Any which way I look, it is obvious that the power price surge is due to regulatory failure. Even if there is collusion among generators or among generators and the NGCP and Meralco, government is still to blame for failure to detect it and stop it.
Deregulating such politically sensitive industries like oil and power is always fraught with danger of abuse by the industry participants. The tricky thing here is how to calibrate the proper regulatory environment to keep everyone in the straight and narrow.
My watch with the energy bureaucracy was during a much different time. It was martial law and we had a very competent energy secretary and a bureaucracy inherited from ESSO and FilOil that knew what they were doing.
The late Energy minister Ronnie Velasco had a degree in engineering and graduate studies in management. He was strategic in his thinking and knew how to get the results he wanted. He was at home with the technical stuff, had a way with numbers and knew how to get good staff and delegate to them.
Velasco also had full control of both the oil side and the power side, being CEO of both PNOC and NPC. If he needed to get anything done, he had the resources and manpower to get it done.
If, for instance, world oil prices have gone down substantially but the local multinationals refused to reflect the downturn quickly, Petron could, as indeed it often did, unilaterally put down the prices first and the rest would have to follow.
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Of course, if this power is not used well by a president who desperately needs to win public approval, it could also damage the industry. That’s how the stranded debts in the power sector now held in PSALM became so big… former President Arroyo prevented NPC from raising rates even when production cost was constantly escalating.
Today’s Secretary of Energy is toothless. FVR privatized Petron and EPIRA privatized NPC. I was never in favor of full privatization for Petron. I thought even a 40 percent government ownership of Petron gives it an insight into a strategic industry it would otherwise not have.
I also think there is always a need for something in the marketplace that will keep the market participants honest. In a truly free market, that’s competition. But in an oligopoly like what we really have here, the implied threat of Petron (or Malaya for that matter) using its market clout to keep petroleum product prices (or electricity rates) reasonable is needed.
Then again, I saw how the post-EDSA administrations including that of Tita Cory destroyed the proud professionalism of the Petron employees. Political protégés were appointed, many of whom were not only clueless of the intricacies of the industry but were also spiteful of the public interest.
I guess even if government kept Petron or a substantial minority interest in it, it wouldn’t have been as effective if it was hopelessly politicized. It is just as well that the company is now being profitably managed by the private sector.
It is the same thing with power. The way I look at Malaya is like having a 40 percent interest in Petron. An Energy Secretary who understands the industry can use it as an implied threat if the private generators abuse their market power.
The problem with Malaya is that it is effectively under the Secretary of Finance rather than the Secretary of Energy. The bean counters are more concerned with the pesos and centavos of running that plant rather than strategically using it to make the generators behave themselves and thereby protect the consumers.
I can understand why the folks at IPPA or the independent power producers association would want nothing better than for government to mothball Malaya. I have even been told that Malaya is the one reason why we don’t have more investors in power plants.
The generators take the free market promise of EPIRA very seriously. But they forget or ignore the fact that they look more like a cartel than a functioning free market. They also forget power is such a sensitive industry with big political implications. As such, it is best to avoid the spikes that rattle consumers like what happened last month.
The pickle we are in right now with power rates shouldn’t have happened if we had more capable government regulators. The head of ERC is very obviously nothing more than a political appointee with no experience or knowledge of how the power industry works.
Energy economics is very complicated and requires years of study and actual experience to understand. A mere lawyer cannot possibly understand the ins and outs. Then again, that may be the least of her concerns. Making life and death decisions for hundreds of power companies must be very satisfying for other reasons.
ERC also needs an army of competent staff who will do all the number crunching and field inspections. Since the nature of the work is highly technical, the really good ones will choose to work with the power companies rather than ERC. I suspect there are a few competent ones among the junior staff at ERC who are overworked.
I blame former President Arroyo for appointing an ERC chair who is clearly unqualified. Pressure should be exerted for her to resign and the staffing of ERC ought to be reviewed so as to correct the obvious weakness in the competence side.
It is the same at the Department of Energy. It was a mistake for Sec Petilla to appoint an undersecretary from his home province with zero experience in any aspect of the energy industry. The Secretary clearly played politics and unfortunately, we the consumers are suffering for it.
I doubt if the DOE has any real technical capability to, for example, protect us from substandard gasoline and other petroleum products. I don’t think they have a testing laboratory as extensive as the one in Petron or Shell that can be used for that purpose.
During our time, it was the Petron laboratory that did all the testing for product samples from gasoline stations suspected of adulterating their products. The only way I protect myself now is to buy only from Petron, Shell or Caltex because I know they have the testing facilities and the brand name to protect.
In a way, I commiserate with Sec Petilla for having so much responsibility and so little by way of tools to meet his objectives. At the same time, however, I am sorry to note that even with the little he had, Malaya, he decided not to use. Or maybe he didn’t know he even had that tool. Rene Almendras should have told him.
ERC is hopeless. I suspect proper regulation is furthest from their minds out there. And when the ERC head was implicated in the pork barrel scam, it indicated where her real interests lie… and protecting power consumers just isn’t it.
P-Noy cannot just wash his hands and say ERC is an independent body from Malacanang and the chair has a fixed term. He has to convince her to resign in the same way he convinced the Ombudsman to resign to give way to a credible replacement. Accelerate investigation of the pork case against her, file it and let the Ombudsman or Sandiganbayan suspend her. We need a credible chair for ERC, nothing less.
What can I say? Regulatory capture is a way of life in this country. Look at LTFRB, LTO, NTC, TRB and other such bodies, one gets the impression that protecting consumer interest is not their primary concern. The financial clout of the private companies they are regulating is just too much to resist either by them or officials over them such as those in Malacanang.
Regulating public utilities to protect consumers and at the same time allowing the business to thrive is an art. But that requires honest and competent professionals. That’s difficult to find, it seems.
If it was an administration other than one that trumpets Daang Matuwid, we can say what is going on is par for the course. But P-Noy himself set the bar of performance and credibility higher. Let us see his people meet those standards or P-Noy should just make them go away where they can do the public no more harm.
New Year’s resolutions
I noticed this posting about a couple’s New Year’s resolutions in my Facebook newsfeed.
Mr: “Honey mula ngayon iiwanan ko ang lahat ng mga kabit ko!”
Mrs: “Wow! TY love! Ako naman ang promise ko ang susunod nating anak, ikaw na ang ama!”
Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco
