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Ill-fit

FIRST PERSON - Alex Magno (The Philippine Star) - January 9, 2021 - 12:00am

Rep. Carlos Zarate and his “Makabayan” colleagues have built a minor cottage industry out of peddling unfounded insinuations the nation’s largest power distributor Meralco is engaged in improper business practices. They indulge in this under the guise of protecting consumer interest.

The latest salvo coming from this band (and this band alone) claims the distribution utility is rigging the upcoming power supply agreement (PSA) bidding to favor its own subsidiary. The bidding has not happened yet and Rep. Zarate offers no proof the bidding is being rigged.

The power sector is among the most regulated industries in the country. Awarding of power supply agreements by the distribution utilities involve the participation of third parties. The Energy Regulatory Commission (ERC) and the Department of Energy (DOE) closely observe the process.

Responding to Zarate’s latest insinuations, Lawrence Fernandez, head of Meralco’s Utility Economics Department and member of the secretariat of the Third Party Bids and Awards Committee, assured the public that “as a regulated entity, Meralco conducts its business in full compliance with all the rules and regulations issued by the Energy Regulatory Commission and Department of Energy.”

The bidding process is transparent. Nothing is gained from discrediting it without basis – except perhaps to bully the distribution utility to unduly favor a competitor. All the previous Competitive Selection Process (CSP) biddings resulted in bringing down energy costs for consumers.

Furthermore, the Electric Power Industry Reform Act of 2001 (EPIRA) provides that “no company or related group can own, operate or control more than 30 percent of the installed generating capacity of a grid and/or 25 percent of the national installed generating capacity.” Meralco, even as its subsidiary Atimonan One Energy Inc. nears completion of the 1,200-megawatt power plant in Quezon province, is nowhere near the limits on cross-ownership prescribed by law.

The Competitive Selection Process ensures the lowest bidder gets the supply contract. If a competitor cannot match the price offer of the Atimonan plant, then they lose the bid. Consumer and national interest is not served by disqualifying the lowest priced supplier – especially by politicizing the process or bullying the efficient supplier.

Even as Zarate indulges in his unfounded speculation against a transparent process, he has been strangely silent on a less transparent process that harms consumers more. That silence makes his motives truly questionable.

The Feed-in Tariff Allowance (FIT-All) is a cross-subsidy intended to encourage investments in renewable energy. In practice, all it accomplishes is to force consumers to pay more for power they do not necessarily consume.

FIT-All blunts whatever cost benefits should accrue to consumers from the more efficient use of traditional technologies. This cross-subsidy spares investment in so-called “renewable energy” from business risks all others bear. FIT-All allows favored investors to reap profits without assuming risks.

The most objectionable feature of FIT-All is that the award of subsidies is not a transparent process. A faceless cabal of energy bureaucrats makes decisions about what technologies to award and how much subsidies will be given them. The consumers are not included in this process.

Under the present set-up, the subsidy given renewable energy (RE) generators vary across businesses and technologies used. This means that government is free to pick and choose which investments will be rewarded. This is not the business of government.

A better way, more favorable to consumers, is to enforce a uniform rate of subsidy for all RE technologies. This will encourage competition for the most efficient technologies available. After all, a kilowatt generated by solar power is the same kilowatt generated by biomass or wind technologies. This alternative model will push the business risks where they should be: on private businesses. Consumers should not be made to bear the risks so private businesses will be ensured profitability.

The highest FIT-All subsidies go to RE businesses owned by the Ayala and Lopez conglomerates. The varying subsidies seem an invitation to charges of regulatory capture.

Most disturbing of all, the funds for the FIT-All subsidies are expected to run dry in a few months. That means consumers will be charged even more to replenish the subsidy fund. By that time, consumers must be fully briefed about the sheer lack of transparency and absence of consultation regarding the award of billions in cross-subsidies enjoyed by RE investors.

If Zarate and his friends are truly engaged in pro-consumer advocacy (rather than working to advance the interest of one industry player over another), they should raise the valid questions about the unaccountable award of FIT-All subsidies. These subsidies, after all, are most responsible the high prices consumers pay for energy – that is in turn a factor that stymies our industrial growth.

Unfit

In the wake of that ugly riot that resulted in the occupation of the US Capitol by rioting thugs sent there by the sitting American President Donald Trump, there are now calls to declare him unfit to serve and removed immediately.

That ugly riot came as no surprise. That was the logical continuation of all the lies and disinformation Trump has been peddling his mindless mob. He was the one directly responsible for commanding his fanatical followers to march on the Capitol where legislators were in the process of formally tallying the electoral votes and officially declaring Biden the next president.

Because the mob was out to interrupt the proceedings, this was clearly an insurrection. Trump should be held accountable for sedition and even treason.

If the tech companies locked up Trump’s media accounts because of the peril he posed to his own country, he cannot be trusted with the nuclear codes.

CARLOS ZARATE
Philstar
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