1. At this time wherein the prices of commodities are
following an upward trend, the
Filipino consumer is faced with yet another difficulty:
how to generate sufficient income in order to
survive the heavy economic situation.
It is undeniable that prices in the world market
are all going up, especially the price of oil.
Then again, the problem on the high rates of
Meralco poses another burden
on the Filipinos...

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The Manila Electric Co., otherwise known as
Meralco, is causing clamor in both the
government and the private sector due to an
ongoing investigation probing into its high
electricity rates. There are allegations that the high
rates of Meralco are being caused by the company’s
self-dealing with its affiliated firms, passing down of the
company’s charges and debts to its subscribers, and
granting of perks to the members of the higher ranks
of its management.
The power rate system of Meralco is one of the
most expensive in Asia, ranking 2nd place next to
Japan. In the local scene, among all Philippine
companies catering to power utilities demand,
Meralco has the highest distribution rates.
Meralco’s electricity rates are comparatively
higher in the Luzon region than inVisayas and
Mindanao. In Manila, subscribers are being charged
P2.44 kWh (kilowatt hour).The second highest is in
Cebu amounting to P1.48 followed by P1.64 charge
in Davao.
In a subscriber’s electric bill, there are several charges
made by Meralco.Apart from the generation
charge, which is the actual consumption made by the
subscriber, and the distribution charge, there are
several additional charges which include eight
government taxes.
Jesus Francisco, the current president of Meralco, has
admitted that 72 million kWh of electricity is being
used by the company is being passed to its
customers at a yearly rate of P427.5 million.
This was defended by the company’s head of network
asset management Rene Acuña by arguing that this
charge is supported by the provisions of
Republic Act 7832 (Anti-Electricity and ElectricTrans-
mission Lines/Materials Pilferage Act of 1994),
a law which allows power distributors to pass the
9.5% burden of their system losses to their
customers. An average of P0.83 per kWh is included
in the electric bill in order to ease Meralco from its
government taxes.
Meralco also has a pending petition with the Energy
Regulatory Commission to be allowed to pass down
to its subscribers the P14 billion it needs to pay
Napocor in order to end its supply contract.
Ownership of Meralco is being shared by
Government Service Insurance System (GSIS), the
Lopezes, and other government agencies. Meralco is
33% government-owned; 23% of which is owned by
Meralco while the other 10% is owned
by other government agencies.Another
33% of the company is owned by
the Lopez family.
“The power rate system of
Meralco is one of the most expensive in
Asia, ranking 2nd place next to Japan.
In the local scene, among all
Philippine companies catering to power
utilities demand, Meralco has the highest
distribution rates...”

3. Busting out Meralco
Meralco’s passing the burden of its generation cost to
consumers amounting to almost P14 billion was
questioned and attacked by the Senate, especially Senator
Juan Ponce Enrile. Meralco then admitted that they do
pass on to electricity subscribers the weight of 72 mil-
lion kWh that the company consumes for its own yearly
operations and declares this as one of its “system losses.”
The legislative branch of the Philippine government
diagnosed Meralco’s process of declaring system losses as
one of the dysfunctions of the ERC for not being able to
regulate Meralco and other power distributors.This
failure to regulate power distributors, especially
Meralco, moved the legislative body to
reprimand the ERC specifically.
One of the main foci of the House of Representatives’
investigation on the cost of electricity is the proposal of
House Speaker Prospero Nograles. Partylist
Representative Ernesto Pablo further supported
Nograles’ proposal to exempt the power industry from
VAT (value added tax) by at least P1 per kWh.This
proposal was also favored by the Energy Regulatory
Board (ERC) but it was countered by Senator Miriam
Santiago by arguing that removing the tax would cause
imbalance in the government’s deficits.
The drastic increase of power rates moved the Arroyo
administration to assign the Government Service
Insurance System (GSIS) to participate in a takeover
bid over the control of Meralco.This has also brought
about noise in the different sectors of the society,
especially the private sector and the media because
the action is reminiscent of the acquisition of private
assets by the government during the Marcos regime.
GSIS Chairperson Winston Garcia said that he plans
to buy the other shares of Meralco that belongs to the
Lopezes and other shareholders.The GSIS Chair wants
Meralco to be split up into sub-franchises to promote
efficiency and transparency in the management of its
labor force and budget. In order to promote its main,
GSIS pushed for the Meralco management to make its
books available to the eyes of stockholders in order for
them to determine the key causes why electricity rates
are shockingly high in the country.
When Too Much Is Bad
In general, high power rates are attributed to Meralco’s
overwhelming annual expenditures and management
dysfunctions. Laxity and abuse in the management style of
Meralco is one of the attributes for the Philippines’ status
as one of the countries having the highest power rates
in the global scene. Meralco has been found out to have
been passing the burden of its systems losses to its
electric subscribers tantamount to P500 million yearly.
"The company's annual losses due to the huge
salaries granted to its top executives were passed on
as additional burden to electric consumers' monthly
electric bill including "system losses".
The "system loss" is the biggest charge
of Meralco to its consumers. It is also defined
as the electricity that was illegally acquired by
dishonest consumers and electricity
which was also lost through the
transmission process. It makes up
9% of the total amount of the
electricity bill..."
This has been revealed by the Senate and has brought
Meralco into a series of questioning ever since. Meralco
has also brought about several controversies regarding its
expenditures which included P55 biliion a year accounted
for its business dealings with its affiliate companies and
a yearly P97 million allotted for grants to its top-notch
executives.
“It’s not my bill, It’s yours”
The situation has also been exacerbated by Meralco’s
procurement of power from Lopez-run power
producers at titillating costs instead of the power
produced by Napocor. The distributor does not opt to
buy from Napocor whose rates are comparatively
lower than its sister companies, whose rates amount to
P6.02 per kWh. In Northern Luzon, Napocor
power costs P3.82/kWh, in Central Luzon P3.26, in
Southern Luzon P3.89.This has increased the
debt of Meralco to a worth of P14 billion, a
ground for a court case with the Napocor.
The high cost of power rates has garnered the Arroyo
administration’s attention to look into its alleged company
and management abuses which should have been
regulated and monitored by the Energy Regulatory
Commission (ERC).The company’s annual losses due
to the huge salaries granted to its top executives were
passed on as additional burden to electric consumers’
monthly electric bill including “system losses.”
The “system loss” is the biggest charge of Meralco to its
consumers. It is also defined as the electricity that
was illegally acquired by dishonest consumers and
electricity which was also lost through the
transmission process. It makes up 9% of the
total amount of the electricity bill.
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4. In view of sustainable measures, the management style of
Meralco should deal away from the “top-to-bottom”
approach and consider management reforms.The
company should also consider investing in technology
to enhance power distribution, a strategy which is more
budget efficient rather than spending lot to finance the
salaries Meralco’s executives.
Inevitability of Insatiability
It is an inevitable fact that businesses are profit-oriented.
Though the power rates system of Meralco has
put the company in such a chaotic controversy, the
weight of proposing solutions should not only be placed
in the hands of the company itself. It must be
remembered that the rates of Meralco are not only gov-
erned by management practices and other
internal factors, but also by the country’s
laws and market policies.
While Meralco can argue that it is just being
responsive and reactive to market forces and the
regulations of the socio-political environment, there is
also a need for our legislators to scrutinize the country’s
laws regarding the power industry. Present laws such as
the EPIRA and the EVAT may be further
assessed to determine their impacts to the power
and utilities industry and make necessary
adjustments to lessen its adverse impacts to power
companies like Meralco and the consumers.
In such way, protection of both corporate
and consumer rights would be ensured.
The Anatomy of Meralco
The management style of Meralco is something to be
said as taking a “top-to-bottom” approach, wherein
command lies to those in the upper ranks, as shown by
the influence of the Lopezes in the company’s business
processes and the irrational and excessive spending on
the top executives’ salaries.This has truly proven to be
inefficient, thereby turning out to be one of the main
reasons for high power rates. It is also unreasonable for
electric consumers to be burdened by Meralco’s
questionable corporate expenses. Such process of
“passing down the burden” is unfair considering the fact
that most of Meralco’s subscribers are poor and cannot
easily keep up with the rapid increase of power rates.
Control of Meralco has been in the hands of the
Lopezes for so long, which only takes part in one-third
(1/3) of ownership. It has been observed that Meralco
opts to buy from Lopez companies such as First Gen
Corp. and First Philippine Holdings at much higher prices
than Napocor. Procurement of costly electrical
equipment and power from companies that are partly
owned by Meralco is a practice which is often associated
with monopolies. Monopolies dictate prices,
market trends, and largely influence supply and demand
by hindering fair market competition, a hurtful
condition for consumers.Also, monopolistic management
of resources is not only costly, but lack of fair
competition in the power utilities market does not
challenge the enterprise to invest further in producing
quality services and utilities to its subscribers at friendly
costs.This is not only a slight matter of
mismanagement of funds, but it also requires more
investigation on Meralco’s books and accounts due to
highly questionable expenditures.
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5. suggestion would be for the government to
initiate franchising to promote fair competition. Fair
competition in the power sector is an attractive vision in
opening Meralco for the franchising of
two or more operations.
More power distributors in the market would not only
ensure that businesses would strive hard to ensure
quality service delivery to their subscribers
for increased profits, but it can later on bring down
power rates to survive and stay competitive in the
market.Thus, a more favorable situation for consumers.
Everything at Stake
The general role of the Philippine government is to
provide quality public service to the Filipino people.This
would be tested at times this, where the country is in dire
need of immediate government intervention.Everything is
at stake at this point; the survival of the power and
energy industry, the strength of our laws, but more
importantly, the ordinary Filipinos.
At this time wherein the prices of commodities are
following an upward trend, the Filipino consumer is faced
with yet another difficulty in his or her life: how to
generate sufficient income in order to survive the heavy
The Search for Sustainability
The removal of the tax levied on the power sector,
while effective, is not aiming for a sustained power sector.
At the initial removal of the tax imposed on electric
utilities, the people would be eased from the burden of
at least P1 per kWh in Manila and P0.83 in the provincial
areas.This would only prove to be effective in the short
term. If management practices, transmission, and
distribution processes would remain to be costly,
the positive impact of this proposed solution
would be extinct.
There is also a need for the government to tighten its
regulations on the power industry. It was noted that the
Energy Regulatory Commission was also put into the
limelight for its failure to implement its policies to
regulate the business processes of Meralco;
leading to further deterioration of its management
system. Consistent monitoring of the power industry
should not only be an objective which looks
good on paper, but the meaning of this objective
lies in the successful service delivery of
power companies ensured by the regulatory body.
It is a known fact that the government has resorted to
privatization in order to ensure effective and
efficient delivery of services.At this time
wherein Meralco is involved in a controversy due
to high power rates, a government takeover may
seem like a source of comfort. But then, sole
control of the government on the private sector was
often associated with inefficiencies and failure, as
observed throughout history. It should be remembered
that in the new era of development, the government is
not the only main driver for change.A better
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6. economic situation. It is undeniable that prices in the
world market are all going up, especially the price
of oil.This puts the declaration that the Philippine
economy is getting stronger, as shown by the
appreciation of the Philippine peso.The purchasing
power of the peso is having difficulty coping up with
the speedy increase of the prices of goods. Much to
our dismay, the so-called strong Philippine economy is
questionable because 71% of Filipinos consider them-
selves as poor (Pulse Asia). The peso may
have strengthened a little but prices
increase faster; the appreciation of the
Philippine peso is not felt.
The problem on the high rates of Meralco, if not
addressed, poses another burden to the Filipinos.
Indeed, we are subject to the prices of commodities in
the world market and it is a blind hope to expect that
prices would go down in due time.What the
government can do is to lessen the hurtful
implications of high prices of energy commodities,
such as the service provided by Meralco. Exempting
electricity from the EVAT may be a solution, but if the
government chooses to do such, careful investigations
on the impact of removing EVAT are needed in
order to ensure that electricity rates are
consumer-friendly without compromising
its revenues.
Inquisitive outlook
The drastic increase of power rates of Meralco would
continue to raise the eyebrows of critics, their
consumers, and even their shareholders.There would
be continuous clamor for change in the management
system and transparency in its books and budget until
the issue is resolved. Bringing down the power rates
would not only entail further reforms in Meralco’s
business processes and system, but also initiatives from
the government to regulate the power industry.
This is not only an issue of dissecting market forces.
The Philippine society is faced with further
debates whether the country’s policies and regulations
are in favor of upper few.The power and monopolistic
tendencies of the Lopezes would be further
questioned by the public.
The disciplinary measures of the Arroyo
administration imposed on Meralco proves that the
government is still persistent in proving that it still has
a say in the goings-on in the private sector.
The Arroyo administration’s step in this issue is a
reminder to the people that the government is
still persistent in proving itself as a hand of steel.
It is but just that the government has done something
to address this popular issue.Whether the
government’s response to this issue is for the popular
welfare is still in question; but then again, there
would always be a silver lining.
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