The franchise and strategic responsibility of distribution utilities

Remember that unfortunate outage on Panay Island last year, which led to a staggering P3.8 billion in economic losses?

That incident serves as a reminder that while we may take power for granted because of its constant availability in our daily lives, any disruption is bound to have consequences in the lives of individuals, families, communities, and the nation.

Thus, as we work toward our aim of achieving sustainable and inclusive economic growth, it is vital to acknowledge that it is power that supports and sustains all economic activity.

The Philippine Energy Plan (PEP) 2023-2050 foresees electricity sales to grow more than four times over their 2022 levels by the year 2050. This translates to an average annual growth rate of 5.5%. The increasing population and expanding economy will continue to drive the demand.

In the short term, the need for affordable, reliable power is magnified with the coming elections on May 12. Imagine polling centers, using automated machines, experiencing power interruptions or outages. Thus, power is not just an economic issue; it is also crucial to the integrity of our electoral process.

THE ROLE OF DISTRIBUTION UTILITIES
In this context, the role of distribution utilities (DUs) becomes even more critical. They serve as the crucial link between power generation and the everyday needs of homes, businesses, and essential services.

In the Philippines, utility companies operate through franchises, which are granted by Congress and affirmed by Executive action. By the nature of the services they provide, utilities — distribution utilities in particular — engage in businesses that must be viable investments, yes, but above all, they exist to serve the public good.

The fact that distribution utility franchises must go through a rigorous legislative process underscores the great responsibility that franchise holders must deliver. A franchise is not merely a license to operate; it is a public trust that demands continuous investment in infrastructure, system reliability, and consumer protection.

MERALCO’S FRANCHISE
Last week, Executive Secretary Lucas Bersamin confirmed that President Ferdinand Marcos, Jr. had signed the extension of the franchise of the Manila Electric Co. to distribute power in Metro Manila and its environs.

With the extension, Meralco has been granted a fresh 25-year privilege to distribute power until 2053. Its current franchise will expire in 2028.

Meralco has well over a hundred years’ experience in the power industry. Economic activity in its service areas make up a significant part of the national output. Residents of Metro Manila and its environs have practically never known any other power distributor aside from Meralco.

The company’s established track record stems from its keen awareness of its responsibility to secure adequate and affordable power supply through transparent and competitive mechanisms such as the Competitive Selection Process (CSP). This ensures that consumers benefit from least-cost power procurement while ensuring transparency and fair competition among power generation companies.

DISPARATE ABILITIES
Despite Meralco’s reach and capacity, however, the extension of its franchise alone does not comprise nor guarantee the stability and affordability of power across the country. Distribution utilities are still disparate in terms of capacity and quality. They vary in the fulfillment of their franchise mandates — how customers deserve consistent energy services, and how DUs must perform to meet customer needs.

Franchises are not to be taken lightly. It is not a right that one is entitled to, no matter how long a DU has been in business. It’s a privilege earned by showing a real commitment to energy security, strong performance, and forward thinking — especially in addressing challenges that impact power distribution and service quality.

As the nation strives for progress, distribution utilities must rise to the challenge. They must take proactive steps to upgrade their systems, prevent outages, and ensure uninterrupted service. Only then can we build an energy-secure Philippines capable of supporting long-term development.

Despite the current challenges that the Philippine economy is facing, there is great reason to be hopeful that targets can be met and that the right systems and policies are in place. Still, these systems aren’t flawless, and outcomes will vary across franchise areas.

Meralco’s franchise was extended for good reason, and key to the new 25-year privilege is its acknowledgment that for it to be able to deliver quality service, it must not be content with what it has been doing in the past. Energy is a critical infrastructure, affecting the lives and livelihoods of millions. Improving the quality of distribution channels is a persistent challenge to DUs. They also have to contend with threats that may not have been present, or may not have been as sophisticated, in the past.

Energy security is essential to powering our country’s economic aspirations. It is the DUs’ strategic responsibility to be a key enabler of growth by ensuring reliable and accessible power to all households and industries — an essential foundation for sustained national development and economic competitiveness.