MERALCO HONCHOS GET P97M ANNUALLY

“These apparent management abuses and lax regulation are the reasons why the Philippines has one of the highest power rates in the world, second only to Japan in Asia,” Santiago said.

NPC is the generator, Meralco is the distributor, and ERC the regulator of the power industry, with all three and other sectors falling under the bicameral Powercom’s power to “set the guidelines and overall framework to monitor and ensure proper implementation” of R.A. No. 3196, the Electric Power and Reform Act of 2001.

“Consumers are paying for the high annual salaries of the Meralco chief executive officer and seven other senior executive officers which in 2008 will total some P97 million. The officers and directors as a group will get some P170 million. This appears to be management abuse,” Santiago said.

Santiago listed “apparent management abuses” by the three agencies as follows:

• Meralco is reportedly buying electricity from NPC and WESM (Wholesale Electricity Spot Market) during peak periods, when prices are high, resulting in high pass-through generation charges to its consumers.
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• Meralco and NPC entered into an agreement to ask ERC to allow Meralco to pass on to its consumers its unpaid debts to NPC.
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• Power rates are high in Luzon, than in Visayas and Mindanao.
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• NPC apparently manipulates its rates based on Time-Of-Use (TOU) which are very high, and which are passed on to consumers.
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• NPC apparently gives preferential rates to economic zone consumers, but passes on the cost of the discounts to its other consumers.
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• NPC charges its consumers for its revenue requirements, which seem to include its P7 billion bad debts.
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• NPC buy its power from IPPs (Independent Power Producers) but at higher rates than the avoided cost, or the marginal cost, and then passes on the higher rates to the consumers
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• ERC has neglected its duty to set the new caps on recoverable systems loss, and use questionable “performance-based regulation,” valuation of assets, and benchmarking methodology.

Santiago said the possible penalties for management abuse can be legislative, corporate, and criminal.

Meralco operates under a franchise, meaning a right conferred by the government to engage in specific business, including the rights necessary for public utility companies to carry on their operations.

“The legislative remedy provided by the Constitution is for Congress to amend or repeal the Meralco franchise, as required by the common good,” she said.

The senator added that the corporate remedy is to penalize the responsible Meralco managers, by voting them out in the next stockholders’ meeting this month.

“The criminal remedy is to file cases in court against the responsible Meralco and NPC officers for the crime called ‘combination in restraint of trade,’ which refers to any conspiracy ‘for the purpose of making transactions prejudicial to lawful commerce, or of increasing the market prices,’” she said.

Santiago ordered the three agencies to submit replies to her long list of technical questions for each agency, and to attach the proper documents.

She said that all replies and documents will be the basis of the report and recommendation that Powercom will submit to Congress.

Santiago also ordered that a set of replies and documents shall be given to a team of UP professors who are at present conducting a study for a paper to be titled “Anatomy of Power Rates in the Philippines.”

The Powercom report will have to analyze technical, financial and regulatory factors that contribute to the present high power rates. It is complex, labyrinthine, and often subterranean,” she said.

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