Electric Cooperatives vs. Private Utilities: Who Really Wins?
- February 27, 2025
The Senate passed Senate Bill 2888 on its third and final reading, permitting Davao Light and Power Company Inc. (Davao Light) to extend its service to seven additional locations in Davao del Norte and Davao de Oro. The Davao Consumer Movement (DCM), a group championing consumer rights, hailed this as a significant win for residents in both provinces.
Senator Juan Miguel Zubiri, the proponent of SB 2888, highlighted that electricity rates under Northern Davao Electric Cooperative (Nordeco) were higher than those of Davao Light. He noted that in December 2024, Nordeco charged consumers P12.56 per kilowatt-hour (kWh), whereas Davao Light offered a lower rate of P9.21 per kWh. Similarly, in November 2024, Nordeco’s rate stood at P12.68 per kWh, compared to Davao Light’s P9.11 per kWh.
Additionally, a compliance report from the National Electrification Administration revealed a consistent rise in Nordeco’s power outage frequency and duration throughout 2024. The System Average Interruption Frequency Index (SAIFI), which measures how often the average consumer experiences power disruptions, and the System Average Interruption Duration Index (SAIDI), which tracks the total length of outages per consumer, both worsened over time.
In the first quarter, Nordeco recorded a SAIFI of 2.66 and a SAIDI of 122.20 minutes. By the second quarter, these figures climbed to 4.99 and 242.33 minutes, respectively, and further increased in the third quarter to 7.16 and 333.24 minutes.
Samal Island Mayor David Uy stated that Nordeco’s poor power service cost the local government between P120 million and P150 million in losses. The tourism sector alone lost P50 million yearly, while businesses, households, public services, and agriculture also suffered significant financial setbacks. To address the issue, the city government allocated P300 million to construct a submarine cable connecting the island to Davao Light.
Davao Light can assume control of the designated franchise areas once President Marcos signs the approval.
(Also read: DOE evaluates 100% electrification target amid funding woes)
Comparing the performance of PDUs & ECs
Recently, an article by Bienvenido Oples Jr. analyzed the performance of private distribution utilities (PDUs) and electric cooperatives (ECs) within the same province or nearby regions, using benchmarks set by the Energy Regulatory Commission (ERC).
Meralco’s SAIDI for scheduled maintenance was 51 minutes, significantly lower than Batangas Electric Cooperative (BATELEC)1’s 257 minutes and BATELEC 2’s 1,386 minutes. For power supply interruptions, Meralco reported a SAIDI of 26 minutes, while BATELEC 1 recorded 2,676 minutes (nearly two days) and BATELEC 2 logged 1,819 minutes.
Oplas also noted that a similar pattern emerged in Zambales, where Subic EnerZone (SEZ) outperforms Zambales Electric Cooperative (ZAMECO), and in Cebu, where Visayan Electric Company (VECO) showed better results compared to Cebu Electric Cooperative (CEBECO).
The bigger picture
In his opinion piece, energy professional Arnel Casanova explained why the performance gap between PDUs and ECs is wide.
“Power distribution is a high risk and high capital investment venture,” he explained. “To deliver power to homes and industries, huge capital investment is needed to build the substations, the power lines, and electrical poles and towers, including the professional engineering services needed to build them.”
PDUs must invest heavily upfront, taking on significant financial risks before recovering costs. Operating and maintaining these utilities is expensive, especially in the Philippines, where natural disasters like typhoons and earthquakes pose constant threats. Ensuring energy security also requires investment in cybersecurity, further increasing costs. Overall, billions of pesos are needed to build, operate, and maintain power infrastructure.
Casanova added that the national government once handled this service, but inefficiencies and funding shortages led to its privatization. PDUs, with the resources and expertise, took over to ensure better management.
The country’s ECs in the Philippines operate under challenging conditions, serving remote areas with high costs and limited resources. As nonstock, nonprofit entities, they struggle to invest in infrastructure, leading to frequent outages and inefficiencies. Their small size weakens their bargaining power, driving up costs. Higher electricity rates don’t always mean better service, as these cooperatives remain vulnerable in the power market.
(Also read: Key insights into RP energy sector from industry leaders)
Complementing, not competing
Partnerships between PDUs and ECs can improve efficiency by leveraging economies of scale. According to Casanova, this can be achieved through joint ventures, shared infrastructure, and bulk purchasing. In response to BATELEC’s declining service quality, Meralco stepped in to assist by sharing technology and expertise with BATELEC and other cooperatives.
For effective collaboration, Casanova noted that supportive policies and regulations are crucial. Authorities must foster an environment that encourages partnerships among power distributors. Offering incentives for shared infrastructure, simplifying approval procedures, and implementing fair tariff structures can help strengthen these alliances and improve overall service efficiency.
In the end, consumers benefit the most from collaboration, which reduces costs. By cutting operational expenses and upgrading infrastructure, electricity can become more stable and cost-effective. Lower power rates ease business costs, increase household savings, and drive economic growth. Fewer outages also improve daily life and support vital services like hospitals and schools.
Sources:
https://www.manilatimes.net/2025/02/18/opinion/columns/let-there-be-light/2056932
https://www.bworldonline.com/opinion/2025/02/18/653701/pdus-vs-ecs/
