MANILA, Philippines--The Lopez group has won another round in its battle to retain control of Manila Electric Co. (Meralco), succeeding in getting the Court of Appeals to issue an order restraining the Securities and Exchange Commission from acting on a plea by the Government Service Insurance System (GSIS) to overturn the election of the Meralco board.

A GSIS official said the state pension fund would immediately seek redress from the courts, adding that the GSIS would not let up in its campaign to end the "mismanagement" of the country's largest electricity distribution utility.

The appellate court's temporary restraining order, to be in force for the next 60 days, was served only minutes after the corporate watchdog adjourned a hearing during which Meralco was asked to explain its defiance of an SEC cease-and-desist order directing Meralco to set aside the unvalidated proxy votes of the Lopezes in last Tuesday's election.

"It's status quo on the validity of the Meralco board ... we will be filing our comments accordingly," said Gerard Lukban, the SEC commission secretary, after he received a copy of the TRO.

He said SEC hearings and directives on the issue of illegal proxies would be temporarily suspended.

The GSIS has argued that Tuesday's election of the Meralco board was tainted by illegitimate proxies and said the final vote would have given the GSIS majority control if the illegal proxies were excluded.

The state-run pension fund, which owns 25 percent of Meralco, wants to shake up the management because it believes its majority stockholders, the Lopez family, have not done enough to bring down electricity prices.

The Lopez group retained majority control of the 11-person board in last Tuesday's vote.

GSIS legal counsel Estrella Elamparo said the GSIS would comply with the appellate court order even as it filed an urgent motion for reconsideration with the Court of Appeals.

"The GSIS follows all legal orders whether they be adverse to us or for us. I wish the Lopezes can say the same when they defied a lawful order of the SEC in relation to Meralco's sham May 27 board election," she said.

"Like we expected, they would try to delay everything," said Elamparo.

She said that even as the SEC hearing was going on, word was already going around that a TRO was being issued and that "Meralco lawyers were already on their way to give [the SEC] a copy of it."

Playing for time

The TRO however failed to stop the SEC hearing. Even then, Meralco won a temporary reprieve from the SEC which gave the firm three days to explain why it should not be cited for contempt for violating a cease-and-desist order.

Midway through the hearing, there was talk that the appellate court had already issued a TRO though it had yet to be officially served. GSIS lawyers urged that the hearing proceed while Meralco lawyers played for time, arguing that the SEC had not yet "acquired jurisdiction" over the case since the respondents, senior Meralco officials, had not been served the proper summons.

Meralco lawyers said the TRO would override the SEC's order for them to make a manifestation with the regulator in three days.

Elamparo said all legal remedies are available to the GSIS in pushing for reforms at Meralco, including the intervention of the appellate court and the Supreme Court.

"Ultimately, the GSIS believes in fighting for what is right, in fighting for the cause of long-suffering Meralco customers and in protecting Meralco shareholders from corporate malpractices such as those seen in Meralco under the Lopezes," she said.

"Meralco cannot hide in the dark forever. The GSIS has put its unconscionable actions against consumers in the spotlight and the people can now see through their misdeeds," she said.

Customers' deposits

In a related development, Meralco on Friday denied allegations made the other day by the National Association of Electricity Consumers for Reforms (Nasecore) that it had misappropriated part of the interest from customers' meter and bill deposits estimated to reach about P21 billion.

Nasecore has filed with the justice department a criminal complaint for "syndicated estafa" against the Meralco board for allegedly declaring as income P889 million in customers' money.

The amount represents 4 percent of the customers' deposits which Meralco had put down as "interest and other income account" in its Dec. 31, 2006, financial statement.

Nasecore said this constituted misappropriation because this effectively converted the money belonging to Meralco's customers into corporate profits or income of Meralco shareholders.

Merlaco claimed that a similar case was filed by a customer with the SEC which issued a decision last January dismissing the complaint.

Citing the SEC decision, Meralco said it was absolved of the misrepresentation charges as it already made "sufficient disclosures in its audited financial statements of the details and basis for the adjustment."

Refund mechanics

Meralco also said that the Energy Regulatory Commission has yet to issue the mechanics for the refund of the customers' meter and bill deposits which Meralco is obligated to return under new ERC regulations.

These yet-to-be-issued guidelines would clarify the appropriate interest rates for both the meter and bill deposits applicable for specific periods, Meralco said.

Meralco also said that it was never required to place its collected meter and bill deposits in a trust fund, as the Nasecore claimed.

Interest earning

It said that the state regulator had ruled in 1985 that the collection of the meter deposit was appropriate "to afford Meralco some relief so it can use the meter deposits for purposes of purchasing and installing new meters or replacing defective meters."

It explained that the bill deposit, which is equivalent to one month's bill of the customer, is intended to guarantee payment of monthly bills.

"Both deposits earn interest at the rate prescribed by the regulator. In fact, other private distribution utilities were allowed to collect meter deposits ahead of Meralco," it said.

He 1985 decision allowing Meralco to collect meter deposits was carried over into the Energy Regulatory Board, the predecessor of the ERC, in 1995.

Obliged to return deposits

Meralco said that its only obligation with regard to the 1985 and 1995 decisions was to return the meter and bill deposits upon the termination of the contract of service with the customer, with payment of interest at the prescribed rate.

The ERC subsequently ruled that these customers' deposits are to be refunded but has yet to issue the guidelines for the refund.

ERC chair Rodolfo Albano told a House energy committee hearing last Thursday that the regulator was already finalizing the draft guidelines for the refund, incorporating inputs from Meralco, which he said would be released next week.