RURAL ELECTRIFICATION PROGRAM 36 Years RURAL ELECTRIFICATION PROGRAM 5 October 2005 Honesty, Efficiency and Solidarity Auditorium

REPUBLIC ACT 6038 (1969) Created NEA as the Primary Agency to implement the RURAL ELECTRIFICATION PROGRAM (REP) Provided for the organization & supervision by NEA of ELECTRIC COOPERATIVES (ECs) nationwide

Characteristics of Rural Electrification During the Early Years of Implementation Electrification was made possible by using small generating units of 30 to 60 kw Service was only available in municipal centers Low voltage of electricity suitable only for lighting Service was available for 3 to 6 hours usually in the evening

Davao Light & Power Co., Inc. STATUS OF RE PROGRAM June 1969 Cabanatuan Elect Corp Sapang Palay Rural Electric Service Cooperative Dagupan Elect Corp Northern Nueva Ecija Electric Service Cooperative MERALCO Infanta Light & Power Service Cooperative Porac Electric Service AEC & SFELAPCO Cabatuan Community Electric Coop Assoc, Inc. Six Mexican Barrios Electric Service Cooperative PECO VECO & MECO Lubang Electric Service Cooperative CEPALCO Victorias Electric Service Cooperative BOHOL Provincial Elect System ILPI COLIGHT Misamis Oriental Rural Electric Service Davao Light & Power Co., Inc. Source: EA Annual Report 1968-1969 Southern Farmers Cooperative

PRESIDENTIAL DECREE 269 (1973) TRANSFORMED NEA INTO A GOVERNMENT CORPORATION AND DECLARING AS A NATIONAL POLICY OBJECTIVE THE TOTAL ELECTRIFICATION OF THE PHILIPPINES

OVER-ALL STATUS THEN AND NOW FIRST YEAR (1969) Status of Energization Municipalities/Cities (52%) Potential 1,422 Energized 739 Connections (19%) Potential 6.210M Energized 1.217M 2005 Status of Energization Municipalities/Cities (100% energized) 1,609 Barangays Coverage 41,930 Energized 38,978 % Energization 93% Connections Potential 17.04M Served 12.28M % Energization 72% Population Served 73M (Approximate)

PERFORMANCE BY UTILITY As of July 31, 2005 Electric Municipalities/Cities Barangays Connections Distribution Utilities Coverage Energized % Coverage Energized % Potential Served % Electric Cooperatives 1,451 1,451 100 36,003 33,165 93 11,141,200 6,939,953 62 MERALCO 111 111 100 4,317 4,243 98 4,416,000 4,173,508 95 PIOUs/LGUs/Others 47 47 100 1,610 1,570 98 1,486,000 1,165,363 78 TOTAL PHILIPPINES 1,609 1,609 100 41,930 38,978 93 17,043,200 12,278,824 72

STATUS OF BARANGAY ENERGIZATION As of July 2005 PERCENT ENERGIZED BASCO PERCENT ENERGIZED 90 - 100% - 96 ECs 80 - 89% - 9 ECs 70 - 79% - 6 ECs 60 - 69% - 4 ECs 59 & Below - 4 ECs PIOUs / LGUs - 26

EC CATEGORIZATION 2000 2001 2002 2003 2004 A+ 42 47 40 45 59 A 18 16 13 B 12 15 21 19 C 11 7 2 10 6 D 14 5 E 22 27 20 17 DMPCD-1/12/05

2000 … 1st GOCC to be ISO 9001

Note: Savings due to the restructuring amounts to approximately P161 M or 49% reduction in operating expenditures.

SEC. 58. Additional Mandate of the National Electrification (NEA) SEC.58. Additional Mandate of the National Electrification (NEA). – NEA shall develop and implement programs: To prepare electric cooperatives in operating and competing under the deregulated electricity market within five (5) years from the effectivity of this Act, specifically in an environment of open access and retail wheeling; To strengthen the technical capability and financial viability of rural electric cooperatives; and To review and upgrade regulatory policies with a view to enhancing the viability of rural electric cooperatives as electric utilities.

Short Term Credit Facility aims to finance the ECs’ monthly shortfall on the settlement of power accounts with the NAPOCOR and TRANSCO. Funds allocated for this purpose amounts to P300M. Equity Financing Scheme was introduced to assist ECs in complying with the Distribution and Grid Code. NEA will finance the actual equity requirement or up to 20% of the total purchase price of the distribution equipment being procured through financing but not to exceed P8M. The initial funding allocation is P100M. FINANCIAL PROGRAMS TECHNICAL PROGRAMS INSTITUTIONAL PROGRAMS

Single Digit System Loss Program for the reduction of the national system loss average by at least 1% annually starting 2004 to attain the single digit level before 2010. The amount of P300M was allocated for this program. Enhancement of ECs’ Capital Resources through the adoption of a policy allowing ECs to secure loans (collateral-sharing) outside of NEA to finance their upgrading and rehabilitation projects. FINANCIAL PROGRAMS TECHNICAL PROGRAMS INSTITUTIONAL PROGRAMS

Credit Facility for EC Power Accounts with GENCOs and Market Operator (WESM) provides Stand-By Credit Facility for ECs which fail to meet the credit worthiness indicators set in their contracts with the GENCOs, and/or to avoid suspension in the WESM and the claim of the security provided to the Market Operator due to default in payment. Initial funding allocation is P500 M. Credit Facility for the Acquisition of Sub-transmission Facilites (69 kv lines) from TRANSCO aims to finance the ECs’ equity requirement of up to 20% of the total acquisition cost of the NAPOCOR/TRANSCO sub-transmission facilities. initial funding allocation of P100M was established. FINANCIAL PROGRAMS TECHNICAL PROGRAMS INSTITUTIONAL PROGRAMS

SYSTEM LOSS As of June 2005 SINGLE DIGIT - 8 ECs 10% to 14% - 42 ECs BASCO SINGLE DIGIT - 8 ECs 10% to 14% - 42 ECs ABOVE 20% - 16 ECs 15% to 20% - 52 ECs NO DATA AVAILABLE - 1 EC 24

Macro Engineering Assistance Program (MEAP) was designed to ensure the attainment of single digit systems loss before 2010, improve the level of power reliability and ensure the ECs’ compliance to the Grid and Distribution Codes. Systems Loss Segregation Program complements the MEAP which aims to guide the ECs quantify and segregate the technical, non-technical and administrative loss. Through this, the ECs shall be able to determine which priority activities should be implemented immediately to maximize beneficial effects. FINANCIAL PROGRAMS TECHNICAL PROGRAMS INSTITUTIONAL PROGRAMS

Management Academy for Rural Electrification was established primarily to serve as learning venue for the best practices of successful ECs. People Development Academy (Toledo City) teaches leadership and corporate values to EC leaders and employees. To date, a total of 1,408 pax have undergone trainings in 12 multi-disciplines seminars. Integrated Strategic Planning Seminar-Workshops were conducted for 114 ECs to assist them in formulating their 5-year operational plans (2005-2009). An in-house-developed computerized model (ICPM) was designed to harmonize the data for all plans currently existing. It also serves as the basis for the Distribution Development Plans of 2005-2009. FINANCIAL PROGRAMS TECHNICAL PROGRAMS INSTITUTIONAL PROGRAMS

A total of 121 pax from 41 ECs underwent various WESM-related trainings including a WESM Operations Seminar with PEMC Officials as resource persons were attended by ALL Luzon Main Grid-Connected ECs Competency Training and Certificate Programs on Electric Distribution System Power Engineering through a MOA between NEA and UP Diliman. To date, a total of 46 participants from 35 ECs have been able to complete the program. FINANCIAL PROGRAMS TECHNICAL PROGRAMS INSTITUTIONAL PROGRAMS

Management Academy for Rural Electrification was established primarily to serve as learning venue for the best practices of successful ECs. People Development Academy (Toledo City) teaches leadership and corporate values to EC leaders and employees. To date, a total of 1,408 pax have undergone trainings in 12 multi-disciplines seminars. Integrated Strategic Planning Seminar-Workshops were conducted for 114 ECs to assist them in formulating their 5-year operational plans (2005-2009). An in-house-developed computerized model (ICPM) was designed to harmonize the data for all plans currently existing. It also serves as the basis for the Distribution Development Plans of 2005-2009. FINANCIAL PROGRAMS TECHNICAL PROGRAMS INSTITUTIONAL PROGRAMS

A total of 121 pax from 41 ECs underwent various WESM-related trainings including a WESM Operations Seminar with PEMC Officials as resource persons were attended by ALL Luzon Main Grid-Connected ECs Competency Training and Certificate Programs on Electric Distribution System Power Engineering through a MOA between NEA and UP Diliman. To date, a total of 46 participants from 35 ECs have been able to complete the program. FINANCIAL PROGRAMS TECHNICAL PROGRAMS INSTITUTIONAL PROGRAMS

Medium-Term Development Plan (2005-2009) ICPM Summary Corplan, Engineering, Accounts Management & Guarantee, Finance, Institutional Development, Management Assistance

ICPM INST’L B S E P LTDP LF - BEP factors to consider: GCP/PIP/ REP WESM OPEN ACCESS DIST. CODE GRID CODE ERC COMPLIANCES MAGNA CARTA TIME-OF-USE E.O. 119 DEMAND & SUPPLY INST’L ICPM OUTPUTS DDP INSTITUTIONAL PROGRAMS FINANCIAL PROJECTIONS 2005 WORKPLAN BSEP LTDP LF GCP/PIP/REP Updated, Harmonized, Distinctive

BARANGAYS TO BE ENERGIZED (2005 – 2008) EC with most number of unenergized barangays: LASURECO - 363 Waived: 778 3,068 BARANGAYS 2005 – 221 2007 - 200 2006 – 200 2008 - 200

NUMBER OF SITIOS TO BE ENERGIZED 2005 = 821 2006 = 522 2007 = 440 2008 = 335 2009 = 305 EC with most number of identified Sitios for energization: MARELCO - 123 Sitios Electrified from Jan.03-June 05: 2,559

CONSUMER CONNECTIONS Year No. 2005 375,575 2006 367,217 2007 391,969 2008 413,518 2009 502,337 Total 2,050,616 EC with most number of consumers to be connected: NEW – BENECO (11,035) ADD-ONS – ALECO (64,819)

SUBSTATION REQUIREMENT (Additional) 685 397 280 250 295 TMVA TOTAL No. of Units 5 MVA – 92 10 MVA – 96 20 MVA – 13 OTHERS * – 112 EC with greatest S/S capacity requirement: PENELCO – 85 MVA * 2.5, 3.75, 15, 30 MVA

SUBSTATION REQUIREMENT (Rehab/Upgrading) TMVA 200 139 100 90 80 TOTAL No. of Units 5 MVA – 35 10 MVA – 30 20 MVA – 3 OTHERS * – 1 EC with greatest S/S capacity for Rehab: ISELCO II – 120 MVA * 2.5, 3.75, 15, 30 MVA

Distribution Transformers 10 KVA – 4,373 50 KVA – 6,320 15 KVA – 6,882 75 KVA – 379 25 KVA – 12,589 100 KVA – 674 37.5 KVA – 3,875 167 KVA – 267 TOTAL NO. OF UNITS: 35,359 EC with biggest number of dx transformer requirement: CAGELCO II – 1,365

Kilowatt Hour Meters 3 Phase – 5,921 1 Phase – 1,556,427 TOTAL NO. OF UNITS: 1,562,348 EC with greatest number of kwh-mtr requirement: AKELCO – 120,075

Distribution Facilities Kilometers of Lines EXPANSION REHAB/REVAMP DC – 39.250 DC – 0 3Ø – 290.139 3Ø – 615.570 2Ø – 466.777 2Ø – 169.510 1Ø – 5,687.917 1Ø – 884.050 UB – 4,534.618 UB – 1,213.830 OS – 1,776.087 OS – 665.780 EC with longest dx lines for expansion: ZANECO – 690.7 ckt.kms. EC with longest dx lines for rehab/revamp: ZAMECO II – 360.3 ckt.kms.

SUBTRANSMISSION FACILITIES and VOLTAGES other than 13.2 kv EXPANSION REHAB CENECO is the only EC with subtransmission line for rehab. EC with longest subtransmission line for expansion: COTELCO – 110.5 kms.

GRAND TOTAL: 193,803 POLES 25’ – 19,838 30’ – 62,918 35’ – 56,030 25’ – 19,838 30’ – 62,918 35’ – 56,030 40’ – 26,105 45’ – 13,125 OTHERS*– 15,787 GRAND TOTAL: 193,803 * Includes concrete, steel and above 45 footers EC with most number of Pole Requirements: ISECO – 12,750

FUNDING REQUIREMENT (P ‘000) 2005 – 8,338,532 2006 – 7,056,259 2007 – 6,400,667 2008 – 6,039,058 2009 – 5,982,477 GRAND TOTAL: 33,816,993 EC with largest funding requirement: BATELEC II – 1,175,437

sources Operational Efficiency Subsidies and Loans Rate Adjustments DOE’s Energy Regulations No. 1-94, as amended 50% of P0.01 per kwh financial benefits Local Government Code of 1991(Chapter II, Sections 289 to 294) 80% of the proceeds maybe used to construct distribution lines and lower the cost of electricity Missionary Electrification-Universal Charge Subsidy to QTPs (alternative service providers) Government General Appropriations Act (GAA) for DOE,NEA/ECs and SPUG (if any) WB-GEF under DOE’s Rural Power Project Available for household and community applications (US$ per Wp)

VOLUME OF BUSINESS Consumer Connections II. Energy Sales (MWH) 2004 2009 6,702,789 8,753,405 2004 2005 - 2009 9,546,390 Annual Ave: 12,390,656 Growth Rate = 23% Growth Rate = 23% III. Revenues (P) 2004 2009 47B Annual Ave = 73B Growth Rate = 36%

next steps… 100% Barangay Energization by CY 2008 Single Digit System Loss by CY 2010 90% Energization Rate for Residential Consumers by CY 2017

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