Predictability

Business, as we know, hates uncertainty and loves predictability. A clear path to the future helps enterprises plan longer term and work more productively.

This is the reason why Meralco, by far the country’s largest electricity distribution utility (DU), filed for another 25-year extension of its franchise years ahead of the current one’s expiration. This will allow everyone the luxury of fully examining the economic issues involved in this decision.

Several legislators, led by economic wizard Rep. Joey Salceda, have filed the bills seeking the extension of this valuable franchise. None has yet filed a bill seeking the termination of the franchise, although the usual rabble-rousers intermittently demand this. A termination of the franchise will have traumatic repercussions on all our businesses.

 It will be easier for everyone to simply extend the franchise, even with a provision (as contained in Salceda’s filing) to allow the expansion of its coverage to communities wanting to be included in its service area. Conversely, it will be extremely impracticable to break up the existing franchise (as some interested parties may want) and redistribute operations to several franchise-holders. This is a process that will take many years to complete, especially if new players in the game have little experience in electricity distribution.

There is, in fact, no economic study analyzing the whatever advantages there might be in the breakup of the franchise. Economic sensibility quickly recognizes that the existing setup in electricity distribution enjoys overwhelming advantages over all other possible alternatives.

The size of the Meralco operations suits the economies of scale that enables the DU to leverage against power producers to win the best deals possible for its consumers. This is the reason why Meralco is able to offer the lowest power rates among all distribution utilities. It is also the reason why it has been able to consistently elevate the quality of its service to ensure reliability despite the country’s thinning power reserves.

This week, the prestigious Management Association of the Philippines (MAP) issued a well-prepared position paper arguing for the renewal of Meralco’s franchise. This position paper adds to the arguments already presented for this option.

The MAP paper underscores Meralco’s commitment to government’s green energy goals. Its franchise area now posts a remarkable 64 percent share of the Green Energy Options Program’s total energy consumption.

Meralco, MAP notes, prioritizes empowering its customers. It leads all other DUs in customer choice programs promoted by the Electric Power Industry Reform Act (EPIRA). Evidence for this is provided by the 65 percent participation rate among all qualified customers in the retail market.

Meralco, furthermore, has not lagged behind in applying new technologies to benefit its customer base. The DU has the largest smart meter program service benefitting nearly 100,000 households to date.

The DU is well on its way towards implementing a time-of-use program, marketed as Peak/Off Peak (POP). This program allows eligible consumers to save on their electric bills for off-peak use of power. With the rapid advance of digital technologies, this advantage could be used by all consumers eventually.

Meralco’s concern for efficiency and resiliency enabled the company to meet or exceed standards set by the Energy Regulatory Commission (ERC). The company has been unrelenting in lowering its systems-loss rate. It now posts a systems-loss rate lower than the prescribed standard and the lowest among DUs nationwide. Since consumers pay for systems losses, this achievement effectively lowers power costs.

By developing its microgrid technologies, the DU is able to adjust to global hyper-scalers with high power demands. It can now reconfigure its systems to adjust to differentials in demand across sections of its franchise area.

Meralco is the only DU that has achieved 100 percent electrification within its franchise area. As part of its Lifeline Rate Program, the company offers a discount ranging from 20 percent to 100 percent for its poorest customers. The company is now implementing a 5 percent discount for the elderly as its participation in the country’s care for its senior citizens.

Meralco’s standard of excellence in management spills beyond its service area. The company reliably supports electric cooperatives nationwide during times of natural disasters. Its commitment to mutual aid helps strengthen the overall resilience of the Philippine power grid.

The nation’s largest DU has not been wanting in the support it extends to government programs such as the Build, Build, Build program and private-public partnerships. Many of the projects involved in these programs require new electricity connections. The company remains committed to driving Philippine progress.

On the basis of all these considerations, MAP urges the House of Representatives to favorably consider Meralco’s franchise renewal. Clearly, prompt action by our legislators will significantly reduce uncertainties associated with major franchise renewals.

Convicted

Donald Trump has been found guilty on all counts of fraud involved in the hush money case filed in New York. This makes the presumptive presidential nominee a convicted felon.

 The Trump campaign has been prepared for an outcome like this one. It has been trying to convince voters the trial is part of the Biden administration’s “weaponization” of the justice system. This flawed narrative has not failed to impress Trump’s diehard loyalists.

Analysts expect the conviction to have only minimal impact on the on-going contest between two unpopular old men. Despite the many scandals associated with him, Trump has managed to keep his base and pose a serious challenge to incumbent Joe Biden.

Support for Trump has baffled the rest of the world.