LOPEZ TO GOVERNMENT: YOU CAN HAVE MERALCO

LOPEZ TO GOVERNMENT: YOU CAN HAVE MERALCO

MANILA, MAY 9, 2008 (STAR) By Elisa Osorio - Fed up with pressures from the government to lower electricity rates, the patriarch of the Lopez family that controls the Manila Electric Co. said he now wants out of the power firm because he’s “sick and tired of the business.”

Oscar Lopez, chairman of First Philippine Holdings Corp. (First Holdings), said he will not oppose a government buyout of his family’s holdings in Meralco to pave the way for the lowering of rates.

“We cannot even get a rate increase because government keeps saying our rates are too high,” Lopez told reporters on the sidelines of the Philippines-Europe conference at the Renaissance Hotel in Makati City yesterday.

Meralco is under government pressure to pare down electricity rates and a joint congressional commission has set a hearing on Monday to make the country’s largest power distributor explain its alleged overcharging.

The specter of a government takeover loomed after Government Service Insurance System (GSIS) president and general manager Winston Garcia demanded to see Meralco’s financial records.

Garcia denied that he was gearing for a takeover and said he merely wanted a “change in management” in Meralco. He said the GSIS, being a major stockholder, has the right to make such demands. Of the government’s 33 percent overall stake in Meralco, GSIS controls 23 percent.

Last year, the Lopez family entered into deals to buy additional stakes in Meralco from partner Union Fenosa of Spain and from the Meralco pension fund, raising its stake from 18 percent to 33.4 percent.

“If he (Garcia) wants, he can buy us out,” Lopez pointed out.

Lopez ruled out buying the GSIS share in Meralco. “We don’t have the money,” he said.

On Garcia’s call for a management change in Meralco, Lopez said it is contrary to the government’s privatization thrust.

President Arroyo has called on Meralco to lower power rates to appease foreign business groups which have complained of high power costs and to ease the burden on the poor who are saddled with rising food and oil prices.

The last time Meralco raised its basic distribution charge was in June 2003. A new petition to hike rates is pending with the Energy Regulatory Commission (ERC).

Willing to negotiate

Informed of Lopez’s pronouncement, Garcia said GSIS is willing to negotiate with Meralco.

“I hope they will come to us formally. We want to talk to them. Not necessarily to purchase but if they want to sell we would like to sit with them,” Garcia said in a telephone interview.

Meanwhile, Lopez said Meralco welcomes any move of the government, particularly Congress, to investigate the alleged high power costs, but insisted the power distributor should not be singled out.

“They can do everything they want. All I’m saying is that the high rates are not Meralco’s responsibility,” Lopez said.

“Our rates are as low as we can get them. It’s the government that has to take out the VAT (value added tax) and the royalties on natural gas,” he explained.

At Malacañang, Press Secretary Ignacio Bunye accused the Lopezes of trying to twist facts on the issue of the alleged Meralco overpricing.

“This is common knowledge and there is a general clamor from the public that there should be an explanation from Meralco why they charge so high,” he said.

“It’s like they’re trying to twist the situation but what the public is just asking for is the basis of (Meralco’s) computation,” Bunye said.

“If the call of the GSIS for Meralco to open its books has been heeded, we would not have reached this point,” Bunye said.

He said a full-scale public hearing would ensure transparency in the utility firm’s accounting and operations. “There are many details that are not available to the public,” he said.

Joint congress probe readied

Sen. Miriam Santiago, who heads the Joint Congressional Power Commission (Powercom), said the investigation will unmask and pave the way for the prosecution of “criminal syndicates” responsible for the high Meralco rates.

“That is a conglomeration of mafias. I am sure, although I may not have the evidence, that there is a crime involved. That is a crime of a combination of a restraint in trade or monopoly. That is punishable under the Penal Code,” Santiago said.

“I expect it to be a battle of titans,” Santiago said of Monday’s hearing. “I will ask Mr. Winston Garcia of the GSIS to enumerate as briefly as possible the ways in which he thinks Meralco has been mismanaged such as to result in very high electricity rates,” Santiago said.

She said the situation at Meralco that may have led to the ballooning of rates might be worse than that at the Bureau of Customs, although she stressed the owners, including the Lopezes, might not be involved.

“Yun ang basehan kung bakit sinabi ng ibang senador na Meralco lang ang makakapagpatakbo sa Meralco. Ang ibig sabihin lang niyan ay napakaraming pasikot-sikot diyan (That’s the basis for some senators’ claim that only Meralco can run Meralco. It means there are many goings-on there),” she said.

Sen. Rodolfo Biazon, for his part, cautioned the government against working clandestinely for a management change in Meralco.

“The government seems to be deploying all powers and resources to effect government control over this utility company,” Biazon said.

“This move is seemingly being put into motion by mustering the necessary votes through the use of government stocks and proxies from the independent stock holders,” he said.

“We will witness a parade of incompetent political appointees who will be coming one after another, depending on the direction of the political winds,” Biazon pointed out.

“If this happens, then there is danger that this utility company could go under. If this occurs, it may not only be the interest of the general public being served by Meralco that will be jeopardized, but may include the losses to be suffered by government corporations owning stocks in Meralco such as the GSIS that would also be put in danger,” he added.

Meanwhile, Caloocan Bishop Deogracias Iniguez warned the public and politicians against knee-jerk reactions to reports of government’s Meralco takeover plan.

“Tingnan nating mabuti ang mga development dito sa isyung ito at pag-aralan kung ano ang mga tunay na mga nangyayari (Let’s examine first the developments in this issue to determine what’s really happening),” Iniguez, head of the Catholic Bishops’ Conference of the Philippines Public Affairs Committee, said.

Outspoken Lingayen-Dagupan Archbishop Oscar Cruz, for his part, said he supports a congressional inquiry into the matter but questioned the timing and purpose.

“Why are they only raising the issue now? Is she cramming because she only has two more years in office?” Cruz said, apparently referring to President Arroyo.

Cap on profits

Meanwhile, a pro-administration lawmaker proposed that Congress limit the profits of state-owned National Power Corp. (Napocor), Meralco, and other power generators and distributions to bring down the cost of electricity.

“It’s time that we review the Public Service Act and maybe the Epira (Electric Power Industry Reform Act) of 2001. We should limit the profitability of public utilities,” Quezon City Rep. Matias Defensor told a news forum at Serye Café in Quezon City. He said public utilities are among the most profitable companies in the country.

Defensor said his proposal should cover “all corporations engaged in public service, including shipping and water distribution.”

Other congressmen have proposed that the “system loss charge” be removed from the list of charges that the law allows power distributors to charge their customers.

Quezon Rep. Lorenzo Tañada III, also at the Serye forum, said families making “unconscionable” profits out of electricity should be exposed.

“Let us know who are these families who are enriching themselves at the expense of consumers,” he said.

He said a congressional investigation should not be limited to Meralco but should include Napocor and private power producers as well.

“Let us not concentrate on Meralco. Let us look at the entire basket. To me, the real culprits behind high electricity rates are Napocor and IPPs,” he added.

At a separate forum on power sponsored by the Energy department, Secretary Angelo Reyes asked the Department of Finance to review the imposition of VAT on systems loss. Reyes relayed the request to Finance Undersecretary Jeremias Paul.

Paul heads the DOF’s Corporate Affairs Group, one of whose tasks is to monitor the cash flows of government-run corporations.

“I’m not the tax expert, but as I said I will talk with BIR (Bureau of Internal Revenue) and get their reaction on taxing system loss,” Paul said.

“With it being a loss, then there may be nuisance there. But I’ll look into the details and coordinate with my other colleagues in the department,” Paul said.

At the meeting, Meralco president Jesus Francisco stressed that Meralco is doing its best to lower its systems losses. He said it is costlier for Meralco to breach the 9.5 percent cap on systems loss.

“Every percentage in system loss over the cap would cost us probably billions at today’s cost of power. So it would be foolish of us not to go after pilferage and that’s why we spend P300 million for that,” Francisco said. – With Christina Mendez, Jess Diaz, Paolo Romero, Evelyn Macairan, Donnabelle Gatdula, Antonieta Lopez

Reported by: Sol Jose Vanzi

PHILIPPINE HEADLINE NEWS ONLINE [PHNO] WEBSITE