Consumers shoulder

MANILA Electric Co. officials yesterday told the Joint Congressional Power Commission that it is charging its customers nearly half a billion pesos a year for electricity which Meralco itself uses.

The officials said the 72 million kilowatt-hours of power that Meralco consumes is included in the “system loss” charge imposed on consumers.

System loss is that portion of electricity which is pilfered or is lost during transmission. Meralco’s 9.5 percent system loss has been partly blamed for high electricity rates.

Meralco’s free use of power and passing on the cost to consumers surfaced during questioning by Sen. Juan Ponce Enrile on the utility’s business dealings with other companies owned by the Lopez family.

Meralco senior executive vice president Ireneo Acuna said that at a pass-on rate of P5.7 per kilowatt-hour, Meralco’s consumption is worth P427.5 million yearly.

Meralco president Oscar Francisco justified the practice.

“This is administrative and operational usages and it is passed on to consumers,” he said.

He said inclusion of the Meralco consumption in the system loss charge has the approval of the Energy Regulatory Board.

“It is a cost allowed by the ERC to pass on to consumers,” he said.

Winston Garcia, GSIS president and general manager, said the 72 million kWh should be shouldered by Meralco as a cost of doing business and that it should be priced at P8 per kWh.

Estrella Elamparo, GSIS spokesman, said: “From Meralco’s admission, we see Meralco not only not paying for 72 million kWh it uses as Meralco, but profiting from those 72 million kWh by charging the cost of the same to its customer.”

“It’s what we call in Tagalog na ginigisa tayo sa sarili nating mantika,” she added. “The problem is that the majority of Meralco customers are poor. Thus, it’s unconscionable for Meralco to saddle them with paying for electricity Meralco itself uses.”

The GSIS, which holds four of 11 seats in the Meralco board on the strength of its 33 percent holdings, has also questioned Meralco’s passing on of systems loss.

Francisco said that aside from the National Power Corp., Meralco buys power from independent power producers owned by the Lopezes and from the Wholesale Electricity Spot Market (WESM).

Lopez-owned IPPs include the First Gas Sta. Rita and First Gas San Lorenzo with a combined capacity of 1,500 megawatts.

Francisco said the supply mix is 50 percent IPPs, 40 percent Napocor and 10 percent WESM.

Sen. Miriam Defensor Santiago, co-chair of Powercom, said that aside from Meralco, also to be blamed for high power rates are Napocor and the Energy Regulatory Commission.

Napocor is the prime generator, Meralco is the distributor, and ERC is the regulator of the power industry.

“Consumers are paying for the high annual salaries of the Meralco chief executive officer and seven other senior executive officers which in 2008 will total some P97 million. The officers and directors as a group will get some P170 million. This appears to be management abuse,” Santiago said.

“These apparent management abuses and lax regulation are the reasons why the Philippines has one of the highest power rates in the world, second only to Japan in Asia,” Santiago said.

Santiago listed “apparent abuses” by the three agencies as follows:

. Meralco is buying electricity from NPC and WESM during peak periods, when prices are high, resulting in high pass-through generation charges to its consumers.

. Meralco and NPC entered into an agreement to ask ERC to allow Meralco to pass on to its consumers its unpaid obligations to NPC.

. Power rates are higher in Luzon than in the Visayas and Mindanao.

. NPC apparently manipulates its rates based on Time-Of-Use (TOU) which are very high on peak demand, and which are passed on to consumers.

. NPC apparently gives preferential rates to economic zone consumers, but passes on the cost of the discounts to its other consumers.

. NPC charges its consumers for its revenue requirements, which apparently include its P7 billion bad debts.

. NPC buys its power from IPPs but at higher rates than marginal cost and then passes on the higher rates to the consumers

. ERC has neglected its duty to set new caps on recoverable systems loss and has adopted questionable “performance-based regulation,” valuation of assets, and benchmarking methodology.

Garcia said the GSIS is not interested in taking over Meralco, but is seeking reform in management.

He said that being a major shareholder of Meralco, the GSIS has a right to participate in the power utility’s management.

“(We are) talking with the Lopez group. I believe that as a major shareholder our concerns should be heard. We can come up with common ground. We are not anti-Lopez, we are against how management of Meralco is being done right now,” he said.

“No, (we are) not interested in taking over (Meralco). I don’t believe GSIS should be the one to manage. What I want is we hire a more competent, more professional management team in Meralco,” he said.

Garcia said there are more supervisors than rank-and-file employees in Meralco.

Santiago said the possible penalties for management abuse can be legislative, corporate, and criminal action.

Since Meralco operates under a franchise, Santiago said, the remedy provided by the Constitution is for Congress to either amend or repeal its franchise “as required by the common good.”

The corporate remedy is to penalize Meralco managers by voting them out in the next stockholders’ meeting, which is scheduled this month.

Santiago also said the criminal remedy is to file cases in court against the Meralco and NPC officials for “combination in restraint of trade,” which refers to any conspiracy “for the purpose of making transactions prejudicial to lawful commerce, or of increasing the market prices.”

Santiago ordered the three agencies to submit replies to her long list of technical questions.

She said that all replies and documents will be the basis of the report and recommendation that Powercom will submit to Congress.

Santiago also ordered that a set of replies and documents be given to a team of UP professors who were present during the hearing to prepare a paper to be titled Anatomy of Power Rates in the Philippines.

“The Powercom report will have to analyze technical, financial and regulatory factors that contribute to the present high power rates. It is complex, labyrinthine, and often subterranean,” she said.

Santiago also questioned the “sinister” deal between Meralco and NPC on the P27 billion slapped on the distribution utility for ditching a 10-year power contract two years ahead of its expiration in 2004.

Santiago said that the public should not be made to bear the brunt of whatever debts are incurred by the state-owned power firm and the Lopez-controlled Meralco.

“We have ordered the ERC which supervises over the Meralco, Transco (National Transmission Corp.) and Napocor, not to grant the petition.because they were the ones who incurred the debts and public does not have any role in it. We should follow the principle that when the consumers are not made part of the decision-making, they should not be exacted any fees. That’s called the ‘just and reasonable principle,'” she said.

“Under that principle, we have ordered the ERC to dismiss the petition, we have ordered the ERC to dismiss the petition of Meralco supported by the Napocor to pass on the costs of their mutual debts to the consumer,” she added.


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