Will ALECO never get out of its mess?

The Albay Electric Cooperative (Aleco) is once again flashing its distress signal – threats of brownouts. Calls mounted for the resignation of the members of the Aleco Board their inefficiency to curb the growing debt of the electric cooperative (EC) which is now pegged at P3.2 billion. Will Aleco never get out of its mess?

Photo courtesy of http://www.freefoto.com

Reductionism states that since the problem of Aleco is its debts, the simplest solution is to pay the same. To do that, the public utility must be efficient in its operations, a task that lies in the hands of the general manager. If efficiency is not attained, then the general manager should be replaced.

Because of this simplistic approach, Aleco replaced its general managers 12 times since its organization in 1991. This is as opposed to good performing electric EC’s like Bohol Electric Cooperative-I with only 5 general managers since 1971, and the Cebu Electric Cooperative III with only 3 general managers since 1979. The collection efficiency of these coops is 100% while systems losses range between 7%-10% only. Aleco, meanwhile, has an average collection efficiency rate of 88% and an average systems loss of 25%.

Of course, it can be said that the turnover of general managers is a function of their qualifications and ability. Poor general managers need to be replaced while performing ones need to be retained. But hiring a general manager for six months or one year, though, is a different story as the said period may not be enough to develop and implement a plan or sustain a program that is supposed to address the electric utility’s woes. Second, even if the general managers hired are highly competent, managing Aleco will be very tough because as the study conducted by the consulting team organized with the aid of Catholic Bishop Jose Sorra in 2003, the electric coop’s financial situation and technical capabilities are not sufficient to provide the electricity requirements of Aleco for the year 2004 and onwards. In a simple terms, the solution to Aleco’s woes will not be solved by simply replacing its managers.

Institutionalism, on the other hand, argues the need for organizational change. This can be initiated by the members of Aleco’s Board of Directors who, for two decades, are under fire for allegedly doing nothing while in office. Second, like most electric coops in the Philippines, Aleco is under the supervision of the National Electrification Administration (NEA) – the agency blamed for the misfits of electric coops. For instance, because of the NEA, Aleco became a guinea pig for consolidation and de-consolidation, and allegedly because of the NEA, Aleco fell to the hands of a number of incompetent and corrupt general managers.

It should be noted that Albay province was once serviced by three major electric companies – the original Aleco, the Lealda Electric Company, and the Ligao Power Plant which services the First, Second, and Third Districts, respectively. These companies were taken over by the government and consolidated to one Aleco during the Marcos period. Because of the large coverage, Aleco was deconsolidated into three only to be consolidated again in 1991. The aim is to maximize the economies of scale and make Aleco a pilot in merging poor and good performing electric coops.

The piloting of Aleco, however, failed so NEA had to take over. Allegations of corruption clouded the EC until the loans ballooned from P270 million in 1998 under Merlin Rosales to P3.2 billion as of this writing. Because of the failure to pay the loans, the National Power Corporation had to take over on July 17, 2008. Even then, this move did not solve Aleco’s problems.

(Click here for Part 2)


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