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Misdirection

FIRST PERSON - Alex Magno (The Philippine Star) - May 4, 2021 - 12:00am

When purveyors of agitprop indulge in serious misdirection of the issues, it is almost never a mistake. It is driven by a hidden agenda.

Last week, Bayan Muna representatives filed a bill seeking to ban what they call “cross-ownership of distribution utilities and power generation companies.” That bill effectively seeks to amend the Electric Power Industry Reform Act (EPIRA) that served as the framework for long-term investments in modernizing our power sector.

EPIRA explicitly allows bilateral supply contracts subject to review by the Energy Regulatory Commission. A limit of 50 percent of total power supply contracts are allowed to be bilateral – meaning between the distribution utility and power generation companies it might be invested in. No distribution utility comes close to that limit.

The more important principle in concluding power supply contracts is the Competitive Selection Process (CSP). Any power generator can compete for a contract through the CSP. This enables a fully transparent and contestable market process.

Because of the CSP, we have managed to gradually lower power costs over the past few years. This benefited our economy. It has created a fair and predictable pricing regime further reinforced by the wholesale electricity spot market. With these mechanisms for fair pricing, “cross-ownership” has never been a significant factor – although the 50 percent limit is strictly enforced.

There are instances, in fact, when the participation of subsidiaries worked to benefit the consumers. The subsidiary power generating companies could offer lower prices to set a benchmark for the competition.

Bayan Muna might better serve consumers by opening an investigation into the sweetheart deals Meralco entered into when the Lopez group controlled the distribution utility. At that time the distribution utility was unrestricted in awarding power supply contracts to its allied firms. This was before EPIRA prescribed a Third Party Bids and Awards Committee (TPBAC) to oversee bidding for power supply contracts. The TCBAC mechanism effectively checks against self-dealing.

Even better, Bayan Muna could sponsor legislation against the unilaterally imposed feed-in tariffs (FIT) that was just recently increased by over a peso per kilowatt hour to reduce market risks for wind and solar generators. All consumers bear the costs brought about by FIT even as there is no transparency on how the subsidy is used. Energy Secretary Al Cusi explicitly complained about high FIT rates in the hearing of the Joint Congressional Energy Commission.

At the very least, Bayan Muna could have chosen to tackle the extraordinarily high power rates in Cebu. The local chambers of commerce have complained about this for months.

But then, perhaps, it is not profitable for Bayan Muna to tackle these very real issues plaguing our energy situation.

Ayuda

“Ayuda” (Spanish for “aid”) has become an important word during this pandemic. It refers to direct assistance offered by government to vulnerable social sectors.

The Philippines is probably the only country where direct cash subsidies are handed out. Without a working national identification system, handing out cold cash to millions of beneficiaries has always been fraught with leakages. But, after the cash distribution last year, the public has come to expect such assistance whenever quarantine measures are tightened.

When the NCR+ was put back to EQC last month, government found itself under pressure to hand out cash subsidies. Budget authorities found enough to hand out a measly P1,000 per beneficiary.

A group of congressmen led by former Speaker Alan Peter Cayetano, identifying themselves as the Balik sa Tamang Serbisyo (BTS), has been pushing for a handout of P10,000. They first filed the 10K Ayuda Bill last February. Last Saturday, Labor Day, the group mounted a Facebook program called “Sampung Libong Pagasa” to reiterate their call for the bill’s passage.

The current House leadership promised that the BTS-sponsored bill would be integrated into the Bayanihan 3 stimulus bill. But it appears the joint hearing of the House committee on economic affairs and committee on social services did not adopt the proposed amount for cash assistance.

Proponents of the Ayuda bill argue that the cash assistance will do the economy good. It represents the amount needed by a family of five to subsist for a month. It could also be used to start small businesses that will soak up the large unemployment created by the lockdown.

Of course, if the number of probable beneficiaries is multiplied by ten thousand, the amount needed to implement this proposal will be very large indeed. It could pose a large budgetary shock, considering revenues this year would likely reflect the major contraction of our economy.

Cayetano and his group have identified probable sources of funding for this proposed cash assistance. They claim that P1.5 billion allocated under Bayanihan 1 for the Social Amelioration Program has not been disbursed. In addition, the DWSD still has P75 billion from its regular budget and P6.7 billion from Bayanihan 1 and 2 remaining unused. Furthermore, they say the Department of Education has P4 billion allocated for digital learning programs lying idle.

The group has not made clear if the proposed cash handout involves only those put under ECQ recently or if it includes all qualified for social amelioration nationwide. The variance in the actual number of beneficiaries means a lot for our budgetary balance.

The whole world, as we know, has returned to Keynesian economic calculations to favor deficit spending to stimulate economic growth. The Ayuda bill could be justified in those terms.

But a debate is still required to determine if this is the most fiscally responsible use of public funds at this time.

EPIRA
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