Electric Cooperatives and the Energy Transition: Help or Hindrance?

The Department of Energy’s (DOE) latest planning documents lock in an ambitious path: renewables should reach 35% of power generation by 2030 and 50% by 2040. However, as of 2024, the Philippines was still well short of this goal: multiple trackers and market reports place renewable energy’s (RE) share at around 22% of generation.

Two reforms aim to accelerate progress: Renewable Portfolio Standards requiring yearly RE increases to meet the target, and a Renewable Energy Market for trading green energy and compliance certificates, fully launched in late 2024. Both are expected to boost renewable supply for distribution utilities, including electric cooperatives (ECs).

(Also read: Power Up Amianan: A Call for Reliable Energy Providers)

EC failures slow progress

Outside the big private utilities, most Filipino consumers are served by 121 ECs under the National Electrification Administration (NEA), a model designed for rural electrification.

The Philippines’ ECs trace their roots to the late 1960s, when Congress and Malacañang created the NEA to roll out US-style rural co-ops and drive total electrification. The 2001 EPIRA law liberalized generation and distribution but left ECs intact, while the 2013 NEA Reform Act expanded the agency’s supervisory and disciplinary powers, including takeover authority over struggling co-ops.

But ECs’ corruption, governance disputes, and high system losses often stall bankable renewable power purchase agreements (PPA), delay interconnection upgrades, and raise consumer costs, with recent enforcement actions from the government.

These persistent weaknesses have left many ECs ill-equipped to meet the demands of a fast-changing power sector. A closer look at these inefficiencies reveals why, despite their critical role in rural electrification, ECs remain one of the biggest obstacles to the country’s clean energy transition.

Chronic system loss and pilferage

Technical and non-technical losses in many ECs erode cash flow, deter lenders, and are partly passed on to consumers. For instance, in 2024, the Energy Regulatory Commission (ERC) fined the Isabela II Electric Cooperative (ISELCO II) ₱2 million for failing to justify generation charges passed on to consumers and for ignoring orders to submit fuel cost records tied to its supply contract.

In February 2025, the Cebu Electricity Rights Advocates (CERA) urged the ERC to review the 12% system loss cap for ECs, warning it fuels steep power bills and undermines Cebu’s competitiveness. “These losses are then transferred to consumers, resulting in disproportionately high electric bills,” said CERA convenor Nathaniel Chua.

Private distribution utilities have a lower system loss cap of 5.5%.

Weak financial standing

ECs remain heavily reliant on NEA loans, underscoring their limited access to long-term capital. In 2024, NEA lent ₱1.8 billion, mostly for capex, on top of nearly ₱1 billion in 2023. While a ₱50 million credit facility for each EC’s smart grid upgrades offers some relief, it highlights their inability to finance renewable-ready infrastructure on their own.

Additionally, a report by the Institute of Contemporary Economics showed ECs in Panay and Guimaras spent only ₱2.38 billion of a ₱10.52 billion budget from 2022 to September 2024. Just 3.1 to 3.7% went to infrastructure, resulting in a weak grid.

Governance disputes & politicization

Though legislation now bars politically connected individuals from coop leadership to shield operations from partisanship, oversight tensions remain.

From 2021 to 2024, the Benguet Electric Cooperative (Beneco) was plunged into turmoil when the NEA removed its board and attempted to install an outsider as general manager, prompting protests and a police-backed takeover of its headquarters. The Court of Appeals eventually ruled that NEA had no authority to override the cooperative’s board, nullifying NEA’s actions.

The Partners for Affordable and Reliable Energy (PARE), an energy advocacy group, also flagged politically tinged messaging by ECs ahead of the 2025 midterm elections. This raised alarms that campaign efforts and vote-seeking behavior could overshadow the co-ops’ service mandates.

Regulatory & legal friction

In 2023, the ERC took action against 33 ECs for non-compliance with reporting rules. These entities were issued show-cause orders after failing to provide the required data on pass-through fuel costs charged to their consumers.

The following year, regulatory and legal pressures on co-ops deepened. The Supreme Court ruled that ECs have no exclusive territorial rights under their congressional franchises, upholding a law that expanded MORE Electric and Power Corporation’s service into parts of Iloilo served by the Iloilo Electric Cooperatives (ILECO) I, II, and III. The Court said franchises are privileges, not property, and may be opened to competition if it benefits the public.

Disaster exposure & asset fragility

EC networks are typhoon-exposed, with repeated asset hits hurting loss rates and opex, further weakening their ability to co-invest in RE-enabling grid works.

In October 2024, at least 24 ECs suffered over ₱70 million in infrastructure losses from Typhoon Kristine. Senator Sherwin Gatchalian urged NEA to enforce compliance with the Electric Cooperatives Emergency and Resiliency Fund Law.

“The goal of ECERF is not just to provide funds that ECs can tap for the restoration and rehabilitation of ECs’ damaged infrastructures following a fortuitous event such as a typhoon but to ensure that the distribution utilities are resilient to withstand calamities,” Gatchalian said.

(Also read: Marcos Unveils PH’s First Mega Solar Irrigation System)

Addressing EC inefficiencies

The Philippines has set the right renewable targets and built the market scaffolding to reach them. Whether it gets there on time now hinges on what happens at the last mile — the distribution utilities.

“Rural electricity cooperatives are notorious for their higher power costs, the poor quality of electricity delivered, long brownouts, and questionable charges,” wrote Alex Magno of the PhilStar. “It is not coincidental that areas covered by inefficient electricity cooperatives have the lowest rates of progress.”

Every year, Philippine taxpayers shoulder billions of pesos in subsidies for rural ECs through NEA. In 2025 alone, the government released ₱3.6 billion for the Sitio Electrification Program and line rehabilitation, with Congress setting aside over ₱5 billion in this year’s budget. These allocations, classed as grants rather than loans, are not repaid by the cooperatives; they are merely required to liquidate expenses.

Commission on Audit reports have flagged ₱992 million in unliquidated balances as of 2023, underscoring long-standing concerns about accountability in a subsidy program that continues to run into the billions.

Columnist Komfie Manalo stated that ECs have relied heavily on government support since their inception, yet the areas they serve continue to suffer from frequent power outages to this day. “According to analysts, the subsidies must be halted to cut the undue burden on taxpayers, who are not even customers of these electric cooperatives but unfortunately still carry the responsibility to aid in the survival of the ECs,” he wrote.

Fixing these long-standing weaknesses is critical if ECs are to play their part in the energy transition. Without stronger governance, sound finances, and modernized grids, rural consumers risk being left behind in the shift to cleaner power — and the country’s RE goals could remain just that: goals on paper.

Sources:
https://www.oecd.org/content/dam/oecd/en/publications/reports/2024/02/clean-energy-finance-and-investment-roadmap-of-the-philippines_2831a466/7a13719d-en.pdf

https://legacy.doe.gov.ph/energy-information-resources?q=power-development-plan

https://www.wesm.ph/market-development/re-market/renewable-portfolio-standards

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