What Ails ZAMSURECO II? Years of Government Intervention, Questions About Money and Power Supply

Zamboanga del Sur II Electric Cooperative (ZAMSURECO II) has been under government intervention for years. It has received poor performance ratings and faced regulatory questions over its power procurement practices and system losses.

For consumers, the problems are easier to see: rising electricity bills, recurring brownouts and uncertainty over when power will be restored.

But these problems also raise questions about how the cooperative is being managed. Why has it taken so long to address the issues that led to government intervention? Are its power supply agreements giving consumers a fair deal? Has it reduced electricity losses? And has its financial and operational condition improved after years of government supervision?

These questions deserve answers. ZAMSURECO II is owned by its member-consumers, and its decisions affect the cost and reliability of electricity across its service area.

Government records provide some information about the cooperative’s problems. However, they do not yet give a complete picture of its current condition.

Government intervention dates back to 2019

In August 2019, an official management announcement from ZAMSURECO I said the National Electrification Administration (NEA) had appointed its general manager, Jose Raul A. Saniel, as project supervisor and acting general manager of ZAMSURECO II.

The appointment followed NEA Board Resolution No. 82, series of 2019, which deactivated ZAMSURECO II’s board of directors because of its reported failure and inability to lead the cooperative.

The move placed the cooperative under special management arrangements after the NEA intervened in its leadership.

The arrangement appears to have continued for several years.

The Department of Energy’s (DOE) 2023-2032 Distribution Development Plan still listed a project supervisor and acting general manager for ZAMSURECO II. The NEA’s 2024 annual report also recorded a six-month extension of Ruben R. Bonalos’ designation as acting general manager under Board Resolution No. 2024-436, dated Dec. 11, 2024.

(The current status of the cooperative’s board and management needs to be confirmed through updated NEA records.- Editor)

Still, the length of the intervention raises an important question: What has the NEA accomplished since taking over?

Has the cooperative improved its operations and financial management? Have the problems that led to the board’s deactivation been addressed? Is there already a plan to restore normal governance?

Government intervention is meant to correct management problems and help an organization recover. Consumers should be able to see the results after several years of supervision.

NEA gives the cooperative poor performance ratings

ZAMSURECO II’s performance ratings also raise concerns.

In its 2024 annual report, the NEA classified the cooperative as a Category C electric cooperative for the period covering the fourth quarter of 2023 to the third quarter of 2024. Its budgetary and institutional performance indicators both received Orange ratings.

The NEA conducted a roundtable assessment with the cooperative on Nov. 12, 2024, as part of efforts to address its operational weaknesses.

However, the ratings alone do not explain the problems behind the cooperative’s performance.

Is it having difficulty collecting electricity payments? Does it have problems meeting financial obligations? Are operating expenses too high? Are its management systems and internal controls working properly?

An Orange rating does not establish corruption or criminal wrongdoing. But it indicates areas that require attention and corrective action.

The NEA should disclose the specific findings behind the ratings, the measures required from the cooperative and whether management has met its improvement targets.

Member-consumers should also be informed about the results of these assessments. They need to know whether the problems identified by the NEA have been addressed.

System losses reached 20.76% in 2018

Another issue concerns the amount of electricity ZAMSURECO II loses between the time it purchases power and the time it sells electricity to consumers.

The DOE’s 2019-2028 Distribution Development Plan reported that the cooperative purchased 149,100 megawatt-hours of electricity in 2018 but sold only 118,142 megawatt-hours.

The difference was 30,958 megawatt-hours, equivalent to a system loss rate of 20.76%.

This means the cooperative paid for substantially more electricity than it recorded as sales. The difference warrants an explanation.

System losses can come from several sources. Some are technical, such as energy lost as electricity travels through distribution lines and transformers.

Others are nontechnical. These may include illegal connections, defective meters, inaccurate meter readings and billing errors.

Unpaid electricity bills also affect a cooperative’s finances, although they are not classified as electricity losses.

Whatever the causes, a system loss rate of 20.76% is a serious concern. ZAMSURECO II must pay for the electricity it purchases, including power that does not register on customers’ meters. High losses can therefore affect its financial condition and the cost of delivering electricity.

However, the 20.76% figure refers to 2018. It should not be treated as the cooperative’s current system loss rate.

The NEA, DOE and ZAMSURECO II should release updated figures showing how much electricity the cooperative purchases, distributes, sells and loses.

Consumers also need to know what measures have been taken to reduce losses, including improvements to distribution lines, transformers and metering systems.

Without updated figures, it is difficult to determine whether the cooperative has made progress on this problem.

ERC proceedings raise questions about power purchases

ZAMSURECO II’s power procurement practices have also faced regulatory scrutiny.

In proceedings dated May 22, 2023, under ERC Case Nos. 2023-327 SC and 2023-328 SC, the Energy Regulatory Commission (ERC) dealt with alleged violations involving the cooperative’s failure to comply with an order requiring complete documents and data for a fuel audit.

The proceedings also involved the validation of generation charges imposed on consumers and the review of the cooperative’s power purchase agreements.

These matters are important because electricity procurement costs are reflected in the rates paid by consumers, subject to regulatory rules.

Electric cooperatives purchase electricity from generating companies and other suppliers. The documents supporting these purchases help regulators determine whether the charges passed on to consumers are properly justified.

The ERC proceedings do not, by themselves, establish that ZAMSURECO II overcharged consumers or that all alleged violations were proven. The final decisions in the cases should be checked before drawing conclusions.

However, the issues raised call for clarification.

Did the cooperative submit the required documents? Were its generation charges properly supported? Were its power purchase agreements reviewed to ensure that the terms and costs were reasonable?

ZAMSURECO II should explain how it evaluates electricity purchases and checks the charges submitted by its suppliers.

Consumers have a right to know whether the costs included in their electricity bills are properly documented and justified.

ERC also acted on outage reporting

The cooperative’s reporting of power interruptions has also been the subject of regulatory proceedings.

In ERC Case No. 2022-315 SC, the Commission issued a decision on Oct. 22, 2025, concerning alleged violations of ERC Resolution No. 12, series of 2006, which requires electric utilities to submit quarterly reports on power interruptions.

These reports help regulators monitor service reliability. They provide information on the frequency and duration of outages and the areas affected.

Without accurate reports, it becomes difficult to determine how often consumers experience interruptions and whether the problems are recurring.

The source of an outage also matters. A shortage from a generating plant, a transmission problem and a fault in the cooperative’s distribution network require different solutions.

ZAMSURECO II should provide consumers with timely information about power interruptions, including their causes, affected areas and expected restoration times.

It should also explain what steps are being taken to prevent recurring outages.

The final outcome of the ERC case should be verified to establish the cooperative’s specific regulatory obligations and whether any violations were confirmed.

Therma South outage led to higher electricity rates

The cooperative’s power supply arrangements came under pressure again in June 2026 following an outage at Therma South Inc.

The shutdown of one generating unit reduced the electricity available to ZAMSURECO II from the company from 10 megawatts to 5 megawatts.

For the affected billing period, the cooperative reported the following power supply mix:

• Wholesale Electricity Spot Market: 46%
• Therma South Inc.: 21%
• Power Sector Assets and Liabilities Management Corp.: 33%

Residential consumers experienced a rate increase of P2.5237 per kilowatt-hour.

The incident showed how a disruption at a generating plant can affect electricity costs. When a supplier cannot deliver the contracted power, an electric cooperative may have to purchase replacement electricity from the Wholesale Electricity Spot Market (WESM).

WESM prices fluctuate depending on supply and demand. When electricity supply is tight, replacement power can become more expensive, and the additional cost may be reflected in consumer rates.

ZAMSURECO II may not have been responsible for the generating company’s outage. However, the incident raises questions about its ability to manage supply disruptions.

How dependent is the cooperative on individual power suppliers? Does it have alternative sources of electricity? Are its supply contracts sufficient to cover possible shortages? What measures can management take to limit the effect of higher spot-market prices on consumers?

Earlier DOE planning documents projected possible supply shortages for ZAMSURECO II between 2021 and 2028. These projections belong to an earlier planning period and do not establish that the cooperative faces a shortage today.

Updated information on electricity demand, available generating capacity and existing supply contracts is needed to assess its current position.

Audited financial statements could provide answers

The cooperative’s financial condition is another area that requires closer examination.

The NEA Freedom of Information portal records a successful request dated Aug. 10, 2026, for ZAMSURECO II’s audited financial statements.

These documents could help determine whether the cooperative has enough financial resources to meet its obligations, maintain its distribution system and invest in improvements.

Several items deserve attention:

• Total assets and liabilities
• Outstanding loans and interest payments
• Accumulated deficits or retained earnings
• Accounts receivable and collection efficiency
• Payments due to generating companies and other suppliers
• Cash flow and available funds
• Capital expenditures and infrastructure investments
• Depreciation and the condition of distribution assets

Monthly revenue alone does not show whether a cooperative is financially sound.

Even if it collects substantial amounts from consumers, it may still face financial difficulties because of high operating expenses, unpaid accounts, outstanding loans or system losses.

Financial difficulties, however, do not automatically mean that funds have been misused.

The audited financial statements should be examined alongside audit findings, management letters and NEA assessments to provide a clearer picture of the cooperative’s financial condition.

Consumers should be able to see whether ZAMSURECO II can meet its obligations while maintaining and improving its distribution network.

Consumers deserve a full accounting

ZAMSURECO II serves households, schools, hospitals, farms, businesses and other establishments. Its performance affects the daily lives and livelihoods of the people within its service area.

Higher electricity rates put additional pressure on household budgets. Frequent outages disrupt businesses and affect essential services. Poor distribution facilities can make electricity unreliable even when sufficient power is available from generating companies.

The NEA should explain the results of its years of intervention, including whether the problems that led to the deactivation of the cooperative’s board have been resolved.

The ERC should clarify the outcomes of its proceedings involving power procurement and outage reporting, including whether ZAMSURECO II has complied with its regulatory requirements.

The DOE should provide updated information on the cooperative’s system losses and power supply situation.

ZAMSURECO II management, meanwhile, should report directly to its member-consumers on its financial condition, operational performance and plans to address continuing problems.

The cooperative and the government agencies involved should also be given the opportunity to respond to these concerns.

The purpose is not to presume wrongdoing based on unfavorable ratings or regulatory proceedings. It is to establish what happened, determine whether the problems have been corrected and identify what still needs to be done.

After years of government intervention, consumers should be able to see measurable improvements.

They need reliable electricity, reasonable and properly supported rates, responsible financial management and a cooperative that answers to its member-consumers.

The NEA and ZAMSURECO II should provide the figures and explain what has changed. If problems remain, they should identify the causes and present a clear plan for addressing them.

Consumers have waited years for improvements. They deserve to know when those improvements will come.

(Editor’s Note: The available records suggest that ZAMSURECO II should not be investigated simply as an electric cooperative with expensive electricity. There are deeper questions about whether its financial condition, governance arrangements, power procurement and distribution operations have been adequately addressed.)

(Daily Sun Chronicle will update the story once the full details of the following documents will be available: NEA – Full 2024 Comprehensive Operations Audit of ZAMSURECO II, including findings and recommendations; NEA – 2022-2025 audited financial statements and management letters; NEA – Annual performance assessments and financial/institutional rating worksheets; NEA – Loan balances, repayment schedules and outstanding obligations; NEA – Board deactivation orders, intervention reports and restoration conditions; DOE – 2019-2025 actual system-loss reports; DOE – Latest Distribution Development Plan and Power Supply Procurement Plan; ERC – Complete records and final dispositions of Cases 2023-327 SC, 2023-328 SC and 2022-315 SC; and ERC – Approved power supply agreements, generation charge assessments and interruption reports)

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