MERALCO DONATIONS CHARGED TO US

 Originally Published: July 1, 2009

In person, Pete Ilagan is polite, affable and self-effacing. He has no pretensions to wealth or superior intellect, ever aware of his “ordinary” status and calling—as a consumer advocate.

Actually, he used to be a full-time preacher about 10 years ago in Tacloban City. He was just “borrowed” by the local chapter of the Rotary Club to lead the fight against the predatory power rates being imposed on residents by the Tacloban power-distribution utility.

After winning a rollback of rates for Tacloban residents, he realized he could do much more good as a consumer advocate in this particular field. It did not take him long to realize that the most abusive of all the power-distribution companies was also the biggest of them all—the Lopez-controlled Manila Electric Co. (Meralco). Thus, Meralco became the main focus of his advocacy for the past seven years.

Meralco is the largest among 140 distribution utilities in the country, most of which are small-time rural cooperatives with franchise areas rarely going beyond city or municipal boundaries. Meralco, in contrast, has a “mega” franchise covering 4.4 million captive customers in Metro Manila and at least six surrounding provinces. Meralco also distributes more than half of the combined power output in the country.

Ilagan rose to national prominence as the head of the consumer watchdog group called the National Association of Electricity Consumers for Reforms Inc. (Nasecore). Apart from notching up a string of little victories at the Energy Regulatory Commission (ERC), Nasecore takes a big chunk of the credit for the landmark Supreme Court decision ordering Meralco to return some P32 billion it had illegally collected from captive customers five years ago.

Nasecore has been relentlessly opposing Meralco petitions for rate increases, convinced that Meralco has been wantonly disregarding its franchise mandate to provide electricity to its customers at the least possible cost.

And now, Ilagan has uncovered what he believes is another hidden cost that has helped raised Meralco rates to their present steep levels. Ilagan pinpointed this hidden cost in a letter dated September 30, 2008, to ERC Chairman Zenaida Cruz-Ducut.

This hidden cost, Ilagan said, can be found in the sizeable donations being casually given out by Meralco purportedly in fulfillment of its “corporate social responsibility.” He wrote:

“If Meralco wishes to be known as a donor or a philanthropist, the donations should come from the pockets of the owners and not from Meralco. If Meralco wants to donate a parcel of land, equipment or anything in kind, the Meralco owners must raise the money to buy these Meralco properties. And if it wants to donate cash, the more that this cash should come from the pockets of the owners.”

Ilagan contends that the various donations—in cash and in kind worth several millions—were questionable and illegal for the simple reason that such charities would not, in any way, help Meralco improve its service to its customers. On the contrary, he said, it could only lead to higher power rates. Such donations are entered in the books as part of Meralco’s “operational expenses,” which are automatically passed on to Meralco customers.

He, therefore, formally asked ERC whether the Meralco management had the ERC’s permission to make such generous donations.

If such donations were not previously authorized, then the ERC must direct Meralco to immediately “retrieve” or take back the donations.

Ilagan cited a previous ruling made by the Energy Regulatory Board (the ERC’s predecessor) on the issue of donations. The ruling, made in ERB Case 98-20 in connection with a petition to roll back power rates in Leyte, was as follows:

“Voluntary contributions to charitable institutions, donations to civic organizations, expenses during strikes, Christmas expenses and other expenses which do not appear to directly benefit the consumers should not be considered as operating expenses. Donations and contributions, if included as an expense for rate-making purposes, become an involuntary levy on rate payers, who, because of the monopolistic nature of utility service, are unable to obtain service from another source and thereby avoid such levy.”

So who were the fortunate recipients of Meralco’s corporate generosity? Nasecore enumerated them as follows:

1. In Meralco’s 2007 annual report, the Lopez management disclosed on page 30 a “donation of seven Sibol schools through Gawad Kalinga,” but there was no mention of the amount. Apparently, this was a cash donation for the construction of the school buildings.

2. “Reliable information have also reached us that, just recently, Meralco also made a cash donation of P3 million to the College of Engineering of the University of the Philippines. We are afraid this may be part of the P889 million which is the subject of a syndicated-estafa charge we filed against Meralco lately.”

3. The Ateneo Loyola school bulletin, dated July 2, 2005, reports that through a generous land donation of Meralco adjacent to the Medical City hospital situated inside the Meralco compound along Ortigas Avenue, Pasig City, the Ateneo School of Medicine and Public Health will be constructed (photocopy attached). The ongoing construction of this school can not be hidden from the motorists passing the street along Medical City. And since Medical City hospital also stands within the compound of Meralco, we have reason to believe that the land where it stands is also a donation of Meralco.

4. Another land donation is revealed in Meralco’s Notes in its Financial Statement No. 8 (a). Rockwell, page 38 of its audited financial statements for 2007, and it reads: “In March 2008, the Parent Company and Rockwell signed a joint-venture agreement to construct a three-tower Meralco BPO building project at the Meralco compound, Ortigas Center, Pasig City. As agreed, the Parent Company contributed the use of the land while Rockwell will contribute to the development cost of the property. The joint-venture agreement provides that the sharing between the parties shall be 70 percent for Rockwell and 30 percent for the Parent Company. As of December 31, 2007, the project was at the substructure phase and development cost incurred amounting to P256 million. The company expects to complete the project by May 2009.”

On the basis of what Ilagan has accomplished and continues to doggedly pursue, he richly deserves to be called Meralco’s nemesis.

This unassuming gentleman from Tacloban City has a trait that is both admirable and fearsome in his chosen calling. Admirable, that is, to folks whose interest he is fighting for, and fearsome to those he is battling. He may be soft-spoken, but he has the ferocity of a pit-bull terrier. When he sinks his teeth into something, he is implacable. He will never let go.

You can be sure you will be hearing more from him about these generous charities that Meralco has been freely giving away at our expense.

Omerta_bdc@yahoo.com