TIMES indeed are changing.
The Panay Electric Co. (PECO) stands to lose the franchise it has tightly held as a monopoly for 95 years to distribute electricity in Iloilo City.
After the House of Representatives approved in September the franchise of a firm called MORE Electric and Power Co. to operate as an electricity distribution firm in the city, the Senate committee on public works headed by Sen. Grace Poe gave it its own stamp of approval on October 22. PECO had filed its franchise renewal application with the House in November 2017, but it has not been acted upon.
The new firm is mainly bankrolled by global ports-management and casino billionaire Enrique Razon. It will reportedly be run by two National Power Corp. presidents from two administrations: Fidel Ramos’ Guido Delgado and Gloria Macapagal-Arroyo’s Cyrill del Callar.
PECO’s exit from Iloilo was totally inconceivable before. Some 70 percent of PECO is owned by Iloilo’s old elite Cacho clan, known to be very close to one of the most powerful politicians in the President Aquino 3rd’s government, Sen. Franklin Drilon. who was Senate President during that regime.
Apparently, PECO has been so profitable for the Cacho family that the firm’s current president Luis Miguel Camacho is a member of that very elite group of Filipinos listed in the International Consortium of Investigative Journalists’ (ICIJ) database of massive leaked information from law firms that handled the setting up, or maintenance, of offshore accounts.
He is identified there as an “intermediary” in an offshore company in the British Virgin islands named Costa Group Investments Ltd. That it wasn’t a case of mistaken identity is proven by the fact that the ICIJ reported Costa Group’s or Camacho’s address as “3rd Floor, Manfred’s Building General Luna St. Iloilo City, Philippines 5000.” That’s the address of PECO’s principal office.
But the story here is not just about a provincial elite. Thirty percent of PECO’s shares are held by the most powerful oligarch in the country since the strongman Marcos fell in 1986, the Eugenio Lopez clan. The Lopezes through First Philippine Holdings acquired these shares in 1996, a few years after the Yellow-controlled Congress gave PECO a 25-year franchise, when its 1968 authority expired. The 25-year period is ending this year — when the Yellow Cult is no longer in power.
While PECO might seem to be a small provincial company to talk about, it has been a huge money-making machine. Iloilo City has especially boomed in the 2000s because many of its elite families built resorts and other businesses in Boracay with their profits channeled back to the city where they live. Boracay in fact has become so much a tourist spot that its environment had degraded so much that it became, as President Duterte put it, a cesspool he had to close for six months.
PECO has been a cash cow for the Lopezes, with revenues from it estimated to have totaled nearly P1 billion from 1996 to 2017.
But its revenues from PECO have not been just in the form of dividends. After the Lopezes got 30 percent of PECO’s shares in 1996, the clan through its Panay Power Corp. built a new 72-megawatt plant that supplied most of the company’s power retailed to Iloilo residents.
Panay Power Corp.’s power sales to PECO were so profitable that in 2003 the Lopezes sold it (as it badly needed cash at the time) for P2.3 billion to Mirant Philippines, a joint venture of Japanese firms Marubeni Corp. and Tokyo Electric Power Company Holdings with Metrobank’s George Ty.
The practice in the Philippines of a distribution company and the power generator it gets its electricity from having the same shareholders has been widely criticized as one reason for high electricity prices. Such cross-ownership allegedly allows the power generator to charge the highest price it can, which the distributor simply passes on to the consumer, who has no choice but to pay the price since the distributor is a monopoly.
Indeed, PECO’s critics claim that its generation charge is the highest among all urban areas in the main grids. It is about P2.50/kwh, higher than Manila, Cebu or Davao.
Highest in the world
That certainly is a likely reason why, according to a research on retail electricity prices by the non-governmental association Freedom from Debt Coalition, PECO’s P13.3 retail per kilowatt hour rate (for a monthly consumption of 195 kwh) is the highest among the country’s five metropolises: Metropolitan Manila’s electricity price is P10 per kilowatt hour; Davao City, P6.9; Cebu, P9; Bacolod, P6.4; and General Santos, P5.5.
It is even shocking that the NGO’s report claimed that Iloilo City’s electricity prices are the highest among 70 countries in the world. That indeed is the price of oligarchy.
But it is not only the high cost of electricity provided by PECO that is the problem, but also its service, according to leaders of Iloilo City.
The Iloilo City Council last year even passed a resolution asking Congress not to renew PECO’s franchise and urged the national government’s takeover of electricity distribution in the metropolis. The resolution claimed that several suits filed at the Energy Regulatory Commission alleged that PECO overcharged its customers on several occasions and seems to have a penchant for overbilling its consumers. It alleged that PECO was ordered to refund P631 million to its customers and last year hadn’t fully complied with the directive.
The city office tasked to receive consumer complaints claimed that it had received 1,800 pending complaints from its consumers for poor service and overcharging of power bills
PECO’s critics also alleged that while it has been very profitable for its shareholders, it has been inefficient. Its systems loss in 2017 was 9.9 percent, the highest among private utilities in the Philippines, much higher than Meralco’s 5.9 percent. PECO has 16 times more brownouts than the average in the country. The duration of PECO’s brownouts is 30 times longer than the average for electricity systems in the country.
PECO’s struggle to maintain its nearly century-old franchise is very crucial for the Lopezes as the firm operates in the oligarch clan’s “homeland” itself, Iloilo City, and is considered as some kind of family heirloom.
Indeed, in the Lopezes’ PR campaign to have PECO’s franchise renewed, First Philippine Holdings Corp. Chairman Federico Lopez was reported to have said in several newspapers that PECO is their “family’s commitment to Iloilo.” And even if the Lopez conglomerate’s finances reportedly haven’t been so good, the newspaper headlines claimed, the “Lopezes are ready to invest more in Panay Electric.”
That was really a reply to allegations by the Iloilo City Council itself that PECO has not been investing to improve its infrastructure, and instead has been declaring huge dividends to its shareholders. Extrapolating from dividends from PECO reported by the listed firm First Philippines to the stock exchange, I estimate these profits to amount to P3 billion from 1996 to 2017.
PECO’s media blitz has been so intense that even Philippine Daily Inquirer’s Solita Monsod, the Yellow Cult’s most sophisticated spokesperson, devoted one of her once-a-week columns to claim that the House of Representatives’ approval of the bill to grant a franchise to PECO’s competitor was a “grave abuse of power.”
Grave abuse of power to end the 95-year monopoly of an inefficient electricity distributor? To use Monsod’s favorite “emo” term: “Jeez.” What gets my goat over Monsod’s Yellow pontifications is that she doesn’t disclose, especially in such articles involving the Lopezes and its firms, that her husband Christian Monsod has always been a top executive of the Lopezes, even before martial law.
The impact of PECO’s loss of its franchise extends beyond Iloilo. It would be a very ominous precedent for the Lopez clan’s media empire, the ABS-CBN Corp. Its franchise to operate as a broadcasting firm expires in 2020, two years before President Duterte — who has stated that he will block the grant of such authority — steps down.