Is Meralco’s Rate Hike a Political Gambit?

If you haven’t heard, Meralco was granted a significant increase in its distribution rate by the Energy Regulatory Commission this past week, one that will add between P 1.20 and P 2.48 per kilowatt-hour to customer bills and officially make their electric rates the highest in the world beginning next month. This follows an increase of P 0.71 this past month due to climbing wholesale electric prices, a move that was undoubtedly met with friendly sympathy for Meralco’s plight on the part of families, as it was perfectly timed to coincide with the start of the school year.

Meralco supposedly does not profit from collecting generation and transmission charges, so the increase on everyone’s June bill is a slightly more complicated argument; but there is no obvious reason why Meralco needs the impending rate increase for distributing the power it buys to its customers. If you think there is, here are a couple highlights from its 1^st Quarter financial report to disabuse you of that notion:

• Gross revenue increased faster than costs; the difference was only 1%, but that 1% was worth about P 1.17 billion.
• Net income increased by 5% to just over P 3.4 billion.
• The company’s before-tax profit margin increased from 8.6% to 9.6%.

The simplest conclusion to draw from a rate increase in view of that healthy financial performance is that Meralco are a bunch of greedy cockhammers, but on the other hand, they’re a utility company; that particular trait is a given. So is there something else, something a bit more sinister happening? Here’s a possible explanation:

Meralco is now largely controlled by business magnate Manuel V. Pangilinan. As early as December of last year, MVP’s name was being floated as a possible presidential candidate in the 2016 elections. He has spent most of the past year being very visible in the news, but – unlike just about everyone else in this country – has been notably silent when it comes to political topics, apart from issuing a mildly complimentary statement on the conviction of Chief Justice Corona last month.

And in the other corner, we have President “BS” Aquino. From MVP’s perspective, N/A is a big problem. First and most immediately, he’s bad for business; the once heralded and now largely forgotten PPP program has completely stalled, and while the Administration has made much of the unexpected GDP growth last quarter, two key areas that mean something to a growth-minded businessman like MVP – household and government consumption expenditures – have had a pretty flat arc since Aquino took office. And despite Meralco’s doing well financially, there are some signs that the economy is not really picking up; for example, since the beginning of 2011, Meralco has lost about 140 industrial customers.

All of that makes the Aquino Machine a serious political obstacle, to MVP’s own aspirations, certainly, if he has them, but even if he doesn’t, the last thing he needs is a popular BS Aquino and the Liberal Party playing kingmaker to another incompetent unable to provide business opportunities come 2016. Thus the indicated solution is for MVP to either offer himself or someone of his choosing as the better alternative, but to achieve that, he has to make the current power unpopular.

One of the most effective ways to do that is to make sure the population experiences serious economic discomfort. That is what ultimately removed Marcos from power, almost got Aquino 1.0 ejected from the Palace – and caused her to end her term on a decidedly low note – allowed GMA, et al. to engineer Estrada’s removal, and if you need more examples, was the main cause of the ouster of the leaders of Tunisia, Libya, and Egypt. When people get their electric bills next month, they’re not going to blame Manny Pangilinan, they’re going to blame the president. At which point, MVP is in a perfect position to be the hero.

Tin-foil hat material? History Channel-worthy conspiracy theory? Perhaps. But in a country where a complete nincompoop can walk into the presidency over his own mother’s grave, it is nowhere near being the weirdest thing that could happen.

BenK

I write a column for The Manila Times on Tuesdays, Thursdays, and Saturdays. Most of the energy sector and the heads of several government agencies probably wish I didn’t.