Tuesday, October 27, 2020

BWorld 457, No to free electricity from Meralco, genco

 * My article in BusinessWorld, October 14, 2020.

The International Monetary Fund (IMF) has released the October 2020 update of its World Economic Outlook (WEO) with more macro data like GDP (gross domestic product) size and growth in 2019 onwards which were not available in the April 2020 WEO.

Listed below the top five biggest economies in the world, then the major economies of East Asia. The IMF projects a -8.3% GDP contraction of the Philippines this year, second deepest in Asia after India.

I added electricity generation, data from the BP Statistical Review of World Energy (SRWE) 2020. For the Philippines and many developing or emerging economies, there is indeed a close relationship between GDP growth and power demand. For the Philippines, GDP growth average from 2014 to 2019 ranged from 6% to 6.6% while electricity generation over the same period ranged from 5.8% to 6.1% (see table 1).

As this column has consistently argued, the country’s deep contraction is not caused by the pandemic per se but by public hysteria and government lockdowns. The Concerned Doctors and Citizens of the Philippines (CDC PH) continues its campaign to “Flatten the Fear” not the economy by calling for lifting the lockdown — only the elderly and those with underlying conditions and sickness would be asked to isolate and quarantine.

Last week, a group of NGOs called for “a moratorium on bills incurred during the ECQ period, and online petition called #TigilBayad” and particularly targeted Meralco in their press release which they also presented to Congress and the Energy Regulatory Commission (ERC).

Tigil Bayad or Stop Payment, or simply free electricity? This is socialistic thinking based on emotion and not reason. When people go to a public market, they have to pay for even half a kilo of tomatoes or potatoes; nothing is free because farmers, traders, and city vendors have to earn and feed their families too.

And the ERC was pressured in a Congress hearing, a report in BusinessWorld said (“Regulator may extend freeze order vs. power cuts to end of the year,” Oct. 14).

In a monthly media briefing for October by the Independent Electricity Market Operator of the Philippines (IEMOP), officials reiterated that with significant decline in power demand, electricity prices remain low, nearly half of their levels in 2019 both in the customer effective spot settlement price (ESSP) and load-weighted average price (LWAP, see table 2).

 So if electricity spot prices remain low, and the generation charge becomes cheaper, why should the ERC impose an extended no disconnection order for people who do not pay?

ERC Chair Agnes VST Devanadera mentioned Republic Act No. 11494, or the Bayanihan to Recover as One Act, or simply Bayanihan II. I checked the law, Section 4. “COVID-19 Response and Recovery Interventions,” sub-section (vv) has a horrible last sentence,

“… the minimum 30-day-grace period and staggered payment … shall apply to all payments due within the period of the CQ in the entire electric power value chain to include generation companies, the transmission utility, and distribution utilities.”

There are three important things to respond to this provision.

One, it should apply only under ECQ or MECQ periods, so that under a more relaxed GCQ, people should pay, or be disconnected if they do not pay.

Two, if the gencos (power plants), transmission (NGCP) and distribution (DUs, ECs, RES) are not to be paid, then other sectors and charges should also not be paid — universal charge by NPC and PSALM, feed in tariff (FIT) by Transco, local taxes by LGUs, VAT and excise tax by BIR.

Three, prolonged payment waiver creates a “moral hazard” problem. If people cannot be disconnected if they do not pay,  why should they? And time comes that their accumulated bill has become bigger because they did not pay for four or eight months, they can lobby for a mandatory big discount, and all the populist NGOs and legislators driven by the politics of envy will be on their side.

I hope that the ERC and DoE will consider these points. The freeze order on power disconnection until end-December is wrong.

See also:
BWorld 454, Flatten the fear and hysteria, not the economy, September 28, 2020 
BWorld 455, No climate emergency, October 05, 2020 
BWorld 456, Flattening the rule of law, October 26, 2020.

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