MANILA Electric Co. (Meralco) said its partnerships with electric cooperatives (ECs) could generate billions of pesos in consumer savings by bringing the co-ops' double-digit system losses down to single-digit levels.

Arnel P. Casanova, Meralco senior vice-president and head of strategic distribution utility partnerships, said on Money Talks with Cathy Yang on One News on Thursday that some ECs record system losses of as much as 25%, compared with Meralco's level of about 5%.

"Because [if] Meralco comes in, the double-digit system losses of the electric companies will be dropping down to single-digit," Mr. Casanova said.

System losses refer to the difference between electricity delivered to a distribution system and the electricity actually delivered to end-users. The costs arising from these losses are charged to consumers, up to ceilings set by the Energy Regulatory Commission: recoverable system losses are capped at 13% for electric cooperatives and 8.5% for private distribution utilities such as Meralco. Losses running as high as 25% at some ECs exceed that cap, leaving those co-ops to absorb the difference on top of their existing constraints.

"If you are able to lower that to even a single-digit, that's worth billions of pesos of savings for the consumers themselves. So you get reliable power, efficient economic utility, and cheaper power," he said.

Capital and technology gaps

Electric cooperatives — more than 100 of which operate across the Philippines, carrying out rural electrification under the state-run National Electrification Administration created in 1969 — serve areas outside the franchise zones of large private utilities. Mr. Casanova said they face constraints in capital and technical capability, which Meralco intends to address through potential partnerships.

"The challenge among the electric cooperatives is capital and technology. So they have great people who are serving the consumers. However, they lack capital and technical capability," Mr. Casanova said.

"So Meralco has those financial resources and also the expertise for 124 years we've been in this business. So we want to infuse all this capital and shared technological capability to all the electric cooperatives around the Philippines so that they could provide reliable and affordable power," he added.

Shareholdership for member-consumers

Under Meralco's proposed partnership model, participating ECs would be converted into stock corporations, allowing member-consumers to become shareholders.

"Unlike other competitors, they really take over the electric cooperatives because they take away the franchise, they take away the assets, and they even terminate the employees. In this case, for Meralco, we actually allow the electric cooperatives to stay as they are," Mr. Casanova said.

The conversion would allow member-consumers to hold stock certificates and potentially receive dividends from the utility, he noted.

"Currently, as member consumers, they don't have any stock certificates because it's a non-stock-up profit. But with the conversion to stock corporation, they would now have a stock certificate to show for it. And they would be sharing dividends in the same manner as any shareholder would have," Mr. Casanova said.

Meralco is the country's largest private electricity distribution utility, serving more than 8.2 million customers in Metro Manila and nearby provinces, including Bulacan, Cavite, Rizal, and parts of Laguna, Batangas, Pampanga, and Quezon.

Its controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.

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