Ambiguous

Now we have a little more clarity about the “bill shock” that hit consumers when the first electricity bills were sent out after the lockdown.

In a letter last week to Rep. Lord Allan Velasco, consumer group Laban Konsyumer Inc. (LKI) pins the blame for the “bill shock” to what they described as an “ambiguous advisory” issued by the Energy Regulatory Commission (ERC). The advisory being referred is the Distribution Services and Open Access Rules issued to power distributors.

The advisory addressed a very practical problem arising from the lockdown.

On one hand, our power billing system is almost entirely reliant on electric meters being manually read by personnel of the distribution utilities. During the lockdown, the meter readings could not be done. The meter readers were quarantined like everyone else.

On the other hand, the distribution utilities needed to keep the revenue flow running so that they can cover their costs and pay the generating companies. The generating companies, too, needed to be paid to cover their operating costs, including the purchase of fuel.

In its advisory issued May 26, the ERC instructed the distribution utilities and electric cooperatives to issue bills based on the average consumption for the three months from November 2019 to February 2020. This was what caused the most shocking of the bills sent out. Offices and plants that were closed during the lockdown period were billed as if they were open and operating.

In the course of last week’s congressional hearing, the spokesman for LKI blamed the confusion on the “lack of implementing details” of the ERC advisory. The advisory allowed the distribution utilities to use an estimated consumption as the basis for billing, provided the word “Estimate” was clearly printed on the bill. However, according to the LKI, the advisory lacked “solid and granular directions” to the power distributors to make the bills clearer to the consumers.

The “bill shock” is not peculiar to the Meralco service area. It is something that happened in nearly all areas of the country.

As quarantine restrictions are relaxed, the meters could be read for actual consumption. Adjustments could be made in subsequent billings. In the end, this confusing episode should work itself out.

For its part, Meralco unveiled a two-stage billing process. Any excess over actual consumption in the first “estimated” billing will be applied to the subsequent billing.

To allow enough time for the corrections to work out, Meralco president Ray C. Espinosa announced during the congressional hearing there will be no disconnection for unpaid bills until September. This should enable enough leeway to complete their bills payments through the installment plan previously announced.

If only all our other problems will sort themselves out in the same manner.

Wholesale

The Department of Agriculture (DA) found its foot in its mouth last week as it tried to counter evidence of overpriced contracts for the purchase of urea fertilizer to be distributed to farmers as incentive to shift to higher yielding rice varieties.

Several groups have come forward to present actual receipts of retail purchases of the same fertilizer the DA purchased in bulk. While the DA procured P1.8 billion worth of fertilizers from two suppliers at P995 per 50-kilogram bag, farmer advocates submitted receipts from several areas showing an average retail price of P850.

Grasping at straws to justify the wholesale price they agreed to, spokesmen for the DA appeared in a number of media outlets arguing the contract price is justified because it included, apart from the cost of the fertilizer, “transportation costs, incidental services and applicable taxes” as the commodity is delivered to municipalities covered by the Rice Resiliency Program.

But the lower retail prices include all those costs as well – plus a reasonable profit for the retailer. The fertilizer bought from retail outlets by the farmers did not travel to the locality for free. The retailers pay for the same “incidental services” and for the same “applicable taxes.”

The DA’s defense for its higher bulk procurement price is neither sensible nor logical.

The fertilizer the DA purchased at P950 per bag will be presumably delivered in bulk to the department’s warehouses. That is the end of the seller’s obligations. The DA, using its own transport, will deliver the commodity to localities. It will therefore subsidize storage and transport costs on top of the purchase price.

Had the DA handed out P850 coupons to the farmers to acquire the fertilizer from retail outlets, the same money paid to the two winners of the wholesale bid could have purchased several hundred thousand more bags of the input. Retailers could have profited, the DA could have saved on transport and storage subsidies and farmers could have made their purchases as they needed to. So many people could have been a lot happier.

Something does not make sense here.

The entire reason the DA decided to centralize procurement of P1.8 billion worth of urea fertilizers is that doing so will give the agency leverage to bargain for the “most advantageous price” for government. That is not what happened here. Through centralized procurement, the DA ended up paying as much as P150 more per bag even as there was ample supply of the commodity and many companies capable of supplying domestic needs.

The DA claims the budget or P1,000 per bag was arrived at based on data provided by the Fertilizer and Pesticide Authority and the Philippine Statistics Authority. That “data” could not be more compelling than the actual receipts being waved by farmers who bought retail.