Screw Indonesian-controlled Meralco

19

First of Two Parts

“Insanity: doing the same thing over and over again and expecting different results.”—statement attributed to Albert Einstein.

As a nation with one of the most backward electricity industry structures in the world, unchanged for decades, we are indeed mad.

Every year since Marcos fell in 1986 we suffer power outages throughout the summer, and then when the typhoon season comes, we again suffer power outages, this time around purportedly due to the power of nature. We even use the private power industry’s euphemism, to make the phenomenon acceptable: “brownouts,” which, however, refers to drops in voltage and not the total loss of electricity we suffer so often.


Can you imagine not only the metropolis, but also an entire agro-industrial region—Southern Luzon, supposedly our economic powerhouse—losing power for nearly a week? And because of the inefficiency of another public utility, water services, water has been cut off from many areas that use water pumps.

Apologists for the private monopoly that is Meralco point to the huge blackouts in Southern Brazil in 1999, Northeast US in 2003 and Southeast India in 2012. But those blackouts were due to very unique reasons (a software glitch in the US, for example). More importantly, power was restored in only two days. Six days after typhoon Glenda– which was even below the super-typhoon category – many parts of Metro Manila, Southern Luzon and other provinces in the path of the storm, still didn’t have power.meralco

Have you heard of weeklong blackouts in Thailand, Taiwan, Osaka and Tokyo, Hong Kong and Shenzhen?

They are also hit by powerful typhoons at the same frequency as us, about 20 a year, of which five are destructive. There have been power outages in these cities right after they are hit by typhoons certainly, but the power companies manage to restore power in a few hours, even a day’s time. In a town in Cavite where I live, Meralco was just starting to fix electricity poles on the sixth day, and its crew sizes and equipment seemed like they were just on a regular maintenance work.

How much has the country lost in economic output in the last six days?

Typhoons a given

We have had typhoons and super-typhoons since pre-historic times, because our archipelago faces the vast Pacific Ocean where these are generated, and with the earth’s rotation having the effect of building up the destructive power of these weather phenomena.

This even explains much of our history, especially the Church’s pernicious hold on our people’s minds. The typhoons made this colony so unattractive to the Spaniards that so few military men would come here, that it was left to Catholic Church orders—whose eyes were on China—to brainwash the Indios to accept, rather than to fight, the Spanish conquest and exploitation, since after all, they can look forward to being in heaven.

That there will be destructive typhoons every year threatening our power system is so obvious: Why hasn’t Meralco reinforced its power infrastructure to resist typhoons as utility companies have in other typhoon-hit countries? (Instead, Meralco’s spokesman passed on the blame to the National Grid Corp. of the Philippines for two days following the storm, alleging that it was the NGCP’s transmission lines from the power plants to Metro Manila and Southern Luzon that went down. The spokesman stopped using that line, though, when parts of Metro Manila and that region regained power and other areas didn’t.)

In several typhoon- (or cyclone-hit) countries, power companies have had programs decades ago to bury their lines underground to resist whatever happened on the surface. Have you seen any electric post in the Ayala district in Makati (built in the 1960s) and Bonifacio Global City (1990s) – as well as that conglomerate’s new villages like Nuvali and Greenfield—that make these areas’ electricity system typhoon-resistant? Did these cost a fortune Meralco can’t afford?

Has Meralco even started to think of such a program of putting its lines underground?

I was told that many of the electricity “transformers”—the “short-circuiting” of which Meralco always uses as an excuse to explain power outages—are more than 20 years old. A ramrod straight pole is not a tree whose branches of leaves act like sails, thus ending in their uprooting. Strong, modern electric poles like the ones you see in our superhighways NLEX and SLEX were built only in recent years. I haven’t seen any of them falling down. The ones I saw toppled down were poles that were obviously 20, or even 30 years old.

No plan for typhoons

I’ve just read all of Meralco’s annual reports from 2007 to 2013. There is not a single sentence in any of these reports that Meralco has strengthened, or even plans to strengthen, its infrastructure to withstand typhoons as our neighboring countries have done with their electricity systems.

The responsibility given by the government to Meralco, in exchange for having a monopoly over some 5 million households, is not just to provide electricity at normal times. It is to build a power infrastructure that can resist the most powerful of typhoons, as Metro Manila and the adjacent regions make up an area hit every year by typhoons.

The indisputable ethos of Meralco’s owners is that the company is just another firm from which they can suck profits. For instance, the all-important “Message from the Chairman” Manuel V. Pangilinan (revealingly subtitled, “To Our Shareholders,” with no such message to “consumers”) in Meralco’s 2013 annual report entirely boasts of the huge profits the firm has made, its rising share prices and its efforts to go into other businesses.

But Meralco is a government-endowed natural monopoly and its primordial purpose is to ensure efficient, cheap power supply to its clients, the Filipinos, even through the most devastating typhoons.

It really is a scandalous situation, and we’re crazy for not raising a ruckus over our suffering because of Meralco.

Is it because Filipinos have been culturally conditioned not to raise a fuss? Complaining over basic consumer rights are now seen as negativism. Or is it because Meralco is one of the largest advertisers that the press can’t file critical reports about the company? Or has Meralco sent the message to media outfits: don’t cross us, our owners own the Philippine Star and Channel 5, which can muckrake your owners’ dirt, such as their tax-evasion cases?

Meralco’s electricity price of 25 US cents per kilowatt hour (the 2013 average) is the highest in Asia, more expensive for example than rich Singapore’s 23 cents, Thailand’s 15 cents, Malaysia’s 10 cents, and Indonesia’s 5 cents (For details, see my column, “High Electricity Rates, Root of our Backwardness, Jan. 9, 2014).

Yet, despite such high rates charged to consumers, Meralco’s infrastructure is the worst, breaking down for days after a typhoon.

And this will make you mad: Amid its weak and faulty infrastructure, Meralco since 2009 has raked in profits of P66 billion, or an average of P13 billion annually.

This bears a repeat—Meralco enjoys profits of P66 billion since 2009, P13 billion in cold cash every year. Needless to say, it is one of the most profitable companies in the country—its belly swelling each time a Filipino parts with his hard-earned cash to pay this inefficient monster.

A monopoly

Meralco is profitable because it is a monopoly and the government has allowed its prices to increase every year, with hardly any state demand to strengthen its infrastructure. (See “Meralco’s been raking it: Why?”, The Manila Times, January 12, 2014).

Meralco’s spokesman and a famous but gullible TV broadcaster have been repeating in the past several days the propaganda line: “Meralco profits depend on the electricity they sell, so having power outages are not to their advantage, so they’ll do whatever they can to restore power.”

That’s not borne out by the facts: Meralco’s profits surged from P13.7 billion in 2011 to P17.1 billion in 2012, and to P19 billion in 2013, years when massive blackouts occurred because of the powerful typhoons that hit the country in those years.

Meralco’s overriding goal, because profit-seeking private individuals own it, is not to provide cheap, uninterrupted electricity service to their captive customers, but to suck as much profits as they can from the firm. I’d bet their owners applauded billionaire Ricky Razon’s famous quote when he was interviewed at Davos: “I’m not here to save mankind, but to make money.”

The reality is that Meralco’s owners, or rather, the single controlling owner, owns other companies. If investing P100 million in another business could generate more profits in another business, then the owner won’t use that money to improve Meralco’s infrastructure.

This isn’t hypothetical. Early this year, rather than investing some of its profits for the company’s infrastructure, Meralco invested P8.8 billion in acquiring a power plant in Singapore. (See “Meralco fires up $1.2-B 800-MW plant… in Singapore, Manila Times, February 10, 2014.)

Rather than spending its funds to make its delivery of electricity more efficient for Metro Manila and Southern Luzon, and making them typhoon-resistant, Meralco will spend at least P20 billion this year alone on building a 460-MW power plant in Quezon.

And this will make you madder: Rather than use the bulk of its earnings to improve its infrastructure to make it typhoon-resistant, Meralco has been giving most of its profits to its shareholders. These, from 2008 to 2013, totaled P40 billion—an amount I would think would have been more than enough to make at least Metro Manila and Southern Luzon’s electricity infrastructure resistant to typhoons.

Indonesian owner

But this will make you livid: An Indonesian tycoon whose father was a crony of the strongman Suharto, Anthoni Salim, gets the lion’s share of Meralco’s profits, since he directly or indirectly controls 48.3 percent of Meralco.

And he didn’t even spend a peso from his funds to acquire his controlling stocks. (See “Indonesian Magnate Controls Meralco, Feb 23, 2014 and “Salim brought in zero funds to capture Meralco,” The Manila Times, February 26, 2014.)

But isn’t a public utility like Meralco reserved to Filipinos? Yes, but he managed to do it, because of our weak or even captured regulatory bodies (See “How Salim skirted foreign ownership limits,” The Manila Times, March 3, 2014).

The two meanings of “nationalize” are operative in the case of our biggest power company.

One is to put a company in government hands. A company with a monopoly on such a crucial service as electricity just cannot be owned by the private sector. The power companies in Southeast Asia, except for tiny Singapore, which is only as big as the Subic Free Port, are all government-controlled and or owned.

The other meaning of “nationalize” is to recover such a firm from a foreigner, in this case an Indonesian tycoon, Salim, who probably would paraphrase Razon: “I’m not here to make life easier for you Filipinos, but to make money.” Salim, who lives in Los Angeles, wouldn’t care if you and I spend days, weeks or even months, without power.

(Note: My columns cited above were written several months back. Neither Meralco nor any of Mr. Pangilinan’s representatives or proxies has disputed them.)

Next week: Meralco’s nationalization: Is it doable?

tiglao.manilatimes@gmail.com

FB: Rigoberto D. Tiglao

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19 Comments

  1. to the pro-marcos:

    you people forget that only the cronies could do business. a truly dynamic business environment could only work w/o his cohorts monopolizing everything. you don’t know what its like to be an entrepreneur. it is those people’s creativity and energy that the dictator does not want to see. your new society has failed, and it will forever be an outmoded and futile yearning for your so-called good old days. the Philippines, especially the private sector will adapt and thrive as long as some idiot strong man does not come to power to serve only the interests of the few. are you perhaps a son of a crony? irritating you makes me happy! how much it must gall you at the success of those who were not part of your so-called elite!

  2. Why should we allow a public utility be operated as a monopoly by a private company?
    Why should the profits of a public monopoly be enjoyed only by a few? A public monopoly should be owned by the state and the people. There is no justification to leave in private hands a public monopoly since there is no competition or rivals to that public utility. The basic justification for capitalism to exist is because competition drives down prices and costs. In the case of Meralco there is no competition. So what is the reason for leaving it in private hands? Meralco should be nationalized !!! Anyone who opposes its nationalization is a paid hack of the capitalists !!!

  3. Dear Mr. Tiglao, isn’t it dangerous for you to pursue this scenario to
    nationalize electricity. If you are able to write something about it and suddenly alll our leaders (God help us) opened their nationalistic hearts cried for nationalizing the power sector then, water come next. The billonaires may do something about you! You know what I mean. Better hire first class security expert before your next column is published.
    God help you!

    • Filipinos owed so much from the many journalists like the late Mr Dacer and many others esp. those who died during the Ampatuan massacre whose dedication preserves our freedom to express our different views . We prayed that those who may have the desire to suppress it, will be curtailed from doing what they purposely do to harm them.

  4. President Marcos was right when he sent messages thru some emissaries to Pres. Cory Aquino to operate the BNPP for the good of the country and secure the future but it was never heard for some other reasons. Easy money is always in the mind of the greedy politicians for self-enrichment not formulating ways for the benefit of the general populations. So for us ordinary citizens there’s nothing we can do but only to wait for changes in this country that while we breath we hope.

  5. I live in das marinas cavite & our electricity was turned back on yesterday. Now the reason meralco get away with this is the response from the filipino people. I was complaining to my wife about meralco & she wouldnt have any of it. She defended them saying its not their fault. You cant point out to her that other countries would have it repaired quicker as she hates that. She hates being told other countries do things better than the philippines. If they lack manpower they could hire on a daily rate as many workers as they need to do the manual work then the qualified workers could do all the connecting & it would get sorted much more quickly.

  6. Renato Rentoza on

    The spectre of power crisis in Luzon has loomed large since two years ago and became real in the past two weeks as power shortage caught up with us. The sole reason for this is the Aquino government’s lack of planning for this sector and shelving new power plnat proposals, with every little howl from Leftists (this time posing as Environmentalists). Government, and other sectors now blaming the distributor (Meralco) as it is wont to do on very issue as it cannot admit fault. As I understand meralco merely charges a distribution fee. The price per kilowatt hour charged consumers is largely made up of “generation charges” from whom meralco buys the electricity for distribution. Nationalization? Goodness Mr. Tiglao, are you serious? Power generation to be managed by Government? Govt-run Malaya chose not to operate at a time of acute power shortage last November, because to do so would be to lose money, wehn it was later found out that not doing so actually made them profit immensely.

    • Congrats to you. I also live in Cavite but we still don’t have power. Worse no power no pump for water. so no water!

    • Daang Matuwid on

      you know the reason why the malaya plant became expensive? because they intend to do such in order to justify that running things by private entities are more efficient. tsk tsk

    • Mr. Tiglao, I would not force you to reveal where in Cavite you do stay. That’s for your security. Our similar fate does coincide. Ours is a coastal town where water does not flow when power from Meralco is absent.

  7. Money and power in our country belongs to callous tycoons in cahoots with corrupt to the bones politicians. Citizenry are already numb, contented with the status quo.

  8. I appreciate your article on Meralco ownership. It’s indeed scandalous because our country let vital utlity companies such as Meralco to be run by private corporations. It should not only be Salim Group that need to be blame here but also the Lopezes and member of their management team. They’re both greedy!!
    This reminded me during marcial law period when former President Marcos took over Meralco from Lopezes. The justification was that the electric and water ulitilities were vital to the PH economy and need to be controlled by the governnment. It was also taken over because it was alledged that the Lopezes were siphoning money out of the country by buying equipment from abroad with the central bank as collateral. Isn’t this similar on what the new Meralco management is doing? Mr. Pangilinan as good executive will assure investor like Salim that their money will double and will be secured by transfer to other countries i.e Singapore. This scheme is done by many Filipino businessmen such as the taipans led by Sy by investing in countries of their origin like China or Hongkong were their money is secured. SM has at least 5 megamalls in China, at least two being constructed and possibly will increase to 10-12 malls in the next 5 years. Biggest mall will be built in Tianjin with 540,000 sqm mall. Whilst this method of investing in foreign countries is legitimate and good for PH, I questioned how much money goes back to PH for development. In fact it is the other way around SM Malls in PH are malls for Chinese products. have a look at the malls. How much PH product you think will be sold in China? Therefore, we indigenous Filipinos should be wiser and let’s be aware who we need to support. To our people in the government who are supposed to protect our country from capital flight and economic sabotage are not at all doing their jobs. Even China’s ambassador recently has revealed that they have smaller investments in the PH. then why shoud we invest in their country? Think! The Meralco foreign ownership scheme is scratch in the surface. The PH government should fully investigate the investment trade policy and if it will not help the PH it should not be allowed to continue.

  9. I admire your articles Amb. Tiglao. Just to be clear, are you saying that the Lopezes ran Meralco better than MVP , or they sucked back then just as they do now ?

    • Certainly not. They even run it so badly, as well as their other firms, that they had to sell their shares

  10. Dear Rigoberto,
    Just read your enlightening article re power supply ownership. I couldn’t agree more, that sovereignty for public utilities has moved to individuals at a detrimental effect to all citizens. This is as a result of those two academically gifted, Ronald Reagan ( a broken down B grade cowboy actor ) and Maggie Thatcher ( a preacher’s daughter who stole the school kids free milk supplies ), whose entire existence revolved around selling off state owned facilities and outsourcing state owned services to their already rich hangers on, this was famously tagged Reaganomics. This had a devastating effect on all countries because maintaince of all the public utilities was neglected in the quest for ever increasing need to create record profits year after year. Now we are all paying for those corrupt policies foisted on the public so many years ago, with electricity grids breaking down, roadways crumbling, water supplies dwindling, transport systems failing to provide safe and efficient service, armed services lacking the equiptment to defend our shores, mining giants with more power than governments and on and on. This is happening in Australia as well as many other countries around the world. Once there was a revolution led by the people of the Philippines sadly those giants on whose shoulders we stood on were expended for nothing.
    Allen Skeen

  11. Migs Doromal on

    Other option (from nationalization of MERALCO) is to break the monopoly by granting or or two more franchises to other players to operate as power distributor and competitor of MERALCO in Metro Manila. There was a bill filed in Congress a few years back but nothing came off it.

    ALSO, having mentioned the National Grid Corporation of the Philippines (NGCP), there is CLEAR and PRESENT DANGER to OUR national security with THE STATE GRID CORPORATION OF CHINA (owning a whopping 40% stake) as “controlling” owners of the said transmission facility. This is a very SERIOUS THREAT to our national interests. Other owners, SM group (30%) and the Coyiuto Group (30%) (WT#$%F!!!) are ALL CHINESE!!!!!

  12. I missed the Marcos Era, they know how to run the government. Today not only is the government so incompetent but at least a million times more corrupt than ever before.

    • The cause of all these is greed of the few As a nationalistic President former Pres Marcos as stated by Bongbong Marcos , that his father dream of a “new society” Philippines today would be just like Singapore. But Filipinos ought to remember that when Marcos became sick , greed of the few rich elite ensue and its very much alive and in existence , rich business owners manipulated the situation and since then they have monopolized most businesses like Meralco, PLDT ,SM and etc.Corruption in its worse form has been instrumental to where the country is today and thx to courageous whistleblowers, hopefully it will come to an end, and hopefully it will be a reality.