P91-B Double Charging

PEOPLE'S STRUGGLE

Herman Tiu Laurel

9/10-16/2012

THE dispute exploded into the public scene last week as Meralco grandiosely announced that PSALM (Power Sector Asset Liabilities Management) owed Meralco customers a P 9.1-billion refund for double charging in transmission line costs.

PSALM countered, saying that Meralco's charges are "unfounded and at best, premature considering that the final amount is yet to be determined after the ERC approves the implementation of a refund or collection scheme on compliance of the parties with the directives of the regulatory body". In the first place, this overcharging has the consent of the Energy Regulatory Commission (ERC) based on its issuances of provisional and various automatic increases in power rates.

They're all to blame
We wrote about the ERC's practice of approving rate increases posthaste with promises to review later ("True up or Throw up", August 8-14 issue). "Under recoveries" or "over recoveries" or "over under recoveries" are decided, but they're always charged to consumers first. This is what happened in the Meralco vs. PSALM dispute. Consumers already paid. The confusing "recovery" terminologies came with EPIRA and the ERC's "PBR" – Performance Based Rate mechanism allowing 15.6% profit margin plus incentive that can reach to 17%. Before the PBR in 2004 we had the RORB, Return-On-Rate-Base limited to 12%. The crucial difference is not only the cap on profit but, as Jojo Borja of Iligan Light and Power Inc. again reminds me, the automatic "pass on" of generation increases under the PBR which was never the case under the RORB.

One of the key factors is the WESM, Wholesale Electricity Spot Market, which allocates power contracts amongst the IPPs and PSALM to ensure that every "investor" gets a "fair" share of the power supply contracts – and never mind if it's not fair to consumers and taxpayers. WESM "spot" market prices have gone as high as P60 to P 70/kWh when Napocor rates can in the same period hover just around P5/kWh. DUs like Meralco pass it on and ERC does nothing about it.

Gibberish
PSALM CEO Emmanuel R. Ledesma Jr. explained "… that the alleged double charging in transmission line costs arose out of the simultaneous implementation of the transition supply contract (TSC) between National Power Corp. (Napocor) and Meralco and of the price determination methodology (PDM) in the wholesale electricity spot market". i.e. the WESM. Ledesma continues, "PSALM cannot deviate from either until an effective segregation mechanism from Philippine Electricity Market Corp. (PEMC) is approved by the Energy Regulatory Commission (ERC)," More gibberish: "PEMC (Phil. Elec. Market Corp., the Board of WESM) earlier commented that 'the segregation of line rentals into transmission loss and congestion cost … of the WESM would entail reconstruction of hourly data … would cause considerable strain in its resources." Gibberish again. PEMC and WESM are parasites.

The ERC portrays itself as the solution: "Energy agency to decide on P9.1B controversy", a September 5 headline reads. The truth is ERC is the main part of the problem for completely failing in its regulatory duty, overlooking the double-charging and allowing it to fester for two years causing great damage to consumers. This is clear in this report, "The ERC, in a decision dated March 10, 2010, already found a 'double charging in transmission line costs.'

But compliance by various parties involved was incomplete as some of the data needed for the computation were no longer available…" If ERC had found "double charging" way back in the first quarter of 2010 or over and a half years ago it should have acted swiftly to save the public the billions of pesos. ERC's superfluous explanations excuses today are more unnecessary gibberish.

Meralco refunds due
Every power consumer should be pressuring the authorities and Meralco posthaste to refund what it owes to consumers. The 2003 Meralco refund of P 30 billion to consumers for an illegal "provisional increase" in 1994, ordered by the Puno Supreme Court, is supposed to be completed by 2015; but the critical question crusader Butch Junia has raised is the question of where Meralco is drawing the funds for the refund. Meralco should have paid the refund from its equity and not from the cash flow from the payment of Meralco power consumers; otherwise it would be the consumers paying the refund to their selves. Junia has more to tell consumers to demand from Meralco.

Meralco should immediately refund the P 14-B it gypped from Napocor when it reneged on its supply contract with it, which Meralco now wants to conspire with Napocor to pass on to consumers. Consumers however should demand P 42 billion on top of this P 14 billion because of interests and write offs Meralco finagled in its negotiations with Napocor to settle the matter. Mang Naro Lualhati, one of those who won the P 30-B refund for all consumers in 2003 demands that Meralco refund close to P 40-B in the 100% overprice of the Maximum Average Price (MAP) ERC approves for Meralco of P 1.60/kWh which, by Lualhati's (an accountant) computation should be no more than P 0.90/kWh. Mr. Jojo Borja of Iligan Light is charging Meralco of overpriced asset bases such as electric poles, transformers and sub-station, inflated by as much as 500% to 900% - all this documented.

Meralco should also refund the P 2.2-B "regulatory liaison", a budget that Meralco and ERC has never explained to any degree of satisfaction. Butch Junia also points out the P 14-B refund Meralco owes the public which was discovered when the Commission on Audit (COA), was ordered by the 2003 Supreme Court to test audit two years of Meralco's operation (2004 and 2007, if my memory serves me right) and found in just one year test audit P 2.7-B overcharging. Projecting from that result the P 14-B is the sum total. The Meter Deposit Refund (MDR) is also a gigantic amount. Decided since 2004, it was mandated to start in 2008 and to be completed within five years, consumers should be checking if this has been on schedule; it must be asked if interest was charged on this meter deposit, and paid to the consumers.

Solution
The Filipino taxpayers and power consumers are beset by the "highest power rates in the world". In 2003 the Puno Supreme Court made milestone decisions to support the citizen crusaders cause against the power rate abuses of Meralco, by affirming the primacy of the 12% Return-On-Rate-Base (RORB), disallowed Meralco from charging its income tax to customers, ordered a COA audit of Meralco finding billions in overcharging. Government never followed through with the 2003 SC decisions. ERC, distorting EPIRA's ill-conceived license for it to formulate rate setting methodologies, set up the PBR (Performance Based Rate) upping to 17% allowable profit margins for the Distribution Utilities like Meralco ) and establishing "automatic increases" on power generation and passed on to consumers.

Ten years of power crises have educated the Filipino people in the evils of the EPIRA and the conspiracy of the power oligarchs, the politicians and the ERC. There is so much more for the public to learn, such as what WESM, the PEMC, PBR, MAP, ARR ad nausea but it should all be simplified: the EPIRA and the PBR are the root evils, they must be junked.

 Malacañang must be blamed squarely, then Congress, for not doing anything about this. The people must push for the repeal of EPIRA and reversal of the PBR. If needed the people must take action in the streets, the Internet, the social media networks, and media. The Freedom from Debt Coalition (FDC) is launching a series of activities in October which we should all support; we will announce these in due time. Our comrades in Mindanao, like Jojo Borja and Louie Corral, are doing their share. The solution to the power abuse lies in the People's Struggle.

Russia, Apec and RP

DIE HARD III

Herman Tiu Laurel

9/10/2012

While the US pivot back to Asia early 2012 has stirred controversy over its militaristic tone, another major power has been pivoting positively. Russia is emerging with its own "look East" policy, purely on trade terms aiming to expand trade with the region by "about 50 percent" in the coming years. This target was expressed way back in Moscow in a speech on Aug. 27, Deputy First Prime Minister Igor Shuvalov. The pivot East of Russia fulfills the vision of the double-headed eagle state emblem of Russia with one head facing West and the other head now clearing its vision of its view of Asia. Russia can indeed in the 21st Century, bridge the perspective for the entire World; filling in for the blind spots. Its pivot can be the fulcrum balancing West and East, supported by its economic clout with the globe's largest deposit of oil and gas now beginning to be tapped.

This year's Asia-Pacific Economic Cooperation (Apec) forum was opened in Vladivostok by Russian President Vladimir Putin. The international cable TV news carried the grand opening and parade of heads-of-states to the easternmost city of the only country in the world that covers 11 time zones. A look at the Atlas to behold the entire expanse of Russia shows a breathtaking panorama of territory, as impressive as the grand and impressive edifices built by Russia for the Apec meet. With its recent entry into the World Trade Organization, despite some misgivings today in the world about trade globalization, Russia signals its readiness to face the challenge of global economic competition while promoting its own economic interests and spreading its goodwill particularly with the nations of the East.

Russia's pivot East is palpable in the Philippines, as we witness greater Russian presence in local media, increased activities such as the visit of Russian artist early this year to its grand National Day celebration. We saw this in the special briefing in the Russian embassy arranged for some journalists on the occasion of the Apec summit in Vladivostock. One significant manifestation is the assignment of a Commercial Counselor at the embassy after years of absence. Although a permanent trade mission had been around for some time we hadn't met any trade counselor in the past years. We were introduced to Andrey Sapozhnikov who's been in Manila for six months now, and in our briefing we were read some statistics showing dramatic increases in trade with the Philippines in the past year; they're small compared to trade with traditional trading partners but a huge leap compared to Russia-Philippines trade the past decade. The deputy chief of Mission, Minister-Counselor Artem Kudoyarov also joined us in the briefing, engaging us in a very lively discussion of trade possibilities and the merits and demerits of Apec, compared to BRICS and the TPP (Trans-Pacific Partnership).

At the special briefing counselor Saposhnikov read an official document pertaining to Russia's policies and activities relating to Russia's chairmanship of the 2012 Apec, citing 100 events since Jan. 1, including ministerial sessions, meetings of senior officials, committees and task teams, seminar and conferences, 50 initiatives and blueprints proposed by the Russian government. All these, Sapozhnikov stated, "…encompassing four priority spheres — trade and investment liberalization and regional economic integration; strengthening food security; establishing reliable supply chains; intensive cooperation to foster innovative growth." We do not have space to list all but especially interesting is Russia's support for "joint efforts aimed at the formation of the single educational zone within Apec region," a very interesting program we should now more about.

Simultaneous with the 2012 Apec is a 2012 Youth Apec which was initiated by Russia Prime Minister Dmitri Medvedev earlier. I found this out on the Internet. Its main goal is to show that young people are able to discuss serious problems and decisions and should be heard. The three days of discussions came up with the Apec Youth Leaders Declaration to be presented to leaders of Apec. The Youth meet depicts the ideal World of tomorrow, all nations around the Pacific rim working together towards economic prosperity and peace. At this writing the main Apec forum is on its last day and no final declaration has been issued but the messages during the summit is a good indication: from leaders such as Putin and Hu Jin Tao, admonitions about the perils of the protectionist temptations and calls for the calming of tensions in Asia. These are positive signals we welcome.

Russia and President Vladimir Putin has certainly pulled off an impressive show of leadership in Apec 2012. I rate this performance at par with China's hosting of the 2008 Olympics, in setting the stage for the respective nations' role for the 21st Century World. Russia is here to stay as a major economic and political power on the World stage, and the Philippines and Filipinos should take note and recognize the third major global power that will be among the major factors to enhance the progressive future of the region and the country — Russia, alongside China and the US.

(Watch Destiny Cable GNN's HTL edition of Talk News TV, Saturdays, 8:15 to 9 p.m., with replay at 11:15 p.m. and Sunday, and on www.gnntv-asia.com: this week "Power, Water: the Struggle"; tune to 1098AM radio every Thursday 3 p.m.; visit http://newkatipunan.blogspot.com)

A creeping containment

BACKBENCHER
Rod P. Kapunan
9/8-9/2012



Maybe it is high time to remind US Secretary of State Hilary Clinton that China is the only great power to fight the US yet comes out to exert an even greater influence in world politics. Unlike the great powers whose influence have either been reduced by defeat as Germany and Japan, or imploded in the aftermath of internal political retraction as the Soviet Union, China fought the US in a bloody but limited land war in Korea. Yet it is about to emerge as the greatest economic power of our time.

China's entry into the Korean War in 1950 has put a dent on the image of the US as an invincible superpower. The country whose huge army was derisively called "pajama-clad soldiers" was the first to deny the US its trophy of victory. The Korean War ended in the signing of an armistice agreement on July 27, 1953. It was not peace brought about by victory or one negotiated to end the conflict, but a temporary cessation of hostilities.

Although it was North Korea and the US that signed as principal parties to the armistice agreement, the world knew it was the result of an agonizing realization by the US that it was locked in a fierce stalemate with no hope of victory. Pouring in an insurmountable number of troops to fight alongside with their North Korean allies, the People Liberation Army in no time pushed the allied forces to the fringes of South Korea. Many anticipated it as another Dunkirk with the humiliated American soldiers about to wade their way to Japan.

The early optimism of General Douglas MacArthur to cross the Yalu River ended up in disastrous retreat. After the Inchon landing where the US forces rapidly advanced, that was soon reversed after Chinese troops pushed US troops far below the 38thParallel. That victory, though paid with a heavy price, left a deep scar into the unblemished record in American military history.

To repair his badly tarnished image, General MacArthur proposed the idea of using an atom bomb to destroy China's industrial plants in Manchuria and carpet bombing the supply lines for the Chinese troops that were advancing like swarm of ants. Unfortunately, that arrogance was not shared by US President Harry Truman, thus forcing him to unceremoniously sack the aging Commander of the US Forces in Korea.

We are compelled to give this backdrop to remind Clinton that while China cannot militarily match the US, its armed forces have been modernized by quantum lead. The army that once walked in snickers to cause the US to nosebleed in Korea could usher in an even devastating damage to the US forces in the whole of Asia in the event of another conflict. It is for this why the US is trying to avoid direct confrontation with China over the disputed islets in the South China Sea.

The problem with this duplicity in the US policy is it cannot pursue a neutral position while marshalling the members of the Asean to ratify the Code of Conduct for the South China Sea that could technically place them on a direct collision course with China.

First, not all the members of the association have territorial claims in the South China Sea. This explains why Cambodia refused to come out with a final communiqué in the recently concluded Asean ministerial meeting in Phnom Penh.

Second, the member-countries are aware that the association is not an ideological bloc, but an economic bloc which has succeeded in institutionalizing many of their declared policies. Formally integrating the disputed territorial claims in the South China Sea into their agenda could transform the economic bloc to a political forum that could be exploited by non-member countries like the US.

Third, not all Asean-member countries share the same ideological sentiments to unify them, viz. ratify the proposed Code of Conduct. Their primordial concern is on how to develop further their trade ties and explore the possibilities of welcoming Chinese investments.

Fourth, for the fact that the US is the one brokering for the early ratification of the Code of Conduct, that endorsement has backfired. Right now, it is perceived as a Trojan horse. Once ratified, it could automatically convert the dispute to one between China and the Asean with the bloc playing proxy for the US in containing China.

Fifth, to ratify the Code of Conduct could spell an end to an illustrious economic bloc. Either it could disintegrate due disuse or could signal the revival of an arms race. The price they will have to pay to subsidize the ambition of the US and its surrogate states, like the Philippines, is too high for the brisk trade they now enjoy with modern China.

Sixth, Asean today stands as the most successful regional bloc in the whole of Asia. Many of its economic agenda have been institutionalized and integrated as part of the member-countries' economic development goals. That feat could easily be set aside by the conversion of Asean into a highly politicized regional bloc.

As of now, the US is the one heavily profiting from the increased tension as seen in the steep purchase of military equipment by the Philippines that could not even tip the scale to alter the balance of power in the region. Instead its limited resources will be dissipated, while in the meantime, the US takes advantage to advance its economic interest in dealing with China.

Finally, a direct confrontation now with China could be far costlier and more devastating for the US. A second round confrontation is something even the majority of the Americans would wish to avoid.

rpkapunan@gmail.com