After losing the battle to get a franchise for ABS-CBN, it appears the Lopezes are in for another major battle, this time, in the energy sector if retired Philippine Air Force Maj. Gen. Romeo V. Poquiz is to be believed.
In a Facebook post, Maj. General Poquiz opened with a foreboding line, ‘Broadcasting, Done. Electricity, Next.’
Maj. General Poquiz made the dire prediction after Congressman Mike Defensor mentioned another Lopez sin – that on electricity. Unfortunately, Defensor was not allowed to talk further for obvious reason – the hearing was about ABS-CBN franchise not about electricity.
Fast forward, Congress has already started a probe on Meralco this week and as far as the news is concerned, the Lopezes’ sweetheart deals that the retired General talked about has not yet been discussed.
‘During the last day of the ABS-CBN Franchise hearing, Congressman Defensor mentioned another sin of the Lopez oligarchy – that on electricity. He was cut short by the Chairman of the Committee, however, because electricity is not related to the franchise. They agreed to tackle said issue in a separate hearing by the Good Government and Public Accountability Committee.’
Maj. General Poquiz called this another explosive issue because of various reasons.
‘Anyway, this is another explosive issue, not only because of the 25 years locked-in price as mentioned by Congressman Defensor, but also on some other issues.’
Maj. General Poquiz cited an important development in Meralco’s history before the Lopezes sold the company to a new owner that should explain to consumers why our electricity bills increased during ECQ when market forces say otherwise.
‘Before Meralco, an electricity distribution company, was sold by the Lopez family sometime in 2010, it entered into Power Supply Agreements (PSA) with First Gen Corporation, thru its 2 subsidiaries FGPC & FNPC – power generation companies also owned by the Lopezes.’
Maj. Gen. Poquiz enumerated 3 reasons why the contract entered by Meralco then was deleterious to electricity consumers.
Said PSAs were onerous to us electricity consumers due to the following:
1. They have provisions where the generation costs of electricity is locked and guaranteed for 25 years. This is detrimental to us consumers because even if the current owners of Meralco would like to reduce the current cost of electricity, they cannot do so due to the lock-in price. If there was no lock-in, costs of electricity these days should be much lower because of the huge drop of fuel prices in the world market.
2. The PSAs have “Pass Through” provisions where the costs of generating the electricity is passed on to the customers at the locked-in price.
3. The PSAs have Take or Pay (ToP) provisions whereby whether all the generated electricity is utilized or not, the customers still have to pay the entire amount of electricity generated.
Maj. Gen. Poquiz described the PSA’s as ‘sweetheart deals’ and already concluded there was a conflict of interest. He said the Congressional probe on this make it worth watching.
‘The PSAs were clearly sweetheart deals. There was conflict of interest by the owners – both the seller and buyer of electricity. This is a related party transaction that should be seriously looked into by government regulators. The Congressional investigation on this is therefore once again exciting to watch.’
Of course, Maj. Gen. Poquiz preempted the Lopezes, saying they will defend PSA’s calls it legal because the electricity rates had the blessings of the ERC. But, the retired General prepared a quick answer that should make the Lopezes worry – the thing called Regulatory Capture.
‘As with the ABS-CBN compromise with BIR where ABS-CBN only paid 3.8%, out of 100% of its tax dues, the Lopez family will argue that the PSAs, including all its onerous provisions, are legal, because the electricity rates were approved by the Energy Regulatory Commission. That may be the case. However, there is such a term as Regulatory Capture – the corruption of the regulated co-opting the regulator.’
Source: Romeo V Poquiz