An Open Letter to Mr. MVP

An Open Letter to Mr. MVP

Manuel V. Pangilinan

Chairman and CEO, Meralco and Metro Pacific

5 November 2015

Dear Mr. MVP

First of all we want to thank you on behalf of the millions of Filipino basketball fans who enjoyed the games of the Gilas Filipinas and Ateneo teams for your generosity in helping them recruit talent, get great coaches, and become competitive.

We also want to acknowledge the improvements in Meralco’s charges under your leadership, in Systems loss charges (now 10.5% instead of 14.5% a few years ago), distribution charges reduced by 0.18 per kwh recently, and the current lower generation rates of P3.99 compared to 5.60 per kwh just a year ago. These improvements are however not permanent and not enough.
We would like therefore to similarly appeal for your cooperation in putting in place permanent solutions to the high Meralco power rates that, if reduced to fair and competitive level, will bring more long term joy and economic upliftment to millions of Filipinos serviced by Meralco.

Implementation of Mandatory CSP

We ask Sir that you do not stand in the way of the implementation of Mandatory CSP, (Competitive Selection Process) in accordance with DOE Circular 2015-06-008 and open the currently closed Meralco generation market to truly independent power generators.

Broader Benefits of Mandatory CSP

The macro-economic benefits of subjecting power supply contracts to Mandatory CSP go beyond just reducing generation rates by market testing them. 1) CSP will open the generation market to more investors thus insuring continued power supply development for the long term; and 2) it will provide a mechanism for the government, especially the DOE, to steer new power projects with a holistic strategy for energy mix, locational, environmental, and transmission systems and costs development. Somethings it does not have now.
Meralco might want to view that it is to its long term business interest to treat their customers with respect and to assure their loyalty through superior service and competitive rates and value.

Legal and Fair Profits

We ask that you and Metro Pacific be contented with the legal profits from the distribution franchise and from the 50% of generation services that you are allowed to contract with affiliated companies. Public interest require that Meralco submit to transparent and truly competitive bidding the power generation contracts to assure it is least cost in market terms and not as self-servingly defined by Meralco
We realize that the sellers of Meralco to your group may have convinced you that Meralco as the distribution utility has a right to negotiate power supply contracts with its affiliated companies as they had done during their time. Your own lawyers and analysts may have convinced you that the EPIRA Law of 2001 and its Implementing Rules have loopholes (Section 45(b) and Rule 11 respectively) that will enable you to also dominate power generation legally.

Issue is Public Interest and Fairness

The issue however is less of legality and more of public interest, morality, and the fairness of Meralco having the undue royal right to self-determine the projects and prices that it will pass on to the consumers, a privilege that even the government does not have in taxation which is subjected to lengthy debate by peoples representatives in Congress and the Senate, and further reviewed and signed by the President of the Philippines. The ERC reviews of the negotiated Meralco rates are not sufficient to assure the protection of the public. A Regulatory review of rates is to determine fair and reasonableness based on cost data submitted. A competitive bidding will be computed by the bidders for a competitive price.

Competition (unless it is rigged) will always beat regulation in bringing down power costs.

MSK will be working for the repeal of Rule 11 of the Epira IRR which is the one giving monopolization a semblance of legality.

Illogical Power to Price

Recently you were quoted by Ms Myrna Velasco of the Manila Bulletin, a consistently anti-CSP writer, to be saying that the “CSP is illogical because it is shifting the power to price from Meralco to the generators”. That being a pass on charge, “Meralco does not make money on it and that least cost power is a fiduciary trust….that is why market power should reside with the DU”

Meralco consumers have not had much luck relying on Meralco for least cost power. It does not buy power on arms-length basis. What has been illogical is allowing the power to price to Meralco and its sister generators who are both owned and controlled by Meralco and its parent Metro Pacific. Meralco has formed its own power generation subsidiary Meralco PowerGen. It cannot be ignored that Sweetheart deals of the past continue to overcharge consumers to the tune of P6.1 billion in 2013, P10.3 billion in 2014, and so far P5.5 billion in 2015. Our generation cannot consign our children to similar burden for the next 25 years.

Meralco consumers deserve some respect for its intelligence and should be spared from continuously hearing that “Meralco does not make money on it”. We hope we can stop kidding ourselves. So far Meralco had signed with sister company Meralco PowerGen 460mw for Mauban and 600mw for Redondo Power in Subic. Meralco wants to get it to 3,000mw which is a clear monopolization of the generation sector.

You were quoted as referring to the mess in power pricing in the November December 2013 fiasco as justification for Meralco’s right to self-negotiate power supply. Your assistants may have neglected to show you our analysis of what happened in Meralco’s contracted generators during those fateful months. This is contained in our article “Is Meralco Telling Whole Story?” published by the Daily Inquirer on May 11, 2014. It might be enlightening for it to be read by Meralco.

Violation of Fiduciary Trust

We have no doubt that you and Meralco have the force to take this CSP matter to the Supreme Court in what would be a classic Meralco and PowerGen versus Meralco consumers battle where we assume you will try to fight for your groups right to self-negotiate and monopolize power generation under the guise of “consumer welfare”. That would be reverse CSR. The resolve of the consumer volunteers nonetheless should not be underestimated.

Consumers do not begrudge your groups success and the billions you are making in the telecom sector because at least there is a semblance of competition, although we wish the government did not allow the purchase of Sun. Distribution of Electricity is a regulated monopoly. It is wrong and anti-consumer to allow that monopoly to extend to generation. Metro Pacifics choice is whether to monopolize distribution or generation, but not both. 50% of Meralco’s generation, as unfortunately allowed by the current Epira Law, is already a significant profit benefit of its control of the distribution market.