Garcia not giving up on campaign to lower Meralco rates


Posted at Jun 08 2008 10:48 PM | Updated as of Jun 09 2008 06:48 AM


To embattled Winston Garcia, the fight to bring down power rates charged by Manila Electric Company (Meralco) continues despite a quick knockout from a temporary restraining order (TRO) recently issued by the Court of Appeals.
Garcia, president of state pension fund, Government Service Insurance System (GSIS), a major Meralco shareholder, considers the TRO as a temporary 60-day ceasefire before the contending parties resume grueling legal combat.
But it didn't mean the end of his campaign to reduce Meralco's electricity rates. He still has speaking engagements and media interviews where he details the reasons for his crusade.
Last Friday, he spoke before Chinese businessmen who are members of Anvil Club. Previously, the influential Makati Business Club issued a statement that criticized the move of government, referring mostly to GSIS's strategies, to wrest control of Meralco.
The TRO was the latest twist in the ongoing legal battle between the warring shareholders of Meralco—GSIS and the Lopez family—over control of the country's largest power utility. It nullified a Securities and Exchange order against proxy votes in favor of the Lopezes that could have rendered Garcia victor as early as round one, when Meralco pushed through with its board election during its annual stockholders meeting on May 27.
Not a hero
Garcia's message has been consistent: By effecting change in Meralco's board and management composition, he could lower electricity rates.
In his speech at the Anvil Club, Garcia said he does not aspire "to be a hero," but to keep the ball rolling for consumers who deserve some saving from a hefty P21.0 billion, at the least, in "unfair" power cost that is charged them yearly.
Garcia reiterated his findings about onerous provisions of Meralco's contract with its independent power producers (IPPs). He focused on the "take or pay" provision that allowed Meralco to pass on to customers the costs of unused power and plant leases, amounting to P4.89 billion and P17.0 billion, respectively, last year.
"These provisions are proper for BOT (build-operate-transfer) contracts only. They violate the [power industry reform] law and franchise of Meralco that state it should supply electricity to its captive market in the least cost manner."
"They (management) should remove the unused gas," he said, referring to power sourced from the Lopez family's natural gas-fired plants, Sta. Rita and San Lorenzo in Batangas.
Garcia also reiterated that Meralco has maintained a bloated and bureaucratic structure and forged "sweetheart deals" with its sister companies that are also run by the Lopez group. These include First Electro Dynamics Corp. (for ballasts and transformers), First Sumiden Circuits, Inc. (flexible printed circuits), First Philippine Industrial Corp. (fuel), and Philippine Electric Corp. (distribution and transformers).
He said the power retailer has a workforce of over 6,000 permanent and 4,000 contractual employees that were paid a total of P8.0 billion in 2007. According to him, the average cost per employee was P850,000 and this was passed on to consumers as well.
Garcia also criticized Meralco's P2.8-billion pension fund, which he said was non-contributory.
"Convert this pension fund into a provident fund wherein both the employer and employees would contribute."
"If it's a provident fund, you get lump sum when you retire and not a monthly pension, which is really expensive especially to consumers who are shouldering it."
Other ways to lower rates
To further reduce electricity prices, Garcia singled out a simulation, wherein Meralco would increase power purchased from the National Power Corp. from 35-70 percent during peak and non-peak hours.
This would effectively cut transmission charges from P1.20 per kilowatt-hour to just P0.50 per kWh, and generation costs from the current P4.87 per kWh to P3.93 per kWh, he explained. "You see, the higher the load factor, the lower the transmission and generation charges."
Garcia said "untenable" system losses should also be addressed seriously.
Since Meralco's practices have been "abusive" and it lacked transparency on how its system losses were incurred, he said an independent body, therefore, should be the one to review these losses.
System losses have three components: technical, non-technical, and administrative costs. The first refers to electricity that evaporates as it travels through transmission lines from the power plant to the end users. The second refers to pilferages. And the third refers to other items that the industry's regulator, the Energy Regulatory Board, allows distribution and generation companies to pass on to consumers.
There is a provision in the power reform law that requires the three components to be unbundled and given separate caps. Currently, all three are lumped into a 9.5 percent allowable cap passed on to consumers who are not aware if the distribution company is improving on efforts to limit technical and non-technical losses but not on administrative aspects, and vice versa.
Implementation of the law's several phases, however, has been delayed, including the unbundling of the systems loss components.
Garcia management
Garcia also reiterated that "Meralco should have a competent, professional and independent management team to implement all these recommendations."
He was referring to the team he was said to be forming to wrest control of Meralco. "I keep saying that if it were my management, rates would go down by 10-20 percent. If they don't, then, I will resign [as member of Meralco board]."
Garcia disclosed that he has come up with a shortlist of two or three people he was eyeing to lead the Meralco management. He declined, however, to name them.
"All I can say is these people are familiar with the energy sector," he told reporters.
Garcia has slammed the legitimacy of the new Meralco board, where his staunchest rival, Manolo Lopez currently sits as chairman and chief executive officer.
Garcia, who boldly attempted to derail Meralco's board election with a cease-and-desist order from the SEC that was supposed to stop the Lopezes from casting proxy votes in their favor, still lost a majority of five seats after his opponents declared the order null and void.
"The management is continuing to stay in power even if they don't have the right," he stressed.
But whether Garcia, together with the government, really had the upper hand in the management or not is now up to the courts to decide.
This legal battle—a highlight in Philippine corporate history— continues on June 23 and 24, when the CA starts hearing Meralco's petition questioning the SEC's jurisdiction over the conduct of its board election.