• Jericho Petilla: Regulatory capture personified

    Ben D. Kritz

    Ben D. Kritz

    As promised, Energy Secretary Carlos Jericho L. Petilla submitted his resignation last week, after failing to fully restore electricity supply to all the areas damaged by last month’s Typhoon Yolanda.

    The Philippines’ online community, which almost daily sets new standards of gullibility for itself, initially lavished praise on Petilla for his “integrity” and “honoring his word,” despite the fact that it was obvious the moment he uttered his mayabang “I will resign if power is not restored by Christmas Eve” that no such thing would ever happen. And sure enough, roughly six minutes after Petilla announced his resignation, it was firmly rejected by President B.S. Aquino 3rd, without so much as a whisper of protest from Petilla, leading a friend of mine to comment that former Customs chief and well-known “resigner” Ruffy Biazon “ought to sue Petilla for gimmick infringement.”

    Petilla never intended to resign, and if he did, that notion would have been quickly squashed by his overlords in the power sector, before whom Petilla has demonstrated that he is completely helpless. After doing nothing to stop the astonishing rate increase imposed by the Manila Electric Co. (Meralco) on its five-plus million customers, Petilla was apparently caught off-guard by the firestorm of public anger; after some of his people faced hearings in the House of Representatives, Petilla “ordered” the Department of Energy (DOE), the Energy Regulatory Commission (ERC), and the Philippine Electric Market Corp. (PEMC) to “investigate” whether there was collusion between Meralco and power suppliers to drive up electricity costs.

    That all sounds very consumer-friendly, but why the DOE and its various sub-agencies would be investigating something they allowed to happen in the first place ought to be questioned. In his role as Energy Secretary, Petilla is the man in charge; furthermore, he serves as chairman of the PEMC, the parent corporation of the Wholesale Electricity Spot Market (WESM), the presumed source of the obnoxiously high power costs. Thus, he is in the odd and obviously unworkable position of being both the head of a for-profit market and its chief regulator. The ERC is technically an independent body, but the “anything goes” nature of trading on the WESM seems to put the regulator in a difficult position: If high electricity prices are allowed at the WESM (the responsibility for which ultimately belongs to the DOE Secretary and the Board of Directors he leads), the ERC has little justification for disallowing a rate hike by distributors to compensate for them.

    Being in a compromised position is bad enough, but the way Petilla picked up that ball and ran with it is what makes the entire issue a demonstration of gross personal failure on his part rather than a simpler organizational problem. Despite the DOE’s supposedly “investigating” price-fixing, Petilla last week issued a jaw-dropping statement indicating just how low his regard for the “consumer protection” aspects of his job really are, public advising Meralco to appeal the 60-day Temporary Restraining Order (TRO) issued by the Supreme Court against the rate hike, and saying that it could cause financial difficulties for Meralco who would be forced to borrow to cover its power purchases.

    Here’s a fun fact. In its third quarter business summary (which is available online to anyone, even Secretary Petilla), Meralco had this to say about its financial position as of the end of September: Free cash flow of P11.1 billion, and net debt of negative P34.6 billion, or in other words, a we’re-totally-not-in-debt-at-all gearing ratio of minus 0.49. Figures on how much power Meralco bought during the elevated price period vary, but seem to be around P3 billion—the company may borrow to cover that because it may be financially advantageous to do so, but it certainly doesn’t need to borrow.

    With Petilla on their side, it’s little wonder Meralco seems to have been emboldened to use the confusion caused by the issuance of the TRO in the middle of the company’s bill-generation cycle to actually ignore the Supreme Court order, as one correspondent from Parañaque alerted us.

    She writes: “Last December 26, I went to Meralco Tambo to pay my bill [received in December], anticipating a manual calculation of the supposed increase and deducting it from my bill, in accordance with the TRO at least effective December. The cashier and officer in charge said I had to pay in full, because the bill was generated before the issuance of the TRO, regardless if payment was being done after the TRO date. Meralco will then act on the final outcome of the hearing, they said.” Apparently, there were several angry customers at Meralco’s Tambo Business Center, all being told to pay the full bill and TRO be damned. Not being satisfied with that answer, our correspondent asked to speak to someone higher on the totem pole but, “They asked me to wait for a long time, so I just left.”

    Two days later, however, on December 28, Meralco posted this statement on its Twitter feed in response to a customer query about the December bills: “Kung natanggap ninyo ang inyong bill bago ang December 20, 2013. Maaari kayong magbayad katumbas ng inyong November bill. Gayundin, maaari kayong makipag-ugnayan sa pinakamalapit na Meralco Business Center para sa karagdagang impormasyon.” ["If you receive your bill before December 20, 2013, you can pay your November bill equivalent. Also, you can contact the nearest Meralco Business Center for more information.”]

    How many people might have unwittingly paid their entire December bill (Meralco has said roughly two-thirds of its customers had already been billed before the TRO was issued) is anyone’s guess, and since it is a virtual certainty the rate hike will eventually be allowed—barring a ridiculously-unlikely determination by the DOE or the Department of Justice that price-fixing did in fact occur—those customers will not be getting that money back. Perhaps Meralco’s new spokesman Jericho Petilla can at least thank them for helping to keep the company afloat through its oh-so-difficult financial challenges.



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    1. Thievery sanctioned by a conniving yellowist govt led by no other than freaking Abnoy. Masa, siya ang binoto ninyo. Bayad kayo sa katangahan ninyo!

    2. Another Yellow corrupt cabinet secretary…lawyering for Meralco and Pnoy’s oligarch KKKs and campaign contributors…

      PWE…! Enough of the yellows…!

    3. Aurelio Agcaoili on

      These people are of the same kind: they are all sadists. The thing is they have found a willing partner–we the masses. We are all masochists. Bring in the pair, now and forevermore!

    4. All of this investigation whether there was collution resulting in the monstrous rise in our electricity rates is nothing but palabas. Of course there was and will always be collution among the same oligarchs who are both the power producers and distributors at the same time. Just ask who are these and obvious will be the Lopezes, Aboitises, Panguilinans who are both the major power producers and majority owners of meralco. Ask also who are the suppliers of power in WESM and the same people will emerge. When these people want a sudden windfall (to buy the latest Ferrari as commented by someone) they just shrink the power supply by a simple excuse of a maintenace shutdown of some plants so that the power rate in WESM shoots up and meralco turns around to say that it has no choice but buy the higher priced WESM power to distribute who stands to benefit, its the same power suppliers who supply the WESM power who also caused the power cost surge in tne first place by reducing the supply of power. Remember that WESM price is spot pricing determined by market consideration,i.e., supply and demand. Another curious matter is malampaya produces natural gas which is used entirely by power plants in Luzon accounting for a hefty 37% of power of Luzon power. I have not succeeded in finding out who these power producers are (media accounts do not disclose this) but I’ll bet its the same people (Lopezes, Aboitises, etc.). So when malampaya closes for “maintenance” purposes who derermines when but the same power producers. Its so obvious: there is no need to investigate whether there is collution it happens as a matter of regular business as usual. Who are they kidding they don’t really care do they that the stuggling meralco customers will have to shell out more on top of the highest electricity rates in the world to.begin with. Windfall is windfall and lets not hold our hopes high that the SC means to make permanent its TRO palabzsdin iyan!