively conduce to the achievement of the

purposes of this Decree;

(k) To borrow funds from any source, private or Government, foreign or

domestic, and, not inconsistently with Section 8, to issue bonds or other

evidences of indebtedness therefor and to secure the lenders thereof by

pledging, sharing or subordinating one or more of the NEA's own loan

securities;

(l) To receive from cooperatives all articles of incorporation, amendments,

consolidation, merger, conversion and dissolution, and all certificates of

changes in the location of principal offices and of elections to dissolve, and,

upon determining that such are in conformity with this Decree, to certify the

same, to file them in the records of the NEA, and to maintain a registry of such

filings the provisions of Act No. 1459, as amended, to the contrary

notwithstanding;

(m) To acquire, by purchase or otherwise (including the right of eminent

domain, which is hereby granted to the NEA, to be exercised in the manner

provided by law for the institution and completion of expropriation

proceedings by the National and local governments), real and physical

properties, together with all appurtenant rights, easements, licenses and

privileges, whether or not the same be already devoted to the public use of

generating, transmitting or distributing electric power and energy, upon NEA's

determination that such acquisition is necessary to accomplish the purposes of

this Decree and, if such properties be already devoted to the public use

described in the foregoing, that such use will be better served and accomplished

by such acquisition: Provided, That the power herein granted shall be

exercised by the NEA solely as agent for and on behalf of one or more public

service entities which shall timely receive, own and utilize or replace such

properties for the purpose of furnishing adequate and dependable service on an

area coverage basis, which entity or entities shall then be, or in connection

with the acquisition shall become, borrowers from the NEA under sub-paragraph

(f) of this Section: And provided, further, That the costs of such

acquisition, including the cost of any eminent domain proceedings, shall be

borne, either directly or by reimbursement to the NEA, whichever the NEA shall

elect, by the public service entity or entities on whose behalf the acquisition

is undertaken and otherwise to acquire, improve, hold, transfer, sell, lease,

rent, mortgage, encumber, and otherwise dispose of property incident to, or

necessary, convenient or proper to carry out, the purposes for which NEA was

created;

(n) At least annually, not later than June 30th, to report to the President

and when the same comes into existence, the Prime Minister and the National

Assembly, on the status of electrification of the Philippines, including a

comprehensive reporting of loans made, loan funds advanced, loans secured from

other sources and the advances thereof, the names and locations of the

borrowers, the number of services contemplated by such loans, the number

actually receiving service as a result of such loans, the number of electrified

and the remaining number of unelectrified households throughout the Nation, the

amounts of usage by consumers, loans and other activities programmed for the

ensuing year, and all such other information and data as will accurately reveal

the progress being made toward the achievement of the purposes of this Decree;

and to publish such report for dissemination to and use by other interested

departments, agencies and instrumentalities of the National Government and by

borrowers under this Decree; and

(o) To exercise such powers and do such things as may he necessary to carry

out the business and purposes for which the NEA was established, or which from

time to time may be declared by the Board of Administrators to be necessary,

useful, incidental or auxiliary to accomplish such purposes; and, generally, to

exercise all the powers of a corporation under the Corporation Law insofar as

they are not inconsistent with the provisions of this Decree.

Section 5

SEC. 5. National Electrification Administration; Board

of Administrators; Administrator, (a) For the purpose of administering the

provisions of this Decree, there is hereby established a public corporation to

be known as the National Electrification Administration. All of the powers of

the Corporation shall be vested in and exercised by a Board of Administrators,

which shall be composed of a Chairman and four (4) members, one of whom shall be

the Administrator as ex officio member. The Chairman and the three other members

shall be appointed by the President of the Philippines to serve for a term of

six years: Provided, That the terms of the first appointees shall be

six years for the Chairman and one member and three years for the two other

members, respectively, and that the term of the ex officio member shall be

co-terminous with his term as the Administrator. All vacancies except through

expiration of the terms, shall be Oiled for the unexpired term only. The

Chairman and every member of the Board of Administrators shall be entitled to a

per diem of not more than three hundred pesos for each meeting actually attended

by them: Provided, That the total of such per diem shall not exceed one

thousand five hundred pesos per month per member.

The Board of Administrators shall meet regularly at least twice a month and

as often as the exigencies of the agency's affairs demand.

The presence of at least three members shall constitute a quorum which shall

be necessary for the transaction of any business. The affirmative vote of a

majority of the members present shall he necessary for the approval of any

resolution, decision or order, except when a greater vote is required as

sometimes hereinafter provided. In the absence of the Chairman at ;i

Board meeting duly called, the Administrator as ex officio member shall

preside.

The Board shall, without limiting the generality of the foregoing, have the

following specific powers and duties.

(1) To implement the provisions and purposes of this Decree;

(2) To formulate and adopt policies and plans, and to promulgate rules and

regulations, for the management, operation and conduct of the business of the

NEA;

(3) To adopt and, as may be necessary from time to time, to amend annual

budgets for the NEA's borrowing and lending programs and for the agency's

administration: Provided, That copies of such budgets shall be

submitted to the President or the appropriate committee of and as determined by

National Assembly, when it comes into existence, within fifteen (15) days from

the transmission thereof to the NEDA: And, provided further, That the

administrative budget and any amendments thereto shall be subject to the

approval of NEDA;

(4) To fix the compensation of the Administrator and of the Deputy

Administrators, subject to the approval of the President of the Philippines;

and

(5) To establish policies and guidelines for employment on the basis of

merit, technical competence and moral character and, upon the recommendation of

the Administrator to organize or reorganize NEA's staffing structure, to fix the

salaries of personnel and to define their powers and duties.

(b) The management of the NEA shall be vested in the Administrator, who shall

be a person of known integrity, competence and experience in technical and

executive fields related to the purposes of this Decree. He shall be appointed

by the President of the Philippines and shall not be removed except for

cause.

The Administrator shall have the following powers and duties:

(1) To execute and administer the policies, plans and programs, and the rules

and regulations, approved or promulgated by the Board of Administrators;

(2) To submit for the consideration of the Board of Administrators such

policies, plans and programs as he deems necessary to carry out the provisions

and purposes of this Decree;

(3) To direct and supervise the operation and internal administration of the

NEA and, for this purpose, to delegate some or any of his powers and duties to

subordinate officials of the NEA;

(4) Subject to the guidelines and policies established by the Board of

Administrators, to appoint and fix the number and compensation of subordinate

officials and employees of the NEA: Provided, however, That the

provisions of the Civil Service Law and the Wage and Position Classification Law

shall not apply to the appointment and compensation of any such subordinate

official or employee;

(5) For cause, to remove, suspend, or otherwise discipline any subordinate

official or employee;

(6) To prepare an annual report on the activities of the NEA at the close of

each fiscal year and to submit a copy thereof to the President of the

Philippines and when it comes into existence, the Prime Minister and the

appropriate committee of, and as determined by, the National Assembly; and

(7) To exercise such other powers and duties as may be vested in him by the

Board of Administrators.

In case of absence or disability of the Administrator, he shall designate any

of the Deputy Administrators who shall act in his place.

(c) The Auditor General shall be ex of fie to Auditor of the NEA. The

provisions of Section 584 of the Revised Administrative Code, as amended by

Republic Acts numbered 2266 and 2716, shall apply to the Office of the

Representative of the Auditor General in the NEA.

Section 6 Capital Stock.

SEC. 6. Capital Stock. — The authorized capital

stock of NEA is one billion pesos (P1B) divided into ten (10) million shares

having a par value of one hundred (P100.00) pesos each which shares are not to

be transferred, negotiated, pledged, mortgaged, or otherwise given as security

for the payment of any obligation. The sum of fifty million pesos (P50M) of the

capital stock has been subscribed and paid wholly by the Government of the

Philippines in accordance with the provisions of Republic Act numbered

Twenty-seven hundred seventeen and Republic Act numbered Sixty hundred

thirty-eight. The remaining nine hundred fifty million pesos (P950 M) shall be

wholly subscribed by the Government of the Philippines and shall be paid as

follows:

(a) The sum of one hundred ninety-five million pesos (P195M) worth of goods

and services from Japanese Reparations for the eighteenth, nineteenth and

twentieth year schedule, which is hereby allocated to NEA;

(b) The sum of ten million pesos (P10M) for the fiscal year 1973 and the same

amount each year for the next two fiscal years malting a total sum of thirty

million pesos (P30 M) representing proceeds of the sale of reparations goods,

which are hereby allocated to NEA:

(c) The sum of fifty three million five hundred thousand pesos (P53.5M) for

the fiscal year 1973 and the same amount each year for the next nine (9) fiscal

years from the general revenue, which arc hereby appropriated;

(d) The sum of one hundred thirty million pesos (P130M) representing fund or

physical assets which NEDA-FS may make available to the NEA for loan

purposes;

(e) The sum of sixty million pesos (P60 M) representing proceeds

corresponding to the share of the National Government in all franchise taxes

paid by electric service entities; and

(f) Such sums as may be appropriated and/or allocated by the President or the

National Assembly, when it comes into existence, from time to time as the

Financial needs of the NEA shall require until the authorized capital stock is

fully paid up.

Section 7 Loan Standards.

SEC. 7. Loan Standards. — In making a loan

authorized in Section 4, the Board of Administrators is hereby authorized,

empowered and directed:

(a) Before making such loan, to determine and certify that (1) the project or

projects being financed thereby are financially feasible for the purpose of, and

will result in, area coverage in the area or areas to be affected thereby; (2)

funds are or will be available for the total advance of such loans to the

borrower on the schedule contemplated by the loan agreement; and (3) in the

NEA's judgment the security for such loan is reasonably adequate and the

principal of an interest upon such loan will be repaid on schedule and within

the time agreed;

(b) To require that such loan be self-liquidating within a term to be fixed

by the NEA;

(c) To impose upon the loan principal an interest charge to be fixed by the

NEA;

(d) To fix the schedule for repayment of the principal of and the interest

upon such loan in installments recurring not more than every quarter, which

installments may be in unequal amounts and larger in the later years of the loan

term than in the earlier years;

(e) To require in the loan agreement that the borrower's rates, charges,

rules and regulations, policies and all other terms and conditions affecting its

extension and furnishing of service shall be such as to assure achievement of

the loan purposes, and that the same be filed with and for such purpose approved

by the Board of Administrators before being put into effect or changed by the

borrower; and

(f) Subject to the foregoing, to establish and require compliance with such

procedures, rules and regulations as the Board of Administrators may determine

to be necessary or appropriate to assure that the purposes of such loan will be

timely achieved and that the loan agreement and the provisions of this Decree

will be complied with.

Section 8 Contracting Indebtedness: Conditions, Privileges, Exemptions, Sinking Fund, Guarantees.

SEC. 8. Contracting Indebtedness: Conditions,

Privileges, Exemptions, Sinking Fund, Guarantees. — Whenever the Board of

Administrators determines that to accomplish the purposes of Chapter II of this

Decree it is necessary to contract indebtedness, it shall by a resolution,

adopted by the affirmative votes of at least three members, so declare and

authorize the NEA's execution or issuance of, and establish the terms and

conditions to be contained in, such bonds, loan agreements or other evidences of

indebtedness necessary therefor. Such resolution shall become valid and

effective upon approval by the President of the Philippines upon recommendation

of the Secretary of Finance.

(a) With respect to domestic indebtedness to be incurred by the NEA, the

terms and conditions to be contained in such bonds or other evidences of

indebtedness, and other conditions, privileges, exemptions and guarantees

attaching thereto, shall include the following:

Such bonds or other evidences of indebtedness (A) shall be in registered

form and transferable at the Central Bank of the Philippines; (B) shall not be

sold at less, than par; (C) shall be payable ten years or more from date of

issue, as may be determined by the Secretary of Finance before their issuance,

but shall be redeemable, upon the election of the Board of Administrators after

five years from such date of issue; and (D) shall bear interest at an annual

rate to be determined before their issuance by the Secretary of Finance. The

interest may be payable quarterly, semi-annually or annually, as determined by

the Secretary of Finance in consultation with the Monetary Board of the Central

Bank of the Philippines before date of issuance, and both the principal and

interest shall be payable in legal tender of the Philippines.

The bonds or other evidences of indebtedness shall be exempt from the

payment of all taxes by the Republic of the Philippines, or by any authority,

branch, division or political sub-division thereof, which facts shall be stated

upon their face; and they shall be receivable as security in any transaction

with the National Government or any of its branches, subdivisions,

instrumentalities and its owned or controlled corporations in which a security

is required.

The sinking fund shall be established by the National Electrification

Administration in such manner that the total annual contributions thereto,

accrued at such rate of interest as may be determined by the Secretary of

Finance in consultation with the Monetary Board, shall be sufficient to redeem

at maturity the bonds issued under this Subsection. The sinking fund shall be

under the custody of the Central Bank of the Philippines, which shall invest the

same, subject to the approval of the Board of Administrators and the Secretary

of Finance in consultation with the Monetary Board: Provided, That the proceeds

thereof shall accrue to the NEA.

The Republic of the Philippines hereby guarantees the payment by the NEA of

both the principal and the interest of the bonds or other evidences of

indebtedness, and shall pay such principal and interest in case the NEA fails to

do so; and there are hereby appropriated out of the general funds in the

National Treasury not otherwise appropriated the sums necessary to make the

payments so guaranteed: Provided, That the sums so paid by the Republic of the

Philippines shall be refunded by the NEA: And, provided further, That

the NEA, to assure such refunding, shall establish such reserves or sinking

funds and comply with such other restrictions and conditions as the Secretary of

Finance may prescribe and establish for that purpose.

(b) With respect to foreign indebtedness to be incurred by the NEA, such may

be contracted, in the form of loans, credits, convertible foreign currencies, or

other forms of indebtedness, from foreign governments or any international

financial institution of fund source, including foreign private lenders. The

total outstanding amount of such indebtedness, exclusive of interest, shall not

exceed five hundred million United States dollars (U.S. $500M) or the equivalent

thereof in other currencies. The President of the Philippines, by himself or

through his duly authorized representative, is hereby authorized to negotiate

and to so contract with foreign governments or any international financial

institution or fund source in the name and on behalf of the NEA; and is further

authorized to guarantee, absolutely and unconditionally, as primary obligor and

not merely as a surety, in the name and on behalf of the Republic of the

Philippines, the repayment of any indebtedness thereby contracted and the

payment thereon of any due interest charge, up to the limited amount authorized

to guarantee under Republic Act 6142, and also to guarantee the performance of

all or any of the obligations undertaken by the NEA in the territory of the

Republic of the Philippines pursuant to loan agreements entered into pursuant to

this Sub-paragraph (b). Any indebtedness contracted under this Sub-paragraph (b)

and the payment of the principal thereof and of any interest or other charges

thereon, as well as the importation of machinery, equipment, materials, supplies

and services by the NEA, paid from the proceeds of any such contracted

indebtedness, shall also be exempt from all direct and indirect taxes, fees,

imposts, other charges and restrictions, including import restrictions, by the

Republic of the Philippines, or by any authority, branch, division or political

subdivision thereof.

Section 9 Authority to Extend Loans and Release or Subordinate Securities.

SEC. 9. Authority to Extend Loans and Release or

Subordinate Securities. — Whenever in its judgment such is necessary or

desirable to achieve the purposes of this Decree, and particularly if such is

necessary to make or keep a project operationally viable, the Board of

Administrators is hereby authorized and empowered (a) by agreement with the

borrower, to extend the time of payment of principal or interest, or both,

beyond the loan agreement term of any loan made by the NEA under this Decree, or

to defer, for not in excess of seven years, the time when the repayment schedule

for principal or interest, or both, shall begin, or to reschedule payments of

principal or interest, or both, or when none of the foregoing is sufficient, to

compromise any amount owing by a borrower to the NEA subject to provisions of

existing laws; and (b) upon the NEA's determination that such is necessary or

desirable for the purpose of enabling a borrower to accomplish the purposes for

which it has already received an NEA loan and that such will not result in any

diminution of the security of, or of the ability of the borrower to repay, any

outstanding indebtedness of the borrower below the level of such security and

ability were additional borrowings from another lender not undertaken, to

release any after-acquired property clause contained in any lien the NEA holds

on a borrower's properties to, or to share any such lien on a co-equal basis in

proportion to their respective loans with, or to subordinate any such lien in

favor of, any other lender of funds to a public service entity or to the NEA for

relending to public service entities for the purposes for which loans are

authorized under this Decree.

Section 10 Enforcement Powers.

SEC. 10. Enforcement Powers. — If any public

service entity which has borrowed funds from the NEA, or from any other lender

with the NEA's lawfully required prior approval, shall default in its principal

or interest payments, or shall fail, after notice from the NEA, to comply with

any other term or condition of a loan agreement or of any rule or regulation

promulgated by the NEA in administering the provisions of this Decree, the Board

of Administrators is hereby authorized and empowered in its discretion to do any

or any combination of the following:

(a) Refuse to make, or give any lawfully required approval to, any new loan

to the borrower;

(b) Withhold without limitation the NEA's advancement, or withhold its

approval for any other lender with respect to which the NEA has such approving

power to make advancement of funds pursuant to any loan already made to the

borrower;

(c) Withhold any technical or professional assistance otherwise being

furnished or that might be furnished to the borrower;

(d) Foreclose any mortgage or deed of trust or other security held by the NEA

on the properties of such borrower, in connection with which the NEA, may,

subject to any superior or co-equal rights in such lien held by any other

lender; (1) kid for and purchase or otherwise acquire such properties; (2) pay

the purchase price thereof and any costs and expenses incurred in connection

therewith out of the revolving fund; (3) accept title to such properties in the

name of the Republic of the Philippines; and (4) even prior to the institution

of foreclosure proceedings, operate or lease such properties for such period,

and in such manner as may be deemed necessary or advisable to protect the

investment therein, including the improvement, maintenance and rehabilitation of

systems to be foreclosed, but the NEA shall, within five years after acquiring

such properties in foreclosure proceedings, sell the same for such consideration

as it determines to be reasonable and upon such terms and conditions as it

determines most conducive to the achievement of the purposes of this Decree;

or

(e) Take any other remedial measure for which the loan agreement may

provide.

In addition to the foregoing, the Board of Administrators may, at its own

instance and in the name of the NEA, petition any court having jurisdiction for

such purpose or any administrative agency possessing regulatory powers for such

purpose including the Board of Power and Waterworks) to issue such order and

afford such lawful relief as may be necessary.

No borrower shall, without the approval of the Board of Administrators and of

any other lender holding or sharing a lien on such borrower's properties, sell

or dispose of the property, rights, franchises, permits or any other assets

acquired and/or mortgaged pursuant to the provisions of this Decree until all

outstanding indebtedness to the NEA and any other such lender, including all

interest owing thereon, shall have been repaid: Provided, That the NEA

may by appropriate rule or regulation, grant general permission to borrowers to

dispose of incidental properties (excluding real property), rights, franchises,

permits or other assets no longer deemed necessary or useful in conducting the

borrower's operations.

No cooperative shall borrow money from any source without the Board of

Administrators' prior approval: Provided, That the Board of

Administrators may, by appropriate rule or regulation, grant general permission

to cooperatives to secure short term loans not requiring the encumbering of

their real properties or of a substantial portion of their other properties or

assets.

Section 11 Execution of Public Works Acts.

SEC. 11. Execution of Public Works Acts. — The NEA

shall execute all electrification projects that may be authorized in any Public

Works Acts; and for this purpose it may call for assistance and cooperation

consistently with Section 4 (j).

Section 12 Conflict of Interest.

SEC. 12. Conflict of Interest. — (a) No member,

officer, attorney, agent or employee of the NEA shall in any manner, directly or

indirectly, participate in the determination of any question affecting any

public service entity or other entity in which he is directly or indirectly

interested or any person to whom he is related within the third degree of

affinity or consanguinity, Any person violating the provisions of this

Subsection shall be removed from office and shall upon conviction be punished by

a fine not to exceed ten thousand (P10,000.00) pesos or imprisonment not to

exceed five years, or both.

(b) No officer or employee of the NEA or any government official who may

exercise executive or supervisory authority over the NEA, either directly or

indirectly, for himself or as the representative or agent of others, shall

become a guarantor, endorser, surety for loans from the NEA to others, or in any

manner be an obligor for money borrowed from the NEA. Any such officer or

employee who violates the provisions of this Subsection shall be punished by a

fine of not less than one thousand (P1,000.00) pesos nor more than five thousand

(P5,000.00) pesos, or imprisonment for not less than one year nor more than five

years, or both.

(c) No loan shall be granted by the NEA to any person related to any member

of the Board of Administrators or to the Administrator within the third degree

of consanguinity or affinity, or to any corporation, partnership, or company

wherein any member of the Board of Administrators or the Administrator is a

share holder: Provided, That the foregoing prohibition shall not apply

to a cooperative of which any member of the Board of Administrators or the

Administrator or any such relative is a member. Violation by any member of the

Board of Administrators or the Administrator of the provisions of this

Subsection is sufficient cause for his removal by the President of the

Philippines; and the violator shall furthermore be punished as provided

in Subsection (b).

(d) No fee, commission, gift, or charge of any kind shall be exacted,

demanded, or paid for obtaining loans from the NEA. Any officer, employee or

agent of the NEA or the Government exacting, demanding or receiving any fee,

commission, gift of charge of any kind for service in obtaining a loan shall be

punished by a fine of not less than one thousand (P1,000.00) pesos nor more than

three thousand (P3,000.00) pesos, or imprisonment for not less than one year nor

more than three years, or both.

(e) Any person who, for the purpose of obtaining, renewing, or increasing a

loan or the extension of the period thereof, on his own or another's behalf,

shall give any false information or cause through his intrigue or machination

the existence and production of any false information with regard to the

identity, situation, productivity or value of security, or with regard to a

point which might affect the granting or denial of the loan, whether the latter

has been consummated or not, and any officer or employee of the NEA who through

connivance shall allow by action or omission such false information to pass

unnoticed, thereby causing damage to the NEA or exposing the latter to the

danger of suffering such damage, shall be punished by a fine of not less than

the amount of the loan obtained or applied for nor more than three times such

amount, or imprisonment for not less than three months nor more than three

years, or both.

(f) Any officer or employee of the NEA who violates, or causes or permits

another person to violate, and any other person who violates or aids or abets

the violation of, any provision of this Decree not specifically punishable in

the preceding Subsections shall be punished by a fine not exceeding two thousand

(P2,000.00) pesos, or imprisonment not exceeding one year or

both.

Section 13 Supervision over NEA; Power Development Council.

SEC. 13. Supervision over NEA; Power Development

Council. — The NEA snail be under the supervision of the Office of the

President of the Philippines, All orders, rules and regulations promulgated, and

all appointments made by the NEA as well as transactions subject to the

authority and jurisdiction of the NEA involving more than five hundred thousand

(P500,000.00) pesos shall be subject to the approval of the Office of the

President of the Philippines.

In order to achieve coordination and cooperation among different agencies and

sectors having to do with electrification and power development, there is hereby

created a Power Development Council whose Chairman shall be a person or official

designated by the President of the Philippines, and its members shall be the

manager of the NPC, the NEA Administrator, the Director General of the NEDA, the

Chairman of the Board of Power and Waterworks, a representative of electric

cooperatives, to be chosen by a national association of electric cooperatives,

and a representative of the private sector.

The Council shall have a Secretariat to be headed by an Executive Secretary

and staffed by such number of personnel as may be determined by the Council. In

order to augment the expertise necessary in the performance of its functions,

the Council may secure the detail of personnel, either on a part-time or

full-time basis, as well as other forms of assistance from other government

offices and agencies, including government-owned or controlled corporations. The

qualifications and compensation of the personnel of the Secretariat shall be

determined by the Council, but their appointment shall be made by the

Chairman.

The salaries, expenses, operating expenses and such other necessary financial

outlays for PDC shall be provided for from a special annual assessment

to be determined by the Chairman of PDC and paid by the NEA and NPC.

The Council shall adopt an integrated plan of electrification and power

development, coordinate the activities and operations of all sectors involved in

electrification, and recommend such policies and measures to the proper

authorities and parties concerned as it may deem necessary to achieve the total

electrification objective declared in this Decree.

Section 14

SEC. 14. Exemption From All Taxes, Duties, Fees, Imposts

and Other Charges by Government and Government Instrumentalities. — The NEA

shall devote all its returns from its capital investments as well as excess

revenues from its operation to attain its objectives. To enable the NEA to pay

its indebtedness and obligations and in furtherance and effective implementation

of the policy enunciated in this Decree, the NEA is hereby declared exempt:

(a) From the payment of all taxes, duties, fees, imposts, charges, costs and

restrictions to the Republic of the Philippines, its provinces, cities,

municipalities, and other government agencies and instrumentalities, including

the taxes, duties, fees, imposts and other charges provided for under

the Tariff and Customs Code of the Philippines, Republic Act 1937, as amended by

Presidential Decree No. 34, dated October 27, 1972, and Presidential Decree No.

69, dated November 24, 1972, and filing and service fees and other charges or

costs in any court or administrative proceedings in which it may be a party;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the

National Government, its provinces, cities, municipalities and other government

agencies and instrumentalities;

(c) From all import duties, compensating taxes and advance sales tax,

wharfage fees on import of foreign goods required for its operations and

projects; and

(d) From all taxes, duties, fees, imposts, and all other charges imposed

directly or indirectly by the Republic of the Philippines, its provinces,

cities, municipalities and other government agencies and instrumentalities, on

all petroleum products used by the NEA in the generation, transmission,

utilization and sale of electric power.

Section 15 Organization and Purpose.

SEC. 15. Organization and Purpose. — Cooperative

non-stock, non-profit membership corporations may be organized, and electric

cooperative corporations heretofore formed or registered under the Philippine

Non-Agricultural Co-operative Act may as hereinafter provided be

converted, under this Decree for the purpose of supplying, and of promoting and

encouraging the fullest use of, service on an area coverage basis at the lowest

cost consistent with sound economy and the prudent management of the business of

such corporations.

Section 16 Powers.

SEC. 16. Powers. — A cooperative is hereby vested

with all powers necessary or convenient for the accomplishment of its corporate

purpose and capable of being delegated by the President or the National Assembly

when it comes into existence; and no enumeration of particular powers hereby

granted shall be construed to impair any general grant of power herein

contained, nor to limit any such grant to a power or powers of the same class as

those so enumerated. Such powers shall include, but not be limited to, the

power:

(a) To sue and be sued in its corporate name;

(b) To have existence for a period of fifty years;

(c) To adopt a corporate seal and alter the same;

(d) To generate, manufacture, purchase, acquire, accumulate and transmit

electric power and energy, and to distribute, sell, supply and dispose of

electric energy to persons who are its members and to other persons not in

excess of ten per centum of the number of its members: Provided,

however, That a cooperative may furnish electric cold storage or processing

plant service to non-members without limitation: And provided, further,

That a cooperative which acquires existing electric facilities may continue

service from such facilities without requiring such persons to become members,

but such persons may become members upon such terms as may be prescribed in the

cooperative's by-laws;

(e) To assist persons to whom service is or will be supplied by the

cooperative in wiring their premises and in acquiring and installing

electrically powered appliances, equipment, fixtures and machinery for

agricultural, commercial and industrial uses by the financing thereof or

otherwise, and in connection therewith to wire, or cause to be wired, such

premises, and to purchase, acquire, lease as lessor or lessee, sell, distribute,

install and repair such electrically-powered appliances, equipment, fixtures and

machinery;

(f) To assist persons to whom service is or will be supplied by the

cooperative in constructing, equipping, maintaining and operating electric cold

storage or processing plants, by the financing thereof or otherwise;

(g) To construct, purchase, lease as lessee, or otherwise acquire, and to

equip, maintain, and operate, and to sell, assign, convey, lease as lessor,

mortgage, pledge, or otherwise dispose of or encumber, electric transmission and

distribution lines or systems, electric generating plants, lands, buildings,

structures, dams, plants and equipment, and any other real or personal property,

tangible or intangible, which shall be deemed necessary, convenient or

appropriate to accomplish the purpose for which the cooperative is

organized;

(h) To purchase, lease as lessee, or otherwise acquire, and to use, and

exercise and to sell, assign, convey, mortgage, pledge or otherwise dispose of

or encumber franchises, rights, privileges, licenses and easements;

(i) To borrow money and otherwise contract indebtedness and to issue notes,

bonds, and other evidence of indebtedness and to secure payment thereof by

mortgage, pledge, or deed of trust of, or any other encumbrance upon, any or all

of its then owned or after-acquired real or personal property, assets,

franchises, or revenues: Provided, That any borrowing from or any

encumbering of its properties as security in favor of any lending sources other

than the NEA shall require the prior approval of the NEA Administrator and his

certification that such is in furtherance of the purposes and is consistent with

the provisions of this Decree, and that such borrowing and/or encumbering will

not diminish the security of, or of the ability of the cooperative to repay, any

then-outstanding indebtedness of the cooperative to the NEA or any other lending

source below the level of such security and ability were such additional

borrowing not being undertaken;

(j) To construct, maintain and operate electric transmission and distribution

lines along, upon, under and across publicly owned lands and public

thoroughfares, including, without Limitation, all roads, highways, streets,

alleys, bridges and causeways: Provided, That such shall not prevent or

unduly impair the primary public uses to which such lands and thoroughfares are

otherwise devoted;

(k) To exercise the power of eminent domain in the manner provided

by law for the exercise of such power by other corporations constructing or

operating electric generating plants and electric transmission and distribution

lines or systems;

(l) To become a member of other cooperatives or corporations or to own stock

therein, provided such cooperatives or corporations are engaged in a

business or activities germane to or having a reasonable relation to the

business or activities of the cooperative, its members, its directors, or its

employees;

(m) To conduct its business and exercise its powers within or without the

province or provinces in which it supplies service;

(n) To adopt, amend and repeal by-laws;

(o) To fix, maintain, implement and collect rates, fees, rents, tolls and

other charges and terms and conditions for service: Provided, That by

appropriate rules and regulations the NEA shall require that such shall be in

furtherance of the purposes and in conformity with the provisions of this

Decree; and

(p) To do and perform any other acts and things, and to have and exercise any

other powers which may be necessary, convenient or appropriate to accomplish the

purpose for which the cooperative is organized.

Section 17 Name.

SEC. 17. Name. — The name of a cooperative shall

include the words "Electric" and "Cooperative," and the abbreviation "Inc." The

name of a cooperative organized under this Decree shall be distinct from the

name of any other cooperative already organized or converted under this Decree.

The foregoing requirement shall not apply to any cooperative which becomes

subject to this Decree by complying with the provisions of Section 31.

Section 18 Incorporators.

SEC. 18. Incorporators. — Five or more persons,

including cooperatives, may organize a cooperative in the manner hereinafter

provided.

Section 19 Articles of Incorporation.

SEC. 19. Articles of Incorporation. —The articles

of incorporation of a cooperative shall recite that they are executed pursuant

to this Decree and shall state: (a) the name of the cooperative; (b) the address

of its principal office; (c) the names and addresses of the incorporators; and

(d) the names and addresses of its original directors, who shall constitute the

board until the first election of the board by the members; and may contain any

other provisions not inconsistent with this Decree that are deemed necessary or

advisable for the conduct of its business. Such articles shall be signed by each

incorporator and acknowledged by at least two of the incorporators (or on their

behalf, if they are cooperatives). It shall not be necessary to recite in the

articles of incorporation the purpose for which the cooperative is organized or

any of its corporate powers.

Section 20 By-Laws.

SEC. 20. By-Laws. — Unless reserved to the members

in the articles of incorporation, the power to adopt and thereafter to amend or

repeal by-laws shall vest in and be exercised by the board, the affirmative

votes of a clear majority of all directors in office, after due notice to all

directors, being requisite for such purpose. The by-laws shall set forth the

basic rights and duties of members and directors and may contain any other

provisions for the regulation and management of the affairs of the cooperative

not inconsistent with its articles of incorporation or this Decree.

Section 21 Members.

SEC. 21. Members. — Each incorporator of a

cooperative shall be a member thereof, but no other person may became a member

thereof unless such other person agrees to use services furnished by the

cooperative when made available by it. Membership in a cooperative shall not be

transferable, except as provided in the by-laws. The by-laws may

prescribe additional qualifications and limitations with respect to

membership.

The provision of any law or regulation to the contrary notwithstanding, an

officer or employee of the Government shall be eligible for membership in any

cooperative if he meets the qualifications therefor and he shall not be

precluded from being elected to or holding any position therein, or from

receiving such compensation or fee in relation thereto as may be authorized by

the by-laws: Provided, That elective officers of the Government except

barrio captains and councilors, shall be ineligible to become officers and/or

directors of any cooperative. For this purpose, individual permission need not

be obtained from the proper head of office: Provided, however, That

this authority shall not be construed as a permit to the government officer or

employee concerned to devote official time to the affairs of the

cooperative.

Section 22

SEC 22. Meetings of Members. (a) An annual meeting

of the members of a cooperative shall be held at such time and place as shall be

provided in the by-laws.

(b) Special meetings of the members may be called by the President, by the

board, by any three directors or, unless a smaller number or percentage be

prescribed in the by-laws, by not less than 100 members or five per centum of

all members, whichever shall be the lesser.

(c) Except as otherwise provided in this Decree and unless otherwise

provided for in the by-laws, written or printed notice stating the time

and place of each meeting of the members and, in the case of special meeting,

the purpose or purposes for which the meeting is called, shall be given to each

member, either personally or by mail, not less than ten days nor more than

twenty-five days before the date of the meeting. If mailed, such notice shall be

deemed to be given when deposited in the Philippine mail with postage prepaid,

addressed to the member at his address as it appears on the records of the

cooperative.

(d) Unless the by-laws prescribe the presence of a greater or lesser

percentage or number of the members for such purpose, a quorum for the

transaction of business at all meetings of the members of a cooperative having

not more than 1,000 members shall be five per centum of all members, present in

person, and of a cooperative having more than 1,000 members shall be five per

centum of all members or 100, whichever is lesser, present in person. If less

than a quorum is present at any meeting, a majority of those present in person

may adjourn the meeting from time to time without further notice.

(e) Each member shall be entitled to one vote of each matter submitted to a

vote at a meeting of the members. Voting shall be non-cumulative and in person,

but, if the by-laws so provide, may also be by mail or by

proxy.

Section 23 Waiver of Notice.

SEC 23. Waiver of Notice. — Any person entitled to

notice of a meeting may waive notice in writing either before or after such

meeting; however, his attendance shall constitute a waiver of notice of such

meeting, unless such person participates therein solely to object to the

transaction of any business because the meeting has not been legally called or

convened.

Section 24 Board of Directors.

SEC. 24. Board of Directors. — (a) The business of

a cooperative shall be managed by a board of not less than five directors, each

of whom shall be a member of the cooperative or of another which is a member

thereof. The by-laws shall prescribe the number of directors, their

qualifications other than those prescribed in this Decree, the manner of holding

meetings of the board and of electing successors to directors who shall resign,

die or otherwise be incapable of acting. The by-laws may also provide for the

removal of directors from office and for the election of their successors.-

Directors shall not receive any salaries for their services as such and, except

in emergencies, shall not receive any salaries for their services to the

cooperative in any other capacity without the approval of the members. The

by-laws may, however, prescribe a fixed fee for attendance at each meeting of

the board and may provide for reimbursement of actual expenses of such

attendance and of any other actual expenses incurred in the due performance of a

director's duties.

(b) The directors of a cooperative named in any articles of incorporation,

consolidation, merger or conversion shall hold office until the next annual

meeting of the members and until their successors are elected and qualify. At

each annual meeting or, in case of failure to hold the annual meeting as

specified in the by-laws, at a special meeting called for that purpose, the

members shall elect directors to hold office until the next annual meeting of

the members, except as otherwise provided in this Decree. Each director

shall hold office for the term for which he is elected and until his successor

is elected and qualifies.

(c) Instead of electing all the directors annually, the by-laws may provide

that each year half of them or one-third of them, or a number as near thereto as

possible, shall be elected on a staggered term basis to serve two-year terms or

three-year terms, as the case may be.

(d) A majority of the board of directors in office shall constitute a

quorum.

(e) The board shall exercise all of the powers of a cooperative not conferred

upon or reserved to the members by this Decree or by its articles of

incorporation or by-laws.

Section 25 Districts.

SEC. 25. Districts. — The by-laws may provide for

the division of the territory served or to be served by a cooperative into two

or more districts for any purpose, including, without limitation, the nomination

and election of directors. The by-laws shall prescribe the boundaries of the

districts, or the manner of establishing such boundaries, the manner of changing

such boundaries, and the manner in which such districts shall function.

Section 26

SEC. 26. Officers. The officers of a cooperative

shall consist of a president, vice-president, secretary and treasurer, who shall

be elected annually by and from the board. When a person holding any such office

ceases to be a director, he shall ipso facto cease to hold such office. The

offices of secretary and treasurer may be held by the same person. The board may

also elect or appoint such other officers, agents, or employees as it deems

necessary or advisable and shall prescribe their powers and duties. Any officer

may be removed from office and his successor elected in the manner prescribed in

the by-laws.

Section 27 Amendment of Articles of Incorporation.

SEC. 27. Amendment of Articles of Incorporation. —

A cooperative may amend its articles of incorporation by complying with the

following requirements: Provided, however, That a change of location of

principal office may effected in the manner set forth in Section 28. The

proposed amendment shall be presented to a meeting of the members, the notice of

which shall set forth or have attached thereto the proposed amendment or an

accurate summary thereof. If the proposed amendment, with any changes, is

approved by the affirmative vote of not less than two-thirds of the total votes

cast thereon at such meeting, articles of amendment shall be executed and

acknowledged on behalf of the cooperative by its president or vice-president and

its seal shall be affixed thereto and attested by its secretary. The articles of

amendment shall recite that they are executed pursuant to this Decree and shall

state: (1) the name of the cooperative; (2) the address of its principal office;

and (3) the amendment to its articles of incorporation. The president or

vice-president executing such articles of amendment shall make the annex thereto

an affidavit stating that the provisions of this Section with respect to the

amendment set forth in such articles were duly complied with.

Section 28 Change of Location of Principal Office.

SEC. 28. Change of Location of Principal Office. —

A cooperative may, upon authorization of its board or members change the

location of its principal office by filing a certificate reciting such change of

principal office, executed and acknowledged by its president or vice-president

under its seal attested by its secretary, in the place provided for in

Section 29 Consolidation.

SEC. 29. Consolidation. — Any two or more

cooperatives (each of which is hereinafter designated a "consolidating

cooperative") may consolidate into a new cooperative (hereinafter designated the

"new cooperative"), by complying with the following requirements:

(a) The proposition for the consolidation of the consolidating cooperatives

into the new cooperative and proposed articles of consolidation to give effect

thereto shall be submitted to a meeting of the members of each consolidating

cooperative, the notice of which shall have attached thereto a copy of the

proposed articles of consolidation or an accurate summary thereof.

(b) If the proposed consolidation and the proposed articles of consolidation,

with any amendments, are approved by the affirmative vote of not less than

two-thirds of the total votes cast thereon by each consolidating cooperatives

voting thereon at each such meeting, articles of consolidation in the form

approved shall be executed and acknowledged on behalf of each consolidating

cooperative by its president or vice-president and its seal shall be affixed

thereto and attested by its secretary. The articles of consolidation shall

recite that they are executed pursuant to this Decree and shall state: (1) the

name of each consolidating cooperative and the address of its principal office;

(2) the name of the new cooperative and the address of its principal office; (3)

a statement that each consolidating cooperative agrees to the consolidation; (4)

the names and addresses of the directors of the new cooperative; and (5) the

terms and conditions of the consolidation and the mode of carrying the same into

effect, including the manner in which members of the consolidating cooperatives

may or shall become members of the new cooperative; and may contain any other

provisions not inconsistent with this Decree that are deemed necessary or

advisable for the conduct of the business of the new cooperative. The president

or vice-president of each consolidating cooperative executing such articles of

consolidation shall make and annex thereto an affidavit stating that the

provisions of this Section with respect to such articles were duly complied with

by such cooperative.

Section 30 Merger.

SEC. 30. Merger. — Any one or more cooperatives

(each of which is hereinafter designated a "merging cooperative") may merge with

one or more other cooperatives by complying with the following requirements:

(a) The proposition for the merger of the merging cooperatives into the

surviving cooperative and proposed articles of merger to give effect thereto

shall be submitted to a meeting of the members of each merging cooperative and

of the surviving cooperative, the notice of which shall have attached thereto a

copy of the proposed articles of merger or an accurate summary thereof.

(b) If the proposed merger and the proposed articles of merger, with any

amendments, are approved by the affirmative vote of not less than two-thirds of

the total votes cast thereon by each cooperative voting thereon at each such

meeting, articles of merger in the form approved shall be executed and

acknowledged on behalf of each such cooperative by its president or

vice-president and its seal affixed thereto and attested by its secretary. The

articles of merger shall recite that they are executed pursuant to this Decree

and shall state: (1) the name of each merging cooperative and the address of its

principal office;(2) the name of the surviving cooperative and the address of

its principal office; (3) a statement that each merging cooperative and the

surviving cooperative agree to the merger; (4) the names and addresses of the

directors of the surviving cooperative; and (5) the terms and conditions of the

merger and the mode of carrying the same into effect, including the manner in

which members of the merging cooperatives may or shall become members of the

surviving cooperative and may contain any other provisions not inconsistent with

this Decree that are deemed necessary or advisable for the conduct of the

business of the surviving cooperative. The president or vice-president or each

cooperative executing such articles of merger shall make and annex thereto an

affidavit stating that the provisions of this Section with respect to such

articles were duly complied with by such cooperative.

Section 31 Effect of Consolidation or Merger.

SEC. 31. Effect of Consolidation or Merger. — (a)

In the case of consolidation, the existence of the consolidating cooperative

shall cease and the articles of consolidation shall be deemed to be the articles

of incorporation of the new cooperative; and in the case of merger, the separate

existence of the merging cooperatives shall cease and the articles of

incorporation of the surviving cooperative shall be deemed to be amended to the

extent, if any, that changes therein are provided for in the articles of

merger;

(b) All rights, privileges, immunities and franchises and all property, real

and personal, including without limitation applications for membership, all

debts due on whatever account and all other choses in action of each of the

consolidating or merging cooperatives shall be deemed to be transferred to and

vested in the new or surviving cooperative without further act or deed;

(c) The new or surviving cooperative shall be responsible and liable for all

the liabilities and obligations of each of the consolidating or merging

cooperatives, and any claim existing or action or proceeding pending by or

against any of the consolidating or merging cooperatives may be prosecuted as if

the consolidation or merger has not taken place, but the new or surviving

cooperatives shall be substituted in its place; and

(d) Neither the rights of creditors nor any liens upon the property of any

such cooperatives shall be impaired by such consolidation or

merger.

Section 32 Conversion of Existing Corporation.

SEC. 32. Conversion of Existing Corporation. — Any

corporation heretofore organized or registered under the Philippine

Non-Agricultural Co-operative Act and supplying or having the corporate power to

supply electric energy may convert itself into a cooperative under this Decree

by complying with the following requirements, and shall thereupon become subject

to this Decree with the same effect as if originally organized hereunder:

(a) The proposition for the conversion of such corporation and proposed

articles of conversion to give effect thereto shall be submitted to a meeting of

the members or stockholders of such corporation, the notice of which shall have

attached thereto a copy of the proposed articles of conversion or an accurate

summary thereof.

(b) If the proposition for the conversion and the proposed articles of

conversion, with any amendments, are approved by the affirmative vote of not

less than two-thirds of the total votes cast thereon by members at such meeting,

and/or, if such corporation is a stock corporation or has both members and

voting stockholders, by the affirmative vote of the holders of not less than

two-thirds of those shares of the capital stock of such corporation represented

at such meeting and voting thereon, articles of conversion in the form approved

shall be executed and acknowledged on behalf of such corporation by its

president or vice-president and its seal shall be affixed thereto and attested

by its secretary. The articles of conversion shall recite that they are executed

pursuant to this Decree and shall state: (1) the name of the corporation and the

address of its principal office prior to the conversion into a cooperative; (2)

a statement that such corporation elects to become a cooperative, non-profit,

membership corporation subject to this Decree; (3) its name as a cooperative;

(4) the addresses of the principal office of the cooperative; (5) the names and

addresses of the directors of the cooperative, and (6) the manner in which

members or stockholders of such corporation may or shall become members of the

cooperative; and may contain any other provisions not inconsistent with this

Decree that are deemed necessary or advisable for the conduct of the business of

the cooperative. The president or vice-president executing such articles of

conversion shall make an annex thereto an affidavit stating that the provisions

of this Section were duly complied with in respect to such articles. The

articles of conversion shall be deemed to be the articles of incorporation of

the cooperative.

Section 33 Dissolution.

SEC. 33. Dissolution. — A cooperative may be

dissolved in the following manner: The proposition to dissolve shall be

submitted to the members of the cooperative at any annual or special meeting,

the notice of which shall set forth such proposition. The members at any such

meeting shall approve, by the affirmative vote of not less than a majority of

all members of the cooperative, the proposition that the cooperative be

dissolved ( hereinafter designated the "certificate") shall be executed and

acknowledged on behalf of the cooperative by its president or vice-president

under its seal, attested by its secretary, stating: (1) the name of the

cooperative; (2) the address of its principal office; and (3) that the members

of the cooperative have duly voted that the cooperative be dissolved. Also, an

affidavit, made by its president or vice-president executing the certificate,

shall state that the statements in the certificate are true. Upon the filing of

the certificate and affidavit as provided for in Section 34, the

cooperative shall cease to carry on its business except to the extent necessary

for the winding up thereof, but its corporate existence shall continue until

articles of dissolution shall have been filed. The board shall immediately cause

notice of the dissolution proceedings to be mailed to each known creditor of and

claimant against the cooperative and to be published once a week for two

successive weeks in a newspaper of general circulation in the territory in which

the principal office of the cooperative is located. The board shall wind up and

settle the affairs of the cooperative, collect sums owing to it, liquidate its

property and assets, pay and discharge its debts, obligations and liabilities,

other than those to patrons arising by reason of their patronage, and do all

other things required to wind up its business; and, after paying or discharging

or adequately providing for the payment or discharge of all its debts,

obligations and liabilities, other than those to patrons arising by reason of

their patronage, shall distribute any remaining sums and/or unliquidated assets,

first, to patrons for the pro rata return of all amounts standing to their

credit by reason of their patronage; second, to members for the pro rata

repayment of membership fees; and third, to patrons for the amounts of any

outstanding contributions in aid of construction they have made. Any sums and/or

unliquidated assets then remaining shall be distributed in such manner as

provided in the cooperative's articles of incorporation or by-laws,

which may provide for distribution of such sums or assets on a patronage basis

to persons who were members in one or more prior years or for transfer thereof

to a new cooperative to succeed the one being dissolved. The board shall

thereupon authorize the execution of articles of dissolution, which shall be

executed and acknowledged on behalf of the cooperative by its president or

vice-president, and its seal shall be affixed thereto and attested by its

secretary. The articles of dissolution shall recite that they are executed

pursuant to this Decree and shall state: (1)the name of the cooperative; (2) the

address of its principal office; (3) the date on which the certificate of

election to dissolve was filed; (4) that there are no actions or suits pending

against the cooperative; (5) that all debts, obligations and liabilities of the

cooperative have been paid and discharged or that provision to the extent

possible has been made therefor; and (6) that the provisions of this Section

have been duly complied with. The president or vice-president executing the

articles of dissolution shall make the annex thereto an affidavit stating that

the statements made therein are true.

Section 34

Section 34.

Section 35 Nonprofit, Non-discriminatory, Area Coverage Operation and Service.

SEC. 35. Nonprofit, Non-discriminatory, Area Coverage

Operation and Service. — A cooperative shall be operated on a non-profit

basis for the mutual benefit of its members and patrons; shall, as to rates and

services make or grant no unreasonable preference or advantage to any member or

patron nor subject any member or patron to any unreasonable prejudice or

disadvantage; shall not establish or maintain any unreasonable difference as to

rates or services either as between localities or as between classes of service;

shall not give, pay or receive any rebate or bonus, directly or indirectly, or

mislead its members in any manner as to rates charged for its services; and

shall furnish service on an area coverage basis: Provided, That, for

any extension of service which if treated on the basis of standard terms and

conditions is so costly as to jeopardize the financial feasibility of the

cooperative's entire operation, the cooperative may require such contribution in

aid of construction, such facilities extension deposit, such guarantee of

minimum usage for a minimum term or such other reasonable commitment on the part

of the person to be served as may be necessary and appropriate to remove such

jeopardy, but no difference in standard rates for use of service shall be

imposed for such purpose.

The by-laws of a cooperative or its contracts with members and patrons shall

contain such reasonable terms and conditions respecting membership, the

furnishing of service and the disposition of revenues and receipts as may be

necessary and appropriate to establish and maintain its non-profit, cooperative

character and to assure compliance with this Section, No bona fide applicant for

membership on non-member patronage who is able and willing to satisfy and abide

by all such terms and conditions shall be denied arbitrarily, capriciously or

without good cause.

Section 36 Disposition of Property.

SEC. 36. Disposition of Property. — (a) The board

of a cooperative shall have full power and authority, without authorization by

the members thereof, to authorize the execution and delivery of a mortgage or a

deed of trust, or the pledging or encumbering otherwise, of any or all of the

property, assets, rights, privileges, licenses, franchises and permits of the

cooperative, whether acquired or to be acquired, and wherever situated, as well

as the revenues therefrom, all upon such terms and conditions as the board shall

determine, to secure any borrowing by or indebtedness of the cooperative.

(b) A cooperative may not otherwise sell, lease or except by consolidation or

merger, otherwise dispose of the property (other than merchandise and property

which shall represent not in excess of ten per centum of the value of the

cooperative's total assets, or which in the judgment of the board are not

necessary or useful in operating the cooperative) unless such sale, lease or,

except in the case of consolidation or merger, other disposition is (1)

authorized by the affirmative vote of not less than a majority of all members of

the cooperative and (2) consented to by the NEA and any other lending source

which then holds a lien on any of the cooperative's properties.

Section 37 Non-liability of Members for Debts of Cooperative.

SEC. 37. Non-liability of Members for Debts of

Cooperative. — No member shall be liable or responsible for any debts of

the cooperative and the property of the members shall not be subject to

execution therefor.

Section 38 Limitation of Actions.

SEC. 38. Limitation of Actions. — No action or suit

may be brought against a cooperative, or against any agent, servant or employee

thereof, by reason of the maintenance of electric transmission or distribution

lines, or any related equipment, facilities or machinery, on any real property

after the expiration of a period of five (5) years of continuous maintenance of

such lines or related equipment facilities or machinery.

Section 39

SEC. 39. Assistance to Cooperatives; Exemption from

Taxes, Imposts, Duties,- Fees; Assistance from the National Power

Corporation. — Pursuant to the national policy declared in Section 2, the

Congress hereby finds and declares that the following assistance to cooperatives

is necessary and appropriate:

(a) Provided that it operates in conformity with the purposes and

provisions of this Decree, a cooperative (1) shall be permanently exempt from

paying income taxes, and (2) for a period ending on December 31; of the

thirtieth full calendar year after the date of a cooperative's organization or

conversion hereunder, or until it shall become completely free of indebtedness

incurred by borrowing, whichever event first occurs, shall be exempt from the

payment (A) of all National Government, local government and municipal taxes and

fees, including any franchise, filing, recordation, license or permit fees or

taxes and any fees, charges, or costs involved in any court or administrative

proceeding in which it may be a party, and (B) of all duties or imposts on

foreign goods acquired for its operations, the period of such exemption for a

new cooperative formed by consolidation, as provided for in Section 29,

to begin from as of the date of the beginning of such period for the constituent

consolidating cooperative which was most recently organized or converted under

this Decree: Provided, That the Board of Administrators shall, after

consultation with the Bureau of Internal Revenue, promulgate rules and

regulations for the proper implementation of the tax exemptions

provided for in this Decree.

(b) The National Power Corporation shall, except with respect to the National

Government, give preference in the sale of its power and energy to cooperatives,

and shall otherwise provide the maximum support of and assistance to

cooperatives of which it is capable, including assistance in developing

dependable and reliable arrangements for their supplies of bulk power, either

from itself, or from other sources. In pursuance of the foregoing policy, the

National Power Corporation shall not, except upon prior written agreement

approved by the cooperative's board, compete in the sale of power and energy

which without regard to the location of the point of delivery thereof, will be

utilized and consumed within any area franchised to a

cooperative.

Section 40 Exemption from Board of Power and Waterworks and Securities Exchange Commission.

SEC. 40. Exemption from Board of Power and Waterworks and

Securities Exchange Commission. — (a) Cooperatives shall be exempt from

regulation by the Board of Power and Waterworks.

(b) The provisions of the Securities Act shall not apply to any note, bond or

other evidence of indebtedness issued by any cooperative or to any mortgage,

deed of trust, indenture or other instrument executed to secure the same. The

provisions of said Act shall not apply to the issuance of membership

certificates or any other evidence of member or patron interest by a

cooperative.

Section 41 Applicability.

SEC. 41. Applicability. — This Chapter shall apply

only to electric franchises as in Section 3 defined. It shall not be applicable

to franchises for any other utility service or to those separable portions of

franchises covering any other type of utility service though such franchises may

also cover electric service. The Board of Administrators shall hear and

determine all questions which may arise under this Section.

Section 42 Repeal of Franchise Powers of Municipal, City and Provincial Governments.

SEC. 42. Repeal of Franchise Powers of Municipal, City

and Provincial Governments. — The powers of municipal, city and provincial

governments to grant franchises, as provided for in Title 34 of the

Philippines Statutes or in any special law, are hereby repealed:

Provided, That this Section shall not impair or invalidate any

franchise heretofore lawfully granted by such a government or repeal any other

subsisting power of such governments to require that electric facilities and

related properties be so located, constructed, operated and maintained as to be

safe to the public and not to unduly interfere with the primary use of streets,

roads, alleys and other public ways, buildings and grounds over, upon or under

which they may be built.

Section 43 Franchising Powers Delegated to the NEA.

SEC. 43. Franchising Powers Delegated to the NEA. —

The power hereafter to grant and thereafter to repeal, alter or amend new

franchises, heretofore granted by the Congress (or by the President, or by the

National Assembly after it comes into existence), and to repeal, alter or amend

all franchises heretofore granted by any municipal, city or provincial

government, is hereby delegated to the NEA, whose Board of Administrators shall,

acting as a Commission, administer the provisions of this Chapter. Provisions of

Republic Act 2677 to the contrary notwithstanding, no municipality shall

hereafter initiate the operation, or after December 31, 1973, continue any

operation, heretofore initiated, of any service for sale at retail unless it

shall first obtain a franchise from the NEA in accordance with the provisions of

this Chapter. In exercising the powers herein delegated, the NEA shall at all

times seek to serve the National objective of the most rapid total

electrification of the Philippines on an area coverage basis. Without limiting

the generality of the foregoing sentence, the NEA is hereby authorized,

empowered and directed:

(a) Within one hundred eighty days after the effective date of this Chapter

(and periodically thereafter, at least once annually) to notify and require

every person holding a franchise to report to it, within not less than ninety

days after such notice, an accurate description of the geographic area

encompassed in such franchise, the number of households therein receiving

adequate and dependable service, the number of households therein receiving

service which is not adequate and dependable, the number and type of other

retail customers therein receiving adequate and dependable service or service

which is not adequate and dependable, the approximate total number of households

therein, the date such franchise was granted and such other information and data

as the NEA for the purpose of implementing this Section may require, and, on the

basis of such reports and otherwise, including complaints:

to review such franchises to determine whether the holders thereof are

furnishing service on an area coverage basis or are engaged in effective

measures to furnish such service within a reasonable time;

to repeal and cancel any franchise if the NEA finds that the holder thereof

is not then furnishing, and is unable or unwilling within a reasonable time to

furnish adequate and dependable service on an area coverage within such area;

and

to alter and condition such or other existing franchises and to issue new

franchises to the end of assuring area coverage service throughout the Nation as

in this Decree contemplated: Provided, That no franchise shall be

altered, conditioned, repealed or cancelled, and no franchise shall be granted,

without first affording the holder thereof, or the contending applicants

therefor, if such be the case, and any other interested parties opportunity for

hearing; and

(b) Upon determining, after affording opportunity for hearing to all

interested parties, that such is necessary or appropriate to assure or expedite

the furnishing of service on an area coverage basis, to require any public

service entity to interconnect its generation, transmission or distribution

facilities or related facilities with, and through such interconnection to

exchange, sell or purchase power and energy with, to or from or to transmit

power and energy on behalf of, any other public service entity, or if it so

requires or consents, the NPC; and, if such public service entities (and, if

such be the case, the NPC) are unable between or among themselves to agree upon

such, to establish the manner and degree, to fix and apportion the financial

responsibility and sharing of costs, and to determine the other terms and

conditions of such interconnection, exchange, sale, purchase or transmission:

Provided, however, That the provisions of Section 45 to the contrary

notwithstanding, the provisions of this paragraph shall apply to industrial

plants, factories, mills, mines and similar or other power generating entities

in which case they shall qualify as public service entities for purposes of

Section 44 Preference to Cooperatives.

SEC. 44. Preference to Cooperatives. — Whenever two

or more public service entities are affected by and have competing or

conflicting interests with respect to the granting repeal, alteration or

conditioning of the same franchise or franchises, and one or more of such

entities are cooperatives, the NEA shall accord preference to a cooperative over

any other type of public service entity (and shall prefer one cooperative over

another) unless and except to the extent that an order in favor of another type

of public service entity (or of another cooperative) will, as found by the NEA,

result both earlier and ultimately in the furnishing and extending of area

coverage service (1) to a greater number of households (2) over a larger

geographic area, and (3) on the basis of the same or lower rates charges and

fees.

Section 45 Furnishing Service Without a Franchise Prohibited.

SEC. 45. Furnishing Service Without a Franchise

Prohibited. — No person shall furnish or extend service to the public

within any area for which such person has not been granted a franchise or after

such franchise has been repealed and cancelled or so conditioned or altered as

to prohibit service therein: Provided, That such service may be

continued and extended therein, and the NEA, after affording opportunity for

hearing to any interested party, may by order require that it be so continued

and extended, until service to the customers of such person is made available by

a public service entity lawfully authorized to serve therein

Section 46 Additional Regulation of Cooperatives by the NEA.

SEC. 46. Additional Regulation of Cooperatives by the

NEA. — in addition to the other ways in which cooperatives are subject to

regulation by the NEA as provided in this Decree, the NEA, on its own

motion or upon complaint but only after affording opportunity for hearing to all

interested parties, is empowered to and shall (1) require a cooperative to

extend or improve service upon the NEA's determination that such should be done

in furtherance of the purposes of this Decree and that such may reasonably be

done without undue impairment of the feasibility of the cooperative's operations

and financial condition; and (2) require a cooperative to cease and correct any

practice or act which the NEA determines to be in violation of the provisions of

Section 47 Hearings and Investigation.

SEC. 47. Hearings and Investigation. — The NEA is

empowered to conduct such hearings and investigations and to issue such orders

as are necessary for it to implement the provisions of this Chapter, and in

connection therewith, without necessity of previous hearing, to require any

public service entity or the officials thereof to furnish to it such information

and data, including statements of account, schedules of rates, fees and charges,

contracts, service rules and regulations, articles of incorporation, by-laws,

audit reports and other internal records, documents, policies and procedures, as

will enable the NEA to be sufficiently informed in exercising its powers and

authorities: Provided, That no order shall issue finally determining

and substantially affecting any right of any person subject to the NEA's

jurisdiction without first affording such person and any other interested person

opportunity for hearing as a party in the hearing proceeding.

Section 48 Parties and Intervenors in NEA's Proceedings.

SEC. 48. Parties and Intervenors in NEA's Proceedings.

— Public service entities or any other interested person may invoke the

NEA's exercise of its powers and authorities provided for in Sections

43, 44, 45, 46 and 47 by filing verified applications or complaints with the

NEA, and the NEA, on its own motion solely, may institute proceedings in

connection with all matters coming under its jurisdiction as provided

for in said sections. In any proceeding conducted by the NEA, including

proceedings to establish NEA rules and regulations, all persons having a

substantial interest therein shall, upon petition therefor, be permitted by the

NEA to intervene as full parties, and the NEA, in its discretion, may permit

persons having an insubstantial interest therein to intervene as a full party or

on such limited basis as the NEA may prescribe.

Section 49

SEC. 49. NEA Rules and Regulations — The NEA shall

establish appropriate rules and regulations to carry out the provisions of this

Chapter IV, including rules for the conduct of NEA investigations, proceedings

and hearings; and shall timely publish the same when adopted or amended to the

end that all persons affected thereby shall be given reasonable notice

thereof.