Friday, June 06, 2008 Gov't campaign to take over Meralco hit
THE influential Makati Business Club (MBC) on Thursday criticized the Arroyo administration for its campaign to replace the current management of the Manila Electric Company (Meralco), saying it has "damaged several public institutions and sent wrong governance signals to the private sector."
In a statement, the MBC said the administration, represented by Government Service Insurance System (GSIS) general manager Winston Garcia, has used the issue of lowering the price of electricity as the rationale for revamping Meralco's management.
"Damaging public institutions in this way is plainly bad governance. It sends the signal to the private sector that this administration is prepared to sacrifice public institutions and its own reform program for political objectives," the group said.
"Reverse-privatization is the worst way to bring down the cost of electricity, as state-owned enterprises in this country are vulnerable to political patronage and are inefficient due to lack of competition. With few exceptions, government-owned and -controlled corporations have been a heavy burden on the resources of the state," it added.
The business group said in the Arroyo administration's rush to take over the country's largest power distributor through GSIS, it has undermined the Securities and Exchange Commission (SEC), the Energy Regulatory Commission (ERC), the Electric Power Industry Reform Act (Epira) of 2001, and even the GSIS itself.
"Since Republic Act (RA) 8799 transferred all intra-corporate disputes from the SEC to the Regional Trial Courts designated as Commercial Courts, the resort to SEC intervention by the GSIS was improper. By allowing itself to be used by the GSIS to wrest management control, the SEC has contributed to the diminution of its own credibility in the eyes of the business community," the MBC said.
In the electric power industry, system loss refers to electricity lost due to technical inefficiency or pilferage. The anti-electricity pilferage law (RA 7832) allows private utilities to charge up to 9.5 percent of their system losses to consumers.
According to the MBC, it is the ERC's responsibility to protect the consumer's interest.
"But by shifting that responsibility to the GSIS, the administration has weakened the authority of the proper government institution to handle this issue," it said.
Garcia is leading a controversial bid to take control of Meralco. GSIS holds a 23 percent share in the utility firm. Public school teachers make up nearly one-third of the state pension fund's 1.6 million members.
Epira, on the other hand, is a law that seeks to bring down power rates by increasing competition in the sector.
"This administration appears to have lost faith in that law and has resorted to forcing down electricity rates on its own by bludgeoning Meralco, one of the private distribution companies. It is no coincidence that Meralco's major owners may not share the administration's political views," the group added.
The MBC also accused the GSIS of misusing funds invested by its members.
"The GSIS has a fiduciary responsibility to act in a manner that enables the investments it enters into to grow. Yet ever since the GSIS increased its holdings in Meralco to at least 25 percent of the company, Meralco's stock has fallen from P80 per share to P56 per share due to the very public denigration of Meralco's management and its major owners by the GSIS itself! In so doing, the actuarial soundness of the government employees' retirement fund may have been adversely affected," it said. (AH/Sunnex)
