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Deciding Panay Electric’s renewal: The rational approach

"Where there is a sturdy and reliable horse in the picture, there is surely no need to bring in a pony."

 

​Panay Electric Co. Inc. (PECO) is one of the grandest old ladies of Iloilo business. A 95-year-old corporate veteran, PECO is now fighting for its life. Its current franchise will expire in January 2019, and it applied in 2017 for the franchise’s renewal. However, the House of Representatives overwhelmingly voted against a renewal, citing complaints from some of PECO’s customers and some Iloilo officials.

Waiting in the wings, ready to take over from PECO, is More Minerals Corporation, a mining company owned by tycoon Enrique Razon Jr. Recently, Mr. Razon made an offer to the government for the development of the part of Iloilo City and one other Iloilo port. Seen against the offer, Mr. Razon’s interest in Iloilo City’s power generation and distribution business is easy to understand.

With More Minerals’ public relations (PR) apparatus in full cry, PECO has clearly become an underdog. It does not have a PR apparatus to promote and defend its cause, which is the renewal of a franchise to continue providing service to a population that it has served continuously, through a world war and other national vicissitudes, for almost a century.

What is the case against PECO made of? A major newspaper columnist wrote recently about “complaints from Iloilo City households over monthly bills that rose by 1,000 percent” and about “mounting consumer complaints against the firm’s service record.” That is the sum total of the case: alleged over-billing and alleged bad service record.

In this regard it is pertinent, nay necessary, to point out that utilities like power companies are vulnerable to complaints relating to billing and service record. Manila Electric Co. (Meralco) is forever at the receiving end of complaints of that nature. But do they necessarily lead to the non-renewal of an expiring franchise and the grant of a franchise—in overwhelming fashion—to another company? If that were the case, Meralco’s franchise would have been non-renewed long ago. Or are power companies like Meralco and the Visayan Electric Co. (VECO) of the politically powerful Aboitiz family too big for the Representatives to take on? The newspaper columnist I cited above ended his piece with this statement: “The (family that owns PECO) thinks (the coming elections are a factor), noting that they were not big donors to politicians, unlike their rival.”

And what is the case in favor of PECO’s application for a renewal of its franchise?

First, the issue of alleged overbilling, which appears to be the most contentious.

The record—including its testimony at the Senate hearings—shows that PECO has attributed the alleged overbilling to its new metering system, which, it explained, has computed its customers’ bills so as to reflect uncollected and unbilled consumption. Haven’t Meralco’s customers received similar explanations from this country’s largest power distribution company? Yet, Meralco’s franchise has never been in real danger of non-renewal.

To refute the charge of bad service, PECO cited before the two chambers of Congress the commendations it has repeatedly received from the Department of Energy (DOE) for its exemplary management. The latest was for 2015; that’s only three years ago. I am not aware that DOE goes around commending companies without sufficient basis. PECO’s oppositors have adverted to the 2014 Energy Regulatory Commission (ERC) order directing PECO to refund P631 million worth of overbillings to its customers. But alleged overbillings are a matter, at worst, of computation; they do not amount to totally bad corporate performance.

Last but not least, PECO has stressed that managing a power distribution company requires not only know-how but also, perhaps more important, experience. The choice facing Iloilo City residents is one between a DOE-commended company with 95 years of experience and a company with absolutely no power-industry experience. Where there is a sturdy and reliable horse in the picture, there is surely no need to bring in a pony.

The negative arguments that have been attributed to PECO are all remediable; they can, and should, be addressed. But lack of experience is not remediable. A company either has operational experience or it doesn’t. More Minerals Corporation clearly doesn’t.

The matter of PECO’s franchise renewal must not be settled on the basis of discontent on the part of a minority of that company’s customers. Nor should it be settled on the basis of political factors. It needs to be settled on the only basis that will truly serve the interest of Iloilo City power consumers —economic rationality.

Topics: ​Panay Electric Co , Iloilo City , More Minerals Corporation , Enrique Razon Jr , Congress

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