There are few companies in Cebu whose business is as intertwined with everyday Cebuano life quite like VECO. From turning on your coffeemaker upon waking up in the morning to keeping the lights on while working at night, theirs is an outfit operating constantly in the background, providing what some may argue is one of the most basic modern necessities.
It seems funny to recall that, decades ago, VECO had to spearhead initiatives to get people to use electricity. “The company had an appliance store called VESCO, or the Visayan Electric Supply Company, just so people would buy all these things that they could use electricity for,” shares Arlo Sarmiento, who works with VECO’s parent company, Vivant Corporation, as its Executive Vice-President and Chief Operations Officer.
These days, though, it’s a completely different story. VECO now distributes an average of 240-megawatt hours of electricity every month to cover a franchise area of 674 square kilometers, an area that includes Cebu’s major cities and municipalities—Cebu City, Mandaue, Talisay, Naga, Lilo-an, Consolacion, Minglanilla and San Fernando. “There’s a lot of passion and a lot of pride,” says VECO’s Chief Operations Officer Anton Perdices. “Everyone walks in feeling pretty good that they’re working for VECO, knowing they’re responsible for over two million people’s lives.”
A HISTORY American engineers Martin Levering, Albert Bryan, R.R. Landon and A.A. Addenbrook had established Cebu’s first electric company—then Bryan and Landon Electricity—in 1905, covering a franchise that included Cebu, Dumaguete and Dipolog. Later on in the 1910s, the Escaño family acquired the company and renamed it Visayan Electric Company.
“Both parent companies [Vivant and Aboitiz Power] are committed to the industry long-term. With that kind of mindset and shared philosophy, I can’t see how things in VECO would have to change.”
Not long after the Escaños had bought in, the Aboitiz family had also acquired shares and had since been on the VECO board. The two families already had some close ties—they had ran a shipping company together called La Naviera Filipina, before the war had broken it up into each family’s individual businesses, namely Aboitiz Shipping and Escaño Lines.
The close ties between the Escaños, with their extended family the Garcias, and the Aboitizes continued on throughout VECO’s history, but the bigger change would come later, gaining traction in the late 90s and coming to fore by 2004.
THE SHIFT The shift into co-management had been, according to Arlo, a long time coming. “It was something that was discussed over the years until it ultimately happened,” he shares, noting that both families had regular discussions during board meetings.
The timing was certainly right—the Electric Power Industry Reform Act (EPIRA) had just been passed, allowing utility providers to source from independent power suppliers outside of the National Power Corporation (NAPOCOR). “The industry was changing dramatically, so it was really a good time to update VECO as well,” Arlo adds.
When the time came for change, the Garcias had felt that bringing in the Aboitiz family was the natural choice. At the time, the Aboitizes were also running their other distribution utilities Davao and Cotabato Light. “We saw how their culture made those utilities excel more than VECO, so it just made a lot of sense. We thought, let’s adapt this culture,” Arlo says.
As someone who had joined the company during the transition, Arlo himself had experienced the shift in operations. “The culture that VECO had prior to that was a very old one. It was a family-run, patriarchal type of business,” he shares. “But the board, which had been pretty much controlled by the Escaños and the Garcias, believed that a change had to happen, and the Aboitizes brought in a professionalized corporate culture.”
The transition happened in 2004, under Dennis Garcia’s term as President as the first Aboitiz COO and Executive Vice-President. It was then that Arlo joined the company’s utility economics department, the group that takes care of power supply arrangements, purchases the power and reports to the Energy Regulatory Commission. Alfonso’s brother Jimmy came in as Vice President for Engineering, but later took over as COO in 2007.
When Jimmy took over as President in 2014, he had decided to bring in Anton Perdices, who at the time was working in the company’s construction arm. “He came up to me one day and said, I have a job offer for you, and I know you’re gonna like it,” Anton recalls.
When Jimmy had informed the Garcias on the board, it was welcome news. Now, Arlo and Anton, along with Jimmy and Vice-President Emil Garcia, are the family members who serve as VECO officers, with the rest serving at a board level. “Anton pretty much runs the show,” Arlo adds with a laugh.
“But we’re always talking,” Anton replies. “That’s another thing that makes the partnership work—everyone is aware of what’s going on. The families have known each other for so long, so it wasn’t as big of an adjustment. There’s a similar mindset, similar attitude, similar sense of humor. Similar everything.”
IN THE FUTURE Much like any other industry, the business of distributing electricity is one that is constantly evolving. Several pieces of legislation, as well as projects VECO is spearheading itself, mean there will soon be plenty of changes in the market, some of which we’ll be seeing in the near future.
• RETAIL COMPETITION AND OPEN ACCESS (RCOA) This gives consumers the opportunity to purchase their electricity from their preferred supplier. “It’s kind of like the telecommunications industry, where you as a customer ca n choose Globe, Smart or Sun,” Anton explains. “Eventually you can pick where you buy your power, so that will bring competition and eventually drive prices down. There’s going to be all kinds of plans—like if you lock in a contract for three years, this is how much your rate is going to be; if it’s a year, then you will be paying this. There’ll be post-paid and pre-paid plans.”
Eventually, VECO will be relegated to the wires and poles business. Arlo explains, “It’s like a highway: you choose the car, but you pass through the highway—in this case, it’s the wires and poles—and we collect toll fees.”
And apparently, this is all happening soon. Customers with a consumption of one megawatt and above will enjoy the power of choice by February 26, and by June, those who consume 750 kilowatt and above can do the same. “They’re also going to aggregate customer accounts, like in Maria Luisa, for example,” Anton explains. “They can get together as a group, pool their demand, and pick the supplier they want.”
• RENEWABLE ENERGY LAW One of the provisions of this legislation, the Renewable Portfolio Standard dictates that utilities distributions need to purchase a percentage of their supply from renewable sources, with the percentage growing every year.
Currently, VECO already sources 50% of their power from renewable sources, and consumers also have the option to use their own. “Basically if you have solar panels, the electricity you don’t use, you send back to the grid and VECO buys it from you,” Anton explains.
• UNDERGROUND WIRING “What we’re doing now is having them study where it would make the most impact,” Anton explains about VECO’s current plans of moving existing electrical wires underground. One of their major concerns is typhoon resilience, which is why areas like Banilad, where there are a lot of trees, are likely candidates.
With electrical lines moving underground, VECO hopes other utilities like telephone and cable will follow suit.
TECHNOLOGY UPDATES Of course, there are a lot more changes than the consumers realize. “There’s a story about Alexander Graham Bell and Thomas Edison,” Anton shares, narrating how the two would react to how their inventions have evolved through the years. Alexander Graham Bell would be surprised at how much the telephone has changed, with the emergence of mobile and smart phones, while Thomas Edison would find electricity work basically the same way. “But behind the scenes, it’s completely different. Our system operations department, the way we do things, it’s all electronic.”
The updated system has allowed VECO to more effectively source power, and to do so with more foresight. In fact, a process that previously required someone to study power supply and compute future demand can now be performed by a computer system. “It was developed by an Iranian mathematician,” Anton explains. “We have different suppliers who have different prices. This system would take that information, run the math and come up with the best mix—which supplier would be best for this time.”
Although these technicalities may not be something customers themselves would be able to identify, the result affects homeowners in the long run. Being able to source the best and cheapest supply at a given hour will bring down the cost of electricity, which will in turn bring down electric bills.
At the heart of it all, VECO is about the people they serve. The company is continuously looking for ways to give their customers more value for money. “We’re serving the second biggest city in the country,” Anton says. “With that comes tremendous growth, and balancing supply with trying to get the lowest price for our customers is always a concern. It’s also important to keep customer service at a level where they are satisfied. It’s a real challenge. We are growing so fast as a franchise, and customer service is always a concern.”
With this imminent growth on the horizon, both families are confident that having their partnership in place is what’s going to continue bringing their success into the future. “Both parent companies are committed to the industry long term,” Anton shares. “Aboitiz Power is in it for the long haul, and with that kind of mindset and shared philosophy, I can’t see how things in VECO would have to change.”
“I really don’t foresee any changes,” Arlo agrees, pointing out the achievements that both companies were able to achieve together. “I think right now, it’s a case of, if it’s not broken, don’t fix it.”