“The NEA shall immediately step-in and take over from its Board the operations of any ailing electric cooperative. Within a reasonable period after take-over, the NEA may convert the ailing cooperative to either a stock cooperative registered with the CDA or a stock corporation registered with the Securities and Exchange Commission (SEC).
“The NEA shall, in determining the propriety of the conversion, be guided by the ability of the member-consumers of said electric cooperative to pay for their shares in the stock cooperative or stock corporation.
“The NEA may appoint or assign third persons to the Board of the electric cooperative until the NEA decides that the election of a new board of directors to manage the electric cooperative is necessary. The NEA may create a management team for the purpose.
“The NEA shall, in the exercise of its step-in rights under this Act, strictly observe due process of law. The step-in rights may only be exercised by the NEA in case of failure of the electric cooperative to meet operational and financial standards set by the NEA or in other analogous instances set forth in the IRR of this Act.”
What I quoted above is Section 7 of Republic Act No. 10531 (May 7, 2013) otherwise known as the “NEA Reform Act of 2013.”
It amended PD 269 (August 6, 1973), the Martial Law-era executive legislation that fully-organized NEA, by inserting a new provision after Section 4—hence it’s referred to as “Section 4-B.”
Before this insertion, the original Section 4 of PD 269 enumerated FIFTEEN (15) specific powers of NEA.
They do NOT include the power to directly take over the operations of an electric cooperative (ex. BENECO). PD 269, before amendment, did NOT give NEA the power to appoint an acting general manager, install a “Project Supervisor,” terminate its duly-elected Board of Directors en masse, and pad that board with handpicked appointees selected according to no particular criteria, vetted according to unknown qualification standards, and with everything being done with undue haste and in total secrecy.
Imagine that—even at the height of Martial Law when President Ferdinand E. Marcos was a completely unfiscalized, unopposed and unchallengeable total dictator, it did not even occur to him to cloak NEA with god-like powers like these.
No, that had to happen under the liberal and democratic administration of President Benigno “PNoy” Aquino III.
It was during his watch that this notorious “Section 4-B” was inserted in PD 269 (May 7, 2013) granting NEA those sweeping powers under the so-called “Step-in Rights Over Ailing Cooperatives.”
What this means is that BENECO must be an ailing cooperative. This is the ONLY CONDITION under which Section 4-B can come into play. The “Step-in Rights” cannot be triggered by any other circumstances.
Don’t believe any factchecking wolf in sheep’s clothing who will try to tell you otherwise. The proof of the pudding is in the eating, not in the p-r spinning.
Without “Section 4-B” in the picture, there is no way the NEA Board of Administrators (NEA-BOA) or the Administrator himself can take complete control over BENECO, as they have, starting that fateful Day of Grand Betrayal last January 12, 2023.
The powers of the NEA-BOA are specifically enumerated in Chapter II, Section 5, par. “a” of PD 269. There are ONLY FIVE specific powers enumerated by the law (very long to quote and irrelevant to this discussion, so I’ll omit).
What’s important to know is that these powers do NOT INCLUDE tinkering with the organizational structure of BENECO (i.e., any EC), either.
However, on October 8, 1979, President Marcos (Sr.) issued PD 1645, which added a SIXTH power of the NEA-BOA, extending Section 5(a), Chapter II of Presidential Decree No. 269 by adding sub-paragraph (6) which states: “(6) To authorize the NEA Administrator to designate, subject to the confirmation of the Board Administrators, an Acting General Manager and/or Project Supervisor for a Cooperative where vacancies in the said positions occur and/or when the interest of the Cooperative and the program so requires, and to prescribe the functions of said Acting General Manager and/or Project Supervisor, which powers shall not be nullified, altered or diminished by any policy or resolution of the board of directors of the cooperative concerned.”
Someone will try to spin around this provision to say, “See? It’s ‘normal’ for the NEA Administrator to appoint an AGM and a ‘Project Supervisor’ without necessarily implying that BENECO is ailing. That is fake news!”
No.
If you read Section 3 of PD 1645 carefully, it contemplates a situation where there is a VACANCY in the position of General Manager—NEA can fill up that vacancy. (There is ALWAYS a vacancy in the position of “Project Supervisor” of course, because that is ALWAYS filled up simultaneously with its creation!)
What NEA did last January was CREATE a vacancy in the GM position by revoking its own appointment of Atty. Marie Rafael—AND making it very clear that they STILL did not recognize Mel Licoben as the GM.
But Section 3 makes it clear that after NEA appoints an Acting GM and/or a Project Supervisor, it shall prescribe their functions which—and this is the most important part—cannot be nullified, altered or diminished BY THE BOARD OF DIRECTORS OF THE COOPERATIVE CONCERNED.
Clearly, PD 1645 contemplates a situation where the duly-elected Board of Directors IS LEFT UNTOUCHED, so much so that they are restrained from bullying whoever NEA appoints as acting general manager.
What happened in BENECO on January 12, 2023 is NEA booted out the ENTIRE board of directors–the one that the law said should not impede a NEA-appointed GM or PS. I suppose you can say now that they’re out, they really can no longer impede NEA’s handpicked GM or PS. But that is clearly NOT what the law contemplates.
The law envisions the EXISTING duly-elected board to remain functional and continue to enact policies and resolutions–except that these policies and resolution may not nullify, diminish or alter the functions prescribed by NEA for its management appointee(s).
In other words, in exercising its “step-in rights” NEA can, arguably, muzzle the existing board BUT IT CANNOT FIRE THEM ALL ARBITRARILY. That’s the whole point of the cautionary provision that NEA “must always observe due process.”
What you have in BENECO today is an “Interim Board of Directors” composed of five (5) handpicked appointees of NEA.
Naturally, the possibility of these five NEA-sponsored, NEA-installed directors taking any action NULLIFYING the policy intentions of NEA ranges from zero to none.
They will never challenge any functions prescribed by the NEA administrator for the acting general manager (and to HIMSELF as ‘Project Supervisor’) for the most common sensical reason that THEY themselves were appointed BY the NEA Administrator. Duh.
So what is in play in the appointment of these “third persons”—a vague allusion to their NOT being organic to the cooperative—is not the power of NEA to appoint independent directors during normal times, but the power to appoint an ENTIRE BOARD OF DIRECTORS of a coop under distress.
Another tell-tale sign that the conditions obtaining in South Drive today FIT MORE the contingency measures outlined for an ailing cooperative is NEA’s over-insistence on its use of the term “Task Force BENECO” which resonates with the “Management Team” mentioned in Section 7 of RA 10531.
There are no clear provisions on how a cooperative’s officers who will act as members of a “task force” or “management team” are to be selected, under distress conditions.
But there ARE if the selection is done under NORMAL conditions. This is spelled out in Section 26 of PD 269: “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.”
I have not heard either NEA or BENECO refer to any of the five interim directors as the “BENECO President” or “BENECO vice-president,” or “treasurer” or “secretary.”
I’ve heard somebody describe herself as BENECO’s ‘corporate secretary’—a position that doesn’t exist—first of all because BENECO is NOT a corporation, to begin with. It’s a cooperative, with a Board of Directors—whose BOARD SECRETARY is elected BY and FROM the sitting directors, as Section 26 of PD 269 clearly states. This means the true secretary of the Board of BENECO—to be legitimate—must be among the directors appointed to the Interim Board, and must be ELECTED to the position by the members of the Board that must include the nominee himself or herself.
Am I saying that the ‘corporate secretary’ is illegal?
No.
Like I said, there is a way–the ONLY WAY, in fact–for the situation in South Drive today to fall squarely within the purview of the law. And that is is to reckon that this is the scenario of NEA exercising its “Step-in Rights” under Section 4-B.
Why? Because it is only this scenario that is malleable enough to allow three things: (1) the designation of a ‘corporate secretary’ who is not a director, but assigned by virtue of some special appointment as a member of a “task force” or “management team”—which is perfectly fine so long as you “come clean” about it instead of confusing people with unexplainable self-nomenclatures, (2) run the regular daily business of BENECO with a clear understanding of the legal basis of who SIGNS THE CHECKS (who among the 5 interim directors co-signs with the acting general manager, or is it the Project Supervisor?) and (3) the matter of WHEN to call elections for the regular board of directors is left ENTIRELY to the discretion of NEA.
The words “until the NEA decides that the election of a new board of directors to manage the electric cooperative is necessary” is too overbroad, not cannalized by any check-and-balancing factors that it is IMPOSSIBLE to determine when NEA would think the elections are already necessary. And because you don’t know what informs that decision, it is impossible to even AIM for achieving that readiness.
In one sentence, there will be district elections WHEN NEA says there will be district elections, period.
Or, rather, when NEA thinks it’s even NECESSARY.
In constitutional and administrative law, we call that capricious discretion a “ROVING COMMISSION.”
It is unconstitutional.*
The author is a writer and lawyer based in Baguio City, Philippines. Former editor of the Gold Ore and Baguio City Digest, professor of journalism, political science and law at Baguio Colleges Foundation (BCF). He is a photographer and video documentarist. He has a YouTube channel called “Parables and Reason”