Batting for one power provider

By Herbert Vego

WHAT if we end up with only one electricity distribution utility in both the city and province of Iloilo? Would it be good for both the residential and business consumers?

If based on the notion that “competition breeds excellence,” that may not be so.  But it is correct to say that the three electric cooperatives in the province of Iloilo – Iloilo Electric Cooperative 1 (ILECO 1), ILECO 2 and ILECO 3 — leave much to be desired.

Iloilo City, however, has proven that notion wrong on the trail blazed by its sole power provider, MORE Electric and Power Corp. (MORE Power), which, within only five years of operation, has boosted its clientele from 62,000 to 100,000 customers, and still counting.

In the next few months, MORE Power will start competing with the ILECOs for patronage because of the passage of Republic Act No. 11918, expanding its franchise to Passi City and 15 municipalities of Iloilo, namely Alimodian, Leganes, Leon, New Lucena, Pavia, San Miguel, Santa Barbara, Zarraga, Anilao, Banate, Barotac Nuevo, Dingle, Dueñas, Dumangas and San Enrique.

At present, four of them – Leon, Pavia, Sta. Barbara and San Miguel – are served exclusively by ILECO I.

ILECO 2 covers Passi City, Dingle, Dueñas, San Enrique, Dingle, Dueñas, San Enrique, New Lucena, Zarraga, Barotac Nuevo, and Dumangas.

ILECO 3 energizes Anilao and Banate.

It would seem like MORE Power is encroaching on ILECO territories. As ruled by the Supreme Court (SC) in a decision dated July 30, 2024, however, electric cooperatives do not have a constitutional right to an exclusive franchise within their coverage areas. This ruling dismissed the petition of the three ILECOs challenging the validity of MORE Power’s expansion to some of their coverage areas.

As seen by Roel Z. Castro, president and chief executive officer of MORE Power, the SC ruling is “a victory for consumers who have been waiting for years to access modern, reliable, and efficient electric service.”

The public clamor for the private corporation to “come in” resulted from the cooperatives’ inability to satisfy their member consumers.

Decades of wear and tear have turned their viability into liability.  Being non-stock and non-profit public utilities, they lack the logistics to replace and upgrade worn-out poles and power lines.

As of the previous year, the ILECOs had accumulated outstanding loans for capital expenditures: ILECO 1 with ₱12.4 million, ILECO 2 with ₱36.2 million, and ILECO 3 with ₱52 million.

These loans, obtained through National Electrification Administration (NEA), were meant to keep substations functional, according to NEA administrator Antonio Mariano Almeda.

I remember that way back in 2021, then congressmen Michael Gorriceta of the 2nd District of Iloilo and Braeden John Biron of the 4th District co-authored a bill aimed at granting MORE Power a 25-year congressional franchise to operate in Passi City and 15 municipalities.

The named congressmen never intended to abolish the ILECOs but to complement them, believing that the well-being of their constituents and economic growth of business enterprises would depend heavily on reliability and affordability of power supply.

MORE Power is allocating ₱2.1 billion in capital expenditures to upgrade the distribution infrastructure that would enhance efficiency and reduce system’s loss.

At the moment, MORE Power charges the lowest residential rate in Western Visayas at ₱10.52 per kilowatt-hour (kWh). Whereas, the electric cooperatives usually charge one to two pesos higher.

Naturally, foreign and local investors would want to infuse their capital into the city because of the lower electricity rates.

However, this deprives the municipalities of parallel economic growth; and the residents, of high-paying jobs and a more comfortable lifestyle.

In practice, an electricity distribution utility ought to be a “natural monopoly” as intended by the government way back in 1969 with the passage of Republic Act 6038 in 1969, which created the National Electrification Administration (NEA) to initiate rural electrification with an initial capital stock of ₱1 billion.

The NEA provides legal, institutional, financial, and technical assistance to electric cooperatives, empowering them to energize specific geographic areas.

A natural monopoly exists when a single company can produce a product or service cheaper due to the economies of scale or cost benefits that come with producing more goods or services, effectively reducing per-unit price.

Having multiple competing firms, on the other hand, would lead to redundant infrastructure, higher prices for consumers, and potentially lower quality of service. Multiple sets of power lines running to every house would be extremely impractical and expensive.

So, what if the ILECOs eventually merge with MORE Power to achieve the economies of scale?

The franchises of electric cooperatives are good for 25 years with option to renew if still viable. As “googled,” those of 39 electric cooperatives will expire between 2027 and 2029.

One of them is ILECO 2, whose franchise will expire in December 2029.

Incidentally, the merger of debt-ridden and inefficient electric cooperatives with regulated private corporations is nothing new. A good example is the former Central Negros Electric Cooperative (Ceneco), which transformed into Negros Electric and Power Corporation (Negros Power) in August, 2024.

Like MORE Power, Negros Power is a subsidiary of billionaire Enrique K. Razon’s Primelectric Holdings Inc. (PHI).