Transparency and electricity

The price of electric power in our country (the second highest in Asia) has become so complex that even a well-informed citizen would have a hard time grasping the issues, allocating blame, and determining what should be done. This situation is susceptible to demagogic positioning and political opportunism. One can only hope that those who have thoroughly studied the issue can make themselves heard above the din.

For one whole week now, the media blitz on this issue has been led by no less than the President herself and her staunchest allies. The sole target has been the Lopez family-controlled Meralco.  While the high cost of electricity has been a recurring concern of consumer advocates, it is significant that this issue should surface at this time and is now absorbing all the public attention.  Suddenly shunted aside are the issues that have haunted the government in the last few months: the rising price of rice and, even more so, the NBN-ZTE scandal.  This state of affairs is certainly working for Ms Arroyo, who has shown a capacity to override demands for public accountability by simply calling attention to her accusers’ liabilities.

Be that as it may, it is difficult to understand why the GOCCs that jointly own 33% of Meralco and occupy 4 out of 11 directors’ seats cannot press for transparency from within the Meralco board itself.  If there are concerns about corporate corruption, the annual stockholders’ meeting should be a good venue to thresh these out. Failing this, there is always the Energy Regulatory Commission.  But why are the power committees of the Senate and the House, led by Senator Miriam Santiago and Congressman Mikey Arroyo, stepping into the fray at this point?

While it may not clarify the whole problem, a bit of history may provide some context to help us tell a solid argument from bullshit.  I have found it useful to turn to the late Energy Minister Geronimo Z. Velasco’s book, titled “Trailblazing: The Quest for Energy SelfReliance,” for a lucid picture of the events leading to our present energy situation.

In the pre-war years, Meralco, then owned by an American private company, was the foremost generator and distributor of electric power in the country.  The Commonwealth government under Quezon put up the National Power Corporation to tap hydroelectric power, and persuaded Meralco to buy the power generated from this source to augment the power it produces. The State-owned firm used foreign loans and war reparations to build the gigantic hydro projects that we are still using to this day. The capital requirements of these projects were so big they were beyond the means of private investors.  From hydroelectric dams, the NPC expanded to geothermal energy and oil-fired plants, making it the biggest power generator in the country.

On January 5, 1962, the American owners sold Meralco to a Filipino group led by Eugenio Lopez Sr.  Under Filipino ownership and management, Meralco built additional oil-fired plants to supply the expanding Luzon market.   So ahead was Meralco in vision that, in 1967, the owners proposed the construction of a nuclear power plant to meet Manila’s growing energy needs.  The result of this initiative was the passage of RA 5207 which provided the legal framework for the peaceful harnessing of nuclear power. Meralco’s expansion however proved to be financially burdensome.  Its debts rose, and with every peso devaluation, debt servicing became heavier.  In 1971, a politically turbulent year, it applied for a 37% increase in power rates, but the Public Service Commission approved only 20.9%.

Meralco’s woes became NPC’s blessings. In November 1972, two months after declaring Martial Law, Marcos issued PD 40, giving the NPC monopoly in power generation and transmission.  NPC acquired Meralco’s oil-fired plants, and consigned the latter to power distribution.

The NPC’s capital-intensive expansion program forced it to borrow enormous amounts of money.  Emblematic of this program was the decision to pursue the nuclear power concept. The project, began in 1974, mired the NPC in debt, and plunged it in controversies from which it never recovered.  In December 1985, the Bataan Nuclear Power Plant was ready to fire, but the US government intervened once more and asked for a final inspection.  The rest is history. Marcos fell two months after, and the expensive plant was mothballed even before it could produce a single watt of electricity.

Unlike the plant itself, the debts incurred to build it could not be frozen.  It took us another 20 years before we could pay the last dollar on the BNPP debt.  Meanwhile, the once proud NPC has been degraded over the years.  Every administration that came after Marcos did not think twice about lowering NPC rates to score populist points, thus further aggravating the firm’s financial condition.  Today, it is being liquidated piece by piece.

The privatization of power generation and transmission has been done haphazardly – in the wake of a frantic rush to dismantle every project started by Marcos.  It was as if the government expected the private sector to systematically fill in the spaces vacated by State initiative.  When the 12-hour blackouts started to hit us in the final years of the Cory government, we could only respond with a desperate quick-fix – by buying power from hastily invited Independent Power Producers.

We are still paying for all these missteps, and while Meralco is far from blameless, it is surely dishonest to notice only its faults. Transparency and accountability must begin with the government itself.


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