Burning poles, burning bridges

“Assuming that losing its distribution assets would not compel the ERC to revoke PECO’s provision, what would PECO use to distribute electricity to customers?

A sane marketing and public relations person would want to make friends with his target audience to ensure he gets the desired response for a product or service.

But apparently, this was lost in the case of franchise-less Panay Electric Co. (PECO), the 95-year-old utility that has monopolized the distribution of electricity in Iloilo City since the Spaniards left the Philippines and the Americans took over.

In the past decade, PECO has alienated many of its 65,000-odd customers and got the city’s legislative council so riled up with its obstinate refusal to act on the concerns of constituents the council endorsed a resolution for Congress to deny the utility the renewal of its franchise. More recently, PECO was in the crosshairs of the Iloilo City mayor out to prove he is no lackey to the landed Cacho family that owns the company.

Iloilo City Mayor Geronimo Trenas, a veteran of Iloilo politics, is no stranger to PECO. In 2006, he approved the recommendation of the City Treasurer’s Office (CTO) implementing a court ruling that allowed the imposition of a real estate tax on privately-owned utilities like PECO. In the Iloilo City company’s case, this meant a tax on the land where the distribution utility’s electricity poles stand on the city’s streets.

Ten years on when he again returned to City Hall after a nine-year stint as the city’s lone representative in Congress, Mayor Trenas discovered that PECO has contested his directive and City Hall has not collected a single centavo because the utility placed the money in escrow. Now, the court has ruled in the city’s favor, but PECO still refuses to pay the obligation and asked the Local Assessments Board to recompute the company’s realty tax arrears.

In the meantime, PECO’s realty tax arrears, as far as the city government is concerned, has amounted to P90 million without penalties as of March this year. The City Treasurer ordered the City Business Permit and Licenses Office to deny the company’s business permit this year on the basis of the Local Revenue Code prohibiting local businesses from obtaining any city license or permit till they settle their tax obligations.

Mayor Trenas naturally sought a quick resolution of the issue because PECO’s loss of franchise would force it to cease operations after its provisional Certificate of Public Convenience and Necessity (CPCN) granted by the Energy Regulatory Authority (ERC) expires 18 months from now when the new franchise-owner, More Power and Electric Corp., completes its takeover of the city’s distribution system.

PECO apparently offered to settle the P90 million tax arrears and the P7 million penalty in several tranches over a couple of years, but this was rejected by the City Treasurer.

Already riled by PECO’s bullheaded refusal to settle the tax issue, Mayor Trenas was further enraged by the young Marcelo Cacho’s public statement dismissing the mayor’s concern over the rising incidence of electricity pole fires in the city based on the official report of the Bureau of Fire Protection.

The former legislator is a veteran politician who grew up in the wings of his late father, also the former mayor of Iloilo City. Mayor Trenas holds two important and politically-sensitive issues against PECO on the matter involving tax arrears and the public complaints about falling burnt PECO electricity poles dismissed so nonchalantly by the Cacho scion. This did not sit well with City Hall.

But one fights with City Hall really at his own peril as this time the auction of PECO’s distribution assets would take away its lifeline. Assuming that losing its distribution assets would not compel the ERC to revoke PECO’s provision, what would PECO use to distribute electricity to customers?

Perhaps arrogance so arrant for which some families are known and which has apparently permeated PECO as it deals with local government officials and even its own customers marks the beginning of the end for the distribution utility.

If it loses ownership and control of the distribution assets at the 12 December auction, including the 30,000 electricity poles that dot the city’s streets, what would be PECO’s reason for continuing to operate unless it is able to redeem the assets within the one-year period allowed by law?

Unless stopped by a court or a settlement is reached between the city government and PECO, or it redeems its distribution assets by paying its tax arrears, PECO could be seeing the final nail in its coffin hammered when its distribution assets are sold to the highest bidder at the public auction.