Government is the biggest culprit in Philippines’ power woes

Ben D. Kritz

Ben D. Kritz

In about two weeks’ time, the enormous rate increase charged to Manila Electric Co. (Meralco) customers and subsequently interrupted by the issuance of a temporary restraining order by the Supreme Court will again land on customers’ bills, as there is no real legal reason—not even a finding (which is not going to happen, anyway) that power producers colluded to increase prices—to prevent it from being imposed.

And when public outrage reaches fever pitch (again) over it, just about all of it ought to be directed squarely at the useless leadership in Malacañang and the Department of Energy (DOE).

The latest statement coming out of the Office of the President was delivered by Designated Talking Person (and, coincidentally, yet another Aquino functionary who was supposed to disappear from the official roster but hasn’t) Abigail Valte last Friday, who explained the government’s apparent inability to control the price of electricity by pointing out the constraints imposed by the Electric Power Industry Reform Act of 2001 (Epira): “So while you believe that the Executive has so much perceived power, we are limited by what the law says. There is no magic wand to wave,” Valte said.

That response was only marginally more mature than the unfunny and dismissive reaction of Energy Secretary and hypothetical resignee Carlos Jericho Petilla last month, when he was asked about the double-whammy of sharp increases in fuel (diesel, gasoline, and liquefied petroleum gas, or LPG) and electricity prices faced by consumers in December, in part because of the nearly simultaneous shutdown of several power plants: “Kung nagkasabay-sabay silang lahat, hindi ’yan pinlano, it just happened. What can we do [If they were all off at once, it wasn’t planned, it just happened. What can we do]?” As some helpful advice for consumers, Petilla (presumably talking about fuel prices) added, “Don’t buy, kung namamahalan kayo [Don’t buy, if it’s too expensive for you]!”

The point of view of the Aquino administration is completely asinine; it is not only anti-consumer, it is destructive to the economy as a whole. It is a basic responsibility of government to ensure that utility commodities are fairly accessible in reasonable amounts and at reasonable cost. This is not optional because, as the hopelessly out-of-touch Jericho Petilla apparently needs to be told, dwelling in unlighted houses and relying on wood scraps and charcoal for fuel are not actually considered adequate living conditions by the vast majority of Filipinos. The weak defense that “market forces” must be allowed to run their course is damnable as well—hiding behind the Epira law simply provides artificial protections for a natural monopoly, and that imposes an unnatural burden on the rest of the “free market.”

The administration and its apologists might point out that Epira was an Arroyo-era creation, and that high power costs, while perhaps a more contentious issue right now, have been a problem for years. That is true, but if anything that only makes the failure of the Aquino administration more condemnable. Coming into office knowing that high power costs and adequate electricity supply were key economic challenges, and knowing that it was a common conclusion that the Epira law is the root cause of these problems, the administration has done absolutely nothing to address them.

Worse than nothing, from a certain point of view: While the Epira law does prohibit the government from engaging in the power generation business itself (a basic concept that, despite everything, is actually a good idea), it does not prevent the government from strategic planning and establishing development policy. The stock response from the administration to the problem of high power costs is, without fail, to suggest that generating capacity needs to be increased. That is true in Mindanao, but not at all the problem in Luzon. Even if it was, there is nothing in the law that says the government cannot determine the path that “increase in capacity” should take—where power plants should be located, of what configuration and capacity they should be, what the acceptable limits on the cost of the power they produce are, and when they should be available.

Instead, the only planning that is done is to announce a vague figure—e.g., 10,500 megawatts of additional capacity over the next 15 years, according to the DOE’s “Philippine Energy Plan 2012-2030”—and then sit back and wait for the usual suspects, the small cartel of power producers who already hold the entire economy hostage, to make suggestions as to what they will deign to provide. And because in Luzon, at least, power needs are grossly overestimated, “additional capacity” will never solve high power costs under the current legal and economic framework: New plants are only proposed as a means to expand investment, in which a key priority (and a very smart one, from a business point of view) is to maintain the same or nearly the same level of returns.

Obviously, in the short term the Epira law needs to be scrapped, or probably more likely, significantly amended to repair its provisions that have caused nearly a decade’s worth of unintended consequences. This should have been clear the moment Noynoy Aquino put his right hand back in his pocket after taking his oath as President, and it is certainly most painfully clear now. Government must have legal mechanisms to intervene to moderate prices when “market forces” push them to extremes. The fact that the Aquino administration is not pursuing these now is just further evidence of how small a segment of the country it really serves, because after all, “market intervention” is a normal, accepted practice and a matter of formal policy in other areas—like currency manipulation. What’s the difference? If the government can insist that intervention is necessary in one respect why not another, especially one that has as much of a widespread economic impact? Indeed, the law as it is now prevents the government from doing so—but the law has never proved to be much of an impediment to this government’s doing what it thinks is right, it can make the changes needed if it has the will to do so. If it does not have the will, then perhaps it ought to be replaced with one that does.


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  1. Kawawa naman ang mga mahihirap…… pahirap nalang ng pahirap! lalo na dito sa meralco na lalong nag papahirap sa lahat! saan ang katarungan? Pinoy, how can we achieve progress when our energy cost is pulling us all down! Pls act now!

  2. Ricardo Harina on

    The EPIRA law should be amended that will mandate the National Government to build State of the Art Combined Cycle Power Plants in Luzon, Visayas and Mindanao that will reduce power rates and address environment concerns in the near future.

    With no assured substantial, stable and reduced power rates, how can you attract and encourage foreign and local investors in the Philippines under our present conditions?

    Our Nation can never and will never attain the economic progress that Filipinos and Non-Corrupt government officials are dreaming or hoping for if our Nation’s economy is controlled by few greedy and crooked power providers and businessmen in collusion with corrupt government officials and corrupt elected representatives of the people.

    Our government with the cooperation of our Congress should sit together and plan for building State of the Art Combined Cycle Power Plants for Luzon, Visayas and Mindanao that will provide substantial and stable power, reduce the power rates, address environment concerns, attract and encourage foreign and local investors that will provide economic impetus, job and business opportunities that will prevent Filipinos seeking jobs abroad and encourage those working abroad miserably return back because they will see a better Philippines in the near future and alleviate the sufferings of poor Filipinos where our Government will provide affordable and stable power to propel us to economic progress that Filipinos are still dreaming and hoping for..

    This is where we should put into better use the PDAF declared by the Supreme Court unconstitutional and putting up Elevated Water Pass along Pasig River that will mitigate flooding in Metro Manila during rainy season and can be use also as Express Way to lessen traffic problems in Metro Manila and also improve our Tourism along Pasig River.

    Other smaller countries have been doing this that makes them more progressive and attain high economic status in the Forbes list like Austria.

    If we can do this, Filipinos working together under a better and clean government may realize the dream they are hoping for in the near future by starting these projects in 2014.