Reclaim

President Rodrigo Duterte has acquired a rather disturbing habit of late: pronouncing policy ahead of a full study of the matter. It is the equivalent of shooting first and asking questions later.

In the case of the water concessionaires, the President threatened the owners with jail “in the middle of the night” unless they sign new contracts. It turns out there are no new contracts to sign. Government is in the process of seeking ADB expertise to help rewrite the contracts.

Meanwhile, the contract period has been arbitrarily shortened to 2022. Institutional investors have withdrawn en masse from our market, forcing the affected companies to actually buy back their own stock. In the face of the President’s threats, banks are now hesitant to lend working capital to the concessionaires. This will adversely affect improvements on the water distribution system.

Recently, the President declared there would be no new reclamation projects under his watch. That pronouncement upsets the timetable for three large reclamation projects, one undertaken by the City of Pasay and two by the nearby City of Bacoor.

The three reclamation projects will create new living space for the metropolis, help manage the shoreline by improving drainage and water treatment and produce new economic opportunities for millions.

By 2025, Metro Manila will have a population of 20 million. The growth of this urban center spills over to the nearby areas, forcing rich farmland to be converted into housing estates and creating immense traffic congestion.

The City of Bacoor now has a population of 600,000. This is expected to double over the next decade. About 73 percent of the city’s land is devoted to residential use. Land used for agriculture and fisheries shrunk to a mere 6.6 percent of total land area. There is no more space to accommodate the population spilling over from Manila.

In addition, the city needs to confront the challenges of flooding, tsunami and storm surges on its coastline. It needs to deal with proper drainage and sewerage. Only an expertly planned reclamation of the coastline will address these.

Observing the lessons from reclamation work done in the Netherlands, Singapore, Belgium, Hong Kong and Macau, Bacoor’s urban planners have designed two reclamation projects to meet vertical housing needs, open commercial investment opportunities and create jobs for its people.

The two projects, to be undertaken over the next few years, are estimated to produce an estimated P1.8 billion in new tourism receipts alone. They will create about 700,000 new jobs. They will produce well-planned water channels, green zones, technology hubs and sewerage treatment facilities that will solve today’s pressing problems.

The two projects will hasten the cleanup of Manila Bay, prevent sedimentation of its waters and enable in-city relocation of informal settlers exposed on the coast. Using state-of-the-art technologies, the two projects will help reinforce the community’s disaster resiliency as well as allow for a modern mass transit system to be built.

Alas, President Duterte’s abrupt pronouncement now puts all of these on hold.

Cheaper

Meralco customers began the year with good news. Power rates were reduced 41 centavos per kilowatt-hour (kwh) this month. This should help hold down the inflation rate.

To put the rate reduction in perspective, the net reduction from January 2019 to January 2020 amounts to 73 centavos per kwh. Through 2019, the average rate for a 200 kwh customer was P9.90 per kwh. In 2010, that average rate was P10.03. If we adjust for inflation, the reduction is even more remarkable.

Even as the prices of everything else went up over the past decade, Meralco’s power rates have declined. This is not the only unique thing about the distribution utility’s rates. Meralco’s rates are among the cheapest in the country, significantly lower than most electric cooperatives.

Should this counter-inflationary trend continue, the Philippines would be well on its way toward matching benchmark rates in the region. This is good news for the revival of Philippine manufacturing that was badly gutted during the decades of power shortages and high electricity costs.

The superior sourcing strategy adopted by the distribution utility largely explains the rate reductions we enjoy. This strategy revolves around the power supply agreements (PSAs) entered into by Meralco.

Look at the billings statement. The major reductions have been in generation charges. This represents what the distributor pays the power plants, passed on to the consumers. The distribution charges have been virtually constant the past few years.

It is important to mention that reductions in the Meralco rate the past year happened despite the many red and yellow alerts issue during that period. Our power generation capacity remains critical as new power plants have faced delays. Our power reserves are too thin for comfort, considering the country aims to grow its economy by 7 percent this year.

Red and yellow alerts warn of possibly short supply. They tend to push up prices in the electricity spot market. Such surges are moderated by adept power supply agreements that peg the prices of bulk supply.

It is therefore crucial that Meralco is able to proceed with the next round of power supply biddings under the supervision of the Department of Energy and the Energy Regulatory Commission. These biddings will help spur the construction of new and more efficient power plants that our economy direly needs.

Last week, the usual leftist suspects were again at it, warning that electricity prices will rise if power supply biddings continue. It is hard to imagine why. The numbers above say otherwise.

These leftist groups appear to be lobbying for less efficient power suppliers.