CREATING THE “NATIONAL ELECTRIFICATION ADMINISTRATION” AS A CORPORATION, PRESCRIBING ITS POWERS AND ACTIVITIES, APPROPRIATING THE NECESSARY FUNDS THEREFOR AND DECLARING A NATION…

WHEREAS, it is the desire of the Government to effect
changes and reforms in the social, economic, and political structure of our
society;

WHEREAS, detailed studies have clearly emphasized the very
close correlation between consumption of energy and gross national product.
Electric power, wherever, introduced, stimulates the growth of industry and the
economy in general;

WHEREAS, electrification of the entire country, one of the
primary concerns of the Government in order to bring about the desired changes
and reforms, can be hastened by rationalizing the distribution of
electricity;

WHEREAS, rationalization, which implies the adoption of all
measures necessary to obtain the maximum benefit at the minimum expense, can be
achieved by:

1. Establishing island grids and integrating power generating systems.
2. Consolidating electric distribution franchise systems. The existence of
   small franchise systems impede the progress of total electrification, as such
   small and isolated systems are antithetical to the economies of scale.
3. Implementing the area coverage concept, which will allow the construction of
   lines to thinly settled areas which are most costly to electrify,
   provided that the losses from these lines can be reasonably absorbed by
   the more profitable lines;

WHEREAS, under Republic Act No. 6038, dated August 4, 1969,
Presidential Decree No. 40 and Letter of Instruction No. 38, both dated November
7, 1972, the National Electrification on an area coverage basis; to set up
cooperatives for the distribution of power; and to determine privately-owned
public utilities which should be permitted to remain in operation; and

WHEREAS, to attain total electrification in the most
effective and efficient manner, there is a need to further strengthen and make
more flexible the organizational structure of the National Electrification
Administration by converting it into a corporation, wholly-owned and controlled
by the Government possessed with borrowing authority and corporate powers;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Republic of the Philippines, by virtue of the powers vested in me by the
Constitution as Commander-in-Chief of all the Armed Forces of the Philippines,
and pursuant to Proclamation No. 1081, dated September 21, 1972, and General
Order No. 1, dated September 22, 1972, as amended, do hereby repeal Republic Act
No. 6038 and do hereby decree, order and make as part of the law of the land the
Charter of the National Electrification Administration, which reads as
follows:

Chapter I – POLICY AND DEFINITIONS

SECTION 1. Title. — This Decree shall be referred
to as the “National Electrification Administration Decree.”

SEC. 2. Declaration of National Policy. — The total
electrification of the Philippines on an area coverage basis being vital to the
welfare of its people and the sound development of the Nation, it is hereby
declared to be the policy of the State to pursue and foster, in an orderly and
vigorous manner, the attainment of this objective. For this purpose, the State
shall promote, encourage and assist all public service entities engaged in
supplying electric service, particularly electric cooperatives, which are
willing to pursue diligently this objective.

Because of their non-profit nature, cooperative character and the heavy
financial burdens that they must sustain to become effectively established and
operationally viable, electric cooperatives, particularly, shall be given every
tenable support and assistance by the National Government, its instrumentalities
and agencies to the fullest extent of which they are capable; and, being by
their nature substantially self-regulating and Congress having, by the enactment
of this Decree, substantially covered all phases of their organization and
operation requiring or justifying regulation, and in order to further encourage
and promote their development, they should be subject to minimal regulation by
other administrative agencies.

Area coverage electrification cannot be achieved unless service to the more
thinly settled areas and therefore more costly to electrify is combined with
service to the most densely settled areas and therefore less costly to
electrify. Every public service entity should hereafter cooperate in a national
program of electrification on an area coverage basis, or else surrender its
franchise in favor of those public service entities which will. It is hereby
found that the total electrification of the Nation requires that the laws and
administrative practices relating to franchised electric service areas be
revised and made more effective, as herein provided. It is therefore
hereby declared to be the policy of the State that franchises for electric
service areas shall hereafter be so issued, conditioned, altered or repealed,
and shall be subject to such continuing regulatory surveillance, that the same
shall conduce to the most expeditious electrification of the entire Nation on an
area coverage basis.

SEC. 3. Definitions. — As used in this Decree, the
following words or terms shall have the following meanings, unless a different
meaning clearly appears from the context;

(a) “NEA” shall mean the National Electrification Administration, “Board of
Administrators” shall mean the Board of Administrators, and “Administrator”
shall mean the Administrator, all as provided for in this Decree.

(b) “Cooperative” shall mean a corporation organized under Republic Act No.
6038 or this Decree or a cooperative supplying or empowered to supply service
which has heretofore been organized under the Philippine Non-Agricultural
Cooperative Act, whether converted under this Decree or not.

(c) “Public service entities” shall mean (1) a cooperative, (2) the NPC, and
(3) local governments and privately-owned public service entities in operation
which furnish and are empowered to furnish retail electric service.

(d) “Person” shall mean any natural person, firm, association, cooperative,
corporation, business trust, partnership, the National Government or any
political subdivision, agency or instrumentality thereof.

(e) “Service” shall mean electric service, either at wholesale or retail,
including the furnishing of any auxiliary or related service;

(f) “Dependable and adequate service” shall mean service that, consistent
with normal standards and levels of service based upon good utility management
and operating practices, is sufficient .in quantity, having regard for the
demands for service currently existing and reasonably anticipated within the
foreseeable future, and that is accessible on a constant and continuous basis
except for outages occasioned by the need for normal repair, maintenance,
construction or renovation work or by acts beyond the reasonable ability of the
public service entity to prevent or control.

(g) “Area” shall mean (1) the geographic area franchised to a public service
entity or (2) any lesser geographic area for the furnishing of retail service to
which a public service entity pursuant to this Decree borrows, or may apply to
borrow, funds from the NEA, or may otherwise secure loans with the approval of
the NEA, to finance the acquisition or construction and operation, maintenance
or renovation of service facilities.

(h) “Area coverage” shall mean dependable and adequate service that, on the
basis of reasonable and standard extension and service policies, rates, charges
and other terms and conditions, will be or is being made available to all
persons within the affected area as above defined who request such service and
are able and willing to abide by and comply with all such reasonable and
standard terms and conditions, regardless of the relative location of such
persons within the affected area or of their proximity to existing or proposed
service facilities: Provided, that the financial feasibility of the
public service entity’s entire operation is not thereby impaired.

(i) “Interest rate per centum per annum” shall mean an interest rate that is
accrued solely upon the unpaid balance of any loan principal which has actually
been advanced to a borrower and upon any interest payment which has Become due
or been deferred and has not been paid by the borrower, computed on an annual
basis.

(j) “Loan” shall mean a loan the total principal amount of which, as and when
required for application to the purposes thereof, is, at the time of the making
thereof, assured from funds that are or will become available therefor.

(k) “NEDA” shall mean National Economic and Development Authority or any
successor instrumentality that may hereafter be established to perform the same
or substantially similar function; “NPC” shall mean National Power Corporation,
and “NEDA-FS” shall mean National Economic and Development Authority-Foreign
Source.

(l) “Board of Power and Waterworks” shall mean Board of Power and Waterworks
or any successor board, agency or instrumentality that may hereafter be
established to perform the same or substantially similar functions.

(m) “Franchise” shall mean the privilege extended to a person to operate an
electric system for service to the public at retail within a described
geographic area, whether such privilege had been granted by the Congress, by a
municipal, city or provincial government or, as herein provided, by the
NEA.

(n) “Non-profit” shall mean that a cooperative shall not engage in business
for the purpose of making a profit for itself or its patrons, but it shall not
mean that a cooperative may not account on a patronage basis to its patrons for
any receipts in excess of its expenses in relation to its operations in serving
such patrons or in relation to investment of any of its surplus funds pending
their use by the cooperative or their refund to patrons; nor shall it mean such
excess receipts may not be refunded to its patrons, or may not be converted into
patron-furnished capital subject to later redemption and retirement by the
cooperative.

(o) “Board” shall mean the board of directors of a cooperative.

(p) “Household” shall mean a non-seasonal dwelling, capable of receiving
service safely, including apartments and other dwelling combinations.

(q) “Congress” shall mean the President during his exercise of Martial Law,
or the National Assembly under the new Constitution of 1973, whichever is the
case at any given time.

(r) “President” shall mean the President of the Philippines during the
existence of Martial Law, or the Prime Minister when the National Assembly comes
into existence.

Chapter II – THE NATIONAL ELECTRIFICATION ADMINISTRATION

SEC. 4. NEA Authorities, Powers and Directives. —
The NEA is hereby authorized, empowered and directed to promote, encourage and
assist public service entities, particularly cooperatives, to the end of
achieving the objective of making service available throughout the nation on an
area coverage basis as rapidly as possible; and for such purpose it is hereby,
without limiting the generality of the foregoing and in addition to other
authorizations, powers and directives established by this Decree, specifically
authorized, empowered and directed:

(a) To have a continuous succession under its corporate name until otherwise
provided by law;

(b) To prescribe and thereafter to amend and repeal its by-laws not
inconsistent with this Decree;

(c) To adopt and use a seal and alter it at its pleasure;

(d) To sue and be sued in any court: Provided, That NEA shall,
unless it consents otherwise, be immune to suits for acts ex delicti;

(e) To make contract of every name and nature and to execute all instruments
necessary or convenient for the carrying on of its business;

(f) To make loans to public service entities, with preference to
cooperatives, for the construction or acquisition, operation and maintenance of
generation, transmission and distribution facilities and all related properties,
equipment, machinery, fixtures, and materials for the purpose of supplying area
coverage service, and thereafter to make loans for the restoration, improvement
or enlargement of such facilities: Provided, That the public service
entity applying for a loan, if neither a cooperative nor a local government,
must be in operation at the time of application;

(g) To promote, encourage and assist public service entities and government
agencies and corporations having related functions and purposes, with preference
to cooperatives, in planning, developing, coordinating, establishing, operating,
maintaining, repairing and renovating facilities and systems to supply area
coverage service, and for such purpose to furnish, to the extent possible and
without charge therefor, technical and professional assistance and guidance,
information, data and the results of any investigation, study, or report
conducted or made by the NEA;

(h) To approve or disapprove any loan from other lenders to public service
entities which at the time are borrowers from NEA under sub-paragraphs (f) or
(i) of this Section, and thereafter, pursuant to Section 10 (b) to disapprove
advances of loans from other lenders;

(i) To make loans for the purpose of financing the wiring of premises of
persons served or to be served as a result of loans made under sub-paragraph (f)
of this Section, and for the acquisition and installation by such persons of
electrically-powered appliances, equipment, fixtures and machinery of all kinds
for residential, recreational, commercial, agricultural and industrial uses,
such loans to be made directly (1) to public service entities which have
received loans under sub-paragraph (f) of this Section, which entities shall in
turn relend such funds to persons served or to be served by them, or (2) to any
person served or to be served by public service entities which have received
loans under sub-paragraph (f) of this Section: Provided, That at no
time shall the total loans made under this sub-paragraph (i) to a public service
entity and/or to persons served or to be served by such entity exceed
twenty-five (25%) per centum of the outstanding loans to such entity made under
sub-paragraph (f) of this Section;

(j) To so cooperate, coordinate and exchange such information, studies and
reports with, and to seek such cooperation and coordination from, other
departments, agencies and instrumentalities of the National Government,
including the NPC, as will most effectively conduce to the achievement of the
purposes of this Decree;

(k) To borrow funds from any source, private or Government, foreign or
domestic, and, not inconsistently with Section 8, to issue bonds or other
evidences of indebtedness therefor and to secure the lenders thereof by
pledging, sharing or subordinating one or more of the NEA’s own loan
securities;

(l) To receive from cooperatives all articles of incorporation, amendments,
consolidation, merger, conversion and dissolution, and all certificates of
changes in the location of principal offices and of elections to dissolve, and,
upon determining that such are in conformity with this Decree, to certify the
same, to file them in the records of the NEA, and to maintain a registry of such
filings the provisions of Act No. 1459, as amended, to the contrary
notwithstanding;

(m) To acquire, by purchase or otherwise (including the right of eminent
domain, which is hereby granted to the NEA, to be exercised in the manner
provided by law for the institution and completion of expropriation
proceedings by the National and local governments), real and physical
properties, together with all appurtenant rights, easements, licenses and
privileges, whether or not the same be already devoted to the public use of
generating, transmitting or distributing electric power and energy, upon NEA’s
determination that such acquisition is necessary to accomplish the purposes of
this Decree and, if such properties be already devoted to the public use
described in the foregoing, that such use will be better served and accomplished
by such acquisition: Provided, That the power herein granted shall be
exercised by the NEA solely as agent for and on behalf of one or more public
service entities which shall timely receive, own and utilize or replace such
properties for the purpose of furnishing adequate and dependable service on an
area coverage basis, which entity or entities shall then be, or in connection
with the acquisition shall become, borrowers from the NEA under sub-paragraph
(f) of this Section: And provided, further, That the costs of such
acquisition, including the cost of any eminent domain proceedings, shall be
borne, either directly or by reimbursement to the NEA, whichever the NEA shall
elect, by the public service entity or entities on whose behalf the acquisition
is undertaken and otherwise to acquire, improve, hold, transfer, sell, lease,
rent, mortgage, encumber, and otherwise dispose of property incident to, or
necessary, convenient or proper to carry out, the purposes for which NEA was
created;

(n) At least annually, not later than June 30th, to report to the President
and when the same comes into existence, the Prime Minister and the National
Assembly, on the status of electrification of the Philippines, including a
comprehensive reporting of loans made, loan funds advanced, loans secured from
other sources and the advances thereof, the names and locations of the
borrowers, the number of services contemplated by such loans, the number
actually receiving service as a result of such loans, the number of electrified
and the remaining number of unelectrified households throughout the Nation, the
amounts of usage by consumers, loans and other activities programmed for the
ensuing year, and all such other information and data as will accurately reveal
the progress being made toward the achievement of the purposes of this Decree;
and to publish such report for dissemination to and use by other interested
departments, agencies and instrumentalities of the National Government and by
borrowers under this Decree; and

(o) To exercise such powers and do such things as may he necessary to carry
out the business and purposes for which the NEA was established, or which from
time to time may be declared by the Board of Administrators to be necessary,
useful, incidental or auxiliary to accomplish such purposes; and, generally, to
exercise all the powers of a corporation under the Corporation Law insofar as
they are not inconsistent with the provisions of this Decree.

SEC. 5. National Electrification Administration; Board
of Administrators; Administrator, (a) For the purpose of administering the
provisions of this Decree, there is hereby established a public corporation to
be known as the National Electrification Administration. All of the powers of
the Corporation shall be vested in and exercised by a Board of Administrators,
which shall be composed of a Chairman and four (4) members, one of whom shall be
the Administrator as ex officio member. The Chairman and the three other members
shall be appointed by the President of the Philippines to serve for a term of
six years: Provided, That the terms of the first appointees shall be
six years for the Chairman and one member and three years for the two other
members, respectively, and that the term of the ex officio member shall be
co-terminous with his term as the Administrator. All vacancies except through
expiration of the terms, shall be Oiled for the unexpired term only. The
Chairman and every member of the Board of Administrators shall be entitled to a
per diem of not more than three hundred pesos for each meeting actually attended
by them: Provided, That the total of such per diem shall not exceed one
thousand five hundred pesos per month per member.

The Board of Administrators shall meet regularly at least twice a month and
as often as the exigencies of the agency’s affairs demand.

The presence of at least three members shall constitute a quorum which shall
be necessary for the transaction of any business. The affirmative vote of a
majority of the members present shall he necessary for the approval of any
resolution, decision or order, except when a greater vote is required as
sometimes hereinafter provided. In the absence of the Chairman at ;i
Board meeting duly called, the Administrator as ex officio member shall
preside.

The Board shall, without limiting the generality of the foregoing, have the
following specific powers and duties.

(1) To implement the provisions and purposes of this Decree;

(2) To formulate and adopt policies and plans, and to promulgate rules and
regulations, for the management, operation and conduct of the business of the
NEA;

(3) To adopt and, as may be necessary from time to time, to amend annual
budgets for the NEA’s borrowing and lending programs and for the agency’s
administration: Provided, That copies of such budgets shall be
submitted to the President or the appropriate committee of and as determined by
National Assembly, when it comes into existence, within fifteen (15) days from
the transmission thereof to the NEDA: And, provided further, That the
administrative budget and any amendments thereto shall be subject to the
approval of NEDA;

(4) To fix the compensation of the Administrator and of the Deputy
Administrators, subject to the approval of the President of the Philippines;
and

(5) To establish policies and guidelines for employment on the basis of
merit, technical competence and moral character and, upon the recommendation of
the Administrator to organize or reorganize NEA’s staffing structure, to fix the
salaries of personnel and to define their powers and duties.

(b) The management of the NEA shall be vested in the Administrator, who shall
be a person of known integrity, competence and experience in technical and
executive fields related to the purposes of this Decree. He shall be appointed
by the President of the Philippines and shall not be removed except for
cause.

The Administrator shall have the following powers and duties:

(1) To execute and administer the policies, plans and programs, and the rules
and regulations, approved or promulgated by the Board of Administrators;

(2) To submit for the consideration of the Board of Administrators such
policies, plans and programs as he deems necessary to carry out the provisions
and purposes of this Decree;

(3) To direct and supervise the operation and internal administration of the
NEA and, for this purpose, to delegate some or any of his powers and duties to
subordinate officials of the NEA;

(4) Subject to the guidelines and policies established by the Board of
Administrators, to appoint and fix the number and compensation of subordinate
officials and employees of the NEA: Provided, however, That the
provisions of the Civil Service Law and the Wage and Position Classification Law
shall not apply to the appointment and compensation of any such subordinate
official or employee;

(5) For cause, to remove, suspend, or otherwise discipline any subordinate
official or employee;

(6) To prepare an annual report on the activities of the NEA at the close of
each fiscal year and to submit a copy thereof to the President of the
Philippines and when it comes into existence, the Prime Minister and the
appropriate committee of, and as determined by, the National Assembly; and

(7) To exercise such other powers and duties as may be vested in him by the
Board of Administrators.

In case of absence or disability of the Administrator, he shall designate any
of the Deputy Administrators who shall act in his place.

(c) The Auditor General shall be ex of fie to Auditor of the NEA. The
provisions of Section 584 of the Revised Administrative Code, as amended by
Republic Acts numbered 2266 and 2716, shall apply to the Office of the
Representative of the Auditor General in the NEA.

SEC. 6. Capital Stock. — The authorized capital
stock of NEA is one billion pesos (P1B) divided into ten (10) million shares
having a par value of one hundred (P100.00) pesos each which shares are not to
be transferred, negotiated, pledged, mortgaged, or otherwise given as security
for the payment of any obligation. The sum of fifty million pesos (P50M) of the
capital stock has been subscribed and paid wholly by the Government of the
Philippines in accordance with the provisions of Republic Act numbered

Twenty-seven hundred seventeen and Republic Act numbered Sixty hundred
thirty-eight. The remaining nine hundred fifty million pesos (P950 M) shall be
wholly subscribed by the Government of the Philippines and shall be paid as
follows:

(a) The sum of one hundred ninety-five million pesos (P195M) worth of goods
and services from Japanese Reparations for the eighteenth, nineteenth and
twentieth year schedule, which is hereby allocated to NEA;

(b) The sum of ten million pesos (P10M) for the fiscal year 1973 and the same
amount each year for the next two fiscal years malting a total sum of thirty
million pesos (P30 M) representing proceeds of the sale of reparations goods,
which are hereby allocated to NEA:

(c) The sum of fifty three million five hundred thousand pesos (P53.5M) for
the fiscal year 1973 and the same amount each year for the next nine (9) fiscal
years from the general revenue, which arc hereby appropriated;

(d) The sum of one hundred thirty million pesos (P130M) representing fund or
physical assets which NEDA-FS may make available to the NEA for loan
purposes;

(e) The sum of sixty million pesos (P60 M) representing proceeds
corresponding to the share of the National Government in all franchise taxes
paid by electric service entities; and

(f) Such sums as may be appropriated and/or allocated by the President or the
National Assembly, when it comes into existence, from time to time as the
Financial needs of the NEA shall require until the authorized capital stock is
fully paid up.

SEC. 7. Loan Standards. — In making a loan
authorized in Section 4, the Board of Administrators is hereby authorized,
empowered and directed:

(a) Before making such loan, to determine and certify that (1) the project or
projects being financed thereby are financially feasible for the purpose of, and
will result in, area coverage in the area or areas to be affected thereby; (2)
funds are or will be available for the total advance of such loans to the
borrower on the schedule contemplated by the loan agreement; and (3) in the
NEA’s judgment the security for such loan is reasonably adequate and the
principal of an interest upon such loan will be repaid on schedule and within
the time agreed;

(b) To require that such loan be self-liquidating within a term to be fixed
by the NEA;

(c) To impose upon the loan principal an interest charge to be fixed by the
NEA;

(d) To fix the schedule for repayment of the principal of and the interest
upon such loan in installments recurring not more than every quarter, which
installments may be in unequal amounts and larger in the later years of the loan
term than in the earlier years;

(e) To require in the loan agreement that the borrower’s rates, charges,
rules and regulations, policies and all other terms and conditions affecting its
extension and furnishing of service shall be such as to assure achievement of
the loan purposes, and that the same be filed with and for such purpose approved
by the Board of Administrators before being put into effect or changed by the
borrower; and

(f) Subject to the foregoing, to establish and require compliance with such
procedures, rules and regulations as the Board of Administrators may determine
to be necessary or appropriate to assure that the purposes of such loan will be
timely achieved and that the loan agreement and the provisions of this Decree
will be complied with.

SEC. 8. Contracting Indebtedness: Conditions,
Privileges, Exemptions, Sinking Fund, Guarantees. — Whenever the Board of
Administrators determines that to accomplish the purposes of Chapter II of this
Decree it is necessary to contract indebtedness, it shall by a resolution,
adopted by the affirmative votes of at least three members, so declare and
authorize the NEA’s execution or issuance of, and establish the terms and
conditions to be contained in, such bonds, loan agreements or other evidences of
indebtedness necessary therefor. Such resolution shall become valid and
effective upon approval by the President of the Philippines upon recommendation
of the Secretary of Finance.

(a) With respect to domestic indebtedness to be incurred by the NEA, the
terms and conditions to be contained in such bonds or other evidences of
indebtedness, and other conditions, privileges, exemptions and guarantees
attaching thereto, shall include the following:

1. Such bonds or other evidences of indebtedness (A) shall be in registered
   form and transferable at the Central Bank of the Philippines; (B) shall not be
   sold at less, than par; (C) shall be payable ten years or more from date of
   issue, as may be determined by the Secretary of Finance before their issuance,
   but shall be redeemable, upon the election of the Board of Administrators after
   five years from such date of issue; and (D) shall bear interest at an annual
   rate to be determined before their issuance by the Secretary of Finance. The
   interest may be payable quarterly, semi-annually or annually, as determined by
   the Secretary of Finance in consultation with the Monetary Board of the Central
   Bank of the Philippines before date of issuance, and both the principal and
   interest shall be payable in legal tender of the Philippines.
2. The bonds or other evidences of indebtedness shall be exempt from the
   payment of all taxes by the Republic of the Philippines, or by any authority,
   branch, division or political sub-division thereof, which facts shall be stated
   upon their face; and they shall be receivable as security in any transaction
   with the National Government or any of its branches, subdivisions,
   instrumentalities and its owned or controlled corporations in which a security
   is required.
3. The sinking fund shall be established by the National Electrification
   Administration in such manner that the total annual contributions thereto,
   accrued at such rate of interest as may be determined by the Secretary of
   Finance in consultation with the Monetary Board, shall be sufficient to redeem
   at maturity the bonds issued under this Subsection. The sinking fund shall be
   under the custody of the Central Bank of the Philippines, which shall invest the
   same, subject to the approval of the Board of Administrators and the Secretary
   of Finance in consultation with the Monetary Board: Provided, That the proceeds
   thereof shall accrue to the NEA.
4. The Republic of the Philippines hereby guarantees the payment by the NEA of
   both the principal and the interest of the bonds or other evidences of
   indebtedness, and shall pay such principal and interest in case the NEA fails to
   do so; and there are hereby appropriated out of the general funds in the
   National Treasury not otherwise appropriated the sums necessary to make the
   payments so guaranteed: Provided, That the sums so paid by the Republic of the
   Philippines shall be refunded by the NEA: And, provided further, That
   the NEA, to assure such refunding, shall establish such reserves or sinking
   funds and comply with such other restrictions and conditions as the Secretary of
   Finance may prescribe and establish for that purpose.

(b) With respect to foreign indebtedness to be incurred by the NEA, such may
be contracted, in the form of loans, credits, convertible foreign currencies, or
other forms of indebtedness, from foreign governments or any international
financial institution of fund source, including foreign private lenders. The
total outstanding amount of such indebtedness, exclusive of interest, shall not
exceed five hundred million United States dollars (U.S. $500M) or the equivalent
thereof in other currencies. The President of the Philippines, by himself or
through his duly authorized representative, is hereby authorized to negotiate
and to so contract with foreign governments or any international financial
institution or fund source in the name and on behalf of the NEA; and is further
authorized to guarantee, absolutely and unconditionally, as primary obligor and
not merely as a surety, in the name and on behalf of the Republic of the
Philippines, the repayment of any indebtedness thereby contracted and the
payment thereon of any due interest charge, up to the limited amount authorized
to guarantee under Republic Act 6142, and also to guarantee the performance of
all or any of the obligations undertaken by the NEA in the territory of the
Republic of the Philippines pursuant to loan agreements entered into pursuant to
this Sub-paragraph (b). Any indebtedness contracted under this Sub-paragraph (b)
and the payment of the principal thereof and of any interest or other charges
thereon, as well as the importation of machinery, equipment, materials, supplies
and services by the NEA, paid from the proceeds of any such contracted
indebtedness, shall also be exempt from all direct and indirect taxes, fees,
imposts, other charges and restrictions, including import restrictions, by the
Republic of the Philippines, or by any authority, branch, division or political
subdivision thereof.

SEC. 9. Authority to Extend Loans and Release or
Subordinate Securities. — Whenever in its judgment such is necessary or
desirable to achieve the purposes of this Decree, and particularly if such is
necessary to make or keep a project operationally viable, the Board of
Administrators is hereby authorized and empowered (a) by agreement with the
borrower, to extend the time of payment of principal or interest, or both,
beyond the loan agreement term of any loan made by the NEA under this Decree, or
to defer, for not in excess of seven years, the time when the repayment schedule
for principal or interest, or both, shall begin, or to reschedule payments of
principal or interest, or both, or when none of the foregoing is sufficient, to
compromise any amount owing by a borrower to the NEA subject to provisions of
existing laws; and (b) upon the NEA’s determination that such is necessary or
desirable for the purpose of enabling a borrower to accomplish the purposes for
which it has already received an NEA loan and that such will not result in any
diminution of the security of, or of the ability of the borrower to repay, any
outstanding indebtedness of the borrower below the level of such security and
ability were additional borrowings from another lender not undertaken, to
release any after-acquired property clause contained in any lien the NEA holds
on a borrower’s properties to, or to share any such lien on a co-equal basis in
proportion to their respective loans with, or to subordinate any such lien in
favor of, any other lender of funds to a public service entity or to the NEA for
relending to public service entities for the purposes for which loans are
authorized under this Decree.

SEC. 10. Enforcement Powers. — If any public
service entity which has borrowed funds from the NEA, or from any other lender
with the NEA’s lawfully required prior approval, shall default in its principal
or interest payments, or shall fail, after notice from the NEA, to comply with
any other term or condition of a loan agreement or of any rule or regulation
promulgated by the NEA in administering the provisions of this Decree, the Board
of Administrators is hereby authorized and empowered in its discretion to do any
or any combination of the following:

(a) Refuse to make, or give any lawfully required approval to, any new loan
to the borrower;

(b) Withhold without limitation the NEA’s advancement, or withhold its
approval for any other lender with respect to which the NEA has such approving
power to make advancement of funds pursuant to any loan already made to the
borrower;

(c) Withhold any technical or professional assistance otherwise being
furnished or that might be furnished to the borrower;

(d) Foreclose any mortgage or deed of trust or other security held by the NEA
on the properties of such borrower, in connection with which the NEA, may,
subject to any superior or co-equal rights in such lien held by any other
lender; (1) kid for and purchase or otherwise acquire such properties; (2) pay
the purchase price thereof and any costs and expenses incurred in connection
therewith out of the revolving fund; (3) accept title to such properties in the
name of the Republic of the Philippines; and (4) even prior to the institution
of foreclosure proceedings, operate or lease such properties for such period,
and in such manner as may be deemed necessary or advisable to protect the
investment therein, including the improvement, maintenance and rehabilitation of
systems to be foreclosed, but the NEA shall, within five years after acquiring
such properties in foreclosure proceedings, sell the same for such consideration
as it determines to be reasonable and upon such terms and conditions as it
determines most conducive to the achievement of the purposes of this Decree;
or

(e) Take any other remedial measure for which the loan agreement may
provide.

In addition to the foregoing, the Board of Administrators may, at its own
instance and in the name of the NEA, petition any court having jurisdiction for
such purpose or any administrative agency possessing regulatory powers for such
purpose including the Board of Power and Waterworks) to issue such order and
afford such lawful relief as may be necessary.

No borrower shall, without the approval of the Board of Administrators and of
any other lender holding or sharing a lien on such borrower’s properties, sell
or dispose of the property, rights, franchises, permits or any other assets
acquired and/or mortgaged pursuant to the provisions of this Decree until all
outstanding indebtedness to the NEA and any other such lender, including all
interest owing thereon, shall have been repaid: Provided, That the NEA
may by appropriate rule or regulation, grant general permission to borrowers to
dispose of incidental properties (excluding real property), rights, franchises,
permits or other assets no longer deemed necessary or useful in conducting the
borrower’s operations.

No cooperative shall borrow money from any source without the Board of
Administrators’ prior approval: Provided, That the Board of
Administrators may, by appropriate rule or regulation, grant general permission
to cooperatives to secure short term loans not requiring the encumbering of
their real properties or of a substantial portion of their other properties or
assets.

SEC. 11. Execution of Public Works Acts. — The NEA
shall execute all electrification projects that may be authorized in any Public
Works Acts; and for this purpose it may call for assistance and cooperation
consistently with Section 4 (j).

SEC. 12. Conflict of Interest. — (a) No member,
officer, attorney, agent or employee of the NEA shall in any manner, directly or
indirectly, participate in the determination of any question affecting any
public service entity or other entity in which he is directly or indirectly
interested or any person to whom he is related within the third degree of
affinity or consanguinity, Any person violating the provisions of this
Subsection shall be removed from office and shall upon conviction be punished by
a fine not to exceed ten thousand (P10,000.00) pesos or imprisonment not to
exceed five years, or both.

(b) No officer or employee of the NEA or any government official who may
exercise executive or supervisory authority over the NEA, either directly or
indirectly, for himself or as the representative or agent of others, shall
become a guarantor, endorser, surety for loans from the NEA to others, or in any
manner be an obligor for money borrowed from the NEA. Any such officer or
employee who violates the provisions of this Subsection shall be punished by a
fine of not less than one thousand (P1,000.00) pesos nor more than five thousand
(P5,000.00) pesos, or imprisonment for not less than one year nor more than five
years, or both.

(c) No loan shall be granted by the NEA to any person related to any member
of the Board of Administrators or to the Administrator within the third degree
of consanguinity or affinity, or to any corporation, partnership, or company
wherein any member of the Board of Administrators or the Administrator is a
share holder: Provided, That the foregoing prohibition shall not apply
to a cooperative of which any member of the Board of Administrators or the
Administrator or any such relative is a member. Violation by any member of the
Board of Administrators or the Administrator of the provisions of this
Subsection is sufficient cause for his removal by the President of the
Philippines; and the violator shall furthermore be punished as provided
in Subsection (b).

(d) No fee, commission, gift, or charge of any kind shall be exacted,
demanded, or paid for obtaining loans from the NEA. Any officer, employee or
agent of the NEA or the Government exacting, demanding or receiving any fee,
commission, gift of charge of any kind for service in obtaining a loan shall be
punished by a fine of not less than one thousand (P1,000.00) pesos nor more than
three thousand (P3,000.00) pesos, or imprisonment for not less than one year nor
more than three years, or both.

(e) Any person who, for the purpose of obtaining, renewing, or increasing a
loan or the extension of the period thereof, on his own or another’s behalf,
shall give any false information or cause through his intrigue or machination
the existence and production of any false information with regard to the
identity, situation, productivity or value of security, or with regard to a
point which might affect the granting or denial of the loan, whether the latter
has been consummated or not, and any officer or employee of the NEA who through
connivance shall allow by action or omission such false information to pass
unnoticed, thereby causing damage to the NEA or exposing the latter to the
danger of suffering such damage, shall be punished by a fine of not less than
the amount of the loan obtained or applied for nor more than three times such
amount, or imprisonment for not less than three months nor more than three
years, or both.

(f) Any officer or employee of the NEA who violates, or causes or permits
another person to violate, and any other person who violates or aids or abets
the violation of, any provision of this Decree not specifically punishable in
the preceding Subsections shall be punished by a fine not exceeding two thousand
(P2,000.00) pesos, or imprisonment not exceeding one year or
both.

SEC. 13. Supervision over NEA; Power Development
Council. — The NEA snail be under the supervision of the Office of the
President of the Philippines, All orders, rules and regulations promulgated, and
all appointments made by the NEA as well as transactions subject to the
authority and jurisdiction of the NEA involving more than five hundred thousand
(P500,000.00) pesos shall be subject to the approval of the Office of the
President of the Philippines.

In order to achieve coordination and cooperation among different agencies and
sectors having to do with electrification and power development, there is hereby
created a Power Development Council whose Chairman shall be a person or official
designated by the President of the Philippines, and its members shall be the
manager of the NPC, the NEA Administrator, the Director General of the NEDA, the
Chairman of the Board of Power and Waterworks, a representative of electric
cooperatives, to be chosen by a national association of electric cooperatives,
and a representative of the private sector.

The Council shall have a Secretariat to be headed by an Executive Secretary
and staffed by such number of personnel as may be determined by the Council. In
order to augment the expertise necessary in the performance of its functions,
the Council may secure the detail of personnel, either on a part-time or
full-time basis, as well as other forms of assistance from other government
offices and agencies, including government-owned or controlled corporations. The
qualifications and compensation of the personnel of the Secretariat shall be
determined by the Council, but their appointment shall be made by the
Chairman.

The salaries, expenses, operating expenses and such other necessary financial
outlays for PDC shall be provided for from a special annual assessment
to be determined by the Chairman of PDC and paid by the NEA and NPC.

The Council shall adopt an integrated plan of electrification and power
development, coordinate the activities and operations of all sectors involved in
electrification, and recommend such policies and measures to the proper
authorities and parties concerned as it may deem necessary to achieve the total
electrification objective declared in this Decree.

SEC. 14. Exemption From All Taxes, Duties, Fees, Imposts
and Other Charges by Government and Government Instrumentalities. — The NEA
shall devote all its returns from its capital investments as well as excess
revenues from its operation to attain its objectives. To enable the NEA to pay
its indebtedness and obligations and in furtherance and effective implementation
of the policy enunciated in this Decree, the NEA is hereby declared exempt:

(a) From the payment of all taxes, duties, fees, imposts, charges, costs and
restrictions to the Republic of the Philippines, its provinces, cities,
municipalities, and other government agencies and instrumentalities, including
the taxes, duties, fees, imposts and other charges provided for under
the Tariff and Customs Code of the Philippines, Republic Act 1937, as amended by
Presidential Decree No. 34, dated October 27, 1972, and Presidential Decree No.
69, dated November 24, 1972, and filing and service fees and other charges or
costs in any court or administrative proceedings in which it may be a party;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the
National Government, its provinces, cities, municipalities and other government
agencies and instrumentalities;

(c) From all import duties, compensating taxes and advance sales tax,
wharfage fees on import of foreign goods required for its operations and
projects; and

(d) From all taxes, duties, fees, imposts, and all other charges imposed
directly or indirectly by the Republic of the Philippines, its provinces,
cities, municipalities and other government agencies and instrumentalities, on
all petroleum products used by the NEA in the generation, transmission,
utilization and sale of electric power.

Chapter III – ELECTRIC COOPERATIVES

SEC. 15. Organization and Purpose. — Cooperative
non-stock, non-profit membership corporations may be organized, and electric
cooperative corporations heretofore formed or registered under the Philippine
Non-Agricultural Co-operative Act may as hereinafter provided be
converted, under this Decree for the purpose of supplying, and of promoting and
encouraging the fullest use of, service on an area coverage basis at the lowest
cost consistent with sound economy and the prudent management of the business of
such corporations.

SEC. 16. Powers. — A cooperative is hereby vested
with all powers necessary or convenient for the accomplishment of its corporate
purpose and capable of being delegated by the President or the National Assembly
when it comes into existence; and no enumeration of particular powers hereby
granted shall be construed to impair any general grant of power herein
contained, nor to limit any such grant to a power or powers of the same class as
those so enumerated. Such powers shall include, but not be limited to, the
power:

(a) To sue and be sued in its corporate name;

(b) To have existence for a period of fifty years;

(c) To adopt a corporate seal and alter the same;

(d) To generate, manufacture, purchase, acquire, accumulate and transmit
electric power and energy, and to distribute, sell, supply and dispose of
electric energy to persons who are its members and to other persons not in
excess of ten per centum of the number of its members: Provided,
however, That a cooperative may furnish electric cold storage or processing
plant service to non-members without limitation: And provided, further,
That a cooperative which acquires existing electric facilities may continue
service from such facilities without requiring such persons to become members,
but such persons may become members upon such terms as may be prescribed in the
cooperative’s by-laws;

(e) To assist persons to whom service is or will be supplied by the
cooperative in wiring their premises and in acquiring and installing
electrically powered appliances, equipment, fixtures and machinery for
agricultural, commercial and industrial uses by the financing thereof or
otherwise, and in connection therewith to wire, or cause to be wired, such
premises, and to purchase, acquire, lease as lessor or lessee, sell, distribute,
install and repair such electrically-powered appliances, equipment, fixtures and
machinery;

(f) To assist persons to whom service is or will be supplied by the
cooperative in constructing, equipping, maintaining and operating electric cold
storage or processing plants, by the financing thereof or otherwise;

(g) To construct, purchase, lease as lessee, or otherwise acquire, and to
equip, maintain, and operate, and to sell, assign, convey, lease as lessor,
mortgage, pledge, or otherwise dispose of or encumber, electric transmission and
distribution lines or systems, electric generating plants, lands, buildings,
structures, dams, plants and equipment, and any other real or personal property,
tangible or intangible, which shall be deemed necessary, convenient or
appropriate to accomplish the purpose for which the cooperative is
organized;

(h) To purchase, lease as lessee, or otherwise acquire, and to use, and
exercise and to sell, assign, convey, mortgage, pledge or otherwise dispose of
or encumber franchises, rights, privileges, licenses and easements;

(i) To borrow money and otherwise contract indebtedness and to issue notes,
bonds, and other evidence of indebtedness and to secure payment thereof by
mortgage, pledge, or deed of trust of, or any other encumbrance upon, any or all
of its then owned or after-acquired real or personal property, assets,
franchises, or revenues: Provided, That any borrowing from or any
encumbering of its properties as security in favor of any lending sources other
than the NEA shall require the prior approval of the NEA Administrator and his
certification that such is in furtherance of the purposes and is consistent with
the provisions of this Decree, and that such borrowing and/or encumbering will
not diminish the security of, or of the ability of the cooperative to repay, any
then-outstanding indebtedness of the cooperative to the NEA or any other lending
source below the level of such security and ability were such additional
borrowing not being undertaken;

(j) To construct, maintain and operate electric transmission and distribution
lines along, upon, under and across publicly owned lands and public
thoroughfares, including, without Limitation, all roads, highways, streets,
alleys, bridges and causeways: Provided, That such shall not prevent or
unduly impair the primary public uses to which such lands and thoroughfares are
otherwise devoted;

(k) To exercise the power of eminent domain in the manner provided
by law for the exercise of such power by other corporations constructing or
operating electric generating plants and electric transmission and distribution
lines or systems;

(l) To become a member of other cooperatives or corporations or to own stock
therein, provided such cooperatives or corporations are engaged in a
business or activities germane to or having a reasonable relation to the
business or activities of the cooperative, its members, its directors, or its
employees;

(m) To conduct its business and exercise its powers within or without the
province or provinces in which it supplies service;

(n) To adopt, amend and repeal by-laws;

(o) To fix, maintain, implement and collect rates, fees, rents, tolls and
other charges and terms and conditions for service: Provided, That by
appropriate rules and regulations the NEA shall require that such shall be in
furtherance of the purposes and in conformity with the provisions of this
Decree; and

(p) To do and perform any other acts and things, and to have and exercise any
other powers which may be necessary, convenient or appropriate to accomplish the
purpose for which the cooperative is organized.

SEC. 17. Name. — The name of a cooperative shall
include the words “Electric” and “Cooperative,” and the abbreviation “Inc.” The
name of a cooperative organized under this Decree shall be distinct from the
name of any other cooperative already organized or converted under this Decree.
The foregoing requirement shall not apply to any cooperative which becomes
subject to this Decree by complying with the provisions of Section 31.

SEC. 18. Incorporators. — Five or more persons,
including cooperatives, may organize a cooperative in the manner hereinafter
provided.

SEC. 19. Articles of Incorporation. —The articles
of incorporation of a cooperative shall recite that they are executed pursuant
to this Decree and shall state: (a) the name of the cooperative; (b) the address
of its principal office; (c) the names and addresses of the incorporators; and
(d) the names and addresses of its original directors, who shall constitute the
board until the first election of the board by the members; and may contain any
other provisions not inconsistent with this Decree that are deemed necessary or
advisable for the conduct of its business. Such articles shall be signed by each
incorporator and acknowledged by at least two of the incorporators (or on their
behalf, if they are cooperatives). It shall not be necessary to recite in the
articles of incorporation the purpose for which the cooperative is organized or
any of its corporate powers.

SEC. 20. By-Laws. — Unless reserved to the members
in the articles of incorporation, the power to adopt and thereafter to amend or
repeal by-laws shall vest in and be exercised by the board, the affirmative
votes of a clear majority of all directors in office, after due notice to all
directors, being requisite for such purpose. The by-laws shall set forth the
basic rights and duties of members and directors and may contain any other
provisions for the regulation and management of the affairs of the cooperative
not inconsistent with its articles of incorporation or this Decree.

SEC. 21. Members. — Each incorporator of a
cooperative shall be a member thereof, but no other person may became a member
thereof unless such other person agrees to use services furnished by the
cooperative when made available by it. Membership in a cooperative shall not be
transferable, except as provided in the by-laws. The by-laws may
prescribe additional qualifications and limitations with respect to
membership.

The provision of any law or regulation to the contrary notwithstanding, an
officer or employee of the Government shall be eligible for membership in any
cooperative if he meets the qualifications therefor and he shall not be
precluded from being elected to or holding any position therein, or from
receiving such compensation or fee in relation thereto as may be authorized by
the by-laws: Provided, That elective officers of the Government except
barrio captains and councilors, shall be ineligible to become officers and/or
directors of any cooperative. For this purpose, individual permission need not
be obtained from the proper head of office: Provided, however, That
this authority shall not be construed as a permit to the government officer or
employee concerned to devote official time to the affairs of the
cooperative.

SEC 22. Meetings of Members. (a) An annual meeting
of the members of a cooperative shall be held at such time and place as shall be
provided in the by-laws.

(b) Special meetings of the members may be called by the President, by the
board, by any three directors or, unless a smaller number or percentage be
prescribed in the by-laws, by not less than 100 members or five per centum of
all members, whichever shall be the lesser.

(c) Except as otherwise provided in this Decree and unless otherwise
provided for in the by-laws, written or printed notice stating the time
and place of each meeting of the members and, in the case of special meeting,
the purpose or purposes for which the meeting is called, shall be given to each
member, either personally or by mail, not less than ten days nor more than
twenty-five days before the date of the meeting. If mailed, such notice shall be
deemed to be given when deposited in the Philippine mail with postage prepaid,
addressed to the member at his address as it appears on the records of the
cooperative.

(d) Unless the by-laws prescribe the presence of a greater or lesser
percentage or number of the members for such purpose, a quorum for the
transaction of business at all meetings of the members of a cooperative having
not more than 1,000 members shall be five per centum of all members, present in
person, and of a cooperative having more than 1,000 members shall be five per
centum of all members or 100, whichever is lesser, present in person. If less
than a quorum is present at any meeting, a majority of those present in person
may adjourn the meeting from time to time without further notice.

(e) Each member shall be entitled to one vote of each matter submitted to a
vote at a meeting of the members. Voting shall be non-cumulative and in person,
but, if the by-laws so provide, may also be by mail or by
proxy.

SEC 23. Waiver of Notice. — Any person entitled to
notice of a meeting may waive notice in writing either before or after such
meeting; however, his attendance shall constitute a waiver of notice of such
meeting, unless such person participates therein solely to object to the
transaction of any business because the meeting has not been legally called or
convened.

SEC. 24. Board of Directors. — (a) The business of
a cooperative shall be managed by a board of not less than five directors, each
of whom shall be a member of the cooperative or of another which is a member
thereof. The by-laws shall prescribe the number of directors, their
qualifications other than those prescribed in this Decree, the manner of holding
meetings of the board and of electing successors to directors who shall resign,
die or otherwise be incapable of acting. The by-laws may also provide for the
removal of directors from office and for the election of their successors.-
Directors shall not receive any salaries for their services as such and, except
in emergencies, shall not receive any salaries for their services to the
cooperative in any other capacity without the approval of the members. The
by-laws may, however, prescribe a fixed fee for attendance at each meeting of
the board and may provide for reimbursement of actual expenses of such
attendance and of any other actual expenses incurred in the due performance of a
director’s duties.

(b) The directors of a cooperative named in any articles of incorporation,
consolidation, merger or conversion shall hold office until the next annual
meeting of the members and until their successors are elected and qualify. At
each annual meeting or, in case of failure to hold the annual meeting as
specified in the by-laws, at a special meeting called for that purpose, the
members shall elect directors to hold office until the next annual meeting of
the members, except as otherwise provided in this Decree. Each director
shall hold office for the term for which he is elected and until his successor
is elected and qualifies.

(c) Instead of electing all the directors annually, the by-laws may provide
that each year half of them or one-third of them, or a number as near thereto as
possible, shall be elected on a staggered term basis to serve two-year terms or
three-year terms, as the case may be.

(d) A majority of the board of directors in office shall constitute a
quorum.

(e) The board shall exercise all of the powers of a cooperative not conferred
upon or reserved to the members by this Decree or by its articles of
incorporation or by-laws.

SEC. 25. Districts. — The by-laws may provide for
the division of the territory served or to be served by a cooperative into two
or more districts for any purpose, including, without limitation, the nomination
and election of directors. The by-laws shall prescribe the boundaries of the
districts, or the manner of establishing such boundaries, the manner of changing
such boundaries, and the manner in which such districts shall function.

SEC. 26. Officers. The officers of a cooperative
shall consist of a president, vice-president, secretary and treasurer, who shall
be elected annually by and from the board. When a person holding any such office
ceases to be a director, he shall ipso facto cease to hold such office. The
offices of secretary and treasurer may be held by the same person. The board may
also elect or appoint such other officers, agents, or employees as it deems
necessary or advisable and shall prescribe their powers and duties. Any officer
may be removed from office and his successor elected in the manner prescribed in
the by-laws.

SEC. 27. Amendment of Articles of Incorporation. —
A cooperative may amend its articles of incorporation by complying with the
following requirements: Provided, however, That a change of location of
principal office may effected in the manner set forth in Section 28. The
proposed amendment shall be presented to a meeting of the members, the notice of
which shall set forth or have attached thereto the proposed amendment or an
accurate summary thereof. If the proposed amendment, with any changes, is
approved by the affirmative vote of not less than two-thirds of the total votes
cast thereon at such meeting, articles of amendment shall be executed and
acknowledged on behalf of the cooperative by its president or vice-president and
its seal shall be affixed thereto and attested by its secretary. The articles of
amendment shall recite that they are executed pursuant to this Decree and shall
state: (1) the name of the cooperative; (2) the address of its principal office;
and (3) the amendment to its articles of incorporation. The president or
vice-president executing such articles of amendment shall make the annex thereto
an affidavit stating that the provisions of this Section with respect to the
amendment set forth in such articles were duly complied with.

SEC. 28. Change of Location of Principal Office. —
A cooperative may, upon authorization of its board or members change the
location of its principal office by filing a certificate reciting such change of
principal office, executed and acknowledged by its president or vice-president
under its seal attested by its secretary, in the place provided for in
Section 34.

SEC. 29. Consolidation. — Any two or more
cooperatives (each of which is hereinafter designated a “consolidating
cooperative”) may consolidate into a new cooperative (hereinafter designated the
“new cooperative”), by complying with the following requirements:

(a) The proposition for the consolidation of the consolidating cooperatives
into the new cooperative and proposed articles of consolidation to give effect
thereto shall be submitted to a meeting of the members of each consolidating
cooperative, the notice of which shall have attached thereto a copy of the
proposed articles of consolidation or an accurate summary thereof.

(b) If the proposed consolidation and the proposed articles of consolidation,
with any amendments, are approved by the affirmative vote of not less than
two-thirds of the total votes cast thereon by each consolidating cooperatives
voting thereon at each such meeting, articles of consolidation in the form
approved shall be executed and acknowledged on behalf of each consolidating
cooperative by its president or vice-president and its seal shall be affixed
thereto and attested by its secretary. The articles of consolidation shall
recite that they are executed pursuant to this Decree and shall state: (1) the
name of each consolidating cooperative and the address of its principal office;
(2) the name of the new cooperative and the address of its principal office; (3)
a statement that each consolidating cooperative agrees to the consolidation; (4)
the names and addresses of the directors of the new cooperative; and (5) the
terms and conditions of the consolidation and the mode of carrying the same into
effect, including the manner in which members of the consolidating cooperatives
may or shall become members of the new cooperative; and may contain any other
provisions not inconsistent with this Decree that are deemed necessary or
advisable for the conduct of the business of the new cooperative. The president
or vice-president of each consolidating cooperative executing such articles of
consolidation shall make and annex thereto an affidavit stating that the
provisions of this Section with respect to such articles were duly complied with
by such cooperative.

SEC. 30. Merger. — Any one or more cooperatives
(each of which is hereinafter designated a “merging cooperative”) may merge with
one or more other cooperatives by complying with the following requirements:

(a) The proposition for the merger of the merging cooperatives into the
surviving cooperative and proposed articles of merger to give effect thereto
shall be submitted to a meeting of the members of each merging cooperative and
of the surviving cooperative, the notice of which shall have attached thereto a
copy of the proposed articles of merger or an accurate summary thereof.

(b) If the proposed merger and the proposed articles of merger, with any
amendments, are approved by the affirmative vote of not less than two-thirds of
the total votes cast thereon by each cooperative voting thereon at each such
meeting, articles of merger in the form approved shall be executed and
acknowledged on behalf of each such cooperative by its president or
vice-president and its seal affixed thereto and attested by its secretary. The
articles of merger shall recite that they are executed pursuant to this Decree
and shall state: (1) the name of each merging cooperative and the address of its
principal office;(2) the name of the surviving cooperative and the address of
its principal office; (3) a statement that each merging cooperative and the
surviving cooperative agree to the merger; (4) the names and addresses of the
directors of the surviving cooperative; and (5) the terms and conditions of the
merger and the mode of carrying the same into effect, including the manner in
which members of the merging cooperatives may or shall become members of the
surviving cooperative and may contain any other provisions not inconsistent with
this Decree that are deemed necessary or advisable for the conduct of the
business of the surviving cooperative. The president or vice-president or each
cooperative executing such articles of merger shall make and annex thereto an
affidavit stating that the provisions of this Section with respect to such
articles were duly complied with by such cooperative.

SEC. 31. Effect of Consolidation or Merger. — (a)
In the case of consolidation, the existence of the consolidating cooperative
shall cease and the articles of consolidation shall be deemed to be the articles
of incorporation of the new cooperative; and in the case of merger, the separate
existence of the merging cooperatives shall cease and the articles of
incorporation of the surviving cooperative shall be deemed to be amended to the
extent, if any, that changes therein are provided for in the articles of
merger;

(b) All rights, privileges, immunities and franchises and all property, real
and personal, including without limitation applications for membership, all
debts due on whatever account and all other choses in action of each of the
consolidating or merging cooperatives shall be deemed to be transferred to and
vested in the new or surviving cooperative without further act or deed;

(c) The new or surviving cooperative shall be responsible and liable for all
the liabilities and obligations of each of the consolidating or merging
cooperatives, and any claim existing or action or proceeding pending by or
against any of the consolidating or merging cooperatives may be prosecuted as if
the consolidation or merger has not taken place, but the new or surviving
cooperatives shall be substituted in its place; and

(d) Neither the rights of creditors nor any liens upon the property of any
such cooperatives shall be impaired by such consolidation or
merger.

SEC. 32. Conversion of Existing Corporation. — Any
corporation heretofore organized or registered under the Philippine
Non-Agricultural Co-operative Act and supplying or having the corporate power to
supply electric energy may convert itself into a cooperative under this Decree
by complying with the following requirements, and shall thereupon become subject
to this Decree with the same effect as if originally organized hereunder:

(a) The proposition for the conversion of such corporation and proposed
articles of conversion to give effect thereto shall be submitted to a meeting of
the members or stockholders of such corporation, the notice of which shall have
attached thereto a copy of the proposed articles of conversion or an accurate
summary thereof.

(b) If the proposition for the conversion and the proposed articles of
conversion, with any amendments, are approved by the affirmative vote of not
less than two-thirds of the total votes cast thereon by members at such meeting,
and/or, if such corporation is a stock corporation or has both members and
voting stockholders, by the affirmative vote of the holders of not less than
two-thirds of those shares of the capital stock of such corporation represented
at such meeting and voting thereon, articles of conversion in the form approved
shall be executed and acknowledged on behalf of such corporation by its
president or vice-president and its seal shall be affixed thereto and attested
by its secretary. The articles of conversion shall recite that they are executed
pursuant to this Decree and shall state: (1) the name of the corporation and the
address of its principal office prior to the conversion into a cooperative; (2)
a statement that such corporation elects to become a cooperative, non-profit,
membership corporation subject to this Decree; (3) its name as a cooperative;
(4) the addresses of the principal office of the cooperative; (5) the names and
addresses of the directors of the cooperative, and (6) the manner in which
members or stockholders of such corporation may or shall become members of the
cooperative; and may contain any other provisions not inconsistent with this
Decree that are deemed necessary or advisable for the conduct of the business of
the cooperative. The president or vice-president executing such articles of
conversion shall make an annex thereto an affidavit stating that the provisions
of this Section were duly complied with in respect to such articles. The
articles of conversion shall be deemed to be the articles of incorporation of
the cooperative.

SEC. 33. Dissolution. — A cooperative may be
dissolved in the following manner: The proposition to dissolve shall be
submitted to the members of the cooperative at any annual or special meeting,
the notice of which shall set forth such proposition. The members at any such
meeting shall approve, by the affirmative vote of not less than a majority of
all members of the cooperative, the proposition that the cooperative be
dissolved ( hereinafter designated the “certificate”) shall be executed and
acknowledged on behalf of the cooperative by its president or vice-president
under its seal, attested by its secretary, stating: (1) the name of the
cooperative; (2) the address of its principal office; and (3) that the members
of the cooperative have duly voted that the cooperative be dissolved. Also, an
affidavit, made by its president or vice-president executing the certificate,
shall state that the statements in the certificate are true. Upon the filing of
the certificate and affidavit as provided for in Section 34, the
cooperative shall cease to carry on its business except to the extent necessary
for the winding up thereof, but its corporate existence shall continue until
articles of dissolution shall have been filed. The board shall immediately cause
notice of the dissolution proceedings to be mailed to each known creditor of and
claimant against the cooperative and to be published once a week for two
successive weeks in a newspaper of general circulation in the territory in which
the principal office of the cooperative is located. The board shall wind up and
settle the affairs of the cooperative, collect sums owing to it, liquidate its
property and assets, pay and discharge its debts, obligations and liabilities,
other than those to patrons arising by reason of their patronage, and do all
other things required to wind up its business; and, after paying or discharging
or adequately providing for the payment or discharge of all its debts,
obligations and liabilities, other than those to patrons arising by reason of
their patronage, shall distribute any remaining sums and/or unliquidated assets,
first, to patrons for the pro rata return of all amounts standing to their
credit by reason of their patronage; second, to members for the pro rata
repayment of membership fees; and third, to patrons for the amounts of any
outstanding contributions in aid of construction they have made. Any sums and/or
unliquidated assets then remaining shall be distributed in such manner as
provided in the cooperative’s articles of incorporation or by-laws,
which may provide for distribution of such sums or assets on a patronage basis
to persons who were members in one or more prior years or for transfer thereof
to a new cooperative to succeed the one being dissolved. The board shall
thereupon authorize the execution of articles of dissolution, which shall be
executed and acknowledged on behalf of the cooperative by its president or
vice-president, and its seal shall be affixed thereto and attested by its
secretary. The articles of dissolution shall recite that they are executed
pursuant to this Decree and shall state: (1)the name of the cooperative; (2) the
address of its principal office; (3) the date on which the certificate of
election to dissolve was filed; (4) that there are no actions or suits pending
against the cooperative; (5) that all debts, obligations and liabilities of the
cooperative have been paid and discharged or that provision to the extent
possible has been made therefor; and (6) that the provisions of this Section
have been duly complied with. The president or vice-president executing the
articles of dissolution shall make the annex thereto an affidavit stating that
the statements made therein are true.

SEC. 34. Filing of Articles and Certificates. —
Articles of incorporations, amendment, consolidation, merger, conversion, or
dissolution and certificates of changes in the location of principal offices and
of elections to dissolve, when executed and acknowledged and accompanied by such
affidavits as may be required by applicable provisions of this Decree, shall be
presented to the Administrator for filing in the records of his office. If he
shall find that such conform to the requirements of this Decree, he shall so
certify and shall file such in the records of his office. Upon such
certification and filing, the incorporation, amendment, consolidation, merger,
conversion, dissolution or certificate provided for therein shall be in
effect.

SEC. 35. Nonprofit, Non-discriminatory, Area Coverage
Operation and Service. — A cooperative shall be operated on a non-profit
basis for the mutual benefit of its members and patrons; shall, as to rates and
services make or grant no unreasonable preference or advantage to any member or
patron nor subject any member or patron to any unreasonable prejudice or
disadvantage; shall not establish or maintain any unreasonable difference as to
rates or services either as between localities or as between classes of service;
shall not give, pay or receive any rebate or bonus, directly or indirectly, or
mislead its members in any manner as to rates charged for its services; and
shall furnish service on an area coverage basis: Provided, That, for
any extension of service which if treated on the basis of standard terms and
conditions is so costly as to jeopardize the financial feasibility of the
cooperative’s entire operation, the cooperative may require such contribution in
aid of construction, such facilities extension deposit, such guarantee of
minimum usage for a minimum term or such other reasonable commitment on the part
of the person to be served as may be necessary and appropriate to remove such
jeopardy, but no difference in standard rates for use of service shall be
imposed for such purpose.

The by-laws of a cooperative or its contracts with members and patrons shall
contain such reasonable terms and conditions respecting membership, the
furnishing of service and the disposition of revenues and receipts as may be
necessary and appropriate to establish and maintain its non-profit, cooperative
character and to assure compliance with this Section, No bona fide applicant for
membership on non-member patronage who is able and willing to satisfy and abide
by all such terms and conditions shall be denied arbitrarily, capriciously or
without good cause.

SEC. 36. Disposition of Property. — (a) The board
of a cooperative shall have full power and authority, without authorization by
the members thereof, to authorize the execution and delivery of a mortgage or a
deed of trust, or the pledging or encumbering otherwise, of any or all of the
property, assets, rights, privileges, licenses, franchises and permits of the
cooperative, whether acquired or to be acquired, and wherever situated, as well
as the revenues therefrom, all upon such terms and conditions as the board shall
determine, to secure any borrowing by or indebtedness of the cooperative.

(b) A cooperative may not otherwise sell, lease or except by consolidation or
merger, otherwise dispose of the property (other than merchandise and property
which shall represent not in excess of ten per centum of the value of the
cooperative’s total assets, or which in the judgment of the board are not
necessary or useful in operating the cooperative) unless such sale, lease or,
except in the case of consolidation or merger, other disposition is (1)
authorized by the affirmative vote of not less than a majority of all members of
the cooperative and (2) consented to by the NEA and any other lending source
which then holds a lien on any of the cooperative’s properties.

SEC. 37. Non-liability of Members for Debts of
Cooperative. — No member shall be liable or responsible for any debts of
the cooperative and the property of the members shall not be subject to
execution therefor.

SEC. 38. Limitation of Actions. — No action or suit
may be brought against a cooperative, or against any agent, servant or employee
thereof, by reason of the maintenance of electric transmission or distribution
lines, or any related equipment, facilities or machinery, on any real property
after the expiration of a period of five (5) years of continuous maintenance of
such lines or related equipment facilities or machinery.

SEC. 39. Assistance to Cooperatives; Exemption from
Taxes, Imposts, Duties,- Fees; Assistance from the National Power
Corporation. — Pursuant to the national policy declared in Section 2, the
Congress hereby finds and declares that the following assistance to cooperatives
is necessary and appropriate:

(a) Provided that it operates in conformity with the purposes and
provisions of this Decree, a cooperative (1) shall be permanently exempt from
paying income taxes, and (2) for a period ending on December 31; of the
thirtieth full calendar year after the date of a cooperative’s organization or
conversion hereunder, or until it shall become completely free of indebtedness
incurred by borrowing, whichever event first occurs, shall be exempt from the
payment (A) of all National Government, local government and municipal taxes and
fees, including any franchise, filing, recordation, license or permit fees or
taxes and any fees, charges, or costs involved in any court or administrative
proceeding in which it may be a party, and (B) of all duties or imposts on
foreign goods acquired for its operations, the period of such exemption for a
new cooperative formed by consolidation, as provided for in Section 29,
to begin from as of the date of the beginning of such period for the constituent
consolidating cooperative which was most recently organized or converted under
this Decree: Provided, That the Board of Administrators shall, after
consultation with the Bureau of Internal Revenue, promulgate rules and
regulations for the proper implementation of the tax exemptions
provided for in this Decree.

(b) The National Power Corporation shall, except with respect to the National
Government, give preference in the sale of its power and energy to cooperatives,
and shall otherwise provide the maximum support of and assistance to
cooperatives of which it is capable, including assistance in developing
dependable and reliable arrangements for their supplies of bulk power, either
from itself, or from other sources. In pursuance of the foregoing policy, the
National Power Corporation shall not, except upon prior written agreement
approved by the cooperative’s board, compete in the sale of power and energy
which without regard to the location of the point of delivery thereof, will be
utilized and consumed within any area franchised to a
cooperative.

SEC. 40. Exemption from Board of Power and Waterworks and
Securities Exchange Commission. — (a) Cooperatives shall be exempt from
regulation by the Board of Power and Waterworks.

(b) The provisions of the Securities Act shall not apply to any note, bond or
other evidence of indebtedness issued by any cooperative or to any mortgage,
deed of trust, indenture or other instrument executed to secure the same. The
provisions of said Act shall not apply to the issuance of membership
certificates or any other evidence of member or patron interest by a
cooperative.

Chapter IV. FRANCHISES; REGULATION OF COOPERATIVES

SEC. 41. Applicability. — This Chapter shall apply
only to electric franchises as in Section 3 defined. It shall not be applicable
to franchises for any other utility service or to those separable portions of
franchises covering any other type of utility service though such franchises may
also cover electric service. The Board of Administrators shall hear and
determine all questions which may arise under this Section.

SEC. 42. Repeal of Franchise Powers of Municipal, City
and Provincial Governments. — The powers of municipal, city and provincial
governments to grant franchises, as provided for in Title 34 of the
Philippines Statutes or in any special law, are hereby repealed:

Provided, That this Section shall not impair or invalidate any
franchise heretofore lawfully granted by such a government or repeal any other
subsisting power of such governments to require that electric facilities and
related properties be so located, constructed, operated and maintained as to be
safe to the public and not to unduly interfere with the primary use of streets,
roads, alleys and other public ways, buildings and grounds over, upon or under
which they may be built.

SEC. 43. Franchising Powers Delegated to the NEA. —
The power hereafter to grant and thereafter to repeal, alter or amend new
franchises, heretofore granted by the Congress (or by the President, or by the
National Assembly after it comes into existence), and to repeal, alter or amend
all franchises heretofore granted by any municipal, city or provincial
government, is hereby delegated to the NEA, whose Board of Administrators shall,
acting as a Commission, administer the provisions of this Chapter. Provisions of
Republic Act 2677 to the contrary notwithstanding, no municipality shall
hereafter initiate the operation, or after December 31, 1973, continue any
operation, heretofore initiated, of any service for sale at retail unless it
shall first obtain a franchise from the NEA in accordance with the provisions of
this Chapter. In exercising the powers herein delegated, the NEA shall at all
times seek to serve the National objective of the most rapid total
electrification of the Philippines on an area coverage basis. Without limiting
the generality of the foregoing sentence, the NEA is hereby authorized,
empowered and directed:

(a) Within one hundred eighty days after the effective date of this Chapter
(and periodically thereafter, at least once annually) to notify and require
every person holding a franchise to report to it, within not less than ninety
days after such notice, an accurate description of the geographic area
encompassed in such franchise, the number of households therein receiving
adequate and dependable service, the number of households therein receiving
service which is not adequate and dependable, the number and type of other
retail customers therein receiving adequate and dependable service or service
which is not adequate and dependable, the approximate total number of households
therein, the date such franchise was granted and such other information and data
as the NEA for the purpose of implementing this Section may require, and, on the
basis of such reports and otherwise, including complaints:

1. to review such franchises to determine whether the holders thereof are
   furnishing service on an area coverage basis or are engaged in effective
   measures to furnish such service within a reasonable time;
2. to repeal and cancel any franchise if the NEA finds that the holder thereof
   is not then furnishing, and is unable or unwilling within a reasonable time to
   furnish adequate and dependable service on an area coverage within such area;
   and
3. to alter and condition such or other existing franchises and to issue new
   franchises to the end of assuring area coverage service throughout the Nation as
   in this Decree contemplated: Provided, That no franchise shall be
   altered, conditioned, repealed or cancelled, and no franchise shall be granted,
   without first affording the holder thereof, or the contending applicants
   therefor, if such be the case, and any other interested parties opportunity for
   hearing; and

(b) Upon determining, after affording opportunity for hearing to all
interested parties, that such is necessary or appropriate to assure or expedite
the furnishing of service on an area coverage basis, to require any public
service entity to interconnect its generation, transmission or distribution
facilities or related facilities with, and through such interconnection to
exchange, sell or purchase power and energy with, to or from or to transmit
power and energy on behalf of, any other public service entity, or if it so
requires or consents, the NPC; and, if such public service entities (and, if
such be the case, the NPC) are unable between or among themselves to agree upon
such, to establish the manner and degree, to fix and apportion the financial
responsibility and sharing of costs, and to determine the other terms and
conditions of such interconnection, exchange, sale, purchase or transmission:
Provided, however, That the provisions of Section 45 to the contrary
notwithstanding, the provisions of this paragraph shall apply to industrial
plants, factories, mills, mines and similar or other power generating entities
in which case they shall qualify as public service entities for purposes of
Section 4 (f).

SEC. 44. Preference to Cooperatives. — Whenever two
or more public service entities are affected by and have competing or
conflicting interests with respect to the granting repeal, alteration or
conditioning of the same franchise or franchises, and one or more of such
entities are cooperatives, the NEA shall accord preference to a cooperative over
any other type of public service entity (and shall prefer one cooperative over
another) unless and except to the extent that an order in favor of another type
of public service entity (or of another cooperative) will, as found by the NEA,
result both earlier and ultimately in the furnishing and extending of area
coverage service (1) to a greater number of households (2) over a larger
geographic area, and (3) on the basis of the same or lower rates charges and
fees.

SEC. 45. Furnishing Service Without a Franchise
Prohibited. — No person shall furnish or extend service to the public
within any area for which such person has not been granted a franchise or after
such franchise has been repealed and cancelled or so conditioned or altered as
to prohibit service therein: Provided, That such service may be
continued and extended therein, and the NEA, after affording opportunity for
hearing to any interested party, may by order require that it be so continued
and extended, until service to the customers of such person is made available by
a public service entity lawfully authorized to serve therein

SEC. 46. Additional Regulation of Cooperatives by the
NEA. — in addition to the other ways in which cooperatives are subject to
regulation by the NEA as provided in this Decree, the NEA, on its own
motion or upon complaint but only after affording opportunity for hearing to all
interested parties, is empowered to and shall (1) require a cooperative to
extend or improve service upon the NEA’s determination that such should be done
in furtherance of the purposes of this Decree and that such may reasonably be
done without undue impairment of the feasibility of the cooperative’s operations
and financial condition; and (2) require a cooperative to cease and correct any
practice or act which the NEA determines to be in violation of the provisions of
Section 35, and in connection with such authority it may require a cooperative
to file with the NEA, and to make accessible to any person upon request
therefor, copies of all rates, charges, contract forms, fee or deposit
schedules, by-laws, and service rules and regulations.

SEC. 47. Hearings and Investigation. — The NEA is
empowered to conduct such hearings and investigations and to issue such orders
as are necessary for it to implement the provisions of this Chapter, and in
connection therewith, without necessity of previous hearing, to require any
public service entity or the officials thereof to furnish to it such information
and data, including statements of account, schedules of rates, fees and charges,
contracts, service rules and regulations, articles of incorporation, by-laws,
audit reports and other internal records, documents, policies and procedures, as
will enable the NEA to be sufficiently informed in exercising its powers and
authorities: Provided, That no order shall issue finally determining
and substantially affecting any right of any person subject to the NEA’s
jurisdiction without first affording such person and any other interested person
opportunity for hearing as a party in the hearing proceeding.

SEC. 48. Parties and Intervenors in NEA’s Proceedings.
— Public service entities or any other interested person may invoke the
NEA’s exercise of its powers and authorities provided for in Sections
43, 44, 45, 46 and 47 by filing verified applications or complaints with the
NEA, and the NEA, on its own motion solely, may institute proceedings in
connection with all matters coming under its jurisdiction as provided
for in said sections. In any proceeding conducted by the NEA, including
proceedings to establish NEA rules and regulations, all persons having a
substantial interest therein shall, upon petition therefor, be permitted by the
NEA to intervene as full parties, and the NEA, in its discretion, may permit
persons having an insubstantial interest therein to intervene as a full party or
on such limited basis as the NEA may prescribe.

SEC. 49. NEA Rules and Regulations — The NEA shall
establish appropriate rules and regulations to carry out the provisions of this
Chapter IV, including rules for the conduct of NEA investigations, proceedings
and hearings; and shall timely publish the same when adopted or amended to the
end that all persons affected thereby shall be given reasonable notice
thereof.

SEC. 50. Notice. — (a) With respect to any NEA
proceeding, investigation or hearing (including such as are for the purpose of
establishing NEA rules and regulations) which may substantially affect the
rights or interests of any person or persons (including the general public or
the National Government or any department, agency, instrumentality or political
subdivision thereof, if such be the case), the NEA shall cause timely notice in
writing to be furnished to, or served upon, or appropriately published to such
person or persons to the end of affording them reasonable opportunity, as a
party or otherwise, directly to participate, or otherwise to have their
positions, views and interests adequately presented to or represented, in such
proceeding, investigation or hearing.

(b) Upon the completion of any such proceeding, investigation or hearing, the
NEA shall cause timely notice of any order issuing thereupon to be furnished to,
or served upon, or appropriately published to any person or persons (including
the general public or the National Government or any department, agency,
instrumentality or political subdivision thereof, if such be the case) who will
be directly affected thereby. Such notice shall be supplementary to, not in
conflict with or in lieu of, the notices and services otherwise
provided for in this Chapter.

SEC. 51. Hearings Conducted by Board of Administrators
or any Member Thereof. — NEA hearings pursuant to this Chapter may be
conducted by the Board of Administrators en bane or by any one or more members
thereof, as the Board of Administrators may decide: Provided, That the
Administrator shall preside when the Board of Administrators sits en bane:
Provided, further, That all hearings shall be of record: And provided,
finally, That findings, determinations, orders and rulings based upon such
hearings shall require the affirmative majority of all the members of the Board
of Administrators upon the certification, to become a part of such findings,
determinations and orders, on the part of any member of the Board who was absent
from the hearings that he has read the record of the same.

SEC. 52. Compensation. — The members of the Board
of Administrators and other hearing officers as the Board of Administrators may
designate shall be entitled to per diem for each hearing actually conducted or
attended by them in such amount as may be fixed by the President of the
Philippines.

SEC. 53. Hearing Rules; Contempt. — All hearings
and investigations conducted by the
NEA shall be governed by rules adopted by
the NEA, and in the conduct thereof the NEA shall not be bound by the technical
rules of legal evidence: Provided, That the NEA or such member of the
Board of Administrators when conducting a hearing, may summarily punish for
contempt by a fine of not exceeding two hundred (P200.00) pesos or by
imprisonment not exceeding (10) days, or both, any person guilty of misconduct
in the presence of the hearing or so near the same as to interrupt the hearing,
proceeding, session or investigation including cases in which a person present
at a hearing, proceeding, session or investigation refuses to be sworn its a
witness or to answer as such when lawfully required to do so. To enforce the
provisions of this Section, the NEA, or such member thereof, may, if necessary,
request the assistance of the municipal police for the execution of any order
made for said purpose.

SEC. 54. Subpoenas; Contempt. — (a) The NEA may
issue subpoenas and subpoenas duces tecum for witnesses in any matter of inquiry
pending before it, and require the production of all books, paper, tariffs,
contracts, agreements, and all other documents which it may deem necessary in
any proceeding. Such process shall be issued under the seal of the NEA signed by
one of the members of the NEA Board of Administrators, and maybe served by any
person of full age, or by registered mail. In case of disobedience to such
subpoena, the NEA may invoke the aid of the Supreme Court, or any Court of First
Instance of the Philippines in requiring the attendance and testimony of
witnesses and the production of books, papers and documents under the provision
of this Chapter, and the Supreme Court or any Court of First Instance of the
Philippines within the jurisdiction of which such inquiry is carried on, may, in
case of contumacy in refusal to obey a subpoena, issue to any public service
entity subject to the provisions of this Decree, or to any person, an order
requiring such public service entity or person to appear before the NEA and
produce books and papers if so ordered and give evidence touching the matter in
question; and any failure to obey such order of the Court may be punished by
such court as a contempt thereof;

(b) Any person who shall neglect or refuse to answer any lawful inquiry or
produce before the NEA books, papers, tariffs, contracts, agreements, and
documents, or other things called for by the NEA if in his power to do so, in
obedience to the subpoena or lawful inquiry of the NEA, upon conviction thereof
by a court of competent jurisdiction, shall be punished by a fine not exceeding
five thousand (P5,000.00) pesos or by imprisonment not exceeding one year, or
both in the discretion of the court;

(c) Any NEA Board Member shall have the power to administer oaths in all
matters under the jurisdiction of the NEA;

(d) Any person who shall testify falsely or make any false affidavit or oath
before the NEA or before any of its members shall be guilty of perjury, and,
upon conviction thereof in a court of competent jurisdiction, shall be punished
as provided by law;

(e) Witnesses appearing before the NEA in obedience to subpoena or subpoena
duces tecum shall be entitled to receive the same fees and mileage allowance as
witnesses attending Courts of First Instance in civil cases;

(f) Any person who shall obstruct the NEA or any member of the NEA Board
while engaged in the discharge of official duties, or who shall conduct himself
in a rude, disrespectful or disorderly manner before the NEA or any NEA Board
Member while engaged in the discharge of official duties, or shall orally or in
writing be disrespectful to, offend or insult any of the NEA board members on
occasion or by reason of the performance of official duties, upon conviction
thereof by a court of competent jurisdiction, shall be punished for each offense
by a fine not exceeding one thousand (P1,000.00)pesos, or by imprisonment not
exceeding six months, or both, in the discretion of the court.

SEC. 55. Testifying. — No person shall be excused
from testifying or from producing any book, document, or paper in any
investigation or inquiry by or upon the hearing before the NEA when ordered so
to do by the NEA, except when the testimony or evidence required of him may tend
to incriminate him. Without the consent of the interested party, no member or
employee of the NEA shall be compelled or permitted to give testimony in any
civil suit to which the NEA is not a party, with regard to secrets obtained by
him in the discharge of his official duty.

SEC. 56. Depositions. — The NEA may, in any
investigation, proceeding or hearing, by its order in writing, cause the
deposition of witnesses residing within or without the Philippines to be taken
in the manner prescribed by the Rules of Court. Where witnesses reside in places
distant from Manila and it would be inconvenient and expensive for them to
appear personally before the NEA, the NEA may, by proper order, commission any
clerk of the Court of First Instance, municipal judge or justice of the peace of
the Philippines to take deposition of witnesses in any case pending before the
NEA. It shall be the duty of the official so commissioned to designate promptly
a date or dates for the taking of such deposition, giving timely notice to the
parties, and on said date to proceed to take the deposition, reducing it to
writing. After the depositions have been taken, the official so commissioned
shall certify to the depositions taken and forward them as soon as possible to
the NEA. It shall be the duty of the respective parties to furnish stenographers
for taking and transcribing the testimony taken. In case there are no
stenographers available, the testimony shall be taken in long hand by such
person as the clerk of court, the municipal judge or justice of the peace may
designate. The NEA may also commission a notary public to take the depositions
in the same manner herein provided.

The Board may also, by proper order, authorize any of the attorneys of the
legal division or division chiefs of the NEA to hear and investigate any case
filed with the NEA or any matter within the jurisdiction of the NEA and in
connection therewith to receive such evidence as may be material thereto. At the
conclusion of the hearing or investigation, the attorney or division chief so
authorized shall submit the evidence received by him for the Board of
Administrators to enable the latter to render its decision.

SEC. 57. Service. — Every order made by the NEA
shall be served upon the person or public service entity affected thereby within
ten (10) days from the time said order is filed, by personal delivery or by
ordinary mail, upon the attorney of record or, in case there be no attorney of
record upon the party interested; and in case a certified copy is sent by
registered mail, the registry mail receipt shall be prima facie evidence of the
receipt of such order by the public service entity in due course of mail.

SEC 58. Reconsideration. — Any interested party may
request the reconsideration of any order, ruling, or decision of the NEA by
means of a petition filed not later than fifteen (15) days after the date of the
notice of the order, ruling, or decision in question. The grounds on which the
request for reconsideration is based shall be clearly and specifically stated in
the petition. Copies of said petition shall be served on all parties interested
in the matter. It shall be the duty of the NEA to decide the same within thirty
(30) days, either denying the petition or revoking or modifying the order,
ruling, or decision under consideration. If no petition for reconsideration is
filed, no review by the Supreme Court as hereinafter provided shall be
allowed.

SEC. 59. Court Review. — The Supreme Court, is
hereby given jurisdiction to review any order, ruling, or decision of the NEA
and to modify or set aside such order, ruling, or decision when it clearly
appears that there was no evidence before the NEA to support reasonably such
order, ruling, or decision, or that the same is contrary to law, or that it was
without the jurisdiction of the NEA. The evidence presented to the NEA, together
with the record of the proceedings before the NEA, shall be certified by the NEA
to the Supreme Court. Any order, ruling, or decision of the NEA may likewise be
reviewed by the Supreme Court upon a writ of certiorari in proper cases. The
procedure for review, except as herein provided, shall be prescribed by
rules of the Supreme Court. Any order, ruling, or decision of the NEA may be
reviewed on the application of any person or public service entity aggrieved
thereby and who was a party in the subject proceeding, by certiorari in
appropriate cases or by a petition for review, which shall be filed within
thirty (30) days from the notification of the NEA order, decision, or ruling on
reconsideration. Said petition shall be placed on file in the office of the
Clerk of the Supreme Court who shall furnish copies thereof to the NEA and other
interested parties.

SEC. 60. No Stay. — The institution of a writ of
certiorari or other special remedies in the Supreme Court shall in no case
supersede or stay any order, ruling, or decision of the NEA unless the Court
shall so direct, and the appellant may be required by the Court to give bond in
such form and of such amount as may be deemed proper.

SEC. 61. NEA Counsel. — The chief of the legal
division or any other attorney of the NEA shall represent the same in all
judicial proceedings. It shall be the duty of the Solicitor General to represent
the NEA in any judicial proceeding if, for special reasons, the Administrator
shall request his intervention.

Chapter V – TRANSITORY PROVISIONS

SEC. 62. Existing NEA Continued. — (a) The existing
Board of Administrators of the NEA and the Administrator thereof shall be the
Board of Administrators and Administrator provided for under this
Decree, and their respective terms shall be and continue as already
established;

(b) Any reference to the NEA in any existing law or in any executive order or
proclamation of the President shall, with respect to any duty or function
assumed by the NEA pursuant to said Decree, be deemed hereafter to have
reference to the NEA established under this Decree;

(c) The properties, assets, rights, choses in action, obligations,
liabilities, records and contracts of the NEA are hereby transferred to and are
vested in, and assumed by the NEA established under this Decree;

(d) All personnel of the NEA shall be absorbed and transferred to the NEA
established under this Decree without demotion in rank nor reduction salary;
and

(e) All on-going projects and/or approved loans of the NEA established under
Republic Act No. 6038, shall be reviewed by the NEA established under this
Decree and, insofar as found to be economically feasible in accordance with
sound management, engineering and technological standards, shall be continued
and completed on a priority basis.

SEC. 63. Separability of Provisions. — If any
provision of this Decree, or the application of such provision to any person or
circumstance, is declared invalid, the remainder of the Decree or the
application of such provision to other persons or circumstances shall not be
affected by such declaration.

SEC. 64. Effect on Other Acts. — All acts or parts
of acts inconsistent herewith are repealed or modified accordingly.

SEC. 65. Effectivity. — This Decree shall take
effect immediately.

Done in the City of Manila, this 6th day of August, in the year of Our Lord,
nineteen hundred and seventy-three.

			(Sgd.) FERDINAND E. MARCOS President Republic of the Philippines
	By the President:
	(Sgd.) ALEJANDRO MELCHOR
		Assistant Executive Secretary