A good way to scare off foreign investors

3

The muddling of the issue of the power rate increase can be bad for the country as a whole.

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And the Supreme Court issuing a temporary restraining order on the power rate hike of the Manila Electric Co. (Meralco) has emboldened various sectors of society, including showboating politicians wanting to ride on the issue, to further muddle the issue.

In an instant, a large corporation with shares listed at the Philippine Stock Exchange has come under attack as if it were the most evil entity in the country.

But blaming Meralco for the price increase it was set to impose is missing the point on how the power industry in the Philippines currently operates, and how the government mismanaged the whole situation because of lack of foresight.

In the first place, Meralco is merely a power distributor and not a power producer, very much like the SM Malls of Henry Sy are retailers and not manufacturers of products.

Since it is not a power producer, Meralco’s chance of getting the best deal from power producers is to rely on market forces, or if the supply is enough it would surely get the best price. And in a worst case scenario, shortage of power supply will mean Meralco purchasing power at a higher price.

Perhaps the worst case scenario for Meralco happened when the Malampaya natural gas platform went on a maintenance shutdown, which could not be blamed on the utility or even the power producers.

The Malampaya shutdown and the need for other plants to also undergo maintenance shutdown can obviously look like collusion, but the simultaneous shutdown of the country’s only natural gas facility and some major power plants could have been avoided had the Department of Energy (DOE) taken a pro-active approach to the Malampaya issue and the overall power situation.

The Malampaya plant has been operating since 2001 and not expecting it to undergo a maintenance shutdown is like expecting a car to run a million miles without  changing its oil, tires and other parts that wear out.

Why did the DOE allow Malampaya to shut down starting November, when that is the month when factories, which consume huge volumes of electricity, are stepping up production to cash in on the traditional high spending of Filipinos during Christmas time?

Had the DOE taken fully into account the need for the Malampaya plant to shut down, the best it could have done was to avoid a situation where that facility would stop its operations alongside other major power plants from November last year. We still wonder why the DOE failed to see the consequence of those simultaneous shutdowns taking place.

Or at least the Philippine Electricity Market Corp., which operates the Wholesale Electricity Spot Market, should have foreseen how energy prices would unfold under that scenario. Anyway, when did this government have foresight?

So Meralco was placed in a precarious situation since it would be the one collecting from consumers, particularly households, the increased power rates. And it became an unwilling scapegoat in the process.

Suddenly, the bearer of the bad news became the culprit.

This is not to sanitize the image of Meralco, since it has been making huge profits in the past years, and it is keeping a Lopez in the board (despite their divesting much of their interest in the utility) only creates some suspicion because the Lopez empire is also involved in power generation.

But asking Meralco to “sacrifice” some of its profits to appease consumers is asking for the moon, since the DOE could have done something to avoid the situation. And foreign investors are definitely watching closely how Meralco will be chastised or punished, or if it will be forgiven.

Government failure to act proactively on the current high prices of electricity and making Meralco take all the blame is another good way to scare off foreign investors.

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3 Comments

  1. Lennie Jardinero on

    The need for new sources of power has been underscored since 2010. The only response of government was to stop the completed Subic Coal fired power plant from operating despite its having complied with environmental requirements. The Malampaya maintenance shutdown was scheduled more than a year ago, yet it somehow managed to escape notice of the ERC. That a simultaneous shutdown of eight(!) power plants could be so brazenly pulled off only emphasizes government’s lackadaisical attention to our country’s power infrastructure.

    But why should they worry? The economy’s doing great, right? Yes, thanks to our ‘overreliance on remittances to boost domestic consumption and maintain healthy balance of payments over-reliance on remittances from our OFWs. . . indication of its inability to generate endogenous growth engines.’. (Richard Heydarian)

    Our pitiful response to Haiyan/Yolanda victims only shows how hollow our ‘growth’ really is. And when the blackouts start coming, the only direction to go is down.

  2. For the past three. years, how many manufacturing investor have had invested in in our country. I may say many, many shabu plant. Sorry to say this but if you have investors like Ayala, Lopezes then we will be better off not having any. Papaano pupunta manufacturing investor sa bansa kung mataas ang koryente, taxes, labor cost?

  3. florentino maddara on

    Si MVP (Baka nagbigay ng campaign funds kay Noynoy?) marunong magmanage ng mga businesses ng mga foreign investors kumikita sila ng billion na pesos at walang pakialam sa mga kababayan. Ganyan din ang mga Aboitiz (dati cab sec ni Cory Aquino), Lopez, Razon, at iba pa. Lahat ng businesses nila lalo na sa power sector ay nagpapahirap sa mga consumers. At ang DOE at malacanyang dedma lang. They always blame the previous administrations and Epira.