• ‘Regulation’ not in DOE vocabulary

    Ben D. Kritz

    Ben D. Kritz

    FORMER Energy Secretary Raphael Perpetuo Lotilla suggested the other day that the Energy Regulatory Commission (ERC) should be transferred from the Office of the President to the Department of Energy.

    If we were to take a positive view of Lotilla’s comments, we could say he was at least half right. Yes, the ERC should be moved out of Malacañang’s table of organization. Suggesting that it should be part of the DOE, however, is frankly stupid, and belies a gross misunderstanding of the role a utility regulator should play.

    According to the Electric Power Industry Reform Act (Epira), the ERC should be “an independent, quasi-judicial regulatory body,” which is required to “promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the industry.”

    In its current form, the ERC is a three-person body of presidential appointees, and as such, is unavoidably politicized. That would not change if it were incorporated in the DOE.
    The post of Energy Secretary has become one of the most patronage-dependent jobs in the entire government, especially over the past five years. Under the current and admittedly less than ideal circumstances, the ERC as least can interpret its role as an instrument of Administration policy, which allows it to unintentionally do the right thing once in a while. Lotilla’s suggestion would remove that last shred of independence, and make the ERC a more direct tool of energy policy.

    From an Energy Secretary’s point of view, of course, that makes perfect sense, because since the Epira took effect the main – probably only – priority of the DOE has been to work to ensure a sufficient supply of electricity for the country. Not “competitively priced electricity,” not “electricity from a sustainable mix of sources,” but simply “enough electricity.” Social considerations like form and propriety tend to be big obstacles to achieving that objective in a timely fashion, given the limited resources available to apply to it.

    The responsibilities enumerated in the Epira law—promoting competition, encouraging market development, and ensuring customer choice—are functions of policy, not oversight, and should be the job of the DOE, not the ERC. Perhaps this misunderstanding of the regulatory role, a mistake codified in the law, is what confused former Secretary Lotilla into making a suggestion that would effectively eliminate reliable regulation.

    Any electric consumer, whether an individual or a business, could probably describe better than anyone in the government what a utility regulator should be doing. When it comes to electricity, consumers should be able to expect that sufficient supply is available at the lowest fair, practical cost; that supply is sufficiently diversified so that problems such as fluctuating fuel supplies and prices do not have widespread negative impact; and that electricity producers and distributors are conducting business in an ethical manner according to established rules and regulations.

    In more civilized places, public utility commissions are given much greater respect. A model that has proved to be reasonably workable is the one used throughout most of the US – a commission consisting of a much larger number of people, and representing the interests of all concerned stakeholders, the public, the utility industry, and government.

    Of course, even in the US complaints of politicization and regulatory capture by big industry interests never completely disappear, but the system undeniably works much better than the Philippines’ ERC. Notwithstanding problems such as California’s drought, everywhere in the US power, water, gas, and communications utility rates are significantly lower and services far more reliable than in the Philippines.

    The ERC should be divorced from both the Office of the President and the DOE, and made truly independent in much the same manner as the Comelec or the Commission on Audit.

    It should be expanded as well. What model of public-industry-government representation would work best for the Philippines will have to be considered carefully, but since that evidently was not part of the process that formed the current ERC (or bizarre alternatives like former Secretary Lotilla’s suggestion), just taking that step would be progress.



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