Meralco’s franchise renewal: A boon for Philippine economy | BusinessMirror Editorial (2024)

The proposal to extend Meralco’s franchise by another 25 years deserves serious consideration by lawmakers. As outlined by House Committee on Ways and Means Chairman Joey Salceda, there are compelling economic reasons to grant this extension. While Meralco’s current franchise remains valid until 2028, Salceda argued that extending it is not only justified by the company’s compliance with franchise law conditions but also by the positive impact it has on the economy and consumers. (Read the BusinessMirror story: “Extension of Meralco franchise pushed,” May 14, 2024).

One of the key points highlighted by Salceda’s proposed measure is Meralco’s superior service compared to other major electric cooperatives and distribution utilities. Consumers served by Meralco experience minimal outages annually, which is in stark contrast to the prolonged blackouts faced by consumers in areas serviced by other ECDUs. Salceda said that if all ECDUs performed as efficiently as Meralco, the economy would benefit from an additional P201 billion in gross value added annually due to avoided outages. This demonstrates the significant economic advantages that Meralco’s reliable service brings to the table.

Furthermore, Salceda commended Meralco for its robust financial standing, enabling the company to secure power supply agreements (PSAs) in compliance with competitive selection rules. Meralco’s ability to maintain low system loss charges is also acknowledged, which is attributed to the substantial investments the company has made over the past two decades to enhance electric service. These investments, totaling P220 billion, have contributed to Meralco’s effectiveness as a service provider and have garnered interest from numerous municipalities and cities outside the franchise area that wish to be served by Meralco.

In addition to the economic benefits, Salceda’s bill proposes to expand the scope of Meralco’s operations. The existing franchise, Republic Act 9209, does not include provisions for extending services to adjacent or nearby areas. The proposed bill addresses this limitation by allowing Meralco to provide service to other provinces, cities, municipalities, or barangays upon the request of their residents, subject to a referendum or court directive. This expansion would not only benefit the areas seeking Meralco’s services but also contribute to the company’s growth and potentially generate more economic opportunities.

The financial performance of Meralco further supports the argument for franchise renewal. The company reported a significant increase in net income, driven by strong growth in energy sales and higher earnings from its power generation businesses. Meralco’s success in both its power distribution and power generation sectors underscores its competence and stability as a key player in the energy industry.

Renewing Meralco’s franchise for another 25 years aligns with the goal of fostering a stable and efficient power distribution system. The company’s track record of reliable service, robust financial standing, and potential for expansion all contribute to the notion that granting an extension would be in the best interest of the economy and consumers.

Of course, any franchise renewal must come with robust oversight and consumer protection. But on balance, the evidence suggests that extending Meralco’s franchise would be an economic boon for the country. Reliable electricity is a cornerstone of sustained growth, and Meralco has demonstrated its ability to deliver on that front. Lawmakers should seriously consider this proposal as part of the country’s broader economic development strategy.

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