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Chapter 1

INTRODUCTION

LUELCO PROFILE

The province of La Union is supplied mainly with power by the La Union Electric

Cooperative, Inc. (LUELCO), a non-stock, non-profit cooperative.

LUELCO was incorporated on August 6, 1971 under the provisions of Republic Act

(R.A.), No. 6038 which created the National Electrification (NEA), as amended by P.D.

Nos. 269 and 1645. Its primary purpose is to supply, promote, and encourage the fullest

use of electric service to its members on the coverage area.

LUELCO family is guided by its seven (7) corporate values in attaining its mission

which is “to provide an assured total quality electrification service that equates and

beneficial to MCO’s beyond expectations and quality of life”. Its corporate values are

God Fearing, Unity, Discipline, Honesty, Integrity, Loyalty, and Trustworthy. Its vision

is “LUELCO as a distinct EC and utility center of excellence with an assured quality

power supply that is responsive and globally competitive electricity rate in its world class

performance service”.

LUELCO has a total membership of 158,896 and a household connection of 152,813

as of December 31, 2018. These members come from the 21 Municipalities and 1 City

served by LUELCO.

At present, LUELCO has six (6) branch offices located at the municipalities of

Rosario, Agoo, Aringay, Naguilian, Bacnotan, and Bangar. It has also nine (9) collection
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offices located at the municipalities of Sison, Sto. Tomas, Tubao, Pugo, Caba, San

Gabriel, Balaoan, Santol and Luna. There are seven (7) substations which supply the

power requirement of the coverage area located at San Fabian, Sto. Tomas, Agoo,

Aringay, Naguilian, Bacnotan, and in Balaoan.

LUELCO operates in accordance with its policies drafted by the five (5) members of

the Board of Directors who comes second in the organizational structure, representing the

five districts in LUELCO’s coverage area. The Ex-Officio member is the General

Manager who manages and supervises the entire operation.

Last in the hierarchy are the 306 total active strength of LUELCO, hired on the basis

of integrity, compliance, performance and academic qualifications and who work

dedicatedly in accordance with the Code of Ethics.

Objective of the Study

The research aimed to represent development framework guidelines to enforce

governance standards for the efficient operation of EC like La Union Electric

Cooperative, Inc. (LUELCO) and to conform with the applicable provisions of RA 9184

(Government Procurement Reform Act) relative to projects funded through government

subsidies, (GOP) domestic or international grants.

Statement of the Problem

The research tried to observe the appropriate procurement procedure, including

transparent and competitive bidding. Competitive Bidding refers to a method of

procurement which is open to participation by any interested party and which consists of

the following processes: advertisement, pre-bid conference, eligibility screening of bids,

evaluations of bids, post - qualification, and award of contract, the specific requirements

and mechanics.

Specifically, it aimed to find answers to the following specific questions:

1. What is procurement planning?

2. What is the importance of a financial statement analysis in a cooperative?

3. Who are those Bids and Awards Committee and their respective function?

4. Who are primary responsible on LUELCO’s operation in terms of its finances?

Study Subjects

The subjects of the study are the accountants, financial staff and stakeholders of La

Union Electric Cooperative, Inc. that are concerned in analyzing the financial statements.

They are responsible in formulating reliable decisions which are deemed beneficial to the

cooperative and to its member consumer owners. As a distribution utility since August

1971, it is very important to financially analyze its operations since LUELCO is a non-

stock and non-profit organization.

Significance of the Study

The study could serve as a reference for other distribution utilities or electric

companies like LUELCO to evaluate their operations and to come up with decisions that
are beneficial both to the cooperative/company and its member-consumer owners. Also,
this could be used as a reference in future decisions when cooperative would apply for

their capital loans with banks and operational expenditures with the regulators and other

government agencies.

Definition of Terms

The following terms are operationally defined as they are used in the study.

1. Approved Budget of The Contract (ABC) - refers to the budget for the contract duly

approved by the EC Board as provided for in the EC's approved Cash Operating Budget,

Annual Procurement Plan, E-ICPM or ERC approved CAPEX.

2. APP - Annual Procurement Plan

3. BAC - Bids and Awards Committee

4. Bidding Documents - refers to documents issued by the EC (duly approved by the Board)

as basis for bids, furnishing all information necessary for a prospective bidder to prepare

a bid.

5. Bid - refers to a signed offer or proposal submitted by a bidder in response to the Bidding

Documents.

6. CAPEX - refers to the ERC approved capital expenditures of the EC to be recovered

through rate increase.

7. COB (Cash Operating Budget) - refers to the EC's budget for a particular year duly

approved by· NEA.

8. EC- Electric Cooperative

9. E-ICPM - refers to the NEA approved Enhanced - Integrated Computerized Planning

Model of the EC.

10. HOPE - Head of Procuring Entity - refers to the EC Board or its duly authorized official.

(If the Board authorizes the General Manager, it must be through a Board Resolution).
11. . Lowest Calculated Bid - refers to the Bid which was determined to be the Lowest

Calculated Bid after evaluation which shall be subjected to post qualification to

determine its responsiveness to the requirements of the projecUs being bided.

12. Lowest Calculated Responsive Bid - refers to the bid which was determined to be the

Lowest Calculated Bid after evaluation, passed all the criteria for post qualification and

was determined to be responsive to the requirements of the projects being bided.

13. Procuring Entity - refers to the Electric Cooperative