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Power distribution firms must serve the public good

"They must be accountable not only to their biggest stockholders but also to consumers."

How do the mighty fall?

In the case of Panay Electric Co. (PECO) in Iloilo, with a loud thud, it seems, after it lost its congressional franchise in January 2019.

The downfall of the once-mighty company that monopolized the distribution of electricity service to residential, commercial and industrial consumers in Iloilo City since the American colonial period was not unexpected. It came on the heels of complaints by thousands of consumers which forced the city’s legislative body to formally request Congress to reject the renewal of its franchise.

The two chambers of Congress, the Senate and the House of Representatives, granted the franchise to another company, More Electric and Power Corp. (MORE Power), after finding merit in the consumers’ complaint endorsed by their own representatives in the City Council.

A year after losing its franchise, PECO, owned by a landed clan, is now on the defensive as consumers, including civic groups, have uncovered glaring evidence that the company’s finances had been spent allegedly for the personal benefit of its owners and managers.

The consumers had also belatedly realized that they had been paying one of the highest electricity rates in the entire country for two decades.

Moreover, transport groups, the Western Visayas Transport Cooperative (WVTC) and the Iloilo City Loop Alliance of Jeepney Operators and Drivers Association (ICLAJODA) also discovered after conducting a discreet investigation of vehicle registration records at the local Land Transportation Office (LTO) that the utility firm used funds allotted for service vehicles that were supposed to be used for maintenance trips of its technical employees to check or repair faulty electricity distribution wires or equipment to purchase a luxury car for the company’s chief executive officer.

"If true, it is a clear case of a deceitful transaction which involves the money of the electric consumers,” said officials of the two Iloilo transport groups in a recent media report.

The company CEO had earlier been linked by public interest lawyer Zafiro Lauro to the registration in the year 2000 of three offshore companies in the Bahamas that shared the same address as the offshore companies of the world’s filthy rich.

PECO insists there is nothing wrong with their CEO acquiring ownership of a luxury vehicle bought from funds that the Energy Regulatory Commission (ERC) had authorized to be spent for service vehicles. However, all expenditures of utility companies like PECO need approval by regulatory authorities because consumers pay for them through their monthly bills.

“Buying a BMW midsize sedan for personal use by its president cannot be considered economically efficient, but rather an abusive use of customers’ money who will eventually pay for it through the distribution rates of PECO,” leaders of the two Iloilo transport groups asserted.

PECO is also under scrutiny after the new utility, MORE Power, started massive preventive maintenance work on the city’s five electricity substations serving each of the city’s districts to prevent massive damage to the city’s electricity distribution network that could result in a total shutdown of electricity service for the city’s almost 100,000 residential homes and businesses.

MORE Power claims that it inherited a “rotting, decrepit” distribution system from PECO and thus was forced to cut electricity service to the city by 13 hours at the most to repair or upgrade equipment such as transformers and high-voltage wires in the substations.

PECO claims the power outages were the result of mistakes made by MORE Power in the operation of the distribution system, and this is the reason why it should not be allowed to run the distribution business in Iloilo City again.

The ERC will eventually decide if PECO, indeed, is telling the truth in the way it managed the Iloilo City electricity distribution system for almost 100 years.

If proven true, the allegations against PECO underscore the need for utilities like PECO to be always transparent and accountable in all their dealings.

The Philippine Competition Act, or Republic Act 10667, defines, prohibits and penalizes three types of anti-competitive conduct: anti-competitive agreements, abuse of dominant position, and anti-competitive mergers and acquisitions. It also created the Philippine Competition Commission which has the authority to conduct inquiries or investigations and to hear and decide cases involving violations of the law.

This law seeks to enhance economic efficiency and promote free and fair competition in trade, industry and all commercial activities; prevent economic concentration that will control production, distribution or trade, which will unduly stifle competition or lessen, manipulate or construct the discipline of free markets; and penalize all forms of anti-competitive conduct with the object of protecting consumer welfare.

Companies that are publicly-listed, and therefore owned by small stockholders, and whose income is derived from consumers who purchase their services or products, must be able to explain how they spend their money.

Since power distribution firms are imbued with public interest, they must be accountable not only to their biggest stockholders but also to consumers who are, after all, the source of their profits.

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Topics: Ernesto Hilario , Power distribution firms , Panay Electric Co. , PECO , Iloilo City , More Electric and Power Corp. , MORE Power
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