Monday, April 24, 2023

BWorld 597, GDP expansion and an irrational lobby

* BusinessWorld, April 19, 2023.

Last week, the country’s economic team went to Washington DC to hold the Philippine Economic Briefing (PEB) and joined meetings with multilateral agencies and corporate investors and lenders. The economic team has one important goal — to attract more investments and create more businesses and jobs here as more liberal economic policies are implemented.

Also last week, the IMF released the World Economic Outlook (WEO) 2023. I was curious about the economic expansion of the Philippines and other countries over the past four decades, so I checked the database and got the excel file.

I show here different countries’ gross domestic product (GDP) size, both nominal (current GDP values in national currency multiplied by average exchange rate with the US$) and by purchasing power parity (PPP) values, which attempts to remove price level differences of goods and services between countries.

In PPP values of GDP, China overtook the US in 2016 with $18.7 billion. Indonesia overtook Italy in 2011 with $2.23 billion, then France in 2019 with $3.33 billion. And Vietnam had overtaken the Philippines in 2018 with $936 million. Nonetheless, the Philippines has expanded its GDP-PPP tenfold from 1982 to 2022 (see Table 1).


On the fiscal side, the Department of Finance (DoF) and Department of Budget and Management (DBM) labor hard to raise revenues without creating new taxes, and limit spending somewhere because other sectors just keep expanding their share of the annual budget. In particular, the local government units (LGUs), which have higher revenue share after the implementation of the Mandanas ruling, and the military and uniformed personnel (MUP) pension that just keeps expanding, now about P160 billion/year from taxpayers because the previous and current personnel contribute zero to this fund.

Every January, the DoF secures big borrowings to help finance expenditures in the first quarter. Last January, it raised $3 billion from its second global bond offering under the Marcos Jr. administration. Target borrowings for 2023 is P2.21 trillion.

Also last January, the DBM had a good accomplishment — it controlled spending to the January 2022 level while revenues have expanded, resulting in a fiscal surplus of P46 billion (see Table 2). Congratulations, DBM.

Consider also these recent reports in BusinessWorld: “Budget gap widens in February as revenue collections decline” (April 4), “DBM calls on agencies to prioritize infrastructure, human capital, food security in budget proposals” (April 5), “DBM releases P43B for senior citizen health insurance” (April 11), “Gross borrowings jump in Feb.” (April 17).


There is an ongoing noisy lobby that says hybrid cars, e-motorcycles, and e-tricycles should be tax-free too under an expanded Executive Order No. 12 (EO 12), signed by the President last January. For me this is shameless for three reasons.

One, EO 12 itself is wrong in the first place. Those electric vehicles (EVs) — e-cars, e-buses, e-trucks will also add to traffic congestion and road depreciation but contribute zero or little for road maintenance because they are imported tax free.

Two, there is a continuing fiscal burden with high public debt, high annual deficit and borrowings, and high pressure to raise taxes somewhere — and yet many rich sectors want to contribute zero for their vehicles. A small sedan worth P0.5 million is taxed, but e-cars — which should cost at least P1.5 million — hybrid cars — at least P1.2 million — will not be taxed. That is lousy.

Three, the rule of law should prevail. The law applies equally to unequal people, unequal businesses and vehicles. If certain cars should be tax-free, then all cars should be tax-free too. Otherwise, all cars, EVs or gasoline, should be taxed.

The DoF should either ignore or oppose this new lobby to expand tax-free favoritism to hybrid cars and e-tricycles. Or the DoF should convince the President to pull out, to recall EO 12. All cars, all trucks, all motorcycles must either pay taxes, or pay nothing. No exemptions.

See also:
BWorld 594, Philippines to offer more investor returns than Europe, April 18, 2023
BWorld 595, Cancer spending and the budget, April 19, 2023
BWorld 596, More on Meralco distribution charges and energy transition, April 20, 2023.

De-dollarization 1: trend among countries

See these recent reports on "de-dollarization":

Saudi Arabia Says Open to Settling Trade in Other Currencies
By Abeer Abu Omar and Manus Cranny  January 17, 2023

Global South: Gold-backed currencies to replace the US dollar
The adoption of commodity-backed currencies by the Global South could upend the US dollar’s dominance and level the playing field in international trade.
By Pepe Escobar  January 19 2023

Why is Dollar System Collapse Inevitable Amid Creation of BRICS Currency?
Oleg Burunov 30.01.2023

Why is central bank gold buying at record highs?
Anna Golubova  January 31, 2023

Rise of the Petroyuan: The End of the Petrodollar’s Reign and the Impact on Global Markets
by Nick Giambruno

Kenya to Buy Oil Using Local Currency Instead of US Dollars
Roman Sanin 24.03.2023

De-Dollarization Just Got Real
A multi-polar world is bad news for the American Empire but great news for gold

China completes first yuan-settled LNG trade
by Andrew Hayley March 28, 2023

China Settles First LNG Trade In Yuan
By Tsvetana Paraskova - Mar 29, 2023

China settled its first LNG trade in yuan; but gold remains the bigger winner in the global de-dollarization trend
Neils Christensen March 29, 2023

ASEAN Finance Ministers and Central Banks Consider Dropping US Dollar, Euro and Yen, Indonesia Calls for Phasing Out Visa and Mastercard
by Chris Devonshire-Ellis  March 29, 2023

China, Brazil Strike Deal To Ditch Dollar For Trade
Agence France Presse. March 29, 2023

Ex-Goldman chief economist calls on BRICS to challenge USD's dominance as China leads de-dollarization trend
Anna Golubova  March 30, 2023

Alternatives to the U.S. Dollar
By Bruno Venditti  Graphics/Design: Sabrina Lam  March 31, 2023

India Offers Rupee Trade Option to Nations Facing Dollar Crunch
New Delhi has been pushing to internationalize the rupee
Central bank unveiled plans for rupee settlement last year
By Adrija Chatterjee and Ronojoy Mazumdar.  March 31, 2023

BRICS nations working on ‘fundamentally new currency’: Russian official
The US dollar's hegemony in international markets continues to deteriorate partly due to the Global South's refusal to enforce western sanctions against Russia
By News Desk - March 31 2023

China, Brazil to trade in local currencies | March 31, 2023

India, Malaysia can now trade in Indian rupee
April 1, 2023

The Dollar Is In Trouble! Here Are 7 Signs That Global De-Dollarization Has Just Shifted Into Overdrive
April 2, 2023 by Michael

Union Bank becomes first to open special vostro account for India-Malaysia trade settlement in rupee
02 Apr 2023

Economics expert issues dire warning on ‘serious threat’ faced by US dollar: It’s ‘inevitable’
John Carney predicts the global market is returning to a 'Cold War basis'
By Kayla Bailey April 2, 2023

China’s Yuan Replaces Dollar as Most Traded Currency in Russia
Cooperation with China has deepened as sanctions took effect
Kremlin urges conversion from ‘toxic’ to ‘friendly’ currencies
China Scraps Yuan Peg To US dollar
ByBloomberg News. Updated on April 4, 2023

China-Brazil Trade Deal Ditches the Dollar

De-dollarization Has Begun.
Peter C. Earle – April 4, 2023

"No Reason" For Malaysia To Rely On US Dollar, PM Warns As Yuan Influence Grows
Tyler Durden  APR 06, 2023

Asian Monetary Fund suggested, as dollar has been weaponized
China Daily | 2023-04-07

Peter Schiff: The World Is Starting to Divest Itself of the Dollar (Interview)

Brazil’s Lula calls for end to dollar trade dominance
Leftist president lends his voice to Beijing’s efforts to boost renminbi’s role in global commerce
Brazil’s president Luiz In├ício Lula da Silva attacked the supremacy of the US dollar in international trade, asking: ‘why can’t we do trade based on our own currencies?’
Joe Leahy in Shanghai and Hudson Lockett in Hong Kong APRIL 13 2023

De-Dollarization Is Happening at a ‘Stunning’ Pace, Jen Says
Dollar’s reserve currency status has fallen precipitously: Jen
Greenback represents 58% of reserves, down from 73% in 2001
By Matthew Burgess. April 18, 2023

Global de-dollarization and the biblical principle of just measures
By Jeremiah Belgica April 20, 2023

De-dollarization is general trend, but ‘de-weaponization of the dollar’ is more urgent
By Liao Zhengrong Apr 21, 2023    

Calls to move away from the U.S. dollar are growing — but the greenback is still king
Penny Chen Apr 24 2023

See also: Gold reserves, Russia and China stockpiling, December 14, 2019.

Thursday, April 20, 2023

BWorld 596, More on Meralco distribution charges and energy transition

* BusinessWorld April 17, 2023.

At the onset, I want to recognize Alfredo J. Non, a former Energy Regulatory Commission (ERC) Commissioner who made some clarifications in his “Letter to the Editor” last April 13, in response to my column “Low power supply and Meralco distribution cost” last April 3. Thank you for your letter, Sir.

Mr. Non insisted on over-billing by Meralco from 2012 to present of around P100+ billion, of which P48 billion has been refunded to customers over the last two years. The refund is good but I am not sure if Mr. Non should get the credit for this because from what I know, the proposal to conduct a true-up of distribution charges came from Meralco itself.

Below is a disaggregation of the total charges from August 2011 to July 2018. I chose this period because this is the time that Mr. Non was ERC Commissioner and he had oversight function for Universal Charge in Missionary Electrification (UC-ME) and Feed-in Tariff Allowance (FIT-All). UC-ME is a subsidy to customers of off-grid islands and provinces while FIT-All is subsidy to renewable energy (RE) companies that provide intermittent power like solar and wind under the RE law of 2008 (RA 9513).

It turns out that generally there are flat rates for generation, transmission, and distribution-supply-metering (DSM) charges. Even for system loss, subsidies to lifeline rate customers, and taxes were generally flat.

What significantly increased were UC-ME, from only 10 centavos in 2011 to 44 centavos in 2018; and FIT-All, from 4 centavos in 2015 to 24 centavos in 2018 (Table 1).

Seven years ago, I wrote in this column, “Expensive electricity via Feed-in-tariff: which company received how much?” (July 6, 2016). I showed that there were millions and billions received by many RE companies. Then I wrote to Transco asking if my estimates were correct, they replied and I wrote about it, “Transco replies to queries about feed-in tariffs” (July 20, 2016).

So, I revised my computations based on Transco’s reply and it showed that of the P10 billion that RE companies received from FIT in 2015, the bulk went to EDC Burgos Wind (Lopez) P2.36 billion, Northern Luzon UPC wind (Ayala) P1.73 billion, Trans Asia Renewable Guimaras wind (Phinma) P0.66 billion, and Alternergy Pililla wind P0.46 billion.

The beneficiaries of “expensive subsidized wind-solar to save the planet” are not really small poor companies, and that data was for 2015 alone.

I recognize that Mr. Non has a point in limiting Meralco revenues to only distribution revenues and not gross revenues that include collections for generation and transmission charges, among others.

But while Mr. Non seems obsessed with Meralco when it comes to performance based regulation-related pricing, he seems silent on performance based regulation for the only remaining private monopoly nationwide — the National Grid Corp. of the Philippines (NGCP) — other distributors like private distribution utilities (DUs) and electric cooperatives (ECs), and generation companies (gencos) that do not know how to honor their supply contracts with Meralco.

On this, please notice these recent reports in BusinessWorld: “NGCP warns of power interruptions” (March 28), “ERC announces caps for grid market share, generating capacity” (April 3), “Meralco gains de-loading capacity” (April 4), “CA upholds ruling favoring San Miguel units” (April 5), “ERC, NEDA discuss ‘affordability index’ for power” (April 5), and, “Regulator to act on NGCP’s AS appeal this month” (April 16).

We are still being warned about power interruptions, even today, 33 years since the big blackouts started in 1990. Meralco has to enlist the support of big companies to turn on their fossil fuel-using generator sets to run in cases of high demand and low power supply. Two San Miguel gencos dishonored their supply contracts with Meralco, plus two more gencos are terminating their separate supply contracts.

Writers and columnists from other newspapers also pound on “non-affordable electricity” and the proposed electricity affordability index by the National Economic and Development Authority (NEDA) and ERC. Power security should trump power affordability because “cheap but not available” power — blackouts — is anti-consumers. The main reason why prices are high is because supply is tight and low relative to demand. Technically, P10-P15/kwh electricity is still cheaper and safer compared to using candles or gensets during blackouts.

Consider these two quotes from two articles here in BusinessWorld, nine years apart:

“… ensuring that the systems operator National Grid Corporation of the Philippines (NGCP) fully contracts what the system requires. The establishment of a reserve market has been long delayed.” — Romeo Bernardo, “The way forward for the power industry” (Jan. 26, 2014).

“… hundreds of MW of available capacity that remain stranded in various parts of the country as there are no transmission and/or distribution lines to bring them to the cities and the industries that need it badly.” — Romeo Bernardo, “Summer Cycles” (April 16, 2023).

So, this would be a challenge for Mr. Non and other electricity consumer advocates. Target them all for accountability — all or most DUs, ECs, gencos, FIT-entitled RE companies, and the NGCP. The NGCP, in particular, still fails to contract adequate and long-term reserves. I heard it even requires some gencos to advance the cost and effort to connect to the grid, and fails to complete its planned infrastructure on time. The Mindanao-Visayas Interconnection Project (MVIP) was originally set for completion in December 2020, this was moved to 2021, 2022, and hopefully it will be really operational by June 2023.

Many gencos were investigated in the past for supposed “withholding of capacity” and now gencos that blatantly dishonor supply contracts and withhold contracted capacity and somehow escape investigation. And there are provincial ECs that charge their hapless consumers up to P18-P23/kwh.

Finally, on “energy transition” from fossil fuels to renewables, especially solar and wind (S+W). I construct this table (Table 2) covering only three countries due to space constraints. I also introduce the concept of Coal/(S+W) ratio or CSWR to measure the dominance or non-dominance of coal over the two favored RE. The figures show the following:

In UK, there is no energy transition, only energy distortion where, as more S+W is added into the grid, the overall power generation declines. The CSWR has been low even since 2010.

In China and Vietnam, there is also no energy transition, only RE addition to rising coal and other non-RE power. The result is rising overall power generation and CSWR is high, especially in Vietnam.

While the UK and many European countries that embrace energy transition have very low anemic growth, China and Vietnam have very fast growth, which allows them to provide more jobs and businesses to their people.

So, government- and UN-directed “energy transition” is a deeply fictional and hypothetical narrative — it is not happening and will not happen.

The ones who should set any energy mix, any energy transition, should be the consumers. Not governments, not the UN, not environment and climate groups, not media, not climate consultants.

See also:
BWorld 593, Low power supply and Meralco distribution cost, April 09, 2023
BWorld 594, Philippines to offer more investor returns than Europe, April 18, 2023
BWorld 595, Cancer spending and the budget, April 19, 2023.

Letter of Mr. Alfredo Non about Meralco

Letter to the editor
April 13, 2023 | 5:40 pm

Response to Bienvenido S. Oplas, Jr.’s April 3 ‘My Cup of Liberty’ piece, “Low power supply and Meralco distribution cost”

THE ERC (Energy Regulatory Commission) is a quasi-judicial body and, decisions are made by a group of five commissioners (a chairman and four members). No single commissioner or member can act on his own or set his own pace and, decisions are always made “en banc.” A member can express dissent, but final actions are based on majority decision. In this set up, no investigations or any kind of work can be done on a previous decision or issue by individual commissioners. The work is normally initiated based on third party complaints or a directive from the commission itself (motu proprio). The treatment, however, could be different for regulatory and accounting purposes. Regulatory wise, corrections are done prospectively. For accounting purposes, it will be retroactive if it involves an error.

The issue with Meralco could not have been tackled during my time as Commissioner for the simple reason that the rate reset for Third Regulatory Period (RP) covering 2012 to 2015 was decided by the ERC on June 6, 2011 — a few months before my appointment as Commissioner. My term covered the period August 2012 to July 2018.

The final Maximum Average Price (MAP) for the 3rd Regulatory Period (RP) which should have been the basis for the final distribution rates by customer segment was not done even up to this time because of a Motion for Reconsideration (MR) filed by a consumer group (NASECORE) which was elevated to the Supreme Court. This affected and delayed even the start of the reset for 4th RP (2016 to 2019). As a result, Meralco applied with the ERC to allow it to use an Interim Rate from 2016 until the regular reset process is completed to which ERC agreed. Thus, the use of provisional or interim rates has been going on since 2012 up to the present.

The case was resolved by the SC in October 2019 when I was no longer with the Commission. However, Meralco and ERC both filed an MR which remained unresolved even up to this date.

My retirement in July 2018 gave me the time and opportunity to re-visit the pending Meralco rate reset without any restrictions. My investigation indicated several findings, the more significant of which was an error in the calculation of rates for 2012 to 2015. These findings were included in several reports to ERC, the Senate and House Committees on Energy and, even to the Office of the President. I felt sad, angry, and disappointed because my reports seemed to fall on deaf ears and even the media shied away from the issues except TV Patrol of ABS-CBN which covered the news at least three times during the past two years. Copies of my reports were also furnished to the external auditors of Meralco.

With what I have done on my own time and expense, I do not think that anybody could accuse me of inaction or procrastination. I have done all I can to investigate and made the issues and findings known to people and entities who have the ability to do something about it. All I can do now is follow up and force a decision on the issues. I cannot decide for them. The ball is now in their courts.

Without the coverage by ABS-CBN, I would probably be the only person who would know of the over-billing issue up to this time. Of the over P100 billion I estimated as over-billing, ERC has ordered and Meralco has settled cash refunds totaling P48 billion over the past two years. All consumers have benefitted from this.


Meralco executives (particularly Zaldarriaga and Atty. Valles) have always denied that there was over-billing and, that ERC has validated their rates as final. This is a misrepresentation because even the ERC Chairperson herself denied this over the same TV program where the executive appeared. It is clear from the statement by the ERC Chair that the distribution rates from 2012 up to the present were all based on interim or provisional decisions only by ERC and, are subject to adjustment based on the resolution of the MR filed with ERC and the results of the on-going reset process.

The facts are:

1. In its 2022 decision on the 3rd RP, the ERC confirmed that there was an error in the previous decision. However, only a partial adjustment was made resulting in an Order for Meralco to pay a refund of P7.8 billion. After the resolution of the MR with the Supreme Court and, after full adjustment of the error, I expect an additional cash refund to consumers for the period 2012 to 2015.

2. For the period after 2016, ERC also attempted to make corrections which resulted in three refund orders to Meralco totaling P40 billion. Since the basis for the calculation came from the partially adjusted rates from the 3rd RP, ERC has to resolve an MR filed by Intervenors. After resolution, I expect ERC to order Meralco to pay additional refunds to consumers for the period 2016 to the present.

3. In this regard, maybe Meralco should be asked — if they claim there were no over-billings, why did it not oppose any of the above refund orders from ERC? In fact, as of March 2023, Meralco has fully settled all the refund orders totaling P48 billion by way of deduction from monthly bills to consumers.


Any financial analysis should be done on an apples-to-apples basis to provide meaningful results. Transmission, Distribution and Generation are three distinct operations whose profitability can be affected by many factors not common to all segments. Meralco, as a distribution company, reports the value of power distributed and supplied to them by generators as part of revenues. The same value is reported as the cost of power supplied. Remember that the power supplied by Meralco to consumers is a pass-through cost only — meaning Meralco does not earn any profit from it. Therefore, by including the value of power supplied as part of revenues, this dilutes the relationship of net income to total revenues.

If Meralco’s operations will be viewed in substance as a distribution business (where revenues are earned from allowing consumers the use of its distribution network), the DU income statement would appear as follows:

Meralco executives have consistently denied any overbilling. However, in one of the disclosures to Meralco audited financial statements, the following was stated:

“Meralco recognized provisions for any resulting over-recoveries. The movements in and the balance of the ‘Other noncurrent liabilities’ account in the consolidated statements of financial position substantially represent these provisions…”

This indicates that contrary to declarations by Meralco, it was aware that the use of provisional rates since 2012 could result in over-recoveries. A provision was made instead of an adjustment because the final amount can only be determined from ERC’s final decision on the matter. However, considering that the principal reason was an error, the amount of adjustment should be easily determinable.

For regulatory purposes, Meralco may be justified not to adjust its rates without any final decision by ERC. However, for accounting purposes, the issue is — should the expected amount of over-recoveries be treated as a mere provision, a contingent liability or, immediately adjusted with due consideration to the financial accounting requirements as to whether to treat this as a prospective or prior-period adjustments.

In the meantime, Meralco recognized annual deductions from revenues representing provisions for any claims resulting from over-recoveries and other losses amounting to P10,119 in 2019, P15,526 in 2020, and P10,175 in 2021 (all in Million Pesos). The net cumulative balance of these provisions as reflected in the Noncurrent liabilities section of the balance sheet amounted to P69,971 in 2019, P82,942 in 2020, and P97,981 in 2021 (all in Million Pesos).

Considering that separate liability account was maintained for specific Provisions for Other losses (Note 18), the total amount of possible over-recoveries and claims may be broken down as:

If Meralco maintains its declaration to the public that there was no over-billings or over-recovery, then it should not have recognized any liability or provision for over-recoveries. Then, the amounts reported as net income would change significantly as follows:

In this particular scenario, Meralco would be the most profitable among the several Companies in Mr. Oplas’ article.

Consumer and former ERC Commissioner

Wednesday, April 19, 2023

BWorld 595, Cancer spending and the budget

* BusinessWorld April 12, 2023.

The Philippine Statistics Authority (PSA) released today an update on causes of deaths in the Philippines for the period January-November 2022. I expanded the data backwards until 2017 so six years and saw some interesting trends.

One, COVID deaths, both with identified and unidentified virus, have shrunk greatly, from 13.8% of total deaths in 2021 — when it was the second biggest cause of death next to ischemic heart diseases — to only 2.8% in 2022.

Two, cancer deaths declined significantly, from 11.1% of the total in 2019 to only 7.8% in 2021, then up to 10.2% in 2022.

Three, pneumonia deaths also declined significantly, from 10.1% of the total in 2019 to only 4.2% in 2021 — wow! It was up to 4.8% in 2022.

Four, lower respiratory plus tuberculosis (TB) deaths combined declined from 7.9% in 2019 to only 4.9% in 2021, then up to 6.1% in 2022 (see the Table).

My suspicion is that the number of COVID deaths were exaggerated — by labeling many deaths from regular pneumonia as COVID pneumonia, even labeling deaths from cancer and TB with COVID as COVID deaths — to justify the horrible dictatorial lockdown of 2020-2021, and the huge cost of COVID vaccine procurement plus logistics of about P88.6 billion in 2021, P45 billion in 2022, and P24.5 billion in 2023.

The reporting of COVID cases and deaths were also incentivized via higher PhilHealth subsidies. For instance, PhilHealth reimbursement of the hospital bill of COVID patients was P100,000+ for mild pneumonia, about P330,000 for severe pneumonia, and P780,000 for critical pneumonia. So, patients and their families would worry less about their hospital bills if a non-COVID case was declared as a COVID case.

Now that COVID-related sickness and deaths have significantly declined, it is time to reprioritize the budget for public health. I checked cancer deaths — the PSA has a breakdown until 2021 only, with no update yet for 2022 — but the data shown in the table is already useful. The top three cancer killers are breast, colon/rectum/anus, and trachea/bronchus/lung cancers.

Cancer treatment is very expensive and for many middle-class households, it can be a poverty-inducing exercise to spend their savings to save a loved one. More so for already poor households.

Now there are moves to expand public spending in cancer treatment and subsidies for poor households, like a bill in Congress creating a Cancer Assistance Fund.

I can support this initiative, it is understandable. But Congress should not further expand the Department of Health and PhilHealth budgets while keeping existing exaggerated spending on other concerns, like COVID vaccination which has topped P150 billion already from 2021 to 2023.

Why? Because of the huge annual budget deficit, the huge public debt, which requires huge annual borrowings to pay old borrowings plus huge interest payments.

The average government financing or borrowings were as follows: from only P73 billion/month in 2019, this jumped to P208 billion/month in 2020, P188 billion/month in 2021, P164 billion/month in 2022, and now, P335 billion/month for January-February 2023.

We need to cut high borrowings, cut high spending, while improving revenue collections and tax administration.

So, while Congressional efforts to expand subsidies for cancer treatment for the poor are understandable, Congress should also cut spending somewhere else.

See also:
BWorld 592, On LBP-DBP merger and MUP pension reforms, April 08, 2023
BWorld 593, Low power supply and Meralco distribution cost, April 09, 2023
BWorld 594, Philippines to offer more investor returns than Europe, April 18, 2023.

Energy 169, PH's WESM demographics

Some slides about the PH Wholesale Electricity Spot Market (WESM) presented by Mr. Robinson Descanzo of IEMOP, during the PH Electric Power Industry Forum (PEPIF) 2023 last March 20-21 at Diamond Hotel, Manila.

Meanwhile, some old links I noted earlier.

Macron Calls For Public Lights To Be Turned Off Amid Russian Gas Threat
Charles Kennedy - Jul 14, 2022, 7:30 PM CDT

"Macron offered up an energy conservation plan that, among other things, would curtail the use of public streetlights."

Sen. Tom Cotton Warns Companies Joining ESG: “You’d Better Lawyer Up”
Charles Rotter July 15, 2022

Putin’s Gas Game: Toy With Europe’s Supply and Make Its Leaders Squirm
Kremlin weaponizes energy over Ukraine sanctions, a gambit that carries huge risks for both sides as customers race to lock in alternative sources
Joe Wallace and Stephen Fidler, July 21, 2022

See also:
Energy 165, ESG and more impact of sanctions vs Russia, June 03, 2022
Energy 167, ESG, Russia and US oil, June 28, 2022
Energy 168, News reports on Europe situation, June-August 2022, August 17, 2022.

Tuesday, April 18, 2023

BWorld 594, Philippines to offer more investor returns than Europe

* BusinessWorld April 10, 2023. 

After four months of Philippine inflation at 8% and above, dipped to 7.6% in March, a welcome development. But this is more of European level than East Asian as East Asians had inflation of only 1% to 6.3% in February.

On April 12, the Philippines’ economic and infrastructure teams will hold another Philippines Economic Briefing, this time in Washington DC. The economic team is composed of Finance Secretary Benjamin E. Diokno, Budget Secretary Amenah F. Pangandaman, National Economic and Development Authority Secretary Arsenio M. Balisacan and central bank Governor Felipe M. Medalla.

The US-Canada-Europe economies are generally in bad shape, suffering from high inflation and low, decelerating GDP growth. I computed the average first quarter or January-March inflation rates of countries in 2020-2022, and the US and UK lead in this very bad trend. Many businesses there would experience losses or flat revenues and will consider moving to emerging economies where growth is generally faster and inflation is lower (Table 1).

The Philippine economic and infrastructure teams should further assure US-based investors that their money and resources will have better returns here than in Europe or other continents, or at least comparable returns as in other East Asian economies.

In projecting future inflation rates, the “base effect” of the consumer price index (CPI) is an important consideration because inflation is the percent change in CPI a year ago. So, the high Philippines inflation in January to March was partly due to low CPI base a year earlier. With high CPI base from April to December 2022, we can expect lower inflation or percent change in CPI this coming April to December.

The transportation and storage sector accounts only for 3-4% of total GDP but it is an important enabler of production of more goods and services. More mobility of fertilizers and crops, fishery and livestock, steel and cement, people and services across islands and provinces means more growth in agriculture, manufacturing, construction, tourism and other sectors and hence, in overall GDP.

In 2020, GDP contraction was 9.5%, but the transportation and storage sector’s contraction was deeper at -30.6%. In 2021 and 2022 recovery, GDP growth was 5.7% and 7.6% but the sector’s growth was 6.3% and 23.9%, respectively. The main enemy of transportation and overall GDP growth is lockdown dictatorship that was unleashed in the Philippines in 2020 and 2021.

With the “pull up” effect of transportation in overall GDP, we should have bigger, more modern airports, seaports and rail system in the country. The big exodus of people from Metro Manila and neighboring provinces to other provinces during the Holy Week long holidays, moving by air, sea and land highlighted once again the role of the Department of Transportation.

I checked the transportation projects both solicited and unsolicited, from the Public-Private Partnership (PPP) Center. There are many huge projects and the big private proponents are San Miguel Corp. (SMC, Ramon Ang), Prime Assets (Manny Villar group) and GMR-Megawide (Table 2).

Transportation Secretary Jaime Bautista as a member of the infrastructure team that will also fly to Washington DC this week to complement the presentations by the economic team in the economic briefing has a big challenge and opportunities in his shoulder when he speaks and meets with US-based investors and infrastructure players. Good luck, Secretary Jimmy.

There are already many PPP projects in urban rail transportation. They are mainly transportation and real estate projects at the same time. We need bigger, more modern seaports and modern, bigger shipping lines that will transport more trucks, cars and people across islands faster and safer.

We also need bigger, more modern international airports in more provinces and more airlines that will transport foreign visitors and investors to these provinces. The newly amended Public Service Act will make it easier and safer for foreigners to invest in airports and seaports, airlines and shipping lines, power and other infrastructure in the country.

More investments mean more jobs and less poverty. Growth and job creation in the Philippines will become more broad-based, more geographically dispersed and more economically sustainable. And there will be more political empowerment, more economic freedom in more provinces and their people.

See also:
BWorld 591, Devolution and rightsizing the bureaucracy, April 04, 2023 
BWorld 592, On LBP-DBP merger and MUP pension reforms, April 08, 2023
BWorld 593, Low power supply and Meralco distribution cost, April 09, 2023.

Covid 81, Dr. Iggy Agbayani in my column

I checked my columns in BusinessWorld on health and lockdown economics , I realize that I mentioned or quoted Doc Iggy Agbayani 8x already. Reviewing them here.

1. GDP contraction, CDC PH, and medicine taxes
November 11, 2020

"My alumni group, the UP School of Economics Alumni Association (UPSEAA) held a Zoom lecture given by Dr. Benigno “Iggy” Agbayani, Jr., on “Philippines COVID-19 Response, What we got right and wrong” on Nov. 4. Dr. Agbayani is a fellow UP alumnus (BS Biology, Medical Degree, and Residency at UP-PGH). He is currently the Chairman of the Department of Orthopedics, Manila Doctors Hospital. He is also a co-founder of the Concerned Doctors and Citizens of the Philippines (CDC PH) that campaigns to “Flatten the fear” and lift the lockdown..."

2. Global economic impact of lockdowns
March 1, 2021

"That afternoon, the Concerned Doctors and Citizens of the Philippines (CDC PH) led by Dr. Iggy Agbayani and Dr. Allan Landrito held a face-to-face meeting with Gov. Garcia at the Cebu Provincial Capitol. Another set of CDC PH people led by Dr. Homer Lim and Dr. Randy Nicolas had a Zoom meeting with Senator Sotto. A few hours after the meeting, Senator Sotto delivered his speech at the Senate plenary and narrated the information he got from CDC PH doctors."

3. Rising cases, vaccine and Ivermectin
April 5, 2021

“Our FDA (Food and Drug Administration) and DoH (Department of Health) are very strict about recommendations and demand for clinical trials on Ivermectin, fine. But where are the clinical trials on the safety and efficacy studies on mandatory face shields? Why give special treatment to new vaccines that still have no long-term safety studies and only a single placebo randomized controlled trial per vaccine, a consideration not given to the 24-RCT supported efficacy, very affordable and safe Ivermectin?”
— Dr. Benigno “Iggy”Agbayani, Jr.,
President, CDC PH

4. My whole family got COVID
August 23, 2021

"Then there are support advice from other CDC PH doctors and friends like Dr. Iggy Agbayani, lots of medicines and supplements from Gigi Bautista and Eli Abela, lots of Vit. C, D, Azithromycin, zinc, .."

5. Budget 2022, borrowings, and OCTA
September 6, 2021

"I received a formal invitation to be one of the speakers from the Committee Chairman, Representative Michael Edgar Aglipay. Since Dr. Benigno “Iggy” Agbayani was also invited and we are both members of the Concerned Doctors and Citizens of the Philippines (CDC PH), I informed Mr. Aglipay that I would not present and I sent my input and research to Doc Iggy and he will present our joint paper."

6. Philippines’ monthly birth and death data show that indefinite lockdown and mass vaccination are wrong
January 10, 2022

"And the former CDC Ph President Dr. Benigno “Iggy” Agbayani, Jr. offered a good course of action: 'These statistics on deaths and births have a huge implication on the longest, most expensive and tyrannical health protocols our country has ever tried. Unbridled lockdowns and experimental vaccinations are the most likely suspects in this sudden high deaths and low birth rates. An investigation by independent and credible experts on this life and death anomaly should be launched as soon as possible.'"

7. Today’s topics: Economic briefing in Washington DC, PPP Center, Tariff Commission, and agencies with no secretaries
October 17, 2022

"Two doctors would be good as the next DoH Secretary. One is Dr. Godofreda “Jody” Vergeire-Dalmacion, an epidemiologist and retired professor from the Department of Pharmacology, University of the Philippines (UP) College of Medicine. The other is Dr. Benigno “Iggy” Agbayani, Jr., also a product of the UP College of Medicine and former President of Concerned Doctors and Citizens of the Philippines (CDC PH). Both physicians have high credibility and independence, they opposed the lockdown, and advocated focused protection via cheap, proven, and off-patent medicines.

I hope President Ferdinand “Bongbong” Marcos, Jr. will consider Mike Toledo, Dr. Jody Vergeire-Dalmacion or Dr. Iggy Agbayani for those positions."

8. Appreciating life, family, and friends
October 24, 2022

"Six, the Concerned Doctors and Citizens of the Philippines (CDC PH), for their courage in fighting the authoritarian lockdown, the mandatory use of face shields and masks even outdoors, the mandatory vaccination, and discrimination based on the vax card.

In particular, I wish to thank past CDC PH presidents Dr. Benigno “Iggy” Agbayani, Jr., Dr. Homer Lim, and current President Dr. Marivic Villa."

See also:
Covid 78, The dishonest narratives, WEF volatility report, January 14, 2023 
Covid 79, Lockdown, news reports of vax injuries, March 01, 2023
Covid 80, 3rd anniversary of lockdown, March 25, 2023.

Sunday, April 09, 2023

BWorld 593, Low power supply and Meralco distribution cost

* BusinessWorld April 3, 2023.

The big power blackouts in the Philippines started in 1990, when total power generation was 26.3 terawatt-hours (TWH; 1 TWH is equal to 1 million megawatts per hour or MWH). It was severe in 1991, with generation down to 25.6 TWH, and in 1992 with 25.9 TWH, resulting in blackouts lasting many hours every day for two years. Things flat lined in 1993 with 26.6 TWH.

Fast forward to 2023 or 33 years later, when the threat of blackouts continues. Last week, on March 28, the National Grid Corp. of the Philippines (NGCP) warned of power interruptions these hot months.

Here are more troubling numbers about power generation in our country. In 1990, while the Philippines was generating 26.3 TWH of power, Vietnam had only 8.7, Malaysia had 23, and Indonesia had 33 TWH. By 2021, or after three decades, the Philippines is generating 108 TWH of power while Malaysia creates 177 TWH, Vietnam 245 TWH (or 2.3 times that of the Philippines), and Indonesia 309 TWH.

Expressed in average kWh/person of electricity consumption, in 2021 the Philippines generates only 982 kWh/person while Indonesia generates 1,136 kWh/person, Vietnam 2,485 kWh/person, Thailand 2,521 kWh/person, Malaysia 5,420 kWh/person, and Singapore generates a whopping 10,229 kWh/person.

From 2014 to 2021, the increase in power generation in the Philippines was only 4.4 TWH/year while Indonesia increased its power generation by 11.5 TWH/year and Vietnam by 14.8 TWH/year. Since the Philippines targets a GDP growth rate of 6-8% a year until 2028, our power generation should increase by an average of 10 TWH/year or double the current annual increase. See this column’s March 20 piece, “Sustained growth via stable and ample electricity.”

The bulk of our neighbors’ power generation comes from fossil fuels, not from intermittent renewables. From 2012-2021, the Philippines’ average coal consumption in petajoules (1 PJ = 277.78 gigawatts/hour = 0.278 TWH) was only 224 PJ/year while it was 371 PJ/year in Malaysia, 410 in Vietnam, 539 in Thailand, and 1,265 PJ/year in Indonesia. See this column’s March 22 piece, “No energy transition happening, only RE addition to fossil fuels.”

So, the Philippines should focus more on a bigger power supply, focus on electricity security and grid stability, on having no blackouts — even for a minute. Our high electricity prices relative to our neighbors in the ASEAN (except Singapore) is mainly due to our low power supply and grid instability, with frequent thin reserves that drive up prices. If we expand supply and reserves faster than the demand, prices will stabilize automatically. The most expensive electricity is no electricity — blackouts. And the dirtiest energy is not coal but candles, biowaste, and small gensets running on diesel.

Despite the Philippines’ low power generation per capita as discussed above, one consolation is that in Metro Manila and neighboring provinces, there is electricity security. Meralco is doing its job of securing sufficient power for its huge customer base.

Two weeks ago, around March 20, I saw a report from ABS-CBN with former Energy Regulatory Commission (ERC) Commissioner Alfredo Non saying that Meralco has been overcharging for the distribution charge from 2012 to the present, for a total of P110-120 billion. Mr. Non was ERC Commissioner from July 2011 to July 2018. In his seven years as Commissioner, he could have completed his investigation but he did not and now in 2023, or nearly five years after his term ended, he makes noise?

I think Mr. Non is wrong on four counts.

One, even assuming that he is correct in his accusation of “overcharging of distribution cost” by Meralco, he should have finished tackling this issue during his seven years term at ERC but he did not. That is his fault, not Meralco’s.

Two, even under the new ERC leadership, the distribution charge has been upheld and not contested or reversed.

Three, I checked and compared the cost component in monthly electricity bills on the Meralco website. I averaged them for the annual rates, focused on residential consumers that use 200-299 kWh/month, and the rates are not that high compared to the generation charge and transmission charge (see Table 1).

Consider also other costs in the monthly electricity bill — taxes, system loss charge (pro-rate remitted to NGCP and gencos), the universal charge for missionary electrification (UC-ME, a subsidy to off-grid islands and provinces), feed-in tariff allowance (FIT-All, a subsidy to intermittent renewables), a lifeline rate subsidy for customers who use less than 100 kWh/month and pay no distribution charge as this subsidy is passed on to distribution charge of customers who use more than 100 kWh/month.

Four, I checked the BusinessWorld Top 1000 Corporations report, which uses financial statements submitted to the Securities and Exchange Commission (SEC) yearly. I computed the net income/gross revenue ratio, and saw that Meralco has the lowest ratio among the companies in Table 1. It is not a hugely profitable company. The ones who really make a big profit are NGCP and Energy Development Corp., followed by South Premier Power Corp. (SPPC) and First Gas Power Corp. Not in the annual report on Top 1,000 corporations are Quezon Power Phils. Ltd. Co. and San Buenaventura Power Ltd. so they are not included in Table 2.

Perhaps Mr. Non and other detractors should shut up and just wait for any new ERC ruling on distribution charge rates for all distribution utilities and electric cooperatives.

Back to power supply problem and the withholding of power, see these recent reports in BusinessWorld: “ERC to review SMC termination of power supply deals” (March 20), “Meralco moves to partly replace lost 670 MW” (March 21), “NGCP warns of power interruptions” (March 28), “DoE won’t intervene pending NGCP ancillary services appeal” (March 28), “Meralco secures 1-year urgent power supply deal with SPPC” (March 30), “ERC orders distributors to file emergency power supply agreements” (April 2).

San Miguel Corp.’s two power companies are unusual. SMC said they lost money in 2021 for both SPPC and San Miguel Energy Corp. due to higher fuel costs, but SEC data showed they had net incomes, not losses, of P4.5 billion and P5.3 billion respectively that year. Then SPPC terminated its supply contract with Meralco when its rate hike petition at ERC was denied, then it applied for another supply contract. Oh well.

See also:
BWorld 590, No energy transition happening, only RE addition to fossil fuels, April 03, 2023
BWorld 591, Devolution and rightsizing the bureaucracy, April 04, 2023 
BWorld 592, On LBP-DBP merger and MUP pension reforms, April 08, 2023.

Deindustrialization 12, Bypassing the usefulness of fossil fuels, more on net zero

A diagram of the usefulness of fossil fuels, lots of byproducts.


Windfall Tax Leads To Job Losses At UK’s Largest Oil & Gas Producer
By Julianne Geiger - Mar 09, 2023

The Weakening Electric Grid: Less Reliable, More Fragile
Authored by Milton Exrati via The Epoch Times, March 11, 2023

During the last 20-some years in which these arrangements have been in place, a lot of fossil fuel and nuclear has closed, not because of green preferences but because they simply could no longer operate profitably. The electric grid’s infrastructure has deteriorated under the on-again-off-again strains and because providers lack the surplus to upgrade their equipment. At the same time, the reliance of natural gas has grown.

Eminent Oxford Scientist Says Wind Power “Fails on Every Count”

Wade Allison

The Energy Transition Is a Delusion Indeed
By Benjamin ZycherMarch 27, 2023
(This paper has plenty of useful links including long papers)

The Implausibility of a Net Zero Carbon Energy Future is Now Obvious
Germany has hit a brick wall on clean energy, postponing a ban on internal-combustion automobile engines. Let's start there.
MISH MAR 28, 2023

Natural Gas: A Comprehensive Guide To The World's Most Crucial Fuel
By Michael Kern - Mar 30, 2023

Here are some reasons why natural gas is important:

Clean-burning: Natural gas emits fewer greenhouse gases than other fossil fuels when burned.

Abundant: There are vast reserves of natural gas located around the world.

Reliable: Natural gas infrastructure is well-established in many parts of the world.

Flexible: Natural gas can be used for a variety of applications across different sectors.

Cost-effective: Natural gas prices have historically been lower than those for other fossil fuels. 

More about Europe energy, net zero.

Meanwhile, a simple case study of solar rooftop.

My friend in Cebu has solar rooftop 8kw or 8,000 watts capacity.

The average capacity factor for solar is about 18%. Assuming it also applies to solar rooftop, then it should produce 1.44 kwh in 1 hour, 34.56 kwh in 24 hours.

His solar produced only 28.5 kwh and 12 kwh on two days early this week.

Those are only 82.5% and 34.7% respectively of its expected output. And it's late March already, supposedly high solar output bec it's non- or less-cloudy compared to rain/wet months July-Nov or Dec.

Conclusion: rooftop solar cap factor should be only around 14%, much lower than big solar farms. And hence, hard to recover the big investments even after 10, 15 years.

See also:
Deindustrialization 9, Net Zero and Degrowth, Oct-Nov. reports, December 10, 2022
Deindustrialization 10, Net zero, ESG and carbon tax, February 09, 2023
Deindustrialization 11, Failing grid and Net zero, March 03, 2023.

Saturday, April 08, 2023

BWorld 592, On LBP-DBP merger and MUP pension reforms

* BusinessWorld March 29, 2023.

Yesterday, Department of Finance (DoF) Secretary Benjamin E. Diokno held a press briefing with the Malaca├▒ang press corps and shared his presentations in a meeting with President Ferdinand R. Marcos, Jr. Two big announcements, two big issues were discussed in one briefing.

One is the proposed merger of the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) with LBP as the surviving entity, the other was the military and uniformed personnel (MUP) pension reforms. Both the LBP and DBP are under the Finance department while getting money to fund the MUP pension is a DoF function, or headache.

At the onset, I support these two important reforms and I hope the public will also support them.

There are at least four reasons that the LBP-DBP merger will be favorable to the public.

One, the merger will create a bigger, stronger, more resilient government bank while contributing to the reduction in the size of the bureaucracy. In December 2022, their combined assets were P4.18 trillion, larger than Banco de Oro’s P3.92 trillion or BPI’s P2.6 trillion. Thus, LBP will become the largest bank in the country.

Two, this will encourage more consolidation and merger of smaller private banks, resulting in a stronger, more transparent banking system in the country.

Three, the high debt-equity ratio (DER) of the two banks, almost double the DER of the top three private banks (BDO, BPI, MetroBank) can be addressed better via reduced redundancy and inefficiency in operations, resulting in more savings. LBP is expected to have additional lending of P80.3 billion/year given the projected operational savings.

Four, proceeds from the sale of redundant assets of DBP — a big head office in prime land in Makati, a property in BGC, properties and equipment of the 125 branches that will be closed out of the existing 147 branches nationwide, etc. — can be used to retire some public debt, or raise LBP capitalization. The public will benefit via lower taxes to pay interest payments of public debt, or better LBP services, and lower interest cost.

The DoF says that DBP personnel who cannot be absorbed in LBP merger will be offered fair separation benefits.


Here is a background on the MUP pension reforms.

One, there are eight MUP agencies from four departments: the Armed Forces of the Philippines, Philippine National Police, Philippine Public Safety College, Bureau of Jail Management and Penology, Bureau of Fire Protection, Bureau of Corrections, Philippine Coast Guard, and National Mapping and Resource Information Authority.

Two, in 2020 there were 408,310 active personnel and 242,381 pensioners. In 2022, there were 455,781 active personnel and 234,180 pensioners, and in 2023, 460,781 active personnel and 239,097 pensioners (source: DBM projected authorized plantillas).

The main goal of reforms is to avoid a fiscal crisis or collapse. Straight and direct. This is a huge unsustainable pension that will punch a big hole in taxpayers’ pockets, and/or deprive additional funding for other agencies. This is a big fiscal burden to taxpayers for the past 25 years since the Ramos administration and, thus, reforms should be done now and not later.

Secretary Diokno showed two charts comparing the budgets of maintenance and other operating expenses (MOOE) and capital outlays (CO) of MUP — their uniforms, guns, tanks, airplanes, offices, etc. — and their pension. I combined the two charts in one table (Table 2) then I added a comparison with government consumption in the GDP.

The result for taxpayers is ugly. It is a black eye for the MUP pensioners.

One, the share of MUP pension/government consumption has increased from 3.9% in 2015 to 5.3% in 2021, and the increase from 2015 to 2022 was 95% for MOOE+CO, 117% for overall government consumption, and 178% for MUP pension.

Two, the projected increase from 2020 to 2030 of their MOOE+CO is almost 200% or three times the 2020 level, but their pension will rise more than 400% or five times the 2020 level (see Table 2).

Three, another chart shown by Mr. Diokno was about the average monthly pensions in 2022: P4,528 for the Social Security System (SSS), P13,600 for the Government Service Insurance System (GSIS), and P40,049 for the MUP. In other words, the MUP pension was almost nine times that of the SSS and almost three times that of the GSIS. The number of pensioners in the SSS in 2022 were 3.2 million, while there were 554,000 in GSIS, and 234,180 in MUP.

Four, while SSS and GSIS pensioners paid for the fund themselves via monthly salary deductions, the MUP pay zero, nothing — they keep all their monthly salaries and allowances from taxpayers, then their pension will be taken again from taxpayers.

Because of these and other factors, Mr. Diokno, with the concurrence of Defense Secretary Carlito Galvez, Jr. and Interior and Local Government Secretary Benhur Abalos, propose the following reforms:

One, the reform shall apply to all active personnel and new entrants.

Two, removal of automatic indexation of pension to the salary of active personnel of same rank.

Three, MUPs will receive their pension starting at the age of 57.

Four, mandatory contributions will be required of active personnel and new entrants similar to GSIS pensioners.

These are good sense proposals and compromises. I hope that most MUP pensioners and active personnel will agree to these.

I talked to the husband of a friend from UP Sapul in Diliman, retired Brigadier General Francisco “Jun” Mendoza, Jr., who was a former Assistant Deputy Chief of Staff for Education and Training, J8 of the AFP. I asked Jun if he thinks his fellow MUP pensioners will object to the proposed reforms.

Jun replied (he gave me permission to quote him) that he welcomes any reform that would guarantee the stability of funds of retirees. He was assigned at GHQ on several instances and was aware of the deeper problems sustaining the funds, especially when the base pay was increased during the time of former President Rodrigo Duterte. So, most pensioners and even those in active service would support reforms because their worst fear is that government can no longer provide the required amount in the future.

The Executive branch, led by the DoF, has done the computations and identified the proposed reforms. Congress should act swiftly in the needed legislation, especially in MUP pension.

See also:
BWorld 589, Sustained growth via stable and ample electricity, March 26, 2023
BWorld 590, No energy transition happening, only RE addition to fossil fuels, April 03, 2023
BWorld 591, Devolution and rightsizing the bureaucracy, April 04, 2023.