Granular

Twice in a row, Metro Manila escaped being returned to enhanced community quarantine by the skin of its teeth. This is because since late June the tally of coronavirus cases kept surging.

To be sure, our response to this pandemic has not been perfect. We stumbled and scrambled. No one anywhere was fully prepared for this plague. To this day, we are still learning new things every day about this new virus, the way it spreads and the damage it inflicts.

The weakest part of our response has been testing and tracing. In the first weeks, we simply did not have enough testing kits and laboratory capacity to deliver results promptly. Delayed confirmation of infection allows the infected person to continue spreading the virus.

To this day, we have yet to crank up a credible track and trace capability. Unless we do so, our response to this public health emergency will be spotty.

After four months fighting this pandemic, we have improvised and improved on our methods. With the generous support of private corporations, friendly governments and non-profits such as the Philippine Red Cross, we have dramatically improved our testing capacity. A million Filipinos have been tested, some of them post-mortem.

The easiest thing to do in the face of a plague is to lock down whole islands and entire regions. We now know that doing so is not only devastating for the economy, it should only be an interim measure to enable our health system to expand.

The severe lockdowns we experienced did deliver their intended effects. We prevented an explosive spread of infections that would have taken an unimaginable human toll. Whether we completed the other side of the equation – the rapid buildup of our public health system – remains a matter for serious assessment.

One of our inherent advantages is that the country produced a large number of doctors and nurses per capita. Medical personnel used to be one of our main labor exports. Today, as the pandemic lingers, we do face serious shortages of health workers.

Among the innovations in strategy fighting the pandemic has been to take a more “granular” approach. While wholesale lockdowns are avoided, local governments are encouraged to enforce the isolation of communities, villages, neighborhoods and even stretches of roads where infections are recorded.

This “granular” approach is more sustainable than wholesale lockdowns. It allows our economy to begin functioning again and for people to carve out whatever livelihood is possible.

We will likely have to live with this “granular” approach for years as we learn to coexist with a deadly virus. While there are promising developments in the development of a vaccine against this particular virus, producing and administering proven vaccines will take years.

Because this pandemic threatens all of humanity, we will need to produce and administer seven billion doses of this vaccine – and then hope the virus does not mutate beyond the range of efficacy for whatever vaccine becomes available.

Cheaper

Meanwhile, as we learn the myriad ways to coexist with the virus, we have to sort out our other problems where solutions are available. The argument made by opposition politicians that we should focus entirely on the pandemic and nothing else is a bogus one.

We learned from the House hearing on electricity prices that the country has benefited from a sustained downward trend – especially when adjusted for inflation. For this month of July, for instance, electricity rates will fall to their lowest since 2018.

There was a time when the Philippines had among the highest electricity rates anywhere in the world. Those rates were the results of many flaws in the system, ranging from inefficient generation, antiquated power transmission and uncontested markets for power supply. High power rates caused our manufacturing to shrink because production costs became uncompetitive.

As in the case of water, we have been on a long march to better efficiency since the Electricity Power Industry Reform Act (Epira) was passed, thus ending the inefficient government monopoly. New investments in modern power plants brought down generation costs. Privatization of the transmission system opened the way for new technologies to be introduced. A spot market for electricity brought in more competition. New regulations on bidding for power supply contracts brought down generation costs passed on to consumers.

During the House hearing, Meralco officials announced several initiatives to bring down nominal electricity prices to what they were ten years ago. During the three-month quarantine period, for instance, Meralco customers were able to save P1.88 billion because the distribution utility invoked the “force majeure” provision in its power contracts. That resulted in lower generation charges eventually reflecting in the consumer bills.

In the course of the hearing, Meralco was able to convince legislators it has managed to avail of the least cost for the power it distributed in its franchise area. The company’s legislative franchise mandates this.

By its full compliance with the Department of Energy’s competitive selection process (CSP), Meralco was able to bring down generation costs. This is the largest component of the electricity bill consumers receive. The CSP involves an independent third party approved by the Energy Regulatory Commission in the bidding process for wholesale power purchases.

The last CSP concluded December 2019, resulted in a significant P1.00/kwh price cut. That alone translates into a P5.6 billion cumulative savings for customers.

We hope this trend continues. This will help in our post-pandemic recovery. Inefficient power pricing is always dysfunctional for the economy.