Fidel Ramos' legacy

Siya ang dahilan kung bakit ang taas ng kuryente na binabayaran natin ngayon. And the way the Arroyo admin is handling the situation will only make it worse, I believe.

From Neal Cruz:

Napocor bloated Meralco's debt
, Dec 26, 2005
Updated 00:34amam (Mla time)
Neal H. Cruz
Inquirer

THE NEW YEAR WILL BE A BAD YEAR FOR Meralco if developments in the last few days are any indication. If President Macapagal-Arroyo gives her imprimatur to a proposal by an unknown government official to take over Meralco if it does not pay an alleged P42-billion debt to the National Power Corp., then like the Napocor itself and other private companies taken over by the government through the Presidential Commission on Good Government (PCGG), this successful company will be run to bankruptcy. The losers will be not only the Lopezes and other stockholders of Meralco but also millions of people who depend on Meralco for their electricity.

How did this quarrel between the Napocor and Meralco come about? In 1994, Meralco contracted to buy electricity that the Napocor generates to distribute to its customers. During the power crisis that hit the Philippines during the Aquino and Ramos administrations, the latter encouraged Meralco and other investors to put up generation plants because Napocor was unable to supply the demand. This gave rise to the so-called IPPs, or Independent Power Producers, which now supply a big part of our electricity. Meralco put up three or four sister companies to generate power.

However, Ramos approved too many IPPs, with the result that we now have an oversupply of power. Under the contracts of the IPPs with the government, the latter has to pay the rated power-generation capacity of the plant even if the electricity is not used-in fact, even if it is not generated at all. That is the reason for the high cost of our electricity: we are paying for electricity we do not consume.

Meralco, meanwhile, has been buying its electricity from its own IPPs, so it is buying less than the contracted amount from Napocor. The Napocor is now billing Meralco for all the power it could have generated and sold to Meralco had the latter bought all the power it had contracted for. That and other charges, are what bloated Meralco's alleged debt to the Napocor.

Meralco says its obligations amount to only P15 billion.

In 2003, Meralco and Napocor signed a compromise settlement. After adjustments, Meralco's debt was brought down to P20.5 billion, payable in five to six years or until December 2006. Other differences are being threshed out by the Energy Regulatory Commission. In the meantime, the Epira law was passed mandating the privatization of the money-losing Napocor.

In the middle of all these, the confidential memorandum of the unknown official was leaked to the press. The memo still starts with P42 billion but admits that Meralco has acknowledged only a P15-billion obligation. To collect the P42 billion, the memo recommended three options:

1. Meralco will be asked to issue a promissory note or bond in favor of Napocor.

2. Napocor will convert the receivables into equity by receiving an equivalent value of Meralco shares.

3. Napocor will offer special programs and discounted rates to targeted markets.

The second is Napocor's preferred option, and the reason is obvious: Napocor will be sold or go bankrupt, whichever comes first. Either way, its highly paid officials will lose their jobs. If they control Meralco, they can transfer to it.

But three basic questions were not answered by the memo: (1) The settlement agreement is still pending before the ERC; (2) The plan and steps being taken are not in compliance with the Epira law; and (3) The memo wants to subvert the authority of the ERC.

To make heads or tails of the matter, I talked to a Meralco official over breakfast before Christmas and the poor guy was crying on his coffee. The options recommended by the memo were ridiculous, he said. He explained why one by one:

1. On the options of a promissory note or conversion of the debt to shares of stocks: There is no recognized liability on the part of Meralco as contained in the Settlement Agreement between Napocor and Meralco.

2. On the P42-billion debt: The amount is bloated. The memo said it is based on "minimum charges due for unconsumed energy levels for the period of Dec. 25, 2001 to Dec. 31, 2004." But that P42 billion includes interest rates and costs of fuel and other variable costs not actually incurred. "Minimum charges" do not include all these.

3. The memo made false claims: First, it claims that if the alleged debt is converted to equity in favor of the government, there will be no additional cost to Meralco customers. This is a lie. If indeed the P42 billion is based on "minimum charges," the amount will be passed on to customers as provided by the Settlement Agreement.

Second, it claimed that the debt-to-equity option will not inflict pain on ordinary stockholders of Meralco, nor will it change any of the stockholders' rights and benefits. Another lie. A government takeover will surely send the share price plummeting because many of the foreign stockholders, who own a substantial chunk of Meralco shares, will leave the country.

Third, the debt-to equity option will not result in a takeover. Still a lie. If there is no corporate takeover, why does the memo virtually dictate where Meralco should get its power? This violates the Epira law which mandates open access and retail competition.

Fourth, it subverts the authority of the ERC to settle the dispute. The memo turns off foreign investors because it undermines business policies and dealings. Foreign investors want stability and consistency in government policies and rules.

The Napocor is bleeding; it has a long record of mismanagement and corruption; it has the biggest debts in the country; it is beyond rehabilitation. Why entrust the handling of a successful company like Meralco to it?