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BY power
grab, we mean the manipulation of sleeping funds to raid
profitable enterprises, eventually to resell to
interests lurking in the shadows. There are precedents
in this gambit, utilized when the hierarchy controls
dormant pensions contributed by taxpayers and government
employees.
See
where, in banking, these were aggressively used to
invade private corporate ownership to benefit friends
and fill the pockets of cronies. Never mind liquidity
requisites and pensioner needs. Never mind the
imprudence that endangers fiduciary capital and severely
slows services. The old pensioners will soon die,
anyway, and public-school teachers were never really
important. They can be kidnapped when they complain. Or
they can be ignored.
Why
waste state pension funds on the needy? Quiescent
pensions can be lethal war chests. Hostile takeovers won
with booty are not about competence. They are about
greed.
By
baseless charges, we do not mean the distribution rates
charged by Manila Electric Co. (Meralco). Since 2003,
these have petrified. Rather, we refer to accusations by
paragons of Gloria Arroyo’s virtue invoking innuendo and
insinuations to pin increased generation tariffs on a
distribution utility.
In
Meralco’s mauling, pit bulls were let loose, albeit
collars and dog tags identify who tugs the leash and
pulls the strings.
The data
neither substantiate the accusations nor any logic. To
be fair, let us cite easily accessible data that need
neither insidious directorships to filch nor a modicum
of intelligence to understand. Let us use the figures of
the National Power Corp. (Napocor) and engage, at most,
three brain cells so officials might understand each of
generation, transmission and distribution costs in
electricity tariffs.
As any
sophomoric analyst would do, let us focus on delta
variances to analyze why electricity rates increased.
Napocor’s generation cost is a blend from different
plants and fuels. The cheapest are geothermal and
hydroelectric sources. Recently a substantial amount of
these were sold, thus increasing the ratio of expensive
and dollar-depleting fossils—coal, bunker and oil-fired
plants—available to Napocor.
In July
2007 Napocor’s average generation rate for
Luzon was P3.89/kilowatt-hour (kWh). When adjustments to GRAM
(generation rate adjustment mechanism) and Icera
(incremental currency exchange rate adjustments) are
added following the Energy Regulatory Commission’s (ERC)
deferred accounting formula, Napocor’s effective rate
increased from P3.89/kwh to P4.50/kWh from July to
December 2007.
From
January 2008 onward, as Icera reflected dollar declines,
delayed GRAM reflected the exponential increases of oil
and other fossil-fuel costs. While the average
generation rate remained at P3.89/kWh, appended
additives inflated the generation total to P4.76/kWh and
beyond.
Utilizing more fossil fuels increased Napocor’s tariffs.
Unprivatized hydroelectric plants that generated cheaper
power slacked off as maintenance downtimes and fuel
supplies plagued Napocor. When summer came, demand
increased and oversupplies thinned out, aggravated by
Arroyo’s failure to attract new investments in
generation capacity.
In an
undersupply market where distributors are compelled to
purchase from spot markets, the Wholesale Electricity
Spot Market (WESM) rates fly north. More when peaking
diesel plants determine values at which WESM bids are
settled.
When it
debuted, WESM rates were P3.38/kWh. That quickly bloated
by 150 percent to P8.40/kWh within four months, thereby
accumulating an incremental P9 billion, eventually
burdened on Meralco customers. Today WESM’s P7.64/kWh
rates are higher than Napocor’s.
WESM
should have made trading transparent and the market
efficient. But the uncompetitive domination of long-term
bilateral contracts between Napocor and the
cooperatives, plus PSALM’ the Power Sector Assets and
Liabilities Management Corp.’s (PSALM) market power
reduce WESM to a simple venue for those with excesses
selling to those with short-term shortages.
Because
of debt that accounts for over 50 percent of our
deficit, Napocor coddles these bilateral contracts. With
GRAM and Icera inflating Napocor’s rate and WESM tariffs
bloated by an undersupply, generation rates can only
increase.
When the
ERC investigated price-fixing charges against PSALM,
they discovered “bid offers submitted for Ilijan,
Pagbilao and Sual were increased to P10,000/MW and
higher starting August 30 [2006] for peak hours. It is
observed that ALL THREE plants’ bids started at P10,
000. . . EXACT SIMILARITIES [caps supplied] on the price
offers . . . occurred on 30 and 31 August 2006, for the
time period 1100H to 2100H.”
For
plants with different capacities, fuels and economies,
“exact similarities” are incredible. Add charges of
price-fixing and market-power abuse where three PSALM
traders, supposedly simulating competition, sit
back-to-back in one third-floor room immediately above
the cafeteria within the Napocor compound, and we soon
realize that the highest tariffs spawn from WESM and
Napocor.
On
transmission costs, tariffs are no longer capped by a
statutory 12-percent return-on-rate base. Employing
ERC’s performance based rate mechanism, among others,
tariffs are a function of the weighted average cost of
capital (WACC). For the National Transmission Corp. WACC
is 15.85 percent. A 32.08-percent increase, this remains
until 2010 when a recalibration is scheduled.
Sourcing
substantively from Napocor and marginally from WESM to
accommodate demand, Meralco measures up. Its limited
sources, two from natural-gas plants, one from coal, are
cheaper, having substantially indigenous fuels and fewer
currency vulnerabilities. Also, with relatively
proximate sources, two from Laguna, one from Mauban,
transmission charges are halved at P0.66/kWh against
Napocor’s P1.54/kWh, while T-line losses are less. With
actual system losses at 8 percent (1.5 percent below the
statutory limit of 9.5 percent), when maximized to
mitigate economic offtake requisites, the generation
costs average P4.24/kWh. That’s a P0.52/kWh savings
compared to Napocor’s generation cost (inclusive of GRAM
and Icera) that start from P4.76/kWh and up.
Unfortunately, within the cost structure of the
natural-gas plants Meralco sources from and which supply
over 40 percent of Luzon’s needs, state royalties run as
high as 55 percent. These go directly to Arroyo’s
coffers, thus discouraging indigenous energy usage in
favor of higher-cost fuels.
What a
stupid policy. Again, we see where generation rates
balloon. Literally and figuratively, dogs are barking up
the wrong tree. Before they howl and yelp, they should
do as dogs do. Lick clean their own sphincters first. |
