• Power Gothic

    Ben D. Kritz

    Ben D. Kritz

    THIS is just a hypothesis, but I think there may be something more to the recent steep increase in electric rates than mere greed on the part of power generators and suppliers.

    In order to understand this hypothesis, we have to engage in a little role-playing exercise. Imagine yourself as a big business investor in the Philippines, one with significant interests in a variety of businesses—utilities, telecoms, retail, real estate, media, manufacturing, banking, business process outsourcing, construction, and others. In 2010, you decided to support the bid for the presidency by then-Sen. B.S. Aquino 3rd, because for one thing backing an obvious winner is a prudent political survival tactic, and because he, and perhaps more significantly the well-organized Liberal Party machinery behind him, offered the prospect of a number of the stubborn obstacles to doing business that have plagued the Philippines for a decade or more finally being corrected: An inconsistent, unreliable, and glacially slow judicial system, miles of red tape involved in even the simplest transactions, and rampant bureaucratic corruption.

    But it is now three-and-a-half years later, and you, Mr. or Ms. Big Business Person, are thinking you may have made a bad decision.

    Instead of improving the judicial system Mr. Aquino has antagonized it, and to the surprise of no one, the reaction of the entire judicial system to all this has been to become even slower and more disaffected. Instead of reducing red tape and institutional inefficiency, the President and his team have somehow managed to make it worse, with even the most basic projects (a connecting road only a couple kilometers in length, a maintenance contract for a light rail line, refurbishing an airport terminal) mired in political controversy and requiring three, four, or even more attempts before a successful bidding can be achieved. It has gotten so bad that columnists and other public voices (in whose crosshairs you, as an apparent backer of a regime with whom the public is quickly losing patience, find yourself more often as time goes by) now refer to the once-heralded “PPP” initiative as “Post P-noy Projects,” and members of your peer group, without a hint of irony, offer the opinion that no one will do business with the government before 2016 because “it’s just too big a hassle.” And instead of reducing corruption, the Aquino administration has apparently encouraged corruption to not just grow, but grow explosively—perhaps not intentionally, but motives are irrelevant to real-world results. Scandals are not only more numerous and frequent than they ever have been, but are of breathtaking scale. While you, being an ethical businessperson, are not actually involved in the corruption, the understandable public outrage over it casts a wide net of suspicion; the people are keyed-up, and looking for any hint of perceived misdeeds by “the establishment,” which includes you.

    All of this is very bad for business; you and your business peer group now believe that a change needs to be made, and made within the coming year. But how? Something as overt as staging a coup (which the business community, working together, could easily arrange and finance) is out of the question; flawed though they may be, you respect the country’s institutions, and the risks associated with an extralegal regime change are just too great to accept. Besides, a coup is just so . . . third world.
    Fortunately, another opportunity presents itself: The regularly scheduled maintenance of the Malampaya facility, which invariably leads to a short-term increase in power rates every year. Only this year, instead of a moderate increase, a few phone calls are made, a few discreet meetings are held, and the system, which is overseen by two unqualified and utterly useless Aquino appointees at the Department of Energy and the Energy Regulatory Commission (ERC), is thoroughly gamed to create a HUGE increase in power rates for customers of the Manila Electric Co. (Meralco).

    All perfectly legal, and all perfectly designed to place President Aquino in a trap he cannot possibly escape. He cannot do anything legally to stop the rate hike, and as a bonus, the way the laws are written, the ERC cannot retract a rate hike approval once it’s been granted. So even though you will initially be the target of public anger and protest (as though that’s anything new), that rage will quickly shift to the government who is “not doing anything” about the sudden and painful economic shock to Filipino households. Since the utility sector is ostensibly a free market, President Aquino will not step in, no matter what; the fastest way to kill investors’ interest is to do anything that even remotely resembles “nationalization” or “price control,” and not even he is that stupid to attempt it. The Supreme Court may very well intervene (which, of course, is what actually happened on Monday), but that will just make President Aquino and his team look even worse—that the Court had to step in to protect consumers when the administration would not.

    Supreme Court intervention is even preferable in some ways, because it doesn’t solve the problem as far as the consumers are concerned, it simply draws it out; with no legal basis to prevent the rate hike, the Court will have to eventually allow it. That will dial up the public outrage all over again, conveniently sometime around the end of January—just about at the traditional time of the year the Filipino people prefer for throwing presidents out of the Palace. If a few other buttons like the ones labeled “pork barrel” and “DAP” are pressed at the same time—not hard to do, if you control most of the largest media outlets—at that point, you, Mr. or Ms. Big Business, will have President Aquino’s future in your hands: He can either perform according to your specific directions for the remaining time he has in office, or he can be obliged to punch out early; all it will take to make it happen in either case is a guarantee from you to the right people that power rates and a few other oppressive costs borne by the average consumer will be immediately moderated after a favorable outcome.

    Sound farfetched? It does, and no business entity with any sense of self-preservation or, well, sense of any sort would ever even hint that the scenario is plausible; I certainly wouldn’t, if it were me. But it’s an attractive proposition: Either a lame duck president dancing to the tune played by people with actual competence, or a constitutional replacement who is competent himself (notwithstanding the not entirely justified ethical distaste with which he is viewed by many) would be a significant improvement.



    Please follow our commenting guidelines.

    1 Comment

    1. dark… yet plausible… businessmen’s coup to nudge off a lazy leader… let’s watch, but you must have seen the future here, ciao