Powerless

This is how things stand regarding the iffy power situation in Iloilo City and its environs.

Last Feb. 14, President Duterte signed into law Republic Act No. 11212 granting MORE Electric Power Corp. a 25-year franchise to operate and maintain an electricity distribution facility for consumers in Iloilo City. This implies that the 97-year distribution franchise of Panay Electric Power Corp. (PECO) is not being renewed.  The old franchise expired last month.

There were many reasons why Congress decided not to renew PECO’s franchise and allow the entry of a new distribution utility. In a nutshell, the old distributor did not reinvest its earnings in improving service. Consumers complained about the degraded service and the local city council deemed it would be better for the city’s economic future that a new player enters the picture.

That new player, MORE Corp., drew up a modernization plan. It is a plan backed up with over P2 billion in investments. It began work installing new power lines and bringing in more modern equipment.

MORE looked forward to a collaborative exercise with outgoing distributor PECO, offering a generous amount to purchase the latter’s usable assets. PECO, unfortunately, chose to defy the reality its franchise has expired and would not be renewed. Even Senate Minority Leader Franklin Drilon, a good friend of the owners of PECO, expressed disappointment at the attitude the former distributor has taken.

According to one source, PECO refuses to sell its usable assets unless the new distributor agrees to underwrite its “prospective loss of income.” In a word, the old distributor wants to realize an income even if it is no longer in the business of distributing electricity to the Iloilo concession area.

This is obviously an unreasonable demand. If the new player agrees to it, the consumers will be paying for services not rendered.

To be sure, the old distributor wants to get the most from its decrepit assets, having lost the franchise to continue operating. The law covering the transfer of franchise holder is quite explicit, however, on how the assets will be valued. The valuation will be based on the “tax declarations, current audited financial statements and rate-setting applications of the owners” in the event of expropriation. It should be PECO’s fault if it had been undervaluing its assets.

PECO’s intransigence has created some anxiety among consumers in the franchise area. They fear the power situation will be spotty at best, chaotic at worse, during the period of transition where PECO holds on to its assets and MORE builds its own power distribution network.

Fortunately, RA 11212 takes all transition scenarios into account and allows enough leeway for the orderly transfer of operations. The convenience of consumers and the stability of the local economy are given utmost consideration.

The law allows PECO to continue distributing power for two more years to ensure no disruption occurs. The extension of operation, the law underscores, is not to be construed as an extension of the expired franchise.

The law orders all government agencies to speed up the permitting process to enable the new franchise holder to build in its systems within the two-year period.

Should the old franchise holder remain uncooperative, Section 10 of RA 11212 gives the new franchise holder the right of eminent domain. When invoked, it enables MORE to undertake expropriation of the assets needed to distribute power in the locality.

MORE, however, expressed its intention to avoid expropriation as much as possible. Notwithstanding, PECO, in a rather hostile statement, declared it was ready to fight expropriation in court.

It will be to the best interest of the consumers of Iloilo that the situation does not deteriorate to the point where electricity supply will be the dependent on legal maneuvering. As a major growth node for the country, Iloilo needs predictability and certainty to draw in more investments to power its impressive economic expansion.

 Should MORE move quickly enough and build a modern electricity distribution network within two years, then that would render academic PECO’s intransigence and refusal to cooperate.

Industry experts are mystified by PECO’s adamant attitude toward the transition process. The only explanation they could come up with is that the family that owns PECO has somehow become captivated with the idea that the incoming Congress could still change the situation. A new law could supersede RA 11212 or legislators may allow two franchises to exist side-by-side for the same area.

That is an unreasonable expectation on too many counts.

First, it is unlikely Congress will reverse itself. The city government had clamored to replace PECO because of its bad service. No legislator would want to run against the tide of negative opinion about the old distribution monopoly.

Second, local electricity distribution is a natural monopoly. When two companies, using two different distribution systems, attempt to operate side-by-side, both will likely lose money.

Third, PECO’s equipment is archaic. This has been the cause of its spotty service. It cannot possibly compete against a modernizing MORE, which is backed by the Razon conglomerate.

But the Cacho family, owners of PECO, seem to be afflicted with an incurably aristocratic attitude that sees the franchise as some sort of birthright they are entitled to. They seem to think the world owes them that franchise which has been awarded to someone else.

The underlying fact is that they delivered bad service, chose to pay out dividends to the owners rather than invest in upgrading the distribution system. They cannot easily live that failure down.