As I See It
Meralco mega-franchise should be partitioned
By Neal Cruz
Philippine Daily Inquirer
First Posted 01:03:00 06/30/2008
MANILA, Philippines - In its press release last week, the Energy Regulatory Commission (ERC) made it appear as though it “ordered” the National Power Corp. (Napocor) to lower its generation rate. The truth is it was Napocor itself which asked the ERC that its rates be reduced. The ERC merely approved the application. We should be thankful to Napocor, not to the ERC.
Then Meralco tried to have its own spin by issuing its own press release that in the next billing cycle, its residential customers will see a reduction of 30 centavos per kilowatt hour in their electric bills. Big deal! In announcing the rate reduction, Meralco merely reprised what it did last month, which was to announce a 50-centavo/kWh-something rate reduction. The way Meralco made the two announcements, they made it appear we should be thankful to it for reducing power rates.
But the truth is that Meralco does not deserve credit for the reductions. The 30-centavo reduction is due to the cut in generation charges that Napocor applied for. The 50-centavo rate reduction, on the other hand, was due to the pricing ebb and flow in the wholesale electricity spot market (WESM), where Meralco sources less than 10 percent of the power it distributes. Meralco buys 55 percent of its power from its sister companies at an overprice. It also buys all its needs—like transformers, meters, electric poles—from other sister companies at high rates.
The reduction for Meralco consumers should be bigger because of the hefty cut in the Napocor generation charge but that reduction is diluted by the overprice it pays for the power it buys from Lopez-owned IPPs First Gen and First Gas, in violation of its franchise and the Epira provision for distributors to provide its captive market with power at the “least cost” to them. The 30-centavo reduction is just 10 percent of the P3/kWh that Meralco should slash from its rates, and it’s not even coming from its own profit margin. Enough also of Meralco’s excuse that its distribution charge is just 13 percent of its customers’ bills and that the rest are mere pass-ons like generation charges and taxes.
And why did the ERC reduce only Napocor’s generation charge? What about Meralco’s distribution charge? ERC records show that Meralco charges the highest distribution charge in the country, both residential and commercial. While other distributors are charging in the range of P6 to P7 per kWh, Meralco makes a killing charging us P10 per kWh.
While Meralco charges upwards of P10/kWh, Davao Light charges only P6.44/kWh, Veco P6.92, Pampanga P7.63, Bohol P4.92, and Bacolod P5.22. Meralco is overcharging us by P2 to P3 per kWh. All of them, Meralco included, are paying the same taxes and everything else; why can the other distributors charge at least P2 less? Meralco’s rate should really be 20 percent lower than the other distributors since it has the advantage of economies of scale and volume discounts in the purchase of power.
Thus, if Bohol can charge only P4.92, Meralco’s rate should be about only P3.50/kWh. This is very possible if either of two things will happen: (1) If Meralco is freed from the clutches of the Lopezes; and (2) if the mega-franchise of Meralco is made more manageable by breaking it into sub-franchises similar to Maynilad and Manila Water splitting the MWSS water districts.
The problem is that the Lopezes want to control Meralco despite their minority shareholdings of 33.4 percent compared to the 35.7 percent stake of government financial institutions like the Government Service Insurance System, Social Security System, Land Bank, etc. The family wants to take the whole cake instead of only the one-third which it owns.
And they do not want the majority shareholders or anybody else looking at Meralco’s books or cutting its umbilical cord from Lopez-owned subsidiaries like Miescor and GE Phils. If the Lopezes do not want interference on their turf, they should seek a separate franchise for their 33.4-percent stake in Meralco. By doing this, the Lopezes will wholly own that franchise culled from the mother Meralco franchise and they can do whatever they want to do with it.
Let’s face it: the Meralco franchise (the area it covers accounts for 50 percent of the country’s Gross National Product) has become unwieldy and dangerous. It has to be partitioned so that consumers will be better served and could benefit from lower rates arising from indirect competition among the sub-franchise holders.
As shown above, the smaller distributors charge much less than Meralco.
* * *
Why is this presidential wannabe acting so unpresidential? After trying to denigrate Sen. Loren Legarda’s role in the rescue of broadcast journalist Ces Drilon and her companions, he is at it again. Now his attack dogs have turned on Sen. Mar Roxas, another presidential rival, who has been quietly going around his region to help constituents and local officials cope with the massive destruction caused by Typhoon “Frank.”
Senator Roxas, who is a genuine Ilonggo, was already in Iloilo by 5 a.m. of Monday, the day after the super typhoon wreaked havoc on Western Visayas. He brought with him just one assistant when he boarded the C-130 flight, together with Vice President Noli de Castro and Social Welfare Secretary Esperanza Cabral, which brought relief goods to Iloilo and Capiz.
Roxas has been quiet about his efforts to help. However, an attack dog of this presidential wannabe I mentioned has been unleashed to criticize the Ilonggo senator for using the tragedy for photo ops while failing to deliver relief goods.
The irony is that this attack dog is a local official who also hails from Iloilo but held his press conference in an air-conditioned restaurant in Quezon City.
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