People deserve better services
Why is market competition good for consumers? It’s because consumers are afforded with more choices in the goods and services they purchase. If a person is unsatisfied, that person can just opt to look for another supplier or brand.
As a result, businesses are encouraged to innovate to get ahead of the competition and render better experiences for their customers. This leads to more efficiency as businesses strive to offer their goods and services at a higher quality but at a competitive and reasonable price.
There are certainly more nuances to market competition, but the fact of the matter is that people deserve to get their hard-earned money’s worth, and fair market competition can help do that.
It is timely to ponder if the benefits of competition can happen in franchises for the distribution of electric power like those held by either private utilities or cooperatives. While these are natural monopolies, there is an argument to be made that they are heavily regulated, with the Energy Regulatory Commission or ERC tasked to punish the abuse of market power. Cooperatives are also supervised by the National Electrification Administration. But are these enough for fair competition to ensue?
Consider the repercussions of a Supreme Court decision last year on how exclusive franchises are prohibited by the Constitution. It counters a long-standing belief that franchises are entitled to exclusivity, when in fact a franchise is a privilege granted by the State, making it subservient to the common good or public interest as determined by Congress.
In effect, the State can award franchises to introduce new competition, encouraging private utilities and cooperatives to shape up or risk being booted out. Consumers wouldn’t have to wait for the expiry dates of a franchise to appeal to their elected representative/s for transfer to the services of another distribution entity. But I admit that a transfer is easier said than done as it requires an act of Congress.
The Supreme Court decision stemmed from the dismissal of a petition filed by the Iloilo Electric Cooperative Inc. (ILECO) I, II, and III, challenging a law that expanded the franchise of MORE Electric and Power Corp. to 15 municipalities and one city — areas the cooperative previously covered. The cooperative’s claim of franchise exclusivity within its coverage area was deemed invalid.
“Congress enacted RA 11918 to make electricity more affordable for the people of Iloilo province. Congress determined that expanding MORE’s franchise would promote healthy competition since MORE was capable of offering lower energy rates,” the Supreme Court said.
It also seems like MORE is in a better position to improve and modernize facilities and services. ILECO II previously said that its three-year plan and capital expenditure (capex) has a minimum budget of P200-million, partly subsidized by the taxpayer through the National Electrification
Administration. In comparison, without government subsidies, it was reported that MORE’s total investment in Iloilo City’s distribution system is P3-billion from 2020 to 2025.
The precedent on the prohibition of franchise exclusivity will likely have a profound impact on whether the private utility Davao Light and Power Co. will be allowed to expand into areas in Davao del Norte and Davao de Oro currently covered by Northern Davao Electric Cooperative or NORDECO. Likewise, the Davao Light – NORDECO issue is also about who can better perform the job of delivering electricity to consumers, with Davao Light seemingly having the upper hand in terms of reliability and cost-effectiveness.
Another industry development to keep an eye on (and perhaps a more accessible route for market competition) is a potential joint venture between the Manila Electric Company or Meralco and the Batangas II Electric Cooperative Inc. The former is looking to infuse equity and gain a majority to enhance the latter’s services away from intermittent and fluctuating power. While it is not a new franchise, it also shows the involvement of a stronger market competitor (Meralco) leveraging its capabilities to push the other into doing much better.
What matters is that electricity consumers get their hard-earned money’s worth; like those in the Western Visayas and Davao regions whose average annual family incomes are still below the national average, much less in urbanized Metro Manila. The least consumers can expect is reliable and reasonably-priced electricity from their distribution utilities, especially as utility costs are a significant chunk of their family budgets. Data on consumption patterns among Filipino households has the share of housing and utilities expenditure at 14-30% — second most highest after food (37-60%) — depending on the region. For people who deserve better services, may fair market competition prevail.
