All electric cooperatives (ECs) in the country, whether registered with the National Electrification Administration (NEA) or the Cooperative Development Authority (CDA), that comply with NEA’s financial and operational standards will be exempted from local taxes, fees, and charges imposed by local government units (LGUs).

This exemption is outlined in a Joint Memorandum Circular signed today, 04 December 2024, by Energy Secretary Raphael P.M. Lotilla and Finance Secretary Ralph G. Recto, represented by Undersecretary Bayani Agabin. The Circular provides guidelines for electric cooperatives on the availment of preferential rights under Republic Act (RA) No. 7160, in relation to RA No. 10531. Under this Circular, electric cooperatives are required to secure an annual Certificate of Compliance from the NEA, demonstrating their adherence to the prescribed financial and operational standards.

To qualify for this certification, ECs must achieve at least a 75% rating based on NEA’s compliance parameters. These parameters include maintaining high collection efficiency, achieving a positive net worth, meeting system reliability and system loss standards, conducting annual general membership assemblies and district elections as scheduled, implementing electrification projects to attain 100% customer connection, and submitting complete and timely reportorial requirements to the NEA.

Local taxes is defined as taxes or enforced contributions imposed by an LGU in provinces, cities, municipalities and barangays through an ordinance, such as real property taxes, business tax, franchise tax, and tax on transfer of real property ownership.

All ECs, however, remain subject to regulated and reasonable administrative costs imposed by LGUs, in accordance with the Joint Memorandum Circular No. 2019-01 signed by the Department of the Interior and Local Government (DILG) and DOF. This Circular established the guidelines for reasonable rates of regulatory fees and service charges levied by LGUs. These costs include fees for business permits, mayor’s permits, barangay clearances, community tax certificates, and other charges such as those for water consumption, electricity, and toll fees.

The NEA is expected to issue the guidelines governing its issuance of Certificate of Compliance within fifteen days from the effectivity of the Joint Circular.

“This local tax exemption is a significant milestone for our qualified ECs, as it directly translates to reduced financial burdens that can be reinvested into improving services and achieving 100 percent total electrification,” Secretary Lotilla said. “By reducing these costs, we empower them to focus on expanding access to electricity, especially in unserved and underserved areas, ensuring no Filipino household is left behind,” the Secretary added. ###