Meralco and the Lopez family

This issue has a personal resonance for me because both my husband and I worked for the Lopezes in our younger days. Bert was vice president and general manager of Meralco Securities, the forerunner of First Philippine Holdings and I was a reporter for the Manila Chronicle. As it were, we had a ringside view to watch the drama of a family, though not the richest, best typifies the Philippine oligarchy that has been the bane to modernize the country. But it will take a long time and a book to write on those memories.

The need for lower electricity is the most obvious and practical aspect of the dispute between the Lopezes and the government. But there is a greater reason whether ostensibly or not that President GMA will settle as she drives home her government’s point.

It was summarized by her father, the late President Diosdado Macapagal when his reforming government chastised the Lopezes. He said the Lopezes were “using political power and influence to promote the interests of its business empire.” That still goes on and the chosen vehicle in our time is near monopoly of media. It is also well-known among those who have come close enough to the Lopez organization that any government official, elected or not, senators, congressmen and some justices included are fair game for bribery yet tracks are well covered.

It is not certain where the dispute will lead us. After all, other presidents have tried to break the monopoly but in the end were too scared to follow through. Today there are at least three potential presidential candidates for 2010 that can be said to be under the Lopez belt. Let us make it simple and go for the jugular. Can the country afford the cost of electricity that Meralco charges? It seems not. The message of what is involved must go down to the masses.

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Still it would be instructive to revisit how the Lopezes came to such power as to own such a sensitive public utility like Meralco. The Lopez brothers Eugenio and Fernando were shrewd players of how to parlay political power for economic power. As a young reporter I had heard it said that presidential elections in the Philippines were decided on where the sugar bloc puts down its wager. Where the Lopez money goes, there also go the winners.

Back in 1947, Eugenio bought Manila’s morning Chronicle (circ. 44,750), and by adding to it a string of 25 TV and radio stations, he soon became the kingmaker using his newly acquired media.

In his book Anarchy of Families Alfred McCoy wrote on the open secret on how rent-seeking families like the Lopezes build their empires. “With these newspapers, and later a Hiligaynon edition, Ang Panahon, Eugenio Lopez maneuvered to establish himself as the city’s most powerful and professional media voice,” wrote McCoy.

But they got their biggest coup, their crown jewels when hard hitting writers in Chronicle riled against foreign ownership of public utilities. The foreign owners of Meralco then, the General Public Utilities Corp got the hint.  Worried by the campaign of the Lopez-owned Chronicle, the US-owned company sold off the Manila Electric. Predicatably it was bought by  a government-underwritten Philippine syndicate put together by the Lopezes.

But Macapagal was not only after the Lopezes, he also went after other entrenched businessmen. If it seemed the Lopezes were singled out it was only because they were most vulnerable for personal income tax evasion and illegal interests in government contracts.

The earlier Macapagal campaign was about rent-seeking which in political terms means the “political manipulation of the regulatory powers of the state over businesses to favor a few, paving the way for installation of business empires: “By skewing investments and regulations to favor its allies, the Philippine executive has, as an institution, compromised the integrity of the bureaucracy and allowed the privatization of public resources. Over the long term, then, we can conclude that such policies weaken the state and empower elite families, ultimately limiting the capacity of the bureaucracy to direct entrepreneurs and lead the country’s development,” McCoy adds.

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The Macapagal at the helm of the Philippine government today continues with her father’s crusade as her legacy. We should support her. It will mean not only lower electricity bills but a beginning of the end of rent-seeking oligarchs. She is taking on the Lopezes for the high cost of electricity with whatever risks it involves because of powerful media and politicians in their pocket.

She wants to look into what justifies these increases that make electricity in the Philippines the highest in Asia. One reason put forward by those who know the market have accused Meralco of buying from Wholesale Electricity Spot Market (WESM) during peak hours when rates are higher. “This was one of the main reasons given by members of the power industry for the high rates charged by Meralco. We know there is room for improvement in the rates,” the President said. This time there will be no excuses, President GMA ordered Napocor to sell their power to Meralco at lower rates, This is often cited by Meralco to justify their costs. Instead of using the P4.11/kWh rate Napocor would now charge Meralco the same preferential rate of P3.52/kWh it charges the high-load factor industrial customers accredited by the Philippine Economic Zone Authority. That she means business is clear and wants the Meralco problem of exorbitant electricity dealt with immediately.

In her characteristic hardworking style working till dawn with her officials the government will present four petitions in an ERB hearing on May 6. She has invited business people affected by these exorbitant rates but I think this is as much an issue for you and me. The four petitions to be heard by the Energy Regulatory Board enjoin Meralco from buying electricity from the WESM during peak hours; to ensure preferential treatment for households and power-intensive industries in the distribution of TransCo (National Transmission Corp.) charges; to prohibit Meralco from charging its system loss as a separate item; and to require Meralco to charge the same rates as the Visayan Electric Co. (VECO), Cebu Electric Co. (CEBECO) or Davao Light.

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That is the main issue and we should not be distracted even if the owners of Meralco also own our television sources of news. I find it incomprehensible that a director who has an equal stake in the company like the GSIS is unable to get information it needs to responsibly discharge his duties to his own shareholders. “It is not about ownership, says GSIS chief Winston Garcia. It is about transparency and proper governance of Meralco.” I agree with him and so should millions of other users of electricity. They have a right to know how Meralco arrives at the costs it charges to consumers. After all, electricity is probably one of the largest expenditures in a family’s monthly budget.