Biz Buzz: Political considerations
The embattled Iloilo City power utility firm Panay Electric Co. (Peco) faces tough grilling in the Senate when survey leader Sen. Grace
Poe convenes this Monday (Oct. 22) the upper chamber’s committee on public services to decide if the company deserves to be granted a new 25year legislative franchise.
Poe will surely weigh her options carefully on Peco’s case following the overwhelming vote in the House of Representatives two weeks ago to refuse the 95-year-old monopoly a fresh mandate and to grant the franchise instead to More Minerals Corp., a utility firm owned by businessman Enrique Razon Jr.
Early this year when she visited Iloilo City for hearings on the Tax Reform for Acceleration and Inclusion ( TRAIN) Act, an irate Poe had already declared that she was inclined to deny Peco its franchise renewal application because of mounting consumer complaints against the firm’s service record and its alleged penchant for overbilling customers.
In fact, Poe was in Iloilo City in May when the overbilling complaint against Peco reached a crescendo. The city council had just passed a resolution urging the national government to deny its franchise renewal following intervention by the Energy Regulatory Commission (ERC) to resolve complaints from Iloilo City households over monthly bills that rose by as much as 1,000 percent. Peco blamed this on its new metering system that recomputed and rebilled from its customers’ uncollected and unbilled previous consumption.
The same complaints that faced Poe in Iloilo City, meanwhile, made their way to the House committee on legislative franchises chaired by Rep.
Franz Josef Alvarez, who eventually intimated that what sealed Peco’s fate in Congress were financial statements from Peco itself that showed that, while the company was facing complaints of overbilling, it posted successive years of net profits amounting to P198.27 million in 2014, P127.92 million in 2015, P139.26 million in 2015 and P191.1 million in 2016. These profits occurred, Alvarez noted, despite a directive from the ERC itself to refund P631 million in overbillings to Iloilo residents in 2014. Even Speaker Gloria Macapagal-Arroyo, whose husband,
Jose Miguel Arroyo, has extensive family and business relations in Iloilo and Negros provinces, did not intervene despite Peco’s threat to disrupt electricity supply in the city by denying Razon’s power generation firm access to the local distribution network.
Naturally, Poe and the members of the Senate committee on public services cannot ignore the political implications of the issues raised by residents and city officials against Peco, according to Iloilo City Councilor Joshua Alim, one of those leading the campaign against Peco. Indeed, no sane politician can ignore Iloilo City and the surrounding province with more than 1.4 million voters in an election year. —DAXIM L. LUCAS
Meanwhile, Peco says...
What World War 2 or the drastic devaluation of the peso or the political and economic uncertainties of the last few decades could not accomplish, the House of Representatives did when it denied Peco a fresh franchise, and instead awarded it to someone else.
“Questionable” is how Peco describes the granting of a franchise to a new company, effectively replacing a company that had been delivering electricity to the people of lloilo for almost a century.
The House franchise committee recently approved the application of More Minerals Corp. to establish, operate and maintain a power distribution system in lloilo City, effectively forcing the 95-year-old Peco to end operations by January next year.
Peco points out that More Minerals—owned by the wealthy and influential Enrique Razon Jr.—has zero experience in power distribution.
Peco, on the other hand, is a family corporation and the first 100-percent Filipino owned enterprise in lIoilo City. The Ca
cho family has been operating the power company since the beginning, and its professional management has been recognized for its performance by the Department of Energy (DOE) in 2014 as and the ERC in 2015.
In keeping with the law, the company applied for a franchise renewal in 2017 and executives attended all scheduled House hearings. A bill was filed which would extend the franchise of Peco.
But that bill lay dormant for months and now, Peco says that another bill granting the franchise to MoreMinerals was fast-tracked, being passed on third and final reading last week.
Are the coming elections a factor? The Cachos think so, noting that they were not big donors to politicians, unlike their rival.
Will the dynamics in the Senate be different? Abangan! —DAXIM L. LUCAS
Bold prediction
San Miguel Corp.’s ( SMC) big boss Ramon S. Ang may have moved on from the telecommunications business years ago but that doesn’t mean he no longer believes in the sector.
Ang, in a recent chat, said he believed that the government’s third telco initiative and the new mobile player it was expected to produce can still prosper against well-entrenched competitors PLDT Inc. and Globe Telecom.
“It will succeed if you have the money,” Ang said.
The billionaire is well aware of the risks involved in getting into this business. SMC itself tried to launch a mobile service in 2016, but it was not successful. After its talks with Australia’s Telstra fell through, SMC sold its telco assets to PLDT and Globe in May 2016.
He said the current batch of telco aspirants were luckier in the sense that the Duterte administration fully supported the third telco initiative. SMC, he said, had sought the Aquino government’s help in key policy areas such as lowering interconnection rates and allowing cell tower sharing.
These issues, including the use of the government’s dark fiber assets, have mainly been addressed by the Department of Information and Communica- tions Technology under Acting Secretary Eliseo Rio Jr., a champion of the initiative which helped facilitate the entry of the original third player: Sun Cellular in 2003.
Unfortunately, the Aquino administration was hesitant to do so and the rest is history.
In any case, Ang said there was no looking back. He noted that SMC won’t partner or invest with any of the aspirants, of which there are a sizable (and growing) number, despite a lawsuit filed last week by one among their ranks.
“It’s my word of honor. When I sold it to them (PLDT and Globe), I said I will not come back and fight them” Ang said. —MIGUEL R. CAMUS
Aboveboard
Energy Secretary Alfonso Cusi has emphasized that there was no legal or practical basis to defer the declaration of the 1,200-megawatt power plant of Atimonan One Energy Inc. (A1E), a wholly owned subsidiary of Manila Electric Co. (Meralco), as an energy project of national significance (EPNS).
Cusi said that in fact, the declaration of the DOE’s executive committee of the A1E as EPNS was done in compliance with Executive Order No. 30, series of 2017, which reduced the period of regulatory process on crucial energy projects.
“We are in a rush. We don’t want a repeat of what was happening in previous years when it took around three years before permits are granted. We said let’s do it in 30 days so we can comply with the timeline,” Cusi said.
Under EO 30, government agencies are required to act on application for permits involving EPNS within 30 days from the time complete documentary requirements was submitted.
However, earlier, former Energy Undersecretary Petronilo
Ilagan assailed the approval of the Execom resolution declaring the power plant an EPNS and insisted the Execom should have waited for the outcome of the court cases on the alleged Meralco-A1E power supply agreement (PSA) and six other similar deals.
The cases stressed the requirement of a competitive selection process in the procurement of PSA and alleged the Meralco-A1E deal circumvented this process.
However, Cusi explained that the certificate of EPNS had no relation at all with the PSA application of Meralco and A1E. He added that under EO 30, once the applicant has met all the requirements, it should be allowed to enjoy all its privileges under the law.
“The certificate does not cover the PSA because if you are going to put up a plant, you have to file your application to the DOE. That does not include the PSA, which will come later. It’s an entirely separate matter,” he said.
The issue of the PSA, according to Cusi, falls within the authority of the ERC, a quasi-judicial regulatory agency with the power to review bilateral service contracts of distribution utilities.
He pointed out that since the Supreme Court has yet to rule on the pending cases and no temporary restraining order was issued by the court, there was no legal impediment to the Execom’s declaration of the project as EPNS.
Still, Cusi said the DOE was duty-bound to respect any decision the Supreme Court might render on the cases.
“Of course, I will abide by the decision of the Supreme Court,” Cusi added. E-mail us at bizbuzz@inquirer.com.ph. Get business alerts and a preview of Biz Buzz the evening before it comes out. Text ONINQ BUSINESS to 4467 (P2.50/alert)