R.A. 6038

REPUBLIC ACT No. 6038

AN ACT DECLARING A NATIONAL POLICY OBJECTIVE FOR THE TOTAL ELECTRIFICATION OF THE PHILIPPINES ON AN AREA COVERAGE SERVICE BASIS, PROVIDING FOR THE ORGANIZATION OF THE NATIONAL ELECTRIFICATION ADMINISTRATION, THE ORGANIZATION, PROMOTION AND DEVELOPMENT OF ELECTRIC COOPERATIVES TO ATTAIN THE OBJECTIVE, PRESCRIBING TERMS AND CONDITIONS FOR THEIR OPERATION, THE REPEAL OF R.A. NO. 2717, AND FOR OTHER PURPOSES.

CHAPTER I
POLICY AND DEFINITIONS

Section 1. Title. This Act shall be referred to as the "National Electrification Administration Act."

Section 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 diligently to pursue 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 the Congress having, by the enactment of this Act, 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.

Section 3. Definitions. As used in this Act, the following words or terms shall have the following meanings, unless a different meaning clearly appears from the context:

CHAPTER II
THE NATIONAL ELECTRIFICATION ADMINISTRATION

Section 4. National Electrification Administration. Board of Administrators. For the purpose of administering the provisions of this Act there is hereby established an agency to be known as the National Electrification Administration, the powers of which shall be vested in and exercised by a Board of Administrators composed of a Chairman and four 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 with the consent of the Commission on Appointments 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 two members, respectively, and that the term of the ex-officio member shall be co-terminus with his term as the Administrator. All vacancies, except through expiration of the term, shall be filed for the unexpired term only. The Chairman and every member of the Board of Administrators shall serve without compensation and any form of allowances but, unless he is a public official or employee, shall be entitled to a per diem of not more than fifty pesos for each meeting actually attended by him: Provided, That the total of such per diems shall not exceed 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 NEA'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 be necessary for the approval of any resolution, decision or order of the Board. In the absence of the Chairman at a Board meeting duly called, the Administrator, as ex-officio member shall preside over the meeting.

The Board of Administrators is hereby authorized to carry out the provisions and purposes of this Act, and, subject to the approval of the President, to promulgate rules and regulations to govern its proceedings and the exercise of the NEA's authority, to organize, reorganize and determine the NEA's personnel and its staffing pattern, and to define their powers and duties.

The Board of Administrators shall have under its control and supervision an Administrator who shall serve as the Chief Executive Officer of the NEA responsible for carrying out its purposes and programs under the direction of the Board of Administrators, exercise such power and authority as the Board may delegate to him, and perform such acts as he is under this Act authorized and directed and as the Board may authorize and/or direct him so to do. The Administrator shall be a person of known integrity, competence and experience in technical and executive fields related to the purposes of this Act. He shall be appointed by the President of the Philippines with the consent of the Commission on Appointments and shall receive a salary to be fixed by the Board of Administrators with the approval of the President not exceeding twenty four thousand pesos per annum. He shall serve for a term of six years and shall not be removable except for cause.

Section 5. Authorities, Powers and Directives. The Board of Administrators 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 Act, specifically authorized, empowered and directed:

Section 6. Loans form GSIS, SSS and DBP. The GSIS, SSS and DBP are hereby authorized, empowered and directed to make loans directly to public service entities for the same purposes for which NEA loans are authorized in subparagraph (a) of section five. Any other provision of law to the contrary notwithstanding, such a loan shall be made by any of the foregoing three whenever:

The beginning schedule of repayment of the principal of such loans, of the interest charges thereon, or both, may be deferred for a period not to exceed seven years from the advance of such principal, upon the Administrator's request and if the NEC certifies to the lender its approval thereof, in which event provision for such deferment shall be incorporated into the loan agreement and interest shall accrue and be payable on any interest payments so deferred.

Advances to the borrower of loans made pursuant to this section, and advances to a cooperative borrower form any other non-NEA source, shall be made directly to the borrower by the lender at such time or times in such amount or amounts as the Administrator approves; and the Administrator, with respect to such loans, advances, application by the borrower of such advances to their purposes, repayments by the borrower of the principal of and interest upon such loans, and all operations of the borrower affecting the loan security and the borrower's conformity with loan agreements, shall establish and implement the same procedures and requirements affecting the borrower as though such loan had been made by the NEA. Annually, and at any time a borrower's condition indicates that it may default in its loan agreement, or whenever so requested by such a lender or by the NEC, the NEA shall furnish a current and comprehensive report of the status and operations of the borrower relating to its ability to conform with its loan agreement and to its financial and operating conditions in general. To the extent that a loan made pursuant to this section has not been advanced to the borrower within five years after the effective date of the loan agreement, the same shall be rescinded unless the lender and borrower, upon the NEA's approval, agree otherwise, which agreement shall be executed by all three in writing and become a part of the loan agreement.

This section shall not constitute a limitation on the right and ability otherwise lawfully possessed by such a lender to make such loans to such public service entities on terms and conditions more favorable to such entities than herein prescribed.

Section 7. Revolving Fund. A revolving fund, out of which the Board of Administrators is hereby authorized, empowered and directed to make loans to public service entities for the purposes set forth in subparagraph (a) of section 5, is hereby established to consist of the following:

No portion of the revolving fund shall, without the prior approval of the Congress, be expended by the NEA for any purpose other than the loans herein and in section nine authorized and the acquisition authorized in section eleven. The Board of Administrators shall annually, not later than January thirty-first, report to the Congress and the President the current status and amount of the revolving fund and the anticipated status and amount thereof in the ensuing year.

Section 8. Loan Standards. In making a loan authorized in section 7, the Board of Administrators is hereby authorized, empowered and directed:

Notwithstanding the foregoing provisions of this section, the Board of Administrators may fix any higher interest rate or any shorter or longer term for loans made from funds or physical assets made available from sources stated in subparagraphs (c) and (d) of section 7, but only if and not to exceed the extent to which such is required by, or otherwise is made a condition of the availability of such funds or assets from, such sources: Provided, That the Board of Administrators may, unless the conditions attaching to the availability of such funds require otherwise, combine such funds with the other funds in the revolving fund and fix a blended interest charge on loans made generally therefrom at not in excess of the rate which will assure repayment to the revolving fund of interest at three per centum per annum on that portion of funds not derived from such sources and of such higher interest per centum per annum as is required on that portion of funds that is derived from such sources.

Section 9. Loans for Electric-Related Purposes. The Board of Administrators is hereby authorized, empowered and directed to make loans, out of the revolving fund, for the purpose of financing the wiring of premises of persons served or to be served as a result of loans made under Section 7, and for the acquisition and installation by such persons of electrically-powered appliances, equipment, fixtures and machinery of all kinds for commercial, agricultural and industrial uses. Such loans may be made directly (a) to public service entities which have received loans under section 7, which entities shall relend such funds to persons served or to be served by them, or (b) to any person served or to be served by such an entity. Such loans shall be made for such terms, shall bear interest at such rate not to exceed six per centum per annum, and shall be subject to such other terms and conditions as the Board of Administrators shall determine to be necessary and appropriate to assure repayment thereof within the time agreed: Provided, however, That at no time shall the total of loans made for the purposes stated under this section exceed ten per centum of the total of the revolving fund nor shall any such loan to any borrower exceed ten per centum of the total loan to such borrower from the revolving fund.

Section 10. Authority to Extend Loans and Release or Subordinate Securities. Whenever in its judgment such is necessary or desirable to achieve the purposes of this Act, 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 Act, 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 re-schedule payments of principal or interest, or both, or when none of the foregoing is sufficient, to compromise and 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 for the purposes for which loans are authorized under this Act.

Section 11. Enforcement Powers. If any public service entity which has borrowed funds from the NEA, or from any other lender through the services of the NEA as its agent, 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 Act, the Board of Administrators is hereby authorized and empowered in its discretion to do any or any combination of the following:

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 Public Service Commission) 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 under the provisions of this Act 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.

Section 12. Staff. To enable the NEA to implement more effectively the provisions of this Act, the Board of Administrators shall have and provide for a technical staff and such other staffs or personnel is it may deem proper. The Administrator shall appoint the personnel of the NEA, subject to the approval of the Board of Administrators and the requirements of existing law. He shall, furthermore, have control and supervision over them.

Section 13. 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 5(e).

Section 14. Administrative Expenses. The NEA's administrative expenses shall be appropriated annually by the Congress.

Section 15. 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 association or corporation 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 pesos or imprisonment not to exceed five years, or both.

Section 16. Supervision over NEA; Power Development Council. The NEA shall 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 all transactions subject to the authority and jurisdiction of the NEA involving more than five hundred thousand 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 Chairman of the NEC or a representative designated by him, the Chairman of the Presidential Economic Staff or a representative designated by him, a representative of electric cooperatives to be chosen by a national association of electric cooperatives, and a representative of the Philippine Electric Plant Owners Association to be designated by its board. The council shall meet at least once a month and shall adopt an integrated plan of electrification and power development, coordinate the activities and operations of all sectors involved in electrification, conduct relevant studies and researches, 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 Act.

CHAPTER III
ELECTRIC COOPERATIVES

Section 17. Organization and Purpose. Cooperative non-stock, non-profit membership corporations may be organized, and electric cooperative corporations heretofore formed or registered under the Philippines Non-Agricultural Co-operative Act may as hereinafter provided be converted, under this Act 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.

Section 18. Powers. A cooperative is hereby vested with all power necessary or convenient for the accomplishment of its corporate purpose and capable of being delegated by the Congress; 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:

Section 19. 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 Act shall be distinct from the name of any other cooperative already organized or converted under this Act. The foregoing requirement shall not apply to any cooperative which becomes subject to this Act by complying with the provisions of section 34.

Section 20. Incorporators. Five or more persons, including cooperatives, may organize a cooperative in the manner hereinafter provided.

Section 21. Articles of Incorporation. The articles of incorporation of a cooperative shall recite that they are executed pursuant to this Act 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 Act 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.

Section 22. 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 Act.

Section 23. Members. Each incorporator of a cooperative shall be a member thereof, but no other person may become 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 in respect of membership.

The provisions 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.

Section 24. 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.

Section 25. Waiver of Notice. Any person entitled to notice of a meeting may waive such notice in writing either before or after such meeting. If any such person shall attend such meeting, such attendance shall constitute a waiver of notice of such meeting, unless such person participates herein solely to object to the transaction of any business because the meeting has not been legally called or convened.

Section 26. 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 Act, 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.

Section 27. 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.

Section 28. 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 of 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.

Section 29. 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 be effected in the manner set forth in section 30. 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 thereof 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 Act 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 and annex thereto an affidavit stating that the provisions of this section in respect of the amendment set forth in such articles were duly complied with.

Section 30. 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 36.

Section 31. 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:

Section 32. Merger. Any one or more cooperatives (each of which is hereinafter designated a "merging cooperative") may merge into another cooperative (hereinafter designated the "surviving cooperative") by complying with the following requirements:

Section 33. Effect of Consolidation or Merger. (a) In the case of a 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 a 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;

Section 34. Conversion of Existing Corporations. Any corporation heretofore organized or registered under the Philippines Non-Agricultural Co-operative Act and supplying or having the corporate power to supply electric energy may convert itself into a cooperative under this Act by complying with the following requirements, and shall thereupon become subject to this Act with the same effect as if originally organized hereunder:

Section 35. 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. Upon such approval, a certificate of election to dissolve (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 36, 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 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 Act 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 and annex thereto an affidavit stating that the statements made therein are true.

Section 36. Filing of Articles and Certificates. Articles of incorporation, 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 Act, 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 Act, 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.

Section 37. Non-profit, 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 or 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.

Section 38. 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, on 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.

Section 39. 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.

Section 40. 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 years of continuous maintenance of such lines or related equipment facilities or machinery.

Section 41. Assistance to Cooperatives; Exemption from Taxes, Imposts, Duties, Fees; Assistance from the National Power Corporation; Protection of Franchise. 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:

Section 42. Regulation by the Public Service Commission and Securities and Exchange Commission. Pursuant to the national policy declaration in section 2, the Congress hereby establishes that:

Other than an order to require information filings, as provided in (3) of this subsection, the Commission shall issue no order in the exercise of the foregoing powers without affording the cooperative and any other interested person who requests it an opportunity to be heard. Except as provided in this subsection, a cooperative shall be exempt from regulation or control by the Public Service Commission.

CHAPTER IV
TRANSITORY PROVISIONS

Section 43. The Electrification Administration. Republic Act Numbered Twenty seven hundred seventeen is hereby repealed and the Electrification Administration created under it is hereby dissolved in the manner hereinafter provided:

Section 44. Separability of Provisions. If any provisions of this Act, or the application of such provision to any person or circumstance, is declared invalid, the remainder of the Act or the application of such provision to other persons or circumstances shall not be affected by such declaration.

Section 45. Effect on Other Acts. All Acts or parts of Acts inconsistent herewith are repealed or modified accordingly.

Section 46. Effectivity. This Act shall take effect upon its approval.

Approved: July 28, 1969.