Development Policies For
South Cotabato II Electric Cooperative, Inc.
J. Catolico Avenue, Lagao, General Santos City

A Business Policy Development Research
In
Management in Business Policy
(Management 4)

Presented to:
Mr. Elmer Fernandez Abesia
Subject Professor

Presented by:
Jaypee Palcis
Herminio Gianan
Cherry Mae Sacamay
ACKNOWLEDGEMENT
This research would not have been possible without the guidance and the help of several individuals who in one way or another contributed and extended their valuable assistance in the preparation and completion of this study.
First and foremost, our utmost gratitude to Mr. Elmer Fernandez Abesia, our teacher in Management 4 whose sincerity and encouragement I will never forget. Mr. Abesia has been our inspiration as we hurdle all the obstacles in the completion of this research work.
To Mrs. Helen Rose B. Aponesto, People Management Supervisor of SOCOTECO II for accommodating us and answering our questions despite her hectic schedule.
To the staff of the Human Resource Department of SOCOTECO II for being helpful in the preparation of documents we requested.
To our classmates who in one way or another were of assistance especially during the preparation of business letters prior to conducting this research.
Last but not the least, our family and the one above all of us, the omnipresent God, for answering our prayers and giving us the strength to plod on despite our constitution wanting to give up and throw in the towel, thank you so much Dear Lord. Introduction

Since the passage of the Electric Power Industry Reform Act (EPIRA) in 2001, the Philippines embarked on a comprehensive restructuring of its power industry. From a vertically integrated, extensively publicly owned utility business, the industry was envisioned to be broken down into its main components with a deregulated and effectively privatized generation and supply sectors. Despite the reform efforts through the EPIRA enactment however, power rates in the Philippines continue to be among the highest in Asia and remain a source of concern for industries in the country struggling to remain competitive with their regional counterparts. One of the issues, which have not been addressed adequately by industry players and the Energy Regulatory Commission (ERC), is the observed high levels of inefficiency with which Philippine electricity distribution utilities operate.The distribution of electricity in the country is handled mostly by investor‐owned utilities (IOUs) and by consumer‐owned electric cooperatives (ECs), both of which are under rate‐setting regimes (the return on rate base or RORB methodology for the IOUs and a cash reimbursement methodology for the ECs) that do not really promote efficiency in the sector.
One such consumer-owned electric cooperative is the South Cotabato II Electric Cooperative (SOCOTECO II). The South Cotabato II Electric Cooperative, Inc. (SOCOTECO II) was organized & registered with National Electrification Administration on May 7, 1977 as the 84th electric cooperative by virtue of Presidential Decree No. 269, whose primary objective is to make electric service available throughout its coverage area. The coverage area of SOCOTECO II is located in the southernmost tip of the Philippines.

SoCSarGen (South Cotabato, Sarangani & General Santos), has continuously rose in the economy ladder due its rich agro-industrial treasures, combined with rich soil, good rainfall and typhoon-free climate. It also boosts a good number of natural tourist attractions. SoCSarGen is located in the southern-most tip of the Philippines.

SOUTH COTABATO
South Cotabato is endowed with numerous natural sceneries and blessed with creative people who maintain and develop the beauty of these places. As the province progresses and moving towards agro-industrialization, more people in and out of the country is getting more interested of South Cotabato. Some of the tourist attractions in the province, found inside SOCOTECO II's coverage area, are the sprawling Dole pineapple plantation with the imposing presence of Mt. Matutum. SOCOTECO II is the sole electric provider of Polomolok & Tupi since in 1978.

SARANGANI PROVINCE
Sarangani's idyllic coastline of prime white beaches, quiet coves and pristine waters is ideal for beach resorts, diving and sports fishing. Exploring the clear waters of Sarangani Bay, which was declared as a protected area, brings you to the sanctuary of endangered marine life. Adding to these natural wealth are untouched and exotic waterfalls, caves, hinterland lakes, jungle-covered peaks and mangrove forests. SOCOTECO II started operating in Sarangani since 1979, providing electric service for its seven municipalities.

GENERAL SANTOS CITY
General Santos, being the key area for SOCOTECO II, is dubbed as the Tuna Capital of the Philippines. It also accounts for the second largest daily total fish landings in the country. GenSan is a center of rapid industrialization, business and commerce while being only minutes away from beaches, crystal blue waters and swaying palms.SOCOTECO II is the sole electric provider of General Santos City since 1980.

It is the aim of this research study to determine how SOCOTECO II continues to maintain its standard of high excellence in providing services to its members. With the recurring power interruptions in the region today, it is of utmost importance that the cooperative should be able to meet the needs of its members. With the region’s booming economy its power needs is also increasing and to further sustain this development the power supply needs must be met satisfactorily. As of now the cooperative is exploring options such as partnership with local power producers to further increase its power supply.

Chapter 1
Company Profile

SOUTH COTABATO II ELECTRIC COOPERATIVE, INC (SOCOTECO II)
The South Cotabato II Electric Cooperative, Inc. (SOCOTECO II) was organized & registered with National Electrification Administration on May 7, 1977 as the 84th electric cooperative by virtue of Presidential Decree No. 269, whose primary objective is to make electric service available throughout its coverage area. It is located at Jose Catolico Sr. Avenue, General Santos City 9500 with telephone number (083) 552 396. The cooperative is engaged in the retail of electricity throughout its service area. It is the sole provider of electric service in its area of operation and is considered a mega-large electric cooperative. The cooperative designates three (3) area of operations, namely: East Area, West Area and Central. The cooperative has 14 substations with a substation covering each major sectors.

Chapter 2
Organizational Structure

Type of Ownership South Cotabato II Electric Cooperative is a Non-Profit and Non-Stock Electric Cooperative. It is member-owned and its top management is composed of a board of directors which sets its policies. The cooperative’s day-to-day operation is overseen by a General Manager which reports to the President of the cooperative and ultimately to the board of directors. The cooperative has 4 area of opera
Capital
South Cotabato II Electric Cooperative has a capitalization of 5 pesos per members.
Service Offered The cooperative is engaged in the retail of electricity for the whole SocSarGen area (South Cotabato, Sarangani & General Santos). It is the sole provider of electricity in its service area. The status of electrification in its service area is provided below.

2011 Status of Electrification
Number of Towns 9
Number of City 1
Total Covered Brgys. 204
Total Energized Brgys. 204
Percentage of Energization 100%
House Connections 2010 2011 NSO 2007 Active Customers House Connections Active Customers House Connections Potential Household
Gen. Santos City 63,886 77,793 75,419 79,294 111,927
Polomolok 15,750 15,890 18,156 16,363 28,489
Tupi 5,281 6,090 6,272 6,313 12,332
Alabel 4,496 5,117 5,124 5,209 14,737
Malapatan 2,904 3,255 3,280 3,374 13,040
Glan 5,185 5,274 6,034 5,442 22,058
Malungon 5,110 5,873 6,339 6,094 20,038
Kiamba 4,185 5,108 5,152 5,178 10,780
Maasim 2,522 3,310 3,097 3,411 10,062
Maitum 2,976 3,037 3,442 3,117 8,073
BAPA 758 - 935 -
Total 113,052 130,747 133,250 133,795 251,536 Source: SOCOTECO II MFSR (FSD/ITG) / Status of Electrification Report (ISD)

Background of the Study
Mission
To provide best service to our customers.
Vision
Affordable and reliable electric service.
Corporate Values Honesty Respect for Individual Concern for Others Working-Together God-Centered

Repubiic ofthe Philippines
National Electriñcation Administration

4 Quezon City

MEMORANDUM No. 2008-009

TO 1 ALL ELECTRIC COOPERATIVES (ECS)

SUBJECT : REVISED SALARY SCALE FOR ELECTRIC

COOPERATIVE EMPLOYEES

To upgrade the Salary Scale of Employees of Electric Cooperatives in order to provide them with a competitive package for their services to keep them abreast with the prevailing compensation level in the industry, and help ECS maintain a high level of responsibility and accountability.

The prevailing poverty threshold level as determined by the country’s economic managers which, in part account for the minimum Wages adopted by the Regional
Wage Boards, plus three more prospective wage orders were considered as indices in the preparation of this package. Hence, this new issuance will bring about an upgraded pay scale for a majority of employees, particularly of ECS that meet the pre-requisites.

The promulgation of this memorandum shall provide any organization, government or private, and interested groups with an overall appreciation and mechanisms on how ECS determine their compensation scale. This is part as well that ensures full transparency of EC operations to the general public.

It shall he the policy of this Ofiice to establish a salary guide for EC Employees which shall serve as a basis in providingjust and equitable wages according to the cooperatives’ classification and financial standing. In no case, however, shall the salaries of employees be lower than the minimum wage/‘salary provided by the
Labor Code and/or set by the Department of Labor and Employment (DOLE)
Regional Wage Boards.

NIA Road. Gnvernment Center, Diliman, Quezon City, Metm Manila, Philippines Tel. Nu. 92949-09

MECHANICS OF IMPLEMENTATION

Upon recommendation of management and after proper deliberation, the
Board of Directors shall adopt through a Board Resolution, a revised salary scale using the prescribed salary guide.

The Board Resolution together with the Plantilla of Personnel containing the existing and proposed salaries and a three-year projected cash flow shall be submitted to this Office for review and evaluation as to the EC’s financial capability to implement and sustain the salary adjustments. The same should be submitted by the first semester of the year in compliance with NEA Memorandum No. 2006-023 dated 27 July 2006 “Submission on Required Documents That Need Explicit Approval.”

Should the proposal merit a favorable endorsement, the Institutional
Development Department, shall forward the recommendation to the
Deputy Administrator for Electric Distribution Utilities who shall be endorse the same to the Administrator. The final action and/or approval shall be subsequently communicated to the concerned EC, a copy shall also be available at the NEA Financial Planning and Control Division,
Finance Department. Expect NEA’s action, upon EC’s full compliance of requirements, Within the second semester of the same year the proposal had been submitted.

If a new wage order results in a monthly basic rate that is higher than what is set for employees holding rank one (1) positions in the adopted and approved salary scale for EC employees, the EC management is mandated to automatically incorporate the difference as mandated in the Wage
Orders using the Retail/Service Group category. However, if after adoption and explicit approval by the NEA of the salary scale, and the latest issuance of a Regional Wage Order would not affect the salaries and employees at Rank one (1) and that management would still want to incorporate the Wage Order, the NEA should be informed accordingly.

This new salary guide shall not be construed, in any way whatsoever, as a mandated benefit/compensation that the employees shall automatically be entitled to on top of any approved salary increases provided in the
Collective Bargaining Agreement, as this may impair the financial viability of the EC.

To avert the possible distortion of salaries, the EC management is enjoined to maintain the NEA approved job ranks.

7. In the etfent that an EC intends to follow a modiñed salary scale, the same

should be submitted to NEA for ñnal approval.

GENERAL PROVISIONS

1. Adoption of a salary scale shall be suspended/deferred in the following cases:

if the coop posted a cumulative net loss on its past six (6) consecutive months of operations ending the month proceeding the evaluation;

if the coop’s performance based on the Key l;erformance Ilrdicators shows a marked downtrend from the previous year’s Íîgures; and

if the coop retrogresses in its categorfzation asvof evaluâtionldate.

Upgrading of salary scale of employees shall be consequential to increased revenue or improved operations; and in no case must the EC increase its power rates to accommodate the additional cash outlay.

A revised Salary Scale resulting from salary upgrading, is subject to NEA explicit approval since salaries of employees do not form part of the liberalized cash operating budget.

After the new scale has been approved by NEA, the EC management can implement yearly salary step increases, based on merit in order to reward employees who exceeded their targeted performance plans

Salary increases based on merit and utilizing the step increments in the approved salary scale do not need any NEA approval but have to be submitted to the NEA Finance Department for budgetary purposes.

Since across-the-board salary increase has been found to be counter- productive, the Same cannot be allowed.

V. AMENDATORY CLAUSE

This supersedes Memorandum on the Revised Salary Guide for Electric
Cooperative Employees dated il September 2003.

These guidelines shall take effect (I5) days upon submission of copies to the University ofthe Philippines Law Center as required by Executive Order 292.