Open Access

With the summer heat reaching its peak, our coffee shop friends cannot but turn the subject matter to the cost of cooling down homes and offices. That topic, of course, leads to the issue of cost of electricity which is what determines whether or not we can afford a more bearable summer heat.

The barako gang was quick to commend the latest move by the Manila Electric Company or Meralco to give up their erstwhile exclusive distribution of power to large industrial and commercial concerns within their franchise area. The coffee mugsters, of course, are referring to the much-anticipated Open Access regime in the power sector. We are now closer to that dream, thanks to the move by Meralco to allow other other distributors to compete for the business of bringing power to the doorsteps of customers who require one megawatt or more of power supply monthly.

One side of the coffee table was quick to question the commendation to Meralco. The other side was equally quick to defend the praise – the move by the Lopez-managed concern was supposed to be taken only when more than 50 percent of the generation assets of the National Power Corp. or Napocor have already been privatized.

This is what the Electric Power Industry Reform Act or EPIRA mandates. Unfortunately, Napocor has not turned over more than one percent of its generators to the private sector. It has a very long way to go, the barako bunch pointed out. Such is the reason they laud the Meralco move, they added.

It will be recalled that Meralco chair and chief executive officer Manolo Lopez unilaterally offered the Palace to give up its exclusive distribution rights to one-megawatt-or-more power users. The move means this category of customers are now free to choose which supplier they want to buy their electricity from. They now have the power of choice.

The Lopez move was met warmly by the commercial and industrial sectors which have wondered for a long time whether or not Open Access would ever become a reality. The only news they have from the privatization front consist mostly of failed biddings and derailed sale of Napocor assets.

In fact, it has come to a point when many are asking whether or not Napocor is serious with privatization.

The cappuccino connoisseurs explained what made the Meralco move laudable: the power distributor did not have to make the gesture – it could have waited for eternity before allowing competition into their franchise area. EPIRA provided the firm with a cushion that Meralco seems to have willingly given up.

This is "economic statesmanship", the coffee shop gang underscored. In making the gesture, Mr. Lopez may have set a new benchmark for other Filipino business tycoons to follow, they added.

In effect, the Lopezes turned the spotlight once more on an important truth that businessmen have almost always ignored: that the pie is large enough for everyone. Indeed, Mr. Lopez has brought Meralco to a new era.

The avid Arabicans warned, however, that the goodwill resulting from the Lopez gesture is just one side of the story. Napocor will still have to translate the winning move of Meralco into a viable service-cum business that will ultimately benefit consumers, big and small alike.

The expectation is that with this initial competition in the distribution sector, power rates should go down. Meralco is expected to be able to source more power from its own independent power. As we all know, when Meralco buys more from Quezon Power and First Gen, the generation charges in our electricity bills go down by as much as 35 percent. As has been proven twice in the past year, the generation rates of Meralco IPPs are lower than Napocor’s.

With the virtual Open Access, not only the one-megawatt-above customers are benefiting from lower Meralco IPP generation rates. All customer classes are expected to do so.

Napocor, on the other hand, said it could bring this about with the time-of-use (TOU) mechanism. Simply put, Napocor will charge the big users different rates for usage during different times of the day. This is also a welcome development for big industrial and commercial users, at least for those who can, and could afford, to adopt the TOU.

The downside to TOU is that not all large commercial and industrial customers can shift their operations to the hours of the day when Napocor’s rates are lower. The presumption is these would be the wee hours of the day. The barako brigade had earlier pointed out that the TOU beneficiaries would mostly be manufacturers or call centers on 24-hour operations and some of the bigger hotels.

But the really big potential customers may be lukewarm on the idea of TOU. Among these are the major shopping malls whose electricity consumption is more than what an average municipality uses up. Establishments such as these cannot shift their operation to the time of day when Napocor rates are lower – unless shoppers are willing to go on a spending spree at three o’clock in the morning.

Other major users do not have flexible operating hours are the big schools, major banking institutions and the big buildings in Makati which house the business community’s top 1,000 corporations.

The brew battalion also pointed out that TOU may have really been designed for the more affluent sector. When the Open Access regime is fully implemented, expect the mansion owners in the exclusive subdivisions to line up for TOU meters and service, they predicted. The scheme will be highly beneficial to them since these households have their air conditioners running on 24/7 basis. Their overnight use would then cost cheaper, thanks to TOU.

The coffee shop club is not about to trivialize the TOU. Every scheme that could lower power rate – even if it is just for small sector – is always a welcome move. The hope is Napocor would exert all-out effort to speed up the privatization of its assets. The full Open Access regime is what everyone is hoping could bring about more competitive and therefore affordable power rates.

Meralco has chosen not to wait for the fulfillment of the EPIRA provision before it voluntarily opened up its franchise area to competition. The higher off-take from its IPPs that could result from the arrangement with Napocor could help bring about a respite from soaring power rates. This could be a temporary relief. We are waiting still for the permanent solutions.

They could come sooner if more would follow the economic statesmanship of Manolo Lopez.

A job for Tom Hanks

Good morning, Tom. After breaking the Da Vinci code, your objective is to uncover a deep mystery at the Government Service Insurance System (GSIS). Actually, it is a mystery only as far as GSIS’s unknown buyers are concerned.

The Securities and Exchange Commission (SEC) has initiated an inquiry into possible violations of the securities law. Perhaps you can help with its investigation, particularly as the powers-that-be at GSIS are playing hardball.

Since last January, the bosses at this government financial institution have repeatedly announced that they were auctioning or bidding out their Equitable PCIBank (EPCIB) shares at a minimum price of P92 per share for cash. With attendant press releases and newspaper ads, GSIS claim that there was a buyer or buyers for the block of shares but omitted to name them.

GSIS at first called for an auction on March 6, 2006. No buyer or buyers emerged, necessitating a 30-day extension. April 6 came and went. Still no buyers. GSIS scheduled a third auction date on May 8, 2006.

Well, it has been two days now past May 8 and it is your responsibility now, Tom, to find out whether a buyer or buyers showed up by that deadline. So far, GSIS powers are not talking and this task to decode and determine what is true or fictitious, what is real or plain „guni-guni‰ may be an impossible one even for you. We know that decoding the Da Vinci code is a walk in the park compared to unraveling the identity of the unknown buyers. But this is the real litmus test for you, Tom, on how great you are in breaking open mysteries of this sort.

With the apparent failure of its May 8 bidding, it is time for GSIS to come clean. Let the bosses face the truth.

The price yesterday of EPCIB is at P72 per share. In 1999, GSIS along with Social Security System (SSS) purchased PCIBank shares at P92 each. Equitable Bank later acquired PCIB and formed what is now EPCIB.

If GSIS management had exercised bad judgment then, there‚s no shame in that. Mistakes happen all the time in the stock market. If GSIS is now simply trying to maximize its selling price for the EPCIB shares, there’s nothing wrong with that either so long as this is done within ethical and legal boundaries.

GSIS should change tack. It‚s time to move on. GSIS bosses would do better if they concentrated their efforts on helping EPCIB, such as improving its resources, for instance, rather than sell the EPCIB shares.

Going back to your decoding job, Tom, try to find out if GSIS will attempt a fourth extension of the auction.

How many bidders surfaced on May 8 or is there any doubt left that there were no buyers or bidders to begin with?

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