Legislated corruption and inefficiency

In the latest episode of AGENDA on Onenewsph, we talked about the state of energy development and distribution in the Philippines particularly RE or Renewable Energy. Our guests on the show were Undersecretary Wimpy Fuentebella, Atty. Terry Ridon, and Leandro Leviste the youngest yet most aggressive and vocal proponent of solar energy in the country. Leviste is also the president of Solar Ph. which built a Solar Farm in Mindoro, which he claims services 22,000 households. 

Just to prick your interest a bit, you might be surprised with some of the discoveries we came upon. While government statistics state that 90 percent of the Philippines is “electrified” or has electricity, the young Leviste pointed out that a large majority of those so-called “electrified” areas are actually “one light bulb” households. This is quite true because in many such places the “power lines” and supply chain are not designed for high consumption customers like Metro Manila residences or business establishments. Our joke is that those power lines are just a little thicker than the commercial extension cords we use for outdoor events.

During the discussion, we all observed and agreed that most of those households, particularly provincial areas don’t get 24-hour uninterrupted service. A large majority suffer from frequent brownouts resulting from poor maintenance, lack of personnel, or high cost of fuel that forces cooperatives to cut cost by cutting service. Most electric cooperatives also don’t reinvest for the future. It was this very state of affairs and the failure of electric cooperatives in the province of Mindoro that opened up the opportunity for Solar Ph to build a sizeable solar farm to address the constant power shortages.

Another thing we learned, this time from Usec. Fuentebella was that the government no longer allows the Feed In Tariff or what is called FIT in our electric bills. This means that any investor or new player in the field of power generation or energy business can no longer get financial guarantees or financial assistance by way of taxes levied on the consumer. The problem is: we still have to carry on paying for FITs that are part of contracts entered into with power producers beginning from the Ramos administration onwards. So the government and WE the people have to carry on paying for such lopsided agreements that no one seems interested in questioning unless consumers of electricity get together and file a class action suit or demand a bi-cameral investigation of all such contracts to determine which ones are excessive, one-sided or highly disadvantageous to government.

If new players are fearlessly coming in without insurance or guarantees, and if those who’ve benefitted from FIT have already gained their initial ROI on direct investments, why should they be allowed to carry on when we all know the deals were lopsided? Yes, we have to honor contracts as part of our Global Competitiveness scorecard, but our elected representatives and Senators are also duty bound to investigate if we the people have been cheated.

While talking about the possibility and ease for Renewable Energy providers to penetrate markets, I found out that companies like Solar Ph. can’t simply put up shop wherever they want to, or are invited to do so. Using Lipa, Batangas as an example, Leviste and Fuentebella both chimed in and said that no new company can waltz in, in an area where there is an established franchise holder such as a private power company or cooperative. The business falls under “Public Utilities” and as such franchises are issued to operators or investors. That franchise apparently protects the company on the ground from “invasion”, “competition” or any form of threat to the business. Before any new company can come in, the existing company must declare that they are willing to give up their franchise or exclusivity to the area of coverage. So even if the current franchise operator is corrupt, inefficient, not developing, upgrading or reinvesting its goods and services, there is nothing anyone can do because of the “franchise.”

I know from experience that in many areas, public utility companies are not spending or investing money to install proper sized cables for electricity and Telco because the short term ROI or Return On Investment won’t be there. So if you happen to live in such areas like outside city limits, chances are you will have to pay the power cooperative or Telco for the “special” or additional cable from the main road and into your barangay or far flung village.

That distance can be anywhere from 300 meters to kilometers. On many occasions, I know of neighbors sharing the cost. Where we have our mini farm in Lipa, Batangas, I remember that the late Senator Miriam Defensor Santiago and her husband Jun reportedly had to buy their own transformer and pay for 200 meters worth of thick gauge electric cable to light up their farm and perimeter.

It is also interesting to know that there are no tight safeguards or real checks on cooperatives in relation to internal corruption or incompetence. Whether it is an electric cooperative or a water utilities cooperative, very little is said and even less is done to remove politics and internal corruption. It is sadder to note that a number of investigations and dozens of accusations have been hurled at the very regulators of such cooperatives. The Duterte administration is actually trying to correct the mistakes of the past but they should also act to correct corruption and inefficiency of cooperatives and franchise holders. If a public utility franchise holder can’t deliver power and water efficiently in terms of quality and price then their areas should be opened up to new players and direct competition. That is the only way to bring change: Bring Challengers!

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