Camacho: I was for ‘caretaker’ deal

Finance Secretary Jose Isidro Camacho said yesterday the government was only seeking a "caretaking" arrangement with the Manila Electric Co. (Meralco) to ensure its survival after the Supreme Court ordered the firm to refund P28 billion to customers.

Under fire for making a draft memorandum proposing a sweeping state takeover of the company’s board of directors, management and operations, Camacho insisted the government was not seeking to oust the Lopez family as Meralco’s controlling shareholders.

"It was made very clear in the draft as given to them (the Lopezes). What is contemplated here is a caretaking situation because of anticipation that there would be some financial instability in the company because of an adverse decision," Camacho told a press briefing yesterday.

The Supreme Court’s five-member third division ruled unanimously on Nov. 15 that Meralco overbilled its over three million customers from 1994 to 1998. Meralco estimated that the refund could total as much as P28 billion.

Camacho said the draft proposal was only a "starting point" for discussions to help the firm comply with the court ruling.

"The notion of changes in management was bringing in professional executives from the private sector with excellent reputation that are acceptable to all parties concerned, especially to government and the Lopez group and that was made very clear," Camacho said.

"It was meant to be a partnership rather than a takeover ... We have one common interest with everybody, including the Lopez group, the creditors, the other stakeholders and the public – and that is to ensure the financial viability of the company."

Camacho said the government would be exercising its right as shareholder and protecting the interests of government financial institutions, which also have loan exposures to Meralco.

The government holds 25 percent in Meralco, including the shares held by its financial institutions.

The Lopez family only has direct holdings of five percent but other firms controlled by the family hold combined shares of 23 percent. Another eight percent of Meralco is held by the company’s retirement fund.

Critics cautioned against a government takeover, citing its poor track record of managing government-run companies and enterprises.

Senate Majority Leader Loren Legarda said the government’s moves on Meralco was reminiscent of the "crass opportunism during the dark years of martial rule."

Legarda, a former broadcast journalist of the Lopez-controlled ABS-CBN Broadcasting Corp., was referring to the government takeover of Meralco in the early 1970s by the Marcos dictatorship because of the Lopezes’ political opposition.

Businessman Raul Concepcion, a consumer advocate, said Camacho’s proposal was "in poor taste" and would create more "jitters in business."

Meralco said the refund order would "most likely put its utility business to a halt" and hurt the economy.

The landmark ruling reversed a 2000 Court of Appeals decision which barred the now-defunct Energy Regulatory Board (ERB) – the predecessor of the Energy Regulatory Commission (ERC) – from requiring the country’s largest power distributor to refund its customers.

The ERB said Meralco should not include its income tax in the computation of its return-on-rate-base, which determines how much money a company may profit from its operating expenses.

Meralco denied it overbilled customers and argued that its computation of charges has been the industry practice for years in the country and abroad.

The company said it may have trouble servicing its debts if the Supreme Court does not reverse its decision or if its petition for a rate increase was not granted by the ERC.

The firm has total loans of P31 billion of which P22 billion is long-term. Thirty-two percent of the long-term loans is covered by a government guarantee.

However, the country’s highest court rarely reverses its decisions. Meralco has a request for a 30 centavo per kilowatt-hour rate increase pending for five years now.

The company also has a petition pending before the ERC, seeking authority to "unbundle" or itemize its rates. ERC chairperson Leticia Ibay said the panel might make a decision on Meralco’s unbundling rate petition next month. — Marichu Villanueva, AFP, Donna Gatdula, Efren Danao