NO  GOVERNMENT  TAKEOVER  OF  MERALCO - GMA

MANILA, May 7, 2008 (STAR) By Paolo Romero and Aurea Calica - The government categorically denied yesterday that it wanted to take over the Manila Electric Co. (Meralco) of the Lopez group, and said President Arroyo is just mulling a fresh review of contracts with independent power producers (IPP) in a bid to lower power rates.

Albay Gov. Joey Salceda said he discussed the matter of soaring power rates with Mrs. Arroyo during the latter’s visit to Oas town in his province where she met with local officials.

“Of course not, I only want lower (electricity) rates,” he quoted the President as telling him.

“A takeover of Meralco is not in the national interest. Government has no business choosing winners and losers,” Salceda said.

He said the President believes there are “far better options to lower electricity prices” than a Meralco takeover.

The specter of a takeover emerged in the wake of demands by Government Service Insurance System (GSIS) president Winston Garcia for Meralco to present its financial records and to undertake a “change in management.” GSIS has 23 percent interest in Meralco, while other government institutions have a combined stake of 10 percent. The Lopez group owns 34 percent. Some quarters believe the government wants to take over Meralco to get back at the Lopezes who also own the giant network ABS-CBN which is perceived to be critical of the administration.

But Salceda explained that the government is merely eyeing a review of the IPP because it – along with the public – “gained very little” in the last review a few years ago. The review is provided for under the Electric Power Industry Reform Act (EPIRA).

“There is a suspicion that the high electricity rates are due to IPP contracts,” Salceda told The STAR, adding that the government should not “cherry pick on Meralco,” which also sources some of its power from IPPs owned by the Lopezes.

He said one of the objectives of the review is to extend the terms of the IPP contracts. Normally, IPP contracts are for 15 years, which some consider as not long enough for investors to recoup their investments.

He said IPPs index their rates to world oil prices, which continue to soar. He warned that rising energy prices pose greater risks to the country than the tightening supply of rice.

He said Mrs. Arroyo told him that the review of the IPP “just (has) to go through a process.”

Addressing the general assembly of the Federation of Filipino Industries, Inc. (FPII) in Makati City on Friday, the President said that she had ordered the National Power Corp. (Napocor) to lower its rates so that Meralco could lower its own, especially in Luzon.

At the House of Representatives, Speaker Prospero Nograles said he is not sure whether there is indeed a government plan to take over Meralco.

In any case, Nograles said the Constitution empowers the government to temporarily run any public utility “in the event of a crisis, national emergency, in the event of national interest or protection of the public, upon payment of just compensation.”

“That’s the law. So whether the government will do that will depend on its assessment of the national interest,” he said.

Another administration lawmaker, Rep. Elpidio Barzaga, also downplayed reports that the government wants to take over Meralco. “I think it is stretching the imagination too far if you put on the same plane the naked grab of Meralco by the martial law government in 1972,” he said.

The Cavite congressman said he agreed with the Palace move to file petitions with the Energy Regulatory Commission to compel Meralco to lower rates.

“The issues must be submitted to, debated, argued before and decided by the ERC. I am even suggesting the hearings be televised on both the government television stations and ABS-CBN so the public will know the issues,” Barzaga said.

Anak Mindanao Rep. Mujiv Hataman said consumers stand to benefit from the government’s row with Meralco. “This conflict is good because the issues being ventilated are very educational. By all means let us have a national lecture on the power industry because knowledge will make us empowered consumers.”

“The issue here is power rates, not a power struggle in a company. Let us not muddle the issue. The issue must be judged by the facts on hand, by cold numbers and hard statistics,” Marikina Rep. Marcelino Teodoro, for his part, said.

But for Pasig Rep. Roman Romulo, Meralco and the government should resolve the issue through negotiations.

“Instead of being hostile, why can’t they just work together and give relief to ordinary consumers who are already reeling from the high prices of rice and food. But they should make public their action on how to lower the rates, be transparent to consumers,” he said.

Subject to regulation

Sen. Joker Arroyo said Meralco should open its books since it is required by law to make profits only up to a certain level and share the rest with the public possibly through lowering of rates.

“Meralco is given a congressional franchise to exclusively distribute power in Luzon, no one else can do it. So without competition, it will make money especially when we talk here of basic services that it provides,” Sen. Arroyo said. “Since it is a monopoly it is subject to regulation and it has the responsibility to reduce the rates,” he said.

Sen. Arroyo said he doesn’t intend to meddle in Meralco’s row with GSIS president Garcia, but he stressed it was right for the latter to demand transparency from the country’s largest power distributor.

“Right now, I think Meralco is practically an unregulated industry. But it has the obligation to the public, it cannot make too much profit,” he said.

“Who judges that (limit)? It is the Energy Regulatory Commission and if you have a corrupt ERC conniving with Meralco, then the consumers are the losers. So this is what we need to find out,” Sen. Arroyo explained, adding that a monopoly could not be “free as a bird.”

He said Meralco must learn to reduce its expenses and not pass on charges to consumers.

“Whoever gets the management of Meralco will be faced with the same challenge, to lower power rates,” Sen. Arroyo said.

Administration Rep. Monico Puentevella of Bacolod City also called on Meralco to open its book of accounts to show that it has nothing to hide and to “stop Garcia from throwing tantrums.”

“Meralco should open its books and meet Garcia’s demands for documents, in the interest of fair play and transparency,” he said.

“If you want to deprive Garcia of his ammunition in hitting Meralco, then rob him of the issues he is using. If you need forklifts to haul those documents, then do it if that is what it takes to pacify a very tenacious Garcia,” Puentevella added.

Opposition Rep. Roilo Golez, meanwhile, urged the GSIS to sell the bulk of its shares in Meralco.

“The mandate of GSIS is to diversify its investments, to spread out its risks, and not expose itself to huge investments in one entity, exposing in the process the interest of its members to undue risk,” he said.

“The GSIS management should desist from getting enmeshed in the corporate affairs of other entities, especially strategic public utilities, as that would divert their focus from managing the overall investment portfolio of GSIS,” he said.

Golez urged Garcia to stop projecting that he could better manage Meralco and at the same time attend to improving the quality of service that his agency delivers to its members, like making loan and pension processing and distribution faster.

But Garcia said his agency’s stake in Meralco “is just a small portion of the highly diversified foreign and local investments of the state pension fund.”

“The implication of Rep. Golez’s statements is that the investments of GSIS are not diversified. That is not true. Modesty aside, the GSIS investment model is the envy of many because of its perfect mix and judicious placement of funds,” Garcia said in a statement.

He said this made GSIS the No. 1 government corporation in terms of assets, earnings and services to its members.

“Earnings from the diversified investment portfolio of GSIS have, in fact, extended its actuarial life for at least 35 years more,” he added.

Garcia revealed that GSIS has $5 billion more funds that it plans to invest in fixed-income instruments, securities and properties in the country and abroad. He said it is his duty to look after GSIS money in Meralco.

“Meralco’s business is the business of GSIS, and I am making it my business to protect the investments of GSIS members in Meralco against mismanagement,” he said.

“I say thanks but no thanks to the unsolicited suggestions of Mr. Golez. The GSIS will continue to build on its investments for the benefit of its members,” he said. “The GSIS will not be pressured to get in or out of a market or to let go of an investment on the say-so of someone,” he added.

Meanwhile, the Joint Congressional Power Commission (JCPC) is set to conduct a hearing on Friday on the alleged over-billing by Meralco.

Sen. Miriam Defensor Santiago, overall chair of the Powercom, wants to conduct the hearing with presidential son and Pampanga Rep. Mikey Arroyo, chairman of the House committee on energy.

“There is really a need to investigate Meralco because we are paying high electricity costs and yet they also get high income,” Santiago said.

Militants score Meralco, Napocor

Militant party-list representatives urged Napocor and Meralco to substantially reduce their rates so that the cost of electricity could go down.

“It is the height of greed and insensitivity for state-owned Napocor and Meralco to be swimming in profits while a majority of our people suffer from unconscionably high power rates,” the lawmakers led by Satur Ocampo of Bayan Muna said in a statement.

They said Napocor was the most profitable corporation in the country in 2005 and 2006 with net profits of P86 billion and P90 billion, and remains to be the largest power generator. Meralco was third on the list with P13.37 billion in net earnings in 2006.

Meanwhile, despite the administration’s denial of a Meralco takeover bid, the United Opposition (UNO) appeared unconvinced and warned that a takeover will only worsen inefficiency and corruption.

“Government taking over Meralco is a terrible idea that will only lead to inefficiency and corruption. Philippine history will show that companies which were controlled or sequestered by government floundered and lost their competitiveness,” UNO spokesman Adel Tamano said.

“Essentially these companies became milking cows for government officials who were placed in prime positions in these corporations in order to receive fat salaries and perks,” Tamano said.

For his part, UNO president and Makati Mayor Jejomar Binay earlier said the “power play squeeze” on Meralco was intended to divert the public’s attention from the administration’s alleged failure to implement power industry reforms. With Jess Diaz, Delon Porcalla and Jose Rodel Clapano, Christina Paguinto, Jose Miguel Reyes


Chief News Editor: Sol Jose Vanzi

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