Lopez dismisses 'false hopes' for lower rates


Posted at Feb 20 2009 09:42 PM | Updated as of Feb 21 2009 06:05 AM

Oscar Lopez, the patriarch of the Lopez family who owns a major bloc in Manila Electric Company (Meralco), is not buying the line of a board director that some novel schemes could help lower power rates. 

At the sidelines of the Harvard Club of the Philippines General Meeting on Thursday, Lopez told reporters that giving 'false hopes' to consumers on rate reduction may not be appropriate at this time.

Lopez was commenting on previous news reports quoting Ramon Ang, the president of San Miguel Corp., owner of another major bloc in Meralco. Ang recently joined the board of Meralco and was elected vice chairman.

Ang was quoted as saying that they are working out some schemes that might bring down power rates. These include generating more income by piggybacking telecommunications services over Meralco's power lines. (Read story here.)

Lopez described Ang's "promises" as "an impossible task"

"For somebody who's taking over a utility like that, to give such a promise is an impossible task.," Lopez said.

Asked if it is technically possible for San Miguel to lower power rates through these schemes, Lopez said  "I want to see it also, I want to see it."

Higher, not lower

Lopez also noted that Meralco has a pending application with the Energy Regulatory Commission (ERC) for a higher power rate. Meralco's application, which is based on the performance-based rate (PBR), is provided for in the power industry's reforms.

He said higher PBR would allow the company to give more reliable and efficient service to its customers.

"[The PBR] will not lower rates, it will increase rates. [Meralco's service] will suffer [without the PBR]. It will not be able to give all the needed improvements that are needed," he said.

The ERC earlier granted Meralco a 14.49 per kWh average  increase in its distribution charges under the PBR, which was supposed to take effect in the November 2008 billing.

Due to strong opposition from various consumer and militant groups, the rate adjustment was deferred indefinitely.

Looming battle?

The share price of Meralco has skyrocketed in recent weeks on reports that San Miguel was buying shares in the open market to wrest majority of Meralco from the Lopezes.

San Miguel's Ang has denied that his company plans to seize majority control of Meralco.

With Meralco's annual stockholders meeting in May, observers and analysts are watching for possible battle between the two for board control.

In 2008, the Lopez family and allies fought hard to maintain control of the Meralco board even if they only had 34 percent.

The Lopezes were then against the Government Service Insurance System, which owned a direct 27 percent, plus the 10 percent stake of other state-owned financial instutions.

In October 2008, San Miguel bought GSIS's 27 percent stake in Meralco, while another firm, largely believed to be allied with San Miguel, purchased the government financial institutions' stakes.

San Miguel's direct and indirect stakes, however, could have reached 37 percent, enough to contest the Lopezes' firm hold of the firm, had Land Bank's about 4 percent stake not become contentious. Read Land Bank case here.

When asked about his views on San Miguel's plans about its Meralco stake, Lopez said, "I do not know at this point, if they want to just live with us or they want to go ahead and get majority. I cannot fathom their intentions right now."

Lopez also cannot give comment on the prospects of Meralco for the year.

"Well, let's see what happens," he said.

San Miguel's chairman, Eduardo Cojuanco, Jr., previously said they have no intention of taking over the management of Meralco and its investment in the power utility firm is just a form of "support" to the Lopez group.