Fireworks seen over franchise bid

It would not be a cakewalk for dominant distributor Manila Electric Co. (Meralco) as it seeks an early renewal of its franchise that will lapse in 2028.

Supporters in the House of Representatives of the bid to extend Meralco’s franchise wanted to prevent complications that may arise in waiting until the actual end of the 25-year term before filing the renewal bill such as the fate that befell broadcast giant ABS-CBN.

The House of Representatives denied ABS-CBN a new franchise after it expired on 4 May 2020 when the country was dealing with the effects of the pandemic and the enhanced community quarantine in Luzon.

In the course of seeking a new franchise, the House found the broadcast firm underserving of a grant for a new application of ABS-CBN.

Its franchise is set to expire in 2028. As the largest electricity distributor in the country, Meralco services 7.8 million customers in Metro Manila, Bulacan, Cavite, Rizal, and select areas in Pampanga, Laguna, Batangas and Quezon.

Cagayan de Oro 2nd District Representative Rufus Rodriguez called for the grant of a fresh legislative franchise to Meralco, saying that doing so sends a strong signal of economic stability to potential investors — whether local or foreign.

Rodriguez, a member of the House Committees on Energy and Economic Affairs, recently filed House Bill 9813 for the grant of a 25-year legislative franchise to Meralco — a measure that the lawmaker emphasized is necessary to build investor confidence in the country.

Rodriguez said granting a legislative franchise years ahead of the end of the current term would show the government’s commitment to achieving energy security.

“Renewing the franchise of Meralco will show potential investors that capital-heavy investments can benefit from long-term stability here in the Philippines as it is safeguarded by the government. This in turn will result in improved service and economic conditions for Filipinos in the long run,” Rodriguez, who also sits as vice chairperson of the House Committee on Trade and Industry, said.

Compared to areas serviced by electric cooperatives, Rodriguez said faster development can be observed in areas serviced by Meralco.

“Meralco-powered areas have demonstrated rapid economic growth in the past decades compared to those serviced by electric cooperatives. On this basis alone, the government must sustain this development in support of our economic trajectory,” the lawmaker added.

The lawmaker reiterated that Meralco has such a huge responsibility that it would be a disservice to compromise the welfare of consumers because of unfounded issues and allegations.

No rush needed

A consumer advocacy group, however, asked lawmakers and regulators to ensure that the franchise renewal should be carefully deliberated and not rushed.

In a statement over the weekend, Power for People Coalition (P4P) said Meralco should focus on addressing industry issues first before renewing its franchise to better uphold the interest of the public.

However, Meralco argued that immediately securing a franchise renewal will help the power distributor deliver “stable and reliable electricity services” to its growing customers.

“If we give Meralco an early franchise renewal, we are giving them a free pass on all the allegations against them. Giving them a decades-long franchise now will remove the ability of the government to hold them to account and protect consumers,” P4P convenor Gerry Arances said over the weekend.

According to P4P, Meralco needs to clear out its use of allegedly higher weighted average cost of capital (WACC) as the ceiling for its profit margin since 2011.

Additionally, it should resolve the inclusion of non-power distribution facilities, such as a theater, museum, and wellness center, in its asset base, which is used to compute its WACC.

To avoid conflicts of interest, Meralco should likewise stop granting power supply contracts to associate firms or companies owned by its mother company, Metro Pacific Investments Corp.

In a separate statement, Joe Zaldarriaga, Meralco vice president and head of corporate communications, said that calls to renew the legislative franchise of the company is a “firm validation” for the company’s effectiveness as a distribution utility.

“Granting the franchise renewal would allow Meralco’s growing number of customers to continue enjoying stable and reliable electricity service, which is vital in powering not just households but also industrial and commercial customers that drive the country’s economic progress,” Zaldarriaga said.

Meralco added that as a “highly-regulated entity,” it has always been strictly compliant with laws and regulations governing its franchise.

Albay representative Joey Salceda filed a bill aiming to extend the Meralco franchise for another 25 years.

Another bill filed by House Committee on Energy chairman Lord Allan Velasco also aims to grant a 25-year extension to Meralco’s franchise.

Salceda maintained renewing Meralco’s franchise is only expected as it has complied with the conditions of the franchise law and it is good for the economy and the consumer.