Power crisis bound to happen

BACKBENCHER
Rod P. Kapunan
3/31-4/1/2012



The power crisis sweeping Mindanao is not borne out of inept leadership, but one of conspiracy. Maybe President Aquino can fire all his officials headed by Energy Secretary Jose Rene Almendras, but that would not solve the problem of power outage that last daily from four to eight hours. The problem is the result of strong lobby by the country’s top oligarchs to privatize the power plants that still remain in the hands of the National Power Corporation and to make sure all future power plants will firmly remain in their hands.

PNoy’s statement puts truism to the saying of having heard it directly from the horse’s mouth. He said, he would not, at this time, give a go-signal for the construction of the two proposed coal-fired power plants that would have a combined capacity of 300 megawatts. That would take two years to be fully operational. On the other hand, to allow the building of additional power barges would take some time to study the proper rate mix to come up with an acceptable price for the electricity. He said the rate charged by the hydro-electric plants is at P3 per kilowatt hour, while electricity produced from power barges costs P14 per kilowatt hour. It means he would not disturb the existing price cartel for electricity.

Thus, looking at the crisis, one could assume that the shortage is the result of criminal sabotage caused by the impasse between those seeking to privatize the two remaining hydrothermal power plants, the Pulanggi Hydrothermal Power Plant in Bukidnon and the Agus Hydrothermal Power Plant in Iligan, and against those local officials opposed to it. This came to light when North Cotabato Governor Emilou Talino-Mendoza said that the Palace wants Mindanao to submit to its plan to privatize the hydrothermal power plants and to accept power supply from power barges. Among these power oligarchs aching to capture an already captured market are the Lopezes, Ayalas, Aboitizes, and the newcomer, shopping mall tycoon Henry Sy. The chairman of the Mindanao Business Councils Ramon Loresta is opposed to the privatization of the Agus Hydrothermal Plant in Lanao for when Mt. Apo Geothermal Plant was sold to the Lopezes, they immediately raised by 70 percent their power rates for which they are now paying more than P8 per kilowatt hour.

What complicated the issue is the statement of the chairman of the Committee on Energy, Senator Sergio Osmeña. He said, such anomalous practice of imposing “political rates” or one dictated by the government is often the result of populist pressures. Senator Osmeña said, “It was Mrs. Arroyo who ordered the state-owned Napocor to sell its power below the cost of production just to boost her sagging image.” Such a statement only exposes his ignorance because even if “political rates” resulted in losses, it being a form of subsidy that could not result in power shortage notwithstanding the private power suppliers are not obligated to join the price ceiling set by the government. Rather, the fear is it could reduce their profit for the unused power they produce under that onerous power purchase agreement entered into by Ramos although now given a new name.

Moreover, Osmeña’s ranting of private competition as decisive to bring down the prices of electricity makes no sense because that did not result in the lower cost of electricity. Our electricity is considered the highest in Asia today. He knows there could never be a fair competition because the power industry stands as a cartel or an exclusive club made up of handful of demigods. The cartel exists in the fixing of price, in the supply of electricity, and the contract always made in their favor. In effect, competition is a sham.

Besides, before the government decided to cut Napocor into pieces, profit only came from two main sources, profit earned by Napocor for operating those power plants, and profit earned by the distribution utilities. In their bid to destroy the monopsony which we followed for years, each specialized sector in the industry now has to curve out a way to earn, and they come with an array of charges, often not understood by the consumers. The power plant operators first make their killing, followed by the transmission line franchise holders, and finally by the private utility distributors, and each is entitled to create their own charges to justify their hold up rates.

When those morons in government further decided to trade power supply on the wholesale spot market, they thought it would also result in the reduction in the cost of electricity. Not one bothered to think that whether the traders would sell the commodity at a loss, they would never allow themselves to end up without a commission. It is their profit that removes the cost of electricity from what we call “net cost.” This is why the public is asking Osmeña just how competition will help roll back the price of electricity when essentially the duty of the traders is to jack up the price? Otherwise, a consistently low price could cost the trader his job. If at times, the cost of power in the spot market is low, it has nothing to do with cost, but by the low demand for power, and in that instance they are forced to reduce their price resulting in lower profit, but never at a loss.

For all of Osmeña’s wild punch, he failed to analyze that the government can forego profit because that loss in the long run could generate more production, and residually, more employment for our people. The subsidy is thereby recovered by additional revenues that may proliferate because of the low cost in power supply. Osmeña failed to decipher this because his allegiance is to the private operators, specifically to the Lopez family of which he is related by affinity.

(rodkap@yahoo.com.ph)