Ducky Paredes

“The question is: should public interest prevail over private profits?” 

by Ducky Paredes

“In third world countries like the Philippines, equal justice will have a synthetic ring unless the economic rights of the people, especially the poor, are protected with the same resoluteness as their right to liberty. The cases at bar are of utmost significance for they concern the right of our people to electricity and to be reasonably charged for their consumption. In configuring the contours of this economic right to a basic necessity of life, the Court shall define the limits of the power of respondent Meralco, a giant public utility and a monopoly, to charge our people for their electric consumption. The question is: should public interest prevail over private profits?” – Supreme Court Ruling on G.R. No. 141314, November 15, 2002 written by then Associate Justice Reynato Puno.

Ambassador Allistair McDonald of the European Commission notes that one of the major reasons why the Philippines is not attracting as much foreign direct investments as other countries is it high rates of energy.  In is speech at a business forum, the Ambassador bluntly declared: “The price of electricity is higher in the Philippines than almost any country in the region.”

The Manila Electric Company is the largest and oldest distributor of electricity in the Philippines.  It supplies electricity to a franchise area covering nearly 10,000 square kilometers with a population of around 20 million.  The company serves four million customers in 23 cities and 88 municipalities in Metro Manila, Bulacan, Rizal and Cavite and parts of Laguna, Quezon and Batangas.  This is known as the industrial enclave of the country.  Imagine that Meralco produces 50 percent of the Philippines’ Gross Domestic Product (GDP)!

It is thus a gargantuan company imbued with the public interest since it is operating a public utility obligated by law to “ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability.” 

 So, why does it seem as though the Lopez family is running Meralco like a personal empire? The general impression is that the Lopezes milk financial benefits from Meralco for the family’s interests. Yet the Lopezes own only 26.82 percent of Meralco through the First Philippine Holdings Company, which they control.  The Philippine government, through government-owned and controlled corporations, owns 28.2 percent of the corporation.  Other stockholders, corporate or individual, hold the rest of the shares.

The failure of Meralco to keep electricity rates in the Philippines on a competitive level with those of other countries shows that it has failed to keep faith with its franchise to serve the public interest while making only “reasonable” profits. 

No less than the Supreme Court (in G.R. No. 141314) ordered Meralco to reimburse its millions of customers for overcharged rates amounting to P30 billion.

Meralco critics charge it with other “frauds” like buying power at higher rates from Lopez-owned Independent Power Producers through sweetheart contracts, breach of contract with the National Power Corporation (Napocor), illegally charging customers with billions of pesos in “systems losses” which are entirely due to management’s inefficiency, tax evasion and other financial shenanigans.  In fact, a Meralco consumer has sued the firm in Pasay City for “market power abuses or anti-competitive or discriminatory act or behavior” in violation of the Electric Power Industry Reform Act or EPIRA.

Concerned for the welfare of electric consumers and also worried about the non-competitiveness of the Meralco rates, the President has directed the Department of Trade and Industry to appeal to the Energy Regulatory Commission to compel Meralco to lower its rates.

Winson Garcia, president and general manager of the Government Service Insurance System, has asked Meralco to open its books and submit its documents to full scrutiny by the public and its stockholders in the spirit of transparency.  Garcia sits in the firm’s board of directors as representative of 1.2 million GSIS members who are major stockholders of Meralco.

However, the Lopez-controlled top management of Meralco has refused thus far to open its books of accounts and operations, prompting Garcia to threaten to file charges of fraud, estafa and breach of franchise provisions against Meralco. This violates the EPIRA law mandating that franchisees be transparent and accountable.

Meralco has also entered into what some suspect to be sweetheart contracts with IPPs owned by the Lopezes at prices higher than those charged by the NAPOCOR. Meralco critics hold that if Meralco bought all its power from Napocor then consumers would fully enjoy the mandated rate reduction of thirty centavos per kilowatt-hour required by EPIRA; Meralco counters that the Lopez IPPs actually reduce the over-all cost of electricity.

Clearly, though, the Lopez management of Meralco has failed to comply with its franchise obligations to the Filipino people.  Perhaps, a new management team is needed to step in.  In the meantime it should open its books and other documents to its own stockholders and the general public for a full accounting of its operations.  This may be the only way that trusts in the Lopez family and Meralco can be regained.

Let not Manila Rep. Amado Bagatsing be proven right when he says about Meralco:  “This is a fight between the common people of our country against corporate greed.”

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hvp 05.12.08)