Regulators playing hookey

Government inaction, particularly on the part of the Energy Regulatory Commission (ERC), on the energy dispatch issue between the National Power Corp. and Meralco continues. This is costing our consumers millions of pesos that could go a long, long way during this crisis period brought about by high crude prices. Pete L. Ilagan, currently president of NASECORE, writes to us their findings.

"The National Association of Electricity Consumers for Reforms (NASECORE) read your article on the looming energy crisis with much enthusiasm, and we couldn’t agree with you more that there are indeed ways to provide cheaper electricity to consumers if only the industry regulator and parties involved would move to achieve that same objective.

As discussed in your column, one is through economic dispatch, or the system that would provide the cheapest electricity to consumers. We recognize the major roles the Energy Regulatory Commission (ERC) and the National Transmission Co. (Transco) could play in ensuring that this arrangement redounds to the benefit of customers. In fact, NASECORE has called the attention of the ERC and Transco on the fact that Meralco’s more than four million customers were being charged with generation rates much higher than the least cost supply. For instance, in March this year, Napocor’s generation stood at P3.9384 per kilowatthour, while Meralco billed to its customers in April a generation charge of P4.529 per kwh.

In May, when the recent Napocor rate increase was already in effect, the state agency billed a generation rate of P4.408 per kwh to all its Luzon customers, still P0.12 per kwh lower than Meralco’s generation rate the month before. This would only mean that Meralco has been buying more expensive power from sources other than Napocor, therefore unduly burdening its captive market.

Under Section 23 of the Electric Power Industry Reform Act, a distribution utility is under obligation to supply electricity in the least cost manner to its captive market. Transco is likewise obligated to observe economic dispatch of power plants so that cheaper power plants or least cost electricity take precedence over others. We have served the same to Transco in a letter in May to remind the state agency of its obligation as a system operator.

Unfortunately, it seems that Transco interprets the issue of economic dispatch in a different light and at the same time ignores the relevance of the issue by passing the buck to the ERC. We brought this matter to DOE Secretary (Raphael) Lotilla and we hope he will do something about this."

Not A Laughing Matter

The energy crisis is definitely no joking matter, and I would like to thank readers like Melgre O. Granada who have provided fresh insights as well as action opportunities to meet the tightening world fossil fuel scenario. Here is what he has to say.

"(To get the real picture) about the fossil oil supply, I recommend the reading of the UC (University of California) report on "Life after the Oil Crash" by Matt Savinar. From there you will see a wide window for the Philippines to join the alternative fuel industry.

My group is now making arrangements to use the vast ancestral land of the various tribes in (the Philippines) to produce new crops as sources of biodiesel and ethanol, and our partner is negotiating with a Thai producer of organic fertilizer which at least multiplies production of crops by five times. Thanks for people like you. We can wake up our people to see our opportunities in the midst of crisis." Prices of fossil oil will never go down because it is becoming scarce – unfortunately, we cannot repeal the law of Supply and Demand, not even by Ping Lacson or Francis Escudero and Cory Aquino to boot.

Keeping Giant Telecoms In Line

Finally, Ben Tesoro reminds us about the continuing stalemate in the controversy between an NTC ruling and the SC regarding telecommunication firms‚ practice of rounding off a fraction of a minute when charging consumers for their calls.

"I find your column of Aug. 22, 2005 very interesting. By way of background info, I have more than 50 years of experience. Some of my key points in the telecom field are: 11 years employed by PLDT, last position as radio superintendent; 15 years with ITT Philippines as marketing director; three years with GTE Industries as marketing director; and seven years connected with AT&T thru Lucent Technology as equipment distributor. In 1979, I formed my own company as equipment distributor/contractor. During my initial phase of my business, I encountered difficulties with telecom carriers, primarily PLDT. The carriers refused interconnection of PABX trunk lines to PLDT central office lines. Up to 1980, PLDT was almost a total monopoly. We anticipated this interconnection problem as early as 1970s. We formed TESAP (Telecommunication Suppliers Association of the Philippines). In 1979, we requested the National Telecommunications Commission for a ruling on the interconnection problem. Almost single handedly, as president of the association, we were able to secure a ruling deregulating the CPE (Customer Provided Equipment). I consider this as a landmark decision in the telecoms industry. With this ruling, fax machines, telephone sets, PABX equipment were allowed to connect with the telecom central office switch. In 1993, I was the president of PETEF (Philippine Electronic and Telecommunication Federation of the Philippines). This group has around 17 association members under its umbrella. We drafted the first Philippine bill to deregulate fully the telecoms industry. This bill was taken up in the Senate under Senator Edgardo Angara, then Senate president, and became law in 1995 as RA 7925. While the law as passed did contain some deficiencies, it is a landmark decision that resulted in the entry of more players and to the increase of telecom services especially cellphones. It has also resulted to windfall profits for all the carriers, especially the two dominant players, PLDT and Globe. But the big question is do they deserve these profits?

Some two years ago, I attended an NTC forum. I raised the question on the status of a ruling issued by NTC some four or five years back which ordered all carriers to use the six 10-second pulse in computing the fraction of a second. The present practice of carriers is to round off the fraction of second to one minute.

It would appear that carriers are paid for services not rendered. If NTC could implement their proposed ruling, billions could be saved by subscribers, and the government could use this excess charges as basis for taxing the carriers. The proposed NTC ruling was opposed by the carriers and they elevated the case to the Court of Appeals. Subsequently, the case reached the Supreme Court who issued a TRO and remanded the case to the lower court, where it is now in deep slumber. It’s about time that this case be decided to keep telecom giants in line in the interest of government and the calling public."

I bet you, the major telecom companies would rather keep the status quo. The longer the stalemate lasts, the more they rake it in from their users.

In The Eye Of Corporate Shenanigans

Without much warning, the accounting profession was caught in the eye of corporate scandals and debacles. From an icon of integrity and objectivity, it became inextricably linked to corporate fraud, misrepresentation and business malpractices.

What was so damaging in the Enron scandal and the other subsequent corporate debacles that changed the public’s view of the accountants‚ role and accountability? What is the impact on the accounting profession of the new regulations and reporting standards being imposed by government regulators?

Join us in "BREAKING BARRIERS" on Wednesday, 7th September 2005, IBC-TV13 (12 pm) and gain insights into the views of Jerry Isla, chairman & senior partner of Isla Lipana & Co. and PriceWaterhouseCoopers, Philippines, on various developments and issues affecting the accounting profession globally and the impact on local businesses. Watch it.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.