Their milking cow (1)

BACKBENCHER
Rod Kapunan
6/4-5/2011



It is irrelevant whether there would be a gain to be realized to the proposed ordinance adding a 0.5 percent increase in the assessed value of the real property just to implement the Socialized Housing Program of the Quezon City. Rather, the increasing cost for social services has become the local politicians’ favorite pastime to justify their insatiable need to increase their pork barrel. Their projects, if one has to be blunt about it, are not at all intended to ameliorate the poor, but calibrated to promote their own political agenda. We are saying this because the residents and those doing business in the city are now up in arms because the numerous taxes, licenses, permits and certification fees that have been slapped on them are supposed to vouch the boast of then-Mayor Feliciano Belmonte, now Speaker of the House, that he left a hefty P6.5-billion surplus.

The decision of some councilors to press hard its approval exposed the canard peddled by Belmonte for if it were so, all they need is to enact an ordinance to realign that alleged P6.5 billion to the proposed socialized housing program estimated to cost only P223 million without them imposing an additional burden to the property owners. More than that, in 2010, the city government appropriated P30 million under the heading of financial expenses to cover payment for bank charges, documentary stamp taxes, interest expense, and other financial charges which, according to Johnny Chang of the Movement for Better Quezon City, are indicative the city government is mired in debt. In 2009, it paid for the same financial expenses P31.281 million, and in 2008, P50 million or for a total of P111.2 million. Such amount does not reflect yet the principal for which those interests and charges are being paid for by the city government.

Already, the residents of the city are mired in taxes, licenses, business permits and certification fees to the Office of the Mayor down to the barangay level, and the argument made by its proponents led by Councilor Edcel Lagman Jr. is to comply with R.A. No. 7279, or the unpopular Lina law. True, local governments are authorized to pass an ordinance, but failure to enact could not make them liable. On the contrary, Section 43 of that law has become a dead law provision for they could have done it right after it was approved on February 2, 1992, or 19 years ago.

Nonetheless, the eagerness to ram into our throat the proposed socialized housing tax ordinance is because it is some kind of big bonanza that awaits them. It is bound to become another milestone in their continuing efforts to appease the informal urban settlers whom they have made as their ever-reliable election bailiwick. The gimmick is to keep open the pipeline for political patronage, instead of coming out with concrete solutions that would help alleviate the problems related to urban resettlement. One could be sure because the crazy idea would not help ease urban congestion, but could aggravate the problem that in the end the legitimate residents will be overwhelmed by millions of landless people all flocking to the city.

Notably, Quezon City has earned the unsalutary reputation of being called the “squatter capital” of the Philippines. As a matter of fact, the unabated inflow of squatters has been blamed to our local politicians who have been acting as their padrinos and protectors. The ugly part about this modus operandi is that many of them have been encouraged to occupy government and private lands, while in the meantime, City Hall pesters the landowners by imposing on them high taxes, even penalizing them for not paying taxes for those lands that have virtually been appropriated from them.

Many of the legitimate residents are living in small and middle-sized subdivisions who acquired their property through years of hard work. As law-abiding citizens they continue to comply with their obligations. On the other hand, squatters who do not pay anything are, in this case, about to be rewarded by a low-cost socialized housing, to be financed by those who are already burdened with high taxes. In fact, if only our councilors would squeeze a bit harder the gray matter that is inside their coconuts, they would realize that the problem is not on where to get the money, but on how to trim down their bulging pork barrel.

For one, in 2011, the mayor had a budget for his office P2.7 billion or 26 percent of the city’s total budget, an amount much bigger than that of the Vice President of the Republic; the vice mayor, P182.3 million; while the 24 councilors receive P44 million each. The worse thing is that each barangay has been is allocated the minimum of P5 million as its share of the internal revenue allocation, which explains why many of them act as “rah rah” boys of the mayor. An increase in revenue, including the proposed 0.5 surcharge on real estate property, would automatically result in an additional IRA for the “enforcers” of the mayor. As many observe, most of our barangay officials, aside from acting as rabble rousers for the mayor, are now being paid to exact more from their community than in doing their job of overseeing that social order is maintained and public services carried out down to the grassroots level.

Notably, the residents are already fuming mad at how our councilors squander their P44 million pork barrel just to greet them Merry Christmas, Happy New Year, Happy Graduation, and for the unabated construction of their lapida (tombstones) at every district boundaries. Many would not mind seeing them putting up their own lapidas, engraving or painting their names in those mediocre projects if it were their money. Alas, they are using the money collected from the resident taxpayers, which now makes them doubly shameless and corrupt. Of course, they got that cue from then Mayor Belmonte for it was he who initiated the blasphemous practice of personality cult despite him not yet being canonized as saint.

• rodkap@yahoo.com.ph

CAJO

CROSSINGS
Butch Junia
4/25-5/1/2011



Cajo is Catherine Joy. She is our first-born. She is my constant friend; the girl to dote on.

Gentle critic, sought-after fan, trusted confidante, tireless cheerleader, inspiration, reality check, morality police, TV censor and editor, Cajo celebrates her birthday today.

In case you missed it, Cajo is a combination of the first syllables of her first names. Feeling creative and angling for the unique, I coined that name for her, but before she even turned one year old, I resigned my job in Cebu, we moved back to Manila and Cajo became Cathy.

Today I still get a jolt when Brods from the Sigma Rho who were also in Cebu at that time - Jimmy Sarte, Emil Librea, Tony Jalaguena and my ka-batch Estoy Estorninos - ask about Cajo, a name only they and my former colleagues at the National Manpower and Youth Council (NMYC) still remember.

“Cajo” stirs up memories of those years when we would bring Cathy to NMYC in a basket, when our student boarders (who are now dentists) would take turns looking after her, and Cutie would leave Cathy occupied and distracted by the fluttering diapers on the indoor clothesline over her crib.

I doubt if Cathy would have memories of Cebu, because we moved before she was even one year old, but I will not forget those first smiles, the all-around crawl, the cutest yawns, the infant tantrums, the first bite of junk food and fries, the da da that I insisted sounded like “daddy”, and of course, ma ma.

Cathy would always be around her Mommy. A licensed medical technologist, Cutie resigned her teaching position at Southwestern University when Cathy was born, to be a full-time Mom. From there on, our girls got the full-time attention of a stickler for proper table, toilet and bed manners, a strict dietician and a demanding tutor who would check all homework, verify grades and talk to the teachers. On hindsight, it was best for Cathy and Tinie, as they each went their way through grade school to college.

Just as quickly, Cathy was also growing up to be a Daddy’s girl. She grew up with the Hello Kitty generation, and it would be our daily ritual to add something to her collection. It was a good thing the Hello Kitty collectibles came in small items and were not as tough on the pocket.

When she was barely five or six, Cathy was my censor. Times that we would watch TV, when the commercials, especially the White Castle plugs came on, she would ask me to look away from the set.

We also had our “stand by me” moments in Tacloban City, when we came in on a late night flight, found out that my brother had already moved to another place, did not have any ride, were stranded at the outskirts of the City, and had to walk in unfamiliar roads in the dead of night. Cathy was very brave and very trusting of her Dad, without knowing how scared I was for her.

Frank Sinatra had this popular ditty about how daughters can make us feel like fathers, and that is exactly how Cathy made me feel at that time.

For Cathy, prep, grade and high school were at Maryknoll, before it became Miriam College. Expectedly, she had her share of juvenile mischief but there were also the Honors’ Assemblies, Recognition Day and Family Days. Up until finishing high school, Cathy was under the very close watch of Mom and Dad.

College at the University of the Philippines opened up a new world for Cathy. And I know now, on hindsight, it worked best for her.

Guy Lombardo once said a man wishes he were strong enough to tear a telephone book in half, especially if he has a teenage daughter. There were many times I felt like that, but as things stand now, everything still turned out well and right for Cathy.

When she turned 18, for instance, she had her party at our garden, at home. Friends from college and high school and her sorority, which as it happens is my sister sorority, were around. We actually knew most of them very well, especially the high school friends, but still I needed some adjusting to the tequila and scotch on the tables.

If there were a phone book on hand, I would have torn it in half, but as it turned out, my worries were misplaced. Cathy can hold her drink, and so could her friends.

Since Cathy was a toddler, she has always made me feel as the “World’s Greatest and/or Number One Dad.” From her and Tinie, I have a wide collection of those T-shirts, desk pieces, posters, desk clock, etc.

Best surprise they gave me, though, was a McDonald’s cowboys and Indians Birthday Party on my 47th year. They planned, organized and executed it so well that I did not even know that they had called friends from media and from work. In fact I remember giving Cathy a dressing down for coming home late and driving along EDSA (our agreement was that she could only drive from our place to UP) not knowing that she had to get a charcoal portrait for the surprise party. She took it with composure.

According to Greek philosopher Euripides, to a father growing old, nothing is dearer than a daughter. This grown-old father has had the benefit of endearment from two daughters, and I am therefore blessed twice over.

The wisdom of the Greeks, from thousands of years ago, are still relevant and appreciated to this day.

Finally, in a keepsake book for parents and children, “Dear Mom and Dad”, among many child admonitions to parents, one item caught my eye: “Don’t ever suggest that you are perfect or infallible. It gives me too great a shock when I discover that you are neither,” the book said.

Whether we raised the bar too high or just high enough, reckoning from what Cathy and Tinie have achieved so far and what they have made of their young lives, I would hope there were not that many shockers.

Happy Birthday, Cathy, and I hope you don’t disown me for sharing these remembrances with OpinYon’s millions of readers. We love you, Cajo!

Lessons from Agusan

CROSSINGS
Butch Junia
3/7-13/2011



The struggle for power reform in Agusan Del Norte marks a milestone on March 16, 2011, when a consumer initiative to assert lawful ownership over their Electric Cooperative is decided in a referendum, a feat Meralco customers dream to do someday.

I got sent by Ike Seneres, a Brod and fellow columnist in OpinYon, the position paper of the People’s Movement for Socio-Economic Development, a group convened by Roberto Rosales and based in Butuan City, and I was quite impressed with what they have been able to do in Mindanao. Even more remarkable are their plans for their members.

Under that People’s Movement, ACOA or the Alliance for Consumer Ownership of ANECO, also chaired by Mr. Rosales, is spearheading the referendum.

Like Meralco customers, consumer-members of the Agusan Del Norte Electric Cooperative (ANECO) suffer high and oppressive rates resulting from mismanagement and utility abuse. In both cases, structural and policy flaws, compounded by antiquated martial law decrees, spotty implementation and regulatory failure, make those abuses possible.

While not exactly the same in all aspects, ANECO being a Rural Electric Cooperative (REC)) and Meralco a Private Distribution Utility (PDU), their captive customers insist that the same rules of equity and fairness, reasonableness and prudence, should apply in rate-setting.

In both cases, too, recognition of capital contribution and capital expense as consumer equity is a common cause.

ANECO OWNERSHIP. On February 14, 2011, the current management of ANECO got a unique Valentine Greeting from ACOA. Said ACOA in its General Notice: "… for lack of logistical and funding support from the Board of ANECO … (we) will conduct (on March 16, 2011) a member-consumer initiated referendum pursuant to the provisions of RA 9520…”

The referendum is ACOA’s ticket out of the clutches of the National Electrification Administration (NEA) and into the arms of the Cooperative Development Authority (CDA), perhaps a case of jumping from the fire into the frying pan. My first and only encounter with

CDA many years back was hardly inspiring, but time may have been a good teacher and CDA might be in better shape today.

In any case, NEA is not a tough act to follow. Definitely not!

RURAL ELECTRIFICATION. The country’s over 100 REC’s were created by Marcos under martial law powers in 1973, when he issued PD 269 creating NEA and placing the REC’s under its absolute and full control. While a cooperative in name, the RECs were hardly so in terms of ownership and operations. The power to hire and fire REC managers resided solely in NEA, and the funding of RECs through loans was also controlled by NEA. The power to hire and fire and the power of the purse left the RECs at the mercy of NEA.

Patronage capital, the essential and defining characteristic of a cooperative, was not recognized. Worst yet, centralized procurement of poles and other supplies, pegged against loans that coop members had to pay, led to unwanted and expensive inventories, driving rates to the roof.

In fact, imprudent borrowings led to a P18Billion write-off of REC debts in 2001 under RA 9136 or the Electric Power Industry Reform Act (EPIRA), a generous gesture to allow RECs to start with a clean slate, but with taxpayers paying the cost as government absorbed those debts.

The rural electrification program, however, for all its run-away cost and imperfections, brought electricity and progress to the countryside, reaching 98% coverage at the barangay level. In fact, according to ACOA, the RECs have built a combined asset base of P200 Billion, a very potent springboard for economic mobilization in the countryside.

This potential will be unleashed, ACOA says, when people in the countryside are economically empowered by giving them management and control of the RECs..


THE STOCK OPTION. Consumer-members of ANECO seek empowerment via their option to convert ANECO into a stock cooperative under RA 6938 or the CDA Law of 1990 and RA 9520 or the Cooperative Act of 2008.

Early liberation from NEA should have been possible under RA 6938 but ambiguities in that law and its implementing rules made CDA registration near-impossible. The rules on the call for and count of a referendum were impractical and unrealistic.

Under RA 9520, a petition by at least 300 members per district is sufficient for the call of a referendum on the stock option, curing the built-in imperfection of the original law. A 20% vote is sufficient to carry the stock option and CDA registration.

The benefits from CDA listing are many, principal of which is the exemption from taxes, including VAT, and the privilege to carry on business as a coop.

Mr. Rosales minces no words in summing up the disadvantages: non-implementation of all the exemptions by not registering with CDA is an act of great social injustice to the REC members. We agree fully, Mr. Rosales, Sir.

What I like best from the Movement’s plans, however, is the filing of estafa cases against ANECO management for collecting loan payments after the write-off of the P18Billion loans of RECs under EPIRA. What loans could those members be amortizing if those loans had already been absorbed by the government, they ask.

In fact, Mr. Rosales is right in insisting that the condoned loans be considered and credited as equity of the consumer-members, just like Meralco customers insist that capital equipment acquired from their rate payments be credited as consumer equity in Meralco.

We wish ACOA all the luck and all the best, as we watch developments in Butuan with keen interest. There are many lessons to be learned from this Movement, especially in what they have achieved.

MERALCO UPDATE. Meanwhile, we ask Meralco customers to be keenly aware of the underpinnings of Meralco’s aggressive campaign to go into generation. There are legal, policy, operational and practical issues that must be addressed here.

Meralco’s public statements on its generation projects cite a P45 Billion capital expense program now under review by the Energy Regulatory Commission (ERC), a clever juxtaposition to blur the line between generation and distribution. Nice try, but this only highlights the fact that a PDU may only go into generation, if at all, under the most rigorous oversight. Let us not forget that a PDU or Meralco can only charge us for costs that are necessary in providing us the service, i.e. distribution, NOT GENERATION. How then, are they going to book the power plant investment?

Moreover, this P45 Billion capex has already been reduced by ERC to P34 Billion, an amount we are even contesting and certainly not conceding as Gene Lualhati says this should only be P1.0 Billion, based on market growth and Meralco’s own historical costs. (I hope players and advisors in the stock market are properly apprised that Meralco’s claims with ERC are under serious challenge. Or are they that sure that no challenge at ERC can ever be serious?)

Meralco is already defending the P34 Billion capex at the ERC hearing, yet it continues to claim to the rest of the world the P45 Billion in the original application. What gives?

Anyway, this is a whole bag of issues we will tackle in our coming columns

• Email crsng_47@hotmail.com for comments, concerns and suggestions.

Meet the Commissioners

CROSSINGS
Butch Junia
1/24-31/2011



The Energy Regulatory Commission (ERC) is “an independent, quasi-judicial regulatory body to be… composed of a Chairman and four (4) members …of recognized competence in any of the following fields: energy, law, economics, finance, commerce, or engineering, with at least three (3) years actual and distinguished experience in their respective fields...”

This is the essence of Chapter IV, Sec. 38, on the Creation of the Energy Regulatory Commission under RA 9136, also known as the Electric Power Industry Reform Act (EPIRA), where declared State policies under Sec. 2 include the following:

• To ensure the quality, reliability, security and affordability of the supply of electric power;
• To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market;
• To protect the public interest as it is affected by the rates and the services of electric utilities and other providers of electric power;
• To establish a strong and purely independent regulatory body and system to ensure consumer protection and enhance the competitive operation of the electricity market.

Sec. 42 of EPIRA commands ERC to “handle consumer complaints and ensure the adequate promotion of consumer interests,” which is reinforced further in Sec. 43 by the mandate to “promote competition, encourage market development, ensure customer choice and penalize abuse of market power.”

The ERC is empowered to adopt a rate-setting methodology that will allow the utilities “to operate viably,” but, consistent with State policies and ERC mandates to promote consumer interest, that rate “must ensure a reasonable price of electricity.” Clearly, the reform law is not wanting in safeguards for consumers.

Knowing the mandates of power reforms and the institutions that would pursue them, we thought it was important to get to know the people who run these institutions and administer the reforms.

Aided by the magic of Google, we surveyed what was in the public domain on the ERC, starting with its official website.

The photos of the commissioners were posted in their ascendant order, but there was absolutely nothing there on where they came from, or the experience and expertise they brought to the commission. The required “three (3) years [of] actual and distinguished experience in their respective fields of expertise” were hardly discernible from their mug shots.

Unfazed, we persisted in the Google search, and turned up the following:

• Lawyer Zenaida G. Cruz-Ducut, Chairman. Former Member of the House of Representatives for the Second District of Pampanga, serving three terms. She finished AB Pol. Sci. (1976) and LlB (1981) at Far Eastern Univ., with elementary and high school education in Pampanga. Was a Councilor, Professor, Prosecuting Fiscal, Research Attorney, Interpreter, Legal Researcher and Medical Representative. Member of the Integrated Bar of the Philippines, Movement of Advancement of Young Advocates of Pampanga and the Pampanga Human Rights Org. Married to Crisanto Ducut, a businessman, she turns 55 years old next month.
• Lawyer Alejandro Z. Barin, Member, was Acting Chairman until Chairman Cruz-Ducut was appointed. ZoomInfo describes him as active in corporate law practice and listed his previous positions as Corp. Sec./Consultant of General Milling Corp.; Consultant, Tao Commodity Trader; and, Vice Pres., Makati Sports Club. He is the husband of the first ERC chairman under EPIRA and current Securities & Exchange Commission Chairman Fe Barin.
• Rauf A. Tan, Member, Business Admin. & Accounting graduate, Univ. of the Philippines, Certified Public Accountant. ZoomInfo describes Mr. Tan thus: “with more than 25 years experience in the electric power industry in the fields of finance, marketing, management, utility economics, financial systems, public relations, privatization and energy regulation. He actively contributed to the promulgation and is now [at] the forefront in the execution of the performance-based regulation (PBR) of the transmission and distribution utilities in the Philippines.”
• Jose C. Reyes, Member, “formerly with Petron Marketing and National Power Corp.” according to ZoomInfo.
• Lawyer Ma. Teresa R. Castañeda, Member, former ERC Executive Director.

The lack of personal information in the ERC website, on the one hand, and the deluge of irrelevant Google entries on some of the board members, on the other, made the search very frustrating.

But until we can be provided with more relevant information, this should serve as sufficient introduction to the men and women behind the many decisions and orders that are now the subject of contentious debates among industry stakeholders. At the very least, we now know who in particular is responsible for PBR, the source of the unabated increase in power rates and soaring utility profits.

By the way, if the Department of Energy (DOE) will only bother to give some time to the plight of consumers in the electricity industry, the Secretary of Energy might be of some help. Sec. 37 of EPIRA directs the department to “facilitate and encourage reforms in the structure and operations of distribution utilities for greater efficiency and lower costs.” Given the rampant increases in power rates under PBR, Secretary Rene Almendras can very well step in and lower those rates to their true levels for the benefit of consumers.

SCD POSTSCRIPT. Since our column on the Senior Citizens Discount, many have asked why I opposed it. For the record, I am not against the discount per se. In fact, I would endorse a significantly higher rate than 5% to cover even higher levels of power use by seniors. That would be small change compared to the productive years they had put in.

What I questioned was the arbitrary and underhanded action of ERC in passing the discount cost to consumers, without adequate notice and proper consultation. After being apprised of the scheme, not one of those I asked was willing to pay the subsidy.

Worst yet, ERC exempted taxes from the discount, a classic case of government having its cake and eating it too because we are paying the subsidy.

Since it is State policy to subsidize Senior Citizens’ use of power, then let the State pay for it. The subsidy, if collected from consumers, would actually amount to a new tax on them.

Finally, while we’re at it, why should the State tax our System Loss charges?

Loss na nga, and questionable as it is for being grossly overstated (sinama ang generation sa line loss), tinataga pa tayo ng VAT.

Act now. All these excesses and abuses will continue if we do not put our act together. The Freedom for Debt Coalition is hosting the First National Electricity Consumers Conference from January 25-27, 2011 at Cloud 9, Antipolo City. This is free and open to the public. This would be a good first step towards involvement. This is our chance to engage ERC chairman Cruz-Ducut who is slated to speak on “new rate methodologies and other major policy resolutions to lower electricity costs.” This would have been a good policy issue to resolve in a Congressional hearing, but barring that for now, the FDC forum shall be good as well.

On February 5, 2011, ERC will conduct public hearings on the so-called draft determination of Meralco rates for the next four years, from 2012 to 2015. Meralco’s rates for distribution alone are set to go as high as P1.90 pkwh by 2015. Attend this hearing and make your voice heard by ERC. The latest Meralco increase by 15.47 centavos pkwh, from P1.4917 pkwh to P1.6464 pkwh effective July, 2010 but the first collection to be made in the January 2011 billing cycle, was approved without any opposition or intervention from any consumer, whether as an individual or as a group. Unfortunate, but true, that increase can mean additional Meralco revenues of P46.4 Billion that we must all pay for. We should not let this happen again. Act now; join the action against rate increases, utility abuse and regulatory failures.

• Email comments, concerns and suggestions to crsng_47@hotmail.com

Informed Consumer Consent

CROSSINGS
Butch Junia
1/17-23/2011



Payag ka ba na ikaw ang mag-bayad ng Senior Citizen Discount sa kuryente? Tinanong ka ba tungkol dito? Kung tatanungin ka, papayag ka ba?

The Energy Regulatory Commission (ERC) recently announced the Senior Citizen Discount for electricity, to the applause of a lady senator and a congressman and to the elation of many seniors like me.

Was this for real, this time? Or was it more of the old stuff?

I checked the ERC website for the implementing rules and regulations and after going through the definition of terms and the mathematical formula for the discount, the provision I was looking for leapt out of the page: “The Subsidizing End-User.”

There it was. It was not a free lunch, after all. Consumers would have to foot the bill; more of the old ERC stuff.

According to the ERC IRR, the subsidizing end-user “shall refer to the non-senior citizen and non-qualified senior citizen end-users who shall bear the discounts and adjustments extended to qualified senior citizen end-users. All lifeline customers are excluded from the subsidizing end-user base.”

In other words, all the non-qualified customers, except lifeline customers or those consuming less than 100 kwh per month, shall pay for the discounts. That will include every Juan and Juana connected to any distribution utility, including even those seniors whose account is not in their name or do not bother to apply for the discount at all.

In the Meralco franchise area, hardest hit would be the residential customers using more than 400 kwh per month who are already paying more than double the rates of others. Under the ERC order granting Meralco a P0.1547 pkwh increase in its distribution rates from P1.4917 pkwh to P1.6464 pkwh, average, residential customers with over 400 kwh consumption are charged P2.3943 pwkh for distribution, while those in the range of 101 kwh to 200 kwh are charged only P0.93 pkwh. General power customers served by 34.5 kv and 115 kv lines are charged only P0.0282 pkwh.

This grossly unfair and very lop-sided rate structure was challenged by Mang Naro Lualhati who says residential customers were overcharged P39 Billion under these discriminatory rates. According to Mang Naro, he is still waiting for the final ruling of ERC, but he is prepared to elevate his action to the appellate court.

In any case, we are already paying a lifeline rate subsidy that ranges from P0.10 pkwh to P0.14 pkwh and a cross subsidy charge of P0.0103 pkwh. Check out your monthly bills, and depending on your actual consumption, you could be paying as much as P100.00 a month on subsidies.

The power reform law mandated the lifeline rates without specifying where the subsidy will come from. This was used as a sweetener to cushion the impact of reforms, and was dressed up as part of the safety nets.

Ironically, it violated one of the principal objectives of electricity reform and restructuring – the removal of subsidies. So now, not only have the cross and lifeline subsidies been expanded, ERC has hit consumers with yet another subsidy for seniors.

And as with the other subsidies, this will be implemented without those “who shall bear (i.e. pay) the discounts” even knowing that they are the patsies.


Kaya ang tanong po namin sa mga mag-babayad, alam ba ninyo na kayo ang taya dito?

If you say yes, I commend your generosity. If not, let us work to set things right for the consumers. Generosity is a virtue, provided you are not shanghaied into it.

The discount guidelines are in the ERC website. Check them out yourselves.

Take note of the implementation and monitoring scheme, where the utility can charge the subsidy to us without need for prior ERC clearance. Reports are filed at the end of each month but ERC verification is not until after three years. The ERC record for giving consumers access to reports from utilities is not inspiring, thus there is every reason to fret over the kind of latitude apparently granted to utilities in this case.

Bear in mind that while an individual customer may only be charged P10.00, but with 4.5 million customers, that is P45 Million for just one billing cycle. With sales of 30 billion kwh, that is P300 Million for every one centavo charged.

The usual defenders. Some of the usual talking heads of Meralco have come out of the woodwork to defend the utility’s P45Billion capital investment program and sell the so-called improvement in service quality and reliability as justification for Meralco’s soaring profitability. An increase in profits from P2.8 Billion to P12 Billion in just three years, without making any sizable new investment (each cost item in the capital expense program of Meralco is covered by the annual rate increase ERC grants Meralco under Performance Based Regulation) is hardly the reasonable return contemplated under EPIRA. As to the quality of service, that is the obligation of Meralco under its mega-franchise, and if it should fall short of those quality standards, instead of rewarding Meralco with a rate increase, the franchise should be given to someone else. Come to think of it, we have yet to see a tangible advantage – like economies of scale – from giving such a huge franchise to just one service provider.

Email comments, concerns and suggestions to crsng_47@hotmail.com

Power 101: Monopolies & Monopoly Pricing

CROSSINGS
Butch Junia
8/11-17/2010



In our previous columns, we covered various aspects of the power industry. We also addressed specific issues urgent and critical to consumer protection.

If any consumer can be described as ‘battered’, it is the electricity consumer, who has no choice in his service provider and with hardly any say on how much to pay for power.

To help construct the consumer perspective on power, we will run this series. We may not be able to provide many answers, but if we provoke questions, the purpose of the series is served.

Electricity distribution is considered a natural monopoly. It does not make sense for two utilities stringing up parallel and redundant lines or wires. We already have garish sights of hanging and bundled wires with just one distribution utility; imagine if we had two or three.

Until we develop the technology for wireless transmission of electricity, like voice and data conveyance via wireless cell phones and networks, we will remain stuck with the distribution monopolies that we have today, the biggest of which is Meralco.

Monopoly control is made legal by a legislative franchise that defines the franchise territory and authorizes the collection of monopoly rates, subject to review by a regulator. Under this system, the legislative is presumed to make informed franchise decisions and the regulator enjoys presumptive good faith in the exercise of its power to give reasonable returns to investors and secure reasonable rates for consumers. Of course, lobbying and regulatory capture can materially alter that equation.

Pricing of electricity is tricky business. Rates are set based on recoverable cost for providing the service, divided by kwh sales plus a reasonable return for the investment, pegged at the 12% cap set for utilities.

Under the Return On Rate Base (RORB) methodology, actual costs as verified and audited are the basis for rate determination. Utilities complained of the regulatory lag but for the consumers, increases went through a fine-toothed comb, especially as it went up in the judicial review process.

Under the Performance Based Regulation (PBR) which government is now enforcing, rates are set based on projected expenses, and utilities are granted annual increases derived from those estimates. Under RORB, utilities had been ordered to refund overcharges, major of which was the Supreme Court order that disallowed Meralco’s income tax as recoverable expense. Under PBR, that tax has become chargeable to us, and Meralco’s distribution rates have spiked to almost double.

While rate unbundling was supposed to facilitate consumer appreciation of electricity pricing, it has become instead, the launching pad and engine for multi-layered and collateral rate increases.

Under power industry reform, the rates were unbundled or broken down into service components, essentially aligned with the four major industry sectors – generation; transmission; distribution; and, electricity supply and metering.

Generation is primarily a pass-on cost, meaning the distribution utility should not earn or lose anything from it – revenue neutral. Ironically, the monthly fluctuations of generation rates have become the bases for Meralco’s occasional claim of rate reduction.

Transmission at high-voltage levels is a monopoly recently awarded by government to a private concessionaire, the National Grid Corp. of the Philippines. If Meralco lines are the ‘city streets’, the transmission lines are the highways and toll ways to carry bulk electricity, similar to the bulk carriers in the transport sector.

Distribution brings the high-voltage electricity down to consumable industrial and household levels, and is the only other remaining regulated monopoly in the power industry. This sector includes the Privately-owned Distribution Utilities, like Meralco, and the Rural Electric Cooperatives that serve the countryside.

Electricity supply and metering is a ‘new’ sector. A spin-off from distribution, this has been de-monopolized as an initial step towards establishing consumer choice in an industry inherently monopolistic. In the meantime that there is no open access and there are no significant players, this has remained ‘bundled’ with distribution.

In support of de-monopolization, the electricity trader called an ‘Aggregator’ was created under EPIRA. The Wholesale Electricity Spot Market (WESM) was established and open access at the transmission and distribution level was legally mandated. In theory, with a competitive generation market and enough Aggregators active in a trading platform like WESM, the market imbalances in the monopoly can be corrected and the captive customers given a measure of choice.

Of course, between that theory and actual practice is an impassable abyss. Today, aspirations to give captive customers of monopolies a reasonable and fair power rate remain elusive. Blame that on policy logjam and regulatory capture.

Lately, there have been talks of new investments in generation coming in. If the current system is not fixed and reforms are not implemented, the gains from new technology and higher efficiencies will not translate into lower rates for consumers. WESM watchers have questioned WESM’s settlement price, which they say is pegged at the highest quoted price for the day. This definitely defies the law of gravity and common sense.

Obviously, much need to be done, with no significant headway made.

Historical footnote. The early electricity providers were the electric and ice plants operating diesel-powered generators that would run only on some hours of the day. At least, that is how I remember it from our place in Tacloban City. Pres. Ferdinand Marcos later decreed the vertical integration of the industry, establishing the National Power Corp. as the sole generator, buyer and seller of electricity and monopoly operator of the transmission system. Under Pres. Corazon Aquino, at the height of the crippling blackouts, the NPC monopsony was dismantled and the generation sector de-monopolized.

Since then, sustained attempts at restructuring the industry and holding the monopolies at bay were undertaken by the other post-Marcos governments.

It was in 2001, however, with Pres. Gloria Macapagal Arroyo barely five months in office, that the Electric Power Industry Reform Act (EPIRA) was passed by an out-going, lame duck Congress. The EPIRA as adopted had gone through several permutations in at least three (3) earlier Congresses. A hodge-podge of compromises, EPIRA still has to yield consumer dividends, while monopoly utilities and generation companies have been posting remarkable growth in revenues and profits.

Consumer initiatives to fix the law have consistently fallen short, and the hapless consumers remain in dire need of the white knight.

Obviously, much still need to be done for consumers.

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