Home » Articles » Malacañang vs. Meralco, January 30, 1971

Malacañang vs. Meralco, January 30, 1971

Malacañang vs. Meralco
by E. R. Kiunisala

It’s a “Fight to the Finish” Between President Marcos and The Brothers Lopez.

January 30, 1971–IT WAS the surprise of surprises—it came like a bolt out of the blue, setting the country all agog, leaving politicians and businessmen on tenterhooks.

Until then, nobody thought that the six-year old political marriage between Pres. Ferdinand E. Marcos and the Lopez brothers, Eugenio, Sr., and Fernando, the Vice-President, would ever be dissolved. After all, the common belief was: what politics has joined together, not even the public interest can put asunder.

But the political divorce is now a fait accompli and it is fast developing into a full-scale war between Malacañang and Meralco, the financial bastion of the Lopezes. Malacañang has opened fire at the Meralco and the latter fired back in kind.

A “fight to the finish,” declared Marcos.

“So be it” might well be the reply of the Lopezes.

While the Malacañang-Meralco war has so far been limited to ink and talk, the stakes are high: the political supremacy of Marcos, on the one hand, and the financial empire of the Lopezes, on the other.

To start with, Marcos is bent on cutting down Meralco to size. Last week, four government agencies, namely, the Public Service Commission, the Solicitor General’s office, the Bureau of Customs and the Bureau of Internal Revenue, started going over Meralco’s operations with a fine-tooth comb.

Even as the Solicitor General’s office was mapping out legal strategies to lower Meralco’s electric rates last week, the PSC announced that it would investigate the recent Meralco power failure. At the same time, the Bureau of Customs threatened to slap Meralco with a P5 million compensating tax and the Bureau of Internal Revenue filed in court a franchise tax delinquency suit against the light firm.

In Malacañang, Marcos pointed to Meralco’s high rates as one of the principal factors in the rise of prices.

Meralco, of course, did not take Malacañang’s charges lying down. Its board chairman, Emilio Abello, was ready with answers. At the same time, Malacañang strategists got some labor leaders and consumer groups to their side. Their obvious purpose was to show that it is the public itself, not just Malacañang, which is fighting Meralco. The major issue of Malacañang against Meralco is Meralco’s alleged high rates. It is now established, said Marcos, that Meralco’s annual income is P93 million. Which means that the light firm, controlled by the Lopezes, is earning more than it should, in the view of Malacañang. Therefore, it should not have increased its rates last year—the floating rate notwithstanding.

To get a clearer view of the issue, a brief review of Meralco’s history is necessary. To begin with, the Lopezes acquired Meralco from its former American owners in 1962. About a year later, Meralco sought increases in its rates. The FREE PRESS fought it all the way. Even then President Diosdado Macapagal opposed it, too. Just the same, in less than two years, Meralco succeeded in getting the PSC to approve Meralco’s proposed higher rates.

Meralco’s main reason for increasing its rates then was: it needed funds to expand its services. The FREE PRESS believed that what Meralco should have done was to raise money from its stockholders, not from the power and light consumers. Meralco also tried to show that its profits then were way below the ceiling set for public service entities. But the FREE PRESS questioned this and pointed to an official report of the General Auditing Office which stated that the light firm had overvalued its assets.

In March of 1965, Meralco’s 23% increase in rates became final. The Supreme Court itself ruled in favor of the new Meralco rates. The public, including the FREE PRESS, had no alternative but to accept the high court’s decision. It must be noted, in fairness to Meralco, that power and electric services has been very efficient. Unlike the telephone service, the Meralco performance—aside from the rates—gave no one reason to complain.

But when Marcos unofficially devalued the peso by imposing the floating rate in February last year, Meralco again sought for an increase in rates. Its principal argument for the increase: the high costs of operation and maintenance as a result of the floating rate. The government, under Marcos, put up only a token resistance. In record time, the PSC decided to grant the Meralco petition seeking higher rates, involving an average of about 36%.

Again, the case was elevated to the Supreme Court. This time, the FREE PRESS presented the case for and against the proposed rates increase while conscious of the fact that Marcos’s floating rate had increased the costs of business operations. In fact, FREE PRESS, too, had to increase its price—and, thanks to Marcos’s debauchment of the currency through overspending to win reelection, may have to increase its price again.

In May last year, Meralco’s rates went up by an average of 36%. Although the people felt none to happy about it, Marcos himself did not complain. He could not—not because he was close to the Lopezes then, but because he knew that his floating rate had increased the cost of dollars by more than 50%. In fact, Marcos, at that time, sang the praises of Meralco, saying that the light firm had improved and expanded its services without asking help from the government in terms of loans and guarantees!

But now Marcos is singing a different tune. He now blames Meralco for having contributed to the spiraling of prices; he wants Meralco’s rates to be lowered. He has set the machinery of four government agencies into action to look deeper into Meralco’s operations. If Marcos had only done this a year ago, he would have earned the plaudits of the public, in general, and the Meralco consumers, in particular.

This does not mean, however, that the people now disapprove of Marcos’s action taken by itself. Malacañang can make its charges against Meralco stick, Marcos will certainly earn the gratitude of the public. However, his motives for doing so would be suspect. Precisely because of this, businessmen and industrialists are now on pins and needles. If Marcos can steamroller a giant industry, with no government loans or guarantees, such as Meralco, what can stop him from acting similarly in the case of other industries, especially those beholden to the government, whose owners may displease him?

But back to the issues between Malacañang and Meralco. First, about Meralco’s alleged income of P93 million annually.

This amount is now “established,” according to Marcos.

“False!” said Abello, adding that Meralco’s income is very much lower.

How much Meralco is earning yearly, Abello did not say, although he quickly pointed out that it is well within the limit set by law.

The President charged Meralco with paying taxes only 25% of its yearly income.

This is another lie, said Abello.

The truth of the matter, Abello went on, is that “Meralco has always been paying a franchise tax based on 100% of gross earning received as provided for its franchise in addition to all other taxes as provided by law.”

Malacañang according to reports, accused Meralco of not fully paying franchise taxes due the government from 1962 to 1965. What it paid covered only the gross income actually received. Meralco should pay, according to the BIR, a franchise tax on gross billings, whether collected or not.

Abello, contended that Meralco’s franchise provides that Meralco should pay the franchise tax only on gross earnings received—not on, in effect, bad debts. In other words, under the explicit term of its franchise, Meralco has not been deficient in the payment of the franchise tax.

Continued Abello:

“We have formally filed with the BIR our position papers on the question of the franchise tax. . . . We expected that a formal decision would be rendered on the question that we raised and on the basis of this decision, if adverse to us, than an assessment would be served on us, as is the normal procedure. But to our surprise, out of the clear, blue sky, after the events of the last few days, four complaints were suddenly filed by the government in the Manila court of first instance. This is a radical departure from the legal procedure at the BIR.”

While the BIR and Meralco are now locked in a legal battle, the customs bureau is going after the light firm for its alleged non-payment of compensating tax on crude oil importations. The amount involved is P5 million, covering the years from 1968 to the present.

Meralco retorted that it had paid all the taxes due from 1968 to the present.

Declared Abello:

“We have never been assessed for any deficiency in the payment of taxes until this time.”

The PSC, too, is now after Meralco’s neck. The casus belli of the PSC was the recent power failure in Greater Manila and environs. The PSC, stated Commissioner Jose Evangelista, a provincemate of the President, is empowered to regulate public utilities to improve public service. The penalty for the violation of the Public Service Act, warned Evangelista, is the cancellation of the utility firm’s franchise.

The recent power failure widened the rift between Marcos and the Lopezes which ultimately led to an open break between them. Marcos claims that the power failure was the result of a deliberate act, not an accident—to prevent him from making his nationwide address concerning the jeepney strike , which, incidentally, according to Marcos, was instigated by the Lopezes. And the PSC, acting on Marcos’s order, is now investigating the cause of the blackout.

Meralco authorities denied that the power failure was the result of a deliberate act on the part of the light firm. The blackout, they said, was caused by malfunction of a circuit breaker as a result of a vehicle bumping an electric pole on Ramon Magsaysay boulevard. The accident snapped a secondary line which fell on a transmission circuit carrying 110,000 volts. When that happened, continued Meralco spokesmen, the circuit breaker at the Rockwell station failed to switch off automatically, causing other transmission lines to go off.

And then came the Solicitor General’s office, which had been ordered by Malacañang to take immediate steps to lower Meralco’s rates—“in accordance with the clamor of the labor and consumer groups.”

Solicitor General Felix Antonio was also directed by Marcos “to look into the widespread claim that the increase in Meralco rates has been one of the major causes for the spiraling of prices of all other prime commodities.”

Meralco replied that it was ready to roll back its rates if Malacañang would roll back the exchange rate from P6.45 to $1 to the previous rate of P3.90 to $1.

Said Abello:

“As we have stated from the very beginning before the PSC and the Supreme Court, we will immediately roll back our rates to what they were before the floating rate if the government does the same in the case of the dollar-peso parity value.”

Abello went on:

“All we are asking the President of our Republic is to make a pious examination of conscience and review what he has done during the last five years, especially in the fields of monetary and fiscal policy and administration, and he will, we are certain, see that the ills that plague this country today are due to him. Let him not blame business and industry for conditions which he alone is responsible.”

But even as Marcos pledged to carry out the fight with Meralco “to the bitter end,” he professed “no personal” enmity with the Lopezes. He was fighting for principles, he said, and there was no turning back. On the other hand, Meralco let it be known that its stand is based simply on fair play and truth.

Who is telling the truth?

Meanwhile, the Malacañang-Meralco was continues.

May the people gain, not suffer, from it! In that case, vive la guerre!

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14 Comments

  1. Gracie Dijkhuyzen says:

    We love and admires the Lopez clan.Marcos was just a dictator and kleptocrat,read the presidential plunder,it’s all written in black and white.Bravo to the LOPEZES.

  2. […] Concerning the ongoing drama of Meralco, see this article from the Philippines Free Press, Malacañang vs. Meralco, January 30, 1971: […]

  3. The attacks made by then Pres. Marcos on Meralco seems identical to the strategy being ployed by the present administration for the beleaguered utility.

    In this EPIRA regime, the distribution sector remains a regulated entity together with the transmission sector, while the generation and supply sectors are unregulated.

    Thus a distribution utility cannot just increase its price without going thru the tedious process of rate approval by the ERC. As such, power distributors are not the main cause why power rates are high.

    Although, it is true that distributors have the capability of lowering power rates via maintaining good supply mix, coupled with bilateral utilization vis-a-vis taking advantage of the low price offers in the WESM during off-peak and low temperature periods.

    There is a bidding mechanism in the WESM wherein power buyers declare their bilateral quantities (those quantities contracted with other power suppliers / generators) to those periods where market prices are high so that in effect they are charging energy quantities declared to their bilateral contract instead to the market. However, WESM buyers are required to declare the quantities thru their generators / suppliers, giving the latter full control of the situation.

    Another thing is that demand bidding is not yet in place in the WESM, which could give WESM buyers equal opportunities to set the price in the market as we all know its the struggle between demand and supply that set the price in any market. Currently, the WESM is more of a sellers’ market, and the buyers are merely price-takers.

    In short, power distributors too are victims of the price hikes happening in the energy and power industries. Distributors are not profiting from any such occurrences, much more getting benefits from it.

    As far as the present market-based structure is concerned, the four sub-sectors in the power industry have their own objective and intention.

    First, generators are always aiming to maximize returns. They generate and offer power with profits in mind. They could resort to withholding capacity or feigning operational problems to decrease supply, which could result in higher market prices.

    Second, the transmission sector’s goal is to always ensure availability of power in the system, thus it buys energy and reserves without much concern of the price.

    Third, the supply sector have the same agenda with the generation sector. Most generators, are suppliers themselves. But in the local power industry context, a supplier is not necessarily a plant owner. They are brokers, marketeers, retailers, or middle-men between the generators and end-users including distributors.

    Lastly, the distributors are more concerned on bringing down the cost of generation so that they may be able to pass thru to their customers lower power bills. The lower the power bill, the more likelihood of increasing power consumption. That is were the distributors deriving their income — more on quantities or kWh of electricity consumed, not on high generation rates because distributors have no mark-ups whatsoever to the generation charge as these are just pass-thru charges. By the way, the biggest component of our power bill is the generation charge.

  4. […] to two pre-martial law articles concerning Meralco that appeared in the Philippines Free Press (see Malacañang vs. Meralco and Political War and Martial Law? both circa 1971). This then brought up the question of the […]

  5. kapirasongtinik says:

    This is the evil that lurks behind all these.

    http://www.philstar.com/index.php?Bansa&p=50&type=2&sec=54&aid=2008051864

    Bansa
    Meralco sinusulot ng 3 GMA crony

    Monday, May 19, 2008

    Tatlong “crony” umano ni Presidente Gloria Arroyo ang nag-aagawan sa pag-take-over sa Meralco.

    Ayon kay Bayan Muna Partylist Rep. Teddy Casino ang tatlong ito ang itinu­ turong “utak” sa demolisyon sa Meralco para magka­roon ng dahilan ng government take-over sa pinaka­malaking distribution utility sa bansa at hatiin ito sa tatlong franchise area.

    Ang plano ng tatlong malalaking pamilya ay ibinulgar matapos parata­ngan ni Casino na ang “Cebu Mafia” ang nasa likod ng mga serye ng atake sa pamilya Lopez at sa Meralco. Ginagamit umano ng mga pamilya na ito si Government Service Insurance System (GSIS) president and general manager Winston Garcia upang pataasin ang stake nito sa Meralco at atakihin ang mga polisiya ng nasabing distribution utility.

    “Clearly, Winston Garcia has a track record of using his position in GSIS to serve the interests of the Aboitiz group,” ayon naman kay Alliance of Concerned Teachers (ACT) president Antonio Tinio.

    Tinukoy din ni Tinio na ang pamilya Aboitiz ay nasa power generation at distribution din, banking, shipping at kilalang supporter at malapit sa Arroyo administration.

    Bukod sa pamilyang ito ay pinapaboran din ng Malakanyang ang Alsons Group na kon­tro­lado na­man ng pamil­yang Alcan­tara. Si Tomas Alcan­tara ay kilalang ba­hagi ng kit­chen Cabinet ni Pangu­long Arroyo at siya uma­nong tu­matayong lider ng bulong brigade ng Napocor mafia.

    Ayon sa mga sources sa industriya ng kuryente at opisyales ng Napocor, ang dalawang grupong ito ang nag-eengganyo sa Mala­ kan­yang na awayin ang kasalukuyang management ng Meralco sa pa­mamagitan ng pagkakalat ng intriga na ang mga Lopez ang sanhi ng mataas na presyo ng kuryente at hindi ang 12 porsyentong EVAT at ang mataas na singil ng Napocor.

    Idinagdag pa nila na ang mga Aboitiz at Alcan­tara ay naglalaway din sa mga power generating plants na pag-aari ng mga independent power producers (IPP) at gagamitin ang impluwensya nila kay Arroyo upang sungkitin ang mga ito. Bukod sa pagiging kamag-anak ni First Gentleman Mike Arroyo, isa sa mga lalaking Aboitiz ay matalik na kaibi­gan ni Pangulong Arroyo.

    Sinasabi rin ng mga sources sa Philippine Stock Exchange (PSE) na ang nangangasiwa sa pamimili ng Meralco shares ay Vivian Yuchengco, isang stock broker at opisyal ng PSE, at ang ATR Kim Eng ang siya namang dinadaanan ng mga transaksyon.

    Upang mapabilis ang paghawan ng Meralco shares, si Diosdado “Bu­boy” Macapagal at si En­rique Razon ng ICTSI, ang ingatyaman ng partido ni Arroyo, ang siyang gina­gawa ngayong bukal ng pera para mamili ng Meralco shares.

    Kinondena na ng mga kongresista ang ginaga­wang maniobra ni Garcia at ang sobrang pakikialam nito sa usapin ng Meralco ga­yong hindi niya maipali­wanag kung saan nauuwi ang salapi ng GSIS at kung bakit sangkaterbang rek­lamo na ang ginawa ng mga pensyonado at ng mga kawani na pamahalaan na bumubuhay sa institusyong ito.

    Lumilitaw din na bukod pa sa pagiging presidente at General Manager ng GSIS, si Garcia ay umuupo at sumasahod din ng milyun-milyong piso sa ibat-ibang kumpanya na may investment ang GSIS.

  6. […] January 30, 1971 regarding Malacanang (during Marcos Regime) and Meralco (with the Lopez Brothers). Check it out! * e-Meralco Ventures, Inc. is he information and communications technology (ICT) vehicle of […]

  7. Gaudz Pacot says:

    lahat ng pabor sa meralco, sira-ulo!!!!!!!!!!!!

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