Transcript of Senator Miriam Defensor Santiago ’s interview

After the Senate Committee on Energy Hearing With The Respresentatives from the Various Foreign Chambers of Commerce

The Joint Foreign Chambers (JFC) apologized to the Philippine Senate for that letter they sent Pres. Arroyo after Sen. Enrile and I, plus Sen. Arroyo, took turns chastising them for breaking protocol. If they have anything to say about pending legislation, they should say it to the Senate. They should not write the President because it implies that the President could order a co-equal branch of government to do what she wants. And they should not write such a letter and make it public when the Senate is in the middle of debating the amended Epira law which has already took several years. The time to have expressed those sentiments should have been during the committee hearings when the Senate hears all kinds of opinions for and against.

The senators resented the letter for we were expected to lay aside all the things we have been doing on the amended Epira law and give way to the demand of foreign investors to stop amending our own law. But they issued an apology, and in my capacity as chair of the Committee on Energy, the apology is accepted.

However, beyond that, we wanted to know ano ba talaga ang reklamo ninyo na amendahin ang Epira. Sapagkat ang layunin nun ay ibaba ang presyo ng kuryente. Pitong taon na, hindi pa rin bumababa ang presyo ng kuryente kaya tinitignan naming sa Senado kung ano ang magagwa naming hakbang para bumaba ang presyo ng kuryente. Sabi nila (ng JFC) basta wag daw munang amendahin ang Epira.

Pero paulit-ulit naming tinatanong ng mga senador kung ano ba talaga ang ayaw nila jan. Pero ang sagot nila lagi ay malapit ng maprivatize ang Napocor sa katapusang nitong taon kaya’t bakit pa kelangang baguhin ang mga regulasyon. Tinanong sila kung nabasa nila, kasi 60 pages ang amended Epira, pero mukhang hindi. Ang sagot nila ay wala dahil ang mga technical consultants nila ay wala dito.

In my view, they are afraid that the amended Epira will visit or discuss all over again the very notorious IPP contracts where the foreigners are involved. The IPPs are independent power producers; the main power producer in our country is the government through the Napocor. But because of the brownout, Ramos signed contracts with the IPPs at exorbitant costs; and still, we are operating under that legacy. That’s one of the reasons why the price of electricity is very very high.

Under an IPP contract, there is no risk that the investor takes. We are already paying it the capacity service fee and operation and maintenance fee so how come may take-or-pay pa. Binabayaran natin lahat ng ginagamit nila at paggawa nila ng kuryente e bakit pag hindi nating gagamtin ang kuryente pababayarin pa rin tayo? Hindi tama yun. That’s why the public are up in arms against the IPP contracts. I suspect that the evasiveness of the foreign investors today indicate that they do not want to reveal the real reason, which is they don’t want the amended Epira to even mention the IPP contracts.

Nakakasuspetsa talaga kung ano ang angulo nito. Ang angulo natin ay ipagtanggol natin ang ating mga consumer na Pilipino. Ang angulo nila ay gumawa sila ng tubo. Wala namang masama dun kaya natin kinumbida sila e, pero wag naman sana sa pamamagitan nitong mga IPP.

There’s no provision of IPPs on the amended Epira. I think that they are just speculating on fear that maybe someone will stand up during the debates and propose such a position.

Can Congress remove the onerous provision on the take-or-pay?

That’s already part of the amended Epira. That’s what they are afraid of.

With respect to existing contracts we will respect that until the expiration date of that particular contract. We are talking of future IPP contracts.

I think their apology is only an indication that the letter was precipitate, was impulsive; it was an immediate reflex of people who are used to dictating to developing countries our own economic policies. Many of our lawmakers today have been schooled in their very universities and colleges so we’re just reflecting what we’ve learned. Now that we are an independent nation, why is it being held against us that we are able to think for ourselves?

On the conflict of interest that some of the members of the JFC are also partners of local power producers

Yes, they themselves admit it. I said, how can you be so sure that we should not patch Epira, because according to you, power generation will soon be subjected to open access—that is, we can now buy our electricity not only from Napocor but other IPPs. But how can you be so sure that there will be enough IPPs since the law today requires that there should be 70% privatization of Napocor before we can allow open access, before we can allow any power producer to present itself in the market. There are no foreign bidders in Napocor, there are only local bidders and then immediately one of them said, “Ah, we have a big investment in First Gen.” So you see, the foreigners are interested in making profits out of the IPPs, that is the real reason that’s why we’re going around in circles.

They will be called back on the hearings of the anti-trust law. Anti-trust means prevention in monopolies of trade. I am very happy at least the foreigners have been given forewarning at least on the part of the Senate not to dictate our economic policies, not to raise unfounded fears and not to speak in generalities. If only out of courtesy, they should specify what exactly it is that is hurting them in the proposed amended Epira.

Tama lang ba na pagalitan ang mga opisyal ng JFC?

E kung may rason naman kasi. Kung hindi natin itataas ang boses natin sa dayuhan maski mali ang ginagawa mamaya aapakan nalang nila tayo. I think yun yung punto ni Sen. Enrile. He is very capable of exploding, just like me.

They (representatives of the foreign chambers of commers) were very cooperative except that their answers were evasive, they were non-responsive. You cannot blame a witness for trying to get out of a sticky situation.

Can we afford the consequences of displaying our pride?

This is not just mere pride; this is really an assertion of independence from foreigners. We all want you to come here and invest in our country, but please respect our legal system. That’s the point we are trying to make.

Investors watching the hearing will understand that the Senate is responsive to the needs of the times. We cannot calcify into rock the old Epira law because they are more comfortable with it. We are not concerned with the welfare of foreign investors in that way. Our highest concern is the welfare of the Filipino consumer. If those two welfares coincide then we are very happy. If not, then we’ll simply prioritize lower priced power cost.

Can President Arroyo use her emergency powers if the present economic crisis worsens?

The economic crisis is out of our hands, it is being caused by the higher price of oil and by the international food shortage. There is nothing we can do. We are not an isolated island where all of these things are just happening to us. These are world wide afflictions on the entire poor community of the world. If that is the case, upon proper findings, the president, may of course properly exercise her emergency powers but she should adhere strictly to the conditions of the constitution and the Senate will be the first to protest if she does it prematurely.

MIRIAM HITS FOREIGN CHAMBERS ON IPPs

Sen. Miriam Defensor Santiago, chair of the Senate energy committee, said that the Joint Foreign Chambers of the Philippines (JFC) oppose amending Epira because they do not want a review of the IPP contracts.

Epira is the Electric Power Industry Reform Act, while IPP is an industry power producer.

“The foreign chambers have a conflict of interest. They want to preserve Epira, but at the same time they do not want a review of the IPP contracts, apparently because they want to protect their economic interests and investment returns,” Santiago said.

Santiago said that under the IPP law, any proposed electric generating facility should prove that it can generate electric energy cheaper than can be generated by Napocor (NPC), by accessing lower cost of capital, cheaper plant investment, and locally manufactured equipment.

She said that according to a study, in all types of power plants, the IPP costs are higher than NPC generation costs.

“Napocor IPP contracts are like the BOT contracts. They are not standard PPAs which take some levels of business risks,” Santiago said.

BOT stands for build-operate-transfer, while PPA stands for purchase power agreement.

“The IPPs make windfall profits at the expense of consumers. The IPP contracts are unconscionable because the IPPs are already paid for capacity, and for operation and maintenance. Yet at the same time they have a take-over-pay level for variable energy conversion fees. The take-or-pay provisions are excessive,” the senator said.

Santiago said that IPPs follow a fee structure of dollars per kilowatt hour, where the standard procedure is based on pesos per kilowatt hour.

Santiago listed the alleged inconsistencies in the JFC letter to Pres. Arroyo, as follows:

• JFC objects to Epira amendment, but does not particularly explain why.
• JFC contradicts itself because it rejects Epira amendment, but at the same time supports earlier open access. To achieve earlier open access, Epira has to be amended.
  
• JPC contradicts itself by calling for transparent and competitive electricity industry market and yet it rejects at the same time a review of IPP contracts. This is also conflict of interest on the part of JFC.
  
• JFC makes a bare statement that amending Epira will negatively impact the power industry market, without specifying the ways in which negative impact would result.

Santiago said that JFC issued the statement on the presumption that by the end of 2008, NPC will complete 70% privatization.

“What is the basis for this presumption? Will JFC members participate in bids for the JPC assets? At present, no foreign companies are involved in bidding for NPC assets. The only active bidders are local investors,” the senator said.

Santiago said virtually the entire Senate rose to criticize the recent JPC letter to Pres. Arroyo opposing Epira amendment, because the letter should have been addressed to the Congress.

“Lawmaking is the sole prerogative of Congress,” Santiago said.

Santiago said that the senators did not like the letter, because it appears to be an attempt by foreigners to meddle in Philippine policy making.

MIRIAM INVITES FOREIGN CHAMBERS OF COMMERCE TO SENATE ENERGY HEARING

Senator Miriam Defensor Santiago called for a Senate Committee on Energy hearing for Friday (June 6) following senators’ collective condemnation of the statement from foreign chambers of commerce regarding the country’s energy policy.

In a letter last May 27, the Joint Foreign Chambers (JFC) urged President Gloria Macapagal Arroyo not to renegotiate the government contracts with independent power producers (IPPs) nor amend the Electric Power Industry Reform Act (Epira). This drew the ire of senators, saying that the foreign business group is meddling with lawmakers’ efforts to reduce power rates.

Santiago said that it is a question of what kind of amendment the JFC doesn’t want, since Congress is only changing certain provisions of the Epira and not its entirety.

“The only problem with the IPPs is that they have a take-or-pay provision which is very onerous to the Filipino taxpayer. The foreigners can source their electricity from IPPs with take-or-pay provisions but it should not be a standard clause in our contracts of the government and the IPPs,” the senator said.

Santiago invited presidents of various foreign business groups to the hearing, among them Rick Santos of the American Chamber of Commerce of the Philippines, Richard Barclay of the Australian-New Zealand Chamber of Commerce of the Philippines, Stewart Hall of the Canadian Chamber of Commerce of the Philippines, Hubert D’Aboville of the European Chamber of Commerce of the Philippines, Toshifumi Inami of the Japanese Chamber of Commerce of the Philippines, Jae Jang of the Korean Chamber of Commerce of the Philippines, and Shameem Qurashi of the Philippine Association of Multinational Companies Regional Headquarters, Inc.

Also invited to the hearing are Energy Secretary Angelo Reyes, National Power Corporation President Cyril C. Del Callar, Power Sector Assets & Liabilities Management Corporation President Jose C. Ibazeta, Energy Regulatory Commission Chair Rodolfo Albano Jr., and Ernesto Pantangco, president of the Philippine Independent Power Producers Association.

MIRIAM ASKS ERC TO REDUCE POWER RATES

Sen. Miriam Defensor Santiago, chair of the Joint Congressional Power Commission (Powercom) issued instructions to ERC chair Rodolfo Albano to take immediate steps to reduce Meralco rates.

Santiago said that although Powercom has no power to issue orders to ERC, the EPIRA law gives Powercom the function of issuing guidelines to ERC, and to monitor and ensure implementation of the EPIRA, which was intended to lower power rates.

In a privilege speech yesterday, Santiago issued the following guidelines to ERC:

• Resolve within three months, all pending petitions already submitted for resolution, with the end in view of lowering immediately the Meralco power rates;
  
• Uphold consumer protection in resolving the present petition from Meralco and Napocor, requesting permission to pass on to the consumers some P14 billion of the Meralco debt;
  
• Announce immediately a cap on systems losses, lower than the existing 9.5 percent cap;
  
• Order Meralco to list all inclusions in their generation cost;
  
• Order Meralco to show cause why it should not immediately give refunds to its consumers, pursuant to the Supreme Court decisions in cases concerning Meralco income taxation which were apparently passed on to consumers; and
  
• Order Meralco to show cause why it should not immediately give refunds for deposits on billing meters.

In the same privilege speech, Santiago said that the internet website of ABS-CBN, owned by the Lopez group, has committed against her the crimes of blackmail or grave threats, as well as the crime of libel, intended to defeat her candidacy for the International Court of Justice.

Santiago said that the website is guilty of following a scheme or pattern, because a series of derogatory articles against her and Powercom appeared immediately in the website after she chaired a Powercom public hearing to investigate why Meralco power rates are so high, the second highest in Asia.

Santiago chaired the meeting on May 12; the alleged defamatory articles appeared on May 16, 21, 23, and 25.

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MIRIAM: JAIL FOR LYING ON POWER RATES

Sen.Miriam Defensor Santiago, chair of the Joint Congressional Power Commission (Powercom) said she would cite for contempt any official of Meralco, NPC, or WESM who fails to prove allegations made during the public hearing on power rates.

“In other words, if I catch them lying under oath, those officials could be fined up to P500,000, and jailed up to six years,” she said.

Santiago said that for her to decide who is lying, she has secured the cooperation of UP professors who are experts in the electric power industry, namely: Profs. Allan Nerves, Rowaldo del Mundo, and Bienvenido Malquisto, from the Electrical and Electronics Engineering College; and Profs. Arthur Cayanan, and Helena Agnes Valderrama from the Business Administration College.

Santiago issued “urgent orders to submit information” to Meralco president Jesus Francisco, NPC president Cyril del Callar, Asst. vice-president Mario Pangilinan of PEMC, and OIC Alejandro Barin of the ERC.

The orders specify particular documents required from each agency, to be submitted 15 days from receipt of the order.

“The first order of the day is to determine the price paid to the IPPs of both Meralco and NPC,” she said.

Santiago said the issue with respect to Meralco is alleged price manipulation, by making it appear that their own IPPs sell at cheaper prices than those charged by NPC and WESM.

The senator said the issue with respect to NPC is that NPC has been passing on to customers actual IPP costs, instead of avoided costs, meaning marginal cost, as provided by law.

“What Meralco and NPC pay to their respective IPPs, sets the reference rate for the power rates paid by consumers. We have to put closure on this IPP issue, otherwise our power rates will be high forever,” she said.

Santiago said that if documents prove that Meralco intentionally made the decisions to favor its own IPPs at the expense of consumers, that would be management abuse which could be a ground to cancel the Meralco franchise.

“It is virtually impossible that Meralco managers did not know that their decisions would result in unconscionable transfer of wealth from consumers to their own pockets. Such alleged mismanagement is punishable,” she said.

“The second order of the day is the alleged NPC manipulation which results in the Meralco billing for WATOU, or weighted average time of use. It appears that the TOU rates of NPC are very high,” she said.

Santiago said a separate hearing will be needed on the issue that NPC is allegedly increasing its prices to create an emergency situation which would allow it to buy fuel, not through competitive bidding, but through negotiation.

“The Senate energy committee has a duty to investigate whether NPC is negotiating with fuel supplies, instead of holding competitive biddings. The related allegation is that NPC is dealing with fly-by-night coal suppliers,” the senator said.

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Transcript of Senator Miriam Defensor Santiago ’s interview

After the Powercom hearing on Meralco’s high electricity rates

Ang Joint Congressional Power Commission or Powercom na may kapangyarihan sa power industry ay at least nagbigay ng dalawang resulta na makatulong para bumaba ang presyo ng kuryente. Una, inutusan namin ang Energy Regulation Commission, ang tagabantay ng Meralco, Transco, at NAPOCOR na hindi dapat payagan ng ERC ang petisyon ng Meralco.

May kasunduan sila na dahil may utang ang Meralco sa NPC at ang NPC naman ay may utang sa Meralco, hindi nalang nila itutuloy ang paghahabol ng utang nila sa isa’t isa kung ‘di ipasa nalang nila sa mga customers. Ang ginawa natin ngayon ay inutusan ang ERC na huwag payagan ang petisyon na iyon dahil nag-utangan sila sa negosyo nila. Walang papel ang taong bayan doon, hindi naman tayo kinonsulta sa mga utang na iyon. Kailangan sundin ang prinsipyo na kung hindi nakisali ang consumer sa desisyon ng management, hindi sila dapat singilin.

That’s called the “just and reasonable principle”. Under that principle, we have ordered the ERC to dismiss the petition of Meralco supported by the NPC to pass on the costs of their mutual debts to the consumer. We do not even know the exact amount, but definitely it will run perhaps to billions.

Pangalawa, nakuha natin kanina na utusan ang ERC na lagyan ng limit ang systems losses na kalakip doon sa billing ng Meralco. Bawat buwan, nakalakip doon sa binabayad natin sa kuryente ang tinatawag natin na systems losses. Ngayon sa ilalim ng batas, dapat may limit yan kung magkanong systems loss ang pwedeng ipasa ng Meralco sa customer. Hanggang ngayon, hindi nila linalagyan ng limit, kaya inutusan natin kanina ang ERC na lagyan ng limit ang systems loss na yun para lumiit din ang pagsingil sa ating consumers.

Who is to blame for the high electricity prices?

Hindi mo masasabi dahil ang aming mga conclusion ay manggagaling sa mga dokumento na hiningi naming ibigay sa komisyon galing sa iba’t ibang mga pinuno ng mga ahensya na may kinalaman sa paghatid ng kuryente. Pero sa ngayon nakikita ko na mayroon talagang mali na ginagawa ang Meralco. Halimbawa, inaamin ng presidente ng Meralco kanina na ang binibili nilang mga metro sa kuryente ay naggagaling din sa kumpanya na ari din ng Meralco at inaamin nila yung ibang systems losses nila ay hindi kasalanan ng mga gumagamit kundi hindi basta dahil teknikal o due to pilferage kaya ang Meralco ang may kasalanan.

Hindi lamang iyon, pati ang Napocor ay may kasalanan din. Mayroon din silang management abuses. At dapat, ang tagabantay o regulator nila na ang ERC ay kahati din dun sa pagtaas ng presyo dahil hindi sapat ang bagsik ng ERC na bantayan at suriin nya ng mabuting mabuti itong pinagpapatong sa ating electric bill kaya hindi mo masasabi talga na iisa lang sa kanila ang may kasalanan. Pare-pareho silang may sala talaga at banding huli, mangangailangan yan ng pagamyenda ng ating batas ngayon na tinatawag na EPIRA law.

How soon will we see the results?

I hope the results will reflect, more or less, 30 days after the 15 days compliance I gave the ERC.

How about Mr. Garcia's proposal to change Meralco's management?

Ewan ko lang kung pwedeng magawa iyon dahil napaka kumplikado nito, sari-saring mga scientific factors ang involve jan. Kaya ang gagawin natin ay hihingi tayo ng tulong ng isang grupo ng mga UP professors na sa ngayon ay nag-aaral kung paano ibaba yung presyo ng kuryente.
How about the proposal to bring down the VAT?

Imposible yun, dahil wala na ngang pera ang gubyerno tapos lahat ng buwis na napatong dun ay gusto nilang tanggalin, e di lahat nalang ng sector ng ekonomiya hihingi ng ganyang pagalis ng VAT.

On Garcia’s proposal to divide the franchise ng Meralco

There’s no problem with that, we already have a model. What used to be the MWSS was divided into two and it did not result into higher water rates. It, in fact made a lot of money for one franchise holder although the other franchise holder did not make much money. Anyway, it resulted in better water supply. So, we in the Commission have no objection if that is his proposal. Ang question lang dun, ay sabi nila ay hindi nila gusto na ang GSIS ay magpapatakbo kung di sila ang maghahanap ng mas magaling na magpapatakbo. Ewan ko lang kung magagawa yan dahil marami kasing pasikut-sikot jan. Sino ang ilalagay mo dyan ay dapat alam niya lahat ng mga relations diyan ng Meralco at ng mga subsidiary companies and all will depend on the price of electricity by that time. Pero kung management efficiency lang ang paguusapan, mukhang may napatunayan kanina sa pagtatanong ng mga senador at mga kongresista na talagang may management inefficiency. Ibig sabihin ay hindi napaaketo ang batas na sabi ay dapat bigyan ng kuryente ang mamamayan sa least cost manner.

Is there a syndicate here?

Una, ang pag-amin ng Meralco na bumibili siya ng sarili niyang mga metro sa sarili nyang kompanya, at least in part. May mga satellite companies ang Meralco kaya nakikinegosyo sya sa sarili niya. You should keep your private business interest at arm’s length from the public interest.

Is Meralco to blame for  the systems loss?

Partly may kasalanan ang ERC, kasi dati may limitasyon yan e, I think it was 9.5 percent tapos na-abolish ang limit na yun and the power was given to the ERC to set the new limits depending on all those factors that I read off, pero hanggang ngayon hindi sila nagseset ng limits kaya parang libre ang Meralco na gumawa ng kanilang limits. Sasabihin nila na pareho ang lahat ng ito at pinayagan ito ng ERC kaya yun naman ang base ko na magsabi na lax ang ERC. Sana kung mas mahigpit sila sa pag implement ng EPIRA, hindi sana tumaas ng ganun ang singil sa kuryente. Hindi ibig sabihin na dahil na-approve na ng ERC e legal na. Maaring may kasalanan din ang ERC at pati sya maparusahan.

Theoretical studies by technical scholars can find out if there has been a violation of the “just and reasonable principle” or violation of the least cost principle. They could be charged criminally under the penal code for combination in restraint of trade kung ang resulta ay tumaas ang binabayaran ng mamamayan o kaya hindi maganda ang resulta sa ekonomiya pwede na siyang violation of combination in restraint of trade. Parang anti-trust law and anti-monopoly law.

MERALCO HONCHOS GET P97M ANNUALLY

Sen. Miriam Defensor Santiago, chair of the Joint Congressional Power Commission (Powercom), said high power rates are caused by apparent management abuse not only in the Manila Electric Co. (Meralco), but also in the National Power Corporation (NPC), and by apparent laxity in the Energy Regulatory Commission (ERC).

“These apparent management abuses and lax regulation are the reasons why the Philippines has one of the highest power rates in the world, second only to Japan in Asia,” Santiago said.

NPC is the generator, Meralco is the distributor, and ERC the regulator of the power industry, with all three and other sectors falling under the bicameral Powercom’s power to “set the guidelines and overall framework to monitor and ensure proper implementation” of R.A. No. 3196, the Electric Power and Reform Act of 2001.

“Consumers are paying for the high annual salaries of the Meralco chief executive officer and seven other senior executive officers which in 2008 will total some P97 million. The officers and directors as a group will get some P170 million. This appears to be management abuse,” Santiago said.

Santiago listed “apparent management abuses” by the three agencies as follows:

• Meralco is reportedly buying electricity from NPC and WESM (Wholesale Electricity Spot Market) during peak periods, when prices are high, resulting in high pass-through generation charges to its consumers.
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• Meralco and NPC entered into an agreement to ask ERC to allow Meralco to pass on to its consumers its unpaid debts to NPC.
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• Power rates are high in Luzon, than in Visayas and Mindanao .
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• NPC apparently manipulates its rates based on Time-Of-Use (TOU) which are very high, and which are passed on to consumers.
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• NPC apparently gives preferential rates to economic zone consumers, but passes on the cost of the discounts to its other consumers.
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• NPC charges its consumers for its revenue requirements, which seem to include its P7 billion bad debts.
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• NPC buy its power from IPPs (Independent Power Producers) but at higher rates than the avoided cost, or the marginal cost, and then passes on the higher rates to the consumers
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• ERC has neglected its duty to set the new caps on recoverable systems loss, and use questionable “performance-based regulation,” valuation of assets, and benchmarking methodology.

But the senator said there is no basis for the charge that Meralco has been passing on to its consumers high system losses, because Meralco has apparently been absorbing P1 billion every year in system losses.

Santiago said the possible penalties for management abuse can be legislative, corporate, and criminal.

Meralco operates under a franchise, meaning a right conferred by the government to engage in specific business, including the rights necessary for public utility companies to carry on their operations.

“The legislative remedy provided by the Constitution is for Congress to amend or repeal the Meralco franchise, as required by the common good,” she said.

The senator added that the corporate remedy is to penalize the responsible Meralco managers, by voting them out in the next stockholders’ meeting this month.

“The criminal remedy is to file cases in court against the responsible Meralco and NPC officers for the crime called ‘combination in restraint of trade,’ which refers to any conspiracy ‘for the purpose of making transactions prejudicial to lawful commerce, or of increasing the market prices,’” she said.

Santiago ordered the three agencies to submit replies to her long list of technical questions for each agency, and to attach the proper documents.

She said that all replies and documents will be the basis of the report and recommendation that Powercom will submit to Congress.

Santiago also ordered that a set of replies and documents shall be given to a team of UP professors who are at present conducting a study for a paper to be titled “Anatomy of Power Rates in the Philippines .”

The Powercom report will have to analyze technical, financial and regulatory factors that contribute to the present high power rates. It is complex, labyrinthine, and often subterranean,” she said.

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Transcript of Senator Miriam Defensor Santiago ’s interview

On Congress possibly investigating Meralco’s high power rates

Kailangan na talagang imbestigahan ang Meralco dahil napakataas ng binabayad natin sa kuryente, at mataas naman pala ang kinikita nila. Kukumbidahin ko ang chairman ng House committee on energy na sumama sa Senate energy committee para sabay na lang kaming mag-imbestiga. Nalaman ko na inutusan ni Speaker Nograles si Cong. Mikey Arroyo, na chair ng House committee on energy na imbestigahan ang maaring pagbabago sa pag-aari ng Meralco para matupad ang pagbababa ng bayad sa kuryente. Kung gayon Kinukumbida ko ang House committee on energy na sabay na lang kami ng imbestigasyon ngayong linggong ito, kung maaari sa Biyernes, para iisa na lang at hindi paulit-ulit.

Ang pinakamalaking tanong ditto ay bakit sa buong Asya tayo ang bansa na may pinakamataas na presyo ng kuryente, samantalang naibenta na ang isang bahagi ng Napocor at ibebenta pa ang naiwan.

Ang isa pang tanong ay kung bakit napakabagal ang pagpapa-privatize ng Napocor. Kung totoo ang sinasabi ng Pangulong Arroyo na bababa na ang pagbenta ng kuryente ng Napocor sa Meralco, bakit hindi natin nararamdaman na bumaba ang pagbayad natin sa Meralco. Dahil kung mura ang bili nila ng kuryente sa Napocor, na pag-aari ng gobyerno, dapat mura rin ang signil sa taong-bayan. Nakikita natin na may disconnect sa prosesong ito. At bakit kung nanakaw ang kuryente, iyong tinatawag na systems losses, bakit tayo ang magbabayad nito? Hindi naman natin ito napakinabangan. Dalawang beses nang sinabi ng Korte Suprema na masyadong mataas ang pagsingil ng kuryente ang Meralco. Inutsan pa itong ibalik ang Meralco na ibalik sa consumers ang binayad natin. Kung gayon, mayroong may kasalanan diyan Bakit walang imebstigasyon kung bakit mataas ang singil sa kuryente at kung sino ang may pananagutan doon? Lahat ito ay dapat masagot sa joint hearing ng committees of energy ng House at Senate.

There is no congruence in the explanation of the government that it has already lowered the sale price by Napocor to Meralco, and yet Meralco has not lowered its own selling price to the retail consumer. Why is there a disharmony between the process of generating power and bringing it to the consumer? That is the function of the JCPC under the Epira, to see to it that the electricity rates are set as low as possible. Apparently we have not achieved it. Meralco now is the focus of attention and what is stopping the power industry from lowering electric rates so that we can be competitive in the region.

What will be the objectives of the hearings?

If we want to insert more provisions in the Epira law, which is already under debate on the Senate floor. We are still in the process of seeing what kinds of amendments to the Epira will be made. And if we hold these hearings, the conclusion will take the form of possible amendments to the Epira law.

On the possibility of the baselines bills to be reassigned to another committee

Ang ating mungkahi diyan ay tapusin muna ang pag-aaral ng isang grupo ng mga eksperto, na tatawagin nating Congressional Commission on National Territory , at saka tayo gumawa ng public hearing at possible plernary debates tungkol sa bagay na iyon.

Kailangan ko talagang aksyunan ang baselines bills. Ang sinabi ko lang ay hindi ako papayag na madaliin iyon dahil ito ay napakalalim na paksa. Hindi maari na sukat pinag-usapan mo o inisip mo ay gagalaw ito dahil nakasalalay rin dito ang ibang bansa. Kaya dapat diyan ay pag-aralan nating mabuti.

This is really an international problem because it concerns the concept of the extended continental shelf. We need to understand this profoundly. We cannot act on the spur of the moment.

Since it involves a lot of issues, can the bills be tackled by the Committee of the Whole?

Iyan ang siguradong paraan na babagal ang discussion diyan. Una, dahil ang paksa na ito ay para sa mga dalubhasa, which requires highly expert opinions because we shall be debating in an international forum with experts from every country in the world. So we better be sure of our scientific, technical, and legal data. So in that case, we need to conduct it by committee, not by a committee of the whole.

Transcript of Senator Miriam Defensor Santiago ’s interview

On Malacanang’s move to lower electricity rates by taking over Meralco

Remember that the Supreme Court has already ruled that Meralco has overbilled its costumers. It is incumbent of the government to make sure that overbilling does not recur. Otherwise, we would be exercising a futile protest over post facto actions that are prejudicial to the consumer.

As chair of the Powercom, I can summon the chair of the ERC only after he has acted on the matter. We in Congress could not dictate how the ERC, which is an executive agency, should act on the matter.

Our position is this: the EPIRA law, for which the Powercom was established, clearly states as its mandate the lowering of electricity prices in the Philippines , which is one of the highest in Asia . Therefore, if state control of Meralco will result in lower electric costs, the Congress is bound by law to support that move.

In fact, I think Meralco issued a statement today that it will not hinder these moves, and will in fact support them. So it is just a question of methodology, there is no lowering electric prices because both sides appear to agree on that.

The methodology however is tricky. There are technical terms that need to be translated to the public to explain them in detail.

Normally, under the capitalist philosophy, the least participation of government if private business the better. But because the state has expressed official concern over the electric power industry by passing the EPIRA law, we shall allow matters with respect to electricity rates to be decided by the private sector based on good corporate management practices. But if the result for the consumer is significantly higher rates, then we just have to step in.

13 February 2008

MIRIAM URGES SWITCH TO RENEWABLE ENERGY

Sen. Miriam Defensor Santiago, chair of the Senate committee on energy, today delivered her sponsorship urging the Senate to pass the proposed Renewable Energy Act of 2008.
Although there is no internationally accepted definition, Santiago defined renewable energy as “energy which comes from a source not depleted by use, constantly replenished, and never runs out.”

She said that according to the International Energy Agency, renewables include combustible renewables and wastes, hydro power, geothermal, solar, wind, wide, wave or ocean, and hydrogen.

“Renewable energy has become the buzzword of the day, because its potential for use is very large, exceeding all other readily available sources. Investment capital flowing into renewable energy climbed from $80 billion in 2005 to a record $100 billion in 2006,” she said.
Santiago argued for the Senate to pass the bill immediately, because it will contribute to world energy supply security, reduce dependence on fossil fuel resources, and provide opportunities for mitigating greenhouse gases.

“The renewable energy market could increase fast enough to replace and initiate the decline of fossil fuel dominance. Renewables are gaining credence among private investors as having the potential to grow into the next big industry,” she said.

Santiago pointed out that the proposed Renewable Energy Act introduces into the Philippines the Renewable Portfolio Standard which requires electricity suppliers to get an agreed portion of their energy supply from renewable energy.

The bill also creates the Renewable Energy Market, which will be a sub-market in the Wholesale Electricity Spot Market under the EPIRA law.

It also provides the Green Energy Option (GEO), empowering end users to select their electricity requirements sources from renewable energy sources.

Among the incentives offered by the bill for GEO certified developers of renewable energy facilitators are VAT exemption, duty-free exemption, tax credit on domestic capital equipment and services, caps on realty tax rates, and income tax holiday exemption, among others.

Similar incentives are offered to manufacturers, fabricators, and suppliers of locally produced equipment and products for renewable energy facilities.

The bill creates the National Renewable Energy Board, and establishes the Renewable Energy Trust Fund.

“The bill will bestow the benefits of energy security, lower energy prices, particularly electricity rates, sustainable investment, and a healthier community,” Santiago said.

She said that the country could save P200 billion in fuel purchases, P 22 billion in costs due to the harmful effect of conventional fossil fuel-fed power plant emissions, P9 billion in carbon credits, P67 billion from the creation of wealth from renewable energy-based plants.

-End-

THE LEGISLATIVE ENERGY AGENDA, AFTER DAVOS 2008
Speech delivered in the Energy Summit, on 31 January 2008,
at the SMX Convention Center of the Mall of Asia in Pasay City

By

Senator Miriam Defensor Santiago
Chair, Senate Committee on Energy
Chair, Joint Congressional Power Commission

Fixed Principles of Energy Industry

I have just returned with President Arroyo and the rest of the Philippine delegation from the World Economic Forum 2008 in Davos, Switzerland. The delegation then proceeded to Dubai in the United Arab Emirates. This speech is a result of those trips.

There is no longer any debate that the world is entering a period of energy dislocation and, for some communities, the period of energy poverty. This development has been brought about by four trends:

• Trend 1. High fossil fuel prices;

• Trend 2. Growing concern about energy security. Because oil and gas resources are concentrated in a few countries, understandably they use their energy riches as an instrument of foreign policy. With the rise of petrodollar-based sovereign wealth funds, such countries are pursuing more proactive investment strategies. Countries in the Persian Gulf now control more than $1 trillion. One of the reasons for this recent foreign trip was to pursue bilateral energy deals. And one of the consequences of that trip is for Congress to intensify efforts for resource self-sufficiency;

• Trend 3. Growing social concern about both the local and global environments;

• Trend 4. Technology innovation, which has attracted global investment in renewable and alternative energy, now standing at more than $100 billion per year;

These four factors are related and taken together produce a complex interdependency, meaning, that there are tradeoffs. For example, coal is an economic energy source but it is also the single biggest source of manmade carbon emissions. Thus, coal as an energy source now has to contend with the phenomenon of climate change.

With these complex and interdependent trends, Mr. John Browne has recommended certain fixed principles, as follows:

Principle 1 is flexibility, meaning the ability to adapt and to respond quickly to change. The Philippines will not prosper by betting only on the biofuels options. Although I was the Senate author and sponsor of the Biofuels Act of 2007, I insist that our country should maintain a portfolio of options. For example, wind has a clear advantage for our country, because of our favorable weather, strong demand, and developing transmission systems.

Principle 2 is the ability to work in collaborative networks. Our work in government must be connected in multiple ways to the work of NGOs, business companies, consumers, and the Philippine public. We in government are fully aware that we bear the burden of helping design the fiscal and regulatory policies that will drive new energy investments.

Principle 3 is energy efficiency, which will play a starring role in the energy future. Every business should put in place an energy efficiency plan covering the entire spectrum of business activities: operations, supply chains, and workforce behavior. For example, the Philippine airline industry can improve its fuel efficiency by more direct routings, more efficient taxiing on the ground, and less idle time queuing for takeoff slots.

Principle 4 is making carbon a mainstream economic cost for business. There is a global momentum building behind carbon pricing policy, notably in Europe and key American states. As Chair of the Senate Energy Committee, I plan to file a Carbon Pricing Act. Tomorrow, I will discuss at a Bureau of Customs seminar the prospect of a global agreement to succeed the Kyoto Treaty, with strengthened carbon measures. What carbon pricing bill the Congress will enact will be a source of the greatest uncertainty in energy law. My bill will provide for compensatory measures, because the costs of pricing carbon will hit some groups disproportionately, such as poorer people or energy-intensive sectors of the economy.

We have to bite the bullet on the thorny political-economic question of: “Who pays?” To reduce dependence on fossil fuels is a burden that should be shared. It will need an act of real political leadership to pass an aggressive carbon law, which will require that we should put society as a whole above sectional politics. This is the best way to survive this period of energy dislocation.

Food or Fuel: Food Security and Biofuel Production

The United Nations has predicted that the global population will rise above 9 billion by 2050. This will place additional pressure on the global food supply, particularly for a developing country like the Philippines. Our country is characterized by an increasing demand for protein-rich foods which require more water to produce, and more available agricultural land. This is why food prices are likely to increase.

The Philippines joined the global bandwagon for biofuel production by adopting the Biofuels Act of 2007. Obviously, this law aims to reduce carbon emission and dependence on imported sources of energy. I do not understand why certain people refuse to accept that the dynamics of the energy economy will be introduced into global food markets. But I will not go into that now. Instead, I wish to point out that there are at least two complex tradeoffs between biofuel production and food security, as follows:

• Tradeoff 1. The question of national equity: Any shift from food production to biofuel production will have certain consequences for certain communities. While crop exporters may benefit, crop importers may suffer, including agricultural communities which import grain as feeds for animals. In fact, those who might suffer the most in the long run of biofuel production might be the poorer communities where food bought on the open market is a major component of overall expenditures.

• Tradeoff 2. The question of global efficiency and perception of energy security. Global efficiency is best served by market-determined allocation of crop resources globally to food, and biofuels based on price and relative environmental efficiency. But concerns over energy security may undermine the attractiveness of global collaboration. Not all techniques for manufacturing biofuels are equally efficient in terms of reducing aggregate carbon emissions. Biofuels should be pursued not only under a global imperative to reduce carbon emissions, but more importantly, under a national security imperative.

Limits to Energy Price Resiliency

In the report submitted to the World Economic Forum entitled “Global Risks 2008,” experts said: “The global economy has demonstrated remarkable resiliency to increases in energy prices since 2004. But the limits of resiliency may be close to being reached.”

The WEF Global Risk Networks, which prepared the report, warned that there is a conflict between the objectives of secure, reasonably priced energy on the one hand, and reductions in emissions of greenhouse gases on the other hand. We see this conflict in the following ways:

• Coal, the only cheap, widely available fossil fuel, is linked with carbon emissions;
  

• Oil reserves are located in regions of geopolitical instability;
  

• Gas, the cleanest fossil fuel, is difficult to transport;
  

• Nuclear power is probably the best option for carbon-neutral energy from the perspective of currently available technology. But nuclear power continues to cause anxiety, given the problems of waste disposal, fear of nuclear accidents, and questions on the desirability of the global spread of nuclear technologies;
  

• Green technologies, such as wind power and biofuel, have their own problems, notably problems of scale. The use of crops for biofuel may promote greater insecurity for other global resources, namely, food and water.
  

Fighting Climate Change with Nuclear Power

Over 30 countries already have a functioning nuclear industry: Europe, the United States, China, India, and Russia. Other states are exploring the nuclear power option, among them: Turkey, Vietnam, and Egypt.

The benefits of nuclear power are as follows:

• CO2-free power generation
  
• Reliability
  
• Low per-unit direct cost to consumers.
  

However, the risks of nuclear energy are as follows:

• Environmental pollution resulting from spent-fuel disposal
  
• Potential dual use, meaning both civilian and military, associated with fuel enrichment
  
• Safety concerns for the integrity of nuclear power plants
  
• Difficult control over nuclear fuel inventories
  

The problem with nuclear power is that it raises the issue of how to safeguard the nuclear fuel development and distribution process. Furthermore, current weapons and nuclear stockpiles must be comprehensibly inventoried and monitored. The world will have to repatriate highly enriched uranium and replace it with low enriched uranium. At present, six states produce enriched uranium on a commercial basis: France, Germany, Netherlands, Russia, United Kingdom, and the United States. These six countries could block the efforts of other countries to explore a national capacity for nuclear energy.

The primary motivator for the Philippines to consider nuclear power is energy security and diversifying away from fossil power generation. But in the global context, this will require multilateral arrangements that will assure supply. Nuclear power also puts in question the effectiveness of the Nuclear Non-Proliferation Treaty. And, we have to consider the true costs of nuclear energy, because it will be reliant on state support. We also have to consider liability and antiterrorist cover, radioactive waste storage, international monitoring, and research and development costs. For these reasons, I do not foresee a nuclear energy bill in the Senate, or a so-called “nuclear renaissance,” in the near future.

Senate Energy Agenda

For sometime now, we have began the new era of energy reevaluation. Most recently, rising demand, particularly from China and India, has nearly doubled the price of benchmark crudes, with proportional increases for natural gas and other energy products. Oil futures markets indicate that prices will continue to remain within a significantly higher range. This being the case, a developing economy and energy-importing country like the Philippines will be hit the hardest. Experts say that on average, 1.6 percent of total revenues in countries like ours are already being lost. Higher oil prices also delay the transition from environmentally destructive usage of biomass fuels such burning wood toward gas, kerosene, and electricity.

With a higher price environment, we can expect the Senate to discuss measures such as the following:

• Provide incentives for clean coal technologies. But because higher volumes of conventional coal usage would greatly accelerate carbon emissions, it will be a high priority goal of the Senate to develop clean air technologies that are both effective and affordable;

In the long-term, the Senate will have to extend the nuclear option on a need-driven and affordable basis. I have already discussed the pros and cons of nuclear energy. I do not see it on the radar screen in the short-term. However, nuclear power does not contribute to climate change. Hence, we have time to put in place safeguards against nuclear proliferation, terrorism, and industrial accidents;

• Place a premium on alternative fuel bills, specially substitutes for gasoline or diesel in motor vehicles. Our recent law has placed climate-neutral biomass fuels such as ethanol and biodiesel in a more competitive position. However, agricultural tariffs still pose a barrier to global markets;

• Increase the efficiency of biomass fuel use, and promote the use of modern fuels, such as kerosene and LPG, for meeting the cooking needs of the poor;

• Increase access to efficient stoves for both biomass and modern fuels;

• Subsidize capital costs for rural grid electrification, and develop off-grid solutions to providing energy services;

• Target subsidies to access, not to consumption;

• Remove market barriers to trade in kerosene, LPG, biomass fuels, and charcoal, for meeting the cooking needs of the poor;

• Provide supportive regulatory policies for meeting the need for energy services other than cooking; in particular, to make financially sustainable the expansion of access to electricity by poor households.

Our vision on climate change should include tighter government regulation regarding fuel quality, plant emissions, and safety. Unfortunately, these concerns will entail further costs to the energy industry and the Filipino consumer.

After the World Economic Forum 2008, we have to accept the message that perceptions of global risks and priorities are changing with extreme rapidity. In fact, it is said that insuring against business interruption has become more expensive than property insurance.

Former certainties about cheap energy and its environmentally risk-free consumption have disappeared. The World Economic Forum has properly warned that: “In a rapidly changing world, the very fundamentals of energy – price, availability, security, acceptability – stand in need of constant and careful reevaluation. In the national debate on alternative energy sources, there is no room for opinionated legislators.

In conclusion, I have to issue a gentle reminder to the non-lawyers in Congress that under R.A. No. 3019, also known as the Anti-graft and Corrupt Practices Act, it is a crime for any Congress member, “during the term for which he has been elected, to acquire or receive any personal pecuniary interest in any specific business enterprise which will be directly and particularly favored or benefited by any law or resolution authored by him.” If he does possess such an interest, he should divest himself of that interest within 30 days after approval of the bill. This is a friendly reminder from a concerned lawyer who has no political plans for 2010.

-End-

17 January 2008

MIRIAM: UNCHECKED BIOFUELS HARM ENVIRONMENT

Sen. Miriam Defensor Santiago, who will chair the new Biofuels Oversight Committee, warned that unregulated biofuel production can result in environmental destruction, pollution, and human health damage.

“The oversight committee has to ensure that standards are set and enforced, on how the fuels are produced. Different biofuels have different levels of eco-friendliness. If we are smart, we should promote only the right biofuels,” she said.

Santiago said that the New York Times on-line of 15 January 2008, reported that the European Union has drafted a law banning importation of some biofuels from crops grown in forests, wetlands, or grasslands.

In the article “ Europe may ban importation of some biofuel crops,” James Kanter said: “But a flurry of studies has discredited some of the claims made by biofuel producers that the fuels have reduced greenhouse gases…Growing the crops and turning them into fuel can result in considerable environmental harm.”

The senator said that the environmental warning was based on published studies of reputable scientific groups, including: Royal Society, the British national science academy; New Energy Finance at London ; Friends of the Earth; Renewable Fuels Association in Washington ; Smithsonian Tropical Research Institute in Washington; and Europe ’s Energy Commissioner.

Santiago said her oversight committee will require biofuels to deliver a minimum level of greenhouse gas savings, with the minimum level to be determined by scientists, not politicians.

The senator listed the potential dangers of unchecked biofuels farming, as follows:

• Tempts farmers to cut down tropical rainforests;
• Uses tractors which consume diesel;
• Demands nitrogen fertilizer made with natural gas;
• Consumes huge amount of water;
• Encourages farmers to convert grasslands, which need to be preserved, into cornland for ethanol production;
• Encourages conversion of land to biofuel use although they contain high levels of biodiversity.

Santiago said the oversight committee will prioritize the design of a procedural mechanism that will allow government to track biofuel from origin to use, in order to ensure sustainable practices.

In another development on biofuels, Santiago as a constitutional law expert, warned Congress members to comply with the constitutional provision that: “They shall notify the House concerned of a potential conflict of interest that may arise from the filing of a proposed legislation of which they are authors.”

Santiago also warned Congress members to observe another constitutional provision prohibiting them from holding “any financial interest in any special privilege granted by government,” since the Biofuels Act grants fiscal incentives.

The senator said she is questioning whether certain Congress members might be violating the Anti-Graft Law, which makes it unlawful for any Congress member “to acquire or receive any personal pecuniary interest in any specific business enterprise which will be benefited by any law authored by him.”

Santiago , a former RTC judge, said the penalty for unlawful pecuniary interest is imprisonment from 6 to 15 years, and perpetual disqualification from office.

“If the Congress member hides his illegal interest behind a corporate structure or a dummy, then his criminal liability includes the added crimes of fraud, falsification of public document, and violation of the Anti-Dummy Law,” Santiago said.

-End-

Transcript of Sen. Miriam Defensor Santiago’s Interview
14 December 2007

On the JPEPA

By January, on the first working week, I intend to sponsor the JPEPA, provided that I am able to convince the Japanese ambassador that we shall have a side agreement or an exchange of notes that will preclude any finding of unconstitutionality by the Supreme Court. As I have said, that is the threshold question. I think we have also because more or less we have reached a consensus on the language to be employed. The main concern here is that if we substantially alter the provisions of JPEPA, then, under Japanese law, the JPEPA will have to go through the Japanese parliament or Diet all over again. Naturally, the Japanese government does not wish to do that. It is going to delay the matter maybe by a year.

So what we are trying to do is very sensitive. What we are trying to do is craft a vocabulary or a formula that would be acceptable to the Japanese government and will preclude the necessity of submitting the JPEPA all over again to the parliament, and at the same time will satisfy the constitutional requirements of our own Philippine Constitution, so that we can be safely assured that if any petition is brought to the Supreme Court, at least the question of constitutionality, we shall be upheld both on the part of the Senate and the executive branch.

I think we are nearly there because the Japanese ambassador has been very accommodating and cooperative. The formula is with me. I am trying to word it very carefully and calling on all resources of academic training so that we can meet the requirements of Japanese law and Philippine law at the same time.

With regards to the trade and industry provision, there will be no major changes, maybe just a slight amendment on the language employed. I don’t think it would cause any controversy. I think we will have a JPEPA by the first three months of the new year.

On the JCPC’s contempt charge against Transco President and CEO Arthur Aguilar

He submitted a motion for reconsideration, and under the Epira Law that grants powers and jurisdiction of the JCPC of which I am chair, then I find his explanation acceptable and will reconsider the citation for contempt. Apparently he is also very sick.

On the proposed revival of the Anti-Subversion Law

That is a step backward. Under the Anti-Subversion Law, mere membership is punishable, and that would be unconstitutional because it would impinge on the constitutionally protected right of freedom of assembly and association. Although the previous Anti-Subversion Law provided that any member could be prosecuted provided that the member is in possession of arms or in the act of calling on an uprising against the government. Nonetheless, the language is so vague that it could be justifiably accused of unconstitutional infringement of the freedom of assembly and association. Just because you are a member of a party it does not mean that you are guilty of whatever some members have committed, that would be guilt by association which has already been rejected by our Supreme Court.

I believe that the present provisions of our Penal Code on insurrection, sedition, inciting sedition, and the Anti-Terror Law or the Human Security Act already provide amply for the protection of the state against rebels and subversives. But you cannot just hail a person to detention just because you suspect him to be a subversive. That was the authority granted to law enforcers in the Anti-Subversion Law, and that is why it was repealed in 1992.

Do you think it would gain support in the Senate?

No. Considering that the Senate is opposition dominated, plus because of the constitutional issues that it raises, I don’t think it would gain any ground in the Senate or even in the House. These two chambers of the legislature are very sensitive to public opinion, and I think it is indefensible to be able to arrest and prosecute a person just because he or she is a member of a political group. That is antidemocratic.

On the Senate Committee on Energy hearing

The Renewable Energy Bill has been filed in various forms by thirteen senators, so I can already foresee a brief and happy debate in the Senate because we already have thirteen votes, meaning even before we have debated it is already sure of being passed in the Senate. We want to develop renewable energy so that we will no longer be dependent on the fluctuating price of oil. This is actually an oil independence law. We want to give incentives to people who want to develop renewable energy facilities by, for example, exempting them from tariff duties, value-added tax, giving them substantial discounts in realty taxes and income taxes. There are a lot of fiscal and non-fiscal incentives.

On the part of the consumer, the law provides for green energy option, meaning if you choose not to avail of your electricity from the standard electricity supplier which is always sourced from oil, but from a supplier that sources its energy from a renewable energy source. It provides for a discount or a tax holiday when you avail of this option. Binibigyan natin ang consumer ng karapatan para mamili kung alin ang panggagalingan ng kanilang kuryente. Kung oil, kung tumaas ang presyo ng langis, tataas rin ang presyo ng iyong kuryente. O kaya kung renewable energy sources, bibigyan ka ng diskuwento ng gobyerno o babawasan ang iyong income tax. Basically this is an incentives bill so that our country will be weaned away from total oil dependence to renewable energy. We have already agreed with the executive branch that his will be prioritized.

Can the proceeds from the sale of the government’s energy assets be used to lower electricity rates?

You can use it in that sense only if the money is turned over to the National Treasury. Remember when we sell our electricity assets, part of it will go to the government, part of it will go to the National Treasury. That part that goes to the National Treasury can be used by Congress by the President when she submits her proposed budget to subsidize oil prices.

As you have heard the PISTON president this morning, apparently this (public transportation) is an industry crying for help, and the only way you can help an oil industry-based service sector is by subsidy, either by exempting oil from the usual taxes or by government stockpiling it. He made a very radical proposal; he wants government to buy Petron, which we already sold. As I’ve pointed out yesterday, it is very important that we must reconsider and study carefully the sale of our asset kasi kapag nabenta mo na iyon, mahirap na bilhin ito muli.

I say that [subsidy] is a real possibility. Imagine, the peso-dollar parity is now almost Php40, baka bumaba pa. We cannot go back to oil regulation. That would be a step backward.

You’ll notice that there is a periodic sense in the public to change presidents whenever there is an oil price increase. Any president who is historically-conscious will make sure that the almost cyclical increases in oil prices will not affect his or her incumbency.

On Sen. Madrigal’s insistence that there is an anomaly in the Transco sale

That is for her to prove. As far as we could gather from yesterday’s JCPC hearing, there is no documented evidence of her charges. She makes these accusations, but in court you need evidence, and it could either be testimonial or documentary. You have to have a witness who has first hand knowledge that there is a subversion of the Anti-Dummy Law because in effect the charge is that there is no Razon name in any of the papers involved and he is acting through somebody else. To make that charge stick you have to present either a witness who can testify through first hand knowledge, or documentary evidence. I doubt very much if that is possible.

There is an accusation, but even from a fact-finding point of view there is no probable cause. There has to be more than mere verbal accusation. There has to be evidence to support it.

-o0o-

Transcript of Sen. Miriam Defensor Santiago’s Interview
13 December 2007

On the JCPC hearing on the sale of PNOC-EDC

We are on the verge of losing our patience because the issue simply is how much the EDC has contributed to the national treasury. We already know how much it was sold for: some P58 billion. If it (EDC) contributed more than that to the national treasury, then why sell it? Because then it would be able to make more money than it is being sold for in the very near future. They (the government panel) cannot give us a ballpark figure. These are huge amounts of money and we are entitled to an explanation why we are selling a profitable government enterprise.

During the time of President Aquino, the sales of government assets were confined only to those that were non-performing assets or government corporations that were losing money. We never sold any profit-making assets because if we sold it to a private owner he would pay today and we would have today the amount that he paid, but the entire revenue stream or the entire potential earnings of the enterprise would have absolutely stopped. It would be like looking only at the short-term but not at the long-term. It would be trading instant gratification for future security.

(But) the most basic problem is why they didn’t inform us that they were selling it. All the while we thought that just trying to prepare for the sale of certain assets of the EDC like its geothermal fields and steam sales agreements. We didn’t have any inkling that they were selling sixty percent of EDC which would make government lose control of a geothermal firm that is considered one of the first in the whole world. We are number one in steam sales technology and number two in steam sales production. Now PNOC-EDC, through the chair of the Privatization Council (the Finance Secretary) and the president of PNOC-EDC himself, wants to sell this valuable asset for what?

Plus, I have a personal concern on why did the winning bidder, Red Vulcan, bid P 58.5 billion, which is P13.5 billion higher than the floor price. In other words, the Privatization Council and PNOC-EDC undervalued the valuable assets of our government. Even the buyer himself admitted that the floor price was an undervalue of the asset. Why make it easy to sell something that is making money? Their argument there is very weak, and that is that now it (EDC) is in its peak price and we will never be able to sell it in the same amount again. How did they know that? Do they have any fact-based data to support their argument?

In the case of the JCPC, we have one particular instance in the past when, owing to the intervention of a public official, a sale that has already taken place, was cancelled or aborted… it turned out that the cancellation of the government asset sale, I’m talking about Malampaya EC, was correct because eventually the price of oil rose from $30/barrel to $100/barrel, so the income from Malampaya rose as well. If we have not stopped that sale at that time, we would have lost a valuable asset forever, and it is now making a lot of money for the government. That is more or less the same situation as EDC.

Can the JCPC still block the sale?

[The sale] has not yet been implemented. In a sense it has been consummated because the winning bidder has been announced, and was able to make full payment in cash. The next thing that should happen is that it should now take over control of EDC. But not if the JCPC can help it. If we need to go to court, then we will go court. But first we will give the Secretary of Finance and the PNOC President, the two officers responsible for the sale, an opportunity to explain themselves. What I am doing here is I’m making a compilation of all the questions that were raised today and I will give them until next week to give me a specific answer for each question. They were saying this morning that they don’t have the exact figures. We find that hard to believe. You would have at least some rounded or ballpark figures in your head if you are dealing with an amount as big as P 168 billion.

The power of the JCPC is to monitor the privatization of the power industry and to ensure compliance of the Epira. Epira provides that we must optimize the value of our assets that are being sold. If we find that the value has not optimized and we therefore reach the conclusion that the law has not been followed, we would have good legal grounds for ordering them to withdraw their approval, just as they did in Malampaya.

You insinuated earlier that somebody must have received commissions and kickbacks

It cannot be helped because these people could at least have given the senators and the congressmen the basic courtesy of notice. Sa tingin ko may kumita dito. Bakit mo ililihim kung wala kang itinatago? Napag-usapan na ito sa JCPC noon pa. Sinabi namin na huwag na nating ibenta ang shares of stock o control ng EDC, ibenta na lang natin ang mga assets niya. Nagulat na lang kaming lahat na ibebenta na pala. That is mainly the burden of the JCPC. We are trying to understand why they didn’t give us due notice and wait for us. What is the rush, since the sale price of P58.5 billion is meant to go only to make up for the budget deficit. That is not the function of the Privatization Council or the Department of Finance.

They could not even answer the question [how much the government lost in the sale of EDC]. I want to know how much has EDC given to the national treasury. At first they said P71 billion. Kita mo na: binenta natin ng P58 billion ang kumikita ng P71 billion. Tapos ang sabi nila “ Mali pala kami, meron pa pala kaming ide-deduct diyan.” Ang mga kumisyon daw ng mga broker at underwriter sa kanilang benta. Hindi raw kumpleto ang listahan nila. Iyon na nga ang problema, may mga kumikita nang hindi alam ng publiko.

On citing Transco President Arthur Aguilar for contempt

I cited him for contempt because pinag-uusapan dito kung maayos ang pagbenta ng Transco. Biro mo, presidente siya ng Transco hindi siya dumating, nagpadala lang ng vice president niya dahil nagpreside daw siya ng nationwide bidding ng mga subordinate at regional managers niya. Pinag-uusapan ang P160 billion ng gobyerno dito, at mas gusto niya na makihalubilo sa mga subordinates niya. He is not giving the JCPC the proper courtesy of at least his physical appearance.

I gave him 3 days to file a motion for reconsideration, but I have already said that we will not find it acceptable that he explains himself by merely saying that “I am sorry but I am presiding over a nationwide conference.” E di magpa-preside siya ng ibang tao at bumalik siya ng hapon. Anong deperensya? Anong problema? But we will ask him to explain in writing what the details of (the sale of) Transco are.

My reading of the JCPC law is that we can detain or imprison him for less than one year, and we can impose a fine of less than P50,000.

On Ibazeta’s defense on charges of conflict of interest over the sale of Transco

Myself as chair and Rep. Arroyo as co-chair the explanation to be reasonable and therefore valid. He (Ibazeta) is saying that “There is no conflict of interest. I am chair of a terminal services corporation and we are here dealing with the power sector, so I don’t see any conflict between terminal services and the power sector.” Besides, he inhibited himself from the bidding process because of the ethical question that has been raised. Unless there is further evidence, we find that he has acquitted himself successfully on the charge of conflict of interest. Whether there is any irregularity in the bidding process itself or in the projected dire consequences of the sale to this winning bidder, that will be taken up by another committee.

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Transcript of Senator Miriam Defensor Santiago’s Interview

28 November 2007

On the UN findings on the extrajudicial killings in the country

It is both good news and bad news. The bad news is that it says that it does not believe the Armed Forces of the Philippines ’ explanation about extrajudicial killings and people who have disappeared as part of the purge of the Communist Party. Instead, it appears, according to the report, that those people who have died or disappeared have been victims of military abuses.
The good news is that the report does not say either that it is official policy of the Arroyo administration to liquidate leading members of the extreme left. After all, the Communist Party and the NPA have been declared terrorists by other countries. In that sense, the report is even-handed. One thing that we can consider as a plus for the Arroyo administration is that it invited Mr. Alston to come here. He could not have come, under UN rules, unless an invitation has been extended by the administration. This is evidence of the good faith of the Arroyo administration.
What will happen here is that in his capacity as a fact-finder, he will submit this report. In fact, his report is just the final draft of his preliminary draft since the procedure is that the rapporteur must first issue a preliminary draft for comment by the host state before he can draft the final form. This is the final form of the report, but he will now submit it to the Human Rights Council in the UN, which will take it up and decide 1) whether the findings and facts are judicious, meaning if they are reliable, and 2) what action should be taken or recommended by the Council to the General Assembly with respect to the Philippines.

Can it be reversed?

Yes, because it is yet not binding to the Human Rights Council. He is merely an agent or a subordinate of the Council. He is bound to submit it for the Council’s assessment and for their action, whatever it might be.

What can the government do about it?

The government will have to make a more determined effort to educate the rank and file of our soldiers that violence should not be used as a measure for counterinsurgency unless it is employed in self-defense. It cannot be a strategy or a tactic to kill people anonymously to put the fear of the military in them. It is not allowed by the constitution and international law.

There are many ways of issuing instructions to soldiers. You can either talk verbally to them, or you can give them instructions in the form of body language or discreet implications employed n verbal instructions. If the administration makes it crystal clear that it will not tolerate these practices, that should filter down to the ordinary soldier.

The rapporteurs of the United Nations are among the most qualified in their fields of work. The usually come from the academe and have no political power.
In the whole, I find the report to be acceptable.

On the government’s efforts to help the OFW in death row in Kuwait

The case emphasizes the importance of a transfer of sentenced persons treaty, which we just have concurred with respect to Spain . We already have concurred such a treaty with respect to Hong Kong and Thailand , and we hope to concur in the very near future with Canada and Cuba , but most importantly with the Middle Eastern states.

There is nothing we can do on a legal level when the court of another country sentences a
Filipino for crimes as defined in that country. This is only an appeal from one head of state to another. There is no legal force. It may have some legal force. But the best thing to do is to work for a TSP treaty if we cannot get executive clemency from that state.

On the objection from the Chiong family to the passage of the RP-Spain TSPA for allegedly favoring Larreñaga.

It is perfectly understandable. In fact, that is the reason why Sen. Estrada abstained because the Chiong family apparently were ably to contact him. In the case of Sen. Arroyo, he also abstained because his wife, I believe, is one of the counsel of one of the parties in the case. Basically, there is no objection to the TSPA per se for any country, but there is of course objection on the part of the victims’ family. However, our attitude in the Senate was that one case cannot possibly prejudice the fate of seven Filipino prisoners in Spain .

During the interpellations, I did find out that according to Human Rights Watch, the jails in Spain are also congested, overcrowded, and there are not enough facilities for the number of prisoners.

On the postponement of the Comelec’s budget defense in the Senate

Whenever they do not want to appear, I will always want to discipline them. Because Comelec is not ready for budget defense today, I am recommending that we should lop off Php 277 million. That would only leave them Php 4 billion (original proposed busget is Php 4.277 billion). I think, out of basic courtesy to the Senate as an institution and to the fact that the senators prepared interpellation and, in my case as subcommittee chairperson, defense. They should have at least the respect to prepare themselves. You give an excuse slip during final examinations day to the teacher and say “I am sorry I will be absent because I am not prepared for the test.”

On the rush sale of geothermal plants

All I am saying is that I refused to be rushed on these sales. (They are saying that) The motion to accelerate the sale is based on the concept of privatization which is already mandated by law. I refuse to accept that argument because these are multibillion entities, such as Transco. You get one-tenth percent of billions and you get multimillions.

If this sale, based on these conditions, pushes through will there be kickbacks?

I am afraid so. Because why hurry it? The basic philosophy of Epira is not privatization. It is not to give our state assets to private individuals, but to reduce the cost of electricity in the country. This is because according to our lawmakers at that time private owners would run their businesses more efficiently and that would result to lower electricity rates. But as I’ve shown in my letter to the House panel of the Powercom, that is not necessarily the case with the sale of the geothermal plants. If you quote the price in dollars, what happened with the IPPs will happen all over again, because if you do, whenever there is a currency fluctuation it is the consumer who will have to make the so-called adjustment mechanism, which is actually an increase in the price of electricity.

I do know, as an experienced warrior in this field, that someone is going to make money here. I just want the public to be aware of that, because maybe their propaganda might be so effective that they would begin to charge the JCPC of inaction. No we are not. We are studying every case.

Breaking News

12 October 2006

SOLONS SEEK HALT TO POWER PRICE HIKE

Sen. Miriam Defensor Santiago, chair of the Joint Congressional Power Commission (Powercom), said at yesterday’s public hearing (October 12) that the Bicameral Oversight Committee is prepared to “take drastic measures” to stop the anticipated price increase in electricity this coming December.

“If it becomes necessary, we might order a halt to the commercial operation of the Wholesale Electricity Spot Market (WESM),” Santiago said.

However, Santiago cautioned the public to keep an open mind on whether the recent price increases in the third month of the market’s operation is a result of manipulation, or merely “part of the learning curve of the market.”

“It is possible that the government agencies might have lost a lot of money in the first two months of the market, and that is why they try to increase their prices over on the third month,” she said.

Santiago was referring to the Power Sector Assets and Liabilities Management Corp. (PSALM) under President Nieves Osorio, and to the National Power Corp. (Napocor) under President Cyril de Callar.

“It is highly possible that these two agencies were bidding low during the first two months so that their power plants could be dispatched, thus incurring big losses. So in compensation, they might have tried to increase their price offer on the third month, thus causing the spike in prices,” the senator said.

Santiago said that other government agencies might be to blame for the rising prices.

“The Energy Regulatory Commission (ERC) is also suspect, because it has not yet completed the competition rules which have been pending for three years,” she said.

Santiago added that the Philippine Electricity Market Corp. (PEMC) under President Lasse Holopinen is also suspect, because it immediately leaked to the media its investigation about the alleged price manipulation.

“Consistent with market rules, it is correct for PEMC to conduct the investigation through its surveillance committee. But this should have been kept quiet until the findings were conclusive,” Santiago said.

Santiago said the present market problems are partly caused by the failure of Napocor to privatize its Luzon generation assets, which does not even reach five percent, and by the Napocor’s failure to secure bilateral contracts.

“If evidence before the Powercom establishes that there was intentional price manipulation, then we have to punish those responsible. On the other hand, if the unusual price increase was simply part of the learning curve, then the public announcement of the investigation by the market operator would have jeopardized the privatization program under the Epira Law,” she said.

Santiago told media that the main purpose of the hearing was to hear the side of the accuser, PEMC, and the side of the accused, PSALM and NPC.

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Breaking News

7 October 2006

MIRIAM ORDERS BICAMERAL PROBE OF BILLION-PESO POWER MARKET

Sen. Miriam Defensor Santiago, chair of the bicameral Joint Congressional Power Commission or Powercom, said the oversight commission will meet next week, October 12, Thursday afternoon, to investigate charges of alleged price manipulation that allegedly caused sudden spikes in Luzon power bills.

Santiago also raised the alarm that the Power Sector Assets Liabilities and Management Corp. (PSALM), and National Power Corp. (NPC) might be losing billions of pesos in the spot market.

“We in government must act very fast because investor confidence in privatization, as well as public trust in the spot market as a device for bringing down power prices, are both hemorrhaging,” the senator said.

Santiago said that “there is cause for concern” over escalating prices in the Philippine wholesale electricity spot market, known as WESM.

“In the first trading month which was June, biddings resulted in an average price of P2.72 per kiloWatt hour (kWh), in the second month it rose again, and now in the third month it is P4.853 per kWh. This is unreasonably high,” Santiago said.
Santiago said the Powercom probe will focus on PSALM which owns the NPC power plants and is the de facto administrator of all NPC power plants.

“PSALM is the dominant market player, because it controls at least 50 percent of Luzon generation capacity,” the senator said.

At a Powercom hearing last August, Santiago had already raised the issue that NPC might be losing a lot of money, since it generates power at P5 per kWh, but sold it in the spot market at only P2.72 per kWh in the first month.

At that meeting two months ago, Santiago had already noted for the record that: “If the average price of generation is used as indicator of the real market price, then we can conclude that NPC’s generation cost is really high.”

Santiago said the fears raised over possible price manipulation in the market are “well-founded.”

“PSALM has market power, and may have been tempted to manipulate spot prices. But – and this is a big but – there are also other market players who might be engaged in so-called ‘gaming,’ because they know that NPC / PSALM might have been losing billions in the spot market,” Santiago said.

The senator said that there are several factors which influence spot prices, notably the cost of producing electricity, which varies from one electric plant to another.

Santiago said the focus of the Powercom probe will be PSALM’s trading decisions in the last month.

“We need to act very fast, because this allegation of price manipulation in the spot market tends to erode investor confidence in the privatization of the power sector,” she said.

The senator said it is “premature” to order the temporary suspension of WESM as called for by certain business leaders.

“Under the Rules of Court, PSALM and DOE are entitled to the presumption that official duty has been regularly performed. It is for the Powercom hearing to determine whether there is evidence to overthrow this presumption.” Santiago said.

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