Priority

Unless we are able to substantially increase our power generation capacity, our economic growth is going to hit an impenetrable ceiling.

It is not easy to build the generating capacity, to be sure. There are many factors that hinder the task.

Investors are wary of the shifting policy environment that could affect the viability of their investments. Power generation is a capital-intensive enterprise. When we experienced power shortages during the Cory administration, due to lack of planning foresight, we were so desperate we agreed to “take-or-pay” provisions in the power contracts to assure the viability of investments in the generation sector.

Investment risks are also created by the non-policy means available to those who oppose specific projects. A major coal-fired power generation project, for instance, has been held in abeyance since environmentalist groups sought, and won, a Writ of Kalikasan to prevent the project from proceeding. That plant, had it been built on schedule, would have given the Luzon grid a more comfortable reserve level and helped us avert the price abnormalities we saw when the Malampaya-dependent plants were shut down late last year.

Everyone wants sufficient power — although they do not want the plants in their backyards. The problem is that all viable plant locations happen to be in somebody’s backyard and they could resort to judicial relief to block construction.

Finally, there are regulatory risks. Power plants use fuel whose cost they could not control. When fuel prices surge, higher generation costs need to be charged. When regulators come under political pressure, they could disallow market-based charges and force generators to absorb huge losses. We saw this towards the end of last year, when groups opposing power price increases sought, and won, judicial relief.

The Energy Regulatory Commission, under severe political pressure, belatedly forced recalculation of the November-December transactions in the wholesale electricity market. That is a popular decision, to be sure, although it is a blunt instrument that will financially penalize power generators unevenly.

The chaos over electricity pricing the past few months did not deliver encouraging signals to potential investors in our power sector. We are dependent on private investments to build the generation capacity we need. Even if we re-nationalize the power sector, as some militants want, government cannot afford to build the needed generation capacity without plunging us into unsustainable public debt.

By next year, the DOE estimates we will need an additional generating capacity of 600 MW in the Luzon grid alone. This grid powers some for the most vital economic centers, including the metropolitan area, the Clark Economic Zone and the Subic Bay Metropolitan Authority. Some economists think 600 MW is even an underestimate.

Between now and 2030, the entire country will need 10,500 MW to meet its energy needs. That amount of generating capacity is not cheap to build. It poses a daunting challenge for government and private business. Unless we have a convincing plan to acquire that generating capacity by the time our economy needs it, we cannot convince investors to venture into other sectors of our economy, those that will help close the employment gap and actually dent the poverty rate.

This administration’s handling of the energy sector has not been very encouraging. It is not too late, however, to deliver a strong signal that energy security is a top priority.

The huge generating capacity we need to build down the road, considering the challenges mentioned above, requires strong leadership on the part of government. That must be demonstrated soon enough.

Hoax

Delfin Lee, now in jail for multiple estafa, is raring to come to the Senate and discuss the problems plaguing the housing sector. He insisted, in a statement preceding his appearance at the Senate hearing, that the multi-billion housing “scam” attributed to him is “a hoax and a big joke.”

Unlike other “resource persons” summoned to the Senate, Lee appears ready to deliver a lengthy discussion — which he says will be “edifying” to the public.  He promises “to shed light” on the issues surrounding himself and the business he runs. He intimated “manipulations” and “collusions” among the agencies responsible for the country’s housing programs.

Lee is set to appear before the Senate Committee on Urban Planning, Housing and Resettlement today. Sen. JV Ejercito chairs the committee. 

Also summoned to today’s hearings is former Vice-President Noli de Castro who used to chair the Housing and Urban Development Coordinating Committee (HUDCC).

In earlier pleadings related to the cases field against him, Lee accused the housing agencies of misleading the public on the issues. He blames the housing agencies for placing homebuyers at a disadvantage.

Lee denies there was a “scam” in the course of his business operations. Instead, he blames the HDMF and the Pag-IBIG Fund for breaching provisions in the memorandum of understanding between the agencies and Globe Asiatique. Also violated were Funding Commitment Agreements (FCAs) and Collection Servicing Agreements (CSAs) his company entered into with the housing agencies.

The narrative of a “scam” perpetrated by one businessman against the entire array of regulatory agencies does seem rather facile. There must be loopholes in the system and regulatory failure that led to this situation. That context deserves to be discussed since they impact on the future course of our housing program.

Whatever wrongdoing he might have done, merely demonizing Delfin Lee does not suffice to introduce reforms in our housing policies.   We need a sober and thorough examination on how our housing agencies have performed to arrive at a clear course of reform.

With a housing gap of 3 million units, such an examination is urgent.