Meralco Ordered to Refund customers
But the more unusual stuff has been occurring in the power distribution, water, and airports businesses. Making it more unusual is that a single entity – the Lopez Group – is involved in the power distribution business through Meralco and the water business through Maynilad.

On November 15, the Supreme Court’s Third Division in a 5-0 vote ruled that Meralco “overcharged” its four million customers in electricity bills dating back to 1994. The Court concurred with a Commission on Audit finding that Meralco could not include income tax in the computation of operating expenses, something it – and other utilities overseas – had been doing for years and was considered a standard industry practice. Depending on who’s doing the math, estimates of that refund run from P8 billion to P28.15 billion (US$528 million), which the Court says Meralco can implement either through a direct refund or by crediting against future consumption. The company is appealing the decision through a motion for reconsideration.

Following the decision, Standard & Poor’s placed Meralco’s credit rating on “negative alert notice” and the local stock market took an immediate downturn following a 40% plunge in Meralco’s stock price. Meralco now faces a battle on three fronts. First, it has yet to receive a favorable response on a long-standing power rate increase request at the Energy Regulatory Commission. Second, it is carrying significant debt, a major part of it guaranteed by the government. And third, it is facing an uphill battle in the Supreme Court in what is essentially more of an accounting interpretation issue than a legal one.

For the moment, it’s a standoff, with the case pending reconsideration in the Court (filed December 5) and the Energy Regulatory Commission now calling hearings on the rate increase petition. In the meantime, no investor is expected to touch the National Transmission Company privatization (even if the Transco bill were passed) since its rate on return base calculation will be patterned after Meralco’s.

Water Under the Bridge
Calling the case “water under the bridge”, Maynilad Water, one of two companies running the former MWSS water service as private concessionaires, announced in early December that it was “returning” the concession and wanted its money back - around US$303 worth of investments. Maynilad President Rafael Alunan declared that MWSS failed to live up to its contract commitments following the privatization of the concession in 1997. Key among these commitments were timely rate hikes and the appropriate foreign currency adjustments. The Lopez-owned Maynilad Water Services had assumed around 90% of MWSS debts when it won the concession — a hefty burden that had doubled with the peso’s depreciation after the 1997 Asian financial crisis.

If uncontested, the termination should take effect in 60 days. Given govern-ment’s intention to contest the reasons for the notice for termination, the dispute is going to be decided by the Singapore-based International Chamber of Commerce, which has 90 days to rule on the termination and on Maynilad’s “refund”.

The Lopezes’ Benpres Holdings Corp. owns about 59% of Maynilad, which supplies the West zone of Metro Manila. In what was considered a landmark step in the government’s privatization program, Maynilad - along with Ayala Corp.’s Manila Water - won in 1997 the 25-year concession from MWSS to run, manage and improve Metro Manila’s water system.