Keeping the lights on

The picture of three big names in Philippine industry — Manny Pangilinan, Ramon Ang and Manolo Lopez — raising their joined hands in jubilation will be etched for a long time in the collective memory of business observers. I am speaking of the triumvirate who represent the three corporate giants Meralco, the PLDT Group and the San Miguel Group. I refer to the annual stockholders meeting of Meralco last May 26  which was preceded by all forms of scenarios, but was concluded with an uncharacteristic peace and harmony — so much unlike the stockholders meeting of the previous year which was a riot, to say the least, and which adjourned at the wee hours of the morning.

What the meeting lacked in drama it more than compensated with a new Board organization and a new set of corporate officers which say volumes about how the biggest distribution utility would be run well into the future.

Mr. Lopez, who has presided over Meralco’s affairs for 30 years, got the votes of confidence from the two big shareholders in the Board, to remain as chairman and CEO. Mr. Pangilinan will chair the Executive Committee, and Mr. Ang settled for the post of vice chairman. My friend, Jose “Ping” de Jesus, was re-confirmed as president and COO. Meralco is worth watching into the 12 months and well into the next stockholders’ meeting. Meanwhile, it’s back to business for Meralco.

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Drowned temporarily by the deluge of congratulations and I-told-you-so’s is actually a major development in the electric power industry that has tremendous impact on the customer interface of Meralco and its over four million customers.

This watershed development is the new regulatory system, called Performance-Based Regulation (PBR), which was adopted by the Energy Regulatory Commission (ERC) to govern the customer service and rate-fixing processes of distribution utilities.

Let me steer clear of the technical jargon and briefly describe what PBR is.

PBR is more than a rate-setting system; it is a system that keeps Meralco and other distribution utilities on their toes due to the “performance” aspect of the ERC order.

But, first things first. As a rate-setting mechanism, PBR requires all DUs (Distribution Utilities) to submit their four-year projections, which include the number of customers to be serviced for their electricity requirements. To start off the process, DUs, like Meralco, would submit their required revenue and translate that revenue into average rate of electricity to be charged to customers.

This process is strong in public consultations and hearings, conducted before the DUs even begin tooling up for operations and expansion. In the old system - the return on rate base (RORB) -hearings were conducted after the DUs had already invested in tools and equipment. Under PBR, price setting is the product of many consultations, and so the resulting power rate is “owned” by those consulted. That is because, in the new system, the DU gets approval first before it implements the new rate.

But there are more interesting aspects of PBR, and I am sure Meralco customers will welcome such aspects. 

Under PBR’s guaranteed service level (GSL) program, Meralco will be fined when it fails to meet certain sets of performance standards.

For example, you are a customer and you have experienced more than a cumulative total of 35 hours of brownouts. What is ERC’s order for Meralco to do? The utility firm will be fined P120 per incident per customer. If brownouts occur more than 25 times in a year, the customer receives P150 from Meralco. If power is not restored beyond the agreed-on 15 hours, Meralco pays the customer P120.

These hundred or so pesos may look small, but when you multiply these into possibly millions of customers, you’d see a staggering amount. That’s why, Meralco people are forced by the system to be efficient, to be responsive and to remain within the limit on the duration and on the frequency of brownouts. Otherwise, the company will face the scary prospects of substantial cash outflows.

On the side of the customer, this is good. This actually represents added income to the customer - or savings - who can then use such extra money for kids going to school this June.

What is remarkable here, beyond financials, is that ERC has created a system where Meralco and other DUs are always alert to shortfalls in performance and are driven toward excellence.

Of course, we can say that Meralco does not need an external factor to drive it to be efficient. But anyway, dear readers, that’s how it plays out in a regulated industry. The good thing about PBR is that both customer and Meralco are “game.” I like the inspired statement of Manolo Lopez when he declared: “We will keep the lights on!” A toast to that! 

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Before summer’s over, one must hie over to LRI Business Plaza, 210 Nicanor Garcia Street (formerly Reposo St.), Bel-Air, Makati City for entertainment, shopping, and wellness sessions.

There are three new shops at LRI.

Rain, the all-in-one women’s store on the first floor that offers made-to-order furniture, gift items, house decors, home accessories and the like. The clothes and shoes that young owner Tim Tang Ong designed are unique. It also offers special cosmetic services like facial and eyelash extension, arts learned by Ong in Bangkok. “Rain is where you can find beautiful things,” says Tim.

Now’s the time to learn to dance. Studio 116 dance school, owned by Emily Silva, uses an internationally-recognized dance syllabus for ballroom dances like tango, waltz, rhumba, chacha, jive and quickstep, swing, salsa, and salsa sunshine.

You’ll find, at Living Space, on the 2nd floor, modern-design furniture and accents, sofas, accent and dining and lounge chairs. The store provides a fresh mix of the old and new, weaving classic designs with contemporary European elegance. Living Space owners are young couple Alvin and Anne Young who love to share their appreciation for beautiful things.

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My e-mail: [email protected]