FIRST PERSON - Alex Magno - The Philippine Star

The first time Sta. Rosa congressman Dan Fernandez delivered a privilege speech at the floor, it was to propose renaming the country Ophir.

The legislator claimed that the Biblical land of Ophir is actually the Philippines. This is a place, according to the ancient scrolls, that overflows with gold.

To support his claim, Fernandez quotes (unreliably) ancient documents that speak of such a wealthy land. He (wrongly) claims the Philippines had the second largest gold deposits in the world after Africa. Furthermore, he (wrongly) asserts that the ancient Tagalog script is similar to Hebrew.

After delivering the speech, there is no record Fernandez pursued his proposal by submitting a draft bill renaming the country. His use of the congressional privilege hour, where legislators are invited to discuss matters they consider important, was a complete waste of time.

This is not, however, the most egregious thing Fernandez has done on the floor.

More recently, Fernandez used the privilege hour to go into a rant against Meralco. While the issue may be more contemporary, it is a speech that is not disciplined by the facts nor enlightened by a careful study of the power industry. Trump could not have done a better job of warping public understanding of a vital issue.

The crux of his garbled speech, it seems, is to say what seems self-evident: that Meralco is a monopoly. But that needs to be qualified.

Power distribution utilities, whether privately owned or undertaken by cooperatives, are natural monopolies. It is simply the nature of the business. It is not a viable business to have multiple distributors cater to the same area. That means they set up separate poles, lay out separate lines and maintain separate collection systems. The capital costs will be too high and will eventually reflect in stratospheric energy prices.

Besides, the city will choke from an overload of electricity cables. We have recently seen concrete poles collapse under the sheer weight of electricity, phone and television cables.

Had he checked the facts, Fernandez might have realized that Meralco has a “monopoly” only over small consumers. 90 percent of industrial consumption and a third of large commercial consumers chose to have their energy directly supplied by competing retailers such as Aboitiz Power and First Gen.

Proceeding from his undramatic realization that Meralco is a “monopoly,” Fernandez accuses the distribution utility of “control” over consumers. That is not true. Average consumers can always choose to lay out their own connection to the grid, although that will require unrealistic investments on their part – including purchase of step-down transformers and miles of cable. Every other alternative to the present distribution system is uneconomical.

Having proceeded from erroneous premises, Fernandez claims that Meralco has such great power that it indulges in economic sabotage. He (wrongly) claims that the distribution company “controls” 65 percent of the national economy. In fact, Meralco services the National Capital Region and a few contiguous areas around it. The entire service area contributes a third of the GDP.

Economic sabotage is a serious charge. Fernandez might have served his audience better by checking how this crime is defined is our laws.

Fernandez overlooks the fact that while Meralco is one of our biggest companies, it is also among the most heavily regulated. When the Energy Regulatory Commission (ERC) ordered distribution utilities to refund customers P48 billion, only Meralco fully complied.

All power supply agreements, under ERC oversight, must be negotiated competitively and transparently. Meralco has met, if not exceeded, all regulatory standards in this regard. The company continues to keep improving on the economies of scale to be viable long into the future.

Fernandez waddles into technical issues he does not understand.

He tries to accuse Meralco of profiteering by using a higher Weighted Average Cost of Capital (WACC). Without telling us why it should be so, Fernandez says Meralco’s WACC ought to be 9.26 percent and not the prevailing 14.97 percent. He neglects to mention that the WACC is an entirely regulatory measure, not a pricing one. It is the ERC that determines the WACC.

With the sly smile of a vaudeville host, Fernandez tries to pass on the intrigue that Meralco is deathly afraid of its customers shifting to net metering. This is the system where homes that generate their own electricity – say, through solar panels – will get credits from the distribution utility.

What Fernandez does not know is that it is a Meralco business unit that pioneered and propagates net metering arrangements. It improves the company’s economies of scale. The bulk of distribution revenues comes from the large consumers, not the small ones. Solar panels cannot power our industries and renewable energy continues to have marginally higher costs.

Recently, Meralco announced it was investing billions in renewable energy generation. This diversifies their power sourcing and is good for the planet.

What Fernandez fails to mention in his meandering and incoherent speech is that his own constituents in Laguna and Batangas are pleading to be covered by Meralco’s distribution network. The electric cooperatives holding them captive deliver inconsistent power at much higher prices. Meralco, comparatively, delivers clean and reliable power at cheaper rates.

Consumers are now trying to block First Laguna Electric Cooperative (FLECO) from winning a renewal of their franchise. Fernandez should have a talk with them.

During the privilege hour, legislators have the liberty to talk about anything they fancy. But they should first educate themselves.

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