Meralco management change target — Garcia

May 5, 2008

Where earlier he categorically denied government’s plan to wrest control of Manila Electric Co., Winston Garcia, president of cash-rich state pension fund Government Service Insurance System (GSIS), openly spoke yesterday of “changing the present management” of dominant power distributor Meralco.

The Lopez family, which has a diverse ownership in media and utility businesses, currently controls the management in Meralco.

Garcia also indicated in a statement yesterday that President Arroyo supports his every move against Meralco.

“I am happy that the President supports my move because we should now really change the present management of Meralco as they hold themselves accountable to nobody despite the many anomalies that are happening at Meralco,” Garcia said in a press statement.

Garcia has indicated plans of filing criminal and civil cases against the Meralco management.

Garcia disclosed that GSIS was preparing the filing of charges of “large-scale” estafa against the Meralco management for overcharging its consumers billions of pesos in electricity costs.

He also said the GSIS might file a civil action against Meralco based on the Supreme

decision finding the electric company guilty of overcharging its customers of P30 billion.

A Meralco official had said that GSIS has been engaged in the last weeks in an active solicitation of proxies in the runup to the May 27 annual stockholders meeting of the power firm.

Proxies are voting rights from small shareholders who then delegate this to a major bloc in a company to form a strong vote.

Analysts said shares of GSIS and other government institutions combined in Meralco would total 34 percent holdings in the power firm which is already about equal the shares of the Lopezes in the firm.

Administration senators yesterday backed up the apparent Malacañang-led campaign to boot out the Lopezes from the Meralco management as an effort to lower electricity costs.

Senators Juan Ponce Enrile and Miriam Defensor-Santiago indicated there would be no legal impediment if government persists in pursuing the takeover of Meralco, especially is the move is aimed at lowering power cost.

“It’s not the government who will control (the operations of Meralco), it’s the stockholders. Meralco is a private corporation. GSIS (Government Service Insurance System) is not really government, it’s owned by the people in government or who are employed in the government. They all own the assets that’s where they get their retirement pay,” Enrile said in an interview with reporters.

But for Minority Leader Aquilino Pimentel Jr. the on-going efforts by the GSIS to seize control of the board of Manila Electric Company is part of what he described “squeeze play” to compel the Lopez family, which runs big media outlets aside from Meralco, to toe the line of the Arroyo administration.

The GSIS which holds 30 percent control of Meralco’s equity was reported to be eyeing of management change in view of continuing rise in power rates. On top of this, Garcia is said to be now studying the filing of fraud cases against the dominant power firm for alleged P30 billion overcharges made from 1994 to 2002.

Garcia added he welcomed the support given by President Arroyo to GSIS by ordering a review of Meralco power rates and an audit of its operations.

He cited the Supreme Court decision which found Meralco guilty of overcharging consumers and which directed the company to refund the amount to the consumers.

Garcia said that the management is not “transparent” and is hiding many things from its stockholders. He charged that the Meralco management has refused the GSIS demand for documents relating to the company’s operations although GSIS owns 25 percent of the Meralco’s shares of stock.

“We are a major stockholder. I represent 1.5 million members of GSIS who collectively are owners of 25 percent of Meralco. Yet, despite numerous demands, the Meralco refuses to give us the pertinent documents pertaining to its operations. We are entitled to these documents because we are a major stockholder with members in the board of directors. There is no transparency in the Meralco’s management. They must be hiding a lot,” said Garcia.

He referred to the “systems loss” which the management claims, and for which it charges its consumers. Garcia explained that the “systems loss” include losses from pilferages and other cases of inefficiency by the management. He also said the Meralco was charging more than 10 percent “systems loss” to consumers although they were entitled to claim not more than nine percent.

“Why should the consumers and stockholders, who are also consumers, be made to pay for their inefficiency? Somebody has to pay for this but not the innocent customers and stockholders.”

If the Meralco management refuses to give the GSIS the documents it requires, Garcia said he would ask the Bureau of Internal Revenue, the Energy Regulatory Commission and the Securities and Exchange Commission to get the papers so that they would know what is really happening at GSIS.

Garcia stressed that GSIS has a right to help bring electricity rates down on behalf of its 1.5 million members who are all consumers of electricity, aside from the fact that they are collectively major stockholders of the company.

President Arroyo is at it again. If she is not manipulating public issues to conceal corruption scandals implicating her family, she is passing the buck of government mismanagement to the private sector, the opposition decried yesterday.

United Opposition (UNO) President and Makati Mayor Jejomar Binay said the apparent “power play squeeze” being applied against the Lopez family and Manila Electric Co. (Meralco) was another ploy by Malacañang to blame the private sector for her administration’s obvious failure to implement the necessary reforms in the power sector and keep the cost of electricity down.

“Instead of properly identifying the National Power Corporation (Napocor) as the obvious culprit, President Arroyo deviously deflects blame to Meralco and the Lopez family,” Binay added. “She is being in character.”

According to Santiago, Senate energy committee chair and concurrent co-chair of the Joint Congressional Power Commission (JCPC), Congress, while it could not dictate on how the ERC should act on the matter, it is bound by law to support the move of the Executive if state control of Meralco will result in lower electric costs.

Under the Electric Power Industry Reform Act (Epira), it clearly states as its mandate the lowering of electricity prices in the Philippines, which is one of the highest in Asia, she pointed out.

“As chair of the Powercom, I can summon the chairman of the ERC only after he has acted on the matter. We in Congress cannot dictate how the ERC, which is an executive agency, should act on the matter,” she said.”Because the state has expressed official concern over the electric power industry by passing the EPIRA law, we shall allow matters with respect to electricity rates to be decided by the private sector based on good corporate management practices. But if the result for the consumer is significantly higher rates, then we just have to step in,” she added.

Another administration ally in the Senate, Sen. Joker Arroyo, is against the idea of Napocor effectively assuming the burden just so Meralco would be forced to bring down its rates.

“If there is a cost problem, Meralco must contribute to the solution. That’s why I’m faulting the President,” Senator Arroyo said in reference to what he described by “prescription” made by the President to help resolve the soaring power rates in the country.

“What kind of prescription is that? If the problem is with Meralco, then Meralco must solve this. What is the contribution of Meralco to the problem? Zero, none. Meralco must also give a solution and he has not offered any. Remember that this is a regulated industry, it’s a monopoly and whenever it’s a monopoly, that’s subject to regulation by the government,” he said.

“They must offer the solution, they’re quiet. They will agree because they’re not being asked by the President to reduce their rates. What kind of a deal is that?

“In other words, Meralco is the erring company but it is not being asked to do anything. It’s Napocor that is being asked to do so because Napocor is owned by the people. So who will suffer? Napocor,” he added.

Senator Arroyo questions why the so-called independent power producers (IPPs) are not being asked to contribute to providing solution to the problem.

“What the President is saying is that Napocor should shoulder the whole thing. Napocor is owned by the people. How about the IPPs? These are owned mostly by foreigners and they’re not being asked to contribute anything. How about the other companies, they’re not being asked to do anything.

“Another thing, the ERC is very slow in acting on the petitions. It takes years or months before they act. The success or failure of the EPIRA will depend upon the effectivity and honesty of ERC. They have to exhibit something positive,” he said.

Malacañang has also asked Meralco to open its books to the public as part of the transparency being sought by the other stockholders of the company headed by the GSIS.

Press Secretary Ignacio Bunye said the executive is supporting the stand of the GSIS for Meralco to make public its financial records to determine if past power rate hikes charged to the consumers were all above board.

Bunye , however, hinted at lack of interest in the other demand of GSIS President Winston Garcia to change the chairmanship of Meralco stressing that they want transparency to be prioritized first by the power firm as part of public interest.

“Our support is not so much about change in management , but our support is on the issue of transparency so we would all know if what Meralco charged is fair ..it is important to open the books of Meralco. In the corporation law, stockholders has the right to verify the books. Even ordinary citizens knows the need for transparency , because we are all affected on the issue of power rate hikes,” Bunye said.

When pressed again if the executive will support the change of management in Meralco once the transparency issue has been settled, Bunye meaningfully said, “ We ‘ll cross the bridge when we get there.”

The Palace spokesman also denied that “political vendetta” is the motive of the executive in running against Meralco owned by the Lopezes , known critics of the President .

Binay said Meralco merely passes on to the consumer the charges imposed by state-owned Napocor which still controls 70 percent of all power generation in the country.

The Makati mayor said the timing of the President’s tirade against Meralco was “suspect” and “could very well be part of a pattern of harassment against Malacanang’s perceived enemies” given the critical stance taken by Lopez-owned ABS-CBN against government on the issue of media restriction.

“I agree that we must lower the cost of electricity but I deplore the cavalier manner by Malacañang is undertaking to achieve this end. It is passing the blame to the private sector when it should be review its own failed policies on power and energy,” Binay added.

Justice Secretary Raul Gonzalez has jumped on the bandwagon calling on the management of the Meralco to come clean and account for the electric meter deposit fee fund.

Gonzalez says the deposit for the electric meter, which amounts between P4, 000 to P6,000, should be returned by Meralco to the customer once the client transfers or moves out of his place of residence or business.

by Sherwin C. Olaes, Angie M. Rosales, Charlie V. Manalo, Benjamin B. Pulta

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