Baguio council pushes probe of multi million Beneco ‘scam’

BAGUIO CITY – The city council urged last week the National Electrification Administration and Energy Regulatory Commission to investigate purchase of lots here at South Drive by top officials of the Benguet Electric Coop. which Beneco insiders, city officials and residents called a “scam” worth millions of pesos.

The council also authorized the city legal officer to investigate the purchase of lots (reportedly worth P85 million) and to file administrative and criminal charges against those involved pursuant to Section 46 of the EPIRA law in behalf of the city being a valued client of Beneco.

Councilor Fred Bagbagen, who exposed the “scam” in a privilege speech Monday during the regular council session also urged the council to authorize the city legal officer to file for annulment of the deed of sale and titles related to the sale of the lots and invite the broker to shed light on this transaction.

Bagbagen said Beneco officials need to address the issue instead of keeping mum on the matter when it involved millions of pesos.

“Due to the request of concerned citizens, I wrote a letter dated Feb. 3, 2010 to Beneco to inquire regarding its intention to purchase a lot especially one located within the Central Business District,” said Bagbagen in the speech. “Until now, my letter was ignored and was not given even the courtesy of a reply. Shame on them! They even tried to defer the delivery of this speech by offering to host a dinner. Another shame on them! Not me folks, you go better fly a kite.”

Bagbagen said Beneco acquired two lots as evidenced by two transfer certificates of title (018-20100000 and 018-2010000057) covering a total land area of 12,229.88 sq. meters.

He added transfer of the titles in the name of Beneco was effected Jan. 8, 2010 at the Register of Deeds of Baguio City. “This means that preparatory works were undertaken last 2009.” Bagbagen cited chronology of events regarding the transaction:

“In the Baguio Midland Courier issue of April 6, 2008, Beneco came up with an advertisement that the cooperative is interested to buy a city lot within the Central business District and specified that the area should be 1,000 to 1,500 square meters and indicated that the last submission of the offers will be on April 30, 2008.

“On Oct. 20, 2008, Beneco made an acknowledgment again in the Baguio Midland Courier that it has received offers with areas ranging from 500 to 1500 square meters, but provided the added information “that the deliberations of all the offers received was temporarily suspended pending approval and release of the loan applied for by Beneco with the NEA and “assured that Beneco will update you (the bidders) of the status hereof as soon as the matter is duly addressed.”

“On December 22, 2009, the National Association of Electricity Consumers for Reform, Cordillera Chapter (NASECORE), wrote a letter to Beneco opposing the said purchase of lot and posed the query “where Beneco will source the money to purchase the said lot considering that your previous annual financial reports (Souvenir Program Annual Report 2008) showed operational loss of P23,118,477 and an accumulated net loss of P263,735,286.00. What is shown as a modest income comes from Other Income.” This did not merit a reply from Beneco” Bagbagen said.

In another letter dated Dec. 28, 2009, Baguio Electric Power Consumers Cooperative (BAELCO), through its President, Prof. Federico Balanag, wrote to Edita S. Bueno, National Electrification Administration, registering its protest for the intended lot purchase.

The letter to Bueno: “Our Electric Cooperative has not presented the merits of purchasing expensive lots when according to Beneco insiders, the cooperative has an inventory of land holdings (2 has. at Longlong, La Trinidad, Benguet.) Considering that City lots specially within the central business districts are expensive, the total cost of 1,500 square meters will be in the millions of pesos which should be properly informed to the member consumers as they shall be the ones to ultimately pay the lot. It is as standard practice and a good practice of cooperatives that major decisions should be informed to members.

In this regard, may we know if our EC has applied for approval of said purchase from your good Agency? Through our letter, we would like to state our opposition due to the following: Beneco has existing lots to be utilized for whatever purpose; Beneco has payables to us, consumers to prioritize first before others namely: payment of meter deposits costing P75 million plus; payment of overcharges in the amount of P33.9M per ERC decisions and payment of refund discount of P0.2075 per kWh or equivalent to a total of P85M which is in relation to the Beneco -Mirant Contract as per ERC decision. Beneco has no net surplus to pay for any lot purchase, and payment through loan may not be a good move and approval should involve the consumers. We fear that the source of money to purchase comes from loan or the restricted fund which is for a specific purpose.”

According ro Bagbagen, Beneco again ignored the letter and did not answer the queries.

He said the letter was also sent to Zenaida Ducut of the Energy Regulatory Commission on Jan. 26, 2010.

On Jan. 8, 2010 Nasecore-Cordillera Chapter received a letter from ERC saying “This refers to your letter dated Dec. 22, 2009 inquiring whether Benguet Electric Cooperative, Inc. ( BENECO) sought approval from the Commission of its plan to purchase a lot within the Baguio City Commercial Business District and whether same was approved. Please be informed that BENECO has no pending nor approved application with the Commission for such CAPEX project.”

In a letter dated February 2, 2010, Deputy Administrator Edgardo R. Piamonte of NEA answered Nasecore: “The purchase of lot was not included in Beneco’s approved work plan for 2007 to 2009; however, it was included in their 2010 work plan which was submitted to our office for approval.

“On Sept. 30,2008, Beneco submitted a Board Resolution (No. 95-2008) applying for a NEA loan in the amount of P100M to fund the purchase of a lot located in Baguio City and construction of a building therein. However, we are still in the process of evaluating said proposal pending approval of the coop’s 2010 work plan.”

Bagbagen said in answer to Balanag’s letter dated Jan. 26, 2010, lawyer Francis Saturnino C. Juan of the ERC replied in a letter dated Feb. 10, 2010 that “Please be informed that Beneco has no pending nor approved application with the Commission for such CAPEX project”;

“It was hubristic for “Biniliko”, ay, Beneco to totally ignore the above letters, nay not even a semblance of a reply which shows a mind which is as impervious as the wall of China and a warped sense of accountability as it is very apparent that the word “transparency” is alien to it and does things under the table with impunity and without any fear of being questioned,” Bagbagen said.

“For indeed, the board treated the Beneco coffers as if it is their own private funds. Thus, we are totally under a cloud of doubt as to the purpose of Beneco for the purchase of the lot, for its failure to disclose the same in violation of the principle enunciated by Section 43(f) of Republic Act No. 9136 and quoted by Energy Regulatory Commission Resolution No. 18, Series of 2008 entitled “Resolution Adopting the Rules for Approval of Regulated Entities’ Capital Expenditure Projects”, in its first whereas clause which states that “any significant operation costs or projects investments of the National Transmission Corp. and Distribution Utilities which shall become part of the rate base shall be subject to verification by the Commission to ensure that the contracting and procurement of the equipment, assets and services have been subjected to transparent and accepted industry procurement and purchasing practices to protect the public interest” and failure to answer the letter I sent and the various letters of Nasecore and Baelco. ”

Bagbagen added: It also failed to include the same in its agenda during the general assembly held last Dec. 5, 2009.
In his speech, Bagbagen asked: “What is the purpose of the purchase of the lot? Why was the purchase of the 1.2 hectares not bidded out? Was the sub rosa transaction in the best interest of the consumers to whom the payment of the purchase price will be passed on?

“Why did it buy 1.2 hectares in violation of its set guideline of 1,000 to 1,500 square meters as the ceiling of the area as advertised in the Baguio Midland Courier? When it suspended the deliberations of the offers, did it keep its assurance to the bidders that they will be updated of the status of the intended land purchase as stated in the Baguio Midland Courier?

“Why was the said purchase not included in the agenda during the December 5, 2009 general assembly? Are the members not entitled to be presented the plan to purchase the lot considering that as already stated it is the consumers who will ultimately shoulder the payment;

“Why did it not submit the same or include it in its proposed three (3) year capital expenditure program “as mandated by Article 111, 3.1 of Resolution No. 18, Series of 2008 and consequently violated 3.2 or the Requirements for Filing the Application of Capital Expenditure Program which listed stringent requirements like description of each project, projected cost analysis, project financing plan, sworn statement from the authorized representative of the Regulated Entity that an application for approval from the concerned agencies that may have interest in the proposed project has been filed or shall be filed by the Regulated Entity (specify date of filing and furnish ERC a copy within five (5) days upon filing, proof/s that public information dissemination of the proposed capital expenditure program was conducted by the Regulated Entity.

“At the minimum, the Regulated Entity should show proof of posting in at least three conspicuous places within its franchise area, of a notice containing the following: 1) the proposed projects; 2) the reasons for proposing said projects; 3) the source of fund for the said projects; and indicative rate impact of the said projects, if any and proof that a separate application for authority to secure has been filed with ERC in the case of projects to be funded by loan/standby credit?

“In other words, is the approval of the NEA and/or ERC not needed for the purchase of the 1.2 hectares? Does the purchase of the lot take precedence which is not mandatory to its distribution business over its obligations to the consumers?

Where did it get the wherewithal to pay the purchase price of P85 million? (Deed of Absolute Sale dated December 9, 2009,) Is this the real purchase price? Who brokered this transaction?
Bagbagen recommended approval of a city council resolution for Beneco to comply with its obligations to the consumers pursuant to the above stated ERC decisions.

He also pushed approval of a city council resolution to request Beneco to submit all pertinent documents regarding said purchase, but not limited to, like Deed of Absolute Sale, BIR payments, receipt of payment, escrow agreement, sworn statement from the authorized representative of the regulated entity and others to the city council in aid of legislation.

Bagbagen also urged the approval of a city council resolution to request Beneco for an audited report of its operation and maintenance expenses.

A Beneco spokesperson contacted by the Northern Philippine Times said the power firm’s officials would answer Bagbagen’s allegations in a paid advertisement with a Baguio newspaper