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The electricity distribution monopoly of Meralco is
one of the most abstruse and esoteric businesses you can find in the
Philippines. Very few people, if any, understand just exactly how
Meralco computes its electricity rates. The Electricity and Power
Industry Reform Act (EPIRA) of 2001 was supposed to simplify things
but if you read the law, the more you won’t understand the
business.
There is just so much fog in the
language of the law that one cannot but suspect it was written not
by the congressmen and the senators but by lawyers and technicians
working for the Lopezes and the families that control the power
business in the Philippines, like the Aboitizes and the Alcantaras.
One of EPIRA’s ridiculous provisions is the requirement that you
need to get government approval if you want to lower your
electricity rates. If Meralco wants to be generous, why does it need
to go to the government to do that? Why is charity subject to
government regulation?
What is simple and clear is that
the cost of power in the Philippines is the highest in Asia, outside
Japan. For that, I blame both the government and Meralco.
To me, the current brouhaha over
Meralco is nothing more than pure power play and a publicity stunt.
For the Arroyo administration,
sniping at Meralco has diverted public attention, at least
temporarily, away from the worsening rice supply crisis and its
grave implications on hunger, malnutrition and poverty of the
masses. The offensive has also brought to public focus Meralco and
how it does business. High electricity rates strike at the heart of
every consumer—industrial, commercial and residential. Today,
utilities (fuel, light and water) account for about 20 percent of
the consumer spending basket, not 2.11 percent in Metro Manila, as
the government CPI (consumer price index) would like you to believe.
Electricity is the major reason
why it costs so much to do business in the Philippines and why many
Filipinos are hard up. The average higher middle class household
spends monthly about P20,000 on its electricity bill. And yet, how
much does a middle class household make in a month? Not more than
P50,000.
The chairman of First Holdings,
the Lopez patriarch Oscar Lopez, has dared the government to buy
them out in Meralco. The family has a 34 percent stake in the power
distribution monolith valued at P25.5 billion. Of course, the
government won’t bite. Firstly, the state doesn’t have the P25.5
billion. Secondly, buying Meralco makes no sense, especially at this
time when people would rather have rice than electricity. Thirdly, I
doubt that the Lopezes will really sell their stake, not after
coughing up P58 billion in cash (P32 billion) and borrowed money to
pay for the government’s geothermal assets at three times the IPO
price. Finally, Meralco is very profitable. Just ask analyst turned-Albay
governor Joey Salceda. He made a pile from positioning on Meralco
year after year.
The Lopezes have determined that
their core businesses are three—power, broadcast and
infrastructure, particularly the hugely profitable tollways
business. They returned their water concession to the government
after failing to comply with their contractual commitments. Their
telephone is not likely to take off as magnificently as PLDT’s or,
for that matter, Globe’s. Water and phones have proved to be the
Lopezes’ Waterloo. But power has been tremendously profitable.
So the issues are joined. Expect
a long-drawn battle between the government and the Lopezes. Unlike
in other conflicts, in this particular collision of elephants, the
small man cannot but benefit.
Of course, over the long pull,
the Lopezes will eventually win, especially by 2010 when Lopez boy
Vice President Noli de Castro, makes his own bid for the presidency.
The other frontrunner in that race is Loren Legarda, a former Lopez
broadcaster. So Sir Oscar should not lose his cool. It’s
summer—the height of demand for electricity.
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