MANILA, Philippines?A struggle for control has broken out in the country?s largest power utility after government pressure on it to cut its rates, and analysts say the row could affect privatization of the power sector.

State pension fund Government Service Insurance System (GSIS) has called for a management revamp at Manila Electric Co. (Meralco) in a bid to drive down the rates.

?I believe we can only bring down rates if we change management and put somebody who can initiate reforms,? GSIS Chair Winston Garcia told Reuters news agency.

But Garcia said the GSIS, which holds a fourth of Meralco, was not interested in assuming management control of the utility and only wants to ensure that the power firm was not overcharging customers.

Meralco is controlled by the Lopez family, which also owns two power generation plants and geothermal firm PNOC-EDC, as well as the country?s biggest media firm, ABS-CBN Broadcasting Corp. The family owns about one-third of Meralco.

The matter is likely to come to a head at a shareholders? meeting on May 27.

Critics say Meralco buys power at high rates from Lopez-owned generating firms.

?We will try our best to bring down power rates. This can be done if Meralco buys cheaper power from its own power producers,? President Gloria Macapagal-Arroyo told a Cabinet meeting on Tuesday.

Ms Arroyo wants to lower rates to appease foreign business groups which have complained of high power costs and to ease the burden on the country?s poor who are saddled with rising food and oil prices.

Some analysts and commentators say the GSIS is putting pressure on the Meralco management at the instance of the Palace.

Arroyo not against Lopezes

Ms Arroyo?s economic adviser Joey Salceda quoted the President as saying that she was not against the Lopezes.

Salceda said in a radio interview that the government did not want to take control of Meralco.

?It?s bad for the country, it?s bad for the poor, bad for the economy, it sends the wrong signal,? he said.

Meralco says it has to pay high prices for power bought from all generating firms, including those belonging to state-run National Power Corp. (Napocor), whose aging power facilities mean it costs more to produce energy.

Jesus Francisco, Meralco?s president, denied that Lopez-owned power firms were charging more.

?There is some seasonality in power rates, charges really rise in March and April due to the onset of summer,? he said of the high rates charged by Meralco.

The government is privatizing Napocor to cut its debt, boost state finances and attract fresh investment into the energy sector but pressing Meralco to cut rates may turn off foreign investors, analysts said.