Electric cooperatives (ECs) meeting the financial and operational standards set by the National Electrification Administration (NEA) will be exempted from local taxes, fees, and charges imposed by local government units (LGUs).

Energy Secretary Raphael Perpetuo Lotilla said on Wednesday that the initiative aims to reduce electricity costs in areas served by ECs, which typically rely on diesel-fired power plants.

“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,” Energy 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,” he added.

The exemption, which applies to ECs registered with either the NEA or the Cooperative Development Authority (CDA), is outlined in a Joint Memorandum Circular signed on 4 December by Lotilla and Finance Secretary Ralph G. Recto, represented by Undersecretary Bayani Agabin.

The Circular provides guidelines for ECs to avail themselves of preferential rights under Republic Act (RA) No. 7160 in relation to RA No. 10531.

To qualify, ECs must secure an annual Certificate of Compliance from the NEA, which certifies their adherence to prescribed standards.

To obtain the certification, ECs must achieve at least a 75 percent rating based on NEA’s compliance parameters. These include high collection efficiency, a positive net worth, adherence to system reliability and system loss standards, timely conduct of annual general membership assemblies and district elections, full implementation of electrification projects, and submission of complete and timely reports to the NEA.

The exemption covers local taxes such as real property taxes, business taxes, franchise taxes, and taxes on the transfer of real property ownership.

However, ECs remain subject to reasonable administrative costs imposed by LGUs, as outlined in Joint Memorandum Circular No. 2019-01 issued by the Department of the Interior and Local Government and the Department of Finance.

The costs include fees for business permits, mayor’s permits, barangay clearances, community tax certificates, and other charges such as water consumption, electricity, and toll fees.

The NEA will issue specific guidelines for the Certificate of Compliance within 15 days of the Joint Circular’s effective date.