Sen. Miriam Defensor Santiago, chairwoman of the JCPC, directed her order to ERC Commissioner Alejandro Barin who during the hearing admitted that a petition of the Meralco and Napocor is pending before the commission.

"There’s a pending case at the ERC regarding the petition of Meralco supported by the NPC to approve their agreement to pass on the unpaid debts of Meralco to NPC to its customers," Santiago said at the hearing at the Senate.

"Aba nakakagulat ito. Nag- aaway ang Meralco at Napocor, pero ngayon magkasama sila. Ang mga utang nila sa isa’t isa na pinag-aawayan nila ay ipapaubaya sa mga customers? (This is surprising. Meralco and Napocor are fighting but now they are together. They will pass on to consumers the debts that they owe each other?)," Santiago said.

Santiago said this is one of the main reasons the cost of electricity in the Philippines is very high.

"Dahil, nag- utangan sila sa negosyo nila… ang taumbayan, wala tayong papel doon. Hindi naman tayo kinonsulta sa pagkakaroon ng mga utang na iyon. Kaya kelangan sundin ang prinsipyo na kung hindi nakisali ang consumer sa desisyon ng management, hindi sila dapat sisingilin. (Because they incurred debts with each other, people have nothing to do with them. We were not consulted about their debts. That is why the principle that if consumers are not aware of the decision of management, they should not be made to pay for it)," Santiago said.

The ERC is given 15 days to comply with the JCPC’s order, Santiago said.

At the same time, Santiago backed a proposal made by Government Services Insurance Systems (GSIS) President Winston Garcia to break up Meralco into two to three franchises.

"Well, there’s no problem with that. We already have a model, what used to be the MWSS (Manila Waterworks and Sewerage System) or the Nawasa (National Waterworks and Sewerage Administration), which was divided into two and it did not result in higher water rates," Santiago said.

"In fact it made a lot of money for one franchise holder but the other franchise holder apparently did not make money. So, we in the Commission have no objection if that is the intention," Santiago said.

However, Santiago said she does not think that removing Value-Added Tax (VAT) in electricity would be feasible to bring down the cost of electricity.

During the hearing, Garcia said he has no intention of taking over the Lopez-owned Manila Electric Co. (Meralco) whose management he accused of causing the high power rates.

Responding to a question poised by a senator during the JCPC hearing, Garcia denied he is interested in taking over the electric utility company from the Lopez family. He said he merely wants it to be run by a more "competent and efficient" management team.

"What I want is we hire a more competent, more professional management team in Meralco. We have no intention of taking over Meralco. It is my economic philosophy, I don’t believe government should run a business concern because the structure of government itself makes it inefficient. In the case of Meralco I’ve observed it and found it is more inefficient ... more supervisors than rank and file. We are not interested in (a) takeover," Garcia said.

Garcia called Meralco’s high distribution charges that it imposes on residential consumers "anomalous." "It is the highest in the country. It is an anomaly because Meralco distributes more than 70 percent of the power generated. (Supposedly) the more customers you have the more, the more volume distributed, then the cost of distribution should be a lot, lot lower. At least 50 to 70 percent lower than the public distribution company," he said.

He said that instead of P2.44 per kilowatt hour, Meralco should only be charging its consumers R1 or less per kilowatt hour.

"Having 20 times more customers in the country, Meralco, should at least charge P1 less if management is efficient," Garcia said.

Santiago said high power rates are caused by the apparent management abuse not only in the Meralco, but also in the Napocor, and by the apparent laxity in the Energy Regulatory Commission (ERC).

Santiago listed the apparent management abuses by the three agencies as follows:

-- Meralco is reportedly buying electricity from NPC and the Wholesale Electricity Spot Market during peak periods, when prices are high, resulting in high pass-through generation charges to its consumers.

-- Meralco and NPC entered into an agreement to ask ERC to allow Meralco to pass o to its consumers it unpaid debts to NPC,

-- Power rates are higher in Luzon than in Visayas and Mindanao,

-- Napocor apparently manipulates its rates based on Time-of-Use (TOU) which are very high and which are passed on to consumers,

-- Napocor apparently gives preferential rates to economic zone consumers, but passes on the cost of the discounts to its other consumers,

-- Napocor charges it consumers for its revenue requirements, which seem to include its R7-billion bad debts.

-- Napocor buys its power from Independent Power Producers but at higher rates than the avoided cost, or the marginal cost, and then passes on the higher rates to the consumers,

-- ERC has neglected its duty to set the new caps on recoverable systems loss, and it uses questionable "performance-based regulation" valuation of assets and benchmarking methodology.

Meralco President Jesus Francisco denied that the company is experiencing mismanagement and refuted Garcia’s other allegations as well, such as Meralco’s alleged lack of transparency in revealing pertinent documents and records.

"We have delivered to him documents not records. In all instances, that was as fast and as reasonable to me. We had only hoped that he would have made the request during office hours," Francisco said.

The Meralco executive also denied that it is buying electricity from WESM during peak period to manipulate the price of electricity.

Meralco’s IPPs, San Lorenzo, Sta. Rita, and the Quezon power plant, are selling their electricity in the WESM. Francisco said they bought from their own IPPs because they are sold lower than the Napocor even during peak periods.

"We are not favoring our IPPs. If we favor them, it’s because it’s the least costly for our consumers," he said.

Meralco claims cheapest supply in statement

Meralco sources are the cheapest supply and its distribution charges are not highest in the country, Meralco said yesterday at the hearing of the Joint Congressional Power Commission in the Senate

"As will be borne out by the records and as can be seen from our website, we have sought to optimize the overall cost of generation and transmission for our consumers. This has resulted in the least cost for our consumers," Meralco President Jesus Francisco said.

He explained that Meralco maximizes its purchases from Napocor’s special low-cost programs, such as the Economic Zone rate, before it even utilizes its IPPs, such as Quezon Power and First Gas.

According to Meralco’s website, in the month of March, 2008, the overall cost of generation and transmission from the company’s IPPs, which supply about half of its power needs, was P5.25 per kilowatt-hour. In comparison, the combined generation and transmission cost of its other suppliers was P6.37.

Meralco also refuted claims that it charges the highest residential distribution rates in the country. Meralco Vice President Ivanna dela Pea said the company’s socialized prices are skewed towards favoring small power consumers.

The company’s combined distribution, supply, and metering charges to a household using 200 kwh or less is only P1.34 per kwh. These households number more than three million and accounted for three-fourths of all its residential customers.

Francisco reiterated that Meralco has always been transparent in all its dealings. "All the information on Meralco’s rates, finances, and services are freely available on its website, or even at the Energy Regulatory Commission," he said.

He said that Meralco is closely supervised by the government through the Energy Regulatory Commission, which has the power to require the submission of documents from Meralco and to open and examine the company’s books and operations.

Ermita hopes probe will result in lower rates

Malacanang yesterday expressed support for the Senate hearings on the operations of the Manila Electric Co. (Meralco) and gave clearance to officials to attend the hearings.

Executive Secretary Eduardo Ermita said efforts to look into Meralco’s operations should result in lower electricity rates.

"What’s important is that in the end, they would be able to come with a decision so that the agencies involved will consider bringing down the rate of electricity," Ermita said.

Ermita said officials of the National Power Corporation (Napocor), the Department of Trade and Industry (DTI), and the Department of Energy (DoE) will attend the hearings to give details of the government’s petitions before the Energy Regulatory Commission (ERC) to bring down Meralco’s rates.

Malacanang is also pushing to open Meralco’s books to know the costs of its operations.

The Government Service Insurance System (GSIS), which has a 23 percent stake in Meralco, said it had requested Meralco for copies of its books but the requests were allegedly denied.

On the other hand, Meralco said GSIS President Winston Garcia had been invited repeatedly to inspect the books but the invitations were ignored.

The Joint Congressional Power Commission (Powercom) is conducting hearings on Meralco to look into its operations and determine whether its rates are justified. (David Cagahastian)

Napocor denies allegations in 3 print advertisements

The National Power Corp. denied all allegations contained in three print advertisements that "seemed to be favoring the Lopez-owned Manila Electric Company (Meralco), in attempts to explain why electricity rates have gone up in the past three months."

Napocor said the advertisements contained several flaws and misleading information and the figures cited all but place the blame on the National Power Corporation for the increased power rates being charged by the distribution firm.

"The rates that National Power charges its customers like Meralco in the Luzon, Visayas, and Mindanao grids are uniform and the same, under the company’s "one grid, one rate" policy," Napocor said.

It added that National Power’s rates are approved by the Energy Regulatory Commission (ERC) and have undergone the process of application and public hearings before they were approved.

The present approved rate structure of National Power is the Time-of-Use (TOU), which prices electricity based on the time of day it is used or required.

Napocor said Meralco buys electricity from three sources: from National Power, its own independent power producers (IPPs), and the Wholesale Electricity Spot Market (WESM), adding that Meralco sources about 40 percent of its electricity from National Power, and 80 percent of these are bought during peak hours, when electricity rates are naturally high.

"We still provide the cheapest electricity especially during off-peak hours, at P1.84/kwh. The most expensive electricity that National Power provides is during peak hours, at P6.06/kwh," Napocor said.

It said Meralco’s other sources provide varying rates. From its IPPs, the prices are the same, regardless if the electricity is bought during peak or off peak, at about P4.24/kwh. From the WESM, prices will vary because of the market’s volatility. During off-peak, prices in the WESM are cheaper, ranging from a negative amount to zero. It spikes up during peak hours, reaching sometimes P10/kwh.

NPC said Meralco’s purchasing behavior or load pattern from all these sources depends entirely on the utility and it is purely a business decision from Meralco when to buy electricity, at what time and at what price.

"If Meralco is really serious in performing its mandate, as contained in the Electric Power Industry Reform Act (EPIRA), to provide electricity from the cheapest possible source, then all the utility has to do is manage its purchasing mix from all the three sources," said the NPC.

It said "what Meralco should probably do is to decrease the utilization of its IPPs during off-peak, and buy more from National Power at P1.80/kWH, or from the WESM when power is sometimes free at P0.00/kwh. Meralco’s IPPs have a flat rate P4.24/kWh regardless of time of day. The difference in price between Meralco’s IPP rate of P4.24/kWh and National Power’s off-peak rate of P1.80/kWh is P2.44/kWh."