Overtaken

The various petitions brought before the Supreme Court opposing the sharp spike in electricity prices last December might have been overtaken by events.

As an interim measure to protect consumers, the Court issued a temporary restraining order on Meralco, preventing the distributor from collecting the higher charges. Those charges reflect the spike in generating costs claimed by the power producers — with Meralco serving as the collection agent, being the distributor to final users.

Eventually, the Court extended its temporary restraining order to the power generators. Without expanding the scope of the restraining order, the distributor (Meralco) would have been put under great financial pressure from power generators anxious to collect on the electricity they dispatched to the grid.

Last week, the ERC ruled that the generation charges for the November-December period be recomputed based on the average charges during the preceding 12 months. That should take away the speculative pricing that set in November when gas supply from Malampaya was cut off on scheduled maintenance, taking out the gas-powered generating plants.

The ERC ordered the Philippine Electricity Market Corporation (PEMC), which runs the wholesale electricity spot market, to do a recalculation of the November-December period. The PEMC, earlier this week, announced that spot market prices for the controversial billing period should go down to only about half the original quotes.

Meralco contests the PEMC calculation. Based on the parameters set by the ERC order to recalculate, Meralco says generation charges for the November-December period ought to be only a tenth — not just half — of the original quotes.

Going by Meralco’s calculation, the increase in the generation charge for that period should be reduced from P3.44 per kilowatt hour to only P0.27 per kilowatt hour. That is less than a tenth of the original increase that is the subject of the Supreme Court’s intervention.

For the January billing, says Meralco, the increase in the final billing should be cut to P0.45 per kilowatt hour from the original estimate of P4.56. That recalculation basically pulls the rug from under the power price controversy. All the passions invested in that controversy might have been conserved if the ERC acted promptly and intervened in the wholesale market pricing in anticipation of the speculation that short supply induced.

It is not yet time to celebrate, however.

Any recalculation of the generation charge component of our electricity bills will depend on the computation the ERC deems just and the lifting of the Supreme Court’s restraining order on the application of the charges. Meralco, for its part, committed to implement the lower calculation for the benefit of the consuming public.

There are lessons in effective regulatory behavior to be learned here.

Somewhere along the way, the ERC seemed to have lost touch with its fundamental mandate, which is to ensure consumers fair pricing of an indispensable commodity. If they did in October what they finally decided to do this month, all the controversy might have been avoided.

All that controversy accomplished, with all the hysterical accusations and the usual agitprop from the leftist groups, was to scare away investors considering entering our power sector. We need those investments badly to avert power shortages that will hamper further expansion of our domestic economy.

Already, several think tanks are scaling down Philippine growth estimates into the medium term.  The scaling down is driven not by what this administration has accomplished but by what it failed to do during its watch.

If new investments in power generation do not happen, that will only add to the lengthening list of opportunity costs future generations will endure because of the follies of this moment.

Stakeholder

The curiosity has become viral in social media. If you want the details, go to www.deathbytaxes.wordpress.com. It is all there.

The curiosity was sparked by the publication of an internal document from the BIR. In that document, dated January 2013, senior officers of the agency recommended a special audit of a company distributing luxury cars locally. BIR Commissioner Kim Henares did not act on that recommendation.

For weeks, since that internal document circulated in the digital universe, people speculated over the BIR commissioner’s inaction. If the revenue authority was going hammer and tongs after doctors, actors, sportsmen and other middle class people working hard for their money, why let the big fish (like that doughnut distributor and this retailer of luxury cars) off the hook?

From available documents, it is clear the retailer of luxury cars routinely undervalues the price of its imports. Given the volume of sales it made, hundreds of millions if not billions in taxes might have been evaded. Only a serious audit will establish the actual amounts.

In the blog mentioned above, it is claimed that Finance Secretary Cesar Purisima sits as a director of the luxury car distributor and its lesser known sister company under whose name recent car sales have been documented.

This may or may not be the reason our tax authorities seem inclined to look the other way as far as this car dealer is concerned. At any rate, it is surely a matter the Finance Secretary should speak to. It does not reflect very well on his stewardship nor on the levelness of the playing field under the current dispensation.

Too, shouldn’t the Finance Secretary have divested his stakes in private businesses when he assumed office? Divestment will cure the possibility of conflicts of interest such as is being suggested in the case of the car dealer and the taxes he might have avoided.

 

Show comments