Renewal of a
franchise is important when one’s business venture is that of public utility
just like the Panay Electric Co. (PECO), which is based in Iloilo.
We have heard President Rodrigo Roa Duterte threaten the
Lopez owned ABS-CBN, the non- renewal of its franchise, but the President has
in fact made such action when he signed a law which implicitly ended PECO after
95 years of monopoly in the electricity-distribution monopoly.
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| An oligarch cling to power (photo credit to owner) |
PECO is owned by Iloilo based old Spanish Cacho clan and First
Holdings Corp., a company of the Yellow oligarchic Lopez clan.
In Mr. Tiglao’s article in the Manila Times titled “Iloilo
oligarchs defy Duterte and Congress” which was published last March 11, 2019,
has the inner news regarding what is happening in Iloilo.
Sources in Iloilo City claim that the
Lopezes have told the business elite there that it would “fight tooth and nail
Razon’s takeover” of the electricity distribution firm. This defiant stance,
which has emboldened the Cachos, is both due to emotional and business reasons.
Emotional in that the Lopezes believe
they have been and will always be the “rulers” of their Iloilo City hometown,
and that PECO is a family jewel. For the clan, PECO is the source of
significant profits, which amounted to P1 billion from 1996 to 2017.
For the complete understanding and clarity of the issue
raised, We are quoting in full the article published by Mr. Tiglao for the
convenience of our reading public.
Iloilo oligarchs defy Duterte and Congress
Congress last month passed a nearly
unanimous, unprecedented bill to give the electricity-distribution franchise in
the city to a new firm More Electric Power Corp. (MORE).
Legislators refused to extend for
another 25 years the franchise of Panay Electric Co. (PECO), the 95-year-old
monopoly.
The company is owned by the
Iloilo-based old Spanish Cacho clan and First Holdings Corp., a company of the
Yellow oligarchic Lopez clan. A power-generation subsidiary of First Holdings
also had supplied several years back a huge chunk of PECO’s electricity that it
distributes to retail consumers.
President Duterte without any
hesitation signed the bill into law last February 14. The law’s implicit, but
obvious conclusion: PECO after 95 years as the city’s electricity-distribution
monopoly, has become, as most monopolies inevitably do, inefficient; it is time
to give the franchise to a more efficient, well-financed firm.
One would think that PECO would bow
down to the will and judgment of the state, as even the opposition, notably the
senator from Iloilo Franklin Drilon, didn’t attempt to block the bill.
Monopoly rent
One would expect that since the basic reason for their profits—monopoly rent authorized by the state—has vanished, PECO’s owners would start negotiating with MORE to get as much as they can from selling their electricity-distribution assets. After all, what’s the use of PECO’s power poles and lines if it cannot use them anymore for distributing electricity. After all, the law gave PECO a very reasonable two-year period to turn over its monopoly to MORE.
But no, PECO’s Cacho and Lopez owners—the
former apparently a secretive elite as its chairman and president have shunned
media interviews and photos—are digging in, and have tried to block the
implementation of the state’s will, in the manner many unscrupulous businessmen
(and politicians) do in our modern history to block reforms: By filing a case
in the country’s notoriously slow, hardly incorruptible justice system.
Sources in Iloilo City claim that the
Lopezes have told the business elite there that it would “fight tooth and nail
Razon’s takeover” of the electricity distribution firm. This defiant stance,
which has emboldened the Cachos, is both due to emotional and business reasons.
Emotional in that the Lopezes believe
they have been and will always be the “rulers” of their Iloilo City hometown,
and that PECO is a family jewel. For the clan, PECO is the source of
significant profits, which amounted to P1 billion from 1996 to 2017.
ABS-CBN
A news article—which appeared only in ABS-CBN News, owned by the Lopezes who do not hesitate to use the broadcast network as a weapon—reported:
“PECO challenged before a Mandaluyong
City court certain provisions of the franchise to operate a power firm in
Iloilo granted to its rival MORE Electric and Power Corp owned by billionaire
Enrique Razon.
PECO said the provisions amounted to
a ‘takeover’ of its assets and asked the court to stop the Department of Energy
and the Energy Regulatory Commission from implementing the law that granted
MORE its franchise.”
The report, quite obviously biased
for PECO, was misleading in that the law’s Section 10 authorized such a
“takeover” – through the qualified right of the power of ‘eminent domain’ – is
allowed only after “expropriation have been instituted and just compensation
paid.”
PECO’s suit in the court, as reported
by ABS-CBN, however, made the false claim that MORE, “a shell company without
any assets…, in the blink of an eye becomes the new owner of an entire
distribution system” (emphasis mine).
Third richest
MORE is owned primarily by the 59-year-old billionaire Enrique Razon, who the US-based Forbes magazine recently identified as the country’s third richest tycoon, after Manuel Villar (No. 1) and John Gokongwei (No. 2). Razon’s empire had been built on building and running modern container ports in Manila, Subic, Batangas and General Santos City, as well as in Poland and Brazil – a business that requires engineering expertise.
Based on the ABS-CBN report, PECO
implicitly claimed in its petition that MORE’s franchise involved a case of
corruption as it was “allegedly given ‘favorable treatment’, and this violated
the constitutional principle of ‘equal protection’.”
According to the ABS-CBN report,
“PECO urged the court to issue a temporary restraining order and/or a writ of
preliminary injunction to prevent MORE’s takeover of its assets.”
This move is significant, in that if
the court issues a restraining order, MORE will have to stop everything that it
has to do for the takeover of electricity distribution in Iloilo, which could
frighten away its bankers.
More significant is PECO’s petition
to the court to declare the law’s section requiring it to sell its assets to
MORE as unconstitutional. That petition is telegraphing the oligarch firm’s
game plan to raise the issue to the Supreme Court, which has the sole authority
to rule on the constitutionality of laws. With the Court’s huge backlog of
cases, its decision on this matter would take years, and Razon is not known to
be so patient to wait for such things beyond his control.
Drilon irked
The Philippine Daily Inquirer, surprisingly for its largely anti-administration posture, recently carried a report that was critical of PECO, titled “Iloilo power firm refuses to turn over assets to another distributor.”
It quoted at length an irate Senator
Drilon, who had been a close friend of the Cachos:
“Drilon called on the owners of PECO
to allow the negotiation for the sale of their assets after two power
interruptions hit the city on Monday amid the holding of two major events.
“Drilon was apparently irked by the
brownout that affected the opening of the Museum of Philippine Economic History
at the former Elizalde Building and the performance of the Philippine Madrigal
Singers at the St. Anne Parish Church in Molo District.
‘I would like to appeal to the Cacho
family to give Ilonggos a chance and consider the welfare of the city by
allowing a smooth turnover and negotiate for the viable transfer of (their)
assets,’ Drilon told reporters.
He said sufficient and efficient
power is essential in the development of the city. Drilon blamed PECO’s
purported lack of capital investments to avert the power interruptions.”
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