* My article in BusinessWorld, February 17, 2020.
See also:
BWorld 409, Inflation, land transportation, and nCoV, February 12, 2020
Recently there was a story on the huge debt of the Power
Sector Assets and Liabilities Management Corp. (PSALM) because it could not
collect P59 billion from independent power producers (IPPs) and electric
cooperatives (ECs). That is a big amount and PSALM continues to collect various
universal charges (UC) for the various stranded costs and debts of the National
Power Corp. (NPC).
The UC and PSALM were created by the EPIRA law of 2001.
PSALM has three core functions: (a) privatize NPC generation and Transco
transmission assets, (b) manage liabilities of NPC debts, obligations of
electric coops to NEA and other agencies, and (c) administer the collection and
disbursement of UC funds.
The current UC rate of nearly 38 centavos/kWh is big and
UC remittances received by PSALM are big, and it petitions the ERC to avail of
huge funds (see Table 1).
The four UCs components are as follows:
1. ME — a subsidy for electricity supply in small island
provinces and far-flung areas.
2. SCC — excess of the contracted cost of electricity by
NPC over actual selling price.
3. SD — financial obligations of NPC still unliquidated
by privatization proceeds of NPC assets.
4. EC — for watershed rehabilitation and management.
PSALM is administering a huge pile of cash from us
electricity consumers — P183 billion as of September 2019. Two sore thumbs
sticking out here.
One, the ME subsidy for small island provinces and far
away areas seem like they will go on forever when they should have been
eliminated. Debureaucratize the construction of their own baseload, 24/7 power
plants and just augment with big gensets running on diesel during peak hours.
Then NPC-SPUG (small power utility group) can be privatized and/or eliminated
as well.
Two, those old SCCs and SDs by NPC have been there since
the early 1990s, and after nearly three decades they are still there and the UC
rates do not seem to decline through time — Wow! PSALM, being a generation
player managing and operating unprivatized NPC plants, can “sell low” power at
a loss then raid the UC funds to recover its losses and appear to be
financially healthy. This is lousy and creates a moral hazards problem. PSALM
will have little or no incentive to hasten the privatization of the remaining
NPC plants. It can become a forever bureaucracy funded by forever UC subsidies,
and it can distort competition in the Philippines electricity market. PSALM
should go.
On ECs, they are created by politics via Congressional
franchising, monitored and even pampered by politics via the National
Electrification Administration (NEA). With such high political backing, many
ECs are either mismanaged and/or remain inefficient, with persistent blackouts
for their franchise areas. Some also do not pay their gencos. ECs run to the
NEA for loans instead of commercial banks. There are huge taxpayers subsidies
given to NEA annually, mostly for sitio electrification program (SEP, see Table
2).
Around 2017, the Department of Energy identified 17 ECs
that are chronic failures when it comes to providing satisfactory services to
their customers — ALECO (Albay), CASURECO III (Camarines Sur), FICELCO
(Catanduanes), MASELCO (Masbate), OMECO (Occidental Mindoro), ORMECO (Oriental
Mindoro), and PALECO (Palawan). Other problematic ECs are PELCO (Pampanga),
BASELCO (Basilan), LASURECO (Lanao), SULECO (Sulu), and ZAMCELCO (Zamboanga),
DANECO (Davao del Norte).
All ECs should become corporations and depoliticized, and
be registered with the Securities and Exchange Commission and not with NEA. We
now have one-person corporations, so how come these big ECs cannot be
corporatized? NEA as regulator-bureaucracy should go, at least its monitoring
function of ECs.
Last week, I saw one article entitled “MVP’s monopoly of
power and water supply.”
Fake news. There is no such thing as a “monopoly of
power,” whether by MPIC or San Miguel or Ayala, etc., whether in power
generation, in power distribution, or retail supply. See the list of players at
the Wholesale Electricity Spot Market (WESM) for the Luzon and Visayas grids
only (see Table 3).
Nationwide, including the Mindanao grid, there are a
total of 155 electricity distributors: 21 DUs, 11 Ecozones, and 123 ECs. And to
say there is a “monopoly of water supply” is also fake news. There are 584
water distributors nationwide.
------------------See also:
BWorld 409, Inflation, land transportation, and nCoV, February 12, 2020
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