The National Power Corporation

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Mike Wootton

Mike Wootton

So the National Power Corp. (Napocor) is desperately trying to carve out a sustainable mission for itself in the face of a remorseless push for it to be totally obliterated? That Napocor was at one time big [17,000 employees in 1994] and powerful and probably arrogant is for certain. There are instances, however, in which the single minded push for its destruction looks as if it runs against the public interest. So you have to wonder just why the need to destroy is so strong and unyielding.

Putting large state-owned entities out of existence is nothing new, but putting major infrastructural bodies out of existence doesn’t happen too often. It is a symptom of the way in which the current administration is enamored with privatization, for whatever reasons they may have.

The Manila Electric Co. (Meralco) is a private organization heavily imbued with the public interest, and is of a size and level of influence which makes it virtually impossible to control. It is a private monopoly originally established and controlled by American investors, and was originally responsible not only for distribution but also power generation and transmission. In 1961, the American investors were bought out by the Lopezes and Meralco was Filipinized. More recently, it has been “Indonesian’ized” with the Salim group via Manny Pangilinan.

As we all know, the Supreme Court is now investigating whatever it was that led to the recent claim by Meralco of the need for a P4.15 per kilowatt-hour rate increase, and there is a lot of speculation and analysis as to the causes of the claimed need. So far, it looks like a combination of sharp practice and people being asleep on the job, as well as a complete lack of effective governance and regulation. In addition to these factors, there is an awesome amount of regulatory complication emanating from the Electric Power Industry Reform Act (Epira), and the way in which it has been implemented and is administered. Many of the power sales contracts with privatized generators are themselves exceedingly complicated, and are all different with different sets of complications. It is unlikely in my opinion that there will ever be a clear and well articulated outcome to the Meralco rate hike case. The whole thing was obviously far and away too much for the Energy Regulator Commission who themselves, when it suits, claim jurisdiction over the court system for energy matters.

I am not a supporter of privatization in general, and in particular for critical infrastructural services in environments awash with regulatory capture and in which the regulations and contracts are so complicated and varied as to make Einstein pause for thought. The National Grid Corp. of the Philippines is of course privatized and operated by the Chinese. There is, however, a critically important difference between the privatized transmission function and privatized generation; the transmission system is national—unless you are off grid you cannot get away from it—a single set of rules apply. Generation is diffuse there are many different power generators and many different power buyers, and there is no overall standardization or rules which regulatorily “glue” them together, thus the range of contractual arrangements must be vast. In an Epira world, it is the job of the regulator to make sense of it all in order to protect the public interest from monopoly abuse. It is, however, not the job of the regulator to establish the governance system by which the power sector is controlled, and it is in this aspect that it all falls down.

There is a law, Epira, which sets down the roles and responsibilities of the parties in the Philippines power sector, but that is just a load of words on paper and is in itself insufficient to ensure adequate governance of the sector notwithstanding the beloved implementing rules and regulations. Nor is it something which cannot be changed or is immune from challenge. There is a review going on at the moment to see what words can be changed. It is a poor excuse to hide behind Epira when things in the power sector are obviously not operating in the way that they should be to serve the public interest and provide affordable electricity for all [or at least as many as can reasonably be connected]. A review by the World Resources Institute in 2006 highlighted the problems of governance in the power sector, and concluded that “electricity governance in the Philippines needs much improvement in all areas . . . .” That was seven or eight years ago, and the findings implied that the influence of donor agencies [US Agency for International Aid, World Bank, and Asian Development Bank] had in many cases negatively affected the chances of successful implementation of a law that was at best inappropriate for the Philippines, and at worst a forced International Monetary Fund requirement reluctantly adopted and modified in its gestation to suit the interests of the Philippines’ powerful business and political interests. It is difficult to see what improvements in governance have happened since then; things have just become more complicated, and the power of the vested interests in the sector has increased. I think it is a case of having “lost the plot” with the focus of concern having shifted from “why this policy” to “how do we interpret these words.”

There is potential benefit in remission of the Napocor death sentence. It still has 2,500 employees not yet added to the over 12 million unemployed, but more importantly it has corporate knowledge and information to be used in standardizing the way the power sector operates and make things less confusingly complicated. It could readily; take over and operate the ex Shell LPG (liquefied petroleum gas) facility and avoid upcoming spikes in the cost of the gas; it could champion renewable energy implementation; it could teach the cooperatives how to operate off grid systems; and of course it could and should be the national generation body—government does actually have to take some responsibility for basic services; not everything should be gifted to the oligarchs. The requirement to destroy Napocor was never a national initiative; it was forced as a condition of the continuance of multilateral loans which themselves had developed from an impossible objective to achieve the political promise to lower electricity costs—costs were reduced to consumers and Napocor acquired lots of debt that it would not have acquired but for that political promise.

Simplicity is always the best, and the unemployment numbers really don’t need to rise any more particularly by throwing scarce knowledge away. It is the knack of the university professor to explain complicated things in a clear way such that the students can readily understand. Complication leads to confusion and presents endless opportunities for different interpretations and argument, and paralyses progress.

Mike can be contacted at mawootton@gmail.com

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1 Comment

  1. Blame the stupidity governance of the political dynasties in the Philippines from Marcos time to maybe onward even after Aquino regime. They allow oligarchs control almost the whole economy that includes now the water, electricity and transportation industries almost rendering the government as sideline regulators only. It is no surprise that wealth is concentrated only to few rich families. While these ruling dynasties consolidate their wealth and power through manipulations and corruptions, majority of the populace becomes poorer, hence, their votes can be easily bought. These system of governance continues if we don’t remove political dynasty structure in our political system.