LeNdl VicENciO's UseLEss MuLtipLy

Important: Truth behind Meralco Current Issues

May 27, '08 5:10 AM
for everyone

This came from my Ate's e-mail who is working in meralco for almost 10 years

I'm forwarding this information to help you understand the truth behind the issues of the Government taking over Meralco

How some people from the Government twist the truth - kakaiba. It's both funny (and irritating) listening to Government officials talking about Meralco as the one to blame for electricity price increases. Nyehehehehe. Hay, Lord have mercy on these liars or please give them more wisdom to understand simple truths and basic mathematics.

PAANO INTINDIHIN ANG MGA BAHAGI NG INYONG MERALCO BILL

Ito ay ang mga bahagi na bumubuo ng ating electric bill. Nahahati ito sa dalawang kategorya, ang pass-through charges at ang Meralco charges.

I. PASS THROUGH CHARGES (Ito ang bahagi ng singil na kinokolekta ng Meralco para sa gobyerno at ibang kumpanya, gaya ng NAPOCOR, Independent Power Producers, TransCo at PSALM. Wala ni isang sentimo na napupunta sa Meralco).

• Generation Charge – Ito ay para sa kuryenteng binili ng Meralco sa mga generator tulad ng National Power Corporation (NPC) at mga Independent Power Producers (IPPs).

• Transmission Charge – Ito ay bayad para sa pag-deliver ng kuryente mula sa generator na nasa probinsya o malalayong lugar papunta sa pasilidad (linya at substations) ng Meralco. Ang bayad ay napupunta sa National Transmission Corporation (TransCo).

• Local Franchise Tax – Ang mga private utility companies tulad ng Meralco ay kinakailangang magbayad ng local franchise tax: hanggang 0.75% ng gross revenues na napupunta sa local government units.

• VAT – ang pagsingil ng 12% VAT ay alinsunod sa batas na ipinatupad ng ating gobyerno.

• System Loss Charge – Ito naman ang halaga ng kuryenteng nawawala dahil sa mga technical at non-technical losses. Ang pagsingil ng system loss charge ay pinahintulutan ng naaayon sa Republic Act 7832 at ang pagkolekta nito ay hindi maaaring tumaas sa humigit-kumulang na 9.5%.

• Universal Charge – Ito ay ang Missionary Electrification at Environmental charges na napupunta sa Power Sector Assets & Liabilities Management Corporation (PSALM), isang pag-aari at kontrolado ng gobyerno, at nilikha ng Republic Act 9136.

• Lifeline Discount / Lifeline Subsidy – Ito ay naaayon sa isinasaad ng EPIRA (Section 73), kung kaya’t ang ERC ay nagtatag ng Lifeline Discount para sa mga residential customer na kumukonsumo ng hindi hihigit sa 100kWh sa isang buwan. Ang halaga ng discount ay ibabawas sa total ng generation, transmission, distribution, supply, metering at system loss sa ganitong paraan:

•50% discount para sa gumagamit ng 50kWh pababa

•35% discount para sa gumagamit ng 51kWh to 70kWh

•20% discount para sa gumagamit ng 71kWh to 100kWh

Ang discount na ito ay manggagaling sa Lifeline Subsidy Charge, na binabayaran ng mga residential customer na may konsumong higit sa 100kWh bawat buwan at lahat ng industrial at commercial customers.

ANG MGA PASS-THROUGH CHARGES NA NAPUPUNTA SA GOBYERNO AY SIYANG NAGBABAGO BUWAN-BUWAN AYON SA HALAGA NG PAG-GENERATE NG KURYENTE.

SA KATUNAYAN, ANG MGA PASS-THROUGH CHARGES AY BUMUBUO NG 87% NA SIYANG PINAKAMALAKING BAHAGI NG ELECTRIC BILL.

II. MERALCO CHARGES (Ito ay ang bahagi ng singil sa inyong electric bill na napupunta sa Meralco).

• Distribution Charge – ito ay para sa halaga ng pag-gawa, pagpapatakbo (operating) at pag-maintain ng distribution system ng Meralco na nagdadala ng kuryente mula sa high-voltage transmission grids papunta sa mga Meralco residential end-users at komersyal at industriyal establishments.

• Metering Charge – ito ang halaga ng pagbabasa, pagpapatakbo (operating) at pag-maintain ng mga power metering facilities.

• Supply Charge – ito ang halaga ng pagbibigay ng serbisyo sa mga Meralco kostumers, kabilang na ang billing, koleksyon, kostumer assistance at iba pang mga associated services.

Ang Meralco charges ay 13% ng inyong kabuuang bill.

ANG MERALCO AY HINDI NAGTAAS NG SINGIL SA DISTRIBUTION CHARGE MAGMULA 2003.

Sa katunayan, kung ikukumpara ang Meralco charges sa presyo ng iba pang produkto mula June 2003 hanggang Disyembre 2007, makikitang ang presyo ng Meralco ay bumaba habang ang iba ay tumaas. (See table below).

Produkto o Serbisyo	June 2003	December 2007	% Increase / Decrease
LPG (11-kg cylinder)	223.74	594.47	166 %
Diesel ( per liter)	14.98	38.10	154 %
Fuel Oil (per liter)	13.24	29.66	124 %
Pamasahe	9.22	12.00	30 %
Generation & Transmission-Elec.	4.2938	5.3122	24 %
Meralco Charges	1.1806	0.9337	- 21 %

http://www.yehey.com/news/Article.aspx?id=214217

"GSIS funds used to enrich cronies"

YEHEY! Contributors

14 May 2008 | 8:51 AM

The Alliance of Concerned Teachers issued a statement denouncing Government Service Insurance System (GSIS) President and General Manager Winston Garcia’s bid to take control of Meralco, the country’s largest electric utility.

“It’s ironic that while hundreds of thousands of teachers and government employees, who are members of GSIS, are victimized daily by the unjust policies implemented under his watch, Garcia now has the gall to present himself as the champion of public interest in leading the takeover bid against Meralco,” said ACT chairperson Antonio Tinio.

Public school teachers make up one-third of GSIS’s 1.6 million members. Since 2003, there has been widespread disgruntlement among GSIS members sparked by new policies introduced by Garcia, such as the premium-based policy. According to ACT, such policies unlawfully deprive members of their full benefits.

Tinio alleged that Garcia’s takeover bid signals an attempt by businessmen close to Malacañang to take control of the power industry.

Tinio remarked: “Under Pres. Arroyo, we’re seeing a return of Marcos-style crony capitalism. Arroyo and her allies want to carve up the power industry for themselves, with Garcia wielding the butcher’s cleaver. He’s using the state’s resources—our hard-earned pension funds—to enrich Malacañang’s cronies.”

Tinio pointed out that a number of known Arroyo cronies have shown keen interest in the power industry. He noted that the Aboitiz family holds substantial interests in power generation and distribution, owning Visayan Electric Company (VECO) and Davao Light and Power Co., Inc.—the second and third largest privately owned electric utilities in the country, respectively, after Meralco.

Another powerful Arroyo ally, businessman Enrique Razon, Jr., recently won the allegedly tainted bidding to privatize TransCo (the National Transmission Corporation). Razon served as the administration slate’s treasurer in the 2007 elections.

“Once the Lopezes are out of the picture, Malacañang’s allies can easily step in to fill their shoes,” said Tinio. “This is the real agenda behind the Meralco takeover bid.”

Tinio added that this will not be the first time that Garcia used GSIS funds to promote the business interests of an Arroyo crony. In 2004, Garcia withdrew the GSIS’s multibillion peso accounts from the state-owned Land Bank of the Philippines

and designated Union Bank as its depository bank. Soon after, Garcia awarded the multimillion peso contract for the GSIS E-Card project to Union Bank as well. The Commission on Audit has declared the awarding of the E-Card contract to be “illegal and violative of law.” Union Bank is owned by the Aboitiz family.

Aboitizes are not only Arroyo allies, but are close to Garcia’s own family, currently the reigning political clan in Cebu

. Garcia’s sister Gwendolyn is the governor of Cebu, while his father Pablo is the representative of Cebu’s 2nd district.

Tinio challenged Garcia to make a full disclosure of his clan’s ties to the Aboitizes. “He should practice what he preaches regarding transparency. Whose vested interest does he serve?”

_________________________________________________________________________

FAQs for Employees About Current Issues

A. MAJOR ISSUE 1: High Power Rates

1. On the Issue on High Rates

Issue No. 1

From GMA, why are Meralco rates high?

Answers:

Meralco rates are high because of the generation charge which is a pass through cost to Meralco, and not because of the distribution charge as averred by Mr. Garcia

In fact, Meralco has not had an increase in its distribution charge since 2003

For the first quarter of 2008, The Meralco distribution charge on the average was less than 13% of Meralco’s total electricity bill

This means that for every peso that Meralco collects from its customers, only 13 centavos goes to Meralco and the rest goes to the government and generation companies

Issue No. 2

From GMA, why do we buy at peak rates from WESM?

Answers:

On the issue of energy sourcing, no less than the ERC had determined that the optimum sourcing mix is when Meralco’s IPPs are dispatched at contract levels.

Hence, it would be optimal for Meralco to start buying from the IPPs even during the off-peak hours, and just source from WESM the residual power requirements not met by the IPPs and the NPC as demand peaks.

Moreover, all of Meralco’s IPP’s are covered by long-term fuel supply contracts, protecting end-users from fluctuating fuel prices. For example, Quezon Power buys coal at about half the price that is prevailing in the spot market, at $64 per metric ton (As a comparison, Napocor buys it at $160 per metric ton). Besides, WESM prices are volatile.

Issue No. 3

From Garcia, Meralco has sweetheart deals with Lopez owned IPPs.

Answers:

The truth is, the rates of Meralco’s IPPs are lower provided IPPs are running at their MEQ levels

These information are available in the Meralco website at www.meralco com.ph

Issue No. 4

From GMA, on ensuring preferential treatment for households and power-intensive industries.

Answers:

· Meralco is already providing lifeline subsidies to those consuming 0-100 kWh

· The lifeline discount is a percentage discount applied to the total of the generation, transmission, distribution, supply, metering and system loss charges.

· The lifeline discount is mandated by Section 73 of the Electric Power Industry Reform Act (EPIRA), which calls for a socialized pricing mechanism for marginalized customers.

· In Meralco’s case, as set by the Energy Regulatory Commission (ERC), residential customers using up to 100 kWh in a given month enjoy a lifeline discount. The details of the lifeline discount are shown below:

Monthly consumption	% Discount*	No. of Customers (Oct 07)	% of Total Residential Customers
50 kWh of less	50%	706,652	17.5%
51 to 70 kWh	35%	409,933	10.1%
71 to 100 kWh	20%	617,084	15.3%
Total Lifeline Residential		1,733,669	42.9%
* On Generation, Transmission, System Loss, Distribution, Supply and Metering Charges

Lifeline subsidies, in addition, have the effect of mitigating the impact of any power rate increase, including any increase in generation or transmission charges.

· With regard to power-intensive industries, the NPC and Meralco have, in fact, already been implementing an Ecozone Rate Program that has significantly reduced the power rates of PEZA economic zone locators. PEZA stands for Philippine Economic Zone Authority.

· Whatever has been lowered by Napocor, Meralco passes it on to its customers.

2. On The Call for Lower Rates

Issue:

President GMA calls for lower power rates.

Answers:

Meralco welcomes NPC’s move to lower its generation rates to P3.52/kWh. Management said that should this push through, the company will pass any reduction in the cost of generation to the consumers.

The 12% VAT reduction as proposed by Oscar M. Lopez would translate to around 1 peso reduction in electricity cost per kWh

3. On The Questions on System Loss

Issue:

Why is system loss being passed on to Meralco customers, and what is Meralco doing about it?

Answers:

Based on RA 7832 or the Anti-Electricity and Electric Transmission Lines / Materials Pilferage Act of 1994, Meralco is allowed to collect from consumers the cost of systems loss within the 9.5% cap

Meralco absorbs the cost of any system loss beyond the 9.5 percent cap set by the said law

System losses are composed of technical and non-technical losses. Technical losses are natural losses in the line and are normal for any utility company. Non-technical losses are brought about mainly by power pilferers.

The rising non-technical losses is caused by the growing social problem on illegal squatting

Meralco has exerted a lot of effort and implemented programs to curb system loss that include the Kuryente Watch and the implementation of the Elevated Metering Cabinets (EMCs) in depressed communities

Whatever Meralco gets as pilferage recovery is being returned to its customers through its rates

B. MAJOR ISSUE 2: Government Take-Over / Mismanagement

4. On Garcia’s Call for Change in Management

Issue:

Mr. Winston Garcia wants a change in Meralco management because he says that Meralco is mismanaged.

Answers:

No, Meralco is not mismanaged since Meralco abides by the rules and regulations set by EPIRA and by the ERC for decisions that will affect consumers

The Various Awards received by Meralco in recent years serve as tangible proofs of Meralco’s excellent management of company affairs

2005 ECOP Grand Kapatid Winner
Meralco as one of Asiamoney’s 2004 Best Managed Companies
Good Corporate Citizenship Award
Asia Equities Investment Report: Top Place in "'Most Improved Investor Relations”

The Asset: 2002 Leader in Corporate Governance in the Philippines

Asiamoney 2002: 3rd in "Overall Best Corporate Governance Score Among the Top 10 Utilities in Asia”

5. On the Issue on Need for Transparency

Issue:

Meralco is hiding financial documents and contracts between Meralco and IPPs and that Mr. Winston Garcia has requested for these but he claims that Meralco did not provide the said documents.

Answers:

It is not true that Meralco management has not granted access to Mr. Garcia

Meralco has always been transparent with its financial documents and is not hiding anything

The company has repeatedly invited Garcia to review the documents he has requested at the company premises during office hours and to be briefed on his concerns, as this is the right that is granted to a shareholder under the corporation law, but his response was that he was too busy to attend.

In fact the company has provided him copies of the requested documents that do not bind Meralco to confidentiality provisions. Garcia conveniently fails to mention this and in fact has not even commented on any of the information so far provided him.

His insistence on securing copies of documents, some of which have provisions that legally bind the company and its officers to confidentiality, is not only unreasonable but also exposes the company to suits and damages. This contradicts his so-called objective of protecting the investments of GSIS pensioners.

In fact, Garcia sent representatives to retrieve documents from the company premises, but refused to guarantee the confidentiality of such documents. Management therefore refused, citing the need to protect all other shareholders from having such sensitive information falling into the hands of competitors.

· Garcia’s requests are not only unreasonable but also absurd considering he is asking for documents that date back to the 1970’s. While Garcia asserts he has absolute rights as a shareholder, he fails to recognize that his rights are limited by the rights of other shareholders who may not have the same interests as he has.

6. On the Issue of Meralco Ownership

Issue:

How many percent of Meralco does the Lopez family and the government have?

Answer: